SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period from July 3, 1994 to October 1, 1994
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-16930
EGGHEAD, INC.
(Exact name of registrant as specified in its charter)
Washington 91-1296187
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
22011 S.E. 51st
Issaquah, Washington 98027
(Address of principal executive offices) (Zip Code)
(206) 391-0800
(Registrant's telephone number, including area code)
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 ____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock:
Outstanding at
Class October 29, 1994
Common Stock 17,163,406
$.01 par value shares
PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements and Supplementary Data
Refer to Exhibit 28 for the results of the limited review performed by
Arthur Andersen LLP, independent public accountants.
EGGHEAD, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<S> <C> <C>
October 1, April 2,
1994 1994
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $28,595 $ 25,677
Accounts receivable, net of allowance
for doubtful,accounts of $3,932 and
$3,432, respectively 74,127 76,241
Merchandise inventories (Note 2) 131,124 117,106
Prepaid expenses and other current assets 4,560 3,717
Current deferred income taxes (Note 3) 7,727 8,085
Total current assets 246,133 230,826
Property and equipment, net 16,596 19,351
Non-current deferred income taxes (Note 3) 3,072 3,014
Other assets 2,291 2,819
$268,092 $256,010
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks (Note 5) $ - $ -
Accounts payable 106,774 91,055
Accrued liabilities 18,002 19,144
Income taxes payable - 494
Current portion of capital lease obligations 257 295
Total current liabilities 125,033 110,988
Capital lease obligations, less current portion 76 184
Deferred rent 1,415 1,422
Total liabilities 126,524 112,594
Commitments and contingencies (Note 6)
Shareholders' equity:
Common stock, $.01 par value: 50,000,000 shares
authorized; 17,163,406 and 17,121,438 shares
issued and outstanding, respectively 172 171
Additional paid-in capital 120,546 120,287
Retained earnings 20,850 22,958
Total shareholders' equity 141,568 143,416
$268,092 $256,010
</TABLE>
See Notes to Consolidated Financial Statements.
EGGHEAD, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Amounts in thousands, except per share data)
<TABLE>
<S> <C> <C> <C> <C>
13 Weeks Ended 26 Weeks Ended
(unaudited) (unaudited
October 1, October 2, October 1, October 2,
1994 1993 1994 1993
Net sales $194,311 $165,405 $388,159 $346,240
Cost of sales, including certain
buying, occupancy, and
distribution costs 171,961 142,264 343,617 296,269
Gross margin 22,350 23,141 44,542 49,971
Selling, general, and
administrative expense 21,494 20,611 43,251 44,248
Depreciation and amortization
expense, net of amounts
included in cost of sales 2,352 2,041 4,764 3,928
Provision for restructuring costs - - - 4,400
Operating income (loss) (1,496) 489 (3,473) (2,605)
Other (expense) income:
Interest income 153 28 338 137
Interest expense (5) (32) (11) (54)
Other, net (259) (65) (261) (33)
Income (loss) before income taxes (1,607) 420 (3,407) (2,555)
Income tax benefit (provision) 626 (164) 1,328 996
Net income (loss) $ (981) $ 25 $(2,079) $(1,559)
Earnings (loss) per share (Note 4) $(0.06) $0.02 $(0.12) $(0.09)
Weighted average common shares
and common equivalent
shares outstanding 17,163 17,125 17,143 17,055
</TABLE>
See Notes to Consolidated Financial Statements.
EGGHEAD, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<S> <C> <C>
26 Weeks Ended
(unaudited)
October 1, October 2,
1994 1993
Cash flows from operating activities:
Net loss $ (2,079) $ (1,559)
Adjustments to reconcile net loss to
net cash provided (used) by
operating activities:
Depreciation and amortization 5,303 4,770
Deferred rent (7) 39
Deferred income taxes 300 (432)
Stock issued as compensation - 552
Loss on disposition of assets 286 50
Changes in assets and liabilities:
Accounts receivable, net 2,185 2,554
Merchandise inventories (14,006) 25,229
Prepaid expenses and other current assets (843) (1,976)
Other assets 316 (2,101)
Accounts payable 15,594 (38,359)
Accrued liabilities (1,144) 729
Income taxes payable (494) (795)
Total adjustments 7,490 (9,740)
Net cash provided (used) by
operating activities 5,411 (11,299)
Cash flows from investing activities:
Additions to property and equipment (2,645) (4,867)
Proceeds from sale of equipment 33 24
Net cash used by investing activities (2,612) (4,843)
Cash flows from financing activities:
Payments on capital lease obligations (146) (382)
Proceeds from stock issuances 258 488
Net cash provided by financing activities 112 106
Effect of exchange rates on cash 7 (6)
Net increase (decrease) in cash 2,918 (16,042)
Cash at beginning of period 25,677 26,386
Cash at end of period $ 28,595 $ 10,344
Supplemental disclosures of cash paid:
Interest $ 11 $ 54
Income taxes $ 213 $ 866
</TABLE>
See Notes to Consolidated Financial Statements.
EGGHEAD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Note 1 Basis of Presentation
The accompanying unaudited financial statements have been prepared
in accordance with generally accepted accounting principles for
interim financial information and pursuant to the rules and
regulations of the Securities and Exchange Commission. While
these statements reflect the adjustments which are, in the opinion
of management, necessary to fairly state the results of the
interim periods, they do not include all the information and
footnotes required by generally accepted accounting principles for
complete financial statements. These adjustments are of a normal
and recurring nature. For further information, refer to the
annual financial statements and footnotes thereto, for the 52 week
period ended April 2, 1994, contained in the Company's Form 10-K,
filed pursuant to the Securities Exchange Act of 1934. The reader
is further cautioned that operating results for the 13 and 26 week
periods ended October 1, 1994, are not necessarily indicative of
the results that may be expected for the full year.
The Company uses a 52/53 week fiscal year, ending on the Saturday
nearest March 31 of each year. Effective the beginning of fiscal
1995, the Company changed it's fiscal quarters such that each
quarter consists of 13 weeks. Previously, fiscal quarters were
such that the first quarter consisted of 16 weeks, the second and
third quarters were each 12 weeks, and the fourth quarter
consisted of the remaining 12 or 13 weeks. The second quarter
fiscal 1994 financial information represents the second 13 weeks
of the fiscal year.
Note 2 Merchandise Inventories
The majority of merchandise inventories are accounted for using
the moving weighted average cost method. The remainder are
accounted for using the first-in first-out cost method. All
inventories are stated at the lower of cost or market.
Note 3 Income Taxes
Deferred income taxes result from temporary differences in certain
items for income tax and financial reporting purposes.
Note 4 Earnings (Loss) Per Share
Earnings (loss) per share amounts are computed using the weighted
average number of common shares and dilutive common equivalent
shares outstanding during each period using the treasury stock
method. Common equivalent shares result from the assumed exercise
of stock options and from the conversion of cash related to the
employee stock purchase plan into common shares based upon the
terms of the plan. The effect of common equivalent shares was not
included in computation of the loss per share amount for the 13
and 26 week periods ended October 1, 1994, and the 26 week period
ended October 2, 1993, because they were anti-dilutive.
EGGHEAD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(Unaudited)
Note 5 Notes Payable to Banks
Effective October 1, 1994, the Company entered into a revolving
loan agreement with two banks providing for unsecured borrowings
of up to $50,000,000 through September 30, 1995. Each bank
provides a $25,000,000 line of credit and one bank serves as agent
for the agreement. The Company may elect interest rates on the
notes based on the participating banks' rates on overnight funds,
or on the agent bank's rate on certificates of deposit, LIBOR, or
prime rate. The agreement contains a number of covenants,
including a restriction on the payment of dividends and certain
financial ratio requirements. The Company was in compliance with
the financial covenants as of October 1, 1994. There were no
borrowings under these or previous lines of credit during the
first two quarters of fiscal 1995.
Note 6 Leases
The Company leases all its retail stores, corporate, government,
and education sales offices, it's distribution facilities in
Lancaster, Pennsylvania and Sacramento, California, and it's
headquarter facilities in Issaquah, Washington, under operating
leases with terms ranging from one to eleven years. As of October
1, 1994, the future minimum rental payments under these operating
leases were as follows (in thousands):
<TABLE>
<S> <C> <C>
Fiscal Year
1995 (remainder) $ 6,715
1996 12,330
1997 11,106
1998 7,675
1999 3,987
Thereafter 1,055
Total minimum payments $ 42,868
</TABLE>
ITEM 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
The Company uses a 52/53 week fiscal year, ending on the Saturday
nearest March 31 of each year. Effective the beginning of fiscal 1995,
the Company changed it's fiscal quarters such that each quarter consists
of 13 weeks. Previously, fiscal quarters were such that the first
quarter consisted of 16 weeks, the second and third quarters were each
12 weeks, and the fourth quarter consisted of the remaining 12 or 13
weeks. The second quarter and year-to-date fiscal 1994 financial
information represent the second 13 weeks and 26 weeks of the fiscal
year.
RESULTS OF OPERATIONS
The following table shows the relationship of certain items included in
the Company's Consolidated Statements of Operations expressed as a
percentage of net sales:
<TABLE>
<S> <C> <C> <C> <C>
Percentage of Net Sales
Second Quarter Year to Date
13 Weeks Ended 26 Weeks Ended
October 1, October 2, October 1, October 2,
1994 1993 1994 1993
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales, including
certain buying, occupancy,
and distribution costs 88.5 86.0 88.5 85.6
Gross margin 11.5 14.0 11.5 14.4
Selling, general, and
administrative expense 11.1 12.5 11.2 12.8
Depreciation and amortization
expense, net of amounts
included in cost of sales 1.2 1.2 1.2 1.1
Provision for restructuring
costs - - - 1.3
Operating income (loss) (0.8) 0.3 (0.9) (0.8)
Income (loss) before
income taxes (0.8) 0.3 (0.9) (0.8)
Income tax benefit (provision) 0.3 (0.1) 0.4 0.3
Net income (loss) (0.5) 0.2 (0.5) (0.5)
</TABLE>
Net sales of $194.3 million for the 13 week period ended October 1,
1994, were 17% greater than net sales of $165.4 million for the 13 week
period ended October 2, 1993.
Year-to-date sales of $388.2 million for the 26 week period ended
October 1, 1994 were 12% greater than net sales of $346.2 million for
the 26 week period ended October 2, 1993.
The corporate, government, and education (CGE) group generated 52% of
total net sales during the second quarter of fiscal 1995, with 48%
generated by retail operations. This compares to 59% generated by the
CGE group and 41% generated by retail operations in the second quarter
of fiscal 1994.
Year-to-date fiscal 1995, CGE generated 53% of total net sales with the
remaining 47% generated by retail operations. This compares to 58% for
CGE and 42% for retail year-to-date last year.
Corporate, Government, and Education Sales
CGE sales of $101.6 million in the second quarter of fiscal 1995
increased $3.8 million, or 4%, compared to $97.8 million in the second
quarter of fiscal 1995.
Year-to-date fiscal 1995 CGE sales of $204.2 million increased $4.1
million, or 2%, compared to $200.1 million year-to-date last year. As
discussed in the Company's fiscal year 1994 Form 10-K, management
believes its restructuring initiative in CGE has affected sales.
Retail Sales
Retail sales of $92.7 million in the second quarter of fiscal 1995
increased $25.1 million, or 37%, compared to $67.6 million in the second
quarter of fiscal 1994. Year-to-date fiscal 1995 retail sales of $184.0
million increased $37.9 million, or 26%, compared to $146.1 million
year-to-date last year. Second quarter and year-to-date comparable
retail store sales increased 36% and 24%, respectively.
In addition to the comparable store sales growth, there was an increase
in mail order sales due mainly to the acquisition of a mail order
subsidiary, Mac's Place, at the end of the second quarter of fiscal
1994.
Sales of hardware and related accessories increased from approximately
14% of total retail sales year-to-date last year to approximately 30%
year-to-date this year. The increase was due partly to the introduction
of additional hardware products, such as hard drives and printers, since
the end of the second quarter a year ago.
Retail Locations
Year-to-date in fiscal 1995, the Company has closed 10 stores, including
five during the second quarter. Since the end of the second quarter
last year, the Company has closed 16 stores. As of the end of the
second quarter of fiscal 1995, the Company operated 179 retail stores,
compared to 195 at the end of the second quarter a year ago.
Gross margin (net sales minus cost of sales, including certain buying,
occupancy, and distribution costs) as a percentage of net sales was
11.5% in the second quarter of fiscal 1995, compared to 14.0% in the
second quarter last year. Year-to-date gross margin as a percentage of
sales was 11.5% in fiscal 1995, compared to 14.4% in fiscal 1994.
During the second quarter of fiscal 1994, the Company lowered prices in
both its CGE and Retail businesses to improve its competitive position.
As discussed in the Company's fiscal year 1994 Form 10-K, gross margin
as a percentage of sales continues to be affected by industry-wide
pricing pressure related to both competitors' pricing and vendors'
pricing.
The decrease in gross margin as a percentage of sales resulting from the
lower prices was partially offset by retail sales making up a larger
percentage of total sales in the second quarter and year-to-date fiscal
1995 than during the same periods a year ago. Retail sales, compared to
CGE sales, typically have higher margins and lower volume per
transaction.
In addition, retail occupancy costs decreased in the second quarter and
year-to-date this year compared to the same periods last year while
sales increased. The decrease in occupancy costs resulted mainly from
the store closures noted above.
Selling, general, and administrative (SG&A) expense was 11.1% of net
sales in the second quarter of fiscal 1995, compared to 12.5% in the
second quarter of fiscal 1994. Year-to-date SG&A expense was 11.2% of
net sales in fiscal 1995 compared to 12.8% in fiscal 1994. Savings
associated with previous restructuring actions, as discussed on the
following page, were offset by additional expenses from Mac's Place, the
Company's new mail order subsidiary.
Provision for restructuring costs was $4.4 million, or 1.3% of net
sales, year-to-date in fiscal 1994. During fiscal 1994, the Company
lowered its cost structure to improve its ability to compete.
Income (loss) before income taxes, as a result of the foregoing factors,
was a $1.6 million loss for the second quarter of fiscal 1995 compared
to $0.4 million income in the second quarter last year. Year-to-date
the loss before income tax benefit was $3.4 million in fiscal 1995
compared to $2.6 million in fiscal 1994.
As discussed in the Company's Form 10-K for the fiscal year ended April
2, 1994, the Company is examining its retail store format in order to
meet the needs of its customers. It is also beginning to provide value
added customer support services, such as work flow development, through
its Corporate, Government, and Education group.
FINANCIAL CONDITION
Cash and short-term investments increased from $25.7 million at April 2,
1994, to $28.6 million at the end of the second quarter of fiscal 1995.
The $2.9 million increase was mainly due to $5.4 million of cash
provided by operating activities, partially offset by $2.6 million
capital expenditures, as presented in the Consolidated Statement of Cash
Flows for the 26 week periods ended October 1, 1994, and October 2,
1993, on page 3.
Merchandise inventories increased $14.0 million, or 12%, from $117.1
million at April 2, 1994, to $131.1 million at October 1, 1994. The
increase was partly due to the introduction of additional hardware
products, such as hard drives and printers, since the end of the second
quarter a year ago.
Accounts payable increased from $91.1 million at the end of fiscal 1994,
to $106.8 million at October 1, 1994. The $15.7 million increase is
consistent with the increase in inventory.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $5.4 million for the 26
weeks ended October 1, 1994, compared to $11.3 million used by operating
activities during the same period a year ago. During the first two
quarters of fiscal 1995, there was a $15.6 million increase in accounts
payable, partially offset by a $14.0 million increase in inventory.
During the first two quarters of fiscal 1994, there was a $38.4 million
decrease in accounts payable, partially offset by a $25.2 million
decrease in inventory. For further information, see the Consolidated
Statement of Cash Flows for the 26 week periods ended October 1, 1994,
and October 2, 1993, on page 3.
Effective October 1, 1994, the Company entered into a revolving loan
agreement with two banks providing for unsecured borrowings up to $50
million through September 30, 1995. Each bank provides a $25 million
line of credit and one bank serves as agent for the agreement. The
agreement contains a number of covenants, including a restriction on the
payment of dividends and certain financial ratio requirements. The
Company was in compliance with all financial covenants and had no
outstanding borrowings on October 1, 1994.
There was no debt outstanding during the second quarter of fiscal 1995.
The average amount of debt outstanding during the second quarter of
fiscal 1994 was $1.0 million. During the first two quarters of fiscal
1995, working capital requirements and capital expenditures were
financed from operations.
The Company expects that working capital requirements in the foreseeable
future will be satisfied by cash flow from operations and borrowings
under these lines of credit. Depending on its rate of growth, the
Company may require additional financing, including bank borrowings and
further issuances of debt and/or equity securities.
Part II. OTHER INFORMATION
ITEM 1. Legal Proceedings
On June 9, 1994, the Company announced that it had settled a
shareholders' lawsuit originally filed against the Company, a
current officer, and two former officers who were also directors.
The current officer had recently been dismissed from the suit.
The action, originally entitled Finucan v. Egghead, et al., was
filed in federal court in Seattle in September 1993 and is alleged
to be brought on behalf of all purchasers of the Company's common
stock between February 11, 1992, and November 18, 1992, (other
than the individual defendants and other individuals and entities
otherwise affiliated with the Company). The settlement, which is
subject to approval of the court, calls for a cash payment by the
Company of $2.625 million. Net of expected insurance recovery,
the settlement and related attorneys' fees resulted in a pretax
charge of $1.2 million in fiscal year 1994 ($0.04 per share, net
of income tax impact).
ITEM 4. Submission of Matters to a Vote of Security
Holders
The Company held its annual Meeting of Shareholders on September
8, 1994. Paul E. Allen and George P. Orban were elected as Class
II directors, whose terms expire in 1996. The number of votes
cast for election of the above Board of Directors was as follows:
<TABLE>
<S> <C> <C> <C>
Nominee In Favor Withheld
Paul E. Allen 13,620,750 87,032
George P. Orban 13,619,274 88,508
</TABLE>
Part II. OTHER INFORMATION (con't)
ITEM 6. Exhibits and Reports On Form 8-K
a. Exhibits
*10.10 Microsoft 1994/1995 Channel Agreement dated July 1, 1994.
*10.11 Addendum to Microsoft 1994/1995 Channel Agreement dated
July 1, 1994.
*10.11a Follow up letter dated August 2, 1994, from Microsoft
regarding Microsoft 1994/1995 Channel Agreement dated
July 1, 1994.
10.18 Lease Termination and Rent Payment Agreement between
Sammamish Park Place II Limited Partnership as Landlord
and DJ&J Software Corporation as Tenant regarding the
Company's administrative headquarters.
10.18a First Amendment to Lease Termination and Rent Payment
Agreement between Sammamish Park Place II Limited
Partnership as Landlord and DJ&J Software Corporation as
Tenant.
10.18b Second Amendment to Lease Termination and Rent Payment
Agreement between Sammamish Park Place II Limited
Partnership as Landlord and DJ&J Software Corporation as
Tenant.
*10.29 Revolving Loan Agreement dated September 30, 1994, among
Security Pacific Bank Washington, N.A. and U.S. Bank of
Washington, National Association, Egghead, Inc., and DJ&J
Software Corporation.
**10.31a Separation agreement between Egghead, Inc. and DJ&J
Software Corporation (collectively, the "Company") and
Ronald P. Erickson dated August 1, 1994.
27 Financial Data Schedule.
28 Report of Independent Public Accountants.
b. Reports on Form 8-K
None.
* Confidential portions of this exhibit have been omitted and filed
separately with the Commission pursuant to an Application for
Confidential Treatment under Rule 24b-2 under the Securities
Exchange Act of 1934. Each exhibit has been marked to identify
the confidential portions that are omitted.
** Designates management contract of compensatory plan or
arrangement.
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.
EGGHEAD, INC.
(Registrant)
Date: November 4, 1994 /s/ Carolyn J. Tobias
Carolyn J. Tobias
Senior Vice President, Chief Financial
Officer (Principal Financial and
Accounting Officer)
Microsoft Corporation
1994/1995 Channel
Agreement
This Microsoft Corporation 1994/1995 Channel Agreement ("Agreement") is
entered into as of the 1st day of July, 1994 between MICROSOFT
CORPORATION ("MS") having its principal place of business at One
Microsoft Way, Redmond, WA 98052-6399 and DJ&J SOFTWARE CORPORATION
d.b.a. EGGHEAD SOFTWARE ("CUSTOMER") having its principal place of
business at 22011 SE 51st Street, Issaquah, WA 98027.
1. Definitions
All capitalized terms included in this Agreement are as defined in
Schedule A attached hereto.
2. Term of Agreement
2.1 Term
This Agreement shall take effect on the Effective Date and shall
continue until June 30, 1995.
2.2 Termination
Either MS or CUSTOMER may terminate this Agreement and/or any amendment
hereto at any time, with or without cause, upon thirty (30) days prior
written notice. Neither party shall be responsible to the other for any
costs or damages resulting from the termination of this Agreement.
Rights to payment of money which have accrued prior to termination shall
survive termination. Any Product acquired by CUSTOMER pursuant to this
Agreement which is in its possession as of the termination of this
Agreement shall be distributed by CUSTOMER subject to the restrictions
in this Agreement, or may be returned to MS only within sixty (60) days
of termination as authorized herein. CUSTOMER shall make a final report
to MS within ninety (90) days of termination of this Agreement.
Termination of this Agreement shall automatically terminate any
amendments hereto.
3. CUSTOMER Obligations
3.1 Financial Statement
CUSTOMER will provide to MS' credit management, quarterly Financial
Statements within forty-five (45) days after the end of each calendar
quarter. CUSTOMER Financial Statements will be used by MS' credit
department solely for the purpose of establishing and reviewing
CUSTOMER's credit. Financial Statements should be forwarded to attn.
Credit Manager, Finance, Microsoft, One Microsoft Way, Redmond, WA
98052-6399.
3.2 Payment Terms
Payment terms are net ----- (-----) days from the date of MS' invoice,
subject to approval of open discount terms by MS. For payments made
within ----- (-----) days from the date of MS' invoice, CUSTOMER shall
- -------------------------------------------. All invoices outstanding
over thirty (30) days may be assessed a finance charge of the then-
current prime rate plus ----- percent (-----%) per month or the legal
maximum, whichever is less. Failure by CUSTOMER to meet payment terms
may result in a hold by MS of all pending CUSTOMER orders.
All payments to MS by CUSTOMER shall be in the form of bank wire
transfer, sent to the following:
First Interstate Bank of WA
Seattle Main Branch
ABA: #125-000-286
Beneficiary: Microsoft Corporation
Account No. 001-025865
3.3 Shipment Shortage Claims
CUSTOMER shall submit all claims for shortages and/or variances in
shipments to MS in writing within fifteen (15) days of CUSTOMER's
receipt of the shipment. All such claims not submitted in writing to MS
within the fifteen (15) day period shall be deemed waived by CUSTOMER.
CUSTOMER shall be responsible for all claims made with respect to
freight collect shipments, and shall not withhold payment to MS as a
result of such claims.
3.4 No Other Product Warranties by CUSTOMER
Neither CUSTOMER nor any of its employees or agents shall have any right
to make any other warranties or promises for the use of Product which
are not contained in the written warranty document accompanying the
Product. CUSTOMER may, however, make representations and give
instructions for the use of the Product which are contained on the
Product label or container, or End User documentation provided with the
manual or MS product literature denoted by a MS part number or
authorized in writing by MS.
3.5 No Alterations of Product
CUSTOMER shall not alter the Product or Product packaging, and shall
have no authority to make copies of MS diskettes or documentation.
CUSTOMER shall distribute Product to its customers in unopened packages
as shipped by MS.
3.6 Use of Trademarks
The appropriate trademark symbol (either "TM" or "*" in a superscript
following the Product name) shall be used whenever a Product name is
first mentioned in any advertisement, brochure, or other material
circulated or displayed by CUSTOMER. MS' current trademark list is
attached hereto as Schedule B.
3.7 Authorized Distribution
Product acquired under this Agreement shall be distributed only within
the Territory. CUSTOMER shall not, without the prior written consent of
MS, distribute Product to any Reseller or End User whom they have reason
to believe may re-distribute such Product outside of the Territory.
3.8 Taxes
CUSTOMER shall be liable for all sales, use, value added, duties,
tariffs or other similar taxes of any nature whatsoever associated with
the distribution of the Product, and shall indemnify and hold MS
harmless from any such taxes or expenses.
3.9 -----------------------------
From time to time, MS may require ----------------------------------
from CUSTOMER. CUSTOMER shall comply with all ---------------------
requirements designated by MS from time to time.
4. MS Obligations
4.1 Assistance with Reporting
Upon request, MS shall use best efforts to assist CUSTOMER in data
reporting, and will work with CUSTOMER's MIS department to facilitate
the data reporting process.
4.2 New Products; Promotional Products
MS may elect at any time during the term of this Agreement to announce
new or Promotional Product to which the terms and conditions of this
Agreement do not apply. In the event MS elects to announce Promotional
Product, MS shall provide CUSTOMER with ----- (-----) days prior notice
of such announcement.
4.3 Inventory Price Protection
During the term of the Agreement, MS shall grant CUSTOMER a price
adjustment against Product price reductions made by MS, which price
reductions are made on an indefinite basis, on all CUSTOMER's inventory
which CUSTOMER reports as in its inventory as of the day of the price
reduction. Such price adjustment shall be in the form of a Purchase
Credit equal to the difference between the lowest price paid by CUSTOMER
during the ----- (-----) Months prior to the price reduction and the
reduced price, and shall be paid no later than ----- (-----) days after
CUSTOMER provides proof of inventory. Special temporary prices and
promotional offerings, which may include price reductions or free goods,
shall not be considered a price reduction to which this section applies.
4.4 No Warranties for Product Not Manufactured by MS
MS makes no warranties as to items distributed under a third party name,
copyright, trademark or trade name which may be included within the
retail package of a Product sold hereunder.
4.5 Audits
MS may audit the applicable records and operations of CUSTOMER as is
reasonable to verify CUSTOMER's compliance with the terms of this
Agreement. CUSTOMER shall promptly correct any errors and omissions
disclosed by such audit. Any audit will be conducted during CUSTOMER's
normal business hours in such a manner as not to unreasonably interfere
with CUSTOMER's normal business activities.
5. CUSTOMER and MS Obligations
5.1 Order Processing
CUSTOMER shall order Product from MS by written or electronically
transmitted purchase order. All orders by CUSTOMER shall be in Master
Pack quantities only. MS shall have ----- (-----) days from receipt to
reject any purchase order. MS shall fulfill unconditional written or
electronic purchase orders from CUSTOMER, subject to CUSTOMER's credit
limits, current payment status, and approved Average Payment Days
("APD") guidelines as determined by MS.
Except as provided herein, CUSTOMER shall have the right to change or
cancel any purchase order, provided that CUSTOMER notifies MS of the
change or cancellation no later than ----- (-----) hours prior to the
order shipment to CUSTOMER by MS. Should CUSTOMER choose to change any
purchase order line item, CUSTOMER shall be required to submit a new
purchase order to MS, clearly indicating which line item(s) are changed.
Line item changes shall not effect the remaining items on CUSTOMER's
purchase order. Should CUSTOMER choose to cancel a purchase order,
CUSTOMER must provide MS with a written cancellation request
5.2 Defective Product Returns
At MS' sole discretion, MS may determine that a Product or Product
shipment is Defective. Should MS determine that a Product or Product
shipment is Defective, MS shall provide CUSTOMER with a replacement for
all defective Product returned to MS or destroyed at CUSTOMER's
location. ----- shall pay freight costs for shipment of replacement
Product from MS to Customer. All Defective Product returned to MS shall
be shipped freight --------------------- in cartons clearly marked with
the Return Authorization Number and a packing slip affixed to the
carton.
5.3 Product Warranty; Limitation of Liability
(a) MS warrants its software and hardware Product to End Users as
defined in the written limited warranty document accompanying each
Product. All replacement Product is delivered subject to the terms of
the MS limited Product warranty. THE ABOVE LIMITED WARRANTIES ARE IN
LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, OR STATUTORY,
INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE AND OF ALL OTHER OBLIGATIONS OR LIABILITIES ON MS'
PART.
(b) NEITHER MS NOR ANYONE ELSE WHO HAS BEEN INVOLVED IN THE
CREATION, PRODUCTION, OR DELIVERY OF ANY PRODUCT WHICH ARE THE SUBJECT
OF THIS AGREEMENT SHALL BE LIABLE FOR ANY DIRECT, INDIRECT,
CONSEQUENTIAL, OR INCIDENTAL DAMAGES (INCLUDING DAMAGES FOR LOSS OF
BUSINESS PROFITS, BUSINESS INTERRUPTION, LOSS OF BUSINESS INFORMATION,
AND THE LIKE) ARISING OUT OF THE USE OR INABILITY TO USE ANY PRODUCT
EVEN IF MS HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
(c) IN ANY CASE, THE LIABILITY OF MS (i) UNDER ANY PROVISION OF
THIS AGREEMENT; (ii) FOR ANY DAMAGES CAUSED BY A PROGRAM DEFECT OR
FAILURE IN ANY PRODUCT OR (iii) ARISING FROM A COURT OF PROPER
JURISDICTION HOLDING ANY OF THE ABOVE WARRANTIES OR DISCLAIMERS OF
WARRANTIES INADEQUATE- OR INVALID SHALL BE LIMITED TO THE AMOUNT
ACTUALLY PAID BY CUSTOMER TO MS UNDER THIS AGREEMENT. MS' LIMITATION OF
LIABILITY IS CUMULATIVE WITH ALL OF MS' EXPENDITURES BEING AGGREGATED TO
DETERMINE SATISFACTION OF THE LIMIT. THE EXISTENCE OF CLAIMS OR SUITS
AGAINST MORE THAN ONE PRODUCT LICENSED UNDER THIS AGREEMENT WILL NOT
ENLARGE OR EXTEND THE LIMIT. CUSTOMER RELEASES MS FROM ALL OBLIGATIONS,
LIABILITY, CLAIMS OR DEMANDS IN EXCESS OF THE LIMITATION.
5.4 Semester Programs
(a) Marketing Funds
Each Semester, MS may allow CUSTOMER to participate in programs which
provide the opportunity to earn marketing funds. CUSTOMER's
participation in such programs shall be governed by CUSTOMER's then
current Microsoft Rebate and Marketing Fund Addendum to this Agreement,
and Microsoft's Marketing Fund Guidelines, as such may be promulgated
and modified by MS, in its sole discretion, from time to time.
(b) Rebates
Each Semester, MS may allow CUSTOMER to participate in programs which
provide the opportunity to earn rebates as described in CUSTOMER's
current Microsoft Rebate and Marketing Fund Addendum to this Agreement,
and CUSTOMER's Rebate Program Guidelines, as such may be promulgated and
modified by MS, in its sole discretion, from time to time.
(c) Electronic Data Interchange
MS shall require CUSTOMER to provide weekly and monthly sales reporting
during the term of this Agreement. Such sales reporting shall be
submitted to MS in accordance with the Electronic Data Interchange (EDI)
Guidelines as provided to CUSTOMER by MS, from time to time.
5.5 Inventory Balancing
CUSTOMER must submit a written or electronic MS Return Authorization to
return Products for the purpose of inventory balancing in the MS Months
of ------------------------------------, summarizing the quantities of
each Product to be returned. Upon verification that CUSTOMER is meeting
its inventory balancing terms, MS shall issue a Return Authorization
Number, which will expire ----- (-----) days from the date of issue.
To reduce its inventory risk, CUSTOMER shall be entitled to balance its
Product inventory in accordance with the following:
(a) Product inventory may not be balanced more than ----- times
during the term of this Agreement, during the Months indicated above,
and within ----- (-----) days of the date of issue of the Return
Authorization Number,
(b) Product may be balanced only if, at the time of balancing, it
is listed on the then-current MS Price List,
(c) Product may be balanced only if CUSTOMER's Product return is
accompanied by a -------------------------------------------------------
- -------------------------,
(d) The aggregate quantity of Product that may be returned shall
be limited to; (i) in the case of Product classified by MS as "Consumer
Product" (excluding, however, all ------------------- Product), -----%
of net -------------------- of such Consumer Product for the ----- full
Months immediately preceding the stock balancing request, and (ii) in
the case of all Product other than that referred to in clause (i) above,
to -----% of net ------------------------ of all other
Product for the ----- full Months immediately preceding the stock
balancing request,
(e) Promotional Product may not be balanced,
(f) Product to be balanced may only include Product purchased by
CUSTOMER from MS,
(g) Unresaleable product may not be balanced, and
(h) Product is subject to inspection by MS or an MS authorized
agent prior to return by CUSTOMER to MS pursuant to the terms of MS'
then current Return Processing Guidelines.
If the foregoing conditions have been met, CUSTOMER shall return Product
to MS -------------- in cartons clearly marked with the Return
Authorization Number and a packing slip attached to the outside. Any
Product returned to MS which does not comply with the provisions of this
Section may, at MS' discretion, be returned by MS to CUSTOMER subject to
a ----- percent ----------------- and the -------------- incurred by MS
in returning such Product which shall be paid immediately by CUSTOMER to
MS upon receipt of an invoice therefor.
Upon receipt of Product which complies with the conditions set forth in
this Section, MS shall issue a Purchase Credit for the returned Product
in an amount equal to the ------------ CUSTOMER paid for the Product
in the ----- Months prior to the return. In no event, will ------------
- ------- be given for exchanges, replacements or returned merchandise
hereunder. ------------------ shall pay all freight and other costs of
replacement Product in the same manner and on the same terms as new
Product purchased by CUSTOMER under this Agreement
5.6 Prior Version Returns
When MS ships a new version of a Product or a Discontinued Product to
its authorized distributors, CUSTOMER shall receive a Purchase Credit
for prior version of the Product, if CUSTOMER complies with all of the
following:
(a) Product shall be destroyed at ----------------------- once
every other Month,
(b) Product may be returned only if CUSTOMER's Product return
- ------------------------------------------------------------------------
(c) Returned product shall be received by MS within ----- days of
the date the new version of such Product is first shipped by MS to its
authorized distributors,
(d) Product which is promotional merchandise may not be returned,
(e) Product to be returned must only include Product purchased by
CUSTOMER from MS,
(f) Unresaleable Product may not be returned, and
(g) Product returned shall be limited to the --------------------
prior to the new Product version.
MS shall use its best efforts to notify CUSTOMER within ----- days prior
to the shipment of any new Product version, or the existence of any
discontinued Product, which would be subject to this Section.
If the foregoing conditions have been met, Product shall be destroyed at
- ------------- locations pursuant to the terms of MS' then current Return
Processing Guidelines.
5.7 Unresaleable Product Allowance
Contemporaneously with CUSTOMER's credit for prior versions, CUSTOMER
shall receive a Purchase Credit equal to ----- percent (-----%) of
CUSTOMER's net purchases for the previous ----- (-----) Months. Such
Purchase Credit shall be to compensate CUSTOMER for Unresaleable Product
held in CUSTOMER's inventory which is no longer resaleable, provided
that CUSTOMER agrees to destroy or recycle all such Product, and provide
MS will a full report of all Unresaleable Product. Unresaleable Product
may not be resold or recycled.
Upon destruction of Product which complies with the conditions set forth
in this Section, MS shall issue a Purchase Credit for the Product
destroyed in an amount equal to the ------------------------------- paid
for the Product in the ----- months prior to the return. In no event,
will -------------- be given for exchanges, replacements or returned
merchandise hereunder. -------------- shall pay all freight and other
costs of replacement Product in the same manner and on the same terms as
new Product purchased by CUSTOMER under this Agreement
6. Patent, Copyright and Trademark Infringement
MS shall defend and pay the amount of any final adverse judgment against
CUSTOMER, or settlement to which MS has consented, resulting from claims
of infringement of any United States patent, copyright, trademark and/or
service mark with respect to a Product, provided that the Product has
not been altered, and provided further that MS is notified promptly in
writing of such a claim and has sole control over its defense or
settlement, and CUSTOMER provides reasonable assistance in the defense
of the same.
7. Delay in Performance
Neither party shall be liable for failure or delay in the performance of
any of its obligations under this Agreement, except obligations for the
payment of money, if such delay or failure is caused by circumstances
beyond the control of the party affected. Strikes or other labor
difficulties which are not capable of being terminated on terms
acceptable to the party affected shall not be considered circumstances
within the control of such party. In the event of Product shortages, MS
shall have the right to allocate available supplies of the Product in
its sole discretion.
8. No Waiver
None of the provisions of this Agreement shall be deemed to have been
waived by any act or acquiescence on the part of MS, CUSTOMER or their
respective agents or employees, but may be waived only by an instrument
in writing signed by an authorized officer of the waiving party. No
waiver of any provision of this Agreement shall constitute a waiver of
any other provision or of the same provision on another occasion.
9. No Partnership or Agency
Nothing in this Agreement shall be deemed to create or constitute a
partnership, joint venture, agency, or contract of employment between MS
and CUSTOMER.
10. Attorney's Fees; Governing Law
In the event an action is commenced to enforce a party's rights under
this Agreement, the prevailing party in such action shall be entitled to
recover its costs and attorneys' fees. This Agreement shall be governed
by and interpreted in accordance with the laws of the State of
Washington. CUSTOMER consents to nonexclusive jurisdiction and venue in
King County, Washington.
11. Entire Agreement
This Agreement and all attached Amendments, Addenda and Schedules
constitute the entire agreement between MS and CUSTOMER, and supersedes
and terminates any and all prior agreements or contracts, written or
oral, entered into between the parties relating to the subject matter
hereof. Any representations, promises, or conditions in connection
therewith not in writing signed by both parties shall not be binding
upon either party. This Agreement shall control any provisions in
purchase orders which are inconsistent with this Agreement.
12. U.S. Government Restricted Rights
Any Product which CUSTOMER distributes or licenses to or on behalf of
the United States of America, its agencies and/or instrumentalities (the
"Government"), are provided to CUSTOMER with RESTRICTED RIGHTS. Use,
duplication or disclosure by the Government is subject to restriction as
set forth in subparagraph (c)(1)(ii) of the rights in Technical Data and
Computer Software clause at DFAR 252.227-7013, or as set forth in the
particular department or agency regulations or rules which provide MS
protection equivalent to or greater than the above-cited clause.
CUSTOMER shall comply with any requirements of the Government to obtain
such RESTRICTED RIGHTS protection, including without limitation, the
placement of any restrictive legends on the Product software, Product
documentation, and any license agreement used in connection with the
distribution of the Product. Manufacturer is Microsoft Corporation, One
Microsoft Way, Redmond, Washington 98052-6399. Under no circumstances
shall MS be obligated to comply with any Governmental requirements
regarding the submission of or the request for exemption from submission
of cost or pricing data or cost accounting requirements. For any
distribution or license of the Product that would require compliance by
MS with Governmental requirements relating to cost or pricing data or
cost accounting requirements, CUSTOMER must obtain an appropriate waiver
or exemption from such requirements for the benefit of MS from the
appropriate Governmental authority before the distribution and/or
license of the Product to the Government.
13. Confidentiality
CUSTOMER expressly undertakes to retain in confidence the terms and
conditions of this Agreement, and all information and know-how
transmitted to it by MS and make no use of such information and know-how
except under the terms and during the existence of this Agreement.
CUSTOMER shall guarantee and ensure its employees' compliance with this
paragraph. CUSTOMER's obligations under this paragraph shall survive
any termination of this Agreement and shall extend to the earlier of
such time as the information is public domain or five (5) years
following the termination of this Agreement
14. No Assignment
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, provided
that CUSTOMER may not assign its rights or obligations under this
Agreement in any way without the prior written consent of MS.
15. Notices
All notices sent by MS or CUSTOMER alleging, regarding, responding to,
or in any way connected with any claim of breach of this Agreement or
any other legal obligation related hereto, shall be sent via U.S.
certified mail (return receipt requested), or via overnight courier
(e.g., Federal Express, or DHL), and addressed as follows:
If to MS: Microsoft Corporation
One Microsoft Way
Redmond, WA 98052-6399
Attn.: Vice President, U.S. Sales
With cc to: Law and Corporate Affairs
If to CUSTOMER:
Attn.:
16. Survival
Sections 2.2, 3.2, 3.4, 3.5, 3.6, 3.7, 3.8, 4.4, 4.5, 5.3, 5.4(c), 11,
12, 13, 14 and 17 shall survive any termination of this Agreement
IN WITNESS WHEREOF, the parties have signed this Agreement on the dates
indicated below. This Agreement is not binding until executed by MS.
MICROSOFT CORPORATION ("MS") DJ&J SOFTWARE CORPORATION
d.b.a. EGGHEAD SOFTWARE ("CUSTOMER")
By: By:
Michael C. Appe William J. Gilsing
Name (please print) Name (please print)
Vice President, U.S. Sales General Merchandise Manager
Title Title
6/30/94
Date Date
Schedule A
Defined Terms
"Defective Product" is defined as a manufacturer's defect in
materials or media.
"Discontinued Product" is defined as Product that MS has stopped
manufacturing and discontinued from the CUSTOMER Price List.
"Distributor" is defined as any MS customer which purchases MS
Product directly from MS, and distributes said Product to Resellers.
"End User" is defined as the ultimate consumer of Product.
"Financial Statement" is defined as a Balance Sheet as of the last
day of the calendar quarter, and an Income Statement and Statement of
Cash Flows for the quarter and year-to-date, prepared in accordance with
Generally Accepted Accounting Principles ("GAAP"). Any deviation from
GAAP in the quarterly statements shall be clearly noted. These
statements must be signed by an officer of CUSTOMER as being
representative of the books and accounts of CUSTOMER.
"Inventory Balancing" is defined as the return of eligible MS
Products for the purpose of reducing CUSTOMER's stock of such Products.
"Month" is defined as a MS fiscal month as outlined in the
calendar attached hereto as Schedule C.
"Product" is defined as any MS Stock Keeping Unit ("SKU") listed
on CUSTOMER's then current Price List.
"Product Upgrade" is defined as a successor version of a Product
characterized by a change in the one's, tenth's, hundredth's or after
the hundredth's digit of the Product version number.
"Promotional Product" is defined as a special Product SKU which is
available to CUSTOMER for resale for a limited time. Free Product
promotions are not considered Promotional Product.
"Purchase Credit" is defined as a dollar amount credited to
CUSTOMER's account with MS, which amount may only be used by CUSTOMER in
the manner set forth in this Agreement
"Reseller" is defined as any software retailer which purchases
Product from MS or a MS authorized Distributor.
"Return Authorization Number" is defined as the unique number
assigned to CUSTOMER by MS for the purpose of Product returns from
CUSTOMER to MS.
"Semester" is defined as a six month period. There are two (2)
Semesters during the term of this Agreement, January 1 through June 30,
and July 1 through December 31.
"Territory" is defined as the geographic boundaries of the United
States of America, excluding all United States territories, possessions,
or protectorates.
"Unresaleable Product" is defined as any Product held in
CUSTOMER's inventory, including damaged Product or Product returned by
CUSTOMER's customers, which is no longer fit for resale, and is
ineligible for return to MS. For purposes of this Agreement,
Unresaleable Product shall not include that Product which has sustained
solely shrink wrap damage.
<TABLE>
<S>
<C> <C>
Schedule B
Microsoft Trademark List
Product Name Environment
Microsoft Access<F1> for Windows<F2>
Microsoft Access<F1> Exploration Kit for Windows<F2>
Microsoft<F1> Aircraft & Scenery Designer for MS-DOS<F1>
Microsoft<F1> BallPoin<F1> (none)
Microsoft<F1> BallPoint<F1> with QuickPort<F2>
Connection (none)
Microsoft<F1> Basic for UNIX<F1><F3)
Microsoft<F1> Basic for MS-DOS<F1>
Microsoft<F1> Bookshelf<F1> for Macintosh<F1>
Microsoft<F1> Bookshelf<F1> for MS-DOS<F1>
Microsoft<F1> C for MS-DOS<F1>
Microsoft<F1> C/C++ for Windows<F2>
Microsoft<F1> Chart for MS-DOS<F1>
Microsoft<F1> Chart for Macintosh<F1>
Microsoft<F1> Cinemania<F1> for Windows<F1>
Microsoft<F1> COBOL for MS-DOS<F1>
Microsoft<F1> COBOL for OS/2<F1>
Microsoft<F1> CodeView<F1> for Windows<F2>
Microsoft<F1> Creative Writer for Macintosh<F1>
DCA<F1><F4>/Microsoft<F1> Communications Server
(a.k.a. DCA) Networking Series
DCA<F1>/Microsoft<F1> Communications Workstation Networking Series
Microsoft<F1> Developer's System Networking Series
Microsoft<F1> Dinosaurs for Macintosh<F1> on CD-ROM
Microsoft<F1> Electronic Forms Designer for Windows<F2>
Microsoft<F1> Encarta<F2> for Macintosh<F1>
Microsoft<F1> Entertainment Pack for Windows<F2>
Microsoft<F1> Excel for Macintosh<F1>
Microsoft<F1> Excel for Windows<F2>
Microsoft<F1> Excel for Windows<F2> on CD-ROM
Microsoft<F1> File for Macintosh<F1>
Microsoft<F1> Fine Artist for Windows<F2>
Microsoft<F1> Flight Simulator<F2> for MS-DOS<F1>
Microsoft<F1> FORTRAN for UNIX<F1>
Microsoft<F1> FORTRAN for MS-DOS<F1>
Microsoft<F1> FORTRAN Powerstation for MS-DOS<F1>
Microsoft<F1> FORTRAN Powerstation 32 for Windows NT<F2>
Microsoft<F1> FoxPro<F1> for Macintosh<F1>
Microsoft<F1> FoxPro<F1> for MS-DOS<F1>
Microsoft<F1> FoxPro<F1> Connectivity Kit for Windows<F2>
Microsoft<F1> FoxPro<F1> Distribution Kit for Windows<F2>
Microsoft<F1> Game Shop for MS-DOS<F1>
Microsoft<F1> Golf for Windows<F2>
Microsoft<F1> GW-BASI<F1> for MS-DOS<F1>
<F1> Registered trademark.
<F2> Trademark.
<F3> UNIX is a registered trademark of UNIX Systems Laboratories.
<F4> DCA is a registered trademark of Digital Communications Associates.
Schedule B
Microsoft Trademark List
Product Name Environment
Microsoft<F1> Hewlett-Packard<F1><F3> FontPack for Windows<F2>
Microsoft<F1> InPort<F1> for MS-DOS<F1>
Microsoft<F1> Isaac Asimov's The Ultimate Robot for Macintosh<F1> on CD-ROM
Microsoft<F1> LAN Manager Networking Series
Microsoft<F1> LAN Manager for UNIX<F1> Systems Networking Series
Microsoft<F1> LAN Manager Remote Access Service Networking Series
Microsoft<F1> LAN Manager Services for
Macintosh<F1> Networking Series
Microsoft<F1> LAN Manager TCP/IP Utilities Networking Series
Microsoft<F1> LAN Manager Toolkit for sual
Basic<F1> Networking Series
Microsoft<F1> Macro Assembler for MS-DOS<F1>
Microsoft<F1> Macro Assembler for OS/2<F1>
Microsoft<F1> Mail for PC Networks
Microsoft<F1> MASM for MS-DOS<F1>
Microsoft<F1> Modular Windows<F2> Software
Development Kit for Windows<F2>
Microsoft<F1> Mondria<F1> for MS-DOS<F1>
Microsoft<F1> Mouse (none)
Microsoft<F1> MS-DOS<F1> 5 Upgrade operating system
Microsoft<F1> MS-DOS<F1> 6 Upgrade operating system
Microsoft<F1> MS-DOS<F1> Manager for MS-DOS<F1>
Microsoft<F1> MS-DOS<F1> QBasic for MS-DOS<F1>
Multimedia Beethoven: The Ninth Symphony for Windows<F2> on CD-ROM
Microsoft<F1> Multimedia Development Kit for Windows<F2>
Microsoft<F1> Multimedia Stravinsky for Windows<F2> on CD-ROM
Microsoft<F1> Multimedia Viewer for Windows<F2>
Microsoft<F1> Multiplan<F1> for MS-DOS<F1>
Microsoft<F1> Multiplan<F1> for OS/2<F1>
Microsoft<F1> National Gallery for Macintosh<F1>
Microsoft<F1> National Gallery for Windows<F2>
Microsoft<F1> Networks for UNIX<F1>
Microsoft<F1> New York for MS-DOS<F1>
The Microsoft<F1> Office for Macintosh<F1>
The Microsoft<F1> Office for Windows<F2>
The Microsoft<F1> Office for Macintosh<F1> on CD-ROM
Microsoft<F1> OnCall (none; miscellaneous)
Microsoft<F1> OnLine for Windows<F2> (none; miscellaneous)
Microsoft<F1> Open EIS Pak for Windows<F2>
Microsoft<F1> Operating System/2<F1><F4>
Microsoft<F1> Original Mouse (none)
Microsoft<F1> OS/2<F1> LAN Manager Network Device
Driver Kit for OS/2<F1>
<F1> Registered Trademark.
<F2> Trademark.
<F3> Hewlett-Packard is a registered trademark of Hewlett-Packard Company.
<F4> Operating System/2 is a registered trademark of International
Business Machines Corporation.
Schedule B
Microsoft Trademark List
Product Name Environment
Microsoft<F1> OS/2<F1> presentation
Manager<F1><F3> Softset for OS/2<F1>
MS OS/2<F1> Software Development Kit for OS/2<F1>
Microsoft<F1> Paris for MS-DOS<F1>
Microsoft<F1> Pascal for MS-DOS<F1>
Microsoft<F1> Pascal for UNIX<F1>
Microsoft<F1> PC Paintbrus<F1><F4> for Windows<F2>
Microsoft<F1> PowerPoint<F1> for MS-DOS<F1>
Microsoft<F1> PowerPoint<F1> for Windows<F2>
Microsoft<F1> Productivity Pack for Windows<F2>
Microsoft<F1> Professional Advisor Library Kit for MS-DOS<F1>
Microsoft<F1> Professional Toolkit for Visual
Basic<F1> for Windows<F2>
Microsoft<F1> Profit for Windows<F2>
Microsoft<F1> Project for Macintosh<F1>
Microsoft<F1> Project for MS-DOS<F1>
Microsoft<F1> Publisher for Windows<F2>
Microsoft<F1> Publisher Design Pack for Windows<F2>
Microsoft<F1> Publisher Special Occasion
Design Pack for Windows<F2>
Microsoft<F1> QuickBasic<F2> for Macintosh<F1>
Microsoft<F1> QuickBasic<F2> for MS-DOS<F1>
Microsoft<F1> QuickC<F1> for MS-DOS<F1>
Microsoft<F1> QuickC<F1> for Windows<F2>
Microsoft<F1> QuickPascal<F1> for MS-DOS<F1>
Microsoft<F1> Scenes for Windows<F2>
Microsoft<F1> Schedule+ for Windows<F2>
Microsoft<F1> Small Business Consultant CD-ROM series
Microsoft<F1> SoundBits<F2> for Windows<F2>
Microsoft<F1> SQL Administrator for Windows<F2> Networking Series
Microsoft<F1> SQL Server Networking Series
Microsoft<F1> SQL Server Client-Server Development
Kit for WindowsNT<F2>
Microsoft<F1> SQL Server Software Development Kit for WindowsNT<F2>
Microsoft<F1> Support Advantage Service (none)
Microsoft<F1> System V/386 Release 3.2 for UNIX<F1>
Microsoft<F1> TrueImage<F2> (none; miscellaneous)
Microsoft<F1> TrueType<F1><F5> Font Pack for Windows<F2>
Microsoft<F1> Video for Windows<F2>
Microsoft<F1> Visual Basic<F1> for MS-DOS<F1>
Microsoft<F1> Visual Basic<F1> for Windows<F2>
Microsoft<F1> Visual Basic<F1> for Windows<F2>
Microsoft<F1> Visual C++<F2> for Windows<F2> and
WindowsNT<F2>
<F1> Registered Trademark.
<F2> Trademark.
<F3> Presentation Manager is a registered trademark of International
Business Machines Corporation.
<F4> PC Paintbrush is a registered trademark of ZSoft Corporation.
<F5> TrueType is a registered trademark of Apple Computer, Inc.
Schedule B
Microsoft Trademark List
Product Name Environment
Microsoft<F1> Visual C++<F2> for Windows NT<F2>
Microsoft<F1> Visual C++<F2> for Windows<F2>
Microsoft<F1> Visual Tool Suite for Windows<F2>
Microsoft<F1> Win32s for Windows<F2>
Microsoft<F1> Windows operating system
(for 3.1 + higher) for MS-DOS<F1>
Microsoft<F1> Windows<F2> & MS-DOS<F1>5 for
IBM<F1><F3> PS/2<F1><F4>
Microsoft<F1> Windows<F2> Device Driver Kit for MS-DOS<F1>
Microsoft<F1> Windows<F2> for OS/2<F1>
Development Kit for MS-DOS<F1>
Microsoft<F1> Windows<F2> for Workgroups for Windows<F2>
Microsoft<F1> Windows<F2> for Workgroups Add-on
Microsoft<F1> Windows<F2> Libraries for
OS/2 Development Kit for MS-DOS<F1>
Microsoft<F1> Windows<F2> Printing System for Windows<F2>
Microsoft<F1> Windows<F2> Software Development Kit for MS-DOS<F1>
Microsoft<F1> WindowsNT<F2> for Windows<F2>
Microsoft<F1> WindowsNT<F2> Advanced Server for Windows<F2>
Microsoft<F1> Word for Macintosh<F1>
Microsoft<F1> Word for MS-DOS<F1>
Microsoft<F1> Word for OS/2<F1>
Microsoft<F1> Word for Windows<F2> & Bookshelf<F1> for Windows<F2>
Microsoft<F1> Workgroup Templates for Windows<F2>
Microsoft<F1> Works for Macintosh<F1>
Microsoft<F1> Works for Windows<F2>
Microsoft<F1> Works, Multimedia Edition for Windows<F2> on CD-ROM
Microsoft<F1> XENIX<F1> System V/286 for UNIX<F1>
<F1> Registered Trademark.
<F2> Trademark.
<F3> IBM is a registered trademark of International Business Machines
Corporation.
<F4> PS/2 is a registered trademark of International Business Machines
Corporation.
</TABLE>
Schedule C
Microsoft Calendar
Rebate and Marketing Fund
Addendum to The 1994/1995 Microsoft
Channel Agreement
(July - December, 1994)
This Addendum ("Addendum") entered into as of the 1st day of July, 1994,
modifies that certain Microsoft 1993/1994 Channel Agreement
("Agreement") between MICROSOFT CORPORATION ("MS") having its principal
place of business at One Microsoft Way Redmond, WA 98052 and EGGHEAD
SOFTWARE ("CUSTOMER") having its principal place of business at 22011 SE
51st Street, Issaquah, WA 98027. The Agreement is hereby supplemented
as follows:
1. Purpose
The purpose of this Addendum is to set forth the framework by which
CUSTOMER may earn Rebates and Marketing Funds. For purposes of this
Addendum, capitalized terms not otherwise defined herein, shall have the
same definitions as set forth in the Agreement
2. Term and Termination
This Addendum shall be effective as of the date executed by MS below,
and shall expire on December 31, 1994. Either party may terminate this
Addendum, with or without cause, upon thirty (30) days prior written
notice. This Addendum is not valid unless both MS and CUSTOMER have
executed a Microsoft 1994/1995 Channel Agreement.
3. Definitions
All capitalized terms included in this Addendum are as defined in
Schedule A attached hereto.
4. Rebates
4.1 Rebate Program
CUSTOMER is eligible to receive up to a ----- percent (-----%) Rebate
during the Rebate and Marketing Fund Period. The Rebate shall be paid
provided CUSTOMER complies with the program guidelines outlined in
Schedule B. Notwithstanding such program guidelines, MS may, at its sole
discretion, ------------------------- of the Rebate prior to the end of
the Rebate and Marketing Fund Period. The Rebate so paid may be
adjusted subsequently based upon compliance with the program guidelines.
5. Marketing Funds
5.1 Base Level Funds
In partial consideration for CUSTOMER's Qualified ----------------, MS
hereby grants to CUSTOMER the use of Marketing Funds calculated --------
by the total --------- Product CUSTOMER purchased from MS multiplied
by each Product s respective Marketing Fund --------------- as outlined
in Schedule C attached hereto. MS reserves the right to modify Schedule
C at anytime without notice. Marketing Funds accrue ---- and shall
expire on -----------------.
Marketing Funds shall not begin accruing until both CUSTOMER and MS have
executed this Addendum. Should CUSTOMER fail to execute, or should MS
be unable to execute this Addendum by ----------------, for each full
month after --------------, in which this Addendum is not executed,
CUSTOMER shall not receive such month's Marketing Fund accrual.
5.2 Opportunity Funds
Periodically, MS may allow CUSTOMER to participate in other MS programs
in which CUSTOMER shall receive additional Marketing Funds.
5.3 Guidelines for Marketing Fund Use
MS shall provide CUSTOMER with a guideline of activities which MS sees
as a priority for spending the funds. The Microsoft Reseller Marketing
Fund Guidelines is attached hereto as Schedule D, and Section 5.4 below.
5.4 Street Date Program
From time to time, MS may announce new Product or new versions of
existing Product for which MS shall set a Street Date. MS shall ship
such Product to CUSTOMER provided that:
(a) CUSTOMER shall not display or sell the Product in any sales
office, retail store, or outlet prior to established Street Date; and
(b) CUSTOMER's distribution centers and warehouse shall not
distribute, for period of up to ----- (-----) months, Product to any
individual sales office, retail store or outlet which MS in its sole
discretion has determined in violation of the Street Date Program.
Should CUSTOMER violate the terms of this Section 4.2, CUSTOMER shall be
penalized ----- (-----) of the total Marketing Fund accrual for the ----
in which the violation occurred. Further, for a period of up to
- ----- (-----) months, MS reserves that right to withhold shipment to
CUSTOMER of future Product until the Street Date of such Product
6. Reporting Requirements
CUSTOMER shall submit reports to MS as outlined in CUSTOMER's Rebate
Guidelines, and in Schedule E attached hereto in accordance with the EDI
Reporting Guidelines attached hereto as Schedule F. Failure by CUSTOMER
to comply with the terms of the Guidelines will result in CUSTOMER's
loss of its ------------------------- total for each ----- reporting is
non-compliant. Further, CUSTOMER shall ----- (-----) of its Marketing
Fund accruals for each ----- reporting is non-compliant.
IN WITNESS WHEREOF, the parties have signed this Addendum on the date
indicated below. This Addendum is hereby made part of the Agreement.
All terms and conditions of the Agreement not supplemented herein shall
remain in full force and effect. This Addendum is not binding until
executed by MS.
AGREED AND ACCEPTED TO BY AGREED AND ACCEPTED TO BY
MICROSOFT CORPORATION ("MS"): EGGHEAD SOFTWARE
("CUSTOMER")
By By
Name (please print) Name (please print)
Title Title
6/30/94
Date Date
Schedule B
Rebate Program Guidelines
Rebate Program Overview
Programs The July/December, 1994, Rebate period offers two
rebate programs. Rebate percentages available are
listed in the table below. Details on each program
are also included in this document.
<TABLE>
<S> <C> <C> <C>
Maximum Percentage Outlined on
Rebate Incentive Available Page(s)
---------- Program -----% B-2/B-3
---------- Program -----% B-4
Total -----%
</TABLE>
Rebate Rebates will be paid in the form of Microsoft purchase credits
Calculations ------- days after the end of each quarter rebate period
and Payments (i.e. ----- for July/September 1994 quarter). Rebates are
calculated by multiplying the achieved rebate
percentage by the total ----------- for the rebate
period. Note: ---------------------------------------
Compliance Provided that Egghead is compliant with all of the compliance
Rebate requirements, the compliance rebate will be paid in the form of
Payment a purchase credit for use toward Microsoft products each -----
to Egghead on the -------------------------------.
Any issues surrounding rebates should be sent in writing to
Kristin Weeber, Rebate Specialist, no later than 30 days
following receipt of rebate payment. If such written notice
is not provided within thirty (30) days, Egghead shall have no
further right to dispute rebate payment.
Compliance Rebate Program
Program The objective of the Compliance Rebate Program is to incent
Objectives Egghead to be compliant with Microsoft contractual requirements
for payments, Street Dates, and reporting.
Non- Failure to be compliant with any or all of the current compliance
compliance will result in the -----------------------------------.
1.Microsoft At all times during the Rebate Period, a minimum of -----------
Payment percent (-----%) of Egghead's total dollar amount due to MS shall
Requirements be ----- (net ----- days).
2.Microsoft Street Date Program requirements are as outlined in Section 5.4
Street Date of the Addendum.
Requirements
3.Microsoft All reports outlined below must be Timely, Accurate and
Reporting Complete. For purposes of this Schedule B, "Timely" is defined
Requirements as MS receipt of reporting by the due date and time indicated,
"Accurate" is defined as the correct population of all reporting
fields, and "Complete" is defined as the population of all
required reporting fields.
FAST TRACK REPORTING
Fast Track Reporting is defined as a weekly report via
Electronic Data Interchange format ("EDI") of weekly
--------------------. Egghead must report sales from
--------------------------. Egghead must make the EDI reports
available to MS' EDI mailbox each Monday by 8:00am (Pacific
time). These reports shall cover the seven-day period ending
the prior Friday night
Reporting Requirements
Each unit of single license Full Package Product should be
reported as one unit. This applies for both Microsoft products
and for competitive products. Any single Microsoft product that
includes multiple licenses should be reported as one unit.
Microsoft will then convert the quantity of multiple license
units sold to the number of licenses they represent. Examples
of these products include MMLP 20 Pack, MMLP 100 Pack, and
AED 10 Pack. Each competitive multiple license product should
be reported as the number of licenses represented. All volume
licensing agreements (such as MOLP, MVLP, and MELP) should be
reported as one unit for each license sold.
Example: If Egghead sold a quantity of five units of a Microsoft
20 user MMLP, Egghead would report a quantity of five units of
that SKU. However, if Egghead sold a quantity of five units of a
competitor's 20 user MMLP, Egghead would report a quantity of
100 licenses.
3. Microsoft
Reporting ------------------------- REPORTING
Requirements
The following table outlines the --------------- product
categories for EDI reporting. In addition, the table also
specifies the Microsoft products and the competitive products
that will be included in the aggregated ----------------
reporting for the Fast Track Rebate Program:
<TABLE>
<S> <C> <C> <C>
Category Microsoft product Competitive Products
Windows word Word for Windows* ------------------
processors ------------------
Windows Microsoft* Excel ------------------
spreadsheets for Windows* ------------------
Windows bundles Office for Windows* ------------------
Windows Databases Microsoft Access* ------------------
for Windows* ------------------
FoxPro* for Windows* ------------------
Mail Servers Microsoft* Mail ------------------
------------------
Network Operating WindowsNT* Advanced ------------------
Systems Server ------------------
LAN Manager ------------------
------------------
</TABLE>
Accounts are required to report -------- (CTIA type "32") units
and ------------------ for each Microsoft SKU, but are required
only to report total license count for --------------------- (CTIA
type "32") for each category. All SKUs for these titles should be
counted, including full packaged product, upgrades, multiple
license packs, education, and government SKUs.
Example: If Egghead sold-through 50 units of ---------------------
for Windows in one week, then Egghead would report a total of 70
units sell-through of ------------------ products in the Windows
Spreadsheet category.
---------------------- REPORTING
Egghead must submit ----- or ----- reporting by the 10th of each
month for the prior month in the format outlined in Schedule D.
Reporting shall be transmitted in electronic format and sent via
modem to 1-800-831-6316, or on tape or diskette to MS at the
following address:
Microsoft Corporation
Reseller Reporting Group
One Microsoft Way
Redmond, WA 98052
Should Egghead provide on a compliant basis for three (3)
consecutive months both monthly ----- and ----- reporting, and
weekly Fast Track Reporting, MS may at its sole discretion grant a
written waiver of Egghead monthly ----- and ----- Reporting
requirements.
Total Sales-out Rebate Program
Program The objective of the Total Sales-out Rebate Program is to
Objective increase sales of Microsoft products.
Rebate The total possible rebate percentage achievable for Total Sales-
Percentages out Rebate Program is -----% of Qualified ------------- for
July/December 1994.
Goal The program goals are based upon the following:
Definitions -------------------------------------- of Microsoft products.
Microsoft's -------------------------------------.
Egghead's --------------------------------------.
Rebate Egghead's Total Sales-out Rebate Program goals are as follows:
Goals July - September, 1994: $----------
October - December, 1994: $----------
- ----------- Microsoft Product ----- is defined as those Microsoft product
Definitions/ units ---------------- Egghead outlet locations. Egghead's full
Measurement packaged product, MOLP, and upgrade ----------- units will be
measured from the --------- reported by Egghead to Microsoft
Revenue from licensing sales is captured and generated by
Microsoft's financial systems and included in total sales-out
used to measure product sales-out rebate performance.
License revenue (Select and Microsoft Maintenance) credit is
granted as Microsoft recognizes the revenue. This occurs when
Microsoft has received the customer's license reporting.
Following receipt of reporting, Microsoft bills the customer/
reseller and simultaneously recognizes the revenue.
Program Egghead must achieve -----% of the Microsoft dollar -----------
Requirements goal in order to receive their entire ------------ rebate for
July/December 1994. If Egghead achieves greater than -----% of
their ------------ goal, Egghead will receive the exact achieved
percentage of the sales-out rebate goal. If Egghead achieves
less than -----% of their rebate goal, they will not receive any
portion of the -------------- rebate. The purpose of this scale
is to offer an incentive for accounts to meet a portion of their
goal in the event they cannot achieve the full Microsoft ---------
goal.
Example: If Egghead has a quarterly -------------- goal ----------
and Egghead sells -----------over the quarter period, Egghead
will receive ---% of the eligible -----% -------- rebate
percentage, or -----%.
Microsoft Corporation
One Microsoft Way
Redmond, WA 98052-6399
August 2, 1994
Mr. William Gilsing
Egghead Software
22011 S.E. 51st Street
Issaquah, WA 98027
Dear William:
I am sending this letter to confirm our agreement regarding your
Semester 1, 1995 rebate goals to be broken down as follows:
Ql (July - September) = $----------
Q2 (October -December) =- $----------
This letter supersedes the letter I sent to you dated July 29.
I'll be watching these numbers on a regular basis, and will advise you
when product changes are anticipated to occur as these changes relate to
these goals.
Sincerely,
Miriam G. Jackereas
cc: Neil Farnsworth
Annie Olszewski
LEASE TERMINATION AND RENT PAYMENT AGREEMENT
THIS AGREEMENT ("Agreement") is made June 14, 1994, by and between
DJ&J SOFTWARE CORPORATION, a Washington corporation doing business as
Egghead Software ("Egghead"), and SAMMAMISH PARK PLACE II LIMITED
PARTNERSHIP, a Washington limited partnership ("Landlord").
RECITALS
A. Landlord and Egghead are the parties to an Office Building
Lease dated March 23, 1992, under which Egghead is a tenant (the
"Existing Lease"), covering portions of the first and second floors
("Premises") of Sammamish Park Place Building B ("Building"), located in
the City of Issaquah, King County, Washington, which is more fully
described as follows:
Lot 2 of Short Plat No. 1288032, according to the short plat
recorded under King County Recording No. 8911080548.
A complete and true copy of the Existing Lease is attached as Exhibit A
to this Agreement as a reference for determining the terms and
conditions of the Existing Lease.
B. Microsoft Corporation ("Microsoft") desires to enter into a
lease with Landlord for the Building (the "Microsoft Lease").
C. Egghead is willing to surrender the Premises to Landlord so it
can lease them to Microsoft, and Landlord is willing to accept such
surrender and terminate the Existing Lease under the terms set forth in
this Agreement.
D. All capitalized terms used in this Agreement have the same
meaning as set forth in the Existing Lease, except as otherwise
indicated in this Agreement.
NOW THEREFORE, recognizing that Landlord will materially rely on
this Agreement, and in consideration of the mutual promises in this
Agreement, Egghead and Landlord agree as follows:
1. Surrender of Premises. Egghead shall surrender and vacate the
Premises on or before June 15, 1994.
2. Condition of Premises on Surrender. Egghead shall remove its
personal property and trade fixtures from the Premises at its expense.
Egghead shall leave the Premises in the condition received, except for
reasonable wear and tear, casualty and condemnation damage, and pre-
existing defects.
3. Leasehold Improvements. The leasehold improvements constructed by
Egghead in the Premises shall remain and shall become the property of
Landlord on the Termination Date of theExisting Lease, as defined below.
4. Indemnity. Landlord agrees to indemnify, hold harmless and
defend Egghead against anydamages, costs, liabilities or expenses that
Egghead may incur as a result of Microsoft's possessionof the Premises prior
to the Termination Date. Egghead acknowledges that Microsoft will
substantially modify the existing tenant improvements in the Building.
5. Lease Termination. The Existing Lease shall terminate on the
earlier of the date that the Microsoft Lease commences or September 1,
1994 (the "Termination Date"), without any further action or notice by
the parties. Egghead shall continue to make all payments due under the
Existing Lease until the Termination Date, as defined in the prior
sentence.
6. Condition Subsequent. This Agreement shall be null and void
if Microsoft and Landlordhave not executed the Microsoft Lease by
September 1, 1994.
7. Termination of Agreement. This Agreement terminates on November 1, 1999
regardless ofany remaining term or extension under the Microsoft Lease.
8. Payment of Spread. Egghead agrees to pay to Landlord on the
first day of each calendar month following the Termination Date until
the earlier of the date this Agreement terminates, the date payment of
the Full Amount (defined below) restarts following termination of the
Microsoft Lease, or the date the New Lease (defined below) commences, an
amount equal to (a) the Basic Rent and Operating Costs due each month
under the Existing Lease had it not been terminated, less (b) the
$44,049.13 and utility charges which are attributable to the Premises
each month under the Microsoft Lease (the "Spread"). The utility
charges to be deducted from Operating Costs paid by Egghead are
electricity, natural gas, storm water, water, sewer, disposal and refuse
collection, and any other utility cost payable under the Existing Lease
which are attributable to the Premises or the Common Areas. All charges
that may otherwise qualify as Operating Costs that arise due to a
request by Microsoft or any other tenant of the Building (outside the
scope of Operating Costs as they had been charged to Egghead under the
Existing Lease) shall not be included in Operating Costs payable by
Egghead. Egghead's payment of its portion of the estimated Operating
Costs shall be reconciled against actual Operating Costs in accordance
with the provisions of Exhibit A to this Agreement (that is, the
Existing Lease before it was terminated by this Agreement). Landlord
shall provide Egghead an invoice in substantially the form attached as
Exhibit B each month setting forth the calculation of the Spread.
Landlord shall send Egghead an invoice for payment each month in advance
of the due date based on an estimate of Operating Costs, and will
reconcile those estimates to actual Operating Costs each year, all in
accordance with the provisions of Exhibit A to this Agreement.
9. Payment of Full Amount. Egghead agrees to pay to Landlord on
the first day of each calendar month following the date Microsoft no
longer possesses the Premises after expiration of either the 2-year
original term of the Microsoft Lease, or any of the three 1-year
extension options in the Microsoft Lease, until the earlier of the date
this Agreement terminates or the date the New Lease (defined below)
commences, an amount equal to the Basic Rent and Operating Costs due
each month under the Existing Lease had it not been terminated (the
"Full Amount"). Egghead shall not be obligated to pay the Full Amount
before the expiration of the 2-year original term of the Microsoft Lease
or any extension thereof, regardless of any default under or early
termination of the Microsoft Lease.
10. Late Payment. Egghead acknowledges that late payment of the
sums due under this Agreement will cause Landlord to incur costs not
contemplated by this Agreement, the exact amount of which is difficult
to determine. Therefore, if Egghead fails to pay any sum when due under
this Agreement, and where such failure shall continue for a period of
five (5) days after written notice thereof by Landlord to Egghead, then
Egghead shall pay Landlord the greater of the following: (a) a late
charge equal to five percent (5%) of the amount owing; or (b) that
portion of any penalties, including without limitation additional
interest or default "fees" which Landlord's lenders may impose or
require due solely to the late payment by Egghead (the "Late Charge").
In addition to the Late Charge, Egghead shall pay interest at a rate
equal to six percent (6%) per annum above the prime rate charged from
time to time by SeaFirst Bank or its successor on all late payments
under this Agreement thirty (30) days or more past due, or such lower
maximum allowable interest rate for payments due under this Agreement if
the aforesaid rate violates any applicable laws or regulations.
11. Exercise of Extension Options. Landlord shall provide
Egghead with a copy of Microsoft's election to exercise any option to
extend the Microsoft Lease for any additional term that commences before
November 1, 1999.
12. Modification of Microsoft Lease. Upon written notice to
Egghead, Landlord and Microsoft may modify or waive any of the terms or
conditions of the Microsoft Lease, and may grant and agree to
indulgences for defaults or extensions of time to Microsoft without
releasing Egghead from its obligations under this Agreement. However,
Egghead's liability under this Agreement for the Spread shall not be
increased or accelerated as a result of any such modification.
13. New Lease. Upon termination of the Microsoft Lease and
vacation of the Premises by Microsoft, Egghead and Landlord agree to
negotiate in good faith whether or not to enter a new lease of the
Premises containing the same terms and conditions as the Existing Lease
for the remainder of its originally scheduled term, or on such other
terms as are mutually agreeable (the "New Lease"); provided Egghead
shall have no liability for circumstances or events involving the
Premises, and for the use or condition of the Premises, during any
period after the Existing Lease was terminated and before the
commencement date of the New Lease; and further provided Landlord shall
have no obligation to alter or restore the Premises to the condition
existing during the Existing Lease whether or not the parties enter into
a New Lease. If the parties enter into a New Lease, then there will be
no further Improvement Allowance, as provided for under Section 22.2 of
the Existing Lease. Neither party is obligated to enter the New Lease.
Notwithstanding the provisions of this Section 13, Egghead is obligated
to pay the Full Amount under the terms of Section 9 above unless and
until the earlier of the date this Agreement terminates or the date the
New Lease commences.
14. Commissions. Upon execution of the Microsoft Lease, Egghead
shall pay fifty percent (50%) of that portion of the real estate
brokerage commission due to CB Commercial Real Estate Group, Inc.
("Broker") attributable to the Premises for the initial term of the
Microsoft Lease, and the other fifty percent (50%) of such portion of
the commission upon Microsoft's occupancy of the Premises. Egghead
agrees to pay that portion of the Broker's commission attributable to
each extension of the Microsoft Lease term attributable to the Premises
at the time Microsoft elects to exercise each of its options to extend.
The Broker's commission payable by Egghead under this Section shall be
based upon Microsoft's lease of that portion of the entire Building that
is the Premises (37,096 rentable square feet), as more fully described
in Exhibit C to this Agreement. Egghead shall not be liable for any
other brokerage commissions in relation to tile Microsoft Lease or the
New Lease.
15. Acknowledgments by Egghead. Egghead acknowledges to Landlord
and agrees to the following:
a. Except as set forth in this Agreement, Landlord has made no
representations to Egghead regarding the economic benefits to be derived
by Egghead under this Agreement;
b. Egghead is not a third-party beneficiary of the Microsoft
Lease; and
c. Egghead is not entitled to assert any breach of the Microsoft
Lease by either Landlord or Microsoft thereunder as a basis of any kind
against either Landlord or Microsoft.
16. Notices. All invoices, notices and demands which may or are
required to be given by any party to another under this Agreement shall
be in writing and shall be deemed to have been fully given when
delivered in person, or three days after the postmark date if sent by
first class United States mail with postage prepaid, or on the date
shown on the receipt if sent certified or registered United States mail
with return receipt requested and postage prepaid, and addressed to
Egghead at 22011 S.E. 51st Street, P.O. Box 7004, Issaquah, WA 98027,
and to Landlord at 3605 132nd Avenue S.E., Bellevue, Washington, 98006-
1323. The parties may change the address to which notices may be sent
under this Agreement by providing the other party with written notice of
such change.
17. Successors. The terms of this Agreement are binding upon and
shall inure to the benefit of
the parties and their respective heirs, successors and assigns.
18. Governing Law. This Agreement shall be construed and
enforced under the laws of the State of Washington. The parties consent
to the personal jurisdiction of and venue laid in any court of competent
jurisdiction sitting in King County, Washington.
19. Attorney Fees. The prevailing party in any action to
interpret or enforce this Agreement shall be entitled to collect its
reasonable costs and attorney fees incurred in such action, or in any
appeal thereof, or in any bankruptcy or receivership action, from the
non-prevailing party.
20. Amendments. This Agreement may be amended only by written
instrument signed by both Egghead and Landlord.
21. Authority. Each person signing this Agreement on behalf of a
corporation or partnership represents and warrants that they are duly
authorized by the corporation or partnership to execute this Agreement
and that no other signature or authorization is necessary to bind the
corporation or partnership.
22. Entire Agreement. This Agreement is the entire agreement
between the parties concerning
the subjects contained in this Agreement.
23. Multiple Originals. This Agreement may be executed in
duplicate or triplicate, each of which shall be deemed an original, and
together they shall constitute one and the same agreement.
24. Recitals. All recital paragraphs shall be part of the
parties' agreement hereunder.
LANDLORD:
SAMMAMISH PARK PLACE II LIMITED
PARTNERSHIP, a Washington limited partnership
By: VYZIS COMPANY, a Washington
corporation as Managing General Partner
By: Cheryl A. Smith
Its: Executive Vice President
EGGHEAD:
DJ&J SOFTWARE CORPORATION, a
Washington corporation
By: Ronald J. Smith
Its: Vice President
STATE OF WASHINGTON
SS.
COUNTY OF KING
On this 14th day of June, 1994, before me personally appeared
CHERYL A. SMITH to me known to be the EXECUTIVE VICE PRESIDENT of VYZIS
COMPANY, the corporation that is the General Managing Partner of
SAMMAMISH PARK PLACE II LIMITED PARTNERSHIP, the limited partnership
executed the within and foregoing instrument, and acknowledged said
instrument to be the free and voluntary act and deed of said partnership
for the uses and purposes therein mentioned, and on oath stated that he
was authorized to execute said instrument on behalf of the partnership.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year first above written.
Name (Printed): Sheila J. Gill
NOTARY PUBLIC in and for the State of Washington, residing at Kirkland
My appointment expires: 5/25/96
STATE OF WASHINGTON
SS.
COUNTY OF KING
On this 14th day of June, 1994, before me personally appeared
RONALD J. SMITH, to me known to be a VICE PRESIDENT of DJ&J SOFTWARE
CORPORATION, the corporation that executed the within and foregoing
instrument, and acknowledged said instrument to be the free and
voluntary act and deed of said corporation, for the uses and purposes
therein mentioned, and on oath stated that he was authorized to execute
said instrument on behalf of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year first above written.
Name (Printed): Denise J. Ullery
NOTARY PUBLIC in and for the State of Washington, residing at King
County
My appointment expires: 9/1/96
FIRST AMENDMENT
TO
LEASE TERMINATION AND RENT PAYMENT AGREEMENT
THIS AMENDMENT, dated as of June 14, 1994, is made by and
between Sammamish Park Place II Limited Partnership, a Washington
limited partnership ("Landlord"), and DJ&J Software Corporation, a
Washington corporation, d.b.a. Egghead Discount Software ("Tenant" or
"Egghead") (hereinafter "First Amendment").
THIS FIRST AMENDMENT relates to that Lease Termination And
Rent Payment Agreement dated the 14th day of June, 1994, between
Landlord and Tenant ("Lease Termination Agreement").
RECITAL
It is the desire of the parties to amend Paragraphs 13 and
15c. of the Lease Termination and Rent Payment Agreement.
NOW THEREFORE, Egghead and Landlord agree as follows:
1. Paragraph 13, "New Lease," is hereby deleted in its entirety and
replaced as follows:
13. New Lease. Upon termination of the Microsoft Lease and
vacation of the Premises by Microsoft after the date the Full
Amount becomes payable under Paragraph 9 and before November 1,
1999, Egghead and Landlord agree to promptly sign a new lease of
the Premises containing the same terms and conditions as the
Existing Lease for the remainder of what would have been the
Existing Lease's originally scheduled term (the "New Lease");
provided Egghead shall have no liability for circumstances or
events involving the Premises, and for the use or condition of the
Premises, during any period after the Existing Lease was
terminated and before the commencement date of the New Lease; and
further provided Landlord shall have no obligation to alter or
restore the Premises to the condition existing during the Existing
Lease whether or not the parties enter into a New Lease. When the
parties enter into a New Lease, then there will be no further
Improvement Allowance, as provided for under Section 22.2 of the
Existing Lease, and Egghead is not required to pay the Full Amount
called for under Section 9 above because Egghead shall be paying
rent and operating costs under the New Lease. The commencement
date of the New Lease is the date the Full Amount first becomes
payable under Paragraph 9.
2. Paragraph 15(c) is hereby deleted in its entirety and replaced as
follows:
15c. Egghead is not entitled to assert any breach of the
Microsoft Lease by either Landlord or Microsoft thereunder as a
basis of any claim against either Landlord or Microsoft.
3. This Agreement may be executed in duplicate, each of which shall
be deemed an original and in counterparts, together which shall
constitute one and the same Agreement.
4. Except as is herein amended, the Lease Termination Agreement is
hereby ratified and confirmed and all other terms of the Lease
Termination Agreement shall remain in full force and effect, unaltered
and unchanged by this subsequent agreement.
IN WITNESS WHEREOF, the respective parties hereto have executed
this First Amendment or caused this First Amendment to be executed by
their duly authorized representatives the day and year first hereon
written.
LANDLORD:
Sammamish Park Place II Limited Partnership,
a Washington limited partnership
By: Vyzis Company, a Washington corporation,
Managing General Partner
By: Basil D. Vyzis, President
TENANT:
DJ&J Software Corporation,
a Washington corporation,
d.b.a. Egghead Software
By: Ronald J. Smith, Vice President
LANDLORD'S ACKNOWLEDGMENT
On this 3rd day of October, 1994, before me the undersigned,
a Notary Public in and for the State of Washington, personally appeared
Basil D Vyzis, the President of Vyzis Company, to me known to be the
corporation that is the Managing General Partner of Sammamish Park Place
II Limited Partnership, the partnership that executed the foregoing
instrument, and acknowledged said instrument to be the free and
voluntary act and deed of said partnership, for the uses and purposes
therein mentioned, and on oath stated that he is authorized to execute
the said instrument on behalf of the partnership.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year first above written.
Name (Printed): Sheila J. Gill
NOTARY PUBLIC in and for the State
of
Washington, residing at Kirkland
My commission expires: 5-25-96
TENANT'S ACKNOWLEDGMENT
STATE OF WASHINGTON
COUNTY OF KING
On this 23rd day of September, 1994, before me the
undersigned, a Notary Public in and for the State of Washington, duly
commissioned and sworn, personally appeared Ronald J. Smith to me known
to be the Vice President of DJ&J Software Corporation, the corporation
that executed the within and foregoing instrument, and acknowledged the
same instrument to be the free and voluntary act and deed of said
corporation for the uses and purposes therein mentioned, and on oath
stated that he is authorized to execute said instrument.
IN WITNESS WHEREOF my hand and official seal hereto affixed
the day and year in this instrument above written.
Name (Printed): Alice L. Ferguson
NOTARY PUBLIC in and for the State
of
Washington, residing at Kirkland
My commission expires: 12-05-97
SECOND AMENDMENT
TO
LEASE TERMINATION AND RENT PAYMENT AGREEMENT
THIS SECOND AMENDMENT, dated as of June 14, 1994, is made by and
between Sammamish Park Place II Limited Partnership, a Washington
limited partnership ("Landlord"), and DJ&J Software Corporation, a
Washington corporation, d.b.a. Egghead Software ("Tenant" or "Egghead")
(hereinafter "Second Amendment").
THIS SECOND AMENDMENT relates to that Lease Termination And Rent
Payment Agreement, as amended, dated the 14th day of June, 1994, between
Landlord and Tenant ("Lease Termination Agreement").
RECITALS
A. For the monies paid by Egghead to Landlord under the Lease
Termination Agreement, Landlord, as agent for Vyzis Company, a
Washington corporation, and partnerships in which Vyzis Company has an
ownership or management interest, Egghead desires and Landlord is
willing to provide for Egghead space for conference room and/or storage
area use on the terms set forth in this Second Amendment.
B. All capitalized terms used in this Second Amendment have the same
meaning as set forth in the Lease Termination Agreement, except as
otherwise indicated in this Second Amendment.
NOW THEREFORE, Egghead and Landlord agree as follows:
1 Space.
1.1 Leased Space. Landlord, as agent for Vyzis Company, a
Washington corporation, other partnerships in which Vyzis Company has an
ownership or management interest, and Factoria Heights, a Washington
general partnership (hereinafter "Factoria Heights"), leases to Egghead
approximately 7,000 rentable square feet (the "Space") initially as
shown on attached Exhibit "A-1" on the first floor of the Newport
Heights Building (the "Building"). The location of the Space and the
Building may be changed by Landlord from time to time as provided in
Section 1.4 of this Second Amendment. The Space initially leased
hereunder, together with and including other property owned by Factoria
Heights, a Washington general partnership, are legally described on
attached Exhibit "A". The Space may be used for conference room and/or
storage area use.
1.2. Acceptance of Property. Egghead accepts the Space, and all
substituted Space, in its condition on the date Egghead occupies it, to-
wit: "as is".
1.3 Access to Space. Egghead is granted the right of 24 hour a
day access to the Space in the Building. Upon Egghead's vacating the
Space, the Space shall be left in the condition in which it was received
by Egghead.
1.4 Change in Location of Space. Upon five (5) days prior written
notice from Landlord to Egghead that Landlord (or Factoria Heights or
any other entity for which Landlord is acting as agent under this Second
Amendment) requires use of the Space, and has arranged substitute Space
in the same or a substitute Building, Egghead shall vacate the Space and
relocate to the substitute Space or Building in the greater Eastside
area in King County, Washington (in which building Vyzis Company has an
ownership or management interest). The written notice from Landlord
shall include a description of the Space to which Egghead shall
relocate, which shall become a new Exhibit A and A-1 to this Second
Amendment upon being initialed by both parties. All expenses of moving
shall be Egghead's responsibility.
2. Term of the Space Lease. The term for the lease of the Space
under this Second Amendment shall commence on September 1, 1994
("Commencement Date") and shall terminate on the earlier of the date
this Second Amendment terminates, or the date the New Lease (as defined
in Section 13 of the Lease Termination Agreement) commences.
3. Rent. The annual rent payable to Landlord for the Space is the
amount set forth in Paragraph 8 or 9 of the Lease Termination Agreement,
on the terms set forth therein.
4. Personal Property Removal. At any time and from time to time
during the term of this Second Amendment and whether or not Egghead is
in default hereunder, Egghead may remove any or all of Egghead's
property from the Space; provided, Egghead shall be responsible for any
damage to the Building or real property in connection therewith. Upon
the expiration or earlier termination or cancellation of this Second
Amendment, Egghead will immediately remove all of its property from the
Space.
5. Assignment and Subletting. Egghead shall not have the right to
assign or sublet the Space or any part thereof.
6. Damage to Egghead's Property Landlord or its agents shall not be
liable for any damage to Egghead's property in the Space. Landlord or
its agents shall not be liable for interference with light or other
incorporeal heraditaments, nor shall Landlord be liable for any latent
defect in the Space or in the Building. Egghead shall give prompt
notice to Landlord in case of fire or accidents in the Space or in the
Building or of defects therein or in the fixtures or equipment. Egghead
has no obligation to repair or improve the Space, but need only comply
with Section 1.3 above.
7. Indemnification. Both parties shall indemnify, defend and hold
the other harmless from all claims arising from their respective use and
control of the Space or Building or the conduct of its business or from
any activity, work, or thing done, permitted or suffered by that party
in or about the Space or Building. Both parties shall further
indemnify, defend and hold the other harmless from all claims arising
from any breach or default in the performance of any obligation to be
performed by that party under the terms of this Second Amendment, or
arising from any act, neglect, fault or omission of that party or of its
agents or employees, and from and against all costs, attorneys' fees,
expenses, and liabilities incurred in or about such claim or any action
or proceeding brought thereon. In case any action or proceeding shall
be brought against one party by reason of any such claim against the
other, upon notice from the first party, the second party shall defend
the first party at its expense by counsel approved in writing by the
first party; provided that the foregoing provision shall not be
construed to make either party responsible for loss, damage, liability
or expense resulting from injuries to third parties caused by the
negligence of the other, or its officers, contractors, agents or
employees.
8. Waiver of Subrogation. Egghead and Landlord agree to mutually
release each other from liability, and waive all right of recovery
against the other and hereby exercise all waivers of subrogation of
their respective insurers, for any loss of or damage to the property of
each, including earnings derived therefrom caused by or resulting from
fire, the perils of the commonly referred to Extended Coverage
Endorsement and leakage from automatic sprinkler systems, if any, or
from perils insured against under any insurance policies maintained by
the parties hereto.
9. Condemnation/Casually. If due to fire, the elements or the
exercise of the right of eminent domain or other authority of law, the
Space shall become untenantable, dangerous or unfit for Egghead's use,
and no substitute Space can be obtained through reasonable diligence by
the Landlord, this Second Amendment shall be considered terminated and
of no further force and effect. The payment payable under the Lease
Termination Agreement shall continue to be payable in full.
10. Default. Landlord may terminate this Second Amendment upon the
happening of any of the following:
a. The making by Egghead of an assignment for benefit of its
creditors;
b. The levying of a writ of execution or attachment on or against
the Space as the property of Egghead if the same is not released or
discharged within 90 days thereafter;
c. Institution of proceedings in a court of competent
jurisdiction for the reorganization, liquidation or involuntary
dissolution of Egghead, or for its adjudication of the property of
Egghead, and said proceedings are not dismissed and any receiver,
trustee or liquidator appointed therein discharged, within 90 days after
the institution of said proceedings;
d. Egghead creates a mechanic's lien or claim therefor against
the land or Building of which the Space are a part and the same is not
released, or otherwise provided with an the indemnification of Landlord,
within 10 days after written notice thereof first given to Egghead; or
e. The failure of Egghead to pay an installment of rent on the
date due as provided in Paragraph 3 of this Second Amendment.
11. Termination of Second Amendment. This Second Amendment terminates
on November 1, 1999, if not terminated earlier hereunder, regardless of
any remaining term or extension under the Microsoft Lease.
12. Waiver of Lien. Landlord hereby waives any lien upon Egghead's
property in the Space whether such lien is created by common law, by
statute or otherwise and whether such lien may presently exist or may be
created in the future.
13. Subordination/Attornment. Egghead agrees to subject and
subordinate the lease of the Space under this Second Amendment and to
attorn at all times to the lien of any mortgage(s) deed(s) of trust and
other encumbrances hereinafter placed upon Landlord's interest in the
Space and on the land and Building of which the Space are a part, or
upon any building of which the Space forms a part.
14. Limitations of Liability. In consideration of the benefits
accruing hereunder, Egghead and all successors covenant and agree that,
in the event of any actual or alleged failure, breach or default
hereunder by Landlord; then in any suit by Egghead for such breach:
a. The sole and exclusive remedy shall be against the Landlord's
interest in the Building;
b. No general or limited partner of Landlord shall be sued or
named as a party in any suit or action (except as may be necessary to
secure jurisdiction of the partnership);
c. No service of process shall be made against any general or
limited partner of Landlord (except as may be necessary to secure
jurisdiction of the partnership);
d. No general or limited partner of Landlord shall be required to
answer or otherwise plea to any service or process;
e. No judgment will be taken against any general or limited
partner of Landlord;
f. Any judgment taken against any general or limited partner of
Landlord may be vacated and set aside at any time nunc pro tunc;
g. No writ of execution will ever be levied against the asset of
any general or limited partner of Landlord;
h. These covenants and agreements are enforceable both by
Landlord and also by any partner of Landlord.
15. Successors. This Second Amendment and the covenants and terms
herein contained shall bind and inure to the benefit of the parties
hereto, their heirs, successors, executors and administrators.
16. Construction and Interpret. The headings or titles to the
sections of this Second Amendment are not a part of this Second
Amendment and shall have no effect upon the construction or
interpretation of any part hereof.
17. Exhibits. All exhibits attached to this Second Amendment are
incorporated herein by reference.
18. Counterparts. This Agreement may be executed in duplicate, each
of which shall be deemed an original and in counterparts, together which
shall constitute one and the same Agreement.
19. Ratification. Except as is herein amended, the Lease Termination
Agreement is hereby ratified and confirmed and all other terms of the
Lease Termination Agreement shall remain in full force and effect,
unaltered and unchanged by this subsequent agreement.
IN WITNESS WHEREOF, the respective parties hereto have executed
this First Amendment or caused this First Amendment to be executed by
their duly authorized representatives the day and year first hereon
written.
Sammamish Park Place II Limited Partnership,
a Washington limited partnership
By: Vyzis Company, a Washington corporation,
Managing General Partner
By: Basil D. Vyzis, President
DJ&J Software Corporation,
a Washington corporation,
d.b.a. Egghead Software
By: Ronald J. Smith, Vice President
ACKNOWLEDGED AND AGREED:
Executed contemporaneous with Landlord's execution of this Second
Amendment, Vyzis Company, a Washington corporation, and Factoria
Heights, a Washington general partnership, by execution below by duly
authorized representatives, hereby agree to the obligations contained in
this Second Amendment
Vyzis Company, a Washington corporation,
By: Cheryl Smith, Executive Vice President
Factoria Heights, a Washington general partnership,
By: Basil D. Vyzis, Managing General Partner
LANDLORD'S ACKNOWLEDGMENT
STATE OF WASHINGTON
COUNTY OF KING
On this 3rd day of October, 1994, before me the undersigned, a Notary
Public in and for the State of Washington, personally appeared Basil D.
Vyzis, the President of Vyzis Company, to me known to be the corporation
that is the Managing General Partner of Sammamish Park Place II Limited
Partnership, the partnership that executed the foregoing instrument, and
acknowledged said instrument to be the free and voluntary act and deed
of said partnership, for the uses and purposes therein mentioned, and on
oath stated that she/he is authorized to execute the said instrument on
behalf of the partnership.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year first above written.
Name (Printed): Sheila J. Gill
NOTARY PUBLIC in and for the State
of
Washington, residing at Kirkland
My commission expires: 5-25-96
EGGHEAD'S ACKNOWLEDGMENT
STATE OF WASHINGTON
COUNTY OF KING
On this 23rd day of September, 1994, before me the undersigned, a
Notary Public in and for the State of Washington, duly commissioned and
sworn, personally appeared Ronald J. Smith to me known to be the Vice
President of DJ&J Software Corporation, the corporation that executed
the within and foregoing instrument, and acknowledged the same
instrument to be the free and voluntary act and deed of said corporation
for the uses and purposes therein mentioned, and on oath stated that he
is authorized to execute said instrument.
IN WITNESS WHEREOF my hand and official seal hereto affixed the
day and year in this instrument above written.
Name (Printed): Alice L. Ferguson
NOTARY PUBLIC in and for the State
of
Washington, residing at Kirkland
My commission expires: 12-05-97
VYZIS COMPANY ACKNOWLEDGMENT
STATE OF WASHINGTON
COUNTY OF KING
On this 3rd day of October, 1994, before me the undersigned, a Notary
Public in and for the State of Washington, personally appeared Cheryl
A. Smith, the Executive Vice President of Vyzis Company, to me known to
be the corporation that executed the foregoing instrument, and
acknowledged said instrument to be the free and voluntary act and deed
of said partnership, for the uses and purposes therein mentioned, and on
oath stated that she/he is authorized to execute the said instrument on
behalf of the partnership.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year first above written.
Name(Printed): Sheila J. Gill
NOTARY PUBLIC in and for the State
of
Washington, residing at Kirkland
My commission expires: 5-25-96
FACTORIA HEIGHTS ACKNOWLEDGMENT
STATE OF WASHINGTON
COUNTY OF KING
On this 3rd day of October, 1994, before me, a Notary Public
in and for the State of Washington, personally appeared BASIL D. VYZIS,
to me known to be the Managing General Partner of Factoria Heights, the
general partnership that executed the foregoing instrument, and
acknowledged said instrument to be the free and voluntary act and deed
of said partnership, for the uses and purposes therein mentioned, and on
oath stated that he is authorized to execute the said instrument on
behalf of the partnership.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed
my official seal the day and year first above written.
Name (Printed): Sheila J. Gill
NOTARY PUBLIC in and for the State
of
Washington, residing at Kirkland
My commission expires: 5-25-96
EXHIBIT "A"
LEGAL DESCRIPTION
This exhibit is a continuation of that certain Second Amendment dated
June 14, 1994, between Sammamish Park Place II Limited Partnership, a
Washington limited partnership ("Landlord"), and D J & J Software
Corporation, a Washington corporation, d.b.a. Egghead Software, on real
property in King County, Washington, and by this reference shall become
part of that agreement.
LEGAL DESCRIPTION: NEWPORT HEIGHTS
Lot B of Short Plat No. 83-24, according to the Short Plat Survey
recorded under King County Recording No. 8407179002;
Situate in the City of Bellevue, County of King, State of Washington.
EXHIBIT "A-1"
SPACE
This exhibit is a continuation of that certain Second Amendment dated
June 14, 1994, between Sammamish Park Place II Limited Partnership, a
Washington limited partnership ("Landlord"), and DJ&J Software
Corporation, a Washington corporation, d.b.a. Egghead Software, on real
property in King County, Washington, and by this reference shall become
part of that agreement.
AMENDED AND RESTATED
REVOLVING
LOAN AGREEMENT
Between
EGGHEAD, INC.
and
DJ&J SOFTWARE CORPORATION
As "Borrowers"
and
SEATTLE-FIRST NATIONAL BANK
and
U.S. BANK OF WASHINGTON, N.A.
As "Banks"
and
SEATTLE-FIRST NATIONAL BANK
As Agent
Dated as of September 30, 1994
10/13/94
TABLE OF CONTENTS
Definitions.....................................................1
1.1 Terms Defined ..................................................1
1.1.1 "Agent It"......................................................1
1.1.2 "Affiliate".....................................................1
1.1.3 "Assessment Rate"...............................................1
1.1.4 "Banks".........................................................1
1.1.5 "Base Rate".....................................................1
1.1.6 "Borrowers".....................................................2
1.1.7 "Borrowing Notice"..............................................2
1.1.8 "Business Day"..................................................2
1.1.9 "Capital Ratio".................................................2
1.1.10 "CD Rate".......................................................2
1.1.11 "CD Rate Borrowing".............................................2
1.1.12 "Change in Control".............................................2
1.1.13 "Consolidated"..................................................2
1.1.14 "Current Ratio".................................................2
1.1.15 "Default".......................................................3
1.1.16 "DJ&J"..........................................................3
1.1.17 "Domestic Reserve percentage"...................................3
1.1.18 "Egghead".......................................................3
1.1.19 "ERISA".........................................................3
1.1.20 "Event of Default"..............................................3
1.1.21 "Fixed Rate Borrowing"..........................................3
1.1.22 "Indebtedness"..................................................3
1.1.23 "Interest Payment Dates"........................................3
1.1.24 "Interest Period"...............................................4
1.1.25 "LIBO Rate".....................................................4
1.1.26 "LIBO Rate Borrowing"...........................................4
1.1.27 "LIBO Reserve Requirements".....................................4
1.1.28 "Lien"..........................................................4
1.1.29 "Loan"..........................................................5
1.1.30 "Loan Documents"................................................5
1.1.31 "Maturity Date".................................................5
1.1.32 "Net Worth".....................................................5
1.1.33 "Notes".........................................................5
1.1.34 "Offering Rate".................................................5
1.1.35 "Overnight Rate Borrowings".....................................5
1.1.36 "Participant"...................................................5
1.1.37 "Permitted Liens"...............................................5
1.1.38 "Permitted Special Asset".......................................5
1.1.39 "Permitted Special Asset Expenditures"..........................5
1.1.40 "Permitted Special Asset Operating Lease Rentals"...............6
1.1.41 "Person"........................................................6
1.1.42 "Plan"..........................................................6
1.1.43 "Prime Rate"....................................................6
1.1.44 "Prime Rate Borrowing"..........................................6
1.1.45 "50% Pro Rata Share"............................................6
1.1.46 "Seafirst"......................................................6
1.1.47 "Seafirst Overnight Rate".......................................6
1.1.48 "Seafirst Overnight Rate Borrowing".............................6
1.1.49 "Spread"........................................................6
1.1.50 "Subsidiary"....................................................7
1.1.51 "U.S. Bank".....................................................7
1.1.52 "U.S Bank Overnight Rate".......................................7
1.1.53 "U.S. Bank Overnight Rate Borrowing"............................7
1.2 Accounting Terms................................................7
1.3 Section References..............................................7
2. Parties; Loan Purpose...........................................7
2.1 Parties.........................................................7
2.2 Borrowers' Loan Request.........................................8
3. Revolving Loan..................................................8
3.1 Loan Commitment.................................................8
3.2 Use ofProceeds..................................................8
3.3 Note............................................................8
3.4 Advances: Borrowing Notices....................................8
3.5 Interest Rates..................................................9
3.6 Repayment......................................................10
3.7 Extensions., Renewals, or Modifications........................10
3.8 Revolving Loan Commitment Fee..................................10
4. Method of Payment..............................................10
4.1 Collected Funds................................................10
4.2 Book Entry Loan Account........................................10
5. Bank Accounts; Setoff..........................................11
6. Interest Rates; Change in Circumstances........................11
6.l Basis for Determining Interest Rate Inadequate or Unfair.......11
6.2 Illegality.....................................................11
6.3 Interest Cost..................................................12
6.4 Effect on Prime Rate Loans.....................................12
6.5 Reimbursement of Additional Marginal Cost of Funds.............13
7. Conditions Precedent for Advances Under the Loan...............13
7.1 No Default or Event of Default.................................13
7.2 Opinion of Counsel.............................................13
7.3 Correctness of Representations and Warranties..................13
7.4 The Note; Loan Documents.......................................13
7.5 Corporate Proceedings..........................................13
7.6 Conditions to Initial Advance Subsequent to Amendment..........14
8. Affirmative Covenants..........................................14
8.1 Financial Data.................................................14
8.2 Licenses and Permits...........................................15
8.3 Maintenance of Properties......................................15
8.4 Insurance......................................................15
8.5 Maintenance of Records.........................................16
8.6 Inspection.....................................................16
8.7 Corporate Existence............................................16
8.8 Notice of Disputes and Other Matters...........................16
8.9 Exchange of Notes..............................................16
8.10 Other Agreements...............................................16
8.11 Further Assurances.............................................16
8.12 Notification of Defaults.......................................16
9. Negative Covenants.............................................16
9.1 Indebtedness...................................................16
9.2 Dividends and Distributions....................................17
9.3 Transactions with Affiliates...................................17
9.4 Advances and Loans.............................................17
9.5 Investments....................................................17
9.6 Merger and Acquisition.........................................18
9.7 Type of Business...............................................18
9.8 Pension Plan...................................................18
9.9 Capital Ratio..................................................18
9.10 Net Worth......................................................18
9.11 Current Ratio..................................................18
9.12 Negative Pledge................................................18
9.13 Capital Expenditures...........................................19
10. Representations and Warranties.................................20
1O.1 Corporate Status...............................................20
10.2 Power and Authority............................................20
10.3 No Violation of Agreement......................................20
10.4 Recording and Enforceability...................................21
10.5 Litigation.....................................................21
10.6 Good Title to Properties.......................................21
10.7 Condition of Properties........................................21
10.8 Financial Statements...........................................21
10.9 Outstanding Indebtedness.......................................21
10.10 Taxes..........................................................21
10.11 License Fees...................................................22
10.12 Trademarks.....................................................22
10.13 Disclosure.....................................................22
10.14 Regulations U and X............................................22
10.15 Compliance with Securities Laws................................22
11. Default........................................................22
11.1 Events of Default..............................................22
11.1.1 Principal Payment..............................................22
11.1.2 Interest Payment...............................................22
11.1.3 Other Payments.................................................23
11.1.4 Cross Default Material Indebtedness............................23
11.1.5 Cross Default Other Indebtedness...............................23
11.1.6 FalseRepresentation............................................23
11.1.7 Breach of Covenant.............................................23
11.1.8 Other Failure to Perform.......................................23
11.1.9 Breach of Loan Document........................................23
11.1.10 Change in Control..............................................23
11.1.11 Government Seizure.............................................23
11.1.12 Judgment.......................................................24
11.1.13 Bankruptcy: Liquidation........................................24
11.2 Acceleration; Remedies.........................................24
12. Miscellaneous..................................................25
12.1 Notices........................................................25
12.2 Borrowers' Notice of Default by Agent or Banks.................25
12.3 Payment of Expenses............................................26
12.4 Fees and Commissions...........................................26
12.5 No Waiver......................................................26
12.6 Entire Agreement and Amendments................................26
12.7 Benefit of Agreement...........................................26
12.8 Severability...................................................27
12.9 Exhibits.......................................................27
12.10 Governing Law..................................................27
12.11 Holidays.......................................................27
12.12 Counterparts...................................................27
12.13 No Oral Agreements.............................................27
EXHIBITS:
Exhibit A-1 Revolving Note
Exhibit A-2 Revolving Note
AMENDED AND RESTATED
REVOLVING LOAN AGREEMENT
THIS AGREEMENT, entered into as of this 30th day of September
1994, to be effective as of October 1, 1994, by and among EGGHEAD Inc.,
and DJ&J SOFTWARE CORPORATION, as Borrowers, and SEATTLE-FIRST NATIONAL
BANK and U.S. BANK OF WASHINGTON, NATIONAL ASSOCIATION, as Banks, and
SEATTLE-FIRST NATIONAL BANK as Agent, amends and restates the Revolving
Loan Agreement dated as of September 30, 1993. For and in consideration
of the mutual covenants and conditions set forth herein the parties
agree as follows:
1. Definitions.
1.1 Terms Defined. As used herein, the following terms shall have
the meanings set forth below:
1.1.1 "Agent" means Seafirst in its capacity as agent for itself
and U.S Bank hereunder.
1.1.2 "Affiliate" means a Person that, now or hereafter, directly
or indirectly through one or more intermediaries, controls, or is
controlled by or is under common control with Borrowers. A Person shall
be deemed to control a corporation or other entity if such Person
possesses, directly or indirectly, the power to direct or cause the
direction of the management of such corporation or other entity whether
through the ownership of voting securities, by contract or otherwise.
1.1.3 "Assessment Rate" means for any Interest Period for each CD
Rate Borrowing, the maximum annual assessment rate (rounded upwards, if
necessary, to the next higher 1/100th of one percent) incurred by Agent
in providing insurance (through the Federal Deposit Insurance
Corporation or any successor) for time deposits in effect on the first
day of the Interest Period of the requested CD Rate Borrowing.
1.1.4 "Banks" means Seafirst and U.S. Bank, or either of them, as
the context may or shall require.
1.1.5 "Base Rate" means for any Interest Period for each CD Rate
Borrowing, anannual rate (based on the actual number of days elapsed
over a year of 360 days), determined by Agent as the rate set forth as
the rate in effect as of the first day of the Interest Period for a
period equal to the Interest Period in the weekly statistical release
H.15(519) published by the Board of Governors of the Federal Reserve
System under the caption "CDs (Secondary Market)", or, if said rate is
not published as of the first day of the Interest Period, the rate for a
period equal to the Interest Period appearing as of said date under the
caption "Certs of Deposit" on the display designated as "Page 120" on
the Telerate Service (or such other page as may replace Page 120 on such
service or, if none, such other available service displaying a composite
of rates offered for U.S. Dollar Certificates of Deposit as reported by
the Federal Reserve System). If there is no period equal to the
Interest Period on the display, the CD Rate shall be determined by
straight-line interpolation to the nearest month (or week or day if
expressed in weeks or days) corresponding to the Interest Period between
the two nearest neighboring periods on the display.
1.1.6 "Borrowers" means Egghead and D J & J, or either of them, as
the context may or shall require, and shall include the successors of
Egghead and D J & J, respectively. All obligations of Borrowers
hereunder and pursuant to any of the other Loan Documents shall be joint
and several.
1.1.7 "Borrowing Notice" has the meaning set forth in Section 3.4.1.
1.1.8 "Business Day" means any day except a Saturday, Sunday, or
other day on which national banks in the state of Washington are
authorized or required by law to close.
1.1.9 "Capital Ratio" means the ratio of Borrowers' Consolidated
Indebtedness (including contingent liabilities) to Borrowers'
Consolidated Net Worth.
1.1.10 "CD Rate" shall mean for each CD Rate Borrowing an interest
rate per annum equal to:
(a) The Base Rate divided by a number equal to one minus the
Domestic Reserve Percentage: plus
(b) Sum of the Assessment Rate, the Spread and all estimated
processing, brokerage, delivery and related costs (expressed as a
decimal):
[(Base Rate)/(1.00-Domestic Reserve Percentage)] + Assessment Rate &
Spread & Costs
The CD Rate shall be rounded to the nearest 1/100 of 1%, and shall
be adjusted automatically as of the effective date of any change in the
Domestic Reserve Percentage.
1.1.11 "CD Rate Borrowing" means any borrowing under the Loan for
which Borrowers have elected for the application of the CD Rate.
Computations of interest for a CD Rate Borrowing shall be based upon a
360 day year for the actual number of days elapsed.
1.1.12 "Change in Control" means the acquisition by any Person, or
any two or more Persons acting in concert, of beneficial ownership
(within the meaning of Rule 13d-3 of the Securities and Exchange
Commission) of outstanding shares of voting stock of either Borrowers
representing more than 50% of voting control of such Borrowers, which
Person or Persons currently have beneficial ownership of 50% or less of
the outstanding voting shares of voting stock of such Borrowers.
1.1.13 "Consolidated" means the aggregate of the applicable
financial figures of Borrowers and the Subsidiaries as determined in
accordance with generally accepted accounting principles.
1.1.14 "Current Ratio" means the ratio of Borrowers' consolidated
current assets to Borrowers' consolidated current liabilities. For
purposes of calculating Current Ratio, Borrowers' consolidated current
liabilities shall include the Loan.
1.1.15 "Default" means any condition or event which constitutes an
Event of Default, or which with the giving of notice or lapse of time or
both would, unless cured or waived, become an Event of Default.
1.1.16 "DJ&J" means DJ&J Software Corporation, a Washington
corporation, and a wholly owned subsidiary of Egghead.
1.1.17 "Domestic Reserve Percentage" means, for any Interest
Period for each CD Rate Borrowing, that percentage (expressed as a
decimal) representing the maximum reserve, asset and special deposit
requirements of Agent under Regulation D and any other applicable
governmental regulation, as prescribed by the Board of Governors of the
Federal Reserve System, with respect to new non-personal time deposits
in United States dollars in an amount and with a maturity equivalent to
the requested CD Rate Loan. The CD Rate shall be adjusted automatically
as of the effective date of any change in the Domestic Reserve
Percentage.
1.1.18 "Egghead" means Egghead, Inc., a Washington corporation.
1.1.19 "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended from time to time.
1.1.20 "Event of Default" has the meaning set forth in Section
11.1.
1.1.21 "Fixed Rate Borrowing" means CD Rate Borrowings, LIBO Rate
Borrowings and Overnight Rate Borrowings.
1.1.22 "Indebtedness" means all items which in accordance with
generally accepted accounting principles would be included in
determining total liabilities as shown on the liabilities side of the
balance sheet as of the date "Indebtedness" is to be determined, and
guaranties, endorsements (other than for collection in the ordinary
course of business) and other contingent obligations in respect of the
obligations of other Persons.
1.1.23 "Interest Payment Dates" mean:
(a) As to any CD Rate Borrowing, every 30 days after the CD Rate
Borrowing is made and the last day of the Interest Period;
(b) As to any LIBO Rate Borrowing, the day of each calendar month
corresponding to the date the LIBO Rate Borrowing was made commencing on
the first such day to occur after the LIBO Rate Borrowing is made and on
the last day of the Interest Period: if for any succeeding month there
is not a day corresponding to the day the LIBO Rate Borrowing was made,
then on the last day of such month;
(c) As to any Prime Rate Borrowing, the first day of each
calendar month commencing on the first such day to occur after the Prime
Rate Borrowing is made and continuing on the first day of each calendar
month thereafter through the first day of the calendar month immediately
succeeding the calendar month the Prime Rate Borrowing is converted to
another interest rate option; and
(d) As to any Overnight Rate Borrowing, the first day of the
calendar month commencing after the Overnight Rate Borrowing is made.
(e) In the event that any Interest Payment Date would fall on a
day other than a Business Day, the Interest Payment Date shall be the
next succeeding Business Day, and if the Interest Payment Date is also
the last day of an Interest Period, the Interest Period shall be
likewise extended; provided, however, if with respect to any LIBO Rate
Borrowing the next Business Day falls in the next calendar month, the
Interest Period shall end on, and the Interest Payment Date shall be,
the preceding Business Day.
1.1.24 "Interest Period" means (a) for any CD Rate Borrowing, the
30, 60, 90 or 180 day period designated by Borrowers in a Borrowing
Notice; and (b) for any LIBO Rate Borrowing, the one, two, three, or six
month period designated by Borrowers in a Borrowing Notice. Borrowers
may not elect any Interest Period ending later than the Maturity Date of
the Loan.
1.1.25 "LIBO Rate" means for each LIBO Rate Borrowing the interest
rate per annum equal to:
(a) The Offering Rate divided by a number equal to one minus the
LIBO Reserve Requirements; plus
(b) The sum of the Spread plus all estimated processing,
brokerage, delivery and related costs (expressed as a decimal):
[(Offering Rate)/(1.00-LIBO Reserve Requirements)] + Costs &
Spread
The LIBO Rate shall be rounded to the nearest 1/100 of 1%, and
shall be adjusted automatically as of the effective date of any change
in the LIBO Reserve Requirements.
1.1.26 "LIBO Rate Borrowing" means any borrowing under the Loan
for which Borrowers have elected a rate based upon the LIBO Rate to
apply. Computations of interest for a LIBO Rate Borrowing shall be
based upon a 360 day year for the actual number of days elapsed.
1.1.27 "LIBO Reserve Requirements" means for any Interest Period
for each LIBO Rate Borrowing, the aggregate of the maximum reserve
requirements during such Interest Period (expressed as a decimal),
including, without limitation, basic, supplemental, marginal and
emergency reserves, under any governmental regulation governing reserve
requirements for Eurocurrency funding (currently referred to as
"Eurocurrency liabilities") of a member bank of the Federal Reserve
System. The LIBO Rate shall be adjusted automatically as of the
effective date of any change in the LIBO Reserve Requirements.
1.1.28 "Lien" means any security interest, mortgage, deed of
trust, pledge, hypothecation, assignment, charge or deposit arrangement,
encumbrance, lien (statutory or other) or preferential arrangement of
any kind in respect of any property (including any created by, arising
under or evidenced by any conditional sales or other title retention
agreement, the interest of any lessor under a capital lease, any
financing lease having substantially the same economic effect as any of
the foregoing or the filing of a financing statement under the Uniform
Commercial Code or any comparable law naming the owner of the asset to
which such statement relates as the debtor, but not including the
interest of the lessor under an operating lease.
1.1.29 "Loan" has the meaning set forth in Section 3.1.
1.1.30 "Loan Documents" means this Agreement, the Notes and all
other agreements, instruments, and documents arising out of or relating
to this Agreement or the Loan, as well as all renewals and modifications
thereof.
1.1.31 "Maturity Date" means the date defined as such in Section
3.1 or such earlier date the Loan becomes due and payable in accordance
with Section 11.2.
1.1.32 "Net Worth" means Borrowers' Consolidated tangible net
worth determined in accordance with generally accepted accounting
principles.
1.1.33 "Notes" means the revolving promissory notes as set forth
in Section 3.3, as well as all renewals and modifications thereof.
1.1.34 "Offering Rate" means for any Interest Period for each LIBO
Rate Borrowing, an annual rate (based on the actual number of days
elapsed over a year of 360 days), at which deposits in United States
dollars are offered to major banks in the London Interbank Market at
approximately 11:00 a.m. (London time) two London Banking Days before
the first day of such Interest Period in a dollar amount and with a
maturity substantially equal to the requested LIBO Rate Borrowing as it
appears on the Reuters Screen LIBO Page. If two or more such offered
rates appear on the Reuters Screen LIBO Page, the rate in respect of
such date shall be the arithmetic mean of such offered rates.
1.1.35 "Overnight Rate Borrowings" means Seafirst Overnight Rate
Borrowings and U.S. Bank Overnight Rate Borrowings.
1.1.36 "Participant" has the meaning set forth in Section S.
1.1.37 "Permitted Liens" has the meaning set forth in Section
9.12.
1.1.38 "Permitted Special Asset" means each of (i) ---------------
1.1.39 "Permitted Special Asset Expenditures" means capital
expenditures for the acquisition of one or both Permitted Special
Assets, not exceeding $15,000,000 in the aggregate during any rolling
(4) fiscal quarter period (as that period is described in Section 9.13);
provided such capital expenditure is originally financed or refinanced
within 180 days after acquisition of the Permitted Special Asset by long
term Permitted Indebtedness, additional equity or capital leases.
1.1.40 "Permitted Special Asset Operating Lease Rentals" means
rental payments under operating leases for the use of a Permitted
Special Asset, not exceeding $2,000,000 in the aggregate during any
rolling four (4) fiscal quarter period (as that period is described in
Section 9.13).
1.1.41 "Person" means any individual, partnership, joint venture,
firm, corporation, association, trust or other enterprise, or any
government or political subdivision or agency, department, or
instrumentality thereof.
1.1.42 "Plan" means an employee pension benefit plan that is
covered by ERISA or subject to the minimum funding standards under
Section 412 of the Internal Revenue Code of 1986 and is either (a)
maintained by Borrowers or any Affiliate for employees of Borrowers or
(b) maintained pursuant to a collective bargaining agreement or any
other arrangement under which more than one employer makes contributions
and to which Borrowers or any Affiliate are then making or accruing an
obligation to make contributions or has within the preceding five plan
years made contributions.
1.1.43 "Prime Rate" means the floating commercial loan reference
rate of Agent, publicly announced from time to time as its "prime rate,"
which is not necessarily the lowest rate charged to any classification
of Agent customers. For purposes of this Agreement, each time the Prime
Rate shall change, a contemporaneous change will occur in the interest
rate charged to Borrowers on Prime Rate Borrowings effective upon the
announcement or publication of any such change in the Prime Rate. Agent
shall not be obligated to notify Borrowers of any change in the Prime
Rate; however, the Prime Rate is available upon inquiry of Agent.
1.1.44 "Prime Rate Borrowing" means any borrowing that, pursuant
to the terms of this Agreement, bears interest at a rate based upon the
Prime Rate. Computations of interest for a Prime Rate Borrowing shall
be based upon a 360 day year for the actual number of days elapsed.
1.1.45 "50% Pro Rata Share" means a 50% share.
1.1.46 "Seafirst" means Seattle-First National Bank, a national
banking association.
1.1.47 "Seafirst Overnight Rate" means a fixed rate of interest
per annum determined by Seafirst, in its sole discretion, for borrowings
overnight.
1.1.48 "Seafirst Overnight Rate Borrowing" means any borrowing
that, pursuant to the terms of this Agreement, bears interest at a
Seafirst Overnight Rate. Computations of interest for Seafirst
Overnight Rate Borrowing shall be based upon 360 day year for the actual
number of days elapsed.
1.1.49 "Spread" means:
(a) 1.00% at all times when the Capital Ratio is 1.00 to1 or less; or
(b) 1.25% at all times when the Capital Ratio is greater than 1.00 to 1.
Determination of the Spread shall be based on the calculation of Capital
Ratio as shown in the' certificate submitted by Borrowers pursuant to
subsection 8.1.2, to be effective on the day following the closing day
of the period covered by such certificate (the "effective date"). If a
change in Capital Ratio shows that a higher or lower Spread should have
been charged for CD Rate Borrowings and/or LIBO Rate Borrowings which
were accruing interest during the time period beginning on the effective
date, Agent shall recalculate retroactively the interest which should
have been accruing on such CD Rate Borrowings and/or LIBO Rate
Borrowings, and shall notify Borrowers and Banks of the difference in
amount. Within 10 days of the date of such notice, either (i) Agent
shall rebate any overpayment to Borrowers, or (ii) Borrowers shall
reimburse to Agent, for the benefit of Banks. any underpayment. In
addition, the Spread shall be changed prospectively, beginning on the
date Agent receives said certificate on CD Rate Borrowings and/or LIBO
Rate Borrowings then outstanding.
1.1.50 "Subsidiary" means a corporation 80% or more of the
outstanding voting stock of which is owned, directly or indirectly, by
Borrowers or by one or more other Subsidiaries, or by Borrowers and one
or more other Subsidiaries.
1.1.51 "U.S. Bank" means U.S. Bank of Washington, National
Association, a national banking association.
1.1.52 "U.S Bank Overnight Rate" means a fixed rate of interest
per annum determined by U.S. Bank, in its sole discretion, for
borrowings overnight.
1.1.53 "U.S. Bank Overnight Rate Borrowing" means any borrowing
that, pursuant to the terms of this Agreement, bears interest at a U.S.
Bank Overnight Rate. Computations of interest for a U.S. Bank Overnight
Borrowing shall be based upon a 360 day year for the actual number of
days elapsed.
1.2 Accounting Terms. Unless otherwise specified herein, all
accounting terms used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time to time,
applied on a basis consistent with the most recent audited Consolidated
financial statements of Egghead delivered to Bank prior to the execution
of this Agreement.
1.3 Section References. References to "Section" or "subsection"
shall refer to Sections or subsections of this Agreement, unless
otherwise indicated.
2. Parties; Loan Purpose.
2.1 Parties. Banks are national banking associations with their
principal place of business in Seattle, Washington. Borrowers are
corporations formed and existing under the laws of the state of
Washington. DJ&J is engaged in the business of sales of computer
software and related products to end users. Egghead is the owner of all
of the issued and outstanding stock of DJ& J.
2.2 Borrowers' Loan Request. Borrowers have requested Banks to
loan to Borrowers $50,000,000. The purpose of this Agreement is to set
forth the terms and conditions upon which Banks will make the
$50,000,000 loan to Borrowers.
3. Revolving Loan.
3.1 Loan Commitment. Subject to and upon the terms and
conditions set forth herein, and in reliance upon the representations,
warranties, and covenants of Borrowers contained herein or made pursuant
hereto, each Bank severally agrees to make its Pro Rata Share of
advances to Borrowers from time to time and during the period ending
September 30, 1995, (the "Maturity Date"), which Pro Rata Share for CD
Rate Borrowings, LIBO Rate Borrowings and Prime Rate Borrowings for each
Bank shall be its 50% Pro Rata Share, and for Overnight Borrowings shall
be 100% of the Overnight Borrowing requested by Borrowers from that
Bank; PROVIDED, however, that the total of all advances including
Overnight Rate Borrowings made by both Banks, shall not exceed, in the
aggregate principal amount at any one time outstanding, $50,000,000 (the
"Loan"), and the total amount of all advances, including Overnight Rate
Borrowings, made by each Bank shall not exceed, in the aggregate
principal at any one time outstanding, $25,000,000. Borrowers may
borrow, repay without penalty or premium, and reborrow hereunder until
the Maturity Date, either the full amount of the Loan or any lesser sum;
provided that in the case of any CD Rate Borrowing or LIBO Rate
Borrowing, no prepayment shall be made prior to the last day of any
applicable Interest Period.
3.2 Use of Proceeds. Except for capital expenditures permitted
under Section 9.13, the proceeds of the Loan shall be used by Borrower
for short term operating cash and, up to a sublimit of $10,000,000 in
the aggregate outstanding at any one time, (i) for the purpose of
entering into any transaction of merger or consolidation or purchase,
lease, or acquisition of all or substantially all of the property or
assets of any other Person; and (ii) for the purpose of entering into
any transaction of purchase or acquisition of any capital stock, assets,
obligations, or other securities of, any capital contribution to, or
investment in or acquisition of any interest in any Person, or
participation as a partner or joint venturer.
3.3 Note. The Loan shall be evidenced by revolving promissory
notes, one to each Bank, which Borrowers shall execute and deliver
contemporaneously with the execution of this Amended and Restated
Agreement, in the form attached hereto as Exhibits A-1 and A-2, which
notes shall replace the Notes previously executed and delivered to each
respective Bank (each such original note and replacement note a "Note").
3.4 Advances: Borrowing Notices.
3.4.1 Each advance under the Loan shall be made on oral or written
notice given by the Borrowers to the Agent ("Borrowing Notice")
(including written requests communicated by facsimile or telecopy) from
Carolyn J. Tobias, Susan V. Gutgesell, Floyd Murdock, Michelle Serpas,
or Vicki R. Pelton who are and shall be authorized to request advances
until written notice by Borrowers of the revocation of such authority is
received by Agent. Each of the foregoing persons shall only have
authority to request advances that are to be deposited into Borrowers'
demand deposit accounts at either Bank.
3.4.2 Each Borrowing Notice shall specify: (a) the amount of the
requested advance: (b) the interest rate option chosen by Borrowers in
accordance with Section 3.5; and (c) for CD Rate Borrowings and LIBO
Rate Borrowings, the applicable Interest Period for each such borrowing.
Borrowing Notices shall be delivered or communicated to Agent at or
before 1:00 P.M. Seattle local time on the day CD Rate Borrowings,
Overnight Rate Borrowings, or Prime Rate Borrowings are advanced, and at
least two Business Days before LIBO Rate Borrowings are advanced.
3.5 Interest Rates. Each time Borrowers request an advance under
the Loan, or elect to convert a Prime Rate Borrowing to a Fixed Rate
Borrowing, and prior to the expiration of each Interest Period for any
Fixed Rate Borrowings, Borrowers shall elect one of the following-
described interest rates in a Borrowing Notice:
3.5.1 A Prime Rate Borrowing which shall bear interest on the
outstanding principal amount thereof at a rate per annum equal to the
Prime Rate.
3.5.2 A LIBO Rate Borrowing which shall bear interest on the
outstanding principal amount thereof, for the applicable Interest
Period, at a rate per annum equal to the LIBO Rate as defined in and
computed pursuant to Sections 1.1.25 and 1.1.49.
3.5.3 A CD Rate Borrowing which shall bear interest on the
outstanding principal amount thereof, for the applicable Interest
Period, at a rate per annum equal to the CD Rate as defined. in and
computed pursuant to Sections 1.1.10 and 1.1.49.
3.5.4 A Seafirst Overnight Rate Borrowing which shall bear
interest on the outstanding principal amount thereof overnight, at a
rate per annum equal to the Seafirst Overnight Rate as defined in
Section 1.1.47.
3.5.5 A U.S. Bank Overnight Rate Borrowing which shall bear
interest on the outstanding principal amount thereof overnight, at a
rate per annum equal to U.S. Bank Overnight Rate as defined in Section
1.1.52.
3.5.6 Interest rate quotes for Seafirst Overnight Rate Borrowings
and for U.S. Bank Overnight Rate Borrowings, if such Bank chooses to
offer an Overnight Rate Borrowing, shall be given by Seafirst and U.S.
Bank, respectively, before 1:00 P.M., Seattle time on any Business Day,
as requested by Borrowers. Each such interest rate quote shall be
available for 30 minutes after such quote is provided by Seafirst or
U.S. Bank, respectively. Interest rate quotes for CD Borrowings, LIBO
Rate Borrowings and Prime Rate Borrowings shall be given by Agent at
any time before 11:00 A.M., Seattle time on any Business Day, as
requested by Borrowers, and shall be available until 1:00 P.M. Seattle
time on the Business Day given (each LIBO Rate quote shall be for a LIBO
Rate Borrowing two Business Days after the Business Day the quote is
given).
3.5.7 In the event Borrowers do not specify an interest rate for a
requested advance, or in the event that Borrowers do not specify an
interest rate election upon the expiration of an Interest Period, the
Prime Rate shall apply.
3.5.8 Borrowers shall not have the option of specifying the
interest rate or converting to Fixed Rate Borrowings if there exists any
Event of Default, in which case the interest rate charged to Borrowers
on all advances under the Loan, regardless of whether any advances are
then accruing interest at any other interest rate option, shall be to 2%
in excess of the Prime Rate from the date of such Event of Default until
all such Indebtedness is satisfied in full.
3.6 Repayment.
3.6.1 The Notes shall each bear interest (based on the actual
number of days elapsed over a year of 360 days) from the date of each
advance on the unpaid principal balance outstanding at either the Prime
Rate, CD Rate, LIBO Rate, Seafirst Overnight Rate or U.S. Bank Overnight
Rate, as selected by Borrowers, and all accrued interest shall be
payable in arrears on each Interest Payment Date.
3.6.2 Borrowers shall pay Banks all outstanding principal, accrued
interest, and other charges with respect to the Loan on the Maturity
Date.
3.6.3 All prepayments shall be applied first to fees and
charges,if any, then to accrued interest, and then to reduce the
principal balance of the Loan. No CD Rate Borrowing or LIBO Rate
Borrowing may be prepaid before the end of its Interest Period.
3.7 Extensions, Renewals, or Modifications. Any extensions,
renewals of, or modifications to the Loan shall be governed by the terms
and conditions of this Agreement and the other Loan Documents unless
otherwise agreed to in writing by Banks and Borrowers.
3.8 Revolving Loan Commitment Fee. During the term of the Loan,
Borrowers shall pay Banks a commitment fee (the "Commitment Fee")
calculated and payable as follows: an amount equal to 1/4% per annum on
the daily average of the unused portion of the Loan; payable quarterly
in arrears on the last day of each of Borrower's fiscal quarters, as
well as on the Maturity Date. The Commitment Fee shall be based upon
the actual number of days elapsed, divided by 360.
4. Method of Payment.
4.1 Collected Funds. All sums payable to Banks pursuant to this
Agreement shall be paid directly to Agent in immediately available
United States funds, except for interest and principal payable for
Overnight Rate Borrowings, which shall be paid directly to the Bank.
4.2 Book Entry Loan Account. Agent has established a book entry
loan account for the Loan in which Agent will make debit entries of all
advances to Borrowers pursuant to the terms of this Agreement. Agent
will also record in the applicable loan account, in accordance with
customary banking practices, all interest (other than on U.S. Overnight
Rate Borrowings) and other charges, expenses, and other items properly
chargeable to Borrowers, if any, together with all payments made by
Borrowers on account of the Indebtedness evidenced by Borrowers'
respective loan accounts and all other sums credited to the respective
loan accounts. The debit balance of Borrowers' respective loan accounts
shall reflect the amount of Borrowers' Indebtedness to Banks from time
to time by reason of advances, charges, payments, or credits. Borrowers
agree that accounting entries made by Agent with respect to Borrowers'
respective loan accounts shall constitute evidence of all advances made
under, and payments made on, the obligations of Borrowers to Banks.
Agent shall . from time to time, present Borrowers with statements of
the loan account accurately reflecting the status of the account.
5. Bank Accounts: Setoff.
Borrowers hereby pledge and give to Banks and any financial
institution to which Banks may sell a participation in the Loan
("Participant"), a lien and security interest for the amount of all
past, present, and future Indebtedness of Borrowers to Banks in the
balance of any deposit account maintained by Borrowers at either of
Banks or any Participant. Borrowers hereby authorize Banks or any such
Participant in the case of Borrowers' Default hereunder at its sole
option, at any time and from time to time, to apply to the payment of
all or any portion of the Loan or other Indebtedness of Borrowers to
Banks, any deposit balance or balances now or hereafter in the
possession of Banks or such Participant which belong to or are owed to
Borrowers.
6. Interest Rates: Change in Circumstances.
6.1 Basis for Determining Interest Rate Inadequate or Unfair. In
the event that:
6.1.1 By reason of circumstances affecting the Eurodollar market
generally, deposits in dollars in the applicable amounts are not being
offered to Banks in the London Interbank Market for the applicable
Interest Period, or
6.1.2 It shall be unlawful or impossible for Banks to make,
maintain, or fund LIBO Rate Borrowings or CD Rate Borrowings, Agent
shall forthwith give notice thereof to Borrowers. Thereafter, until
Agent notifies Borrowers that the circumstances giving rise to such
suspension no longer exist, the obligations of Bank to advance LIBO Rate
Borrowings or CD Rate Borrowings, as the case may be, shall be
suspended.
6.2 Illegality.
6.2.1 If, after the date of this Agreement, the adoption of any
applicable law, rule, or regulation, or any change therein, or any
change in the interpretation or administration thereof by any
governmental authority, central bank, or comparable agency charged with
the interpretation or administration thereof, or compliance by Banks
with any request or directive (whether or not having the force of law)
of any such authority, central bank, or comparable agency shall make it
unlawful or impossible for Banks to make, maintain, or fund LIBO Rate
Borrowings or CD Rate Borrowings, Agent shall forthwith give notice
thereof to Borrowers.
6.2.2 Upon receipt of such notice, Borrowers shall repay in full
the then outstanding principal amount of each LIBO Rate Borrowing or CD
Rate Borrowing, as the case may be, together with accrued interest
thereon, on either (a) the last day of the then current Interest Period
applicable to such LIBO Rate Borrowing or CD Rate Borrowing if Banks may
lawfully continue to maintain and fund such LIBO Rate Borrowing or CD
Rate Borrowing to such day, or (b) immediately if Banks may not lawfully
continue to fund and maintain such LIBO Rate Borrowing or CD Rate
Borrowing to such day. Concurrently with repaying such LIBO Rate
Borrowing or CD Rate Borrowing, Banks shall advance a Prime Rate
Borrowing in an equal principal amount from Banks for the purpose of
funding the LIBO Rate Borrowing or CD Rate Borrowing being repaid, or,
in Borrowers' discretion, Borrowers may repay Banks in full.
6.3 Interest Cost. If (a) the revision of Regulation D announced
by the Board of Governors of the Federal Reserve System or (b) the
adoption of any applicable law, rule, or regulation, or any change
therein, or any change in the interpretation or administration thereof,
or compliance by Banks with any request or directive (whether or not
having the force of law) of any such authority, central bank, or
comparable agency:
6.3.1 shall subject Banks to any tax, duty, or other charge with
respect to its LIBO Rate Borrowings or CD Rate Borrowings or their
obligation to make LIBO Rate Borrowings or CD Rate Borrowings, or shall
change the basis of taxation of payments to any United States national
banks of the principal of or interest on its LIBO Rate Borrowings, or CD
Rate Borrowings or any other amounts due under this Agreement in respect
to their LIBO Rate Borrowings or CD Rate Borrowings, or their obligation
to make LIBO Rate Borrowings or CD Rate Borrowings (except for changes
in the rate of tax on the overall net income of Banks) imposed by the
jurisdiction in which Banks' principal executive office or Eurodollar
lending office is located; or
6.3.2 shall impose or modify any reserve (including without
limitation, any imposed by the Board of Governors of the Federal Reserve
System), special deposit, or similar requirement against assets of,
deposits with or for the account of, or credit extended by Banks'
Eurodollar lending offices or shall impose on Banks any other condition
affecting their LIBO Rate Borrowings or CD Rate Borrowings, the Notes or
their obligation to make LIBO Rate Borrowings or CD Rate Borrowings; and
the result of any of the foregoing is to increase the cost to Banks of
making or maintaining their LIBO Rate Borrowings or CD Rate Borrowings,
or to reduce the amount of any sum received or receivable by Banks under
this Agreement by an amount deemed by Banks to be material, then the
obligations of Banks to make additional advances in the form of LIBO
Rate Borrowings or CD Rate Borrowings (as the case may be) shall be
suspended until Agent notifies Borrowers that the circumstances giving
rise to such suspension no longer exist.
6.4 Effect on Prime Rate Loans.
6.4.1 If notice has been given pursuant to Section 6.2 or 6.3
suspending LIBO Rate Borrowings or CD Rate Borrowings then, unless and
until Agent notifies Borrowers that the circumstances no longer apply,
all borrowings which would otherwise be made by Banks as LIBO Rate
Borrowings or CD Rate Borrowings may be made instead as Prime Rate
Borrowings, and
6.4.2 If Agent notifies Borrowers that the circumstances giving
rise to the suspension no longer apply, Borrowers may obtain LIBO Rate
Borrowings and CD Rate Borrowings as if the provisions of Section 6.2
and 6.3 had never applied.
6.5 Reimbursement of Additional Marginal Cost of Funds. Borrowers
shall reimburse Banks for such additional marginal costs, taxes, and
expenses which Banks may incur with respect to any LIBO Rate Borrowing
as a consequence of any change in (a) the cost to banks generally of
participating in the London Interbank Market or (b) the laws affecting
the London Interbank Market which are beyond Banks' control, to the
extent such costs are not already calculated into the LIBO Rate;
provided that Borrowers shall not be obligated under this Section to
reimburse Banks for any cost, tax, or expense which is not generally
applicable to United States national banks participating in such market,
or which Banks could have avoided through the exercise of reasonable
prudent banking practices.
7. Conditions Precedent for Advances Under the Loan.
Neither Bank shall be required to make any advance of the proceeds
of the Loan unless or until the following conditions have been fulfilled
to the satisfaction of Banks:
7.1 No Default or Event of Default. There shall not then exist
any Default or Event of Default hereunder, or after having given effect
to the requested advance, there would not exist a Default or Event of
Default.
7.2 Opinion of Counsel. Banks shall have received from counsel
for Borrowers an opinion addressed to Banks and dated as of the date of
the original date of this Agreement, in the form attached hereto as
Exhibit B.
7.3 Correctness of Representations and Warranties. All
representations and warranties of Borrowers contained herein or
otherwise made in writing in connection herewith shall be true and
correct with the same effect as though such representations and
warranties had been made on and as of the date of the advance.
7.4 The Note; Loan Documents. Borrowers shall have delivered the
duly executed Notes to Banks and all other applicable Loan Documents to
Agent.
7.5 Corporate Proceedings. All corporate proceedings of Borrowers
shall be satisfactory in form and substance to Banks, and Banks shall
have received all information and copies of all documents, including
records of all corporate proceedings, which Banks have requested in
connection therewith, including receipt of the following documents which
Banks acknowledge were received upon execution of the original of this
Agreement, such documents where appropriate to be certified by proper
corporate or governmental authorities
7.5.1 The articles of incorporation and bylaws of Borrowers,
together with all amendments thereto;
7.5.2 Certificates of Good Standing for Borrowers in the state of
Washington, dated within 30 days of the date of the execution of the
original of this Agreement; and
7.5.3 Executed resolutions of the board of directors of Borrowers
in the form attached hereto as Exhibit C authorizing Borrowers to
consummate the transactions contemplated by this Agreement.
7.5.4 Executed incumbency certificates in the form attached hereto
as Exhibit D.
7.6 Conditions to Initial Advance Subsequent to Amendment. In
addition to each of the conditions set forth for the making of any
advance hereunder, the obligation of Banks to make the initial advance
subsequent to this Amended and Restated Agreement shall be subject to
the fulfillment and delivery to the Agent, inform and substance to the
satisfaction of the Banks and their counsel, of the following:
7.6.1 Duly executed counterparts for each Bank of this Amended and
Restated Agreement, the Notes replacing the original Notes as described
in Section 3.3 and the Amended and Restated Agency and Intercreditor
Agreement of this same date.
7.6.2 Borrowers' Certificate that none of the corporate governance
documents described in Section 7.5 has been altered, amended, or
rescinded since the date last so certified and delivered to Agent and
each remains in full force and effect as of the date of the Amended and
Restated Revolving Loan Agreement.
7.6.3 Executed incumbency certificate substantially in the form of
Exhibit D hereto as to each of the individual officers executing on
behalf of the Borrowers this Amended and Restated Revolving Loan
Agreement, the Notes, and Loan documents described in Subsection 7.6.1
above, as well as to that officer executing the Certificate required in
Subsection 7.6.2 above.
B. Affirmative Covenants.
Borrowers hereby covenant and agree that, so long as this
Agreement is in effect and until the Loan, together with interest
thereon and all other obligations incurred hereunder, are paid or
satisfied in full, Borrowers shall unless both Banks shall otherwise
consent in writing:
8.1 Financial Data. Keep their respective books of account in
accordance with generally accepted accounting principles, consistently
applied, reported on the basis of Borrowers' fiscal year and furnish to
Banks and Agent:
8.1.1 Within 10 days of the preparation thereof, copies of all
Forms 10Q and 10K filed with the Securities and Exchange Commission and,
upon written request, any other governmental agency or SEC reports
relative to the operations of Borrowers.
8.1.2 As soon as practicable and in any event within 45 days after
the close of each of Egghead's fiscal quarters and within 105 days after
the close of each of Egghead's fiscal years, certificates signed by the
president or chief financial officer of Borrowers, (a) stating that
there existed during such period no Default or Event of Default or if
any such Default or Event of Default existed, specifying the nature
thereof, the period of existence thereof and what action Borrowers
propose to take, or have taken, with respect thereto; and (b) providing
calculations, certified to be true and correct, of the financial
covenants required to be met by Borrowers under Sections 9.9 through
9.11. Promptly upon the occurrence of any Default or Event of Default,
certificates signed by the president or chief financial officer of
Borrowers, specifying the nature thereof, the period of existence
thereof and what action Borrowers propose to take or have taken with
respect thereto.
8.1.3 With promptness, such other information respecting the
business, operations, and financial condition of Borrowers as Banks may
from time to time reasonably request.
8.2 Licenses and Permits. Maintain all material licenses,
permits, and all related or other material agreements necessary for
Borrowers to operate their businesses, as the same may now exist or be
modified or expanded: provided, however, DJ&J may open and close store
locations as it deems appropriate. Borrowers will at all times comply
with any and all material regulations, rules, or requirements of any
federal agency or department and of any state, local, or municipal
government, agency, or department which may at any time have
jurisdiction or power to regulate, license, or grant permits in respect
of the facilities or activities of Borrowers, whether such regulations,
rules, or requirements presently exist, or are modified, promulgated, or
implemented after the date.
8.3 Maintenance of Properties. Keep Borrowers' material
properties in good repair and in good working order and condition, in a
manner consistent with past practices and comparable to industry
standards; make from time to time all appropriate and proper repairs,
renewals, replacements, additions, and improvements thereto; and keep
all equipment which may now or in the future be subject to compliance
with standards or rules imposed by any governmental agency or authority,
or state or local governments or instrumentalities, in full compliance
with such standards or rules.
8.4 Insurance.
8.4.1 Maintain insurance upon such of Borrowers' properties and
businesses against such risks as may be specified by Banks from time to
time, including. but not limited to, fire and extended coverage,
business interruption, liability, and worker's compensation coverage in
amounts and with insurers acceptable to Banks (except to the extent
that, consistent with reasonable industry practice, Borrowers self-
insure).
8.4.2 From time to time upon request by Banks, promptly furnish or
cause to be furnished to Banks evidence, in form and substance
satisfactory to Banks, of the maintenance of all insurance, indemnities,
or bonds required by this Section 8.4 or by any license, lease, or other
agreement to be maintained, including, but not limited to, such
originals or copies as Banks may request of policies, certificates of
insurance, riders, assignments, and endorsements relating to such
insurance and proof of premium payments.
8.5 Maintenance of Records. Keep at all times books of records
and accounts in which full, true, and correct entries will be made of
all dealings or transactions in relation to Borrowers' businesses and
affairs.
8.6 Inspection. Allow any representative or agent of Banks to
visit and inspect any of the properties of Borrowers, to examine the
books of account and other records and files of Borrowers, to make
copies thereof, and to discuss the affairs, business, finances, and
accounts of Borrowers, with its officers, employees, and accountants, at
reasonable times and in such manner as not to unduly interfere with the
regular conduct of Borrowers' business.
8.7 Corporate Existence. Maintain and preserve Borrowers'
corporate existence and good standing in all jurisdictions in which they
do business where the failure to do so would have a material adverse
effect on Borrowers' businesses.
8.8 Notice of Disputes and Other Matters. Borrowers shall
promptly give written notice to Agent of any actions, proceedings, or
claims which are commenced against Borrowers in which the amount
involved is $2,000,000 or more and which is not fully covered by
insurance or which, if not solely a claim for monetary damages, could,
if adversely determined, have a material adverse effect on the business
or assets of Borrowers.
8.9 Exchange of Notes. Upon receipt of a written notice of loss,
theft, destruction, or mutilation of either of the Notes, and upon
surrendering for cancellation such Note if mutilated, Borrowers shall
execute and deliver a new Note of like tenor in lieu of such lost,
stolen, destroyed, or mutilated Note. Any Note issued pursuant to this
Section 8.9 shall be dated so that neither gain nor loss of interest
shall result therefrom.
8. 10 Other Agreements. Comply with all covenants and agreements
set forth in or required pursuant to any other agreement or document
previously, concurrently, or hereafter executed or delivered by
Borrowers in connection with this Agreement.
8.11 Further Assurances. Within 30 days of request by Banks, duly
execute and deliver or cause to be duly executed and delivered to Banks
such further instruments, agreements, and documents and do or cause to
be done such further acts as may be necessary or proper in the opinion
of Banks to carry out more effectively the provisions and purpose of
this Agreement and the other Loan Documents.
8.12 Notification of Defaults. In the event that Borrowers become
aware of a Default or Event of Default hereunder, promptly notify Banks.
9. Negative Covenants.
Borrowers covenant and agree that, until the Loan, together with
interest thereon and all other obligations incurred hereunder, are paid
or satisfied in full, Borrowers shall not, without the prior written
consent of both Banks:
9.1 Indebtedness. Create, incur, assume, or suffer to exist, any
Indebtedness, except: (i) Indebtedness of Borrowers under the Loan
including, without limitation, Indebtedness for the purpose of entering
into any transaction permitted under Sections 9.5, 9.6, and 9.13: (ii)
Indebtedness existing as of the date of this Agreement and disclosed to
Banks in the Consolidated financial statements of Egghead referred to in
Section 10.8; (iii) Indebtedness for borrowed money created after the
date of this Agreement, not to exceed $15,000,000 in the aggregate at
any one time, provided, however, any Indebtedness in excess of
$10,000,000 must be long term Indebtedness for the purpose of financing
Permitted Special Asset Expenditures as defined in Section 1.1.39 and
(iv) accounts payable to trade creditors for goods or services and
current operating liabilities (other than for borrowed money) in each
case incurred in the ordinary course of business, and paid when due
(unless contested by Borrowers in good faith).
9.2 Dividends and Distributions. Declare or pay any cash
distributions or dividends or return any capital to any of Borrowers'
shareholders or authorize or make any distribution, payment, or delivery
of property or cash to any of Borrowers' shareholders, the effect of
which would be to result in a breach of Borrowers' covenants as set
forth in any other provision of this Agreement.
9.3 Transactions with Affiliates. Enter into any transaction,
other than on an arm's length basis, in which Borrowers shall make any
payment, or agree to make any payment, to any Affiliate or transfer or
agree to transfer ownership or possession of any of their business or
assets, tangible or intangible, real, personal, or mixed, to any
Affiliate, provided that this subsection shall not preclude payment made
to Eggspert Software, Ltd. pursuant to the terms of that certain
Agreement dated March 30, 1991, between DJ&J and Eggspert Software,
Ltd., a copy of which has been provided to Banks.
9.4 Advances and Loans. Lend money, make credit available (other
than in the ordinary course of business), or loan property or the use
thereof to any Person or invest in (by capital contribution or
otherwise), or purchase or repurchase the stock or Indebtedness, or all
or a substantial part of the assets or properties, of any Person (except
as contemplated in Section 9.4 and 9.5), or guarantee, assume, endorse,
or otherwise become responsible for (directly or indirectly or by any
instrument having the effect of assuring any Person's payment or
performance or capability) the Indebtedness, performance, obligations,
stock, or dividends of any Person, or agree to do any of the foregoing,
except the endorsement of negotiable instruments for deposit or
collection in the ordinary course of business. Notwithstanding the
foregoing, Borrowers may lend to Eggspert Software, Ltd. up to
$2,500,000 and may guarantee indebtedness of Eggspert Software, Ltd. up
to a maximum amount of $2,500,000.
9.5 Investments. Invest in (by capital contribution or otherwise)
or acquire or purchase or make any commitment to purchase the obligation
or stock or equity of any Person, except (a) the purchase of direct
obligations of the Government of the United States of America or any
agency or instrumentality thereof; (b) interest-bearing certificates of
deposit or repurchase agreements issued by any commercial banking
institution satisfactory to Bank; (c) commercial paper rated, at the
time of purchase, by Standard & Poor's Corporation or Moody's Investors
Service in the highest rating category assigned by such companies for
obligations of that nature; (d) stock or obligations issued in
settlement of claims of Borrowers against others by reason of bankruptcy
or a composition or readjustment of debt or reorganization of any debtor
of Borrowers: or (e) eligible investments referred to in the Egghead
Discount Software Investment Policy dated April 25, 1991; or (f) the
purchase or acquisition of any capital stock, assets, obligations, or
other securities of, the making of any capital contribution to, or the
investment in or acquisition of any interest in any Person, or the
participation as a partner or joint venturer with any other Persons,
provided the aggregate of all investments described in this Section
9.5(f) does not exceed $10,000,000 at any one time.
9.6 Merger and Acquisition. Enter into any transaction of merger,
consolidation, purchase, or lease, or otherwise acquire all or any
substantial part of the property or assets of any other Person if such
merger, consolidation, purchase, lease, or acquisition would result in a
material adverse change in Borrowers' financial position or entail a
cost to the Borrowers in excess of $25,000,000.
9.7 Type of Business. Enter into any business which is
substantially different from and/or not connected with the businesses in
which Borrowers are presently engaged, or make any substantial change in
the nature of their business or operations.
9.8 Pension Plan. Terminate or partially terminate any Plan now
existing or hereafter established, or withdraw from participation
therein, under circumstances which result or could result in liability
to the Pension Benefit Guaranty Corporation or to the fund by which the
Plan is funded or to the employees (or their beneficiaries) for whom the
Plan is or shall be maintained, or permit any other event or
circumstance to occur which results or could result in liability to the
Pension Benefit Guaranty Corporation.
9.9 Capital Ratio. Permit the Capital Ratio to exceed 1.2:1.
9.10 Net Worth. Permit Net Worth to be less than $138,000,000.
9.11 Current Ratio. Permit the Current Ratio to be less than 1.50 to 1.
9.12 Negative Pledge. Suffer or permit, directly or indirectly,
the creation, incurrence, imposition, or assumption by either Borrower of
the existence of any Lien upon or with respect to any part of its
property, whether now owned or hereafter acquired, other than the
following ("Permitted Liens"):
(a) any Lien existing on property of such Borrower to secure
existing indebtedness on the date of this Agreement which has been
disclosed in writing to the Banks as of the date of this Agreement;
(b) Lien created under any Loan Document:
(c) Liens for taxes, fees, assessments or other governmental
charges which are not delinquent or remain payable without penalty, or
to the extent that the same are being contested in good faith by
appropriate proceedings and against which adequate reserves are being
maintained in accordance with GAAP: provided that no notice of lien has
been filed or recorded under the Internal Revenue Code;
(d) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the
ordinary course of business which are not delinquent or remain payable
without penalty or which are being contested in good faith and by
appropriate proceedings, which proceedings have the effect of preventing
the forfeiture or sale of the property subject thereto;
(e) Liens (other than any Lien imposed by ERISA) consisting of
pledges or deposits required in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
social security legislation;
(f) Liens on the property of either Borrower securing (i) the non-
delinquent performance of bids, trade contracts (other than for borrowed
money), leases, statutory obligations, (ii) contingent obligations on
surety and appeal bonds, and (iii) other non-delinquent obligations of a
like nature; in each case, incurred in the ordinary course of business,
provided all such Liens in the aggregate would not (even if enforced)
have a material adverse effect on the business, operations or condition
of such Borrower;
(g) Liens consisting of judgment or judicial attachment liens,
provided that the enforcement of such Liens is effectively stayed and
all such liens in the aggregate at any time outstanding for either
Borrower do not exceed $5,000,000;
(h) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or
interfere with the ordinary conduct of the businesses of either
Borrower;
(i) purchase money security interests on any property acquired or
held by either Borrower in the ordinary course of business, securing
Indebtedness incurred or assumed for the purpose of financing all or any
part of the cost of acquiring such property; provided that (i) any such
Lien attaches to such property concurrently with or within 20 days after
the acquisition thereof, (ii) such Lien attaches solely to the property
so acquired in such transaction, (iii) the principal amount of the debt
secured thereby does not exceed 100% of the cost of such property, and
(iv) the principal amount of the Indebtedness secured by any and all
such purchase money security interests shall not at any time exceed,
together with Indebtedness permitted under Section 9.1, $15,000,000;
(j) Liens securing obligations in respect of capital leases on
assets subject to such leases, provided that such capital leases are
otherwise permitted hereunder;
(k) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of setoff or similar rights
and remedies as to deposit accounts or other funds maintained with a
creditor depository institution;
9.13 Capital Expenditures. Except for Permitted Special Asset
Expenditures as defined in Section 1.1.39, incur aggregate capital
expenditures, including expenditures under leases required or permitted
to be capitalized under GAAP, during any rolling four (4) fiscal quarter
period (i.e., during any given fiscal quarter commencing from and after
the date of this Amended and Restated Agreement and the three (3)
preceding fiscal quarters), in excess of $16,000,000.
9.14 Operating Lease Expenditures. Except for Permitted Special
Asset Operating Lease Rentals as defined in Section 1.1.40, incur
aggregate expenditures under operating leases (i.e., any leases not
required or permitted to be capitalized in accordance with GAAP whether
or not so capitalized) in excess of $17,000,000.00 during any rolling
four (4) fiscal quarter period as described in Section 9.13.
10. Representations and Warranties.
In order to induce Banks to enter into this Agreement and to make
the Loan, Borrowers hereby make the following representations,
covenants, and warranties, which representations, covenants, and
warranties shall survive the execution and delivery of this Agreement
and shall not be affected or waived by an inspection or examination made
by or on behalf of Banks:
10.1 Corporate Status. Borrowers are duly organized and validly
existing corporations in good standing under the laws of the state of
Washington. Borrowers have the power and authority to own their
property and assets and to transact the business in which they are
engaged or presently propose to engage. Borrowers are qualified to do
business in all states except where the failure to be qualified would
not have a material adverse effect on Borrowers.
10.2 Power and Authority. Borrowers have the power to execute,
deliver, and carry out, as the case may be, the terms and provisions of
this Agreement and each of the other Loan Documents, and Borrowers have
taken all necessary action to authorize the execution, delivery, and
performance of this Agreement and the other Loan Documents, the
borrowings hereunder, the making and delivery of the Notes and of each
and every other Loan Document delivered hereunder. This Agreement
constitutes and the Notes and other Loan Documents and instruments
issued or to be issued hereunder, when executed and delivered pursuant
hereto, constitute or will constitute the authorized, valid, and legally
binding obligations of Borrowers enforceable in accordance with their
respective terms.
10.3 No Violation of Agreements. Borrowers are not in default
under any material provision of any agreement to which they are parties,
and neither the execution and delivery of this Agreement or the Notes or
other Loan Documents incidental hereto nor the consummation of the
transactions herein or therein contemplated, nor compliance with the
terms and provisions hereof or thereof, will violate any material
provision of law or any applicable regulation, or any order, writ,
injunction, or decree of any court or governmental department,
commission, board, bureau, agency, or instrumentality, or will conflict
or will be inconsistent with, or will result in any breach of, any of
the material terms, covenants, conditions, or provisions of, or
constitute a default under, or result in the creation or imposition of
(or the obligation to impose) any lien, charge, or encumbrance upon any
of the property or assets of Borrowers pursuant to the terms of any
license, permit, mortgage, deed of trust, lease, agreement, or other
instrument to which either or both Borrowers are parties or by which
either or both Borrowers may be bound, or to which either or both
Borrowers may be subject, or violate any of the provisions of the
articles of incorporation of either or both Borrowers. No order,
consent, approval, or authorization of any public body, agency,
commission, or board is necessary for the execution of this Agreement or
the making of the Notes or for the assumption and performance of this
Agreement or the Notes by Borrowers or for the consummation by Borrowers
of the transactions contemplated by this Agreement.
10.4 Recording and Enforceability. No recording, filing,
registration, notice, or other similar action is required in order to
insure the legality, validity, binding effect, or enforceability of this
Agreement, the Notes, or other Loan Documents executed or to be executed
hereunder as against Borrowers.
10.5 Litigation. Except as set forth in Egghead's audited
consolidated financial statements dated April 12, 1994 and unaudited
financial statements dated July 2, 1994, or as disclosed in Exhibit E,
there are no actions, suits, or proceedings pending or threatened
against or affecting Borrowers before any court or before any
governmental or administrative body or agency, except as disclosed in
writing to Banks, which have, or which would have if determined
adversely to Borrowers, a material adverse effect, financial or
otherwise, upon the assets or business of Borrowers.
10.6 Good Title to Properties. Borrowers have good and marketable
title to their property and assets.
10.7 Condition of Properties. All of the properties of Borrowers
are, and all thereof to be added in connection with any contemplated
expansion will be, in good repair and good working order and condition
in a manner consistent with past practices of Borrowers and comparable
to industry standards and are and will be in substantial compliance with
all standards or rules imposed by any governmental agency or authority
insofar as noncompliance would or might have a material adverse effect,
financial or otherwise, upon the assets or business of Borrowers.
10.8 Financial Statements. The (a) audited consolidated financial
statements of Egghead dated April 2, 1994, and all schedules and notes
included in such financial statements, and (b) unaudited statements of
Egghead dated July 2, 1994, both of which have heretofore been delivered
to Banks and Agent, are each true and correct in all material respects
and present fairly (i) the financial position of Borrowers as of the
date of said statements, and (ii) the results of operations of Borrowers
for the periods covered thereby. Borrowers do not have any significant
liabilities, contingent or otherwise, including liabilities for taxes or
any unusual forward or long-term commitments, which are not disclosed or
reserved against in the statements referred to above or in the notes
thereto. All such financial statements have been prepared in accordance
with generally accepted accounting principles and practices applied on a
basis consistent with prior periods. There has been no material adverse
change (including, without limitation, any such change occasioned by
accident, act of God, war, fire, flood, explosion, strike, or other
labor dispute or orders or action by any governmental authority or
agency or public utility) in the operations, business, property, or
assets of, or in the condition (financial or otherwise) of Borrowers
since July 24, 1993.
10.9 Outstanding Indebtedness. Borrowers do not have any
Indebtedness, including, without limitation, Indebtedness to Affiliates,
that is not disclosed on Egghead's July 2, 1994 unaudited financial
statements.
10.10 Taxes. Borrowers have duly filed all tax returns and
reports required by law to be filed, and all taxes, assessments, fees,
and other governmental charges upon Borrowers, or upon their assets,
that are due and payable have been paid.
10.11 License Fees. Borrowers have paid all license or other fees
and charges that have become due pursuant to any license, permit, or
grant of authority in respect of their business, or has made adequate
provisions for any such fees and charges which have accrued.
10.12 Trademarks. Borrowers own all U.S. rights to the trademark,
trade name, and service mark "Egghead" free and clear of all liens,
encumbrances, and claims (except as provided in the trademark license
agreement dated March 31, 1990, by and between Egghead Software
Services, Inc. and D J & J), and hereby agree not to grant an assignment
of or security interest in such trademark, trade name, or service mark
to any Person during the term hereof.
10.13 Disclosure. Neither the exhibits hereto, nor the financial
information and statements referred to in Section 10.8, nor any
certificate, statement, report, or other document furnished to Banks by
Borrowers or any other Person in connection herewith or in connection
with any transaction contemplated hereby, nor this Agreement, contain
any untrue statements of material fact or omit to state any material
fact necessary in order to make the statements contained therein or
herein not misleading.
10.14 Regulations U and X. Borrowers do not own and no part of
the proceeds hereof will be used to purchase or carry any margin stock
(within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System) or to extend credit to others for the purpose of
purchasing or carrying any margin stock. Borrowers are not engaged
principally, or as one of their important activities, in the business of
extending credit for the purpose of purchasing or carrying any margin
stock. If requested by Banks, Borrowers will furnish to Banks a
statement in conformity with the requirements of Federal Reserve Form U-
1 referred to in said Regulation. No part of the proceeds of the Loans
will be used for any purpose which violates or is inconsistent with the
provisions or Regulation X of said Board of Governors.
10.15 Compliance with Securities Laws. All sales and offers to
sell stock and other securities by Borrowers have been in compliance
with all laws, statutes, regulations, and ordinances governing the same.
11. Default
11.1 Events of Default. "Event of Default" wherever used herein
means any one of the following events (whatever the reason for such
Event of Default, whether it shall relate to one or more of the parties
hereto and whether it shall be voluntary or involuntary or be affected
by operation of law or pursuant to any judgment, decree, or order of any
court, or any order, rule, or regulation of any administrative or
governmental agency or instrumentality):
11.1.1 Principal Payment. If default shall occur in the due
and punctual payment of the principal of either or both of the Notes,
five days after the same shall become due and payable, whether at
scheduled payment date, by acceleration, or otherwise: or
11.1.2 Interest Payment. If default shall occur in the due and
punctual payment of any installment of interest on either or both of the
Notes, five days after such installment shall become due and payable,
whether at scheduled payment date, by acceleration, or otherwise; or
11.1.3 Other Payments. If default shall occur in the payment of
any other payments required by this Agreement or any of the other Loan
Documents five days after the same shall become due and payable; or
11.1.4 Cross Default Material Indebtedness. If any material
Indebtedness of Borrowers for money borrowed (other than the Loan) shall
become or be declared due and payable prior to the stated maturity
thereof, or shall not be paid as and when the same becomes due and
payable (after any applicable grace period), or there shall occur any
event which constitutes, or which with the giving of notice or lapse of
time, or both, would constitute an event of default under any
instrument, agreement or evidence of Indebtedness relating to any such
obligation of Borrowers, the result of which could have a material
adverse effect on Borrowers; or
11.1.5 Cross Default Other Indebtedness. If Borrowers should
default in a payment or performance of any material obligation or
Indebtedness to others (other than as set forth in Section 11.1.4),
after any applicable grace period, whether now or hereafter incurred,
the result of which could have a material adverse effect on Borrowers;
or
11.1.6 False Representation. If any representation or warranty
made (a) by Borrowers in this Agreement or (b) by any other Person in
any document, certificate, or statement furnished pursuant to this
Agreement or in connection herewith, shall be false or misleading in any
material respect; or
11.1.7 Breach of Covenant. If there shall occur a default in the
due performance or observance of any term, covenant, or agreement to be
performed or observed pursuant to Sections 8 or 9; or
11.1.8 Other Failure to Perform. If there shall occur any default
(not otherwise specified in this Section 11.1) in the due performance or
observance of any term, covenant, or agreement to be performed or
observed pursuant to the provisions of this Agreement or any agreement
incidental hereto and such default shall not have been cured within 30
days; or
11.1.9 Breach of Loan Document. If Borrowers shall fail to
perform any of their obligations under any of the Loan Documents not
otherwise specified in this Section 11.1, or if the validity of any of
such documents shall have been disaffirmed by or on behalf of any of the
parties other than Banks thereto and such default shall not have been
cured within 30 days; or
11.1.10 Change in Control. If a Change in Control shall occur,
without both Banks' prior written consent: or
11.1.11 Government Seizure. If custody or control of any
substantial part of the property of Borrowers shall be assumed by any
governmental agency or authority or any court of competent jurisdiction
at the instance of any governmental agency or authority or if any
governmental regulatory agency or authority shall take any final action
the effect of which would be to affect materially and adversely the
operations of Borrowers as now or then conducted;
11.1.12 Judgment. Any judgment or order for the payment of money
in excess of $5,000,000 and not covered by insurance shall be rendered
against Borrowers and either (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order or (ii) there
shall be any period of 45 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
11.1.13 Bankruptcy: Liquidation. If Borrowers shall suspend or
discontinue their business, shall make an assignment for the benefit of
creditors or a composition with creditors, shall be unable or admit in
writing its inability to pay its debts as they mature, shall file a
petition in bankruptcy, shall become insolvent (howsoever such
insolvency may be evidenced), shall be adjudicated insolvent or
bankrupt, shall petition or apply to any tribunal for the appointment of
any receiver, liquidator, or trustee of or for it or any substantial
part of its property or assets, shall commence any proceeding relating
to it under any bankruptcy, reorganization, arrangement, readjustment of
debt, receivership, dissolution, or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect; or if there shall be
commenced against Borrowers any such proceeding which shall remain
undismissed for a period of 60 days or more, or an order, judgment, or
decree approving the petition in any such proceeding shall be entered;
or if Borrowers shall by any act or failure to act indicate its consent
to, approval of or acquiescence in, any such proceeding or any
appointment of any receiver, liquidator, or trustee of or for it or for
any substantial part of its property or assets, or shall suffer any such
appointment to continue undischarged or unstayed for a period of 60 days
or more, or shall take any corporate action for the purpose of effecting
any of the foregoing; or if any court of competent jurisdiction shall
assume jurisdiction with respect to any such proceeding or if a receiver
or a trustee or other officer or representative of a court or of
creditors, or if any court, governmental office or agency, shall, under
color of legal authority, take and hold possession of any substantial
part of the property or assets of Borrowers.
11.2 Acceleration; Remedies. Upon the occurrence of any Event of
Default, Agent shall (unless otherwise directed by both Banks in
writing), by written notice to Borrowers, declare the entire unpaid
principal balance or any portion of the principal balance of the Notes
and interest accrued thereon, to be immediately due and payable jointly
and severally by the makers thereof, and such principal and interest
shall thereupon become and be immediately due and payable, without
presentation, demand, protest, notice of protest, or other notice of
any kind, all of which are hereby expressly waived by Borrowers. Each
Bank may thereafter proceed to protect and enforce its rights hereunder
in any manner or order such Bank deems expedient without regard to any
equitable principles of marshalling or otherwise. All rights and
remedies given by this Agreement, the Notes, and the other Loan
Documents are cumulative and not exclusive of any thereof or of any
other right or remedies available to Banks, and no course of dealing
between Borrowers and Banks or either of or any delay or omission in
exercising any right or remedy shall operate as a waiver of any right or
remedy, and every right and remedy may be exercised from time to time
and as often as shall be deemed appropriate by Banks or either Bank, as
the case may be.
12. Miscellaneous.
12.1 Notices. All notices, requests, consents, demands, approvals,
and other communications hereunder shall be deemed to have been duly
given, made, or served i f i n writing and when delivered personally or
mailed by first class mail, postage prepaid, to the respective parties
to this Agreement as follows:
(a) If to Borrowers:
Egghead, Inc. and
D J & J Software Corporation
22011 S.E. 51st Street
Issaquah, Washington 98027-7004
Attention: Carolyn J. Tobias
SVP, CFO & Secretary
(b) If to Agent:
Seafirst Agency Services
701 Fifth Ave., 16th Floor
Seattle, Washington 98104
Attention: Dora A. Brown
Ass't Vice President
(c) If to Seafirst:
Seattle-First National Bank Northwest National Division, CSC-12
701 Fifth Avenue, 12th Floor Seattle, Washington 98104
Attention: David A. Dehlendorf
Vice President
(d) If to U.S. Bank:
U.S. Bank of Washington, National Association
1420 Fifth Avenue, 11th Floor
Seattle, Washington 98101
Attention: Wade Black
Assistant Vice President
The designation of the persons to be so notified or the address of such
persons for the purposes of such notice may be changed from time to time
by similar notice in writing, except that any communication with respect
to a change of address shall be deemed to be given or made when received
by the party to whom such communication was sent. No other method of
notice is precluded by this Section 12.1.
12.2 Borrowers' Notice of Default by Agent or Banks. In the
event that Borrowers at any time conclude that Agent or Banks have
defaulted in performance of their obligations under this Agreement or
under any of the Loan Documents, Borrower shall promptly give notice of
such default to Agents or Banks, as the case may be and provide such
party with a reasonable time to cure such default.
12.3 Payment of Expenses. Borrowers, whether or not the
transactions hereby contemplated are consummated, shall pay upon demand
all costs and expenses of Banks in connection with the preparation,
negotiation, execution, and delivery of the Loan Documents, as well as
any amendments, modifications, consents, or waivers relating thereto,
including, without limitation, reasonable attorney fees and costs. In
addition, Agent and Banks shall be entitled to recover any costs and
expenses incurred in connection with the preservation of rights under,
and enforcement of, the Loan Documents whether or not any lawsuit is
commenced, in all such cases, including, without limitation, reasonable
attorney fees and costs.
12.4 Fees and Commissions. Borrowers agree to indemnify Agent and
Banks and hold them harmless in respect of any commissions, fees,
judgments, or expenses of any nature and kind which such parties may
become liable to pay by reason of any claims by or on behalf of brokers,
finders, or agents in connection with any act or failure to act by
Borrowers or any litigation or similar proceeding arising from such
claims. Borrowers and Agent and Banks represent that they are
aware of no valid basis for any such claims.
12.5 No Waiver. No failure or delay on the part of Agent or
Banks or the holder(s) of the Notes in exercising any right, power, or
privilege hereunder and no course of dealing between Borrowers and Agent
or Banks or the holder(s) of the Notes shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power,
or privilege hereunder preclude any other or further exercise thereof or
the exercise of any right, power or privilege. The rights and remedies
herein expressly provided are cumulative and not exclusive of any rights
or remedies which Agent or Banks or any subsequent holder(s) of the
Notes would otherwise have. No notice to or demand on Borrowers in any
case shall entitle Borrowers to any other of further notice or demand in
similar or other circumstances or shall constitute a waiver of the right
of Agent or Banks to any other or further action in any circumstances
without notice or demand.
12.6 Entire Agreement and Amendments. This Agreement, together
with the Agency and Inter creditor Agreement of the same date, and the
other Loan Documents, represents the entire Agreement between the
parties hereto with respect to the Loan and the transactions
contemplated hereunder and, except as expressly provided herein, shall
not be affected by reference to any other documents. This Agreement
shall supersede and replace in its entirety any prior or contemporaneous
Revolving Loan Agreements and amendments, modifications, or extensions
thereof by and between Seafirst and Borrowers, or U.S. Bank and
Borrowers. Neither this Agreement nor any provision hereof may be
changed, waived, discharged, or terminated orally, but such may be
accomplished only by an instrument in writing signed by the party
against whom enforcement of the change, waiver, discharge, or
termination is sought.
12.7 Benefit of Agreement. This Agreement shall be binding upon
and inure to the benefit of Borrowers and Agent and Banks, and their
successors and assigns, and all subsequent holders of the Notes or any
portion thereof. Borrowers expressly acknowledge that Banks are not
prohibited or restricted from assigning rights or participation's
hereunder, or any portion thereto, to another party or parties:
provided, however, that Bank shall give prior written notice thereof to
Borrowers and Agent. Borrowers, however, are precluded from assigning
all or any of their respective rights or delegating any of their
obligations hereunder or under any of the other agreements among
Borrowers and Agent and Banks without the prior written consent of such
parties.
12.8 Severability. If any provision of this Agreement or any of
the Loan Documents shall be held invalid under any applicable laws, such
invalidity shall not affect any other provision of this Agreement and,
to this end, the provisions hereof are severable.
12.9 Exhibits. All references to "Exhibits" contained herein are
references to exhibits attached hereto, the terms and conditions of
which are made a part hereof for all purposes.
12.10 Governing Law. This Agreement and the rights and
obligations of the parties hereunder and under the other Loan Documents
shall be construed in accordance with and shall be governed by the laws
of the state of Washington.
12.11 Holidays. Whenever any payment to be made hereunder or on
the Notes shall become due and payable on a day other than a Business
Day, such payment may be made on the next succeeding Business Day and
such extension of time shall in such case be included in computing
interest on such payment.
12.12 Counterparts. This Agreement and each of the Loan Documents
may be executed in one or more counterparts, each of which shall
constitute an original Agreement, but all of which together shall
constitute one and the same instrument.
12.13 No Oral Agreements. ORAL AGREEMENTS OR ORAL COMMITMENTS TO
LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A
DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW. IN WITNESS WHEREOF,
Borrowers and Agent and Banks have caused this Agreement to be duly
executed by the respective, duly authorized signatories as of the date
first above written.
BORROWERS:
DJ&J SOFTWARE CORPORATION EGGHEAD, INC.
By: Terence M. Strom By: Terence M. Strom
Title: CEO Title: CEO
By: Carolyn J. Tobias By: Carolyn J. Tobias
Title: CFO Title: CFO
BANKS:
SEATTLE-FIRST NATIONAL BANK U.S. BANK OF WASHINGTON,
NATIONAL ASSOCIATION
By: David A. Delendorf By: Wade Black
Title: Vice President Title: Assistant Vice President
AGENT:
SEATTLE-FIRST NATIONAL BANK
By: Dora A. Brown
Title: Assistant Vice President
10/13/94
EXHIBIT A-1 TO REVOLVING LOAN AGREEMENT
REVOLVING NOTE
$25,000,000.00 Dated: September 30, 1994
To be effective: October 1, 1994
FOR VALUE RECEIVED, the undersigned, EGGHEAD, INC., and DJ&J
SOFTWARE CORPORATION ("Borrowers") jointly and severally promise to pay
to the order of SEATTLE-FIRST NATIONAL BANK (including any subsequent
holder hereof, "Seafirst"), the principal sum of Twenty Five Million
Dollars ($25,000,000.00), or the aggregate unpaid principal amount of
all advances made by Seafirst to Borrowers under this Note, whichever is
less, in lawful immediately available money of the United States of
America, in accordance with the terms and conditions of that certain
Amended and Restated Revolving Loan Agreement entered into on September
30, 1994, and effective as of October 1, 1994, by and among Borrowers,
Seattle First National Bank as "Agent," and U.S. Bank of Washington,
National Association, and Seattle-First National Bank as "Banks"
(together with all supplements, exhibits, amendments, and modifications
thereto, the "Loan Agreement"). Borrowers also promise to pay interest
on the unpaid principal balance hereof in like money in accordance with
the terms and conditions, and at the rate or rates provided for, in the
Loan Agreement. All principal, interest, and other charges are due and
payable in full on September 30, 1995.
Borrowers and all endorsers, sureties, and guarantors hereof
jointly and severally waive presentment for payment, demand, notice of
nonpayment, notice of protest, and protest of this Note, and all other
notices in connection with the delivery, acceptance, performance,
default, dishonor, or enforcement of the payment of this Note except
such notices as are specifically required by the Loan Agreement, and
they agree that the liability of each of them shall be unconditional
without regard to the liability of any other party and shall not be in
any manner affected by any indulgence, extension of time, renewal ,
waiver, or modification granted or consented to by Seafirst, Agent, or
Banks. Borrowers and all endorsers, sureties, and guarantors hereof
consent to any and all extensions of time, renewals, waivers, or
modifications that may be granted by Seafirst, Agent, or Banks with
respect to the payment or other provisions of this Note and the Loan
Agreement, and to the release of any property now or hereafter securing
this Note with or without substitution and agree that additional makers,
endorsers, guarantors, or sureties may become parties hereto without
notice to them or affecting their liability hereunder.
This Note is one of the "Notes" referred to in the Loan Agreement,
and as such is entitled to all of the benefits and obligations specified
in the Loan Agreement. Terms defined in the Loan Agreement are used
herein with the same meanings. Reference is made to the Loan Agreement
for provisions for the repayment of this Note and the acceleration of
the maturity hereof.
If there shall occur any Event of Default, Seafirst shall have the
option to increase the interest rate charged to Borrowers hereunder as
provided for in the Loan Agreement.
IN WITNESS WHEREOF, the undersigned Borrowers have caused this
Note to be executed by their duly authorized signatories as of the date
first above written.
D J & J SOFTWARE CORPORATION EGGHEAD, INC.
By: Terence M. Strom By: Terence M. Strom
Title: CEO Title: CEO
By: Carolyn J. Tobias By: Carolyn J. Tobias
Title: CFO Title: CFO
10\11\94
EXHIBIT A-2 TO REVOLVING LOAN AGREEMENT
REVOLVING NOTE
$25,000,000.00 Dated: September 30, 1994
To be effective: October 1, 1994
FOR VALUE RECEIVED, the undersigned, EGGHEAD, INC., and DJ&J
SOFTWARE CORPORATION ("Borrowers") jointly and severally promise to pay
to the order of U.S. BANK OF WASHINGTON, NATIONAL ASSOCIATION (including
any subsequent holder hereof, "U.S. Bank"), the principal sum of Twenty
Five Million Dollars ($25,000,000.00), or the aggregate unpaid principal
amount of all advances made by U.S. Bank to Borrowers under this Note,
whichever is less, in lawful immediately available money of the United
States of America, in accordance with the terms and conditions of that
certain Amended and Restated Revolving Loan Agreement entered into on
September 30, 1994, and effective as of October 1, 1994, by and among
Borrowers, Seattle-First National Bank as "Agent," and U.S. Bank of
Washington, National Association, and Seattle-First National Bank as
"Banks" (together with all supplements, exhibits, amendments, and
modifications thereto, the "Loan Agreement"). Borrowers also promise to
pay interest on the unpaid principal balance hereof in like money in
accordance with the terms and conditions, and at the rate or rates
provided for, in the Loan Agreement. All principal , interest, and
other charges are due and payable in full on September 30, 1995.
Borrowers and all endorsers, sureties, and guarantors hereof
jointly and severally waive presentment for payment, demand, notice of
nonpayment, notice of protest, and protest of this Note, and all other
notices in connection with the delivery, acceptance, performance,
default, dishonor, or enforcement of the payment of this Note except
such notices as are specifically required by the Loan Agreement, and
they agree that the liability of each of them shall be unconditional
without regard to the liability of any other party and shall not be in
any manner affected by any indulgence, extension of time, renewal ,
waiver, or modification granted or consented to by U.S. Bank, Agent, or
Banks. Borrowers and all endorsers, sureties, and guarantors hereof
consent to any and all extensions of time, renewals, waivers, or
modifications that may be granted by U.S. Bank, Agent, or Banks with
respect to the payment or other provisions of this Note and the Loan
Agreement, and to the release of any property now or hereafter securing
this Note with or without substitution and agree that additional makers,
endorsers, guarantors, or sureties may become parties hereto without
notice to them or affecting their liability hereunder.
This Note is one of the "Notes" referred to in the Loan Agreement,
and as such is entitled to all of the benefits and obligations specified
in the Loan Agreement. Terms defined in the Loan Agreement are used
herein with the same meanings. Reference is made to the Loan Agreement
for provisions for the repayment of this Note and the acceleration of
the maturity hereof.
If there shall occur any Event of Default, U.S. Bank shall have
the option to increase the interest rate charged to Borrowers hereunder
as provided for in the Loan Agreement.
IN WITNESS WHEREOF, the undersigned Borrowers have caused this
Note to be executed by their duly authorized signatories as of the date
first above written.
D J & J SOFTWARE CORPORATION EGGHEAD, INC.
By: Terence M. Strom By: Terence M. Strom
Title: CEO Title: CEO
By: Carolyn J. Tobias By: Carolyn J. Tobias
Title: Title: CFO
10\13\94
AMENDED AND RESTATED
AGENCY AND INTER CREDITOR AGREEMENT
Dated September 30, 1994
To Be Effective October 1, 1994
SEATTLE-FIRST NATIONAL BANK ("Seafirst") and U.S. BANK OF
WASHINGTON, NATIONAL ASSOCIATION ("U.S. Bank") (Seafirst and U.S. Bank
being sometimes hereinafter referred to individually as a "Bank" and
collectively as the "Banks"), EGGHEAD, INC., and DJ&J SOFTWARE
CORPORATION (collectively, the "Borrowers"), and SEATTLE-FIRST NATIONAL
BANK, in its capacity as agent (the "Agent") for the Banks, agree as
follows:
RECITALS
WHEREAS, the Banks, Agent and Borrowers entered into an Amended
and Restated Revolving Loan Agreement on September 30, 1994, effective
as of October 1, 1994 (together with all renewals, extensions,
modifications and replacements thereof, the "Loan Agreement"); and
WHEREAS, the Banks, Agent, and Borrowers wish to enter into this
Agreement for the purpose of appointing Agent to act in such capacity
with respect to certain aspects of the Banks' dealings with Borrowers
pursuant to the Loan Agreement;
NOW, THEREFORE, the parties agree as follows:
AGREEMENT
SECTION 1. Defined Terms. Terms defined in the Loan Agreement
are used herein with the same meanings.
SECTION 2. Authorization and Action. Each Bank hereby appoints
and authorizes the Agent to take such action as agent on such Bank's
behalf and to exercise such powers under this Agreement as are delegated
to the Agent by the terms hereof and the Loan Agreement, together with
such powers as are reasonably incidental thereto. As to any matters not
expressly provided for by this Agreement and the Loan Agreement, the
Agent shall not be required to exercise any discretion or take any
action, unless requested to act or to refrain from acting upon
instructions agreed to by all of the Banks and the Agent and shall have
no liability to either Bank or to the Borrowers for any action taken or
omitted upon the written instruction of both Banks: provided that the
Agent shall not be required to take any action which exposes the Agent
to liability or which is contrary to this Agreement, the Loan Agreement
or any other Loan Document or applicable law. The parties further agree
that no provision of the Loan Agreement or any other Loan Document may
be changed, waived, discharged, or terminated, unless accomplished by an
instrument in writing signed by the party against whom enforcement of
the change, waiver, discharge, or termination is sought.
SECTION 3. Agent's Reliance, Etc. Neither the Agent nor any of
its directors, officers, agents, or employees shall be liable for any
action taken or omitted to be taken by it or them under or in connection
with this Agreement or any other Loan Document, except for its or their
own gross negligence or willful misconduct. Without limitation of the
generality of the foregoing, the Agent: (a) may treat the payee of each
Note as the holder thereof until the Agent receives written notice of
the assignment or transfer thereof signed by such payee (or subsequent
holder assignment to whom the Agent has received notice) and in form
satisfactory to the Agent, (b) may consult with legal counsel (including
counsel for the Borrowers), independent public accountants, and other
experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of
such counsel, accountants, or other experts; (c) makes no warranty or
representation to the Banks and shall not be responsible to the Banks
for any statements, warranties, or any other Loan Document; (d) shall
not have any duty to ascertain or to inquire as to the performance or
observance of any other Loan Document on the part of the Borrowers or to
inspect the property (including the books and records) of the Borrowers;
(e) shall not be responsible to the Banks for the due execution,
legality, validity, enforceability, genuineness, sufficiency, or value
of this Agreement, any other Loan Document or any other instrument or
document furnished pursuant hereto or thereto; and (f) shall incur no
liability under or in respect of this Agreement by acting upon any
notice, consent, certificate, or other instrument or writing (which may
be by telegram, cable, telex, or telephone facsimile transmission)
believed by it to be genuine and signed or sent by the proper party or
parties.
SECTION 4. Bank Credit Decision. Each Bank acknowledges that it
has, independently and without reliance upon the Agent or the other Bank
and based on the financial statements of the Borrowers and such other
documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and the other
Loan Documents to which it is a party. Each Bank also acknowledges that
it will , independently and without reliance upon the Agent or the other
Bank and based on such document and information as it shall deem
appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other Loan
Documents to which it is a party.
SECTION 5. Indemnification. The Banks agree to indemnify the
Agent, ratably according to the unpaid principal amount of their
respective advances made by each Bank under the Loan (or if no advances
are at the time outstanding, according to their 50% Pro Rata Share) ,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses, or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by,
or asserted against the Agent in any way relating to or arising out of
this Agreement or any other Loan Document or any action taken or omitted
by the Agent under this Agreement or any other Loan Document; provided
that no Bank shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses, or disbursements resulting from the Agent's gross
negligence or willful misconduct.
SECTION 6. Advances, Etc. (a) Each Borrowing Notice given to the
Agent by the Borrowers, except for a request for an Overnight Rate
Borrowing, shall constitute a request for a pro rata borrowing from the
Banks in accordance with each Bank's 50% Pro Rata Share, and each such
advance shall bear interest at either the CD Rate, LIBO Rate or Prime
Rate, as requested by the Borrowers, and determined by the Agent. Each
Bank shall, on the date of each such advance under the Loan, make its
50% Pro Rata Share of such advance available to the Agent at Seafirst
Agency Services, 701 Fifth Ave. , 16th Floor, Seattle, Washington 98104,
Attention Dora A. Brown, i-n same day funds. After the Agent's receipt
of such funds and upon fulfillment of the applicable conditions set
forth in Section 7 of the Loan Agreement, the Agent will make such funds
available to the Borrowers in accordance with Section 3.4.1 of the Loan
Agreement.
(b) Each Borrowing Notice given to Agent by Borrowers for an
Overnight Rate Borrowing shall constitute a request for a borrowing from
the Bank offering the Overnight Rate Borrowing selected by Borrowers,
subject to the limitations set forth in Sections 3.5.4 and 3.5.5 of the
Loan Agreement. The Bank providing the Overnight Rate Borrowing on the
date of each such advance shall make such advance available to Borrowers
directly, upon fulfillment of the applicable conditions set forth in
Section 7 of the Loan Agreement ' by crediting the advance as requested
by Borrowers, in same day funds. Such Bank shall immediately give the
Agent written notice of the date, amount, and maturity of such advance.
(c) Unless the Agent shall have received notice from a Bank prior
to the date of any advance under the Loan that such Bank will not make
such advance available to the Agent, the Agent may assume that such Bank
has made such advance available to the Agent on the date thereof, and
the Agent may, in reliance upon such assumption, make available to the
Borrowers on such date a corresponding amount. If and to the extent
that such Bank shall not have made such advance available to the Agent,
such Bank agrees to repay to the Agent on demand such corresponding
amount, together with interest thereon, for each day from the date such
amount is made available to the Borrowers until the date such amount is
repaid to the Agent, at the interest rate applicable to the advance
made. If such Bank shall repay to the Agent such corresponding amount,
such amount so repaid shall constitute such Bank's advance for the
purpose of this Agreement and the Loan Agreement.
SECTION 7. Conversion to and from Overnight Rate Borrowings. (a)
In the event the Borrowers elect to convert an Overnight Rate Borrowing
to a CD Rate Borrowing, LIBO Rate Borrowing, or Prime Rate Borrowing,
then on the date of such interest rate conversion, the Bank which did
not make the Overnight Rate Borrowing subject to the interest rate
conversion shall make available to the Agent at Seafirst Agency
Services, 701 Fifth Ave., 16th Floor, Seattle, Washington 98104,
Attention Dora A. Brown, in same day funds, its 50% Pro Rata Share of
the CD Rate Borrowing, LIBO Rate Borrowing or Prime Rate Borrowing, as
the case may be, which is subject to the interest rate conversion, for
disbursement to the other Bank. After the Agent's receipt of such
funds, the Agent will make such funds available to the Bank entitled
thereto.
(b) In the event the Borrowers elect to convert to an Overnight
Rate Borrowing from a CD Rate Borrowing or a LIBO Rate Borrowing at the
end of the Interest Period applicable thereto, or from a Prime Rate
Borrowing at any time, then on the date of such interest rate
conversion, the Bank which is making such Overnight Rate Borrowing shall
make available to the Agent at Seafirst Agency Services, 70l Fifth Ave.,
16th Floor, Seattle, Washington 98104, Attention Dora A. Brown, in same
day funds, its 50% Pro Rata Share of the CD Rate Borrowing, LIBO Rate
Borrowing, or Prime Rate Borrowing, as the case may be, which is subject
to the interest rate conversion for disbursement to the other Bank.
After the Agent's receipt of such funds the Agent will make such funds
available to the Bank entitled thereto.
(c) If and to the extent that a Bank shall not have made funds
available to the Agent at the time and in the amount required by
Sections 7(a) and 7(b) hereof, such Bank agrees to pay the Agent on
demand such amount, together with interest thereon, from the date such
amount is due until the date such amount is paid to the Agent, at a
fluctuating interest rate per annum equal for each such day to the
weighted average of the rates on overnight federal funds transactions
with members of the Federal Reserve System arranged by federal funds
brokers, as published for such day (or, if such day is not a Business
Day for the next preceding Business Day) by the Federal Reserve Bank of
San Francisco, or, if such rate is not published for any day which is a
Business Day, the average of the quotations for such day on such
transactions received by the Agent from three federal funds brokers of
recognized standing selected by the Agent.
SECTION 8. Notices of Interest Rate Determination and Protection.
(a) The Agent shall give prompt notice to the Borrowers and the Banks of
the applicable interest rate determined by the Agent for each CD Rate
Borrowing, LIBO Rate Borrowing, and Prime Rate Borrowing under the Loan
Agreement.
(b) The Agent shall give prompt notice to the Banks of all notices
given to the Borrowers pursuant to Section 6.2 and 6.3 of the Loan
Agreement.
(c) The Agent shall give prompt notice to the Banks of all notices
given by the Borrowers to the Agent pursuant to Section 8.8 of the Loan
Agreement.
SECTION 9. Sharing of Payments Prior to Default. (a) Promptly
after receipt by the Agent of each payment of principal made by the
Borrowers under the Notes, the Agent will cause to be applied to the
Banks' respective Notes and distributed to the Banks like funds in
accordance with each Bank's 50% Pro Rata Share for all CD Rate
Borrowings, LIBO Rate Borrowings, and Prime Rate Borrowings, and ratably
in accordance with the respective outstanding principal amounts of each
Bank's Overnight Rate Borrowings. Promptly after receipt by the Agent
of each payment of interest on account of CD Rate Borrowings, LIBO Rate
Borrowings, and Prime Rate Borrowings made by the Borrowers under the
Notes, the Agent will cause to be applied to the Banks' respective Notes
and distributed to the Banks like funds in accordance with each Bank's
50% Pro Rata Share. Promptly after receipt by the Agent of each payment
of the Commitment Fee made by the Borrowers under the Loan Agreement,
the Agent will cause to be distributed funds, in like funds, to each
Bank its proportionate share of the Commitment Fee based on each Bank's
share of the unused portion of the Loan for the applicable period for
which the Commitment Fee is based.
(b) Each payment of interest on account of Seafirst Overnight Rate
Borrowings made by the Borrowers under Seafirst's Note shall be paid
directly to Seafirst. Each payment of interest on account of U.S. Bank
Overnight Rate Borrowings made by the Borrowers under U.S. Bank's Note
shall be paid directly to U.S. Bank.
(c) Unless the Agent shall have received notice from the Borrowers
prior to the date on which any payment to be shared by the Banks in
accordance with Section 9(a) hereof is due that the Borrowers will not
make such payment in full, the Agent may assume that the Borrowers have
made such payment in full to the Agent on such date and the Agent may,
in reliance upon such assumption, cause to be distributed to each Bank
on such due date an amount equal to the amount then due such Bank. If
and to the extent the Borrowers shall not have made such payment in full
to the Agent, each Bank shall repay to the Agent forthwith on demand
such amount distributed to such Bank together with interest thereon, for
each day from the date such amount is distributed to such Bank until the
date such Bank repays such amount to the Agent, at a fluctuating
interest rate per annum equal for each such day to the weighted average
of the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published
for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of San Francisco,
or, if such rate is not published for any day which is a Business Day,
the average of the quotations for such day on such transactions received
by the Agent from three federal funds brokers of recognized standing
selected by the Agent.
(d) If any Bank shall obtain any payment prior to occurrence of an
Event of Default (whether voluntary, involuntary, through the exercise
of any right of set-off, or otherwise) on account of the Loan in excess
of its ratable share of payments to which such Bank is entitled pursuant
to Section 9(a) and 9(b) hereof; such Bank shall forthwith pay over to
the other Bank such amount as shall be necessary to cause such Bank to
share the excess payment ratably with the other Bank in accordance with
Section 9(a) and 9(b) hereof; provided that if all or any portion of
such excess payment is thereafter recovered from such paying Bank, such
payment shall be rescinded and such Bank shall repay to the paying Bank
an amount equal to such Bank's ratable share of the total amount so
recovered from the paying Bank.
SECTION 10. Sharing of Payments After Default. Upon the
occurrence of an Event of Default, the Banks shall cause a payment to be
made between themselves on account of the outstanding principal balance
of their respective Overnight Rate Borrowings so that the outstanding
principal balance of all advances under the Loan as of the close of
business on the date upon which each Bank had notice of the Event of
Default shall be shared by the Banks based upon their 50% Pro Rata
Shares. Each Bank agrees that upon the occurrence of an Event of
Default and after the payment between the Banks as contemplated in this
Section 10, all payments received from the Borrowers (whether voluntary,
involuntary, through the exercise of any right of set-off or otherwise)
shall be shared by the Banks based upon their 50% Pro Rata Shares. If
any Bank shall obtain any payment from the Borrowers in excess of such
Bank's 50% Pro Rata Share, such Bank shall forthwith pay over to the
other Bank such amount as shall be necessary to cause such Bank to share
the excess payment with the other Bank in accordance with each Bank's
50% Pro Rata Share: provided that if all or a portion of such excess
payment is thereafter recovered from such paying Bank, such payment
shall be rescinded and such Bank shall repay to the paying Bank an
amount equal to such Banks' 50% Pro Rata Share of the total amount so
recovered from the paying Bank.
SECTION 11. Notice of Default. The Agent shall not be deemed to
have knowledge or notice of the occurrence of any Event of Default,
unless the Agent shall have received notice from a Bank or the Borrowers
which shall state that such notice is a "notice of default" and shall
describe such Event of Default. If the Agent receives such a notice of
default, then the Agent shall give notice of such Event of Default to
each Bank, or to Borrowers in the event that Borrowers are not the
defaulting party.
SECTION 12. Successor Agent. The Agent may resign at any time by
giving written notice thereof to the Banks and Borrowers. Upon any such
resignation, Banks and Borrowers shall have the right to appoint a
successor Agent. If no successor Agent shall have been so appointed by
the Banks and Borrowers and shall have accepted such appointment, within
30 days after the retiring Agent's giving of notice of resignation of
Agent, then the retiring Agent may, on behalf of the Banks, appoint a
successor Agent, which shall be a commercial bank organized under the
laws of the United States or of any state thereof. Upon the acceptance
by a successor Agent of any appointment as Agent hereunder, such
successor Agent shall thereupon succeed to and become vested with all
the rights, powers, privileges, and duties of the retiring Agent, and
the retiring Agent shall be discharged from its duties and obligations
under this Agreement. After any retiring Agent's resignation or removal
hereunder as Agent, the provisions of this Agreement shall inure to its
benefit as to any actions taken or omitted to be taken by it while it
was Agent under this Agreement.
SECTION 13. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including communication by
telephone facsimile transmission, telegraph, telex or cable) and mailed,
telegraphed, telexed, cabled, transmitted by telephone facsimile or
delivered to the Borrowers, the Banks and the Agent at their respective
addresses and telephone facsimile numbers set forth below:
(a) If to Borrowers:
Egghead, Inc. and
D J & J Software Corporation
22011 S.E. 5lst Street
Issaquah, Washington 98027-7004
Attention: Carolyn J. Tobias
SVP, CFO & Secretary
Facsimile: (206) 391-6267
(b) If to Agent:
Seafirst Agency Services
701 Fifth Ave., 16th Floor
Seattle, Washington 98104
Attention: Dora A. Brown
Ass't Vice President
Facsimile: (206) 358-0971
(c) If to Seafirst:
Seattle-First National Bank Northwest National Division, CSC-12
701 Fifth Avenue, 12th Floor Seattle, Washington 98104
Attention: David A. Dehlendorf
Vice President
Facsimile: (206) 358-3113
(d) If to U.S. Bank:
U.S. Bank of Washington, National Association 1420 Fifth Avenue,
11th Floor
Seattle, Washington 98101
Attention: Wade Black
Assistant Vice President
Facsimile: (206) 587-5259
or, as to each party, at such other address or telephone facsimile
number as shall be designated by such party in a written notice to the
other parties. All such notices and communications shall, when mailed,
telegraphed, telexed, cabled, or transmitted by telephone facsimile, be
effective upon receipt.
SECTION 14. Binding Effect: Governing Law. This Agreement shall
become effective when it shall have been executed by the Banks, the
Borrowers, and the Agent and thereafter shall be binding upon and inure
to the benefit of the Banks, the Borrowers, the Agent, and their
respective successors and assigns, except that no party hereto shall
have the right to assign its rights hereunder or any interest herein
without the prior written consent of each other party hereto, which
consent shall not be unreasonably withheld. This Agreement shall be
governed by, and construed in accordance with, the laws of the state of
Washington.
SECTION 15. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto
in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute one
and the same agreement.
IN WITNESS WHEREOF, Borrowers and Agent and Banks have caused this
Agreement to be duly executed by the respective, duly authorized
signatories as of the date first above written.
BORROWERS:
DJ&J SOFTWARE CORPORATION EGGHEAD, INC.
By: Terence M. Strom By: Terence M. Strom
Title: CEO Title: CEO
By: Carolyn J. Tobias By: Carolyn J. Tobias
Title: CFO Title: CFO
BANKS:
SEATTLE-FIRST NATIONAL BANK U.S. BANK OF WASHINGTON,
NATIONAL ASSOCIATION
By: David A. Dehlendorf By: Wade Black
Title: Vice President Title: Assistant Vice President
AGENT:
SEATTLE-FIRST NATIONAL BANK
By: Dora A. Brown
Title: Assistant Vice President
10/13/94
EGGHEAD, INC.
DJ&J SOFTWARE CORPORATION
SEPARATION AGREEMENT
This Separation Agreement (the "Agreement") between Egghead, Inc.
and DJ&J Software Corporation (collectively, the "Company") and Ronald
P. Erickson ("Erickson") is dated as of August 1, 1994.
RECITALS
A. The Company and Erickson entered into an Executive Employment
Agreement dated as of February 22, 1993 (the "Employment Agreement"),
pursuant to which Erickson was employed as Vice Chairman of the Company.
B. Pursuant to notice dated February 10, 1994, the Employment
Agreement was terminated by the Company under Section 7.1 thereof.
C. After the termination of the Employment Agreement, the Company
employed Erickson "at-will" as Vice Chairman at the same base salary.
D. The Company and Erickson now desire to enter into a formal
separation agreement to end this employment relationship and to resolve
any and all the rights and obligations to each other.
E. The Company has advised Erickson of his right to consult an
attorney prior to signing this Agreement and has provided him with at
least 21 days to consider its severance offer and to seek legal
assistance. Erickson has either consulted an attorney of his choice or
voluntarily elected not to consult legal counsel, and understands that
he is waiving all potential claims against the Company.
AGREEMENT
As parties hereto, the Company and Erickson agree as follows:
1. Employment Agreement
The Company and Erickson hereby confirm the termination of the
Employment Agreement effective as of February 14, 1994 and further
confirm that all obligations of the Company under the Employment
Agreement are declared fully satisfied and are hereby terminated, except
to the extent expressly identified and set forth in this Agreement.
2. Termination of Employment
The employment of Erickson by the Company shall terminate
effective August 1, 1994.
3. Severance Payments
The Company shall pay to Erickson the following amounts as
severance payments:
(a) The amount of any presently unpaid salary earned by Erickson
through July 31, 1994, which amount shall not include accrued vacation
pay.
(b) The sum of $150,000 (before all customary payroll
deductions), such amount to be paid in equal installments on customary
payroll dates over a 12-month period with such period commencing on
August 1, 1994, provided that this Agreement has become effective
pursuant to Section 11. Such amounts shall be treated as compensation
and shall be subject to customary payroll deductions.
(c) The sum of $18,846.06, which constitutes the full amount of
any presently unpaid bonus to which Erickson is entitled under the
Employment Agreement for the fiscal year ended March 31, 1994. Such
amount shall be paid with the execution of this Agreement and shall be
subject to normal payroll deductions.
(d) The sum of $116,667 as a special bonus in respect of his
efforts in the Company's settlement of shareholders' class action law
suit filed against the Company and special projects in Japan. Such
amount shall be paid upon effectiveness of this Agreement under Section
11 and shall be subject to customary payroll deductions.
(e) The sum of $50,000, payable at such time as the Company
enters into a joint venture arrangement with a Japanese entity currently
participating in discussions with the Company, which arrangement is
satisfactory to the Company in its sole discretion. Such amount shall
be paid if, and only if, the Company enters into such arrangement on or
before January 1, 1995 and provided that this Agreement has become
effective under Section 11.
4. Consulting
From the date hereof until December 31, 1994, Erickson shall make
himself generally available to the Company to discuss and consult on
matters relating to the Company's plans, discussions and negotiations
with respect to joint ventures in Japan and, in connection therewith, to
make himself available for travel to Japan to meet with Japanese joint
venture prospects. Erickson shall be entitled to reimbursement to
reasonable out-of-pocket expenses consistent with the Company's then
current policies with respect to executive travel overseas. In
connection with such consulting services, Erickson shall not be required
to devote more than 20 hours per month, nor to be available for travel
to Japan for more than an aggregate of 14 days allocable to no more than
two trips, provided that the Company gives Erickson two weeks notice of
any such trip.
5. Benefits
From the date hereof until August 1, 1995, Erickson shall be
entitled to continue as a participant in medical and dental plans in
which he is a participant as of the date hereof, to the extent permitted
by law and by the terms and conditions of the plan.
6. Stock Options
The Company and Erickson confirm that stock option to purchase
50,000 shares of common stock at a price of $7.50 per share, evidenced
by Nonqualified Stock Option Agreement Number 3082, have fully expired
and Erickson has no rights to purchase common stock thereunder.
7. Noncompetition and Nonsolicitation
Erickson hereby confirms that he is and continues to be bound by
Sections 8 and 9 of the Employment Agreement, dealing with
noncompetition, nonsolicitation and nondisclosure, that Erickson's
obligations under such Sections shall survive the termination of the
Employment Agreement, and that the period of noncompetition and
nonsolicitation shall commence on August 1, 1994 and shall expire on
August 1, 1995.
8. Transition Matters
(a) Erickson represents that, to the best of his knowledge, he
has returned to the Company all Company property in his possession,
including without limitation, Board of Director, Senior Management team
and international development project documents (including all files,
reports, correspondence, contracts, proposals, strategic plans, manuals,
agendas, books, presentations and board packages), equipment, manuals,
files, reports, credit/identification cards, software, hardware and
keys; provided, that Erickson shall be entitled to retain the desk-top
IBM compatible computer, HP printer and related software currently in
his possession.
(b) Erickson hereby represents and warrants to the Company that,
other than as set forth in a report (the "Report") delivered to, or to
be delivered to, the President of the Company prior to the payments
provided for in Section 3(b),(d) and (e), there are no business
relationships, negotiations, plans, contacts, arrangements, commitments
(written or oral and including compensation, commission or severance
payment arrangements), or transactions entered into by Erickson,
individually or on behalf of the Company, (x) with business or entities
located in or doing business in Japan or Europe or with consultants,
agents or others acting in a similar capacity for such businesses or
entities or for the Company, or (y) with current or former employees of
the Company. The Report shall be in reasonable detail and attach
relevant documents.
9. Valid Consideration
Erickson and the Company acknowledge that payment by the Company
to Erickson certain of the amounts described in Sections 3 (particularly
Section 3(d)) is not required by the company policies or procedures, by
the Employment Agreement or by any other contractual obligation of the
Company, and is offered by the Company solely as consideration for this
Agreement.
10. General Release of Claims
(a) Erickson expressly waives any claims against the Company and
releases the Company (including its officers, directors, stockholders,
managers, agents and representatives) from any claims that he may have
in any way connected with his employment with the Company and the
termination thereof. It is understood that this release includes, but
is not limited to, any claims for wages, accrued vacation pay, bonuses,
employment benefits, or damages of any kind whatsoever, arising out of
any contracts, express or implied, any covenant of good faith and fair
dealing, express or implied, any theory of wrongful discharge, any legal
restriction on the Company's right to terminate employees, or any
federal, state or other governmental statute or ordinance, including,
without limitation, Title VII of the Civil Rights Act of 1964, the
federal Age Discrimination in Employment Act, the Washington Law Against
Discrimination, or any other legal limitation on the employment
relationship.
(b) Erickson represents that he has not filed any complaints,
charges or lawsuits against the Company with any governmental agency or
any court, and agrees that he will not initiate, assist or encourage any
such actions.
(c) This waiver and release shall not waive or release claims
where the events in dispute first arise after execution of this
Agreement, nor shall it preclude Erickson from filing a lawsuit for the
exclusive purpose of enforcing his rights under this Agreement.
11. Review and Revocation Period; Effective Date
Erickson shall have 21 days to review this Agreement and consult
legal counsel if he so chooses, during which time the proposed terms of
this Agreement shall not be amended, modified or revoked by the Company.
Erickson may revoke this Agreement if he so chooses by providing notice
of his decision to revoke the Agreement to the Company within seven days
following the date he signs this Agreement. This Agreement shall become
effective and enforceable upon expiration of this seven-day revocation
period.
12. Severability
The provisions of this Agreement are severable, and if any part of
it is found to be unlawful or unenforceable, the other provisions of
this Agreement shall remain fully valid and enforceable to the maximum
extent consistent with applicable law.
13. Knowing and Voluntary Agreement
Erickson represents and agrees that he has read this Agreement,
understands its terms and the fact that it releases any claim he might
have against the Company and its agents, understands that he has the
right to consult counsel of choice and has either done so or knowingly
waived the right to do so, and enters into this Agreement without duress
or coercion from any source.
14. Entire Agreement
This Agreement sets forth the entire understanding between
Erickson and the Company (except to the extent that Sections 8 and 9 of
the Employment Agreement shall survive as provided herein) and
supersedes any prior agreements or understandings, express or implied,
pertaining to the terms of his employment with the Company and the
termination of the employment relationship. Erickson acknowledges that
in executing this Agreement, he does not rely upon any representation or
statement by any representative of the Company concerning the subject
matter of this Agreement, except as expressly set forth in the text of
the Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the dates indicated below.
EGGHEAD, INC.
Terence M. Strom Ronald P. Erickson
Title: President & CEO
Dated: August 9, 1994 Dated: August 3, 1994
Exhibit 28
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Egghead, Inc.:
We have reviewed the accompanying condensed consolidated balance sheet
of Egghead, Inc. (a Washington corporation) and subsidiaries as of
October 1, 1994, and the related condensed consolidated statements of
operations for the 13-week and 26-week periods ended October 1,
1994, and October 2, 1993, and statements of cash flows for the 26-week
periods ended October 1, 1994, and October 2, 1993. These financial
statements are the responsibility of the company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
Seattle, Washington,
October 27, 1994.
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-01-1995
<PERIOD-END> OCT-01-1994
<CASH> 28,595
<SECURITIES> 0
<RECEIVABLES> 78,059
<ALLOWANCES> 3,932
<INVENTORY> 131,124
<CURRENT-ASSETS> 246,133
<PP&E> 52,320
<DEPRECIATION> 35,724
<TOTAL-ASSETS> 268,092
<CURRENT-LIABILITIES> 125,033
<BONDS> 0
<COMMON> 172
0
0
<OTHER-SE> 141,396
<TOTAL-LIABILITY-AND-EQUITY> 268,092
<SALES> 388,159
<TOTAL-REVENUES> 388,159
<CGS> 343,617
<TOTAL-COSTS> 343,617
<OTHER-EXPENSES> 48,015
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11
<INCOME-PRETAX> (3,407)
<INCOME-TAX> 1,328
<INCOME-CONTINUING> (2,079)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,079)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
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