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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): May 13, 1996
EGGHEAD, INC.
(Exact name of registrant as specified in its charter)
Washington
(State or other jurisdiction of incorporation)
0-16930
(Commission File Number)
91-1296187
(IRS Employer Identification No.)
22705 East Mission, Liberty Lake, WA 99019
(Address of principal executive offices) (Zip Code)
(509) 922-7031
(Registrant's telephone number, including area code)
None
(Former name or former address, if changed since last report)
Exhibit Index is at Page 5
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 13, 1996, Egghead, Inc., a Washington corporation ("Egghead"),
closed the sale of its Corporate, Government, and Education ("CGE") division to
Software Spectrum, Inc. ("Software Spectrum") for $45 million in cash pursuant
to the terms of an asset purchase agreement, as amended (the "Purchase
Agreement"). Egghead and Software Spectrum also entered into a Fulfillment
Agreement and a Call Center Lease relating to the provision of certain support
services by Egghead to Software Spectrum and to the lease of Egghead's facility
used by the CGE Division.
The consideration for the transaction was determined in arm's-length
negotiations between Egghead and Software Spectrum.
The Purchase Agreement, the Fulfillment Agreement, the Call Center Lease
and the press release issued in connection with the closing of the sale of the
CGE division are filed as exhibits to this report and are incorporated herein by
reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
(a) Financial Statements of Business Acquired
Not applicable.
(b) Pro Forma Financial Information
It is impracticable to provide the pro forma financial information
required by Item 7(b) at this time. Such pro forma financial information will
be filed by amendment as soon as practicable.
(c) Exhibits
EXHIBIT NUMBER DESCRIPTION
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2.1* Asset Purchase Agreement by and among Software
Spectrum, Inc., Egghead, Inc. and DJ&J Software
Corporation dated as of March 23, 1996.
2.2 First Amendment to Asset Purchase Agreement by and
among Software Spectrum, Inc., Egghead, Inc. and DJ&J
Software Corporation dated as of May 13, 1996.
99.1 Press release issued by Egghead, Inc. on May 14, 1996.
Page 2
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99.2 Press release issued by Egghead, Inc. on May 15, 1996.
99.3 Fulfillment Agreement by and among Software Spectrum,
Inc., Egghead, Inc. and DJ&J Software Corporation
dated as of May 13, 1996.
99.4 Call Center Lease between DJ&J Software Corporation
d/b/a Egghead and Software Spectrum, Inc. dated as of
May 13, 1996.
________________
*Incorporated by reference from Exhibit 2.1 filed with Egghead's report on
Form 8-K dated March 23, 1996.
Page 3
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SIGNATURE
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 hereunto duly authorized.
EGGHEAD, INC.
By: /s/ EDWARD S. WOZNIAK
-------------------------------------
Edward S. Wozniak
Vice President and Chief Financial
Officer
Dated: May 23, 1996
Page 4
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EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
2.1* Asset Purchase Agreement by and among Software Spectrum, Inc.,
Egghead, Inc. and DJ&J Software Corporation dated as of
March 23, 1996.
2.2 First Amendment to Asset Purchase Agreement by and among
Software Spectrum, Inc., Egghead, Inc. and DJ&J Software
Corporation dated as of May 13, 1996.
99.1 Press release issued by Egghead, Inc. on May 14, 1996.
99.2 Press release issued by Egghead, Inc. on May 15, 1996.
99.3 Fulfillment Agreement by and among Software Spectrum, Inc.,
Egghead, Inc. and DJ&J Software Corporation dated as of May 13,
1996.
99.4 Call Center Lease between DJ&J Software Corporation d/b/a
Egghead and Software Spectrum, Inc. dated as of May 13, 1996.
______________________
*Incorporated by reference from Exhibit 2.1 filed with Egghead's report on
Form 8-K dated March 23, 1996.
Page 5
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EXHIBIT 2.2
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FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT
This First Amendment to Asset Purchase Agreement dated March 23, 1996 (the
"Agreement"), by and among Software Spectrum, Inc. ("Purchaser"), Egghead, Inc.
("Egghead") and DJ&J Software Corporation ("DJ&J") (collectively, Egghead and
DJ&J are referred to herein as "Seller") is entered into on this 13th day of May
1996.
RECITALS
A. Capitalized terms that are used herein not otherwise defined will have
the meanings set forth in the Agreement.
B. Purchaser and Seller desire to amend the Agreement to provide for the
equitable allocation of the expenses, revenues and items thereof that are
allocable to the VLAM agreements relating to the Division.
C. In addition, Purchaser and Seller desire to provide for settlement of
potential liabilities arising under or out of the potential transfer to
Purchaser of Seller's interest in the Joint Venture Agreement.
1. ALLOCATION OF REVENUES AND EXPENSES RELATED TO VLAM AGREEMENTS
Notwithstanding anything in the Agreement to the contrary, Seller and
Purchaser agree that all Revenues and Expenses (as such terms are defined
herein), and items related thereto, allocable to each VLAM transaction covered
by a VLAM agreement will be allocated between Seller and Purchaser in accordance
with the principles of this Section 1.
(a) "Revenues" means, with respect to each of the VLAM transactions
covered by a VLAM agreement, the amount invoiced to the customer on such VLAM
transaction with respect to the maintenance component of the VLAM agreement,
excluding sales taxes and other miscellaneous charges.
(b) "Expenses" means, with respect to each of the VLAM transactions
covered by a VLAM agreement, the cost of goods sold on such VLAM transaction
with respect to the maintenance component of the VLAM agreement, determined at
the time the order covered by the VLAM transaction was booked by Seller. Seller
hereby represents and warrants that, in the aggregate, such costs of goods sold
do not differ from the corresponding amounts invoiced or to be invoiced to the
Seller by the Seller's suppliers. Nothing in this paragraph is intended to
impose upon Seller an obligation to perform an invoice by invoice analysis of
its VLAM agreements to
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demonstrate or evidence the accuracy and completeness of the representations
set forth in this paragraph.
(c) In computing Revenues and Expenses, the following conventions will be
applied:
(i) Revenues and Expenses allocable to each VLAM transaction will be
allocated over the maintenance period reflected on the related invoice, in the
same manner as previously allocated by Seller and in accordance with GAAP; and
(ii) Revenues and Expenses allocable to each VLAM transaction will be
spread ratably over the total number of days in the maintenance period
applicable to such VLAM transaction. Accordingly, prorations of Revenues and
Expenses allocable to each VLAM transaction will: (a) as to the pre-closing
period, be based on the ratio of the number of days occurring prior to and
including the Closing Date to the total number of days in the maintenance
period, and (b) as to the post-closing period, be based on the ratio of the
number of days occurring after the Closing Date to the total number of days in
the maintenance period.
(d) "Gross Margin" means, with respect to each VLAM transaction, the
difference between the Revenues and Expenses allocable to such VLAM transaction.
(e) Except as otherwise provided in subparagraphs (f) and (g) below, with
respect to each VLAM transaction (including Microsoft Select 2.x and 3.0 Program
transactions) which has a maintenance period that includes both pre-closing and
post-closing periods,
(i) Purchaser shall be entitled to that portion of the Gross Margin
attributable to such VLAM transaction that relates to the maintenance period
commencing with the day after the Closing Date and ending with the expiration of
the maintenance period;
(ii) Seller shall be entitled to all Revenues, and pay and be
responsible for the payment of, all Expenses associated with that VLAM
transaction;
(iii) On the Closing Date, Seller and Purchaser shall estimate the
amount of the Gross Margin payments due to Purchaser and Seller shall pay such
estimated amounts to Purchaser in cash; thereafter, the parties shall finalize
the amounts of the Gross Margin payments and make any corresponding adjustments
thereto as may be required by Section 4 of this First Amendment; and
(iv) Seller shall have the responsibility for reporting to the
software publishers each of the VLAM transactions which is the subject of this
Section 1(e).
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(f) With respect to each VLAM transaction under the Microsoft Select 2.x
Program, and as relates to those contracts under the Microsoft 3.0 Program (for
which, in either case, Seller has not reported to Microsoft), to the extent that
it relates to a maintenance period that commences on or after July 1, l996,
(i) On the Closing Date, Purchaser shall be entitled to receive, and
Seller shall pay in cash to Purchaser, all Revenues allocated to any maintenance
period from and after July 1, 1996 (such payment to represent an amount equal to
the sum of corresponding cash prepayments and accounts receivable); and
(ii) Purchaser shall report to the software publishers such VLAM
transactions, and shall pay, and be responsible for the payment of, the Expenses
allocated to the maintenance period from and after July 1, l996.
(g) With respect to each VLAM transaction which relates to a maintenance
period that commences after the Closing Date, but which has been reported by
Seller to the software publisher prior to the Closing Date,
(i) Purchaser shall be entitled to the entire Gross Margin
attributable to such VLAM transaction;
(ii) Seller shall be entitled to all Revenues, and pay and be
responsible for the payment of, all Expenses associated with that VLAM
transaction; and
(iii) On the Closing Date, Seller and Purchaser shall estimate the
amount of the Gross Margin payments due to Purchaser and Seller shall pay such
estimated amounts to Purchaser in cash; thereafter, the parties shall finalize
the amounts of the Gross Margin payments and make any corresponding adjustments
thereto as may be required by Section 4 of this First Amendment.
(h) To the extent that any VLAM maintenance transaction covered by a VLAM
agreement invoiced on or prior to the Closing Date is determined to be below
break-even for the maintenance period after the Closing Date (determined by
comparing the Revenues allocable to the maintenance period after the Closing
Date to the Expenses allocable to the same period) (such shortage herein
referred to as a "Negative Margin"), Purchaser shall be entitled to receive in
cash an amount equal to the Negative Margin. No Negative Margin payment will,
however, be due to Purchaser with respect to any VLAM transaction which,
subsequent to its initial invoicing, has been credited prior to the Closing Date
so as to eliminate the amount of any Negative Margin attributable to the VLAM
transaction as first invoiced. On the Closing Date, Seller and Purchaser shall
estimate the amount of all Negative Margin
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payments to which Purchaser is entitled under this Section 1(h), and Seller
shall pay such estimated amounts to Purchaser in cash; thereafter, the parties
shall finalize the amounts of the Negative Margin payments and make any
corresponding adjustments thereto as may be required by Section 4 of this First
Amendment.
(i) The following definitions apply for purposes of this Section 1(i):
(A) "Daily Revenue" means the Revenues divided by the total number of
days in the maintenance period;
(B) "Daily Expense" means the Expenses divided by the total number of
days in the maintenance period;
(C) "Prorated Egghead Days" means the number of days in the
maintenance period that have occurred prior to and including the Closing Date;
(D) "Egghead Earned Margin" means the product of the Prorated Egghead
Days multiplied by the remainder of the Daily Revenue minus the Daily Expense.
If, after the Closing Date, any invoiced item covered by a VLAM transaction
is returned, the following principles will be applied:
(i) If at the time of return the associated account receivable has
not yet been paid, Purchaser will pay Seller the Revenues less the Egghead
Earned Margin; and
(ii) If at the time of return the associated account receivable has
been paid, Seller will pay Purchaser the Egghead Earned Margin.
In addition, should a customer return a license that was invoiced prior to
the Closing Date, the Prorated Egghead Days will be 100%, and all provisions of
this Section will apply to the returned licenses. This section applies only as
to returns that occur within the first 150 days after the Closing Date.
Purchaser will responsible for all vendor reporting on the above returns.
(j) VLAM transactions will be reported by Seller and Purchaser as follows:
(i) Seller will report to publishers all VLAM transactions invoiced
by Seller to customers through and including the Closing Date except for VLAM
transactions covering periods occurring on or after July 1, 1996 required to be
reported under Microsoft's Select 2.x Program which will be reported by
Purchaser; and
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(ii) Purchaser will include in its reports to publishers all
transactions that are invoiced by Purchaser after the Closing Date as well as
all transactions required to be reported under Microsoft's Select 2.x Program
for items invoiced by Seller on and prior to the Closing Date, but which are
reportable to Microsoft following the Closing Date.
(k) Purchaser and Seller acknowledge that the customer VLAM accounts
listed on Schedule A attached hereto will require, after the Closing Date,
Purchaser and Seller to determine the proper allocations of Revenues, Expenses
and items thereof. Purchaser and Seller agree to cooperate to use their best
efforts to determine, promptly following the Closing Date, such allocations on
the same or on a similar basis as that used for allocating the Revenues,
Expenses and items thereof relating to maintenance pursuant to this Section, and
to provide one another with information relating to the determination of the
appropriate allocations relating to each customer listed on Schedule A. In
addition, as to any licenses relating to the Schedule A accounts, the party
invoicing the customer for such licenses will receive the revenues allocated to
such licenses, and pay and be responsible for the payment of the corresponding
expenses.
2. COLLECTION OF VLAM ACCOUNTS RECEIVABLE RETAINED BY SELLER
To the extent that Seller retains any accounts receivable, or the right to
receive payments of part or all of such accounts receivable, with respect to
VLAM transactions pursuant to Section 1 of this First Amendment, Purchaser shall
collect such amounts for the account of Seller and such amounts will be treated
as Seller Receivables under Section 1.7 of the Agreement, except for customer
returns as to VLAM transactions which are covered in Section 1(i) of this First
Amendment.
3. JOINT VENTURE
Seller has delivered to Purchaser a copy of a letter dated May 9, 1996 from
Seller to Uchida Yoko, Co., Ltd. ("Uchida"), countersigned by Uchida, addressing
certain issues relating to Purchaser's interest in the referenced joint venture,
if and when Purchaser succeeds to Seller's interest in the joint venture.
Purchaser hereby acknowledges and confirms that such letter is in form and
substance satisfactory to Purchaser, and waives as a condition to Closing the
objections that Purchaser may have had regarding the delivery of financial
statements regarding the Joint Venture, including an alleged breach of Seller's
obligations with respect thereto in Section 2.1(b) of the Agreement.
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4. TERMS OF ADJUSTMENTS
It is understood that the determination of Revenues, Expenses and items
thereof relating to the allocations between Seller and Purchaser pursuant to
this First Amendment may require adjustments following the Closing Date. The
parties will use their respective commercially reasonable best efforts to
reconcile the amounts set forth in this First Amendment promptly following the
Closing Date, but in no event later than nine (9) business days following the
Closing Date (except for those amounts set forth in Section 1(k)). All
additional amounts owing will be paid by the responsible party within five (5)
business days following determination of such amount. None of the amounts set
forth herein will be subject to the provisions set forth in Section 8.3.5 of the
Agreement.
5. LIMITATION ON AGREEMENTS
Nothing herein shall be construed to constitute the agreement of Purchaser
to assume any liability or payment obligation of Seller to any publisher or
vendor arising on or prior to the Closing Date, nor any agreement of Seller to
assume any liability or payment obligation of Purchaser to any publisher or
vendor arising after the Closing Date. Further, Seller shall retain all
liability for sales, use and other taxes arising out of or pertaining to any
sales to customers of Division under the VLAM agreements arising on or prior to
the Closing Date.
6. SCOPE OF FIRST AMENDMENT
Except as amended hereby, the Agreement remain in full force and effect.
This First Amendment to Asset Purchase Agreement is executed as of the date
first set forth above.
EGGHEAD, INC.
By : /s/ TERENCE M. STROM
---------------------------------
Title: President and CEO
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DJ&J SOFTWARE CORPORATION
By : /s/ TERENCE M. STROM
----------------------------------
Title: President and CEO
SOFTWARE SPECTRUM, INC.
By: /s/ JUDY O. SIMS
-----------------------------------
Title: Chief Executive Officer
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EXHIBIT 99.1
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EGGHEAD SOFTWARE
May 14, 1996
Contact: Nancy Goodspeed
The Rockey Company
(509) 744-3350
EGGHEAD FINALIZES SALE OF CGE BUSINESS DIVISION
SPOKANE, Wash. - Egghead Inc. has closed the sale of its Corporate,
Government and Education (CGE) division to Software Spectrum, Inc. of Garland,
Texas. The acquisition by Software Spectrum was first announced on March 25,
1996.
Egghead Inc. will now focus its expertise and resources on continuing to
grow and expand its core retail business of 164 stores nationwide.
The sale of the CGE division involved approximately 350 employees comprised
of field sales personnel located throughout the U.S. and Canada, plus call
center operations, licensing, credit and administrative offices located in
Spokane. Over the past few weeks, Software Spectrum interviewed the CGE staff,
and is in the process of making employment offers to many of these people.
"Of primary importance to Egghead was that Software Spectrum will maintain
call center operations in Spokane and will lease Egghead's call center facility
for an initial three-year period," said Kurt Conklin, Egghead vice president for
human resources.
"Any Egghead CGE employee, who, for whatever reason, does not receive an
employment offer from Spectrum will receive separation benefits from Egghead,"
Conklin explained.
For fiscal year 1995, the CGE division produced revenues of $429 million,
or 50% of Egghead's total revenues of $863 million. For the first nine months
of fiscal 1996, CGE had revenues of $275 million, or 47% of the Company's total
revenues of $582 million.
Egghead, Inc. is a national retailer of software, computers, and related
equipment through its 164 stores and its 1-800-EGGHEAD consumer sales division.
###
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EXHIBIT 99.2
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EGGHEAD SOFTWARE
EGGHEAD REPORTS PROFORMA BALANCE SHEET AS A
RESULT OF CGE SALE
SPOKANE, Wash. -- (BUSINESS WIRE) -- May 15, 1996 -- Egghead, Inc.
(NASDAQ:EGGS) today reported the estimated impact of the recently completed sale
of its former CGE division on the company's unaudited balance sheet as of March
31, 1996.
As a result of the CGE sale, shareholders' equity has significantly
increased from approximately $139.3 million to an estimated $157.3 million, an
increase of $18.1 million. Total assets of the company have significantly
increased from approximately $278.5 million to an estimated $301.2 million, an
increase of $22.7 million.
The transaction moderately reduced its total receivables from approximately
$84.3 million to an estimated $77.2 million. Egghead's total liabilities have
modestly increased from approximately $139.3 million to an estimated
$143.9 million.
The company has also significantly increased its cash and short term
investments from approximately $49.6 million to an estimated $89 million.
"We are very pleased to have completed the sale of CGE," stated Terry
Strom, president and chief executive officer. "The transaction strengthened
the company's financial position and provides an excellent foundation for
Egghead to focus on our core retail business."
The company announced its intention to sell its former CGE division to
Software Spectrum on March 25, 1996, and the closing of the sale on May 13,
1996. The purchase price for the CGE division was $45 million in cash, which
did not include CGE's current receivables and inventory that Egghead is
liquidating in an orderly manner, resulting in total cash proceeds of
approximately $90 million.
Egghead, Inc. is a leading retailer of computer software, with 164 retail
stores located throughout the country and corporate offices located in Spokane.
The discussion in this news release regarding unaudited and proforma
balance sheets and estimated net proceeds contains forward-looking statements
that involve risks and uncertainties, including variances in transaction costs
and proceeds from the liquidation of receivables and inventories, and other
risks detailed in the company's SEC reports, including the 10-K for the year
ended March 31, 1995. Actual results may differ materially.
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BALANCE SHEET
ACTUAL MARCH 31 VS PROFORMA AFTER CGE SALE
FY1996
(000'S)
MARCH 31 PROFORMA
ACTUAL EFFECT OF AFTER SALE
(UNAUDITED) SALE (UNAUDITED)
----------- ---- -----------
ASSETS
Cash & short term investments 49,590 39,427 89,017
Receivables:
Trade, net 61,735 (7,174) 54,561
Non Trade, net 22,593 0 22,593
Total Receivables 84,328 (7,174) 77,154
Merchandise inventories, net 92,478 (1,200) 91,278
Prepaid expenses 9,611 (7,400) 2,211
Current deferred income taxes 6,760 0 6,760
Total Current Assets 242,767 23,653 266,420
Net property & equipment 31,182 (1,000) 30,182
Non current deferred
income taxes 2,918 0 2,918
Other assets 1,661 0 1,661
Total Assets 278,528 22,653 301,181
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable:
Merchandise 79,039 0 79,039
Volume license & maintenance 31,712 (4,350) 27,362
Non merchandise 9,962 0 9,962
Total accounts payable 120,713 (4,350) 116,363
Accrued liabilities 17,067 4,251 21,318
Income taxes payable 0 4,700 4,700
Other current liabilities 296 0 296
Total Current Liabilities 138,076 4,601 142,677
Long term liabilities 1,183 0 1,183
Total Liabilities 139,259 4,601 143,860
Shareholders' Equity 139,269 18,052 157,321
Total Liabilities and
Shareholders' Equity 278,528 22,653 301,181
# # #
CONTACT: Egghead, Inc.
Brian Bender, 509/891-4851
or
Fi.Comm Ltd.
Michael Newman, 800/790-0569
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EXHIBIT 99.3
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FULFILLMENT AGREEMENT
THIS FULFILLMENT AGREEMENT (this "Agreement") is entered into this 13th day
of May, 1996 by and among Software Spectrum, Inc., a Texas corporation
("Purchaser"), Egghead, Inc., a Washington corporation ("Seller"), and DJ&J
Software Corporation, a Washington corporation and a wholly owned subsidiary of
Seller ("Operating").
RECITALS
A. Pursuant to that certain Asset Purchase Agreement dated March 23, 1996
among the parties hereto (the "Purchase Agreement"), Purchaser is acquiring
certain of the operating assets of the corporate, governmental and educational
products division of Seller ("Division").
B. During the period following the date of this Agreement, Purchaser
desires to obtain from Seller, and Seller is willing to provide to Purchaser
through Operating, certain fulfillment services with respect to sales of
products to customers of Division (the "CGE Products") and other services
relating to the business of Division, all in accordance with the terms and
conditions of this Agreement.
C. All terms not defined herein shall have the same meaning as set forth
in the Purchase Agreement. The words "this Agreement," "hereby," "herein,"
"hereof," and "hereunder" and words of similar import shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
the word "Section," "Schedule" and like references are to this Agreement, unless
otherwise specified. Except as otherwise specified in this Agreement, all
references to "Seller" shall include Operating.
AGREEMENT
1. SERVICES TO BE PROVIDED
1.1 SERVICES PROVIDED
During the Fulfillment Period (as hereinafter defined), Seller shall
provide to Purchaser the following fulfillment services (the "Fulfillment
Services") with respect to sales of CGE Products to customers of Division:
(a) Maintain in inventory the CGE Products listed in Schedule A in
the quantities set forth on Schedule A, as such CGE Products and such amounts
may be amended from time to time by agreement between Seller and Purchaser,
which
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shall consist of CGE Products sold primarily by Division and only incidentally
by Seller's retail operations (the "Schedule A Inventory"), but only to the
extent such CGE Products are available from suppliers (it being understood that
Seller and Purchaser shall use their commercially reasonable best efforts to
return to the supplier any CGE Products that have been deleted from (or the
amounts reduced on) Schedule A);
(b) Maintain in inventory an adequate supply of CGE Products listed
on Schedule B that are sold by both Division and Seller's retail operations (the
"Schedule B Inventory"), but only to the extent such CGE Products are available
from suppliers;
(c) Maintain in inventory an adequate supply of new software products
released by publishers during the term hereof that Seller and Purchaser shall
identify periodically by mutual agreement (the "New Product Inventory"), but
only to the extent such new products are available from suppliers (provided that
a 50-50 distribution of the available supply of any high-demand new products
between Seller's retail operations and Division shall constitute an "adequate"
supply);
(d) Supply the CGE Products listed in Schedule C, if available in
Seller's inventory, but shall have no obligation to maintain inventories of such
products;
(e) As part of the Fulfillment Services, Seller will ensure that
Purchaser's packing slips, invoices and "remit to" information are included on
the cartons shipped pursuant to this Agreement. In this regard, Purchaser will
provide Seller with supplies of forms for inclusion with the cartons that
conform to, and do not require modification of, Seller's existing software
formats and computer system;
(f) Ensure the shipment of Schedule A Inventory, Schedule B Inventory
and New Product Inventory products (in the case of the Schedule B Inventory and
New Product Inventory to the extent available from suppliers) to customers of
Division such that 98% of orders for such products received prior to 2:00 p.m.,
Spokane time, for fulfillment are accurately filled and shipped on the same day
that such orders are received; provided that such products are available in
Seller's inventory;
(g) Process invoices relating to orders shipped pursuant to this
Section 1.1. Customer returns, customer credits and price adjustments for
products shipped by Seller pursuant to this Agreement during the Fulfillment
Period shall be the sole responsibility of Purchaser. Seller will cooperate
with Purchaser and will use commercially reasonable best efforts to assist
Purchaser in obtaining credits from
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vendors for returns for any products not authorized for sale by Purchaser but
shipped by Seller pursuant to this Agreement during the Fulfillment Period; and
(h) Provide Purchaser with reports on the Fulfillment Services in the
same reporting formats, with the same detail, with the same frequency and
promptness and for the same time periods as historically prepared by Seller for
Division prior to Closing.
Purchaser understands and agrees that (i) Seller will have no obligation to
maintain in inventory or otherwise make available any products not listed on
Schedule A, Schedule B or Schedule C or included in New Product Inventory, and
that Purchaser will obtain any such products ("special orders") from other
sources, and (ii) Purchaser assumes responsibility for all special order
processing. In connection with special order processing, Purchaser will be
responsible for locating such products and arranging for shipment of such
products to Seller's warehouse. Seller will process such products in Seller's
inventory and will ship such products to the customer in accordance with the
terms of this Agreement. Purchaser agrees to pay to Seller the per carton fee
set forth in Section 4(a) for all such special orders processed by Seller.
1.2 TECHNICAL SYSTEMS SUPPORT
Seller will also make available to Purchaser the following technical
systems support services relating to the Assets or the business of Division, as
requested by Purchaser (the "Systems Support" and, together with the Fulfillment
Services, the "Services"), for the following periods:
(a) IBM AS400 computer processing services and reporting for those
software applications in existence on the date of the Purchase Agreement or used
by Division during the last three months for up to four months from the Closing
Date (including, without limitation, the VLAM software and the order entry,
invoicing, inventory and related customer reporting and vendor reporting
systems), except that Seller shall maintain any such software applications
relating to collection of the Seller Receivables for up to 150 days from the
Closing Date;
(b) Use of Seller's AT&T telephone switch for up to one year from the
Closing Date;
(c) Use of Seller's OCTEL voice mail system for up to one year from
the Closing Date; and
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(d) Support of Seller's existing Lotus Notes access to the field
sales personnel and management through Seller's servers for up to one year from
the Closing Date.
Seller agrees to cooperate with Purchaser and to provide reasonable
assistance to Purchaser in identifying all reports and other information that
will be reasonably required in order to permit Purchaser to fully utilize the
Services. All Services provided by Seller shall be performed in a commercially
reasonable manner within a reasonable time period after request for such
services. Purchaser will pay $50.00 per employee hour worked for the Systems
Support for all applications maintenance and in connection with the conversion
of Seller's computer systems to Purchaser's systems performed pursuant to this
Section 1.2 at Purchaser's request. As part of the Systems Support provided,
Seller will document the Systems Support performed at the hourly rate set forth
above for such services; provided that, Purchaser will not be charged for
incidental, ministerial and other services not of a technical or professional
nature. Seller will not charge Purchaser for (i) services in connection with
the transfer to Purchaser of data or other information relating to or concerning
Division in the form currently available to Seller, (ii) a copy, in electronic
or other suitable form, of the data created by Seller during the Fulfillment
Period in the ordinary course of providing the Fulfillment Services, or
(iii) Systems Support required or reasonably requested in order to allow
Purchaser to perform its obligations under Section 1.7 of the Purchase
Agreement, except as specified in such Section 1.7.
Upon the Closing, Purchaser will assume telephone voice and data line
charge responsibility for Purchaser's operations and data line charge
responsibility for Lotus Notes access from the field in its current
configuration and Seller will not maintain such capability beyond the periods
set forth in Section 1.2 (b)-(d).
2. NATURE OF SERVICES; AUTHORITY
In providing Purchaser with the Fulfillment Services and the Systems
Support as described in this Agreement, Seller shall comply with all reasonable
instructions of Purchaser so long as such instructions do not have the effect of
making materially more burdensome the Services to be provided by Seller pursuant
to this Agreement. Under no circumstances shall Seller have the authority to
contract for or otherwise legally bind Purchaser, and Seller shall under no
circumstances be deemed to be an agent or representative of Purchaser.
Likewise, under no circumstances shall Purchaser have the authority to contract
for or otherwise legally bind Seller, and Purchaser shall under no circumstances
be deemed to be an agent or representative of Seller. Seller shall retain
exclusive control over its employees responsible for providing the Services
contemplated by this Agreement, and Seller shall be responsible for and will
indemnify Purchaser against any claims brought by such
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employees with respect to their employment by Seller (including the provision of
the Services provided hereunder by such employees).
3. TERM
3.1 BASE TERM
This Agreement shall be for a base term of 120 days from the date hereof
(the "Fulfillment Period"), subject to termination in accordance with
Section 3.2. To the extent Purchaser requests Systems Support for periods
extending beyond the Fulfillment Period in accordance with Section 1.2, all
terms of this Agreement that do not relate expressly to the Fulfillment Services
shall remain in full force and effect.
3.2 TERMINATION
Purchaser may at any time terminate this Agreement by giving Seller 45
days' advance written notice. If this Agreement should be terminated prior to
120 days from the date hereof, the Fulfillment Period provided for in
Section 3.1 shall extend only until the earlier of the expiration of such 45-day
period and the remainder of the base term set forth in Section 3.1.
3.3 EFFECT OF TERMINATION
Upon receipt of a notice of termination in accordance with Section 3.2,
Seller shall continue to be responsible for providing the Fulfillment Services
in accordance with Section 1.1 through such termination.
4. PAYMENT
Seller shall render to Purchaser an invoice on Monday of each week during
the Fulfillment Period, commencing on the first Monday after the Closing Date
(and on the last day of the Fulfillment Period) and such invoice shall include a
detailed list of the items invoiced and items shipped, reconciling the same, in
a form reasonably acceptable to Purchaser, covering:
(a) all CGE Product inventory shipped in fulfillment of orders during
the period beginning on the immediately preceding Monday and ending on the
immediately preceding Saturday, at Seller's weighted average cost (which
represents Seller's net invoice costs) ("Seller's Cost") plus $3.00 per carton
handling charge (freight to be billed directly by freight carriers and paid by
Purchaser and postage associated with invoice processing to be paid by
Purchaser), and
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(b) all Systems Support performed by Seller during the prior half-
monthly period.
Purchaser shall remit payment to Seller by wire transfer in same day funds
within five business days of receipt of each such invoice that includes the
reconciliation required to be included therein.
5. INVENTORY PURCHASE UPON TERMINATION
At the end of the Fulfillment Period (as adjusted in accordance with
Section 3.2), Purchaser will purchase at Seller's Cost, in cash F.O.B., Seller's
Distribution Centers in Lancaster, Pennsylvania, or Sacramento, California, as
applicable, up to $6,000,000 of Division's then-remaining Schedule A Inventory.
6. VOLUME REBATES AND MARKETING FUNDS
(a) After the Closing, Seller relinquishes any rights or claims to
marketing funds and sell-through rebates derived from the business activities of
the acquired Assets, including those related to the CGE Products purchased and
fulfilled by Seller and sold by Division during the Fulfillment Period or
purchased by Purchaser in accordance with Section 5.
(b) Seller agrees to cooperate with Purchaser to arrange sell-through and
purchase rebates with major suppliers based on sales and purchases fulfilled by
Seller derived from business activities relating to the acquired Assets, (any
such rebates to be paid to Purchaser by such suppliers).
7. RECORDS; CONFIDENTIALITY
Seller shall cause to be kept accurate books and records with respect to
the costs and expenses incurred in connection with the Services provided
hereunder, and Purchaser shall be permitted to inspect such books and records
with respect to such costs and expenses during normal business hours upon
reasonable notice to Seller. Purchaser shall have the right to make copies of
such records, at Purchaser's expense. Purchaser and Seller agree that each of
them shall keep confidential such records in accordance with the terms of
Section 4.7 of the Purchase Agreement.
8. INDEPENDENT CONTRACTOR STATUS
Seller shall render and perform the Services as an independent contractor,
in accordance with the standards set forth in Section 9(c), subject to its
compliance with the provisions of this Agreement and with all applicable laws,
ordinances and regulations.
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9. DISCLAIMER; LIMITED LIABILITY
(a) Provided that Seller continues to perform its obligations under this
Agreement in a commercially reasonable manner, nothing in this Agreement will
require Seller to provide or develop additional systems support programs, to
retain employees that it determines are not otherwise necessary in the conduct
of its business or to render any service not provided for in this Agreement, or
in a manner or pursuant to methods different from the standard set forth in
Section 9(c), or, in performing Fulfillment Services or Systems Support
hereunder, to make any change or addition that will require capital
expenditures.
(b) The duties of Seller under this Agreement are subject to interruption
or discontinuance by Seller at any time and from time to time, without incurring
liability to Purchaser or any other Person for any loss, damage or expense that
may result therefrom, for force majeure or other causes beyond Seller's control.
(c) Subject to Section 9(b), Seller will use commercially reasonable
efforts to make the Fulfillment Services and Systems Support available with
substantially the same degree of care as it used in providing Fulfillment
Services to Division prior to the Closing.
10. MISCELLANEOUS
10.1 COMPLETE AGREEMENT; CONSTRUCTION
This Agreement, together with the Purchase Agreement and the other
Ancillary Documents, shall constitute the entire agreement between the parties
with respect to the subject matter hereof and shall supersede all previous
negotiations, commitments and writings with respect to such subject matter.
10.2 APPLICABLE LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of Washington, as applied to contracts executed and to be
fully performed in such state.
10.3 NOTICES
Any notice or demand desired or required to be given hereunder shall be in
writing and deemed given when personally delivered or deposited in the mail,
postage prepaid, sent certified or registered, and addressed as respectively set
forth below, or to such other address as any party shall have previously
designated by such a notice. Any notice so delivered personally shall be deemed
to be received on the date of
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delivery and any notice so mailed shall be deemed to be received three days
after the date on which it was mailed.
Notices to Purchaser and Seller shall be sent as follows:
TO PURCHASER:
Software Spectrum, Inc.
2140 Merrit Drive
Garland, Texas 75041
Attn: Mr. Keith Coogan
TO SELLER OR OPERATING:
Egghead, Inc.
22705 East Mission
Liberty Lake, Washington 99019
Attn: Mr. Terence M. Strom
10.4 AMENDMENTS
This Agreement may not be modified or amended except by an agreement in
writing signed by the parties.
10.5 SUCCESSORS AND ASSIGNS
Except in connection with a merger or consolidation or the sale of all or
substantially all the assets of a party hereto, neither this Agreement nor any
part hereof shall be assigned without the prior written consent of the other
party, and any attempt to assign any rights or obligations arising under this
Agreement without such consent shall be void; PROVIDED, HOWEVER, that the
provisions of this Agreement shall be binding upon, inure to the benefit of and
be enforceable by the respective successors and permitted assigns of the parties
hereto.
10.6 NO THIRD-PARTY BENEFICIARIES
This Agreement is not intended, nor shall it be construed, to confer any
enforceable rights on any Person not a party hereto.
10.7 TITLES AND HEADINGS
Titles and headings to Sections herein are for convenience only and shall
not be deemed parts thereof.
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10.8 ENFORCEABILITY
Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof. Any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction. Without prejudice to any rights or remedies otherwise available
to any party hereto, each party hereto acknowledges that damages would be an
inadequate remedy for any breach of the provisions of this Agreement and agrees
that the obligations of the parties hereunder shall be specifically enforceable.
10.9 COUNTERPARTS
This Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
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IN WITNESS WHEREOF, the parties hereto have entered into and signed this
Agreement as of the date and year first above written.
SOFTWARE SPECTRUM, INC. EGGHEAD, INC.
By /s/ JUDY O. SIMS By /s/ TERENCE M. STROM
---------------------- ---------------------
Its Chief Executive Officer Its President and CEO
-----------------------
DJ&J SOFTWARE CORPORATION
By /s/ TERENCE M. STROM
--------------------
Its Presdient and CEO
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EXHIBIT 99.4
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LEASE AGREEMENT
THIS LEASE (this "Lease") made this 13th day of May, 1996, between DJ&J
SOFTWARE CORPORATION, d/b/a EGGHEAD, a Washington corporation ("Landlord"), and
SOFTWARE SPECTRUM, INC., a Texas corporation ("Tenant").
AS PARTIES HERETO, Landlord and Tenant agree as follows:
1. LEASE DATA AND EXHIBITS
The terms used herein shall have the following meanings unless otherwise
specifically modified by provisions of this Lease:
1.1 BUILDING 1
"Building 1" shall mean office building number 1, located at 22705 East
Mission, Liberty Lake, Washington, situated on the real property ("Property")
more particularly described in EXHIBIT A, as outlined on the site plan attached
hereto as EXHIBIT B-1.
1.2 BUILDING 2
"Building 2" shall mean office building number 2, located at 22705 East
Mission, Liberty Lake, Washington, situated on the Property, and outlined on the
site plan attached hereto as EXHIBIT B-1.
1.3 BUILDINGS
"Buildings" shall mean Building 1 and Building 2, together with the
enclosed passageway that connects Buildings 1 and 2.
1.4 COMPLEX
"Complex" shall mean the Buildings, the Common Area and the Parking Area.
1.5 CAFETERIA
"Cafeteria" shall mean the cafeteria servicing the Buildings and located
within Building 1, a outlined on the site plan attached hereto as EXHIBIT B-1.
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1.6 PREMISES
"Premises" shall mean approximately 55,686 rentable square feet in
Building 2, as outlined on the floor plan attached hereto as EXHIBIT B-2.
1.7 COMMON AREA
"Common Area" shall mean all areas of the Buildings designated by Landlord
as common areas for the use generally of Landlord and other tenants of the
Buildings, including, but not limited to, hallways, the enclosed passageway
between the Buildings and the Cafeteria (but excluding Landlord's lobby area, as
outlined on EXHIBIT B-1, which shall be for Landlord's exclusive use).
1.8 PARKING AREA
"Parking Area" shall mean the unreserved parking spaces in the parking area
adjacent to the Buildings, as such parking area is outlined on the site plan
attached hereto as EXHIBIT B-1.
1.9 TENANT'S PERCENTAGE OF THE COMPLEX
"Tenant's Percentage of the Complex" shall mean fifty-two and one-half
percent (52.5%), calculated on the basis of a total of 55,686 rentable square
feet in the Premises and a total of 106,033 rentable square feet in the
Buildings (exclusive of the covered passageway and the Cafeteria) at the time of
the Commencement Date of this Lease. It is understood and agreed by the parties
that Tenant's Percentage of the Complex shall be verified by actual measurements
to be taken by an architect, engineer or similar professional mutually agreed
upon by Landlord and Tenant within sixty (60) days after the Commencement Date,
and recomputed accordingly in the event the total rentable square feet leased by
Tenant increases or decreases, or in the event the total rentable square feet in
the Buildings increases or decreases.
1.10 COMMENCEMENT DATE AND EXPIRATION DATE
"Commencement Date" shall mean May 3, 1996. If Tenant shall occupy the
Premises prior to the Commencement Date first stated herein, then the
Commencement Date shall be the date of such occupancy.
"Expiration Date" shall mean May 2, 1999.
1.11 RENT
"Rent" shall mean Basic Rent and Additional Rent as hereinafter defined:
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1.11.1 BASIC RENT
"Basic Rent" shall mean:
Months 1-12 $27,610.98 per month
Months 13-24 $31,555.40 per month
Months 25-36 $35,499.83 per month
1.11.2 ADDITIONAL RENT
"Additional Rent" shall mean the Actual Costs Allocable to the Premises (as
hereinafter defined) for a Lease Year (as hereinafter defined), payable in equal
monthly installments based on the Estimated Costs Allocable to the Premises (as
hereinafter defined) and using the following definitions:
(a) "Operating Costs" shall mean all reasonable expenses normally or
customarily paid or incurred by Landlord and not otherwise reimbursed by any
tenant for maintaining, operating and repairing the Complex and the personal
property used in conjunction therewith, including, without limitation, the costs
of: refuse collection; water, sewer and utilities services; emergency power
backup; supplies; janitorial and cleaning services; window washing; landscape
maintenance; maintenance of telephone switching and related equipment; services
of independent contractors; premiums for insurance (including, without
limitation, policies of casualty and liability insurance of such types and in
such amounts as Landlord deems necessary or desirable in the exercise of
Landlord's reasonable judgment), provided Tenant is named an additional insured
thereunder; licenses, permits and inspection fees; and any other reasonable
expense or charge, whether or not hereinabove described, which in accordance
with generally accepted accounting principles would be considered an expense
normally incurred for maintaining, operating or repairing the Complex; provided,
however, that to the extent Tenant pays directly for any of the foregoing
services with respect to the Premises (e.g., electrical service separately
metered to the Premises or custodial services separately contracted for the
Premises), then for the purposes of this Lease, "Operating Costs" with respect
to such services shall mean the cost of providing such services to the Common
Area only. If the costs of providing such services to the Common Area only are
not separately billed by the providers of such services, then the portion of the
costs allocable to the Common Area for such services shall equal the costs of
such services, multiplied by the Common Area's Percentage of the Complex.
Notwithstanding anything to the contrary contained herein, Tenant shall never be
responsible for Operating Costs charged with respect to Landlord's lobby.
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(b) "Real Property Taxes" shall mean taxes on real property and
personal property, including all tenant improvements for which Landlord is not
otherwise entitled to reimbursement by any tenant or other occupant, charges and
assessments levied with respect to the Property, the Buildings, any
improvements, fixtures and equipment used directly in the operation of the
Complex and located in the Buildings or on the Property; and any taxes levied or
assessed in addition to or in lieu of, in whole or in part, such real property
or personal property taxes; and any tax on Landlord's gross receipts unless such
tax cannot be charged to Tenant pursuant to applicable law.
(c) "Lease Year" shall mean the 12-month period commencing January 1
and ending December 31.
(d) "Actual Costs" shall mean the actual expenses paid or incurred by
Landlord for Operating Costs and Real Property Taxes during any Lease Year of
the term hereof.
(e) "Actual Costs Allocable to the Premises" shall mean the Actual
Costs multiplied by Tenant's Percentage of the Complex.
(f) "Estimated Costs Allocable to the Premises" shall mean Landlord's
estimate of Actual Costs Allocable to the Premises for the following Lease Year
as reasonably determined by Landlord.
1.11.3 COMMON AREA'S PERCENTAGE OF THE COMPLEX
"Common Area's Percentage of the Complex" shall mean five and 68/100
percent (5.68%), calculated on the basis of a total of 6,026 rentable square
feet of area in the Common Area and a total of 106,033 rentable square feet in
the Buildings (exclusive of the covered passageway, and the Cafeteria) at the
Commencement Date of this Lease. The parties agree that the Common Area's
Percentage of the Buildings shall be recomputed if the total rentable area of
the Common Area or of the Buildings changes during the term of this Lease.
1.12 PERMITTED USES
"Permitted Uses" shall mean use of the Premises by Tenant only for general
office purposes and for no other business or purpose without the prior written
consent of Landlord.
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1.13 DEFAULT RATE
"Default Rate" shall mean a rate equal to four percent (4%) per annum over
the prime rate of Seattle-First National Bank (or its successors) as announced
from time to time.
1.14 EXHIBITS
The following exhibits are made a part of this Lease:
EXHIBIT A - Legal Description
EXHIBIT B-1 - Site Plan of Property
EXHIBIT B-2 - Floor Plan of Premises
In the event of any inconsistency in the provisions of this Section and more
specific provisions set forth elsewhere in this Lease, the more specific
provision shall control.
2. PREMISES
Landlord does hereby lease the Premises to Tenant, and Tenant does hereby
lease the Premises from Landlord, in their "as is" condition, upon the terms and
conditions herein set forth.
The parties acknowledge that Landlord owns and will continue to occupy
Building 1 and that, accordingly, Landlord and Tenant will share the use of the
Cafeteria and the enclosed passageway between the Buildings. Landlord will also
have rights of access through the Premises, for ingress and egress to and from
the electrical room and the security room in Building 2, as more fully described
in Section 16 below.
3. TERM
The term of this Lease ("Lease Term") shall be a period extending for three
years, commencing on the Commencement Date and expiring on the Expiration Date,
subject to Tenant's renewal options as set forth in Section 4.
4. OPTION TO RENEW
4.1 OPTION
Landlord grants Tenant the option to extend the Lease Term for one (1)
renewal term of three (3) years, commencing immediately upon the Expiration Date
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(each, a "Renewal Term"). This option to renew is expressly conditioned on
Tenant's being, on both the date Tenant exercises its option and the first day
of the applicable Renewal Term, in full and faithful compliance in all material
respects with each and every one of its obligations contained in this Lease.
4.2 EXERCISE OF OPTION; LANDLORD'S RIGHT TO CANCEL EXERCISE
To exercise its option, Tenant must give written notice ("Renewal Notice")
thereof to Landlord at least one hundred twenty (120) days prior to the first
day of the applicable Renewal Term. Landlord is under no obligation to notify
Tenant of this deadline. Tenant understands and agrees that time is of the
essence and unless so exercised by the deadline specified above, the renewal
options herein granted will terminate.
4.3 RENEWAL TERMS
During the applicable Renewal Term, each and every provision of this Lease
will remain unchanged and in full force and effect except that the Basic Rent
will be adjusted as of the first day of the applicable Renewal Term to the then
fair market rental rate as of such date (the "Market Rate"). The "Market Rate"
for the Premises will be specified by Landlord, acting in good faith, and will
be the then current base rental rate being offered by landlords owning similar
office space in the vicinity of the Property, adjusted to reflect the location
of the Premises in the Building and the desirability of the Premises versus the
location and desirability of such other space, if materially different.
4.4 DETERMINATION OF MARKET RATE
Landlord will notify Tenant in writing of the Market Rate at least eighty
(80) days prior to the first day of the applicable Renewal Term. If Tenant
disagrees with the Market Rate specified by Landlord, it will so notify Landlord
immediately and they will meet as soon as possible thereafter in a good faith
effort to resolve their disagreement.
If the parties are still in disagreement sixty (60) days prior to the first
day of the applicable Renewal Term, the Market Rate will be determined by a
panel of three arbitrators, one to be selected by Landlord within forty-six (46)
days before the first day of the applicable Renewal Term (or by Tenant if
Landlord fails to appoint an appraiser within the time provided above), one to
be selected by Tenant (or by Landlord if Tenant fails to do so within ten (10)
days after demand from Landlord), and one to be selected by the first two
arbitrators. Each such arbitrator will be an independent MAI appraiser with at
least ten (10) years' experience in appraising
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commercial real estate in the vicinity of the Property. The cost of the
arbitrator selected by Tenant will be borne by Tenant, the cost of the
arbitrator selected by Landlord will be borne by Landlord, and the cost of the
third arbitrator will be shared equally by Tenant and Landlord. The arbitrators
will meet within five (5) days of their appointment and will render a decision
within ten (10) days thereafter. The Market Rate determined by the arbitrators
will be binding upon both parties.
Until the Market Rate is determined as provided herein, Tenant will pay
Basic Rent based on the Market Rate specified by Landlord, and if the Market
Rate is subsequently determined to be different from the Market Rate specified
by Landlord, Landlord or Tenant, as the case may be, will reimburse the other
for such difference within twenty (20) days of the date of final determination
of the Market Rate.
5. PAYMENT OF BASIC RENT
Commencing on the Commencement Date, Tenant shall pay Landlord Basic Rent
in lawful money of the United States in advance on or before the first day of
each month without offset or deduction at the offices of Landlord at 22705
E. Mission, Liberty Lake, Washington 99019, or such other place as may be
designated by Landlord. Basic Rent for any period during the Lease Term which
is less than one month shall be a pro rata portion of the monthly installment.
6. PAYMENT OF ADDITIONAL RENT
Commencing on the Commencement Date, Tenant shall pay Landlord as
Additional Rent one-twelfth (1/12) of the Estimated Costs Allocable to the
Premises in lawful money of the United States in advance on or before the first
day of each month, without deduction or offset, at the address specified in
Section 5. Prior to the commencement of each Lease Year during the Lease Term,
Landlord shall furnish Tenant a written statement of the Estimated Costs
Allocable to the Premises for such Lease Year, together with the calculation of
the estimated monthly Additional Rent payable during such Lease Year. If at any
time or times during such Lease Year it appears to Landlord that the Actual
Costs Allocable to the Premises will vary from Landlord's estimate by more than
five percent (5%) on an annual basis, Landlord may, by written notice to Tenant,
revise Landlord's estimate for such Lease Year, and subsequent Additional Rent
payments by Tenant for such Lease Year shall be recalculated based on Landlord's
revised Estimated Costs Allocable to the Premises.
Within ninety (90) days after the close of each Lease Year during the Lease
Term, or as soon thereafter as practicable, but not later than one hundred
twenty (120) days after the close of such Lease Year, Landlord shall deliver to
Tenant a written statement setting forth the Actual Costs Allocable to the
Premises during the
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preceding Lease Year. If such costs for any Lease Year exceed Estimated Costs
Allocable to the Premises paid by Tenant to Landlord, Tenant shall pay the
amount of such excess to Landlord as Additional Rent within forty-five (45) days
after receipt of such statement by Tenant. If such statement shows such costs
to be less than the amount paid by Tenant to Landlord, then the amount of such
overpayment by Tenant shall be credited by Landlord to the next immediate Rent
payable by Tenant. Tenant shall have the right, at Tenant's sole expense, to
audit Landlord's books regarding Actual Costs, provided that (i) such right
shall not be exercised more than once each calendar year, and (ii) such right
must be exercised, if at all, by delivery of written notice to Landlord on or
before thirty (30) days after Landlord's delivery of the written statement
setting forth Actual Costs Allocable to the Premises during the preceding Lease
Year. If the audit reveals that Landlord's statement is determined to be in
error by more than five percent (5%), the amount of Additional Rent payable by
Tenant attributable to Actual Costs Allocable to the Premises shall be
recalculated based upon the results of any such audit.
If the Expiration Date is a day other than the last day of a Lease Year,
the amount of any adjustment between Actual Costs and Estimated Costs Allocable
to the Premises with respect to the Lease Year in which such termination occurs
shall be prorated on the basis of a 365-day year. Any amount payable by
Landlord to Tenant or by Tenant to Landlord with respect to such adjustment
shall be payable within forty-five (45) days after delivery by Landlord to
Tenant of the Statement of Actual Costs Allocable to the Premises with respect
to such Lease Year.
7. [INTENTIONALLY OMITTED]
8. USES
The Premises shall be used only for Permitted Uses and for no other purpose
without the prior written consent of Landlord. No act shall be done in or about
the Premises that is unlawful or that will increase the existing rate of
insurance on the Buildings. Tenant shall not commit or allow to be committed
any waste upon the Premises, or any public or private nuisance or other act or
thing which disturbs the quiet enjoyment of Landlord or any other tenant in the
Buildings. Tenant shall not, without the written consent of Landlord, use any
apparatus, machinery or device in or about the Premises which will cause any
substantial noise or vibration or any increase in the normal use of electric
power. If any of Tenant's office machines and equipment should disturb the
quiet enjoyment of Landlord or any other tenant in the Buildings, then Tenant
shall provide adequate insulation, or take other action as may be necessary to
eliminate the disturbance. Tenant shall comply with all laws relating to
Tenant's use of the Premises and shall observe such reasonable rules and
regulations
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as may be adopted and published by Landlord for the safety, care and cleanliness
of the Premises or the Buildings, and for the preservation of good order
therein, including but not limited to any rules and regulations and/or
declaration of protective covenants attached to this Lease. Notwithstanding the
foregoing, no rules or regulations hereafter promulgated by Landlord shall
materially diminish Tenant's rights or increase Tenant's obligations under this
Lease.
9. SERVICES AND UTILITIES
9.1 GENERAL
Landlord shall maintain the Common Area in reasonably good order and
condition except for damage occasioned by the act or omission of Tenant, the
repair of which damage shall be paid for by Tenant.
Landlord shall furnish (or cause to be furnished) the Premises with
electricity for lighting and operation of normal power usage office machines,
water, heat and normal air conditioning service. Landlord shall also provide
light replacement service for Landlord-furnished light. If the foregoing
services are not separately metered to Tenant, the cost of providing such
services shall be reimbursed by Tenant to Landlord in the form of Additional
Rent pursuant to Section 6. Tenant shall, at Tenant's expense, provide for its
own trash disposal and janitorial services with respect to the Premises.
Landlord shall not be liable for any loss, injury or damage to property
caused by or resulting from any variation, interruption or failure of such
services to be provided by Landlord (including, but not limited to, the
emergency power backup system) due to any cause whatsoever, or from failure to
make any repairs or perform any maintenance. In the event of such variation,
interruption or failure, however, Landlord shall use reasonable diligence to
restore such service. No temporary interruption or failure of such services
incident to the making of repairs, alterations or improvements, or due to
accident or strike, or conditions or events beyond Landlord's reasonable control
shall be deemed an eviction of Tenant or relieve Tenant from any of Tenant's
obligations hereunder. Landlord will use reasonable efforts to notify Tenant at
least forty-eight (48) hours in advance of any scheduled or anticipated
interruption in any such services. Notwithstanding anything to the contrary
contained in this Section 9 or elsewhere in this Lease, if any such slowdown,
interruption or stoppage of any such services, or the Landlord's inability to
perform any covenant herein creates a condition which interferes substantially
with Tenant's normal use of the Premises as allowed under this Lease, and as a
consequence Tenant is compelled to discontinue or materially curtail business in
the Premises in whole or in part for a period of twenty (20) consecutive days,
then the Basic Rent and Additional Rent shall
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be proportionately abated during the time of such discontinuance or curtailment
of business, but no such abatement shall continue beyond the time that the
slowdown, interruption, stoppage or inability to perform no longer persists,
regardless of any delay by Tenant in resuming operation of business after that
time. If any such slowdown, interruption, stoppage or inability to perform
continues for a period of forty-five (45) consecutive days and Tenant is
compelled (whether for prudent business reasons or otherwise) to discontinue
business in the Premises, Tenant shall have the right thereafter to terminate
this Lease upon notice to Landlord; however, such termination right shall not
continue beyond the time that the slowdown, interruption, stoppage or inability
to perform no longer persists.
Before installing any equipment (other than customary and normal office
equipment) in the Premises that generates more than a minimum amount of heat,
Tenant shall obtain the written permission of Landlord and Landlord may refuse
to grant such permission if the amount of heat generated would place an above
average burden on the air-conditioning system of the Buildings unless Tenant
shall agree to pay at Landlord's election: (a) the costs of Landlord for
installation, operation and maintenance of supplementary air-conditioning units
as necessitated by such equipment or (b) an amount reasonably determined by
Landlord to cover the additional burden on the existing air-conditioning system
generated by such Tenant equipment.
If Tenant uses any equipment in the Premises requiring above average power
usage as compared to other areas of the Complex, Tenant shall in advance, on the
first day of each month during the Lease Term, pay Landlord as Additional Rent
the reasonable amount estimated by Landlord as the cost of furnishing
electricity for the operation of such equipment; provided, however, that this
provision shall not be applicable if electricity is separately metered for the
Premises. Basic Rent does not include any amount to cover the cost of
furnishing electricity for such purposes unless so stated therein.
At Tenant's request, Landlord shall use its best efforts to cause utilities
furnished to Tenant to be separately metered, and Tenant shall pay for the
installation costs of and the conversion to any meters required. To the extent
meters cannot be installed, or the cost of such installation is excessive,
Tenant shall continue to pay for such utilities as part of the Additional Rent.
9.2 TELEPHONE SWITCHING EQUIPMENT
During the period commencing on the Commencement Date and ending on the
first anniversary of the Commencement Date, Tenant shall be entitled to the
nonexclusive use (in common with Landlord) of Landlord's telephone switching
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equipment (and related equipment and services, including computer servers and
long distance lines) which services the Premises (collectively, "Telephone
Switching Equipment"). Tenant shall cooperate with Landlord in making the
necessary connections for such nonexclusive use, and Tenant will not create
demands on the Telephone Switching Equipment that would cause the system to
become overloaded or out of repair. Landlord shall not be liable for any loss,
injury or damage to Tenant or Tenant's property caused by or resulting from any
variation, interruption or failure of the Telephone Switching Equipment due to
any cause whatsoever, or from failure to make any repairs or perform any
maintenance. In the event of such variation, interruption or failure, however,
Landlord shall use reasonable diligence to restore such service. Landlord shall
maintain the Telephone Switching Equipment in accordance with reasonably prudent
business practices, but Landlord does not guarantee its operation or
performance.
Tenant shall pay Landlord for its usage of the Telephone Switching
Equipment, as determined by Landlord's internal meters and/or third-party
supplier's invoices. Tenant shall perform and shall pay for any configuration
changes and enhancements to the Telephone Switching Equipment required by
Tenant, provided that Tenant's right to reconfigure and enhance the Telephone
Switching Equipment shall in no way impact Landlord's use of the Telephone
Switching Equipment. If Tenant requires the services of an employee of Landlord
in connection with Tenant's connection to, or reconfiguration, maintenance or
use of the Telephone Switching Equipment, Tenant shall also pay Landlord at the
rate of $50 per hour per person. All payments due to Landlord under this
Section 9.2 shall be deemed to be Additional Rent and shall be paid by Tenant
within ten (10) days after Landlord's delivery of a bill therefor.
9.3 CAFETERIA
Tenant shall be entitled to nonexclusive use (in common with Landlord) of
the Cafeteria servicing the Building. Operating Costs relating to the Cafeteria
will not include subsidies paid by Landlord for any food service operations, but
will include all other costs and expenses with respect to the Cafeteria. Tenant
agrees to cause its employees, agents and invitees to comply with all reasonable
rules and regulations as may be adopted and published by Landlord from time to
time for the safety, care and cleanliness of the Cafeteria and for the
preservation of good order therein.
10. PARKING AND ACCESS
The Parking Area shall be used for vehicle parking only and shall be used
for no other purposes except as required for trash disposal (including exterior
storage) without the prior written consent of Landlord. The Parking Area shall
be available to Tenant and its invitees on a first come, first serve basis, and
Tenant shall ensure that
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all parking spaces designated as "Visitor Parking" in the Parking Area are kept
available for visitors of Landlord and Tenant, also on a first come, first serve
basis. Tenant agrees that Tenant will not park, nor will Tenant permit Tenant's
employees, agents, guests, invitees and/or licensees to park, on streets within
the Property or in any other spaces, lots or areas within the Property except as
may be specifically provided for in this Lease.
Trucks or other vehicles may only temporarily park at bays serving the
Premises while loading and unloading, and shall not be stored in the parking,
maneuvering or loading areas. Tenant, Tenant's employees, agents, guests,
invitees and licensees shall use all due care and best efforts not to interfere
with Landlord's and other tenants' use of parking and maneuvering areas.
11. TAX ON RENT
If any governmental authority shall in any manner levy a tax on Rent
payable under this Lease or rentals accruing from use of property, or such tax
in any form against Landlord measured by income derived from the leasing or
rental of the Complex, such tax shall be paid by Tenant either directly or
through Landlord; provided, however, that Tenant shall not be liable to pay any
federal or state income tax imposed on Landlord.
12. PERSONAL PROPERTY TAXES
Tenant shall pay prior to delinquency all personal property taxes payable
with respect to all property of Tenant located on the Premises or in Building 2
and shall promptly provide written proof of such payment upon request of
Landlord.
13. IMPROVEMENTS
Prior to the Commencement Date, Landlord shall, at its own expense,
construct demising walls and an exterior doorway for Tenant's new entry, as
outlined on EXHIBIT B-2 attached hereto. Landlord will submit its plans and
specifications for such walls and doorway to Tenant for Tenant's review and
approval, which approval will not be unreasonably withheld or delayed. Tenant
shall be solely responsible for all furnishings required for its entry.
All standard or special tenant improvements which are affixed to the
Premises, including, but not limited to, any paid for by Landlord, shall at all
times be the property of Landlord. Notwithstanding anything in this Lease to
the contrary, however, Tenant improvements such as telephone and computer
equipment (except for lines and internal Building wiring) whether or not affixed
to the Premises, will
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remain the property of Tenant. Upon the Expiration Date or sooner termination
of the Lease Term, all improvements and additions to the Premises made by Tenant
shall become the property of Landlord, except Tenant may remove Tenant's trade
fixtures, office supplies and movable office furniture and equipment not
attached to Building 2 provided: (a) such removal is made prior to the
Expiration Date or sooner termination of the Lease Term, (b) no Event of Default
(as defined in Section 24 of this Lease) exists at the time of such removal, and
(c) Tenant immediately repairs all damage caused by or resulting from such
removal. All other property in the Premises and any alterations or additions
thereto (including, without limitation, wall-to-wall carpeting, paneling, wall
covering or lighting fixtures and apparatus) and any other article affixed to
the floor, wall or ceiling of the Premises shall become the property of Landlord
and shall remain upon and be surrendered with the Premises, Tenant hereby
waiving all rights to any payment or compensation therefor. If, however,
Landlord so requests in writing, Tenant will, prior to the Expiration Date or
sooner termination of the Lease Term, remove such alterations, additions,
fixtures, equipment and property placed or installed by Tenant in the Premises
as requested by Landlord, and will immediately repair any damage caused by or
resulting from such removal to the condition of the Premises prevailing upon the
Commencement Date, reasonable wear and tear excepted.
If Tenant shall fail to remove any of Tenant's property of any nature
whatsoever from the Premises on the Expiration Date, sooner termination of the
Lease Term or when Landlord has the right of reentry, Landlord may, at
Landlord's option, remove and store said property without liability for loss
thereof or damage thereto, such storage to be for the account and at the expense
of Tenant. If Tenant shall not pay the cost of storing any such property after
it has been stored for a period of thirty (30) days or more, Landlord may, at
Landlord's option, sell, or permit to be sold, any or all of such property at
public or private sale (and Landlord may become a purchaser at such sale), in
such manner and at such times and places as Landlord in Landlord's sole
discretion may deem proper, without notice to Tenant, and shall apply the
proceeds of such sale: first, to the cost and expense of such sale, including
reasonable attorneys' fees actually incurred; second, to the payment of the
costs or charges for storing any such property; third, to the payment of any
other sums of money which may then be or thereafter become due Landlord from
Tenant under any of the terms hereof; and, fourth, the balance, if any, to
Tenant.
14. ALTERATIONS AND CARE OF PREMISES
Tenant shall take good care of the Premises (and all telephone lines,
equipment, fixtures and mechanical systems therein) and shall promptly make all
necessary repairs and maintenance, except those to be made by Landlord as
provided
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herein, in order to keep the Premises in neat, clean and sanitary condition.
Tenant shall maintain all signs approved by Landlord in good, clean and
attractive condition.
Landlord will be responsible only for structural repairs or replacement of
or to the roof, foundations, sub-floor and structural walls of the Buildings,
HVAC, mechanical, electrical and life safety systems in the Complex (including
the Premises), normal wear and tear excepted. Nothing herein will limit
Tenant's obligation to pay its share of Operating Costs with respect to the
maintenance and operation of the HVAC, mechanical, electrical and life safety
systems in the Complex.
Tenant shall, at the expiration or sooner termination of this Lease,
surrender and deliver the Premises to Landlord in as good condition and in the
same layout and configuration as when received by Tenant from Landlord or as
thereafter improved with Landlord's consent, reasonable wear and tear and damage
by fire or other insured casualty excepted.
Tenant shall not make any material alterations, additions or improvements
in or to the Premises, or add, disturb or change in any material way any floor
covering, wall covering, window blinds, fixtures, plumbing or wiring without
first obtaining the written consent of Landlord, which consent will not be
unreasonably withheld or delayed. Tenant shall deliver to Landlord full and
complete plans and specifications prepared by a licensed architect for any such
material alteration, addition or improvement along with keys to any locks
changed by Tenant provided that Tenant shall not be required to retain an
architect in connection with the installation of telephone, computer and
security equipment contemplated hereby. Landlord acknowledges and agrees that
Tenant will have the right to construct a new telephone, security and computer
room for the operation of Tenant's business; provided, however, that Tenant
submits its plans and specifications for such construction to Landlord for
Landlord's review and approval prior to the commencement of such construction,
which approval will not be unreasonably withheld or delayed. In addition,
notwithstanding the above, Tenant shall have the right to make nonstructural
alterations which do not exceed Five Thousand Dollars ($5,000) in any one
instance, and minor decorations to the Premises, without obtaining Landlord's
written consent, but Tenant shall deliver to Landlord copies of all plans and
drawings relating to any such nonstructural alterations.
Landlord shall have the right to approve the contractor to be hired by
Tenant to construct any alteration, and such contractor shall be fully licensed
and bonded and insured.
Landlord does not and will not make any covenant or warranty, express or
implied, that any such plans or specifications submitted by Tenant are accurate,
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complete or in any way suited for their intended purpose. Further, Tenant shall
indemnify and hold Landlord harmless from any liability, claim or suit,
including attorneys' fees, arising from any injury, damage, cost or loss
sustained by persons or property as a result of any defect in design, material
or workmanship arising as a result of any Tenant improvements.
All such work so done by Tenant shall be done in accordance with all laws,
ordinances and rules and regulations of any federal, state, county, municipal or
other public authority and/or Board of Fire Underwriters. Tenant expressly
covenants and agrees that no liens of mechanics, materialmen, laborers,
architects, artisans, contractors, subcontractors or any other lien of any kind
whatsoever shall be created against or imposed upon the Premises, the Property
or the Complex, and that in the event any such claims or liens of any kind
whatsoever shall be asserted or filed by any persons, firms or corporations
performing labor or furnishing material in connection with such work, Tenant
shall pay off or cause the same to be discharged of record within ten (10) days
of notification thereof. All alterations, improvements or changes made by
Tenant to the Premises shall be the property of Landlord and shall remain upon
and be surrendered with the Premises upon the termination of this Lease.
Landlord shall have the right, but not the obligation, to inspect any
alterations during and at the conclusion of construction. If, in Landlord's
reasonable opinion, the same are not installed in accordance with plans and
specifications submitted to Landlord under the requirements of this Section,
then, in addition to any other remedy provided to Landlord under this Lease,
Landlord shall have the right to require Tenant to reconstruct the same to
conform to such plans and specifications and at Tenant's cost and expense.
Tenant acknowledges and agrees that a material condition to the granting of
approval of Landlord to any alterations and/or improvements and/or repairs
required under this Lease or desired by Tenant is that the contractors who
perform such work shall carry a comprehensive liability policy, naming Landlord
as an additional insured thereon, with a combined single limit for personal or
bodily injury of not less than One Million Dollars ($1,000,000), at Tenant's
expense. Landlord may require proof of such insurance coverage from each
contractor at the time of submission of Tenant's request for Landlord's consent
to commence work.
All damage or injury done to the Premises by Tenant or by any persons who
may be in or upon the Premises with the consent (express or implied) of Tenant,
including the cracking or breaking of glass of any windows or doors, shall be
paid for by Tenant and Tenant shall pay for all damage to the Buildings and any
appurtenances thereto caused by Tenant or Tenant's employees, agents, guests,
invitees and/or licensees. Tenant shall not put any curtains, draperies, blinds
or other hangings in, on
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or beside the windows in the Premises or place any furniture on the patios, if
any, without first obtaining Landlord's consent, which shall not be unreasonably
withheld or delayed. All normal repairs necessary to maintain the Premises in a
tenantable condition shall be done by or under the direction of Landlord.
Tenant shall promptly notify Landlord of any damage to the Premises requiring
repair. Landlord shall, in the exercise of prudent business practices, determine
those repairs that are necessary to maintain the Premises in good condition.
15. HAZARDOUS MATERIAL
15.1 DEFINITION OF "ENVIRONMENTAL LAWS"
The term "Environmental Laws" means any and all state, federal and local
statutes, regulations and ordinances relating to the protection of human health
and the environment.
15.2 DEFINITION OF "HAZARDOUS MATERIAL"
The term "Hazardous Material" means any hazardous or toxic substance,
material or waste, including, but not limited to, those substances, materials
and wastes listed in the United States Department of Transportation Hazardous
Materials Table (49 C.F.R. Section 172.101) or by the United States
Environmental Protection Agency as hazardous substances (40 C.F.R. pt. 302 and
amendments thereto), petroleum products and their derivatives, and such other
substances, materials and wastes as become regulated or subject to cleanup
authority under any Environmental Laws. Notwithstanding the foregoing, the term
"Hazardous Material" shall not include: (1) chemicals routinely used in
business office areas or (2) janitorial supplies, cleaning fluids, or chemicals
necessary for the day-to-day operation or other maintenance of the Premises if
the disposition, handling, storage or quantity of the items described in (1) and
(2) herein are at all times in compliance with all applicable legal
requirements.
15.3 LIMITATION ON USES OF HAZARDOUS MATERIAL
Tenant shall:
(a) not cause or permit any Hazardous Material to be brought upon,
used, kept or stored on or about the Premises by Tenant or its agents,
contractors or subtenants without the prior written consent of Landlord;
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(b) cause the Premises and all of Tenant's operations conducted
thereon to comply with all Environmental Laws and orders of any governmental
authorities having jurisdiction under any Environmental Laws; and
(c) obtain, keep in effect and comply with all governmental permits
and authorizations required by Environmental Laws with respect to the Premises
or Tenant's operations.
15.4 NOTICES
Tenant shall immediately notify Landlord in writing if Tenant becomes aware
of any of the following:
(a) Any violation of Environmental Laws regarding the Premises or
Tenant's operations;
(b) Any order, notice of violation, fine or penalty or other similar
action relating to Hazardous Material or Environmental Laws and to the Premises
or Tenant's operations; or
(c) Any complaint or lawsuit filed or threatened to be filed by any
person or other entity, including, without limitation, any governmental
authority, relating to Hazardous Material or Environmental Laws and to the
Premises or Tenant's operations.
15.5 INDEMNIFICATION
Tenant agrees to defend (with counsel approved by Landlord), fully
indemnify, and hold entirely free and harmless Landlord from and against all
claims, judgments, damages, penalties, fines, costs, liabilities or losses
(including, without limitation, diminution in value of the Premises, damages for
the loss or restriction on the use of rentable or usable space or of any amenity
of the Premises, damages arising from any adverse impact on marketing of space,
sums paid in settlement of claims, attorneys' fees, consultant fees and expert
fees) that arise during or after the Lease Term and that are imposed on, or paid
by or asserted against Landlord by reason or on account of, or in connection
with, or arising out of Tenant's use, generation, manufacture, refinement,
transportation, treatment, storage, handling, recycling or disposal of Hazardous
Material, or any release of Hazardous Material in connection with or as a result
of Tenant's use or activities, or of Tenant's agents, contractors or subtenants,
or any violation of any Environmental Law by Tenant or its agents,
subcontractors or subtenants; provided, however, this indemnity provision will
not apply to any Hazardous Material present on the Premises prior to the
Commencement Date;
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provided further, however, that Tenant acknowledges that Landlord has disclosed
to Tenant the presence of asbestos floor tiles currently covered by carpeting
within the Premises. In the event any tenant improvements or other alterations
require Tenant to disturb the floor tiles, Tenant will comply with all
Environmental Laws in connection with the disturbance of such tiles, and will
take all actions necessary to prevent or minimize any damage or personal injury
that may be caused by the release of, or exposure to, such asbestos.
15.6 SURVIVAL
The provisions of this Section 15 shall survive the expiration or earlier
termination of this Lease.
16. ACCESS
16.1 GENERALLY
Landlord and Landlord's employees and agents shall not have any right to
enter the Premises without having given Tenant at least twenty-four (24) hours
prior written notice of such entry, but no such notice shall be required in
cases of emergency involving an imminent risk to persons or property or in cases
of access to the security and electrical rooms as provided in Section 16.3.
When reasonably necessary, Landlord may temporarily close entrances, doors,
corridors, elevators or other facilities without liability to Tenant by reason
of such closure and without such action by Landlord being construed as an
eviction of Tenant or as relieving Tenant from the duty of observing and
performing any of the provisions of this Lease. Landlord shall have the right to
enter the Premises for the purpose of showing the Premises to prospective
tenants within one hundred twenty (120) days prior to the Expiration Date or
sooner termination of the Lease Term. Landlord shall not be liable for the
consequences of admitting by passkey, or refusing to admit to the Premises,
Tenant or Tenant's employees, agents, guests, invitees and/or licensees.
Landlord shall indemnify and hold Tenant harmless from and against all
loss, cost, expense, claim or damage arising from any negligent act or omission
of any employee, agent or invitee of Landlord while in the Premises.
16.2 EXERCISE FACILITIES AND TELEPHONE EQUIPMENT ROOM
Landlord has retained exclusive use of, and does not lease to Tenant, the
exercise facilities and water heater room adjacent to the exercise facilities,
both located in Building 2, as outlined on the site plan attached hereto as
EXHIBIT B-2. Landlord will have access through the Premises on an as-needed
basis only to the
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telephone equipment room, the water heater room and the utility room adjacent to
the water heater room. Landlord's access to such rooms will be limited to
Landlord's technical, maintenance and security personnel and will be by card key
only. Landlord's access to the utility room will be for the purpose of reading
meters and observing the security panel located therein. Landlord's access to
the telephone equipment room will be for the purpose of observation only for
that period of time between the Commencement Date and that date by which
Landlord has removed its telephone switching equipment from, and vacated, the
telephone equipment room, which removal and vacation shall be completed no more
than thirty (30) days following receipt by Landlord of written notice from
Tenant that Tenant has successfully installed its own telephone switching
equipment in the telephone equipment room. During the period of shared access
to the telephone equipment room, if either Landlord or Tenant determines that
any repairs, modifications or alterations are necessary in the telephone
equipment room, the party making such determination may make such repairs,
modifications or alterations only after receiving the written approval of the
other party, which party shall not unreasonably withhold or delay such approval.
Landlord agrees to use commercially reasonable best efforts to comply with all
reasonable requests of Tenant to assist Tenant in Tenant's installation of its
Telephone Switching Equipment and systems in the Premises. Landlord and
Landlord's employees and agents shall not have access to the exercise facilities
through the Premises.
16.3 ELECTRICAL ROOM
Landlord has retained use of, and does not lease to Tenant, the
electrical room located in Building 2, as outlined on the site plan attached
hereto as EXHIBIT B-2. Landlord agrees to use commercially reasonable best
efforts to comply with all reasonable requests of Tenant to assist Tenant in
Tenant's installation of its wiring and connections for computer and
electrical equipment required by Tenant for the operation of its business in
the Premises. Landlord will share use of the electrical room with Tenant.
The costs and expenses that are paid or incurred by Landlord for maintaining,
operating and repairing the electrical room will be included within Operating
Costs to be shared by Tenant under this Lease. In addition, each party shall
defend and indemnify the other party and save the other party harmless from
and against any and all liability, damages, costs or expenses, including
reasonable attorneys' fees, arising from any act, omission or negligence of
the indemnifying party or its employees or agents arising from such party's
use of or access to the electrical room. Tenant shall permit Landlord and
Landlord's employees and agents to enter into, upon and through the Premises,
at all times required by Landlord, for ingress and egress to and from the
electrical room. Landlord's access through the Premises to the
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electrical room will be limited to Landlord's technical, maintenance and
security personnel. Such access shall be by card-key only, and shall be on an
as-needed basis only. Landlord will keep records of its access to the
electrical room and will provide such records to Tenant upon request.
17. INSURANCE
17.1 FIRE AND EXTENDED COVERAGE INSURANCE ON TENANT'S PERSONAL
PROPERTY AND FIXTURES
At all times during the Lease Term, Tenant shall keep in force at Tenant's
sole cost and expense fire insurance and extended coverage in companies
reasonably acceptable to Landlord, equal to the full replacement cost of
Tenant's fixtures, furnishings, equipment and contents upon the Premises.
Landlord shall be named as an additional insured on all such policies.
At all times during the Lease Term, Landlord shall keep in force fire
insurance and extended coverage in an amount equal to the full replacement cost
of the Complex (exclusive of the properties owned by Tenant) in amounts and with
companies acceptable to Landlord in the exercise of prudent business practices.
Tenant acknowledges that it will pay its proportionate share of such insurance
pursuant to Section 6 and Tenant will be named an additional insured on such
policies.
17.2 LIABILITY INSURANCE
Tenant shall, during the Lease Term, keep in full force and effect a policy
of public liability and property damage insurance with respect to the Premises
and the business operated by Tenant in the Premises, with a combined single
limit for personal or bodily injury and property damage of not less than One
Million Dollars ($1,000,000). The policy shall name Tenant as insured, and
Landlord as an additional insured and shall contain a clause that the insurer
will not cancel or change the insurance without first giving Landlord thirty
(30) days' written notice. The insurance shall be provided by an insurance
company approved by Landlord and a copy of the policy or a certificate of
insurance shall be delivered to Landlord. All public liability, property damage
and other liability policies shall be written as primary policies, not
contributing with and not in excess of coverage which Landlord may carry. All
such policies shall contain a provision that Landlord, although named as an
additional insured, shall nevertheless be entitled to recover under said
policies for any loss occasioned to Landlord, Landlord's employees and/or agents
by reason of the negligence of Tenant. All such insurance shall specifically
insure the performance by Tenant of the indemnity agreement as to liability for
injury to or death of persons or injury or damage to property as contained in
Section 20. Any insurance (whether
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liability or casualty) required by the terms of this Lease to be carried by
Tenant may be carried under a blanket policy (or policies) covering other
properties of Tenant or its related or affiliated corporations, or both;
provided, however, that Tenant provide Landlord evidence reasonably satisfactory
to Landlord that (a) Landlord is named as an additional insured on such policy
or policies and (b) the coverage under such policy or policies is sufficient to
cover the limits required herein.
17.3 LANDLORD'S LIABILITY INSURANCE
At all times during the term of this Lease, Landlord shall maintain in full
force and effect comprehensive public liability insurance with minimum limits of
One Million Dollars ($1,000,000) for injury to or death of one or more persons
in any one occurrence and One Million Dollars ($1,000,000) for damage to or
destruction of property in any one occurrence. Any insurance (whether liability
or casualty) required by the terms of this Lease to be carried by Landlord may
be under a blanket policy (or policies) covering other properties of Landlord
and/or its related or affiliated corporations.
17.4 LENDER
Any mortgage lender interested in any part of the Buildings or Premises
may, at Landlord's option, be afforded coverage under any policy required to be
secured by Tenant hereunder, by use of a mortgagee's endorsement to the policy
or policies.
18. DAMAGE OR DESTRUCTION
If the Premises or all or part of the Complex shall be destroyed or
rendered untenantable, either wholly or in part, by fire or other unavoidable
casualty such that Tenant cannot reasonably continue to carry out its normal
business activities from the Premises until such damage is repaired, which
repairs Landlord's Architect reasonably believes can be repaired within one
hundred eighty (180) days from the casualty, and provided such repairs do not
actually require more than two hundred ten (210) days from the date of the
casualty to be completed, then this Lease shall not terminate. Otherwise,
either party may, by written notice to the other, either (a) terminate this
Lease within sixty (60) days after (i) such casualty or (ii) the end of such two
hundred ten (210) day period, as applicable, or (b) keep this Lease in effect,
in which case Landlord shall restore the Premises to their previous condition;
provided during such restoration Basic Rent and Additional Rent shall be abated
in the same proportion as the untenantable portion of the Premises bears to the
whole thereof; and provided further if the damage is due directly or indirectly
to the fault or neglect of Tenant or Tenant's employees, agents, guests,
invitees and/or licensees, there shall be no
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abatement of Rent. Landlord shall not be required to repair or restore
fixtures, improvements or other property of Tenant.
19. WAIVER OF SUBROGATION
Whether the loss or damage is due to the negligence of either Landlord or
Tenant, their employees or agents, or any other cause, Landlord and Tenant do
each herewith and hereby release and relieve the other and any other tenant, its
employees and agents from responsibility for, and waive their entire claim of
recovery (including deductible amounts under the policies of insurance referred
to below) for, any loss or damage to the real or personal property of either
located anywhere in the Buildings arising out of or incident to the occurrence
of any of the perils which are covered by their respective fire insurance
policies, with extended coverage endorsements, that each of them is required to
carry under this Lease (regardless of whether such coverage is actually in
effect). Each party shall cause its insurance carriers to consent to such
waiver and to waive all rights of subrogation against the other party.
20. INDEMNIFICATION
Subject to Section 19, Tenant shall defend and indemnify Landlord and save
Landlord harmless from and against any and all liability, damages, costs or
expenses, including attorneys' fees, arising from any act, omission or
negligence of Tenant or Tenant's employees, agents, guests, invitees and/or
licensees in or about the Premises, the Common Area and the Parking Area, or
arising from any breach or default under this Lease by Tenant, or arising from
any accident, injury or damage, howsoever and by whomsoever caused, to any
person or property, occurring in or about the Premises, the Common Area and the
Parking Area; provided that the foregoing provision shall not be construed to
make Tenant responsible for loss, damage, liability or expense resulting from
injuries to third parties caused by the negligence of Landlord or Landlord's
employees, agents and/or invitees.
Landlord shall not be liable for any loss or damage to person or property
sustained by Tenant or other persons, which may be caused by the Buildings or
the Premises, or any appurtenances thereto, being out of repair, or the bursting
or leakage of any water, gas, sewer or steam pipe, or by theft, or by any act or
neglect of any tenant or occupant of the Buildings or of any other person, or by
any other cause of whatsoever nature except to the extent that Tenant's loss is
caused by the gross negligence, willful misconduct or willful omission of
Landlord or Landlord's employees or agents. Tenant agrees to use and occupy the
Premises, the Common Area and the Parking Area at Tenant's own risk and, except
as specifically set forth in the preceding sentence, hereby releases Landlord,
Landlord's employees and/or agents from all claims for any damage or injury to
the fullest extent permitted by law.
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21. ASSIGNMENT AND SUBLETTING
Subject to the terms set forth herein, Tenant shall not assign, transfer,
mortgage or encumber this Lease nor sublet the whole or any part of the Premises
without first obtaining Landlord's written consent, which consent may be
withheld or conditioned in Landlords' sole reasonable discretion. Any consent
granted by Landlord shall require that such subtenant or assignee consent to be
bound by all of the terms and conditions of this Lease. No such assignment or
subletting shall relieve Tenant of any liability under this Lease regardless of
whether such liability arises by or through Tenant. Assignment or subletting
shall not operate as a waiver of the necessity for a written consent to any
subsequent assignment or subletting, and the terms of such consent shall be
binding upon any person holding by, under or through Tenant. Landlord may, at
Landlord's election, collect rent directly from such assignee or subtenant.
If Tenant is a corporation, then any transfer of this Lease by operation of
law, merger, consolidation or liquidation shall constitute an assignment for the
purpose of this Section; provided, however, that as long as Tenant is a publicly
owned company, Landlord's consent to an assignment of this Lease will not be
required as a result of merger, consolidation or liquidation, or any change in
the ownership of, or power to vote, the majority or controlling interest of
Tenant's outstanding voting stock unless (a) such change is the result of any
reorganization or merger by which the Tenant's rights under this Lease are
transferred to a subsidiary or affiliate or any other entity in which Tenant has
controlling interest (in which case Tenant agrees to guaranty performance under
this Lease and upon receipt of such guaranty, in form and content satisfactory
to Landlord, Landlord's consent will automatically be deemed to be given) or
(b) such change results from Tenant's merger with, or purchase by, any
competitor of Landlord.
In the event Tenant should desire to assign this Lease or sublet the
Premises or any part hereof, Tenant shall give Landlord written notice at least
thirty (30) days in advance of the date on which Tenant desires to make such
assignment or sublease, which notice shall specify: (a) the name and business
of the proposed assignee or sublessee, (b) the amount and location of the space
affected, (c) the proposed effective date and duration of the subletting or
assignment, and (d) the proposed rental to be paid to Tenant by such sublessee
or assignee. Landlord shall then have a period of fifteen (15) days following
receipt of such notice within which to notify Tenant in writing that Landlord
elects either (i) to permit Tenant to assign or sublet such space, in which
event if the proposed rental rate between Tenant and sublessee is greater than
the Rent payable under this Lease, then such excess rental shall be deemed
Additional Rent owed by Tenant to Landlord under this Lease, and the amount of
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such excess, including any subsequent increases due to escalation or otherwise,
shall be paid by Tenant to Landlord in the same manner that Tenant pays the Rent
hereunder and in addition thereto or (ii) to withhold consent to Tenant's
assignment or subleasing such space and to continue this Lease in full force and
effect as to the entire Premises.
22. SIGNS
Tenant shall not inscribe any inscription, or post, place or in any manner
display any sign, notice, picture, placard or poster or any advertising matter
whatsoever, anywhere in or about the Premises or the Buildings at places visible
(either directly or indirectly as an outline or shadow on a glass pane) from
anywhere outside the Premises without first obtaining Landlord's written consent
thereto (and Landlord shall not consent to any sign outside the Premises unless
it is on the side of Building 2 facing Signal Drive, in which case Landlord's
consent under this paragraph is hereby deemed given to Tenant, but Tenant shall
deliver to Landlord drawings or plans showing any such sign prior to its
installation). Any such consent by Landlord shall be upon the understanding and
condition that Tenant will remove the same at the Expiration Date or sooner
termination of the Lease Term and Tenant shall repair any damage to the Premises
or the Building caused thereby.
23. LIENS AND INSOLVENCY
Tenant shall keep the Premises and the Complex free from any liens arising
out of any work performed and materials ordered or obligations incurred by
Tenant, and Tenant does hereby indemnify and hold Landlord harmless from any
liability arising from such lien. In the event any lien is filed against the
Complex, the Property described on EXHIBIT A or the Premises by any person
claiming by, through or under Tenant, Tenant shall promptly, upon request of
Landlord and at Tenant's sole costs and expense, furnish to Landlord a bond in
form, content and amount, and issued by a surety, satisfactory to Landlord, in
its sole discretion, indemnifying Landlord, the Property and the Complex against
all liability, costs and expenses, including, without limitation, attorneys'
fees, which Landlord may incur as a result thereof. Provided such bond has been
furnished, and after written notice to Landlord, Tenant may contest any such
lien by appropriate proceedings conducted in good faith and with due diligence,
at Tenant's sole cost and expense, if and only if such proceedings suspend the
collection of any amount claimed from Landlord, Tenant, the Property and the
Premises, and neither the Property, the Complex nor the Premises (or any part
thereof) is or will be in danger of being sold, forfeited or lost.
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24. DEFAULTS
24.1 EVENTS OF DEFAULT
The following events are referred to, collectively, as "Events of Default"
or, individually, as an "Event of Default":
(a) Tenant defaults in the due and punctual payment of Rent, and such
default continues for five (5) days after written notice from Landlord delivered
by hand to Tenant's last known address or via facsimile to Tenant's last known
facsimile number; however, Tenant will not be entitled to more than one (1)
written notice for monetary defaults during any twelve (12) month period, and if
after such written notice any Rent is not paid within five (5) days of when due,
an Event of Default will be considered to have occurred without further notice;
(b) This Lease or the Premises or any part of the Premises are taken
upon execution or by other process of law directed against Tenant, or are taken
upon or subject to any attachment by any creditor of Tenant or claimant against
Tenant, and the attachment is not discharged or disposed of within thirty (30)
days after its levy;
(c) Tenant files a petition in bankruptcy or insolvency or for
reorganization or arrangement under the bankruptcy laws of the United States or
under any insolvency act of any state, or admits the material allegations of any
such petition by answer or otherwise, or is dissolved or makes an assignment for
the benefit of creditors;
(d) Involuntary proceedings under any such bankruptcy law or
insolvency act or for the dissolution of Tenant are instituted against Tenant,
or a receiver or trustee is appointed for all or substantially all of the
property of Tenant, and such proceeding is not dismissed or such receivership or
trusteeship vacated within sixty (60) days after such institution or
appointment; or
(e) Tenant breaches any of the other agreements, terms, covenants or
conditions that this Lease requires Tenant to perform, and such breach continues
for a period of thirty (30) days after written notice from Landlord to Tenant
or, if such breach cannot be cured reasonably within such thirty (30) day
period, if Tenant fails to diligently commence to cure such breach within thirty
(30) days after written notice from Landlord and to complete such cure within a
reasonable time thereafter.
24.2 LANDLORD'S REMEDIES
If any one or more Events of Default set forth in Section 24.1 occur, then
Landlord has the right, at its election:
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(a) To give Tenant written notice by hand delivery to Tenant's last
known address or via facsimile to Tenant's last known facsimile number of
Landlord's intention to terminate this Lease on the earliest date permitted by
law or on any later date specified in such notice, in which case Tenant's right
to possession of the Premises will cease and this Lease will be terminated,
except as to Tenant's liability, as if the expiration of the term fixed in such
notice were the end of the term;
(b) Without further demand or notice, to reenter and take possession
of the Premises or any part of the Premises, repossess the same, expel Tenant
and those claiming through or under Tenant, and remove the effects of both or
either, using such force for such purposes as may be necessary, without being
liable for prosecution, without being deemed guilty of any manner of trespass
and without prejudice to any remedies for arrears of monthly rent or other
amounts payable under this Lease or as a result of any preceding breach of
covenants or conditions; or
(c) Without further demand or notice to cure any Event of Default and
to charge Tenant for the cost of effecting such cure, including, without
limitation, reasonable attorneys' fees and interest on the amount so advanced at
the rate of ten percent (10%) per annum, provided that Landlord will have no
obligation to cure any such Event of Default of Tenant.
Should Landlord elect to reenter as provided in (b), or should Landlord take
possession pursuant to legal proceedings or pursuant to any notice provided by
law, Landlord may, from time to time, without terminating this Lease, relet the
Premises or any part of the Premises in Landlord's or Tenant's name, but for the
account of Tenant, for such term or terms (which may be greater or less than the
period that would otherwise have constituted the balance of the term) and on
such conditions and upon such other terms (which may include concessions of free
rent and alteration and repair of the Premises) as Landlord, in its reasonable
discretion, may determine, and Landlord may collect and receive the Rent.
Landlord will in no way be responsible or liable for any failure to relet the
Premises, or any part of the Premises, or for any failure to collect any Rent
due upon such reletting. No such reentry or taking possession of the Premises
by Landlord will be construed as an election on Landlord's part to terminate
this Lease unless a written notice of such intention is given to Tenant. No
written notice from Landlord under this Section 24.2 or under a forcible or
unlawful entry and detainer statute or similar law will constitute an election
by Landlord to terminate this Lease unless such notice specifically so states.
Landlord reserves the right following any such reentry or reletting to exercise
its right to terminate this Lease by giving Tenant such written notice, in which
event this Lease will terminate as specified in such notice.
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24.3 CERTAIN DAMAGES
In the event that Landlord does not elect to terminate this lease as
permitted in Section 24.2(a), but on the contrary elects to take possession as
provided in Section 24.2(b), Tenant shall pay to Landlord monthly Rent and other
sums as provided in this Lease that would be payable under this Lease if such
repossession had not occurred, less the net proceeds, if any, of any reletting
of the Premises after deducting all of Landlord's reasonable expenses in
connection with such reletting, including, without limitation, all repossession
costs, brokerage commissions, attorneys' fees, expenses of employees, alteration
and repair costs and expenses of preparation for such reletting. If, in
connection with any reletting, the new lease term extends beyond the existing
term, or the Premises covered by such new lease include other premises not part
of the Premises, a fair apportionment of the rent received from such reletting
and the expenses incurred in connection with such reletting as provided in this
Section 24.3 will be made in determining the net proceeds from such reletting,
and any rent concessions will be equally apportioned over the term of the new
lease. Tenant shall pay such rent and other sums to Landlord monthly on the day
on which the monthly Rent would have been payable under this Lease if possession
had not been retaken, and Landlord will be entitled to receive such rent and
other sums from Tenant on each such day. Landlord will attempt to mitigate
damages arising from an Event of Default by making reasonable efforts to relet
the Premises in whole or in part.
24.4 CONTINUING LIABILITY AFTER TERMINATION
If this Lease is terminated on account of the occurrence of an Event of
Default, Tenant will remain liable to Landlord for damages in an amount equal to
monthly Rent and other amounts that would have been owing by Tenant for the
balance of the term had this Lease not been terminated, less the net proceeds,
if any, of any reletting of the Premises by Landlord subsequent to such
termination, after deducting all of Landlord's expenses in connection with such
reletting, including, without limitation, the expenses enumerated in
Section 24.3. Landlord will be entitled to collect such damages from Tenant
monthly on the day on which monthly Rent and other amounts would have been
payable under this Lease if this Lease had not been terminated, and Landlord
will be entitled to receive such monthly Rent and other amounts from Tenant on
each such day. Alternatively, at the option of Landlord, in the event this
Lease is so terminated, Landlord will be entitled to recover against Tenant as
damages for loss of the bargain and not as a penalty:
(a) The worth at the time of award of the unpaid Rent that had been
earned at the time of termination;
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(b) The worth at the time of award of the amount by which the unpaid
Rent that would have been earned after termination until the time of award
exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided;
(c) The worth at the time of award of the amount by which the unpaid
Rent for the balance of the term of this Lease (had the same not been so
terminated by Landlord) after the time of award exceeds the amount of such
rental loss that Tenant proves could be reasonably avoided; and
(d) Any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its obligations
under this Lease or, in the ordinary course of business, likely to result
therefrom.
The "worth at the time of award" of the amounts referred to in (a) and (b) above
is computed by adding interest at the interest rate of ten percent (10%) per
annum on the termination date from the termination date until the time of the
award. The "worth at the time of award" of the amount referred to in (c) above
is computed by discounting such amount at the discount rate of the Federal
Reserve Bank of Seattle, Washington, at the time of award plus one percent (1%).
24.5 CUMULATIVE REMEDIES
Any suit or suits for the recovery of the amounts and damages set forth in
Sections 24.3 and 24.4 may be brought by Landlord, from time to time, at
Landlord's election, and nothing in this Lease will be deemed to require
Landlord to await the date upon which this Lease or the term would have expired
had there occurred no Event of Default. Each right and remedy provided for in
this Lease is cumulative and is in addition to every other right or remedy
provided for in this Lease or now or hereafter existing at law or in equity or
by statute or otherwise, and the exercise or beginning of the exercise by
Landlord of any one or more of the rights or remedies provided for in this Lease
or now or hereafter existing at law or in equity or by statute or otherwise will
not preclude the simultaneous or later exercise by Landlord of any or all other
rights or remedies provided for in this Lease or now or hereafter existing at
law or in equity or by statute or otherwise. All costs incurred by Landlord in
collecting any amounts and damages owing by Tenant pursuant to the provisions of
this Lease or to enforce any provision of this Lease, including reasonable
attorneys' fees from the date any such matter is turned over to an attorney,
whether or not one or more actions are commenced by Landlord, will also be
recoverable by Landlord from Tenant.
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25. PRIORITY
This Lease shall be subordinate to any mortgage or deed of trust now
existing upon the Premises or the Property and to any and all advances to be
made thereunder, and to interest thereon, and all renewals, replacements or
extensions thereof. Tenant agrees to subordinate its interest in the Premises
and under this Lease to the lien of a future mortgage or deed of trust which
secures a loan to Landlord for the benefit of the Complex or Premises (or a loan
to refinance such a loan), and further agrees to attorn to the holder of such
mortgage or such deed of trust, provided that the holder of such mortgage or
deed of trust delivers to Tenant a nondisturbance agreement providing that so
long as Tenant is not in default under this Lease, Tenant's possession of the
Premises and rights under the Lease shall not be effected by a foreclosure, a
deed in lieu of foreclosure or any other post-default remedy or proceeding under
such mortgage or deed of trust.
26. NONWAIVER
Waiver by Landlord of any breach of any term, covenant or condition herein
contained shall not be deemed to be a waiver of such term, covenant or
condition, or of any subsequent breach of the same or any other term, covenant
or condition herein contained. The subsequent acceptance of Rent by Landlord
shall not be deemed to be a waiver of any preceding breach by Tenant of any
term, covenant or condition of this Lease, other than the failure of Tenant to
pay the particular Rent so accepted, regardless of Landlord's knowledge of such
preceding breach at the time of acceptance of such Rent.
27. SURRENDER OF POSSESSION
Upon the Expiration Date or sooner termination of the Lease Term, whether
by lapse of time or otherwise, Tenant shall promptly and peacefully surrender
the Premises to Landlord.
28. HOLDOVER
If Tenant shall, with the written consent of Landlord, hold over after the
Expiration Date of the Lease Term, Tenant shall be deemed to be occupying the
Premises on a month-to-month tenancy, which tenancy may be terminated as
provided by the laws of the State of Washington. During such tenancy, Tenant
agrees to pay to Landlord twice the Basic Rent as set forth herein, unless a
different rate shall be agreed upon, and to be bound by all of the terms,
covenants and conditions herein specified, so far as applicable.
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29. CONDEMNATION
If all of the Premises, or such portions of Building 2 as may be required
for the reasonable use of the Premises, are taken by eminent domain, this Lease
shall automatically terminate as of the date Tenant is required to vacate the
Premises and all Rent shall be paid to that date. In case of a taking of a part
of the Premises, or a portion of Building 2 not required for the reasonable use
of the Premises, then this Lease shall continue in full force and effect and the
Rent shall be equitably reduced based on the proportion by which Tenant's
Percentage of the Complex is reduced, such Rent reduction to be effective as of
the date possession of such portion is delivered to the condemning authority.
Landlord reserves all rights to damage to the Premises for any taking by eminent
domain, and Tenant hereby assigns to Landlord any right Tenant may have to such
damages or award, and Tenant shall make no claim against Landlord for damages
for termination of the leasehold interest or interference with Tenant's
business. Tenant shall have the right, however, to claim and recover from the
condemning authority compensation for any loss to which Tenant may be put for
Tenant's moving expenses, provided that such damages may be claimed only if they
are awarded separately in the eminent domain proceedings and not as part of the
damages recoverable by Landlord.
30. NOTICES
All notices under this Lease shall be in writing and delivered in person,
via facsimile or sent by registered or certified mail: to Landlord at the same
place Rent payments are made, Attn: Real Estate Department, Facsimile No. 509-
891-6796; to Tenant at 2140 Merritt Drive, Garland, Texas 75041, Attn: CEO,
Facsimile No.______________; and to the holder of any first mortgage or deed of
trust at such place as such holder shall specify to Tenant in writing; or such
other addresses and facsimile numbers as may from time to time be designated by
such party in writing. Notices given as aforesaid shall be deemed given on the
date of personal delivery, the date any facsimile is transmitted or the date of
such mailing.
31. COSTS AND ATTORNEYS' FEES
If Tenant or Landlord shall take any action for any relief against the
other, declaratory or otherwise, arising out of this Lease, including any suit
by Landlord for the recovery of rent or possession of the Premises, the losing
party shall pay the successful party a reasonable sum for attorneys' fees and
costs in such action, at trial and on appeal, and such attorneys' fees and costs
shall be deemed to have accrued on the commencement of such action.
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In the event Tenant requests Landlord's consent to any assignment or
sublease hereunder or to any modification or amendment of this Lease, then
Tenant shall pay reasonable attorneys' fees incurred by Landlord in connection
with Landlord's review of such request and preparation of any documents required
to evidence Landlord's consent, if granted.
32. LANDLORD'S LIABILITY
Anything in this Lease to the contrary notwithstanding, covenants,
undertakings and agreements herein made on the part of Landlord are made and
intended not as personal covenants, undertakings and agreements or for the
purpose of binding Landlord personally or the assets of Landlord except
Landlord's interest in the Premises and the Complex, but are made and intended
for the purpose of binding only Landlord's interest in the Premises and the
Complex, including, but not limited to, any and all net consideration received
by Landlord from the sale of all or any portion thereof, and all net insurance
and condemnation proceeds paid to Landlord in connection therewith. No personal
liability or personal responsibility is assumed by, or shall at any time be
asserted or enforceable against, Landlord or Landlord's heirs, legal
representatives, successors and assigns on account of this Lease or on account
of any covenant, undertaking or agreement of Landlord contained in this Lease.
33. ESTOPPEL CERTIFICATES
Tenant shall, from time to time upon written request of Landlord, execute,
acknowledge and deliver to Landlord or Landlord's designee a written statement
stating: the date this Lease was executed and the date it expires; the date
Tenant entered into occupancy of the Premises; the amount of Basic Rent and
Additional Rent and the date to which such Rent has been paid; and certifying
(to the extent that the same is true and correct): that this Lease is in full
force and effect and has not been assigned, modified, supplemented or amended in
any way (or specifying the date of agreement so effecting this Lease); that this
Lease represents the entire agreement between the parties as to this leasing;
that any conditions under this Lease to be performed by Landlord have been
satisfied; that any required contributions by Landlord to Tenant on account of
Tenant's improvements have been received; that there are no existing defenses or
offsets which Tenant has against the enforcement of this Lease by Landlord; that
no Rent has been paid in advance; and stating the amount of the Security Deposit
paid to Landlord. It is intended that any such statement may be relied upon by
a prospective purchaser of Landlord's interest or a mortgagee of Landlord's
interest or assignee of any mortgage upon Landlord's interest in the Property.
If Tenant shall fail to respond within ten (10) business days of receipt by
Tenant of a written request by Landlord as herein provided, Tenant shall be
deemed to
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have given such certificate as above provided without modification and shall be
deemed to have admitted the accuracy of any information supplied by Landlord to
a prospective purchaser or mortgagee and that this Lease is in full force and
effect, that there are no uncured defaults in Landlord's performance, that the
Security Deposit is as stated in this Lease and that not more than one month's
Rent has been paid in advance.
34. TRANSFER OF LANDLORD'S INTEREST
This Lease shall be assignable by Landlord without the consent of Tenant.
In the event of any transfer or transfers of Landlord's interest in the Premises
or the Property, other than a transfer for security purposes only, the
transferor shall be automatically relieved of any and all obligations and
liabilities on the part of Landlord accruing from and after the date of such
transfer and Tenant agrees to attorn to the transferee.
35. RIGHT TO PERFORM
If Tenant shall fail to pay any sum of money, other than Rent, required to
be paid by Tenant hereunder or shall fail to perform any other act on Tenant's
part to be performed hereunder, and such failure shall continue for ten (10)
business days after notice thereof by Landlord, Landlord may, but shall not be
obligated so to do, and without waiving or releasing Tenant from any obligations
of Tenant, make any such payment or perform any such other act on Tenant's part
to be made or performed as provided in this Lease. Landlord shall have (in
addition to any other right or remedy of Landlord) the same rights and remedies
in the event of the nonpayment of sums due under this Section as in the case of
default by Tenant in the payment of Rent.
36. EXECUTION OF LEASE BY LANDLORD
The submission of this document for examination and negotiation does not
constitute an offer to lease, or a reservation of or option for the Premises,
and this document shall become effective and binding only upon execution and
delivery by Landlord. No act or omission of any employee or agent of Landlord
or of Landlord's broker shall alter, change or modify any of the provisions
hereof.
37. GENERAL
37.1 TITLES
The title to sections of this Lease are not a part of this Lease and shall
have no effect upon the construction or interpretation of any part hereof.
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37.2 GOVERNING LAW
This Lease shall be construed and governed by the laws of the State of
Washington.
37.3 BINDING EFFECT
All of the covenants, agreements, terms and conditions contained in this
Lease shall apply to and be binding upon Landlord and Tenant and their
respective heirs, executors, administrators, successors and assigns.
37.4 NO BROKER ENGAGED BY TENANT
Tenant represents and warrants to Landlord that Tenant has not engaged any
broker, finder or other person who would be entitled to any commission or fee in
respect of the negotiation, execution or delivery of this Lease and shall
indemnify and hold harmless Landlord against any loss, cost, liability or
expense incurred by Landlord as a result of any claim asserted by any such
broker, finder or other person on the basis of any arrangements or agreements
made or alleged to have been made by or on behalf of Tenant.
37.5 ENTIRE AGREEMENT
This Lease contains all covenants and agreements between Landlord and
Tenant relating in any manner to the lease, use and occupancy of the Premises
and other matters set forth in this Lease. No prior agreements or understanding
pertaining to the same shall be valid or of any force or effect and the
covenants and agreements of this Lease shall not be altered, modified or added
to except in writing signed by Landlord and Tenant.
37.6 VALIDITY
Any provision of this Lease which shall prove to be invalid, void or
illegal shall in no way affect, impair or invalidate any other provision hereof
and the remaining provisions hereof shall nevertheless remain in full force and
effect.
37.7 INTEREST
Any Rent or other sums payable by Tenant to Landlord which shall not be
paid within fifteen (15) days after the due date thereof shall bear interest
from the due date at the Default Rate calculated from the date of delinquency to
the date of payment.
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37.8 INTERPRETATION
This Agreement and each of the terms and provisions hereof are deemed to
have been explicitly negotiated between the parties, and the language in all
parts of this Agreement shall, in all cases, be construed according to its fair
meaning and not strictly for or against either party.
37.9 AUTHORIZATION
If Tenant is a corporation or partnership, Tenant represents and warrants
that the execution, delivery and performance of this Lease have been duly
authorized by all necessary persons. The officer or partner executing this
Lease on behalf of Tenant further individually represents and warrants that he
or she is duly authorized to execute and deliver this Lease to Landlord on
behalf of Tenant.
37.10 NO RECORDING
Tenant shall not record this Lease or any notice or memorandum thereof in
the records of the county auditor without Landlord's prior written consent.
IN WITNESS WHEREOF, this Lease has been executed the day and year first
above set forth.
LANDLORD:
DJ&J SOFTWARE CORPORATION,
d/b/a EGGHEAD
By /s/ TERENCE M. STROM
---------------------------
Name: Terence M. Strom
Title: President and CEO
TENANT:
SOFTWARE SPECTRUM, INC.
By /s/ JUDY O. SIMS
----------------------------
Name: Judy O. Sims
Title: Chief Executive Officer
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STATE OF WASHINGTON )
) ss.
COUNTY OF SPOKANE )
On this 13th day of May, 1996, before me, the undersigned, a Notary Public
in and for the State of Washington, duly commissioned and sworn, personally
appeared Terence M. Strom, to me known to be the person who signed as President
and CEO of DJ&J SOFTWARE CORPORATION, d/b/a EGGHEAD, the corporation that
executed the within and foregoing instrument, and acknowledged said instrument
to be the free and voluntary act and deed of said corporation for the uses and
purposes therein mentioned, and on oath stated that he was duly elected,
qualified and acting as said officer of the corporation, that he was authorized
to execute said instrument and that the seal affixed, if any, is the corporate
seal of said corporation.
IN WITNESS WHEREOF I have hereunto set my hand and official seal the day
and year first above written.
/s/ LISA N. KINSEY
-----------------------------------
(Signature of Notary)
[SEAL]
___________________________________
(Print or stamp name of Notary)
NOTARY PUBLIC in and for the State
of Washington, residing at Post Falls.
My Appointment Expires: 2/9/2000.
STATE OF TEXAS )
) ss.
COUNTY OF DALLAS )
On this 10th day of May, 1996, before me, the undersigned, a Notary Public
in and for the State of Texas, duly commissioned and sworn, personally appeared
Judy O. Sims, to me known to be the person who signed as Chief Executive Officer
of SOFTWARE SPECTRUM, INC., the corporation that executed the within and
foregoing instrument, and acknowledged said instrument to be the free and
voluntary act and deed of said corporation for the uses and purposes therein
mentioned, and on oath stated that Judy O. Sims was duly elected, qualified and
acting as said officer of
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the corporation, that Judy O. Sims was authorized to execute said instrument and
that the seal affixed, if any, is the corporate seal of said corporation.
IN WITNESS WHEREOF I have hereunto set my hand and official seal the day
and year first above written.
/s/ DIANE M. ADKINS
--------------------------------
(Signature of Notary)
Diane M. Adkins
--------------------------------
(Print or stamp name of Notary)
NOTARY PUBLIC in and for the State
of Washington, residing at Dallas.
My Appointment Expires: 3/27/99.
[SEAL]
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