EXHIBIT 2.2
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
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
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Title: President and CEO
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DJ&J SOFTWARE CORPORATION
By : /s/ TERENCE M. STROM
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Title: President and CEO
SOFTWARE SPECTRUM, INC.
By: /s/ JUDY O. SIMS
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Title: Chief Executive Officer
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