Document:

Exhibit 10.6

Execution Version

 

 

AGREEMENT
AND PLAN OF MERGER

 

By
and Among

Overstock.com, Inc.,
a Utah corporation

and

Overstock.com
Acquisition Subsidiary, Inc.,

a Washington corporation

and

Gear.com, Inc.,
a Washington corporation

Executed
on November 3, 2000

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  
	
  ARTICLE I DEFINITIONS

  	
   

  
	
  1.01

  	
  Defined
  Terms

  	
   

  
	
  ARTICLE II THE MERGER

  	
   

  
	
  2.01

  	
  The Merger

  	
   

  
	
  2.02

  	
  Certain Effects of the
  Merger

  	
   

  
	
  2.03

  	
  Conversion of Securities

  	
   

  
	
  2.04

  	
  Dissenters’
  Rights

  	
   

  
	
  2.05

  	
  Rounding
  Numbers

  	
   

  
	
  2.06

  	
  No Further Transfers

  	
   

  
	
  2.07

  	
  Assumption of
  Outstanding Stock Options

  	
   

  
	
  2.08

  	
  Closing

  	
   

  
	
  2.09

  	
  Filing of Articles of
  Merger

  	
   

  
	
  ARTICLE
  III REPRESENTATIONS AND WARRANTIES OF GEAR.COM

  	
   

  
	
  3.01

  	
  Organization and Qualification

  	
   

  
	
  3.02

  	
  Authorizations
  and Validity of this Agreement

  	
   

  
	
  3.03

  	
  Binding Obligations

  	
   

  
	
  3.04

  	
  Capitalization of Gear.com

  	
   

  
	
  3.05

  	
  No Brokers or Finders

  	
   

  
	
  3.06

  	
  Agreements

  	
   

  
	
  3.07

  	
  Litigation

  	
   

  
	
  3.08

  	
  Indebtedness

  	
   

  
	
  3.09

  	
  Disclosure

  	
   

  
	
  3.10

  	
  No
  Conflicts

  	
   

  
	
  3.11

  	
  Subsidiaries

  	
   

  
	
  3.12

  	
  Compliance with
  Laws and Other Instruments

  	
   

  
	
  3.13

  	
  Financial Statements

  	
   

  
	
  3.14

  	
  No
  Adverse Changes

  	
   

  
	
  3.15

  	
  Title
  to Properties

  	
   

  
	
  3.16

  	
  Inventory

  	
   

  
	
  3.17

  	
  Compliance
  with Laws and Other Instruments

  	
   

  
	
  3.18

  	
  Discoveries

  	
   

  
	
  3.19

  	
  Copyright

  	
   

  
	
  3.20

  	
  Related Party Transactions

  	
   

  
	
  3.21

  	
  Intellectual Property

  	
   

  
	
  3.22

  	
  Permits

  	
   

  
	
  3.23

  	
  Restrictions on Business

  	
   

  
	
  3.24

  	
  Powers
  of Attorney

  	
   

  
	
  3.25

  	
  Absence of
  Certain Commercial Practices

  	
   

  
	
  3.26

  	
  Condition
  of Assets

  	
   

  
	
  3.27

  	
  Tax Matters

  	
   

  
				

 

i

 

	
  3.28

  	
  Books
  and Records

  	
   

  
	
  3.29

  	
  Representations Not Waived

  	
   

  
	
  3.30

  	
  Intellectual
  Property Assignments; Confidentiality Agreements

  	
   

  
	
  ARTICLE
  IV REPRESENTATIONS AND WARRANTIES OF OVERSTOCK.COM

  	
   

  
	
  4.01

  	
  Organization and Good
  Standing

  	
   

  
	
  4.02

  	
  Authorizations and
  Validity of this Agreement

  	
   

  
	
  4.03

  	
  Binding Obligations

  	
   

  
	
  4.04

  	
  Capitalization

  	
   

  
	
  4.05

  	
  No Brokers or Finders

  	
   

  
	
  4.06

  	
  Agreements

  	
   

  
	
  4.07

  	
  Indebtedness

  	
   

  
	
  4.08

  	
  Overstock.com Common Stock

  	
   

  
	
  4.09

  	
  No
  Conflicts

  	
   

  
	
  4.10

  	
  Litigation

  	
   

  
	
  4.11

  	
  Financial Statements

  	
   

  
	
  4.12

  	
  Tax Matters

  	
   

  
	
  4.13

  	
  Books
  and Records

  	
   

  
	
  4.14

  	
  Disclosure

  	
   

  
	
  4.15

  	
  Subsidiaries

  	
   

  
	
  4.16

  	
  Employees and
  Employee Benefit Plans

  	
   

  
	
  4.17

  	
  No
  Adverse Changes

  	
   

  
	
  4.18

  	
  Compliance
  with Laws and Other Instruments

  	
   

  
	
  4.19

  	
  Discoveries

  	
   

  
	
  4.20

  	
  Copyright

  	
   

  
	
  4.21

  	
  Related Party Transactions

  	
   

  
	
  4.22

  	
  Intellectual Property

  	
   

  
	
  4.23

  	
  Permits

  	
   

  
	
  4.24

  	
  Restrictions on Business

  	
   

  
	
  4.25

  	
  Powers
  of Attorney

  	
   

  
	
  4.26

  	
  Absence of
  Certain Commercial Practices

  	
   

  
	
  4.27

  	
  Condition of Assets

  	
   

  
	
  4.28

  	
  Representations
  Not Waived

  	
   

  
	
  4.29

  	
  Intellectual
  Property Assignments; Confidentiality Agreements

  	
   

  
	
  4.30

  	
  Title to Properties

  	
   

  
	
  4.31

  	
  Inventory

  	
   

  
	
  4.32

  	
  Books
  and Records

  	
   

  
	
  ARTICLE
  V ITEMS TO BE DELIVERED AT CLOSING BY OVERSTOCK.COM 

  	
   

  
	
  5.01

  	
  Closing
  Deliveries

  	
   

  
	
  ARTICLE
  VI ITEMS TO BE DELIVERED AT CLOSING BY GEAR.COM 

  	
   

  
	
  6.01

  	
  Closing
  Deliveries

  	
   

  

 

ii

 

	
  ARTICLE
  VII CONDITIONS TO OBLIGATIONS TO CLOSING 

  	
   

  
	
  7.01

  	
  Conditions to
  Obligation of Overstock.com

  	
   

  
	
  7.02

  	
  Conditions to the
  Obligations of Gear.com

  	
   

  
	
  ARTICLE VIII
  TERMINATION AND AMENDMENT

  	
   

  
	
  8.01

  	
  Termination

  	
   

  
	
  8.02

  	
  Effect of Termination

  	
   

  
	
  8.03

  	
  Amendment

  	
   

  
	
  8.04

  	
  Waiver

  	
   

  
	
  ARTICLE IX COVENANTS 

  	
   

  
	
  9.01

  	
  General

  	
   

  
	
  9.02

  	
  Covenants
  and Continuing Obligations Regarding Charter Documents

  	
   

  
	
  9.03

  	
  Conduct of
  Business Pending the Merger

  	
   

  
	
  9.04

  	
  Conduct of
  Business Pending the Merger

  	
   

  
	
  9.05

  	
  Operation of Business

  	
   

  
	
  9.06

  	
  Operation of Business

  	
   

  
	
  9.07

  	
  Full Access

  	
   

  
	
  9.08

  	
  Notices

  	
   

  
	
  ARTICLE X
  MISCELLANEOUS PROVISIONS 

  	
   

  
	
  10.01

  	
  Expenses

  	
   

  
	
  10.02

  	
  Further Assurances

  	
   

  
	
  10.03

  	
  Public Announcements

  	
   

  
	
  10.04

  	
  Notices

  	
   

  
	
  10.05

  	
  Jurisdiction; Service
  of Process

  	
   

  
	
  10.06

  	
  Governing
  Law

  	
   

  
	
  10.07

  	
  Entire
  Agreement

  	
   

  
	
  10.08

  	
  No
  Oral Modification

  	
   

  
	
  10.09

  	
  Assignments,
  Successors, and No Third-Party Beneficiaries

  	
   

  
	
  10.10

  	
  Severability

  	
   

  
	
  10.11

  	
  Captions;
  Currency

  	
   

  
	
  10.12

  	
  Exhibits and Schedules

  	
   

  
	
  10.13

  	
  Specific Performance

  	
   

  
	
  10.14

  	
  Interpretation

  	
   

  
	
  10.15

  	
  Counterparts

  	
   

  
	
  10.16

  	
  Tax-Free Reorganization

  	
   

  

 

 

iii

 

 

EXHIBITS

 

EXHIBIT A                             — Defined Terms

EXHIBIT B                               — Chart Outlining the Number of Shares of Overstock.com Common Stock
to be Issued and Options for Overstock.com Common Stock to be Granted

EXHIBIT C                               — Intentionally Omitted

EXHIBIT D                              — Articles of Merger

EXHIBIT E                                — Form Opinion of Counsel to Overstock.com

EXHIBIT F                                — Form Opinion of Counsel to Gear.com

 

iv

 

AGREEMENT AND PLAN
OF MERGER

 

                THIS
AGREEMENT AND PLAN OF MERGER (this “Agreement”)
is entered into on the 3rd day of November, 2000 (the “Execution
Date”), by and among OVERSTOCK.COM, INC., a Utah
corporation (“Overstock.com”), OVERSTOCK.COM ACQUISITION SUBSIDIARY, INC.,
a Washington corporation (“Sub”) and GEAR.COM, INC., a
Washington corporation (“Gear.com”).

RECITALS

 

                A.            The parties desire that Sub merge
with and into Gear.com (the “Merger”), with Gear.com surviving, in
accordance with WBCA and subject to the conditions herewith set forth.

 

                B.            The respective Boards of Directors
of Overstock.com, Sub and Gear.com have determined that it is in the best
interests of each entity and its respective shareholders that the Merger be
consummated in the manner and on the terms and conditions set forth herein.

 

                C.            The Board of Directors of Gear.com
has approved this Agreement and the Merger as required by applicable law.

 

                D.            The Board of Directors of
Overstock.com and Sub have approved this Agreement and the Merger as required
by applicable law.

 

                E.             The parties intend that the Merger
shall (i) qualify as a tax-free reorganization described in
Section 368(a) of the Internal Revenue Code, as amended, and (ii) be
accounted for as a purchase.

 

A G R E E M E N T

 

                For
good and valuable consideration, and in consideration of the terms and
conditions contained herein, the parties agree as follows:

ARTICLE I

DEFINITIONS

 

                1.01         Defined Terms.  For
purposes of this Agreement, all capitalized terms shall have the meanings set
forth on Exhibit A attached hereto and incorporated herein for all
purposes (such meanings to be equally applicable to both the singular and the
plural forms of the terms defined), unless otherwise defined in the body of
this Agreement.

ARTICLE II

THE MERGER

 

                2.01         The Merger.  On the basis of the
representations, warranties, covenants and agreements set forth in this
Agreement, at the Effective Time of the Merger and in accordance with the WBCA:

(a)           Sub
shall be merged with and into Gear.com with Gear.com as the surviving
corporation (Gear.com as existing on and after the Effective Time being
hereinafter sometimes referred to as the “Surviving Corporation”).

(b)           At
the Effective Time, the Articles of Incorporation of the Surviving Corporation
shall be amended and restated in their entirety to conform to the substantive
portions of the Articles of Incorporation of Sub as in effect immediately prior
to the Effective Time; provided, however, that Article I thereof shall be
amended to read as follows: “The name of this corporation is Gear.com, Inc.”

(c)           The
Bylaws of Sub as in effect immediately prior to the Effective Time shall
thereafter be the Bylaws of the Surviving Corporation until duly amended or
repealed.

(d)           The
directors of Sub immediately prior to the Effective Time shall thereafter be
the directors of the Surviving Corporation until their respective successors
are duly elected or appointed and qualified in the manner provided in the
Articles of Incorporation and Bylaws of the Surviving Corporation, or as
otherwise provided by law.

(e)           The
officers of Sub immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation until their successors are duly elected
or appointed and qualified or until their resignations or removal.

 

2

 

(f)            The
other effects of the Merger shall be as set forth in this Agreement, the
Articles of Merger and the applicable provisions of Washington law.

 

                2.02         Certain Effects of the
Merger.  At the Effective
Time, the separate existence of Sub shall cease, and Sub shall be merged into
Gear.com which, as the Surviving Corporation, shall thereupon and thereafter
possess all the rights, privileges, powers and franchises, of a public or of a
private nature, and be subject to all restrictions, disabilities and duties of
each of Gear.com and Sub and shall continue its corporate existence as a
Washington corporation.  If at any time
Overstock.com shall consider or be advised by its outside advisors that any
further assignment or assurances in law or any things are reasonably necessary
or desirable to vest in the Surviving Corporation, according to the terms
hereof, the title to any property or rights of Gear.com, the last acting
officers and directors of such corporation, as the case may be, or the
corresponding officers and directors of the Surviving Corporation shall and
will execute and make all such proper assignments and assurances and do all
things reasonably necessary or proper to vest title in such property or rights
in the Surviving Corporation, and otherwise to carry out the purposes of this
Agreement.

 

                2.03         Conversion of Securities.

(a)           At
the Effective Time, by virtue or the Merger and without any action on the part
of Overstock.com, Gear.com Sub or any holder of Gear.com Capital Stock by
virtue of the Merger, except with respect to the approval requirements
hereunder:

(i)            Each share of Common Stock of the Sub
issued and outstanding immediately prior to the Effective Time shall
automatically be converted into one fully paid and non-assessable share of
Common Stock of the Surviving Corporation which, together, shall constitute all
of the issued and outstanding shares of Common Stock of the Surviving
Corporation immediately after the Effective Time.

(ii)           All shares of any class of capital
stock of Gear.com held by Gear.com as treasury shares, if any, shall be
canceled.

(iii)          Each share of Gear.com Common Stock issued
and outstanding immediately prior to the Effective Time (excluding any shares
of Gear.com Common Stock, if any, held by Persons who have not, by written
consent or vote, approved the Merger and with respect to which such Persons
shall become entitled to exercise dissenters’ rights in accordance with
Chapter 23B.13 of the WBCA), shall be converted into 2.798554 fully paid
and non-assessable shares of Overstock.com Common Stock.  Nineteen Million Thirteen Thousand Nine
Hundred Thirty-three (19,013,933) shares of Overstock.com Common Stock (the “Maximum
Common Stock Pool”), is the maximum aggregate number of shares of
Overstock.com Common Stock that may be issued upon conversion of all Gear.com
Common Stock issued and outstanding immediately prior to the Effective Time.

 

3

 

(iv)          Each share of Gear.com Series A
Preferred Stock issued and outstanding immediately prior to the Effective Time
(excluding any shares of Gear.com Series A Preferred Stock, if any, held
by Persons who have not, by written consent or vote, approved the Merger and
with respect to which such Persons shall become entitled to exercise
dissenters’ rights in accordance with Chapter 23B.13 of the WBCA) shall be
converted into 10.044735 shares of fully paid and non–assessable shares
of Overstock.com Common Stock. 
Twenty-one Million Seven Hundred Seventy-three Thousand Two Hundred
Sixty-nine (21,773,269) shares of Overstock.com Common Stock (the “Maximum
Series A Preferred Pool”), is the maximum aggregate number of shares
of Overstock.com Common Stock that may be issued upon conversion of all
Gear.com Series A Preferred Stock issued and outstanding immediately prior
to the Effective Time.

(v)           Each share of Gear.com Series B
Preferred Stock issued and outstanding immediately prior to the Effective Time
(excluding shares of Gear.com Series B Preferred Stock, if any, held by
Persons who have not, by written consent or vote, approved the Merger and with
respect to which such Persons shall become entitled to exercise dissenters’
rights in accordance with Chapter 23B.13 of the WBCA) shall be converted
into 3.348244 shares of fully paid and non-assessable of Overstock.com Common
Stock.  Seventeen Million Four Hundred
Sixty-nine Thousand One Hundred Seventy-three (17,469,173) shares of
Overstock.com Common Stock (the “Maximum Series B Preferred Pool”),
is the maximum aggregate number of shares of Overstock.com Common Stock that
may be issued upon conversion of all Gear.com Series B Preferred Stock
issued and outstanding immediately prior to the Effective Time.

(vi)          A chart outlining the potential number
of shares of Overstock.com Common Stock to be issued and options for
Overstock.com Common Stock to be granted in connection with this Agreement is
summarized in Exhibit B, attached hereto and incorporated herein
for all purposes.

(vii)         In the event a Gear.com Shareholder
perfects his, her or its dissenters’ rights, pursuant to Chapter 23B.13 of
the WBCA (“Dissenters’ Rights”), he, she or it would not be entitled to
receive any shares of Overstock.com Common Stock.

(viii)        Each Gear.com Shareholder (excluding
those Gear.com Shareholders exercising their Dissenters’ Rights) shall receive
the number of shares of Overstock.com Common Stock equal to its, his or her “Proportionate
Share” of the Maximum Common Stock Pool, Maximum Series A Preferred
Pool and the Maximum Series B Preferred Pool, respectively, based on the
following formula: (a) with respect to those Gear.com Shareholders owning
Gear.com Common Stock, the term “Proportionate Share,” with respect to
the Maximum Common Stock Pool, shall be equal to the total number of shares of
Gear.com Common Stock owned by the applicable Gear.com Shareholder divided
by the total number of shares of 

 

4

 

Gear.com Common Stock held by all Gear.com
Shareholders; (b) with respect to those Gear.com Shareholders owning
Gear.com Series A Preferred Stock, the term “Proportionate Share,”
with respect to the Maximum Series A Preferred Pool, shall be equal to the
total number of shares of Gear.com Series A Preferred Stock owned by the
applicable Gear.com Shareholder divided by the total number of shares of
Gear.com Series A Preferred Stock held by all Gear.com Shareholders; and
(c) with respect to those Gear.com Shareholders owning Gear.com
Series B Preferred Stock, the term “Proportionate Share,” with
respect to the Maximum Series B Preferred Pool, shall mean the total
number of shares of Gear.com Series B Preferred Stock owned by the applicable
Gear.com Shareholder divided by the total number of Gear.com
Series B Preferred Stock held by all of the Gear.com Shareholders.

(ix)           Notwithstanding anything to the
contrary contained herein, the total number of shares of Overstock.com Common
Stock to be issued, to be subject to Dissenters’ Rights pursuant to this Section 2.03,
and to be subject to the Gear.com Options assumed by Overstock.com upon the
Effective Date shall not exceed 63,482,207.

(b)           On
or as soon as practicable after the Execution Date (but in no event later than
four (4) days after the Execution Date), Overstock.com or Gear.com shall mail
to each of the Gear.com shareholders as of the record date for determining the
Gear.com shareholders entitled to consent to the Merger an Information Package
and instructions for effecting the surrender of the certificates in exchange
for certificates representing Overstock.com Common Stock.  Upon surrender of a certificate for
cancellation to Overstock.com (or to such other agent as may be appointed by
Overstock.com), together with all of the documents included in the Information
Package that require execution by shareholders, duly executed, and such other
documents as may be reasonably required by Overstock.com, the Gear.com
Shareholders shall be entitled to receive in exchange therefor, by the later of
(a) fifteen 15 business days following the Closing Date, and
(b) fifteen (15) business days following the surrender of such
certificate, a certificate representing that number of whole shares of Overstock.com
Common Stock that such holder has the right to receive based upon the
conversion described in Section 2.03 herein.

 

                2.04         Dissenters’ Rights.

(a)           Notwithstanding
Section 2.03 hereof, Dissenting Shares shall not be converted into
a right to receive any portion of Overstock.com Common Stock.  The holders thereof shall be entitled only
to such rights as are granted by the WBCA. 
Each holder of Dissenting Shares who becomes entitled to payment for
such shares pursuant to the WBCA shall receive payment therefor from the
Surviving Corporation in accordance with the WBCA; provided, however, that
(i) if any Gear.com Shareholder immediately prior to the Closing who
asserts Dissenters’ Rights in connection with the Merger (a “Dissenter”)
shall have failed to establish his entitlement to Dissenters’ Rights as
provided in the WBCA, or (ii) if any such Dissenter shall have effectively
withdrawn his demand for payment for such shares or waived or lost his right to
payment for his shares under the dissenters’ rights process under the WBCA,
each such share held by such Dissenter shall be treated as if it had 

 

5

 

been
converted, as of the Effective Time, into Overstock.com Common Stock as
provided in Section 2.03. 
Gear.com shall give Overstock.com prompt notice of any demands for
payment received by Gear.com from a person asserting Dissenters’ Rights, and
Overstock.com shall have the right to participate in all negotiations and
proceedings with respect to such demands. 
Gear.com shall not, except with the prior written consent of
Overstock.com, make any payment with respect to, or settle or offer to settle,
any such demands.

(b)           As
used herein, the term “Dissenting Shares” means any shares of Gear.com
Capital Stock held by shareholders who have not consented to, or approved, the
Merger and who are entitled to Dissenters’ Rights under the WBCA, and who have
properly exercised and not subsequently withdrawn or lost or waived their
rights to demand payment with respect to their Gear.com Capital Stock in
accordance with the WBCA.

 

                2.05         Rounding Numbers.  In
determining a Gear.com Shareholder’s right to his, her or its Proportionate
Share of the merger consideration described herein, any fractional share of
Overstock.com Common Stock to which a Gear.com Shareholder would have been
entitled to based on his, her or its Proportionate Share shall be rounded up to
a whole share of Overstock.com Common Stock.

 

                2.06         No Further Transfers.  After
the Closing Date, there shall be no transfers of any shares of Gear.com Capital
Stock on its stock transfer books.  If,
after the Closing Date, certificates formerly representing shares of Gear.com
Capital Stock are presented to Gear.com, they shall be forwarded to
Overstock.com and be canceled and exchanged in accordance with this Section 2.06,
subject to applicable law in the case of Dissenting Shares.

 

                2.07         Assumption of Outstanding
Stock Options.

(a)           At
the Effective Time, Overstock.com shall assume the Gear.com, Inc. 1998 Restated
Stock Option Plan (the “Gear.com Option Plan”) and outstanding
non-qualified options (the “Gear.com Options”) to acquire 1,867, 333
shares of Gear.com Common Stock granted under the Gear.com Option Plan to the
individuals identified to Overstock.com in writing by Gear.com prior to the
Closing.  Upon the Effective Date, the
assumed Gear.com Options shall be converted into options for an aggregate of
5,225,832 shares of Overstock.com Common Stock, based upon an exchange ratio of
2.798554 shares of Overstock.com Common Stock to one share of Gear.com Common
Stock underlying the assumed stock option. 
The exercisability of the assumed Gear.com Options shall not be affected
by the transactions contemplated by this Agreement.

(b)           At
the Effective Time, each then outstanding Gear.com Option whether or not
exercisable at the Effective Time and regardless of the respective exercise
prices thereof, will be assumed by Overstock.com.  Each Gear.com. Option so assumed by Overstock.com under this
Agreement will continue to have, and be subject to, the same terms and
conditions set forth in the Gear.com Option Plan (and any applicable stock
option agreement for such Gear.com Option, including any amendments thereto)
immediately prior to the Effective Time (including without limitation, any
vesting provisions or post–termination exercise periods) except as
follows:

 

6

 

(i)            Each Gear.com Option will be
exercisable (or will become exercisable in accordance with its terms) for that
number of whole shares of Overstock.com Common Stock equal to the product of
the number of shares of Gear.com Common Stock that were issuable upon exercise
of such Gear.com Option immediately prior to the Effective Time multiplied by
2.798554, rounded up to the nearest whole number of shares of Overstock.com
Common Stock; and

(ii)           The per share exercise price for the
shares of Overstock.com Common Stock issuable upon exercise of such assumed
Gear.com Option will be equal to the product determined by dividing the exercise
price per share of Gear.com Common Stock at which such Gear.com Option was
exercisable immediately prior to the Effective Time by 2.798554, rounded up to
the nearest whole cent.

(c)           Each
assumed Gear.com Option shall be vested immediately following the Effective
Time as to the same percentage of the total number of shares subject thereto as
it was vested as of immediately prior to the Effective Time.  As soon as reasonably practicable, but in no
event more than twenty (20) days after the Effective Time, Overstock.com will
issue to each person who holds an assumed Gear.com Option a document evidencing
the assumption of such Gear.com Option by Overstock.com.

 

                2.08         Closing.  The closing (the “Closing”) of the
transactions contemplated by this Agreement will take place at the offices of
Bracewell & Patterson, L.L.P. at the following location: 500 N. Akard,
Suite 4000, Dallas, Texas 75201, at 10:00 a.m. Central Standard time
on the second business day following the satisfaction or waiver of all
conditions to the obligations of the parties, to consummate the transactions
contemplated hereby (other than conditions with respect to actions the
respective parties will take at the Closing itself) or such other date as the
parties may mutually determine (the “Closing Date”).

 

                2.09         Filing of Articles of Merger.  On the
Closing Date and subject to the terms and conditions hereof, the parties hereto
shall cause the appropriate agreement of merger and related documents
(collectively, the “Articles of Merger”) complying with the applicable
provisions of the WBCA, substantially in the form attached hereto as Exhibit D,
and in such form as required by, and executed in duplicate in accordance with,
Washington Law, to be delivered for filing with the Secretary of State of the
State of Washington (the “Washington Secretary of State”).  The Merger shall become effective on the
date (the “Effective Date”) and at the time (the “Effective Time”)
of filing of the Articles of Merger with the Washington Secretary of State or
at such time as may be specified in the Articles of Merger as filed.  If the Washington Secretary of State
requires any changes in the Articles of Merger as a condition to filing or to
issuing its certificate to the effect that the Merger is effective, Overstock.com,
Sub and Gear.com will execute any necessary revisions incorporating such
changes, provided such changes are not inconsistent with and do not result in
any material change in the terms of this Agreement.

 

7

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF
GEAR.COM

 

                Except as is otherwise set forth
in the Gear.com Schedule of Exceptions, Gear.com hereby, represents and
warrants to Overstock.com, as follows:

 

                3.01         Organization and
Qualification.  Gear.com is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Washington, and has all requisite authority and power,
licenses, authorizations, consents and approvals to carry on its Business, to
own, hold and operate its properties and assets and to enter into this
Agreement and the other agreements contemplated hereunder.  Gear.com is duly qualified to do business
and is in good standing as a foreign corporation in all jurisdictions where the
nature of the property owned or leased by it, or the nature of the business
conducted by it, make such qualification necessary, except where the failure to
be so qualified or in good standing, individually or in the aggregate, has not
had and could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.

 

                3.02         Authorizations and Validity
of this Agreement.  The
execution, delivery and performance by Gear.com of this Agreement and each of
the other Transaction Documents to be executed and delivered by Gear.com are
within Gear.com’s corporate powers and have been duly authorized by all
necessary corporate action.

 

                3.03         Binding Obligations.  This
Agreement and each of the other Transaction Documents to be executed and
delivered by Gear.com constitute the legal, valid and binding obligations of
Gear.com and are enforceable against Gear.com in accordance with their terms,
except as enforceability may be limited by applicable (i) bankruptcy,
insolvency, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors’ rights and (ii) Laws
relating to the availability of specific performance, injunctive relief or
other equitable remedies.

 

                3.04         Capitalization of Gear.com.  The
authorized capital stock of Gear.com consists of (a) Sixty Million
(60,000,000) shares of Common Stock, par value One Cent ($0.01) per share, of
which Six Million Seven Hundred Ninety-Four Thousand One Hundred Ninety–Nine
(6,794,199) shares are issued and outstanding as of the Closing Date and Twenty–Five
Million (25,000,000) shares of Preferred Stock, par value One Cent ($0.01) per
share, consisting of (i) 2,167,630 shares of Series A Convertible
Preferred Stock, all of which are issued and outstanding as of the Closing
Date, and (ii) 5,217,412 shares of Series B Convertible Preferred
Stock, all of which shares are issued and outstanding as of the Closing
Date.  Set forth on Schedule 3.04
is a complete and accurate list of shareholders of Gear.com, including the
number of shares held by each, and a complete and accurate list of all Persons
who hold options or warrants to acquire shares of capital stock of Gear.com as
of the Closing Date, (the “Gear.com Option Holders”).  All of the outstanding shares of capital stock of Gear.com are
duly authorized, validly issued, fully paid and non–assessable.  Except as described on Schedule 3.04,
there are no warrants, options, phantom stock, subscriptions or other rights or
preferences (including conversion or preemptive rights) outstanding to acquire capital
stock of Gear.com, or notes, securities or other instruments convertible into
or exchangeable for capital stock 

 

8

 

of Gear.com, nor any agreements or
understandings with respect to the issuance thereof, including without
limitation, agreements to issue securities of Gear.com in exchange for
services.  There are no voting trusts,
proxies or other agreements or understandings with respect to the voting of
Gear.com Capital Stock.

 

                3.05         No Brokers or Finders. 
Gear.com has incurred no liability for commissions or other fees to any finder
or broker in connection with the Merger.

 

                3.06         Agreements.  Except
as disclosed on Schedule 3.06 hereto, Gear.com is not a party to or
bound by any Contract (i) that involves a payment in excess of $50,000
during any 12–month period of time; (ii) that is not cancelable by
Gear.com without penalty upon twenty (20) days notice; or (iii) that
is expected to generate more than $50,000 in revenues in the twelve months
after the date hereof.  Except as set
forth on Schedule 3.06, Gear.com has not (i) made commitments
relating to the acquisition by Gear.com of any operating business or the
capital stock of any other Person; (ii) made commitments under which
Gear.com agrees to indemnify any Person other than in the ordinary course of
business, as required by law or as set forth in Gear.com’s Articles of
Incorporation or Bylaws as amended, (iii) made commitments relating to any
Governmental Entity; (iv) made material commitments with agents, sales
representatives and consultants to the Business; (v) made commitments
relating to outstanding letters of credit or performance bonds or creating any
obligation or liability as guarantor, surety, co–signer, endorser, co–maker,
indemnitor or otherwise in respect of the obligation, of any person or entity,
except as endorser or maker of checks or letters of credit endorsed or made in
the ordinary course of business.

 

                3.07         Litigation.  There
is no Action pending or, to the knowledge of Gear.com, threatened against or
affecting Gear.com or its respective properties or assets.  Gear.com (including, without limitation,
Gear.com’s properties and assets) is not subject to any Order.

 

                3.08         Indebtedness. 
Gear.com is not a party to any loan agreement, indenture, guaranty or other
obligation, whether written or oral, relating to (i) indebtedness of
Gear.com; (ii) money loaned to others; or (iii) the performance of
any debt obligation to which Gear.com is a party other than as disclosed on Schedule 3.08
hereto.  All of the items listed on Schedule 3.08
were entered into in the ordinary course of business, are valid and binding, in
full force and effect and are enforceable in accordance with their respective
terms except as enforceability may be limited by applicable
(i) bankruptcy, insolvency, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors’ rights and
(ii) Laws relating to the availability of specific performance, injunctive
relief or other equitable remedies, and, except as otherwise disclosed on Schedule 3.08,
to the knowledge of Gear.com, there exists no breach or default, or any event
which with notice or lapse of time or both, would constitute a breach or
default by any party thereto.

 

                3.09         Disclosure.  No
representation or warranty of Gear.com contained in this Agreement or the
Transaction Documents delivered at Closing contains any untrue statement of
material fact or omits to state a material fact necessary to make the
statements herein or therein not misleading.

 

                3.10         No Conflicts.  Except
for such filings and Consents as may be required under the WBCA and as set
forth in Schedule 3.10 hereto, neither the execution, delivery or
performance of 

 

9

 

this agreement by Gear.com, nor the
consummation of the merger will, with or without giving of notice or lapse of
time or both (i) violate, conflict with or result in any breach of any
provision of the Articles of Incorporation or Bylaws of Gear.com;
(ii) require any Permit or Consent of any Governmental Entity;
(iii) require any Consent under or result in a violation or breach of, or
constitute a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under any Contract of Gear.com valued at $25,000
on an individual basis or $100,000, in the aggregate, or to any other
obligation of Gear.com; (iv) violate, conflict with or result in any
breach of any Order or Law applicable to Gear.com; or (v) result in the
creation or imposition of any Encumbrance upon any of the assets of Gear.com,
except in the case of each of the foregoing, where such violation or the
failure to obtain such Permits or Consents would not, individually or in the
aggregate, have a Material Adverse Effect.

 

                3.11         Subsidiaries. 
Gear.com has no Subsidiaries and does not, directly or indirectly, own any
interest in any corporation, partnership, firm or other business entity.

3.12         Employees and Employee Benefit Plans.

(a)           Schedule 3.12
hereto contains a complete list of all employment agreements to which Gear.com
is a party.  Gear.com has provided to
Overstock.com the names and current annual or hourly cash compensation and
other material benefits, with respect to each employee of Gear.com and any
employment contracts, employee confidentiality agreements, and employee
non-compete agreements to which Gear.com is a party.  To Gear.com’s knowledge, no labor organization, collective
bargaining representative or group represents or claims to represent any of Gear.com’s
present employees and Gear.com has no collective bargaining or employment or
other similar agreements with any employees of Gear.com.  With respect to employees of Gear.com,
(i) there is no strike, labor dispute or work stoppage, slow down, or lockout
actually pending or, to the knowledge of Gear.com, threatened against or
affecting Gear.com; (ii) no union organizational campaign is in progress;
(iii) Gear.com is in material compliance with all applicable laws
representing employment and employment practices, term and conditions of
employment and wages and hours, and is not engaged in any unfair labor
practice; (iv) there is no unfair labor practice charge or complaint
against Gear.com pending or, to the knowledge of Gear.com, threatened against
Gear.com before the National Labor Relations Board (herein so called);
(v) there is no pending or, to the knowledge of Gear.com, threatened
grievance; and (vi) (A) to the knowledge of Gear.com, no charges with
respect to or relating to Gear.com are pending before the Equal Employment
Opportunity Commission or any state or local agency responsible for the
prevention of unlawful employment practices and (B) Gear.com has received
no notice of the intent of any Governmental Entity responsible for the enforcement
of labor or employment laws to conduct an investigation with respect to or
relating to Gear.com and, to the knowledge of Gear.com, no such investigation
is in progress.  Except as described on Schedule 3.12
hereto, to the knowledge of Gear.com, no sexual harassment has occurred or is
occurring and no hostile work environment has been created by any current or
past employee of Gear.com.

(b)           Gear.com
has made available to Overstock.com current, accurate and complete copies of
all documents embodying or relating to each company benefit plan, policy or 

 

10

 

program
(including, without limitation, “employee benefit plans” within the meaning of Section 3(3)
of ERISA), each employee agreement, including all amendments thereto, and trust
or funding agreements with respect thereto, any of which plan, policy, program
or agreement is (i) sponsored, maintained, or contributed to by Gear.com,
or (ii) with respect to which Gear.com has (or could have) any obligation
or liability.  Gear.com has also made
available to Overstock.com a complete and accurate pay register for all of its
current employees.

(c)           Neither
Gear.com nor any ERISA Affiliate presently sponsors, maintains or contributes
to, nor has Gear.com nor any ERISA Affiliate ever sponsored, maintained,
contributed to, or been required to contribute to, a pension plan which is
subject to Title IV of ERISA.

(d)           Neither
Gear.com nor any ERISA Affiliate (i) maintains or contributes to any
Gear.com benefit plan which provides, or has any liability to provide, life
insurance, medical, severance or other employee welfare benefits to any
employee upon his retirement or termination of employment, except as may be
required by Section 4980B of the Internal Revenue Code of 1986, as amended
(the “Code”); or (ii) has ever represented, promised or contracted
(whether in oral or written form) to any employee (either individually or to
employees as a group) that such employee would be provided with life insurance,
medical, severance or other employee welfare benefits upon his retirement or
termination of employment, except to the extent required by Section 4980B
of the Code.

(e)           Gear.com
is not obligated, contingently or otherwise, under any agreement to pay any
amount which will be treated as an “excess parachute payment,” as defined in
Section 280G(b) of the Code.

 

                3.13         Financial Statements. 
Gear.com has previously delivered to Overstock.com the financial statements
described in Section 3.13(a), and attached to this Agreement as Schedule 3.13(b)
are the financial statements described in Section 3.13(b) (the
financial statements described in this Section 3.13 are herein
sometimes collectively referred to as the “Financial Statements”).  The Financial Statements are:

(a)           an
audited balance sheet of Gear.com at December 31, 1999, and the related
audited statement of income, changes in stockholders’ equity and statement of
cash flows for the 12–month period then ended (the “Most Recent Fiscal
Year End”), and

(b)           unaudited
balance sheet of Gear.com and related unaudited statement of income, (the “Most
Recent Financial Statements”) as of and for the nine months ended
September 30, 2000.

 

The foregoing Financial Statements, including
in all cases the notes thereto, are in all material respects in accordance with
the Books and Records of Gear.com (which, in turn, are accurate and complete in
all material respects), have been prepared in accordance with GAAP consistently
applied over the periods covered thereby (with the exception that the Most Recent
Financial Statements do not include footnotes), and fairly present the
financial condition of Gear.com as of the date thereof and for the period
covered thereby subject to normal year–end audit adjustments and any 

 

11

 

other adjustments described therein.  Other than liabilities that have arisen
since September 30, 2000, in the ordinary course of the business of
Gear.com or except as disclosed on Schedule 3.13, Gear.com has not
incurred any obligation or liability of any nature, whether absolute, accrued,
contingent or otherwise, required to be set forth on a balance sheet under GAAP
which is not reflected in the Most Recent Financial Statements.  As of October 15, 2000, the aggregate
liabilities of Gear.com are as set forth on Schedule 3.13.

 

                3.14         No Adverse Changes.  Except
as disclosed on Schedule 3.14, since September 30, 2000, there
has been (a) no change in (i) the assets, liabilities or financial
condition of Gear.com from that set forth in the Most Recent Financial
Statements, or (ii) the condition (other than financial) or business of
Gear.com, other than, with respect to clauses (i) and (ii) hereof, changes
in the ordinary course of business the effect of which changes has not caused,
individually or in the aggregate, a Material Adverse Effect, (b) no
damage, destruction or loss, whether or not covered by insurance, having a
Material Adverse Effect, (c) no labor dispute, other than routine
grievances by individual employees, that has caused, individually or in the
aggregate, a Material Adverse Effect, (d) no declaration or payment by
Gear.com of any dividend or other distribution, in cash or property or other
assets, (e) no transfer of any Intellectual Property Rights, (f) no
mortgage or pledge of or encumbrance upon any assets of Gear.com, (g) no
contractual obligation entered into by Gear.com providing for obligations of a
party thereto of $50,000 or more, (h) no agreement by Gear.com to borrow
money or incur or guarantee indebtedness, (i) no notice received regarding
the termination, cancellation, acceleration or modification of any Contract, to
which Gear.com is a party or by which Gear.com is bound, (j) no change
made or authorized in the Articles of Incorporation or Bylaws of Gear.com, (k) no
increase in the base compensation of any of its directors, officers and
employees, and (l) no change in employment terms for any of its directors,
officers and employees.

 

                3.15         Title to Properties. 
Gear.com has good and marketable title to all of its personal properties and
assets reflected in the Most Recent Financial Statements, or purported to have
been acquired after the date of such Most Recent Financial Statements
(excepting, however, property and other assets, sold or otherwise disposed of
subsequent to such date in the ordinary course of business), free of any
mortgage, pledge, lien, charge, security interest or other Encumbrance,
subordination or adverse claim, except as reflected in the Most Recent
Financial Statements for Gear.com. 
Gear.com enjoys peaceful and undisturbed possession under all permits or
leases under which it is operating, and all such leases are valid, subsisting
and in full force and effect.  Gear.com
has not been advised of a breach of any such permit or lease and there is no
basis for any such breach to be threatened. 
Except as disclosed on Schedule 3.15, neither any director
or officer of Gear.com nor the shareholder of Gear.com owns or has any interest
(other than as shareholder) in any property, real or personal, tangible or intangible,
used in the Business of Gear.com.

 

                3.16         Inventory.  Gear.com’s net inventory is merchantable and
fit for the purpose for which it was procured, and none of such is slow–moving,
obsolete, damaged or defective, subject only to the reserve for write–downs
or write–offs of Inventory set forth on the face of the Financial
Statements.  The Financial Statements
accurately reflect the cost of the Gear.com Inventory.

 

12

 

                3.17         Compliance with Laws and Other
Instruments.  Except as set forth
on Schedule 3.17, Gear.com is in compliance and has in the past
complied with all existing foreign and domestic laws, rules, regulations,
ordinances, orders, judgments and decrees applicable to the Business and/or its
assets, except for any non–compliance which would not have a Material
Adverse Effect on Gear.com.  Neither the
ownership nor use of Gear.com’s properties nor the conduct of the Business
conflicts with the rights of any other Person, or violates, or with or without
the giving of notice or the passage of time, or both, will violate, conflict
with or result in a default, right to accelerate or loss of rights under, any
terms or provisions of Gear.com’s Articles of Incorporation or Bylaws as
presently in effect, or any Encumbrance, lease, license, agreement,
understanding, law, ordinance, rule or regulation, or any order, judgment or
decree to which Gear.com is a party or by which any of them may be bound or
affected.  Except as set forth on Schedule 3.17,
Gear.com has no knowledge of any currently proposed foreign, federal or state
laws, rules, regulations, ordinances, orders, judgments, decrees, governmental
takings, condemnations or other proceedings which would be applicable to the
Business and/or Gear.com’s assets, which might have a Material Adverse Effect
on the Business and its assets, whether now or at any time after the
Closing.  Except as set forth on Schedule 3.17
hereto, there is no outstanding order of restraint, no outstanding or, to the
knowledge of Gear.com, threatened order, writ, injunction or decree of any
foreign or domestic court, governmental agency, arbitration tribunal or
environmental claim against Gear.com, involving or relating to the Business
and/or its respective assets.  The
foregoing shall be deemed to include, but not be limited to, foreign and
domestic laws and regulations relating to applicable patent, copyright and
trademark laws, trade secret and unfair competition laws, and all other
applicable foreign and domestic laws, including equal opportunity, wage and
hour and other employment matters, and antitrust and trade regulation laws.

 

                3.18         Discoveries.  Except
as disclosed on Schedule 3.18, no employee has developed any ideas,
conceptions, inventions, improvements or discoveries which would be considered
Intellectual Property, whether patentable or not, that relate to the Business
but are not the property of Gear.com.

 

                3.19         Copyright.  Except as disclosed on Schedule 3.19,
no employee has created any original work of authorship fixed in any tangible
medium of expression, which is the subject matter of copyright, including,
without limitation, video tapes, written presentations, computer programs,
drawings, models, manuals, brochures and the like that relate to the Business
but are not the property of Gear.com.

 

                3.20         Related Party Transactions.  Except
as disclosed on Schedule 3.20, no shareholder, director, officer or
former shareholder, director of officer of Gear.com, or any affiliate of or any
person related by blood or marriage to any such present or former shareholder,
director or officer: (i) owns any property or right, tangible or
intangible, which is used in the Business; (ii) to the knowledge of
Gear.com has any pending claim or cause of action against Gear.com; or
(iii) owes any money to Gear.com.

 

                3.21         Intellectual Property.

(a)           Schedule 3.21
lists all Intellectual Property Registrations covering Intellectual Property
used by Gear.com in the operation of the Business or necessary for the
operation of the 

 

13

 

Business
as presently conducted.  All such
Intellectual Property is either owned by Gear.com or covered by an agreement
listed on Schedule 3.21, except where the failure to own or possess
rights to use Intellectual Property would not have a Material Adverse Effect on
Gear.com.  To the extent any such
Intellectual Property is listed on Schedule 3.21, Gear.com has
taken all reasonable measures to maintain in confidence all Trade Secrets and
confidential information that it owns or uses. 
Except as set forth on Schedule 3.21, all of Gear.com’s
patents, patent applications, registered trademarks, trademark applications and
registered copyrights remain in good standing with respect to all fees and
filings due as of the date of this Agreement. 
To the knowledge of Gear.com, no other Person has any rights to any of
the Intellectual Property owned or used by Gear.com (except pursuant to
agreements or licenses specified on Schedule 3.21) and, to the
knowledge of Gear.com, no other Person is infringing, violating or
misappropriating any of the Intellectual Property that Gear.com owns (except as
set forth on Schedule 3.21).

(b)           To
the knowledge of Gear.com, the use of the Intellectual Property owned by
Gear.com in the operation of its Business does not infringe or violate, or
constitute a misappropriation of, any Intellectual Property rights of any other
Person.  Gear.com has not received any
complaint, claim or notice alleging any such infringement, violation or
misappropriation.

(c)           Schedule 3.21
identifies each patent or registration which has been issued to Gear.com with
respect to any of its Intellectual Property, identifies each pending patent
application or application for registration which has been made with respect to
any of its Intellectual Property, describes each patent application which
Gear.com presently intends to file, and identifies each license or other
agreement pursuant to which Gear.com or any of its subsidiaries has granted any
rights to any third party with respect to any of its Intellectual Property,
except for those licenses granted in the ordinary course of business by
Gear.com to its customers.

(d)           Except
as set forth in Schedule 3.21, Gear.com has not entered into any
agreement or offered to indemnify any Person against any charge of infringement
by Gear.com’s Intellectual Property. 
Gear.com has not entered into any agreement granting any Person the
right to bring any infringement action with respect to, or otherwise to
enforce, any of Gear.com’s Intellectual Property rights.

 

                3.22         Permits.  Schedule 3.22 sets forth a list
of all Permits issued to or held by Gear.com. 
Such listed permits are the only permits that are required for Gear.com
to conduct its Business as presently conducted.  Each such Permit is in full force and effect and no suspension or
cancellation of such Permit is threatened and there is no basis for believing
that such Permit will not be renewable upon expiration.  Each such Permit will be in full force and
effect immediately following the Closing and will not expire or terminate as a
result of the consummation of the Merger.

 

                3.23         Restrictions on Business. 
Gear.com and its Affiliates are not restricted by agreement from carrying on
the Business anywhere in the world.

 

                3.24         Powers of Attorney.  There
are no outstanding powers of attorney executed on behalf of Gear.com.

 

14

 

                3.25         Absence of Certain
Commercial Practices.  Neither
Gear.com nor any person acting on behalf of it has given or agreed to give any
gift or similar benefit of more than nominal value to any customer, supplier,
governmental employee or official, or any other person who is or may be in a
position to help, hinder or assist Gear.com or the person giving such gift or
benefit in connection with any actual or proposed transaction relating to the
Business, which gifts or similar benefits (other than entertainment expenses
provided in the ordinary and normal course of business in accordance with
applicable law) would individually or in the aggregate subject Gear.com or any
officer, director, employee or agent of Gear.com, to any fine, penalty, cost or
expense or to any criminal sanctions. 
No such gift or benefit is required in connection with the operations of
Gear.com and the Business to avoid any penalty, cost, expense or Material
Adverse Effect on Gear.com.

 

                3.26         Condition of Assets.  The
assets of Gear.com are in good operating condition and repair, are fit and
usable for the purposes for which they are being used and conform in all
material respects to all applicable ordinances, regulations and laws.

 

                3.27         Tax Matters. 
Gear.com has (A) timely filed all tax returns, reports and declarations
that are required to have been filed by it with all appropriate foreign, U.S.
federal, state and local governmental agencies (and all such returns are true
and correct in all material respects) and has paid all foreign, U.S. federal,
state and local taxes with respect to the periods covered by such returns
except such amounts which are being contested in good faith; (B) timely
paid all taxes owed by it or which it is obligated to withhold from amounts
owing to any employee (including, without limitation, social security taxes),
creditor or third party except such amounts which are being contested in good
faith; and (C) not waived any statute of limitations with respect to taxes
or agreed to any extension of time with respect to a tax assessment or
deficiency, except where the failure to take the actions set forth in (A), (B)
and (C) would not have a Material Adverse Effect.  There is no pending dispute with any taxing authority relating to
any of said returns which if determined adversely to Gear.com would result in
the assertion by any taxing authority of any valid deficiency for taxes and to
Gear.com’s knowledge, there is no liability for any taxes for which Gear.com
has not made an adequate reserve on the Most Recent Financial Statement, except
for such liabilities which would not have a Material Adverse Effect.

 

                3.28         Books and Records.  Gear.com
maintains its Books and Records in accordance with good business practice and
in sufficient detail to reflect accurately and fairly the transactions and
financial condition of Gear.com. 
Gear.com has made available to Overstock.com the complete and accurate
set of Gear.com’s Books and Records.

 

                3.29         Representations Not Waived.  The
representations and warranties of Gear.com contained herein will not be
affected or deemed waived by reason of any investigation made by or on behalf
of Overstock.com and/or its representatives or agents or by reason of the fact
that Overstock.com and/or its representatives or agents knew or should have
known that any such representation or warranty is or might be inaccurate in any
material respect.

 

                3.30         Intellectual Property
Assignments; Confidentiality Agreements.  With
respect to any Intellectual Property described on Schedule 3.30
hereto, which constitutes the invention of any employee of Gear.com
(collectively hereinafter, “Employee Inventions”), all employees of Gear.com

 

15

 

have assigned their rights, if any, to such
Employee Inventions to Gear.com pursuant to assignment agreements
(collectively, the “Intellectual Property Assignments”).  With respect to all of the Intellectual
Property described on Schedule 3.21 hereto, all employees of
Gear.com have executed invention assignment and confidentiality agreements in
favor of Gear.com (collectively, the “Confidentiality Agreements”).  True, correct and complete copies of all of
the Intellectual Property Assignments and the Confidentiality Agreements have
been made available by Gear.com to Overstock.com.  To the knowledge of Gear.com, none of Gear.com’s officers,
employees, consultants, distributors, agents or representatives have on their
own behalf entered into any agreement regarding know-how, trade secrets,
assignment of rights in inventions, or prohibition or restriction of
competition or solicitation of customers, or any other similar restrictive
agreement or covenant, whether written or oral, with any Person other than
Gear.com during the period in which such officer, employee, consultant, agent
or representative was employed with or engaged by Gear.com.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF
OVERSTOCK.COM

                Overstock.com hereby represents
and warrants to Gear.com as follows:

 

                4.01         Organization and Good
Standing.

(a)           Overstock.com
is a corporation, duly organized, validly existing and in good standing under
the laws of State of Utah, and has all requisite corporate authority and power,
licenses, authorizations, consents and approvals to carry on its business, to
own, hold and operate its properties and assets and to enter into this
Agreement and the other agreements contemplated hereunder.  Overstock.com is duly qualified to do
business and is in good standing as a foreign corporation in all jurisdictions
where the nature of the property owned or leased by it, or the nature of the
business conducted by it, make such qualification necessary, except where the
failure to be so qualified or in good standing, individually or in the
aggregate, has not had an could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Overstock.com.

(b)           Sub
is a corporation, duly organized and validly existing under the laws of the
State of Washington, and has all requisite corporate authority and power,
licenses, authorizations, consents and approvals to carry on it business, to
own, hold and operate its properties and assets and to enter into this
Agreement and the other agreements contemplated hereunder.  Sub is duly qualified to do business and is
in good standing as a foreign corporation in all jurisdictions where the nature
of the property owned or leased by it, or the nature of the business conducted
by it, make such qualification necessary, except where the failure to be so
qualified or in good standing, individually or in the aggregate, has not had
and could not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on Sub.

 

                4.02         Authorizations and Validity
of This Agreement.

 

16

 

(a)           The
execution, delivery and performance by Overstock.com of this Agreement and each
of the other Transaction Documents to be executed and delivered by
Overstock.com are within the corporate powers of Overstock.com, and have been
duly authorized by all necessary corporation action.

(b)           The
execution, delivery and performance by Sub of this Agreement and each of the
other Transaction Documents to be executed and delivered by Sub are within the
corporate powers of Sub, and have been duly authorized by all necessary
corporate action.

 

                4.03         Binding Obligations.

(a)           This
Agreement and each of the other Transaction Documents to be executed and
delivered by Overstock.com constitutes the legal, valid and binding obligation
of Overstock.com and is enforceable against Overstock.com in accordance with
their respective terms, except as enforceability may be limited by applicable
(i) bankruptcy, insolvency, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditor’s rights and
(ii) Laws relating to the availability of specific performance, injunctive
relief or other equitable remedies.

(b)           This
Agreement and each of the other Transaction Documents to be executed and
delivered by Sub constitutes the legal, valid and binding obligations of Sub
and is enforceable against Sub in accordance with their respective terms,
except as enforceability may be limited by applicable (i) bankruptcy,
insolvency, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditor’s rights and (ii) Laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies.

 

                4.04         Capitalization.

(a)           The
authorized capital stock of Overstock.com consists of Five Hundred Million
(500,000,000) shares of capital stock of which Four Hundred Fifty Million
(450,000,000) shares are designated as “Common Stock” with no par value per
share (“Overstock.com Common Stock”) and of which Fifty Million
(50,000,000) shares are designated as Preferred Stock, no par value per share
(“Overstock.com Preferred Stock”). 
Set forth on Schedule 4.04 is a complete and accurate list
of all shareholders of Overstock.com, including the number of shares held by
each, and a complete and accurate list of all Persons who hold options or
warrants to acquire shares of capital stock of Overstock.com (“Overstock.com
Option Holders”), Two Hundred Twenty–three Million Eight Hundred
Forty–two Thousand and Six Hundred Eighty–three (223,842,683)
shares of Overstock.com Common Stock are issued and outstanding on the date
hereof.  No shares of Overstock.com
Preferred Stock are issued and outstanding on the date hereof.  Except for outstanding warrants to purchase
an aggregate of Thirty–one Million Eight Hundred and Three Thousand Six
Hundred Ninety–six (31,803,696) shares of Overstock.com Common Stock and
outstanding options to purchase an aggregate of 7,618,069 shares of
Overstock.com Common Stock on the date hereof, no other shares of capital stock
or other securities of Overstock.com were issued, reserved for issuance or
outstanding.  All of the outstanding shares
of Overstock.com Common Stock are duly authorized, validly issued, fully paid
and non–assessable.  Except as
described on Schedule 4.04, there are no warrants, options, phantom
stock, subscriptions or other rights or 

 

17

 

preferences
(including conversion or preemptive rights) outstanding to acquire Capital
Stock of Overstock.com, or notes, securities or other instruments convertible
into or exchangeable from capital stock of Overstock.com nor any agreements, or
understandings with respect to the issuance thereof, including, without
limitation, agreements to issue securities of Overstock.com in exchanges for
services.  There are no derivative
securities, bonds, debentures, notes or other indebtedness of Overstock.com
having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which any shareholders of
Overstock.com may vote.  There are no
voting trusts, proxies or understandings with respect to voting Overstock.com
Capital Stock.

(b)           The
authorized capital stock of Sub consists of One Thousand (1000) shares of
Common Stock, par value One Cent per share ($0.01).  Overstock.com is the sole owner of such outstanding shares of
Common Stock.  No other shares of
capital stock or other voting securities of Sub were issued, reserved for
issuance or outstanding.  All of the
outstanding shares of Sub Common Stock are duly authorized, validly issued,
fully paid and non-assessable.  Except
as described on Schedule 4.04, there are no warrants, options,
phantom stock, subscriptions or other rights or preferences (including
conversion or preemptive rights) outstanding to acquire capital stock of Sub,
or notes, securities or other instruments convertible into or exchangeable from
capital stock of Sub, nor any agreements, or understandings with respect to the
issuance thereof, including, without limitation, agreements to issue securities
of Sub in exchanges for services.  There
are no derivative securities, bonds, debentures notes or other indebtedness of
Sub having the right to vote or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which any shareholders
of Sub may vote.

 

                4.05         No Brokers or Finders. 
Overstock.com has incurred no liability for commissions or other fees to any
finder or broker in connection with the Merger.

 

                4.06         Agreements.  Except
as disclosed on Schedule 4.06 hereto, Overstock.com is not a party
to or bound by any Contract (i) involving a payment in excess of $50,000
during any 12–month period of time; (ii) that is not cancelable by
Overstock.com without penalty upon twenty (20) days notice; or
(iii) that is expected to generate more than $50,000 in revenues in the
twelve months after the date hereof. 
Except as set forth on Schedule 4.06, Overstock.com has not
(i) made commitments relating to the acquisition by Overstock.com of any
operating business or the capital stock of any other Person; (ii) made
commitments under which Overstock.com agrees to indemnify any Person other than
in the ordinary course of business or as required by law; (iii) made
commitments relating to any Governmental Entity; (iv) made material
commitments with agents, sales representatives and consultants to the Business;
or (v) made commitments relating to outstanding letters of credit or
performance bonds or creating any obligation or liability as guarantor, co–signer,
endorser, co–maker, indemnitor or otherwise in respect of the obligation,
of any person or entity, except as endorser or maker of checks or letters of
credit endorsed or made in the ordinary course of business.

 

                4.07         Indebtedness. 
Overstock.com is not a party to any loan agreement, indenture, guaranty or
other obligation, whether written or oral, relating to (i) indebtedness of
Overstock.com; (ii) money loaned to others; or (iii) the performance
of any obligation to which Overstock.com is a party other than as disclosed on Schedule 4.07
hereto.  All of the items listed on Schedule 4.07
were 

 

18

 

entered into in the ordinary course of
business, are valid and binding, in full force and effect and are enforceable
in accordance with their respective terms except as enforceability may be
limited by applicable (i) bankruptcy, insolvency, reorganization, moratorium
and similar laws of general applicability relating to or affecting creditors’
rights and (ii) Laws relating to the availability of specific performance,
injunctive relief or other equitable remedies, and, except as otherwise
disclosed on Schedule 4.07, there exists no breach or default, or
any event which with notice or lapse of time or both, would constitute a breach
or default by any party thereto.

 

                4.08         Overstock.com Common Stock.  The shares of Overstock.com Common Stock to be issued to the
Gear.com Shareholders pursuant to and in accordance with this Agreement have
been duly authorized and, when issued and delivered pursuant to the terms of
this Agreement, will be duly and validly issued, fully paid and nonassessable,
and will be free and clear of all Encumbrances, other than restrictions on
transfer imposed by the Securities Act and state securities laws, including
without limitation “blue sky” laws.

 

                4.09         No Conflicts.

(a)           Except
for such filings and Consents as may be required under the WBCA, neither the
execution, delivery or performance of this Agreement by Overstock.com, nor the
consummation of the Merger will, with or without giving of notice or lapse of
time or both (i) violate, conflict with or result in any breach of any
provision of the Articles of Incorporation or Bylaws of Overstock.com;
(ii) require any Permit or Consent of any Governmental Entity;
(iii) require any Consent under or result in a violation or breach of, or
constitute a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under any material Contract of Overstock.com or
to any other material obligation of Overstock.com; (iv) violate, conflict
with or result in any breach of any Order or Law applicable to Overstock.com;
or (v) result in the creation or imposition of any Encumbrance upon any of
the assets of the Overstock.com, except, in the case of each of the foregoing,
where such violation or the failure to obtain such Permits or Consents would
not, individually or in the aggregate, have a Material Adverse Effect on
Overstock.com.

(b)           Except
for such filings and Consents as may be required under the WBCA, neither the
execution, delivery or performance of this Agreement by Sub, nor the
consummation of the Merger will, with or without giving of notice or lapse of
time or both (i) violate, conflict with or result in any breach of any
provision of the Articles of Incorporation or Bylaws of Sub; (ii) require
any Permit or Consent of any Governmental Entity; (iii) require any Consent
under or result in a violation or breach of, or constitute a default (or give
rise to any right of termination, amendment, cancellation or acceleration)
under any material Contract of Sub or to any other material obligation of Sub;
(iv) violate, conflict with or result in any breach of any Order or Law
applicable to Sub; or (v) result in the creation or imposition of any
Encumbrance upon any of the assets of the Sub, except, in the case of each of
the foregoing, where such violation or the failure to obtain such Permits or
Consents would not, individually or in the aggregate, have a Material Adverse
Effect on Sub.

 

19

 

                4.10         Litigation.  There is no Action
pending or, to the knowledge of Overstock.com or Sub, threatened against or
affecting Overstock.com or Sub or their respective properties or assets.  Each of the Overstock.com and Sub
(including, without limitation, their respective properties and assets) is not
subject to any Order.

 

                4.11         Financial Statements.  Overstock.com
has previously delivered to Gear.com: (i) an audited balance sheet of
Overstock.com as of December 31, 1999, and the audited statements of
operations, stockholders’ equity and cash flows for the fiscal year then ended
and (ii) an unaudited balance sheet of Overstock.com as of
September 30, 2000, and the related statements of operations,
stockholders’ equity and cash flows for the nine months then ended (the “Overstock.com
Most Recent Financial Statements”). 
The foregoing financial statements, including in all cases the notes
thereto, are in all material respects in accordance with the Books and Records
of Overstock.com (which, in turn, are accurate and complete in all material
respects) have been prepared in accordance with GAAP applied on a consistent
basis (except  as may be indicated
therein or in the notes thereto) and present fairly, in all material respects,
the financial position of Overstock.com as of the dates thereof and the results
of their operations and cash flows for the periods then ended subject, in the
case of the unaudited interim financial statements, to normal year–end
audit adjustments, and any other adjustments described therein.  Other than liabilities that have arisen
since September 30, 2000, in the ordinary course of business of
Overstock.com conducted consistent with past practice.  Overstock.com has not incurred any material
obligation or liability of any nature, whether absolute, accrued, contingent or
otherwise, required to be set forth on a balance sheet under GAAP which is not
reflected on the September 30, 2000 balance sheet or which would otherwise
have a Material Adverse Effect on Overstock.com.

 

                4.12         Tax Matters. 
Overstock.com has (A) timely filed all tax returns, reports and
declarations that are required to have been filed by it with all appropriate
foreign, U.S. federal, state and local governmental agencies (and all such
returns are true and correct in all material respects) and has paid all
foreign, U.S. federal, state and local taxes with respect to the periods
covered by such returns except such amounts which are being contested in good
faith; (B) timely paid all taxes owed by it or which it is obligated to
withhold from amounts owing to any employee (including, without limitation,
social security taxes), creditor or third party except such amounts which are
being contested in good faith; and (C) not waived any statute of
limitations with respect to taxes or agreed to any extension of time with
respect to a tax assessment or deficiency, except where the failure to take the
actions set forth in (A), (B) and (C) would not have a Material Adverse Effect
on Overstock.com.  There is no pending
dispute with any taxing authority relating to any of said returns which if
determined adversely to Overstock.com would result in the assertion by any
taxing authority of any valid deficiency for taxes.  Overstock.com has no knowledge of any liability for any taxes for
which Overstock.com has not made an adequate reserve on the September 30,
2000, balance sheet, except for such liabilities which would not have a
Material Adverse Effect on Overstock.com.

 

                4.13         Books and Records. 
Overstock.com maintains its books and records in accordance with good business
practice and in sufficient detail to reflect accurately and fairly the transactions
and financial condition of Overstock.com.

 

20

 

                4.14         Disclosure.  No representation or
warranty of Overstock.com contained in this Agreement or the Transaction
Documents delivered at Closing, contains any untrue statement of material fact
or omits to state a material fact necessary to make the statements herein or
therein not misleading.

 

                4.15         Subsidiaries. 
Overstock.com has no Subsidiaries and does not, directly or indirectly, own any
interest in any corporation, partnership, firm or other business entity.

 

                4.16         Employees and Employee
Benefit Plans.

(a)           Schedule 4.16
hereto contains a complete list of employment contracts to which Overstock.com
is a party.  To Overstock.com’s
knowledge, no labor organization, collective bargaining representative or group
represents or claims to represent any of Overstock.com’s present employees and
Overstock.com has no collective bargaining or employment or other similar
agreements with any employees of Overstock.com.  With respect to employees of Overstock.com, (i) there is no
strike, labor dispute or work stoppage, slow down, or lockout actually pending
or, to the best knowledge of Overstock.com, threatened against or affecting
Overstock.com; (ii) no union organizational campaign is in progress;
(iii) Overstock.com is in material compliance with all applicable laws
respecting employment and employment practices, term and conditions of
employment and wages and hours, and is not engaged in any unfair labor practice;
(iv) there is no unfair labor practice charge or complaint against
Overstock.com pending or, to the best knowledge of Overstock.com, threatened
against Overstock.com before the National Labor Relations Board; (v) there
is no pending or, to the knowledge of Overstock.com, threatened grievance; and
(vi) (A) to the knowledge of Overstock.com, no charges with respect
to or relating to Overstock.com are pending before the Equal Employment
Opportunity Commission or any state or local agency responsible for the prevention
of unlawful employment practices and (B) Overstock.com has received no
notice of the intent of any Governmental Entity responsible for the enforcement
of labor or employment laws to conduct an investigation with respect to or
relating to Overstock.com and, to the knowledge of Overstock.com, no such
investigation is in progress.  To the
knowledge of Overstock.com, no sexual harassment has occurred or is occurring
and no hostile work environment has been created by any current or past
employee of Overstock.com.

(b)           Overstock.com
has made available to Gear.com, or has caused to be provided to Overstock.com,
current, accurate, and complete copies of all documents embodying or relating
to each company benefit plan, policy or program (including, without limitation,
“employee benefit plans” within the meaning of Section 3(3) of ERISA) each
employee agreement, including all amendments thereto, and trust or funding
agreements with respect thereto.

(c)           Neither
Overstock.com nor any ERISA Affiliate presently sponsors, maintains or
contributes to, nor has Overstock.com nor any ERISA Affiliate ever sponsored,
maintained, contributed to, or been required to contribute to, a pension plan
which is subject to Title IV of ERISA.

(d)           Neither
Overstock nor any ERISA Affiliate (i) maintains or contributes to any
Overstock.com benefit plan which provides, or has any liability to provide,
life insurance, medical, 

 

21

 

severance
or other employee welfare benefits to any employee upon his retirement or
termination of employment, except as may be required by Section 4980B of
the Code; or (ii) has ever represented, promised or contracted (whether in
oral or written form) to any employee (either individually or to employees as a
group) that such employee would be provided with life insurance, medical,
severance or other employee welfare benefits upon his retirement or termination
of employment, except to the extent required by Section 4980B of the Code.

 

                4.17         No Adverse Changes.  Except
as disclosed on Schedule 4.17, since September 30, 2000, there
has been (a) no change in (i) the assets, liabilities or financial
condition of Overstock.com from that set forth in the Overstock.com Most Recent
Financial Statements, or (ii) the condition (other than financial) or
business of Overstock.com, other than, with respect to clauses (i) and
(ii) hereof, changes in the ordinary course of business the effect of which
changes has not caused, individually or in the aggregate, a Material Adverse Effect,
(b) no damage, destruction or loss, whether or not covered by insurance,
having a Material Adverse Effect, (c) no labor dispute, other than routine
grievances by individual employees, that has caused, individually or in the
aggregate, a Material Adverse Effect, (d) no declaration or payment by
Overstock.com of any dividend or other distribution, in cash or property or
other assets, (e) no transfer of any rights to Intellectual Property,
(f) no mortgage or pledge of or encumbrance upon any assets of Overstock.com,
(g) no contractual obligation entered into by Overstock.com providing for
obligations of a party thereto of $50,000 or more, (h) no agreement by
Overstock.com to borrow money or incur or guarantee indebtedness, (i) no
notice received regarding the termination, cancellation, acceleration or
modification of any Contract, to which Overstock.com is a party or by which
Overstock.com is bound, (j) no change made or authorized in the Articles
of Incorporation or Bylaws of Overstock.com, (k) no increase in the base
compensation of any of its directors, officers and employees, and (l) no
change in employment terms for any of its directors, officers and employees.

 

                4.18         Compliance with Laws and
Other Instruments.  Except
as set forth on Schedule 4.18, Overstock.com is in compliance and
has in the past complied with all existing foreign and domestic laws, rules,
regulations, ordinances, orders, judgments and decrees applicable to the
Business and/or its assets, except for any non-compliance which would not have
a Material Adverse Effect on Overstock.com. 
Neither the ownership nor use of Overstock.com’s properties nor the
conduct of the Business conflicts with the rights of any other Person, or
violates, or with or without the giving of notice or the passage of time, or
both, will violate, conflict with or result in a default, right to accelerate
or loss of rights under, any terms or provisions of Overstock.com’s Articles of
Incorporation or Bylaws as presently in effect, or any Encumbrance, lease,
license, agreement, understanding, law, ordinance, rule or regulation, or any
order, judgment or decree to which Overstock.com is a party or by which it may
be bound or affected.  Except as set
forth on Schedule 4.18, Overstock.com has no knowledge of any
currently proposed foreign, federal or state laws, rules, regulations,
ordinances, orders, judgments, decrees, governmental takings, condemnations or
other proceedings which would be applicable to the Business and/or
Overstock.com’s assets, which might have a Material Adverse Effect on the
Business and its assets, whether now or at any time after the Closing.  Except as set forth on Schedule 4.18
hereto, there is no outstanding order of restraint, no outstanding or, to the
knowledge of Overstock.com, threatened 

 

22

 

order, writ, injunction or decree of any
foreign or domestic court, governmental agency, arbitration tribunal or
environmental claim against Overstock.com affecting, involving or relating to
the Business and/or its assets.  The
foregoing shall be deemed to include, but not be limited to, foreign and
domestic laws and regulations relating to applicable patent, copyright and
trademark laws, trade secret and unfair competition laws, and all other
applicable foreign and domestic laws, including equal opportunity, wage and
hour and other employment matters, and antitrust and trade regulation laws.

 

                4.19         Discoveries.  Except
as disclosed on Schedule 4.19, no employee of Overstock.com has
developed any ideas, conceptions, inventions, improvements or discoveries which
would be considered Intellectual Property, whether patentable or not, that
relate to the Business but are not the property of Overstock.com.

 

                4.20         Copyright.  Except
as disclosed on Schedule 4.20, none of Overstock.com’s employees
has created any original work of authorship fixed in any tangible medium of
expression, which is the subject matter of copyright, including, without
limitation, video tapes, written presentations, computer programs, drawings,
models, manuals, brochures and the like that relate to the Business but are not
the property of Overstock.com.

 

                4.21         Related Party Transactions.  Except
as disclosed on Schedule 4.21, no shareholder, director, officer or
former shareholder, director or officer of Overstock.com, or any affiliate of
or any person related by blood or marriage to any such present or former
shareholder, director or officer: (i) owns any property or right, tangible
or intangible, which is used in the Business; (ii) to the knowledge of
Overstock.com, has any pending claim or cause of action against Overstock.com;
or (iii) owes any money to Overstock.com.

 

                4.22         Intellectual Property.

(a)           Schedule 4.22
lists all Intellectual Property Registrations covering any Intellectual Property
used by Overstock.com in the operation of its business or necessary for the
operation of its business as presently conducted, except where the failure to
own or possess rights to use such Intellectual Property would not have a
Material Adverse Effect on Overstock.com. 
Overstock.com has taken all reasonable measures to maintain in
confidence all trade secrets and confidential information, that it owns or
uses.  To Overstock.com’s knowledge, all
of Overstock.com’s patents, patent applications, registered trademarks,
trademark applications and registered copyrights remain in good standing with
respect to all fees and filings due as of the date of this Agreement.  To Overstock.com’s knowledge, no other
Person has any rights to any of the Intellectual Property owned by
Overstock.com, except to the extent such rights would not have a Material
Adverse Effect on Overstock.com and, to the knowledge of Overstock.com, no
other Person is infringing, violating or misappropriating any of the
Intellectual Property that Overstock.com owns or uses.

(b)           To
Overstock.com’s knowledge, the use of Intellectual Property rights owned by
Overstock.com do not infringe or violate, or constitute a misappropriation of,
any Intellectual 

 

23

 

Property
rights of any other Person. 
Overstock.com has not received any complaint, claim or notice alleging
any such infringement, violation or misappropriation.

(c)           Schedule 4.22
identifies each patent or registration which has been issued to Overstock.com
with respect to any of its Intellectual Property, identifies each pending
patent application or application for registration which has been made with
respect to any of its Intellectual Property, describes each patent application
which Overstock.com presently intends to file, and identifies each license or
other agreement pursuant to which Overstock.com or any of its subsidiaries has
granted any rights to any third party with respect to any of its Intellectual
Property, except for those licenses granted in the ordinary course of business
by Overstock.com to its customers.

(d)           Except
as set forth in Schedule 4.22, Overstock.com has not entered into
any agreement or offered to indemnify any Person against any charge of
infringement by Overstock.com’s Intellectual Property.  Overstock.com has not entered into any
agreement granting any Person the right to bring any infringement action with
respect to, or otherwise to enforce, any of Overstock.com’s Intellectual Property
rights.

 

                4.23         Permits.  Schedule 4.23 sets forth a list
of all Permits issued to or held by Overstock.com.  Such listed permits are the only permits that are required for
Overstock.com to conduct its Business as presently conducted and in which is
presently proposed to be conducted.  Each
such Permit is in full force and effect and no suspension or cancellation of
such Permit is threatened and there is no basis for believing that such Permit
will not be renewable upon expiration. 
Each Permit will be in full force and effect immediately following the
Closing and will not expire or terminate as a result of the consummation of the
Merger.

 

                4.24         Restrictions on Business. 
Overstock.com and its Affiliates are not restricted by agreement from carrying
on business anywhere in the world.

 

                4.25         Powers of Attorney.  There
are no outstanding powers of attorney executed on behalf of Overstock.com.

 

                4.26         Absence of Certain
Commercial Practices.  Neither
Overstock.com nor any person acting on behalf of it has given or agreed to give
any gift or similar benefit of more than nominal value to any customer,
supplier, governmental employee or official, or any other person who is or may
be in a position to help, hinder or assist Overstock.com or the person giving
such gift or benefit in connection with any actual or proposed transaction
relating to the Business, which gifts or similar benefits (other than
entertainment expenses provided in the ordinary and normal course of business
in accordance with applicable law) would individually or in the aggregate subject
Overstock.com or any officer, director, employee or agent of Overstock.com, to
any fine, penalty, cost or expense or to any criminal sanctions.  No such gift or benefit is required in
connection with the operations of Overstock.com and the Business to avoid any
penalty, cost, expense or Material Adverse Effect on Overstock.com.

 

24

 

                4.27         Condition of Assets.  The
assets of Overstock.com are in good operating condition and repair, are fit and
usable for the purposes for which they are being used and conform in all
material respects to all applicable ordinances, regulations and laws.

 

                4.28         Representations Not Waived.  The representations and warranties of
Overstock.com contained herein will not be affected or deemed waived by reason
of any investigation made by or on behalf of Gear.com and/or its
representatives or agents or by reason of the fact that Gear.com and/or its
representatives or agents knew or should have known that any such
representation or warranty is or might be inaccurate in any material respect.

 

                4.29         Intellectual Property
Assignments; Confidentiality Agreements.  With
respect to any Intellectual Property described on Schedule 4.29
hereto, which constitutes the invention of any employee of Overstock.com
(collectively hereinafter, “Overstock.com Employee Inventions”), all
employees of Overstock.com have assigned their rights, if any, to such
Overstock.com Employee Inventions to Overstock.com pursuant to assignment
agreements (collectively, the “Overstock.com Intellectual Property
Assignments”).  With respect to all
of the Intellectual Property described on Schedule 4.22 hereto, all
employees of Overstock.com have executed invention assignment and
confidentiality agreements in favor of Overstock.com (collectively, the “Overstock.com
Confidentiality Agreements”).  True,
correct and complete copies of all of the Overstock.com Intellectual Property
Assignments and the Overstock.com Confidentiality Agreements have been made
available by Overstock.com to Gear.com. 
To the knowledge of Overstock.com, none of Overstock.com’s officers,
employees, consultants, distributors, agents or representatives have on their
own behalf entered into any agreement regarding know-how, trade secrets,
assignment of rights in inventions, or prohibition or restriction of
competition or solicitation of customers, or any other similar restrictive
agreement or covenant, whether written or oral, with any Person other than
Overstock.com during the period in which such officer, employee, consultant,
agent or representative was employed with or engaged by Overstock.com.

 

                4.30         Title to Properties. 
Overstock.com has good and marketable title to all of its personal properties
and assets, real and personal, reflected in the Overstock.com Most Recent
Financial Statements, or purported to have been acquired after the date of such
Overstock.com Most Recent Financial Statements (excepting, however, property
and other assets, sold or otherwise disposed of subsequent to such date in the
ordinary course of business), free of any mortgage, pledge, lien, charge,
security interest or other Encumbrance, subordination or adverse claim, except
as reflected in the Overstock.com Most Recent Financial Statements for
Overstock.com.  Overstock.com enjoys
peaceful and undisturbed possession under all permits or leases under which it
is operating, and all such leases are valid, subsisting and in full force and
effect.  Overstock.com has not been
advised of a breach of any such permit or lease and there is no basis for any
such breach to be threatened.  Except as
disclosed on Schedule 4.30, neither any director nor officer of
Overstock.com nor the shareholders of Overstock.com owns or has any interest
(other than as shareholder) in any property, real or personal, tangible or
intangible, used in the Business of Overstock.com.

 

25

 

                4.31         Inventory.  Overstock.com’s net inventory is
merchantable and fit for the purpose for which it was procured, and none of
such is slow-moving, obsolete, damaged or defective, subject only to the
reserve for write-downs or write-offs of Inventory set forth on the face of the
Overstock.com Financial Statements.  The
Overstock.com Financial Statements accurately reflect the cost of the
Overstock.com inventory.

 

                4.32         Books and Records. 
Overstock.com maintains its Books and Records in accordance with good business
practice and in sufficient detail to reflect accurately and fairly the
transactions and financial condition of Overstock.com.  Overstock.com has made available to Gear.com
the complete and accurate set of Overstock.com’s Books and Records.

ARTICLE V

ITEMS TO BE DELIVERED AT CLOSING
BY OVERSTOCK.COM

 

                5.01         Closing Deliveries.  The
obligations of Gear.com to perform and observe the covenants, agreements and
conditions hereof to be performed and observed by it at the Closing shall be
subject to the following conditions, which may be expressly waived only in
writing by Gear.com:

(a)           delivery
to Gear.com of true and correct copies of resolutions of the Board of Directors
of Overstock.com, certified by an officer of Overstock.com, approving the
execution, delivery and performance of this Agreement and containing the
current Articles of Incorporation and current Bylaws;

(b)           delivery
to Gear.com of an officer’s certificate certifying and including true and
correct copies of resolutions/consents of the shareholder of Sub, certified by
an officer of Sub, approving the execution, delivery and performance of this
Agreement;

(c)           delivery
by Overstock.com of certificates of good standing of Overstock.com in Utah;

(d)           all
permits, licenses, approvals or notices that are necessary for the consummation
of the transaction hereunder have been approved or obtained;

(e)           delivery
to Gear.com of an unaudited balance sheet of Overstock.com as of a date within
two (2) days of the Closing Date, prepared in accordance with GAAP, which
fairly presents the financial condition of Overstock.com as of the date
thereof;

(f)            delivery
by Gear.com of an opinion of counsel to Overstock.com in the form set forth in Exhibit E
attached hereto;

(g)           delivery
to Gear.com of a written assignment and assumption, executed by Overstock.com,
pursuant to which Overstock.com agrees to assume, and assumes the obligations
of Gear.com under, the Amended and Restated Retention and Severance Agreement
between Joseph 

 

26

 

Kenny
and Gear.com, dated November 3, 2000, and the Amended and Restated
Retention and Severance Agreement between Kevin Quigley and Gear.com, dated
November 3, 2000.

ARTICLE VI

ITEMS TO BE DELIVERED AT CLOSING
BY GEAR.COM

 

                6.01         Closing Deliveries.  The
obligations of Overstock.com to perform and observe the covenants, agreements
and conditions hereof to be performed and observed by it at the Closing shall
be subject to the following conditions, which may be expressly waived only in
writing by Overstock.com.

(a)           delivery
to Overstock.com of the Books and Records of Gear.com;

(b)           delivery
to Overstock.com of true and correct copies of resolutions of the Board of
Directors of Gear.com, certified by an officer of Gear.com, approving the
execution, delivery and performance of this Agreement, and containing the
current Articles of Incorporation and the current Bylaws;

(c)           delivery
to Overstock.com of an officer’s certificate certifying and including true and
correct copies of resolutions/consents of the Gear.com shareholders, certified
by an officer of Gear.com, approving the execution, delivery and performance of
this Agreement;

(d)           delivery
to Overstock.com of certificates of valid existence of Gear.com in Washington;

(e)           all
permits, licenses, approvals or notices that are necessary for the consummation
of the transaction hereunder have been approved or obtained;

(f)            delivery
to Overstock.com of an unaudited balance sheet of Gear.com as of a date within
two (2) days of the Closing Date, prepared in accordance with GAAP, which
fairly presents the financial condition of Gear.com as of the date thereof;

(g)           delivery
of the following items from the Information Package, executed by holders of at
least ninety-five percent (95%) of the Gear.com Capital Stock: (i) the
written consent of Gear.com Shareholders, (ii) a release agreement to be
executed by each Gear.com Shareholder (the “Shareholder Release”), and
(iii) the Investment Representation Letter;

(h)           delivery
of a certificate of an officer of Gear.com acknowledging that, upon the
Effective Date, Gear.com will be terminating its obligations to indemnify the
directors, officers and other agents of Gear.com prior to the Closing Date;

(i)            delivery
of a certificate of Gear.com certifying that all of the Gear.com Shareholders
to receive any of the Overstock.com Common stock as outlined in Section 2.03
have 

 

27

 

completed
their Letters of Transmittal indicating that they are “accredited investors” as
that term is defined in Rule 501 promulgated under Regulation D of
the Securities Laws; and

(j)            delivery
to Overstock.com of the opinion of counsel to Gear.com, in the form set forth
in Exhibit F attached hereto.

ARTICLE VII

CONDITIONS TO OBLIGATIONS TO
CLOSING

 

                7.01         Conditions to Obligation of
Overstock.com.  The obligation of Overstock.com to consummate the transactions to
be performed by it in connection with the Closing is subject to the
satisfaction of the following conditions, which may be expressly waived only in
writing by Overstock.com:

(a)           holders
of at least ninety-five percent (95%) of the shares of Gear.com Capital Stock
shall have voted in favor of the Merger or consented thereto in writing;

(b)           the
holders of at least ninety-five percent (95%) of the shares of Gear.com Capital
Stock shall have executed the written consent of Gear.com Shareholders, the
Shareholder Release and the Investment Representation Letter;

(c)           delivery
to Overstock.com of the opinion of counsel to Gear.com, in the form set forth
in Exhibit F, attached hereto;

(d)           there
shall not be in effect any statute, rule, or regulation which makes it illegal
for Overstock.com to consummate the transactions contemplated hereby or any
order, decree, or judgment which enjoins Overstock.com or Gear.com from
consummating the transactions contemplated hereby;

(e)           all
representations and warranties made by Gear.com contained in this Agreement
shall be true, correct and complete in all material respects on and as of the
date when made, and on and as of the Closing Date as if made on and as of that
date, and Overstock.com shall have received a certificate dated the Closing
Date signed by Gear.com to the foregoing effect;

(f)            Gear.com
shall have performed and complied with all of its covenants hereunder from the
Execution Date through and including the Closing, and Overstock.com shall have
received a certificate dated the Closing Date signed by Gear.com to the
foregoing effect;

(g)           Gear.com
shall have delivered to Overstock.com a certificate to the effect that each of
the conditions specified in this Section 7.01 is satisfied in all
respects; and

(h)           no
action shall be pending or threatened before any Governmental Entity that seeks
to enjoin, restrain or prohibits consummation of this Agreement or the Merger.

 

28

 

                7.02         Conditions to Obligations of
Gear.com.  The obligations of Gear.com to consummate the transactions to be
performed by it in connection with the Closing is subject to the satisfaction
of the following conditions, which may be expressly waived only in writing by
Gear.com:

(a)           delivery
to Gear.com of the opinion of counsel to Overstock.com and Sub in the form set
forth in Exhibit E, attached hereto;

(b)           there
shall not be in effect any statute, rule, or regulation which makes it illegal
for Gear.com to consummate the transactions contemplated hereby or any order,
decree, or judgment which enjoins Gear.com or Overstock.com from consummating
the transactions contemplated hereby;

(c)           all
representations and warranties made by Overstock.com contained in this
Agreement shall be true, correct and complete in all material respects on and
as of the date when made, and on and as of the Closing Date as if made on and
as of that date, and Gear.com shall have received a certificate dated the
Closing Date signed by Overstock.com to the foregoing effect;

(d)           Overstock.com
shall have performed and complied with all of its covenants hereunder from the
Execution Date through and including the Closing, and Gear.com shall have
received a certificate dated the Closing Date signed by Overstock.com to the
foregoing effect;

(e)           Overstock.com
shall have delivered to Gear.com a certificate to the effect that each of the
conditions specified in this Section 7.02 is satisfied in all
respects;

(f)            no
action shall be pending or threatened before any Governmental Entity that seeks
to enjoin, restrain or prohibits consummation of this Agreement or the Merger;
and

(g)           Eric
Dillon shall be appointed a member of the Board of Directors of Overstock.com.

ARTICLE VIII

TERMINATION AND AMENDMENT

 

                8.01         Termination.  This
Agreement may be terminated and the Merger may be abandoned at any time prior
to the Effective Time:

(a)           by
mutual written consent of Overstock.com and Gear.com;

(b)           by
either Overstock.com or Gear.com, if there shall be any law or regulation that
makes consummation of the Merger illegal or if any judgment, injunction, order
or decree enjoining Overstock.com, Sub or Gear.com from consummating the Merger
is entered and such judgment, injunction, order or decree shall become final
and nonappealable; provided, however, that 

 

29

 

the
party seeking to terminate this Agreement pursuant to this subsection (b)
shall have used all reasonable efforts to remove such judgment, injunction,
order or decree;

(c)           by
Gear.com, in the event of a material breach by Overstock.com of any
representation, warranty and/or covenant, which breach constitutes a Material
Adverse Effect as to Overstock.com, or any agreement contained herein that has
not been cured or is not curable within three (3) days after notice of
such material breach or if any condition to the obligations of Gear.com becomes
incapable of being satisfied on or before November 11, 2000;

(d)           by
Overstock.com, in the event of a material breach by Gear.com of any
representation, warranty and/or covenant, which breach constitutes a Material
Adverse Effect as to Gear.com, or any agreement contained herein that has not
been cured or is not curable within three (3) days after notice of such
material breach or if any condition of the obligations of Overstock.com becomes
incapable of being satisfied on or before November 11, 2000; or

(e)           by
Gear.com, in the event that the results of Gear.com’s due diligence
investigation of Overstock.com shall be unsatisfactory to Gear.com in its sole
discretion.

 

                8.02         Effect of Termination.  In the
event of the termination of this Agreement pursuant to Section 8.01
hereof, there shall be no further obligation on the part of any party hereto,
except that nothing herein shall relieve any party from liability for any
willful breach hereof and/or for any liability of any party then in breach.

 

                8.03         Amendment.  This Agreement may be amended only in
writing signed by all of the parties hereto.

 

                8.04         Waiver.  At any time prior to the Effective Time, any
party hereto may (a) extend the time for the performance of any obligation
or other act of any other party hereto, (b) waive any inaccuracy in the
representations and warranties contained herein or in any document delivered
pursuant to and at the closing Date, or (c) waive compliance with any
agreement or condition contained herein. 
Any such extension or waiver shall be valid only if set forth in an
instrument in writing signed by the party or parties to be bound thereby.

ARTICLE IX 

COVENANTS

 

                9.01         General.  Each of the parties hereto will use its commercially
reasonable best efforts to take all action and to do all things necessary,
proper, or advisable in order to consummate and make effective the transactions
contemplated by this Agreement.

 

                9.02         Covenants and Continuing
Obligations Regarding Charter Documents.  Prior
to the Closing, Overstock.com shall cause Sub to amend the Articles of
Incorporation of Sub to include a provision (the “Added Provision”) that
contains the substance of Article 9 of the Articles of Incorporation of
Gear.com as of the date of this Agreement. 
Overstock.com shall, and 

 

30

 

Overstock.com shall cause the Surviving
Corporation to, keep in effect the Added Provision of the Articles of
Incorporation of the Surviving Corporation, and neither Overstock.com nor the
Surviving Corporation shall cause or permit such Added Provision to be amended.

 

                9.03         Conduct of Business Pending
the Merger.  Except as otherwise
contemplated by this Agreement, Overstock.com shall not, between the Execution
Date and the Effective Time, directly or indirectly do, or propose to do, any
of the following without prior written consent of Gear.com, which consent shall
not be unreasonably withheld or delayed:

(a)           amend
or otherwise change its Articles of Incorporation of Bylaws;

(b)           except
for the issuance of shares of Overstock.com Common Stock or Overstock.com
Preferred Stock upon the exercise or conversion of currently outstanding
options, warrants or convertible notes, issue, sell, contract or issue or sell,
pledge, dispose of, grant, encumber or authorize the issuance, sale, pledge,
disposition of (i) any shares of capital stock of any class of
Overstock.com, (ii) any options, warrants, convertible securities or other
rights of any kind to acquire any shares of such capital stock, or any other
ownership interest (including, without limitation, any phantom interest) of
Overstock.com, or (iii) any assets of Overstock.com, except in the
Ordinary Course of Business; or

(c)           issue
cash or other dividends to its shareholders.

 

                9.04         Conduct of Business Pending
the Merger.  Except as otherwise
contemplated by this Agreement, Overstock.com shall not, between the Execution
Date and the Effective Time, directly or indirectly do, or propose to do, any
of the following without prior written consent of Gear.com, which consent shall
not be unreasonably withheld or delayed:

(a)           amend
or otherwise change its Articles of Incorporation or Bylaws;

(b)           except
for the issuance of shares of Gear.com Common Stock upon the exercise or
conversion of currently outstanding options, warrants or convertible notes or
preferred stock, issue, sell, contract or issue or sell, pledge, dispose of,
grant, encumber or authorize the issuance, sale, pledge, disposition of
(i) any shares of capital stock of any class of Gear.com, (ii) any
options, warrants, convertible securities or other rights of any kind to
acquire any shares of such capital stock, or any other ownership interest
(including, without limitation, any phantom interest) of Gear.com, or
(iii) any assets of Gear.com, except in the Ordinary Course of Business
(defined below).

(c)           enter
into any employment agreements, severance agreements or similar agreements;

(d)           issue
cash or other dividends to its shareholders; or

(e)           give
bonuses or salary increases to any of its employees or independent contractors.

 

31

 

                9.05         Operation of Business.  During
the period from the Execution Date until the Effective Date, Gear.com will not
engage in any practice, take any action, or enter into any transaction outside
the Ordinary Course of Business. 
Without limiting the generality of the foregoing, Gear.com will not
engage in any practice, take any action, or enter into any transaction outside
the Ordinary Course of Business the primary purpose or effect of which could
negatively impact cash.  For purposes of
this Agreement, the term “Ordinary Course of Business” shall mean the ordinary
course of business consistent with past custom and practice (including with
respect to quantity and frequency). 
Without limiting the generality of the foregoing, Gear.com will not
cause or permit Gear.com to declare, set aside or pay any dividend or make any
distribution with respect to its capital stock, or redeem, purchase or
otherwise acquire any of its capital stock.

 

                9.06         Operation of Business.  During
the period from the Execution Date until the Effective Date, Overstock.com will
not engage in any practice, take any action, or enter into any transaction
outside the Ordinary Course of Business. 
Without limiting the generality of the foregoing, Overstock.com will not
cause or permit Overstock.com to declare, set aside or pay any dividend or make
any distribution with respect to its capital stock, or redeem, purchase or otherwise
acquire any of its capital stock.

 

                9.07         Full Access.  During
the period from the Execution Date until the Effective Date, Gear.com will
permit representatives of Overstock.com to have full access at all reasonable
times, and in a manner so as not to interfere with the normal business
operations of Gear.com to all premises, properties, personnel, books, records
(including tax records), contracts and documents of or pertaining to Gear.com.

 

                9.08         Notices.  During the period from the Execution Date
until the Effective Date, each Party hereto will give prompt written notice to
the others of any material adverse development causing a breach or potential
breach of any of its own representations and warranties in this Agreement.

ARTICLE X

MISCELLANEOUS
PROVISIONS

 

                10.01       Expenses.  Subject to the provisions of Section 10.01(b),
each of the parties hereto will pay all costs and expenses incurred by it or on
its behalf in connection with the Agreement and the Merger, including fees and
expenses of its own Representatives.  If
an Action is brought by a party to this Agreement for the enforcement of this
Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party will be entitled to recover legal fees and
costs incurred in that Action in addition to any other relief to which it may
be entitled.

 

                10.02       Further Assurances.  At any time, or from time to time after the Closing, Gear.com
will, upon Overstock.com’s reasonable request, execute and deliver such
instruments of transfer, conveyance, assignment and assumption, in addition to
those delivered at the Closing and take such

 

32

 

other action as Overstock.com may reasonably
request in order to evidence the consummation of the Merger.

 

                10.03       Public Announcements.  No
press release or announcement concerning the Merger will be issued by any party
without the prior consent of the other parties, except as such release or
announcement may be required by Law, in which case the party required to make
the release or announcement will, to the extent practicable, allow the other
party reasonable time to comment on such release or announcement in advance of
such issuance.

 

                10.04       Notices.  All notices, consents, waivers and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written or
electronic confirmation of receipt), (b) sent by telecopier (with written
confirmation of receipt), provided, that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee, if
sent by a nationally recognized overnight delivery service (receipt requested),
in each case to the appropriate addresses and telecopier numbers set forth
below (or to such other addresses and telecopier numbers as a party may
designate by notice to the other parties):

(a)           If to Overstock.com:

Overstock.com, Inc.

2855 Cottonwood Parkway, #500

Salt Lake City, UT 84121

Attention:  Patrick Byrne, CEO

 

with a copy to (which copy shall not constitute notice):

 

Bracewell & Patterson, L.L.P.

500 North Akard Street, Suite 4000

Dallas, Texas 75201-3387

Attention:  Janice Z. Davis,
Esq.

Facsimile No.: (214)
758-1010

(b)           If to Gear.com:

Gear.com, Inc.

3123 Eastlake Avenue East

Seattle, Washington 98102-3802

Attention:  Nicholas Eitel, CEO

 

33

 

with a copy to (which copy shall not constitute notice):

 

Perkins Coie, LLP

1201 Third Avenue, Suite 4800

Seattle, Washington 98101

Attention:  David McShea, Esq.

Facsimile No.: 206-583-8500

 

                10.05       Jurisdiction; Service of
Process.  Each of the parties
hereto hereby irrevocably and unconditionally consents to submit to the
exclusive jurisdiction of the (a) Court of the State of Utah and
(b) United States District Court in Salt Lake City, Utah, for any actions,
suits or proceedings arising out of or relating to this Agreement, the
Transaction Documents and the Merger (and agrees not to commence any action,
suit or proceeding relating thereto except in such courts), and further agrees
that service of any process, summons, notice or document by U.S. registered
mail to its respective address set forth in Section 10.03 will be
effective service of process for any action, suit or proceeding brought against
it in any such court.  Each of the
parties hereto hereby irrevocably and unconditionally waives any objection to
the laying of venue of any action, suit or proceeding arising out of this
Agreement, the Transaction Documents or the Merger in the courts of the State
of Utah, and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.

 

                10.06       Governing Law.  This
Agreement will be construed in accordance with and governed by the internal
laws of the State of Utah without regard to conflicts of laws principles
thereof, except to the extent the WBCA shall be held to govern the terms of the
Merger.

 

                10.07       Entire Agreement.  This
Agreement and the Transaction Documents constitute a complete and exclusive
statement of the terms of the agreement between the parties with respect to the
subject matter contained herein and supersedes all prior agreements between the
parties.

 

                10.08       Oral Modification.  This
Agreement may not be amended except by a written agreement executed by the
party to be charged with the amendment. 
Any attempted amendment in violation of this Section 10.08
will be void ab initio.

 

                10.09       Assignments, Successors, and No Third-Party Beneficiaries.  No
party may assign any of its rights under this Agreement or any Transaction
Document without the prior written consent of the other parties to this
Agreement; and provided, that no assignment will limit or affect the
assignor’s obligations hereunder. 
Subject to the preceding sentence, this Agreement and the Transaction
Documents will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties.  Nothing expressed or referred to in this
Agreement or the Transaction Documents will be construed to give any Person other
than the parties to this Agreement any legal or equitable right, remedy or
claim under or with respect to this Agreement or the Transaction Documents or
any provision of this Agreement or the Transaction Documents.  Subject to the preceding sentence, this
Agreement and the Transaction Documents and all of its 

 

34

 

provisions and conditions are for the sole
and exclusive benefit of the parties to this Agreement and their successors and
assigns.

 

                10.10       Severability.  If any
provision of this Agreement is held invalid or unenforceable by any court of
competent jurisdiction, the other provisions of this Agreement will remain in
full force and effect.  Any provision of
this Agreement held invalid or unenforceable only in part or degree will remain
in full force and effect to the extent not held invalid or unenforceable.

 

                10.11       Captions; Currency.  The
article, section and paragraph captions herein and the table of contents hereto
are for convenience of reference only, do not constitute part of this Agreement
and will not be deemed to limit or otherwise affect any of the provisions
hereof.  Unless otherwise specified, all
references herein to numbered articles and sections are to articles and
sections of this Agreement and all references herein to exhibits are to
exhibits to this Agreement.  Unless
otherwise specified, all references contained in this Agreement or in any
Transaction Document to dollars or “$” will mean United States Dollars.

 

                10.12       Exhibits and Schedules.  All
Transaction Documents are hereby incorporated in and made a part of this
Agreement as if set forth in full herein. 
Capitalized terms used in the Transaction Documents but not otherwise
defined therein will have the respective meanings assigned to such terms in
this Agreement.  Disclosure of any item
in any section of or on any schedule to this Agreement will not constitute
disclosure of such item in any other section of or on any other schedule to
this Agreement, whether or not the existence of the item or its contents should
be or is relevant to any other section of or schedule to this Agreement, unless
an explicit cross-reference thereto appears in such other section or schedule.

 

                10.13       Specific Performance.  In the
event of any actual or threatened default in, or breach of, any of the terms,
conditions and provisions of this Agreement, the party or parties who are or
are to be thereby aggrieved will have the right of specific performance and
injunctive relief giving effect to its or their rights under this Agreement, in
addition to any and all other rights and remedies at Law or in equity, and all
such rights and remedies will be cumulative. 
The parties agree that any such breach or threatened breach would cause
irreparable injury, that the remedies at law for any such breach or threatened
breach, including monetary damages, are inadequate compensation for any loss
and that any defense in any action for specific performance that a remedy at
Law would be adequate is waived.  The
parties further agree that any requirement under any Law to post security as a
prerequisite to obtaining equitable relief is hereby waived.

 

                10.14       Interpretation.  For the
purposes of this Agreement, (i) words in the singular will be held to
include the plural and vice versa and words of one gender shall
be held to include the other gender as the context requires, (ii) the
terms “hereof”, “herein”, and “herewith” and words of similar import will,
unless otherwise stated, be construed to refer to this Agreement as a whole and
not to any particular provision of this Agreement, (iii) the word
“including” and words of similar import when used in this Agreement will mean
including, without limitation, “unless otherwise specified, (iv) the word
“or” will not be exclusive, (v) the phrase “made available” will mean that
the information referred to has been made available if requested by the party
to whom such information is to be made available, (vi) any reference to
any Law referred to in this Agreement will be deemed 

 

35

 

to include any successor Law and the rules
and regulations issued pursuant to such Law or successor Law and any amendments
or supplements to such Law or successor Law, (vii) any accounting term
used in this Agreement will have, unless otherwise specifically provided
herein, the meaning customarily given such term in accordance with GAAP, and
all financial computations hereunder will be computed, unless otherwise
specifically provided herein, in accordance with GAAP consistently applied and
(viii) a “breach” of a representation, warranty, covenant, obligation or
other provision of this Agreement or any Transaction Document will be deemed to
have occurred if there is or has been (A) any inaccuracy in or breach of
or any failure to perform or comply with, such representation, warranty,
covenant, obligation or other provision, (B) any claim by any Person or
other occurrence or circumstance that is or was inconsistent with such
representation, warranty, covenant, obligation or other provision; and the term
“breach” means any such inaccuracy, failure, claim, occurrence or
circumstance.  The parties hereto have
participated jointly in the negotiation and drafting of this Agreement and this
Agreement will not be construed for or against any party by reason of the
authorship or alleged authorship of any provision hereof or by reason of the
status of the respective parties.

 

                10.15       Counterparts.  This
Agreement may be executed simultaneously in two or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which
together will be deemed to constitute one and the same agreement.

 

                10.16       Tax-Free Reorganization.  The
parties intend to adopt this Agreement and the Merger as a tax-free plan of
reorganization under Section 368(a) of the Code.  The parties shall not take a position on any
tax return inconsistent with this Section 10.16 unless there has
been a “final determination” (within the meaning of Section 1313(a)
of the Code) to the contrary. 
Overstock.com and Sub covenant agree not to take any action (or cause
the Surviving Corporation or any Affiliates of Overstock.com or Sub not to take
action), which if taken or not taken, as the case may be, would reasonably be
expected to prevent the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code.

[The remainder of this
page intentionally left blank.]

 

36

                IN WITNESS
WHEREOF, THIS Agreement has been duly executed and delivered
by the duly authorized officers of the parties as of the date first written
above.

 

	
   

  	
  OVERSTOCK.COM:

  	
   

  
	
   

  	
  OVERSTOCK.COM,
  INC., a Utah corporation

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Jason Lindsey

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Jason
  Lindsey

  	
   

  
	
   

  	
   

  	
  Title:

  	
  CFO

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  GEAR.COM:

  	
   

  
	
   

  	
  GEAR.COM,
  INC., a Washington corporation

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SUB:

  	
   

  
	
   

  	
  OVERSTOCK.COM
  ACQUISITION SUBSIDIARY, INC., a Washington corporation

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Jason Lindsey

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Jason
  Lindsey

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

37

 

                IN
WITNESS WHEREOF, THIS Agreement has been duly executed and delivered
by the duly authorized officers of the parties as of the date first written
above.

	
   

  	
  OVERSTOCK.COM:

  	
   

  
	
   

  	
  OVERSTOCK.COM,
  INC., a Utah corporation

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  GEAR.COM:

  	
   

  
	
   

  	
  GEAR.COM,
  INC., a Washington corporation

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Nicholas S. Eitel

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Nicholas
  S. Eitel

  	
   

  
	
   

  	
   

  	
  Title:

  	
  CEO

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SUB:

  	
   

  
	
   

  	
  OVERSTOCK.COM
  ACQUISITION SUBSIDIARY, INC., a Washington corporation

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

38

EXHIBIT A

TO

AGREEMENT
AND PLAN OF MERGER

DEFINITIONS

“Action” — any legal, administrative, arbitral, mediation or
other alternative dispute resolution procedure or other action, proceeding,
claim, inquiry or investigation before any court, arbitrator or other
Governmental Entity.

“Affiliate” — (a) With respect to a particular individual:
(i) each member of such individual’s Family (as defined below in this
definition); (ii) any Person that is directly or indirectly controlled (as
defined below in this definition) by such individual or one or more members of
such individual’s Family; and (iii) any Person with respect to which such
individual or one or more members of such individual’s Family currently serves
or has previously served as a director, officer, employee, partner, member,
manager, executor, or trustee (or in a similar capacity).

(b)           With respect to a
specified Person other than an individual: (i) any Person that directly,
or indirectly through one or more intermediaries, controls, or is controlled
by, or is under common control with, the Person specified; (ii) each
Person that serves as a director, officer, employee, partner, member, manager,
executor, or trustee of such specified Person (or in a similar capacity); and
(iii) any Affiliate of any individual described in clause (ii).

For purposes of this definition, (a) ”control” of a Person
will mean the possession, directly or indirectly, of the power to direct or
cause the direction of its management or policies, whether through the
ownership of voting securities, by Contract or otherwise; and (b) ”Family”
of an individual includes (i) the individual, (ii) the individual’s
spouse and former spouses, (iii) any other natural person who is a child,
sibling or parent of the individual or the individual’s spouse, and
(iv) any other natural person who resides with such individual.

“Agreement” — this Agreement and all the exhibits, schedules or
other documents attached to or referred to in this Agreement, as the same may
be amended, modified or supplemented from time to time in accordance with its
terms.

“Articles of Merger” — the meaning set forth in Section 2.09.

“Books and Records” — the books of account and other financial
and corporate records and files (including records and files stored on computer
disks or tapes or any other storage medium) of Gear.com and related to the
Business, wherever located, including minute books, stock record books, books
of account, corporate seals, written Contracts and other documents, instruments
and papers.

“Business” — as used in Article III or in a context
referring to Gear.com, the business currently conducted or to be conducted by
Gear.com at any time; as used in Article IV or in a 

 

A-1

 

context referring to Overstock.com, the business
currently conducted or to be conducted by Overstock.com.

“Business Day” — any day other than a Saturday, Sunday or other
day on which commercial banks located in Salt Lake City, Utah are authorized or
required to be closed.

“Claim” — a written notice, asserting a breach of representation
or warranty, covenant, agreement or other obligation contained in this
Agreement or in any Transaction Document.

“Closing” — the meaning set forth in Section 2.08.

“Closing Date” — the meaning set forth in Section 2.08.

“Code” — the meaning set forth in Section 3.12(d).

“Confidentiality Agreements” — the meaning set forth in Section 3.30.

“Consents” — all consents, waivers, approvals, allowances,
authorizations, declarations, filings, recordings, registrations, releases,
validations or exemptions and notifications.

“Contract” — any agreement, understanding, contract, commitment,
obligation, promise or understanding (whether written or oral and whether
express or implied).

“Dissenter” — the meaning set forth in Section 2.04(a).

“Dissenting Shares” — the meaning set forth in Section 2.04.

“Effective Date” — the meaning set forth in Section 2.09.

“Effective Time” — the meaning set forth in Section 2.09.

“Employee Inventions” — the meaning set forth in Section 3.30.

“Encumbrance” — any charge, claim, adverse claim, community
property interest, condition, equitable interest, easement, encumbrance,
option, lien, pledge, hypothecation, assignment, deposit arrangement, security
interest (preference, priority or other security agreement or preferential
arrangement of any kind), mortgage, deed of trust, retention of title
agreement, right of first refusal, right of first offer, co–sale right,
preemptive right, or other restriction or granting of any rights of any kind
(including any restrictions on, or right granted with respect to, the use,
voting, transfer, receipt of income or exercise of any other attribute of
ownership).

“ERISA” — the Employee Retirement Income Security Act of 1974,
as amended.

“ERISA Affiliate” — any corporation, partnership, limited
liability company, sole proprietorship, trade, business or other organization,
entity or person that, together with Gear.com or Overstock.com (as applicable),
is treated as a single employer under Section 414(b).

 

A-2

 

“Execution Date” — the meaning set forth in the Recitals.

“Financial Statements” — the meaning set forth in Section 3.13.

“GAAP” — generally accepted accounting principles of the United
States as in effect from time to time, and applied in a manner consistent with
prior periods.

“Gear.com” — the meaning set forth in the introductory
paragraph.

“Gear.com Capital Stock” — any and all shares of Gear.com Common
Stock, Gear.com Series A Preferred Stock and Gear.com Series B
Preferred Stock.

“Gear.com Common Stock” — any and all shares of common stock,
par value $0.01 per share, of Gear.com.

“Gear.com Option Holders” — the meaning set forth in Section 3.04.

“Gear.com Option Plan” — the meaning set forth in Section 2.07(a).

“Gear.com Series A Preferred Stock” — any and all shares of
Series A Convertible Preferred Stock, par value One Cent ($0.01) per
share, of Gear.com.

“Gear.com Series B Preferred Stock” — any and all shares of
Series B Convertible Preferred Stock, par value One Cent ($0.01) per
share, of Gear.com.

“Gear.com Shareholder” — a shareholder of Gear.com, Inc. in
existence immediately prior to the Closing Date.

“Gear.com Shareholders” — all of the shareholders of Gear.com,
Inc. in existence immediately prior to the Closing Date, including without
limitation all shareholders owning any and all of the Gear.com Capital Stock.

“Governmental Entity” — any: (i) federal, state, local,
foreign or international government; (ii) court, arbitral or other
tribunal or governmental or quasi-governmental authority of any nature
(including any governmental agency, political subdivisions, instrumentalities,
branch, department, official, or entity); or (iii) body exercising, or
entitled to exercise, any administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of any nature pertaining to
government.

“Information Package” — a package to be delivered to the
Gear.com Shareholders containing, among other things (i) a brief
description of the transaction; (ii) a copy of this Agreement;
(iii) a business overview of both Gear.com and Overstock.com;
(iv) certain financial statements of Gear.com and Overstock.com;
(v) a consent of the Gear.com Shareholders; (vi) the Letter of
Transmittal; (vii) a Shareholder Release; and (viii) the Investment
Representation Letter.

 

 

A-3

 

“Intellectual Property” — all United States and foreign
(a) inventions and discoveries (whether patentable or unpatentable and
whether or not reduced to practice), all improvements thereon, and all patents,
patent applications and patent disclosures, (b) registered and
unregistered trademarks, service marks, logos, trade names, corporate names and
other identifiers and registrations and applications for registration thereof,
including all marks registered in the United States Patent and Trademark
Office, and including all goodwill associated therewith, (c) copyrights in
both published and unpublished works (whether or not registered) and any
renewal rights therefore, (d) computer software, data and documentation
(in any form, including source code and/or object code form), (e) trade
secrets and confidential business information (including ideas, formulas,
compositions, inventions (whether patentable or unpatentable and whether or not
reduced to practice), know-how, manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, copyrightable works, financial,
marketing and business data, pricing and cost information, business and
marketing plans and customer and supplier lists and information) (collectively,
“Trade Secrets”), (f) Internet domain names or applications
therefor, (g) sui generis database rights, (h) all other proprietary
rights, (i) all copies and tangible embodiments of the foregoing (in
whatever form or medium) in which Gear.com or Overstock.com, as the context may
require, has any rights, (j) all licenses or agreements in connection with
the foregoing and (k) all rights and causes of action for infringement,
misappropriation, misuse, dilution or unfair trade practices associated with
the foregoing.

“Intellectual Property Assignment” — the meaning set forth in Section 3.30.

“Intellectual Property Registrations” — all United States and
foreign patents, patent applications, copyright registrations (and applications
thereof) and trademark registrations (and applications thereof) issued to or
filed by Gear.com in connection with the Business;

“Intellectual Property Rights” — all rights, title and interest
in and to the Intellectual Property.

“Inventory” — all inventory of Gear.com.

“Investment Representation Letter” — a letter containing various
representations and warranties by Gear.com Shareholders and which document is
to be included in the Information Package.

“Laws” — all laws, principles of common law, statutes,
constitutions, treaties, rules, regulations, ordinances, codes, rulings, Orders
and determinations of all Governmental Entities.

“Leases” — all leases, subleases, rights to occupy or use and other
arrangements with respect to Real Property, including, in each case, all
amendments, modifications and supplements thereto and waivers and Consents
thereunder.

“Letter of Transmittal” — a letter from the Gear.com
Shareholders describing, among other things, the shares of Gear.com Capital
Stock owned by such Gear.com Shareholder.

 

A-4

 

“Liability” — all debts, liabilities, obligations, Contracts and
commitments, whether known or unknown, asserted or unasserted, fixed, absolute
or contingent, matured or unmatured, accrued or unaccrued, liquidated or
unliquidated, due or to become due, whenever or however arising (including
liabilities arising out of any Contract or tort based on negligence, strict
liability or otherwise).

“Material Adverse Effect” — (a) When used in connection
with Gear.com, any change or effect (or any development that, insofar as can
reasonably be foreseen is likely to result in any change or effect) that,
individually or in the aggregate with any such other changes or effects, is materially
adverse to the business, assets, financial condition, results of operations or
prospects of Gear.com and (b) when used in connection with Overstock.com,
any change or effect (or any development that insofar as can reasonably be
foreseen, is likely to result in any change or effect) that, individually or in
the aggregate with any such other changes or effects, will materially adversely
affect the ability of Overstock.com, as the case may be, to perform its
obligations under this Agreement or consummate the Merger.

“Maximum Common Stock Pool” — the meaning set forth in Section 2.03.

“Maximum Series A Preferred Pool” — the meaning set forth
in Section 2.03.

“Maximum Series B Preferred Pool” — the meaning set forth
in Section 2.03.

“Merger” — the meaning set forth in the Recitals.

“Most Recent Fiscal Year End” — the meaning set forth in Section 3.13(a).

“Most Recent Financial Statements” — the meaning set forth in Section 3.13(b).

“Order” — any award, decision, stipulation, injunction,
judgment, order, ruling, subpoena, writ, decree or verdict entered, issued,
made, or rendered by any Governmental Entity.

“Overstock.com” — the meaning set forth in the introductory
paragraph.

“Overstock.com Common Stock” — the meaning set forth in Section 4.04.

“Overstock.com Confidentiality Agreement” — the meaning set
forth in Section 4.29.

“Overstock.com Employee Inventions” — the meaning set forth in Section 4.29.

“Overstock.com Intellectual Property Assignments” — the meaning
set forth in Section 4.29.

“Overstock.com Most Recent Financial Statements” — the meaning
set forth in Section 4.11.

“Overstock.com Option Holders” — the meaning set forth in Section 4.04.

 

A-5

 

“Overstock.com Preferred Stock” — the meaning set forth in Section 4.04.

“Permit” — all licenses, permits, certificates, Consents, or
other authorizations, issued, granted, given or otherwise made available by or
under the authority of any Governmental Entity or pursuant to any Law.

“Person” — any individual, sole proprietorship, firm,
corporation (including any non–profit corporation and public benefit
corporation), general or limited partnership, limited liability partnership,
joint venture, limited liability company, estate, trust, association,
organization, labor union, institution, entity or Governmental Entity,
including any successor (by merger or otherwise) of such entity.

“Representative” — with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other
representative of such Person, including legal counsel, accountants, and
financial advisors.

“SEC” — the Securities and Exchange Commission.

“Securities Act” — the Securities Act of 1933, as amended.

“Shareholder Release” — the meaning set forth in Section 6.01(g).

“Sub” — the meaning set forth in the Recitals.

“Subsidiary” — any corporation, limited liability company,
partnership, association or other business entity of which (i) if a
corporation, a majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in the election
of directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof, or (ii) if a limited liability
company, partnership, association or other business entity, a majority of the
partnership or other similar ownership interest thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more Subsidiaries
of the Person or a combination thereof. 
For purposes hereof, a Person or Persons shall be deemed to have a
majority ownership interest in a limited liability company, partnership,
association, or other business entity if such Person or Persons shall be
allocated a majority of limited liability company, partnership, association or
other business entity gains or losses or shall be or control any managing
member or general partner of such limited liability company, partnership,
association or other business entity.

“Surviving Corporation” — the meaning set forth in Section 2.01(a).

“Taxes” — all taxes, charges, duties, fees, levies or other
assessments, including, without limitation, income, excise, property, ad
valorem, sales, use, gross receipts, recording, insurance, value added,
profits, license, withholding, payroll, employment, net worth, intangibles,
capital gains, transfer, stamp, social security, environmental, occupation
alternative minimum, 

 

A-6

 

recapture and franchise taxes, imposed by any
Governmental Entity, and including any interest, penalties and additions
attributable thereto.

“Transaction Documents” — any certificate, schedule, agreement
or other document required to be delivered at Closing pursuant to this
Agreement, including, without limitation, this Agreement.

“Washington Secretary of State” — the meaning set forth in Section 2.09.

“WBCA” — the Washington Business Corporation Act, as amended
from time to time.

 

A-7Exhibit
10.8

 

 

OLD MILL CORPORATE CENTER

THIS LEASE AGREEMENT (the “Lease”) is dated the 23rd day of January,
2002, between HOLLADAY BUILDING EAST L.L.C., (“Lessor”) and Overstock.com
(“Lessee”).

W I T N E S
S E T H:

ARTICLE I

Section
1.1             Premises.  The Lessor hereby leases to Lessee, and
Lessee leases from Lessor, upon the terms and conditions of this Lease, those
premises outlined on a floor plan attached hereto as Exhibit “A” and made a
part hereof (the “Premises”), and containing approximately 19,444 rentable
and 16,478 usable square feet (which includes 572 rentable and 485
usable square feet of the building’s cafeteria) located on the first
floor, suite #100 of the building known as Old Mill Corporate Center
(the “Building”) located at 6322 South 3000 East, Salt Lake City, Utah 84121.  The term “Property” shall refer to the
Building and real property, the entire site, together with any and all
appurtenances, rights, privileges and easements pertaining thereto including
but not limited to the elevators, stairways, corridors, entranceways, rest
rooms, walkways, roadways, driveways, loading docks, cafeteria, parking
facilities and other similar or related facilities (collectively “Common
Areas”) as may exist in and about the Building and Property.

Lessor and Lessee are aware and acknowledge that the foregoing area
contains Lessee’s allocated share of the common area of the building.

Section
1.2             Term.  This Lease shall commence on the date Lessor
delivers to Lessee possession of the Premises in substantially complete
condition (as defined in Section 2.1 hereinafter) (the “Commencement Date”) and
shall terminate on the date five (5) years following the Commencement Date.

ARTICLE II

Section
2.1             Possession.

I.                 The parties intend for Lessor to deliver possession of
the Premises to Lessee in substantially complete condition on February 1,
2002.  Nevertheless, Lessee is aware
and acknowledges that Lessor may be unable to deliver possession of the
Premises on such date due to causes beyond the reasonable control of Lessor.  In such event, this Lease shall remain in
full force and effect; and Lessor shall have no liability to Lessee whatsoever
as a result of the delay in delivery of possession.

II.             In the event Lessor is able to deliver to Lessee
possession of the Premises in substantially complete condition prior to February 1,
2002, Lessee may but shall not be required to take possession of the
Premises at any time prior to February 1, 2002.

III.         In the event Lessor is unable to deliver to Lessee
possession of the Premises in substantially complete condition on February 1,
2002, rent shall abate until Lessor is able to deliver to Lessee possession
of the Premises in substantially complete condition.

IV.         For purposes of this Lease, the term “substantially
complete condition” shall mean that Lessor has completed the improvements in
accordance with the plans set forth in the Addendum, with the exception of
minor punch-list items, and has received a certificate of occupancy for the
Premises.

V.             Should the Commencement Date be other than the first
day of a month, rent shall be prorated for such month based upon the date
Lessor delivers possession of the Premises to Lessee.

VI.         Lessee’s square footage has been calculated using the
architect’s estimates of what the size will be when built.  Lessor and Lessee agree to measure the
“as-built” space during or after construction when the fixed demising walls are
in place.  In the event there is a
change in the size of the suite from the plans to the “as-built” space, Lessor
and Lessee agree to amend the Lease consistent therewith, including any change
in the amount of rent resulting from the change in size.

ARTICLE III

Section
3.1             Base Rental.  Lessee agrees to pay Lessor at 6322 South
3000 East, Suite #120 Salt Lake City, Utah 84121 or such other place as the
Lessor may from time to time designate, an annual rental for the use of the
Premises in the amount of $270,271.60 (the “Base Rental”), payable in
equal monthly installments of $22,522.63 each, the monthly installments
of rental to be paid in advance, without demand, deduction or offset, on the
first day of each and every calendar month during the term hereof (the “Due
Date”).  Rental payments shall commence
on the 1st day of February, 2002, or on the date the
Lessee occupies the Premises, whichever occurs first.  If such commencement day for the payment of rentals occurs on a
day other than the first day of a calendar month, Lessee shall pay rent for the
fractional calendar month involved on a per diem basis (calculated on the basis
of a thirty (30) day month).

Section
3.2             Late Charge and
Interest.  Lessee acknowledges that
late payment by Lessee to Lessor of rent will cause Lessor to incur costs not
contemplated by this Lease, the exact amount of such costs being extremely
difficult and impracticable to fix. 
Such costs include, without limitation, processing and accounting
charges and late charges that may be imposed on Lessor by the terms of any
encumbrance and note secured by any encumbrance covering the Premises.  Therefore, if any installment or rent due
from Lessee is not received by Lessor within five (5) days following the Due
Date, Lessee shall pay to Lessor an additional sum of five percent (5%) of the
overdue rent as a late charge.  The
parties agree that this late charge represents a fair and reasonable estimate
of the costs that Lessor will incur by reason of late payment by Lessee.  Acceptance of any late charge shall not
constitute a waiver of Lessee’s default with respect to the overdue amount or
prevent Lessor from exercising any of the other rights and remedies available
to Lessor.

Rent not paid when due also shall bear interest at the rate of twelve
percent (12%) per annum from the Due Date until paid.  Any late charge also shall bear interest at the rate set forth above,
commencing five (5) days following the Due Date.

Section
3.3             Returned Checks.  In the event a check comes back due to
insufficient funds, a service charge of $25 will be assessed to the Lessee.

ARTICLE IV

Section
4.1             Rent Escalation.  Commencing on each anniversary date of this
Lease, Lessee’s monthly Base Rental amount shall be increased by three
percent (3%) of the monthly rent paid in the preceding lease year.

Section
4.2             Additional Rent.  Subject to Section 4.5 below, the Base
Rental shall be absolutely net to Lessor throughout the Term of this Lease; and
Lessee shall pay all costs, expenses and obligations of every kind relating to
the Premises, the Building, and Property, including all common areas and
parking, on a pro rata or percentage basis and as more particularly defined
hereafter, which may arise or become due during the Term.  Lessee shall indemnify Lessor against such
costs, expenses and obligations.  Lessee
shall pay as additional rent, without demand therefore and without setoff or
deduction, the expenses and charges set out in Sections 4.3 through 4.5
below.  When used in this Lease, the
term “Proportionate Share” of Lessee shall mean and shall be 12.94%
(which is also the percentage the Lessee agrees to pay on all common area and
insurance charges and expenses and taxes as well) of the total expense or
charge in question.

Section
4.3             Definitions.  For purposes of this Article IV and the
Lease in general, the following words and phrases shall have the meanings set
forth below:

A.            “Basic Costs” shall mean all actual
costs and expenses incurred by Lessor in connection with the ownership,
operation, management and maintenance of the Building and Property and related
improvements located thereon (the “Improvements”), including, but not limited
to, all expenses incurred by Lessor as a result of Lessor’s compliance with any
and all of its obligations under this Lease and in providing customary services
to the Premises.  In explanation of the
foregoing, and not in limitation thereof, Basic Costs shall include utilities,
heating, air conditioning, ventilation, water, gas, sewer, electricity, real
and personal property taxes and assessments (whether general or special, known
or unknown, foreseen or unforeseen) and any tax or assessment levied or charged
in lieu thereof, whether assessed against Lessor and/or Lessee and whether
collected from Lessor and/or 

 

Lessee; snow removal, trash removal, cost of equipment or devices used
to conserve or monitor energy consumption, supplies, insurance, including but
not limited to building insurance, liability, hazard, fire, theft, or
earthquake, license, repair and replacement of the Building’s on-site back-up
generator, maintenance and repair of HVAC equipment and systems, permit and
inspection fees, cost of services of independent contractors, costs of
compensation, including, but not limited to property management fees not to
exceed three percent (3%) of Gross Rental, janitorial, gardening, security,
parking, elevator, painting, plumbing, electrical, mechanical, carpentry,
window washing, structural and roof repairs and reserves, signing and
advertising), and rental expense or a reasonable allowance for depreciation of
personal property used in the maintenance, operation and repair of the Building
and Common Areas.  Basic Costs shall
also include capital repairs and replacements amortized over the reasonable
useful life except as provided in Section 4.4 (B) herein after.  Basic Costs shall not include those costs
identified in Section 4.4 (B), nor “Direct Costs” as defined in
Section 4.3 (B).

B.            “Direct Costs” shall mean all actual
costs and expenses incurred by Lessor in connection with any unique or Lessee
specific services requested by Lessee and which Lessor has agreed in writing to
provide in connection with the Premises. 
In addition, Direct Costs shall include all utilities (calculated based
on Lessee’s twenty-four (24) hours per day/seven (7) days per week occupancy,
as agreed by Lessor and Lessee, or if no agreement, as determined by an
independent expert selected by Lessor.

C.            “Estimated Costs” shall mean the
estimated amount of Lessee’s Direct Costs and Lessee’s Proportionate Share of
Basic Costs, excluding the costs of electricity provided to Lessee’s Premises,
if separately metered and billed.

Section
4.4             Report of Basic Costs
and Statement of Estimated Costs.

A.            After the expiration of each
calendar year occurring during the term of this Lease, Lessor shall furnish
Lessee with a written statement of Lessee’s Proportionate Share of Basic Costs
and Lessee’s Direct Costs occurring during the previous calendar year.  The written statement shall specify the
amount by which Lessee’s Direct Costs and Lessee’s Proportionate Share of Basic
Costs exceed or are less than the amounts paid by Lessee during a previous
calendar year pursuant to Section 4.5 (A) below.

B.            At the same time specified in
Section 4.4 (A) above, Lessor shall furnish Lessee a written statement of the
Costs.  Direct Costs and Basic Costs
chargeable to Lessee shall exclude the following costs and expenses:

(a)           Leasing commissions, lease takeover
obligations, and other inducements, costs, disbursements and expenses incurred
in connection with leasing or subleasing space in the Building;

(b)           Payments of principal, interest and
other costs relating to mortgages or deeds of trust or any other debt for
borrowed money;

(c)           Advertising and marketing costs and
expenses;

(d)           Rent and other payments pursuant to
any ground or underlying leases;

(e)           Depreciation, except as expressly
provided herein, and amortization;

(f)            Legal fees, costs and disbursements
based upon or resulting from Lessor’s negligence or other tortious conduct, or
relating to the defense of Lessor’s title to or interest in the Property or
Building;

(g)           Costs incurred to test, survey, clean
up, contain, abate, remove or otherwise remedy Hazardous Substances (as
hereinafter defined) or asbestos containing materials, provided Lessee has not
permitted or caused the same to be placed on or released in the Property;

(h)           Costs incurred by Lessor to the
extent that Lessor is reimbursed by governmental agencies or entities;

(i)            Lessor’s general corporate overhead
and administrative expenses, wages, salaries and fees of officers, including
accounting fees;

(j)            Capital improvements solely for the
benefit of other Lessees and not in common areas; and

(k)           The cost of capital improvements for
the period (useful life) exceeding the Term.

Section
4.5             Payment of Additional
Rent.  Lessee shall pay as
additional rent (“Additional Rent”) Lessee’s Direct Costs and Lessee’s
Proportionate Share of Basic Costs.  The
Additional Rent shall be paid as follows:

A.            With each monthly payment of Base
Rental due pursuant to Section 3.1 above, Lessee shall pay to Lessor, without
offset or deduction, one-twelfth (1/12th) of the Estimated Costs as defined in
Section 4.3 (C).

B.            Within thirty (30) days after
delivery of the written statement referred to in Section 4.4 A above, Lessee
shall pay to Lessor the amount by which Lessee’s Direct Costs and Lessee’s
Proportionate Share of Basic Costs, as specified in such written statements,
exceed the aggregate of Estimated Costs actually paid by Lessee for the year at
issue.  Lessee shall have the right to
audit Lessor’s books upon sixty (60) days notice.  Lessee shall pay costs associated with the audit unless Lessee
finds that Lessor has overstated expenses by more than five percent (5%), in
which case, Lessor will pay audit charges. 
Payments by Lessee shall be made pursuant to this Section 4.5 (B)
notwithstanding that a statement pursuant to Section 4.4 is furnished to
Lessee after the expiration of the Term of this Lease.

C.            If the annual statement of costs
indicates that the Estimated Costs paid by Lessee for any year exceed Lessee’s
actual Direct Costs and Lessee’s Proportionate Share of Basic Costs for the
same year, Lessor, at its election, shall either (i) promptly pay the amount of
such excess to Lessee, or (ii) apply such excess against the next installment
of Base Rental or Additional Rent due hereunder.  Notice of such intent shall be delivered to Lessee not less than
15 days prior to the next installment of basic annual or Additional Rent.

Section
4.6             Resolution of
Disagreement.  Every statement given
by Lessor pursuant to Section 4.4 shall be conclusive and binding upon Lessee
unless within forty-five (45) days after the receipt of such statement Lessee
shall notify Lessor that it disputes the correctness thereof, specifying the
particular respects in which the statement is claimed to be incorrect.  If such dispute shall not have been settled
by agreement, the parties hereto shall submit the dispute to mediation within
one hundred twenty (120) days after delivery of the statement, Lessee shall pay
the amount due according to Lessor’s Statement, and such payment shall be without
prejudice to Lessees position. 
Mediation shall be conducted in Salt Lake City in accordance with the
Commercial Mediation Rules of the American Arbitration Association.  If the dispute shall be determined in
Lessee’s favor, Lessor shall forthwith pay Lessee the amount of Lessee’s
overpayment of rents resulting from compliance with Lessor’s statement,
including interest on disputed amounts at twelve percent (12%) per annum.  Lessor agrees to grant Lessee reasonable access
to Lessor’s books and records for the purpose of verifying operating expenses,
and costs incurred by Lessor.

Section
4.7             Limitations.  Nothing contained in this Part IV shall be
construed at any time so as to reduce the monthly installments of Base Rental
payable hereunder below the amount set forth in Section 3.1 of this Lease.

Should Lessee vacate the premises prior to statements being sent,
Lessee shall provide Lessor with a mailing address of both business and
personal residence in order to forward said statement.  Lessee shall be held responsible for the
reimbursement to Lessor for all additional rents incurred during the period of
occupancy.  All terms and conditions
outlined within this section shall apply should Lessee vacate the premises.

ARTICLE V

Section
5.1             Use.  Lessee shall use the Premises only for general
office purposes and for no other business or purpose, without the prior
written consent of Lessor.

Section
5.2             Building Rules.  Attached hereto are the rules and
regulations relating to the Premises and the entire Property of which the
Premises are a part.  Lessor shall have
the right, at any time or times hereafter, to adopt other or additional rules
and regulations, and to rescind or amend all or any of the attached rules and
regulations or of amendments to any of the rules and regulations attached.  The Lessee shall faithfully observe and
strictly comply with and abide by all such rules and regulations from time to
time in force and shall cause Lessee’ employees, guests and invitees to observe
and comply with the same.

(a) Section VIII of Building Rules states that, in
compliance with the Utah Clean Air Act, it is our policy to have tenants
refrain from smoking in the buildings.

(b) Section IX of Building Rules states that chair
mats are required under all rolling chairs.

Section
5.3             Use Prohibited.  Lessee shall not do or permit anything to be
done in or about the Premises nor bring or keep anything therein which will in
any way increase the rate of or affect any fire or other insurance upon the
Building or any of its contents, or cause a cancellation or any insurance
policy covering said Building or contents. 
Lessee shall not do or permit anything to be done in or about the
Premises which will in any way obstruct or 

 

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interfere with the rights of other tenants or occupants of the Building
or injure or annoy them, or use or allow the Premises to be used for any
immoral, unlawful or objectionable purpose, nor shall Lessee cause, maintain or
permit any nuisance in, or about the Premises. 
No loud speakers or other similar device, system or apparatus which can
be heard or experienced outside the Premises shall, without the prior written
approval of Lessor, be used in or at the Premises.  Lessee shall not commit or suffer to be committed any waste in or
upon the Premises.  The provision of
this Section 5.3 are for the benefit of Lessor only and are not nor shall they
be construed to be for the benefit of any tenant or occupant of the Building.

ARTICLE VI

Section
6.1             Utilities.  Lessor agrees to furnish reasonable amounts
of heat and air conditioning during generally recognized business hours and
during the usual and appropriate season, and to furnish electricity and water
in reasonable amounts; but Lessor shall not be liable for any loss or damage
caused by or resulting from any variation, interruption or failure of such
services due to any cause other than the gross negligence or willful misconduct
of Lessor; and no temporary interruption or failure of such services incident to
the making of repairs, alterations or improvements or due to accidents or
strikes or conditions or events not under Lessor’s control shall be deemed as
an eviction of Lessee or relieve Lessee from any of Lessee’s obligations
hereunder.  If there are separate
utility meters for the Premises, Lessee will pay all costs associated with said
utility meters.  If there are not
separate utility meters, Lessee will pay their proportionate share of the
associated utility costs.

Section
6.2             Excess Consumption of
Utilities.  Lessee must have prior
written consent of the Lessor to add any equipment to, or in any other way make
use of, the Premises which may cause or result in a larger than normal use of
heat, air conditioning, electricity, gas, water, sewer, refuse removal or other
services.  In the event Lessor consents
to the installation of such equipment, or such use, Lessor may assess the
estimated additional expense to the Lessee and Lessee shall pay said amount at
the same time he pays his monthly rental installment.

Section
6.3             Janitorial and Other
Services.  Lessor agrees to supply
janitorial service for all interior and exterior common areas.  Lessor shall provide janitorial
service for the interior portion of the leased unit.  If Lessee requires janitorial services above and beyond services
required for a standard, 40-hour-work-week tenant, Lessee shall be
responsible for all associated additional costs.

(a) Janitorial service includes vacuuming and dumping
of trash cans.

(b) Lessee shall be responsible for carpet cleaning,
blind cleaning, window cleaning and, when applicable, stripping and waxing of
floors.

(c) Lessor shall be responsible for normal repairs to
the basic plumbing, heating, air conditioning and electrical systems.

(d) Lessor shall be responsible for the purchase,
replacement, and installation of all light bulbs within leased premises.

(e) In the event of negligence or willful destruction
by Lessee or Lessee’s clients, Lessee shall be responsible for plumbing and
electrical repairs, the replacement of carpets, draperies, wall coverings,
floor tile, light fixtures and related attachments, and any other hardware
items within the Premises.

(f) Lessee further agrees that any redecorating done
during the term of this Lease shall be at the expense of Lessee.

ARTICLE VII

Section
7.1             Right of Entry.  Lessor shall have the right of access to the
Premises at all reasonable times for the purposes of, including, without
limitation, inspecting, cleaning and repairing the same, or to exhibit the
Premises at any time before the expiration of this Lease.

Section
7.2             Maintenance and Repair.  Lessee shall maintain and repair the
interior of the Premises in the same condition as delivered to it, ordinary
wear and tear excepted.  Lessee shall
not damage or destroy the Premises.  In
the event Lessee shall fail to comply with its obligations hereunder, Lessor
shall have the right to enter onto the Premises and effect such repair and
maintenance and charge the costs thereof to the Lessee together with twelve
percent (12%) interest per annum on the costs so expended, said amounts to be
considered as additional rent hereunder.

Section
7.3             Improvements.  Lessee hereby accepts the Premises in its
present condition without any obligation upon Lessor to make any repairs or
restoration thereto except as provided on Addendum “A” attached hereto and made
a part hereof.  It is further agreed
that this Lease is made by the Lessor and accepted by the Lessee under the
distinct understanding and agreement that the Lessor shall have the right and
privilege to make and build additions to the Building as it may deem wise and
advisable without any liability to the Lessee therefor.

(a) Lessee shall not make any alterations, additions
or improvements in or to the Premises without first obtaining the prior written
consent of Lessor.  Lessee hereby waives
all rights to make repairs at the expense of Lessor as provided by any law or
statute or ordinance now or hereafter in effect.

(b) All alterations, additions of improvements to the
Premises, installed at the expense of Lessor or Lessee, except movable office
furniture, Lessee’s trade fixtures and equipment, shall, unless Lessor elects
otherwise in writing, become the building of Lessor upon the installation
thereof, and shall be surrendered with the Premises at the expiration or
termination of this Lease.

Section
7.4             Liens.  Lessee shall not permit any mechanics’,
materialmen’s or other liens arising out of work performed by Lessee or on
Lessee’s behalf, to be filed against the building, the Building, or the
Premises, nor against Lessee’s leasehold interest in the Premises.  Lessor shall have the right at all
reasonable times to post and keep posted on the Premises any notices which it
deems necessary for protection from such liens.  If any such liens are so filed, Lessor may, upon thirty (30) days
written notice to Lessee, without waiving its rights based on such breach by
Lessee and without releasing Lessee from any obligations, pay and satisfy the
same and in such event the sums so paid by Lessor, with interest at the rate of
twelve percent (12%) per annum from the date of payment, shall be due and
payable by Lessee at once without notice or demand.

Section
7.5             Taxes.  Lessee agrees to pay, before delinquency,
any and all taxes levied or assessed and which become payable during the term
hereof upon Lessee’s equipment, furniture, fixtures, and other personal
property located in the Premises, including carpeting installed by Lessee even
though said carpeting has become a part of the Premises; and any and all taxes
or increases therein levied or assessed on Lessor or Lessee by virtue of
alterations, additions, or improvements to the Premises made by Lessee.  In the event said taxes are charged to or
paid or payable to Lessor, Lessee, forthwith upon demand therefor, shall
reimburse Lessor for all of such taxes paid by Lessor.  Any taxes paid by Lessor on behalf of Lessee
shall bear interest at the annual rate of twelve percent (12%) per annum from
the date of payment by Lessor thereof.

ARTICLE VIII

Section
8.1             Damage or Destruction.  If the Premises or the Building shall be
damaged by fire or other casualty, the damage (exclusive of any improvements or
other changes made to the Premises and paid for by Lessee), may, at the option
of Lessor, be repaired by and at the expense of Lessor to as near condition
which existed immediately prior to such damage or destruction as reasonably
possible; provided, however, that if as a result of damage by fire or other
casualty more than fifty percent (50%) of the net rental area of the Building
is rendered untenantable, then and in such event either Lessor or Lessee shall
have the right and option (exercised, if at all, by giving written notice to
the other party within thirty (30) days of such destruction or casualty) to terminate
this Lease as of the date of such casualty. 
Subject to the foregoing, the Lessor shall commence such repair within
sixty (60) days after such casualty and shall complete the same within a
reasonable time thereafter, subject to acts of God, strikes and other
occurrence not within the control of Lessor. 
In the event Lessor fails to commence such repair or restoration within
such period or shall fail to prosecute such repair and restoration in a timely
manner, then Lessee shall have the right and option (exercised, if at all, by
giving written notice within fifteen (15) days of such failure) to terminate
this Lease.  In the event this Lease is
terminated for any of the reasons aforesaid, any rents or other payments shall
be prorated as of the effective date of such termination and proportionately
refunded to the Lessee or paid to Lessor as the case may be.  During any period in time which the Premises
or any portion thereof is rendered untenantable by fire or other casualty, the
rent shall abate proportionately to the area rendered untenantable for the
period of time during which this condition exists.

Section
8.2             Eminent Domain.  If all or any part of the Premises are taken
by any public or quasi-public authority under the power of eminent domain, or
conveyed to such authority in lieu of such condemnation, then either party, at
its option, shall have the right to terminate this Lease as of the day
possession shall be taken by such authority. 
If, as a result of any such taking, or conveyance in lieu of condemnation,
more than fifty percent (50%) of the net rentable area of the Building is
rendered untenantable, then the Lessor shall have the right and option
(exercised, if at all, by giving written notice within thirty (30) days of such
taking or conveyance) to terminate this Lease as of the date of such taking or
conveyance.

If all or any part of the Building in which the Premises are located
shall be taken by any such authority, or conveyed in lieu of condemnation, then
Lessor shall have the right and option to terminate this Lease.  In the event this Lease is terminated for
any of the reasons aforesaid, any rents or other payments shall be prorated as
of the effective date of such termination and proportionately refunded to the
Lessee or paid to the Lessor as the case may be, and Lessee shall have no claim
against Lessor for the value of any unexpired term of the Lease.  All damages awarded for such taking under
the power of eminent domain, or conveyance in lieu thereof, shall belong to and
be the building of Lessor irrespective of the basis upon which they were
awarded; provided, however, that Lessee shall be entitled to receive any
damages specifically awarded for its share of moving expenses.

 

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ARTICLE IX

Section
9.1             Multiple Parties Tenant.  If there is or comes to be more than one
party that constitutes Tenant hereunder (a) Their obligations shall be joint
and several; and (b) Any notice required or permitted to be given to Tenant may
be given by or to any one of such parties and shall have the same force and
effect as if given by or to all on such parties.

Section
9.2             Assignment.  Lessee may not assign, mortgage, pledge,
hypothecate, or encumber this Lease or sublet the Premises or any part thereof,
nor allow any other person (the agents and servants of Lessee excepted) to
occupy or use the Premises, or any part thereof, or any right or privilege
appurtenant thereto, without first obtaining Lessor’s written consent;
provided, however, if Lessor consents to one or more assignments of this Lease
or consents to the subletting from time to time of the Premises or parts
thereof, the Lessee shall nevertheless remain liable for its performance of
this Lease on its part to be performed, including the payment of the rentals
and other charges assumed by Lessee hereunder. 
Lessor shall not withhold consent unreasonably.

Section
9.3             Subletting.  Notwithstanding anything in Section 9.1
above to the contrary, in the event at any time during the term of this Lease,
Lessee desires to sublet the Premises, Lessor reserves the prior right and
option (a) to require the Lessee to sublet the Premises to a sublessee approved
by Lessor at the same rent as Lessee is required to pay to Lessor under this
Lease; however should Lessee choose to sublease at a reduced rate, Lessee shall
continue to pay to Lessor the full amount due, or (b) to terminate this
Lease.  Lessee shall notify Lessor in
writing not less than sixty (60) days in advance if Lessee proposes to sublet
the Premises, designating the terms of the proposed subletting.  Lessor shall be allowed thirty (30) days
after receipt of Lessee’s notice within which to approve the sub-tenant
identified in Lessee’s notice.  In the
event lessor approves the sub-tenant identified in Lessee’s notice, all of the
provisions of Section 9.1 above respecting subletting shall continue to be in
full force and effect; and nothing contained in this Section (9.3) shall be
construed as a waiver by Lessor of any of its rights under Section 9.1 above.

ARTICLE X

Section
10.1           Signs.  The Lessee shall not place or maintain or
permit to be placed or maintained any signs for advertising of any kind
whatsoever on the exterior of the Building or on any exterior windows in the
Building or elsewhere within the Premises so as to be visible from the exterior
of the Building, or on the interior walls, including doorways of the Premises,
so as to be visible from the public hallways or other public areas of the
Building, except such numerals and lettering on doorways as may be approved and
permitted by Lessor in writing.

Section
10.2           Parking.  Lessee shall have the right to use three and
one half (3.5) parking spaces per 1,000 usable square feet.  In the event Lessee regularly uses more
parking spaces, Lessor shall have the right to charge Lessee for such excess
use at the rates specified below. 
Lessor shall have the sole and exclusive right to designate, and from
time to time in its discretion, redesignate, the parking space or spaces
available for the use of Lessee, its employees, its agents, officers and
customers.  Such parking facilities
shall at all times be under the exclusive control and management of Lessor, and
Lessor shall have the right from time to time to establish, modify and enforce
rules and regulations with respect to such parking facilities.  The parking lot may not be used to store
vehicles or to work on vehicles.  No
vehicle shall be parked in the parking lot for more than eighteen (18)
consecutive hours without prior approval from Lessor.  The tenant agrees to assume responsibility for compliance by its
employees with the parking provisions contained herein.  If the Tenant or its employees park in other
than such designated parking areas the Landlord may charge the Tenant, as
additional rent, Ten Dollars ($10.00) per day for each day or partial day each
such vehicle is parked in any part of the parking lot, or in a fire lane or
handicapped area.  Any vehicles parked
in the parking lots in breach of these terms may be towed away at Lessee’s
expense.  Lessee releases, indemnifies
and holds harmless Lessor and Lessor’s officers, employees and agents from any
claims arising from or relating to such towing of vehicles including any
consequential damages or loss of property or loss of the use of the vehicle or
other property.  The right to tow a
vehicle in addition to Lessor’s rights under the Lease for default or breach of
any of the terms hereof.

Other than parking, egress and ingress, Lessee has no right to use the
common areas, and Lessee shall not obstruct the common areas, including the
sidewalks, landscaped areas, paved areas, parking lots, or driveways.

ARTICLE XI

Section
11.1           Breach or Default.  Lessee shall have breached this Lease and
shall be considered in default hereunder if (a) Lessee files a petition in
bankruptcy or insolvency or for reorganization under any bankruptcy act, or
makes an assignment for the benefit of creditors; (b) involuntary proceedings
are instituted against Lessee under any bankruptcy act; (c) Lessee assigns this
Lease for the benefit of creditors; (d) Lessee fails to pay any rent when due
and does not make the delinquent payments within five (5) days after receipt of
notice thereof from Lessor; or (e) Lessee fails to perform or comply with any
of the covenants or conditions of this Lease and such failure continues for a
period of thirty (30) days after receipt of notice thereof from Lessor.

Section
11.2           Effect of Breach or
Default.  In the event of a breach
of this Lease as set forth in Section 11.1 above, the rights of Lessor shall be
as follows:

(a)   Lessor
shall have the right to cancel and terminate this Lease, as well as all of the
right, title, and interest of Lessee hereunder, by giving to Lessee not less
than ten (10) days notice of the cancellation and termination.  On expiration of the time fixed in the
notice, this Lease and the right, title and interest of Lessee shall terminate
in the same manner and with the same force and effect, except as to Lessee’s
liability, as of the date fixed in the notice of cancellation and termination
were the end of the term herein originally determined.

(b)   Lessor may
elect, but shall not be obligated, to make any payment required by Lessee
herein or comply with any agreement, term, or condition required hereby to be
performed by Lessee, and Lessor shall have the right to enter the Premises for
the purpose of correcting or remedying such default and to remain until the
default has been corrected, or remedied, but any expenditure for the correction
by Lessor shall not be deemed to waive or release Lessee’s default or Lessor’s
right to take any action as may be otherwise permissible hereunder or under the
law in the case of any default.

(c)   Lessor may
re-enter the Premises immediately and remove the building and personnel of
Lessee, and store the building in a public warehouse or at a place selected by
Lessor, at the expense of lessee.  After
re-entry, Lessor may terminate this Lease on giving ten (10) days written
notice of termination to Lessee. 
Without such notice, re-entry will not terminate this Lease.  On termination, Lessor may recover from
Lessee all damages resulting from the breach, including the cost of recovering
the Premises and the worth of the balance of this Lease over the reasonable
rental value of the Premises for the remainder of the Lease term, which such
sum shall be immediately due Lessor from Lessee.

After re-entry, Lessor may relet the Premises or any
part thereof for any term without terminating this Lease, at the rent and on
the terms as Lessor may choose.  Lessor
may make alterations and repairs to the Premises.  The duties and liabilities of the parties if the Premises are
relet as provided herein shall be as follows:

(I) In addition to Lessee’s liability to Lessor for
breach of the Lease, Lessee shall be liable for all expenses of the reletting,
for the alterations and repairs made, and for the difference between the rent
received by Lessor under the new lease agreement and the rent installments that
are due for the same period under this Lease;

(II) Lessor shall have the right to apply the rent
received from reletting the Premises (a) to reduce Lessee’s indebtedness to
Lessor under this Lease, not including indebtedness for rent; (b) to expenses
of the reletting and alterations and repairs made; (c) to rent due under this
Lease; or (d) to payment of future rent under this Lease as it becomes due.

If the new lessee does not pay a rent installment
promptly to Lessor, and the rent installment has been credited in advance of
payment to the indebtedness of Lessor as provided herein, and during any rent
installment period, are less than the rent payable for the corresponding
installment period under this Lease, Lessee shall pay Lessor the deficiency,
separately for each rent installment deficiency period and before the end of
that period.  Lessor may at any time
after a reletting terminate the Lease for the breach on which Lessor had based
the re-entry and subsequently relet the Premises.

(d)   After
re-entry, Lessor may procure the appointment of a receiver to take possession
and collect rents and profits of Lessee, and, if necessary, to collect the
rents and profits, the receiver may take possession of the personal property
used in the business of Lessee, including inventory, trade fixtures and
furnishing, and use them without compensating Lessee.  Proceedings for appointment of a receiver by Lessor shall not
terminate and forfeit this Lease unless the Lessor has given written notice of
termination to Lessee as provided herein.

(e)   In addition
to the remedies provided in this Section 11.2, the Lessor shall have all
remedies now or hereafter provided by law for the enforcement of the provisions
of this Lease and the Lessor’s rights hereunder.

Section
11.3           Abandonment.  Lessee shall not vacate or abandon the
Premises at any time during the term hereof, and if Lessee shall abandon,
vacate or surrender the Premises, or be dispossessed by process of law, or
otherwise, any personal property belonging to Lessee and left on the 

 

- 4 -

 

Premises
shall be deemed to be abandoned, at the option of Lessor, except such property
as may be mortgaged to Lessor.  However,
Lessee reserves the right to vacate the premises at any time and continue to
pay monthly rental obligation.

Section
11.4           Lessor’s Lien.  As security for the payment and performance
by the Lessee of all terms, covenants and conditions on the part of the Lessee
to be paid or performed hereunder, the Lessee hereby grants to the Lessor a
security interest in all furniture, equipment, fixtures, furnishings, and other
personal property of the Lessee now or hereafter situated in the Premises.  During any time that the Lessee is in
default under this Lease, the Lessee shall not have the right to remove from
the Premises any such furniture, equipment, fixtures, furnishings, or other
personal property.  In the event of any
default hereunder by the Lessee, the Lessor shall have all rights and remedies
of a secured party under the Utah Uniform Commercial Code, as now in force or
as hereafter amended.  Such security
interest of the Lessor shall be in addition to any statutory lien or other
security interest now or hereafter exiting.

ARTICLE XII

Section
12.1           Subordination.

(a)           This
Lease, at Lessor’s option, shall be subordinate to any ground lease, mortgage,
deed of trust, or any other hypothecation for security now or hereafter placed
upon the building and to any and all advances made on the security thereof and
to all renewals, modifications, consolidations, replacements and extensions thereof.  If Lessor or any mortgagee, trustee, or
ground lessor shall elect to have this Lease prior to the lien of a mortgage,
deed of trust or ground lease, and shall give written notice thereof to Lessee,
this Lease shall be deemed prior to any such mortgage, deed of trust or ground
lease or the date of recording thereof.

(b)           Lessee agrees to execute any
documents required to effectuate such subordination or to make this Lease prior
to the lien of any mortgage, deed of trust or ground lease, as the case may be
(including, without limitation, a Subordination, Non-Disturbance and Attornment
Agreement in the standard form used by Lessor’s lender), and failing to do so
within ten (10) days after written demand, does hereby make, constitute, and
irrevocably appoint Lessor as Lessee’s attorney in fact and in Lessee’s name,
place and stead, to do so.  Upon
Lessee’s written request to Lessor, Lessor shall request that its lender issue
to Lessee a non-disturbance agreement on such lender’s standard form; provided,
however, the failure of such lender to issue such a non-disturbance agreement
shall in no way affect Lessee’s obligations under this Lease, including this
Section 12.1.

Section
12.2           Mortgagee Protection.

(a)           If, in connection with obtaining
financing for the building or any portion thereof, Lessor’s lender shall
request reasonable modifications to this Lease as a condition to such
financing, Lessee shall not unreasonably withhold, delay or defer its consent
to such modifications, provided such modifications do not materially adversely
affect Lessee’s rights or increase Lessee’s obligations under this Lease.

(b)           Lessee agrees to give to any trust
deed or mortgage holder (“Holder”) by prepaid certified mail, return receipt
requested, at the same time as it is given to Lessor, a copy of any notice of
default given to Lessor, provided that prior to such notice Lessee has been
notified, in writing, (by way of notice of assignment of rents and leases, or
otherwise) of the address of such Holder. 
Lessee further agrees that if Lessor shall have failed to cure such
default within the time period provided for in this Lease, then the Holder
shall have an additional thirty (30) days after expiration of such period, or
after receipt of such notice from Lessee (if such notice to the Holder is
required by this section), whichever is last to occur, within which to cure
such default or if such default cannot be cured within that time, then such
additional time as may be necessary to cure such default (including but not
limited to commencement of foreclosure proceedings, if necessary, to effect
such cure), in which event this Lease shall not be terminated.

ARTICLE XIII

Section
13.1           Indemnification.  Lessee agrees to indemnify and save the
Lessor harmless from expenses, actions, costs of actions (including attorneys’
fees), for injury (including death), to any person or persons which may occur
in, on or about the Premises.  Lessee
agrees to pay all sums of money in respect of any labor, services, materials,
supplies or equipment furnished or alleged to have been furnished to Lessee in
or about the Premises which may be secured by any mechanic’s, materialman’s or
other lien against the Premises or the Lessee’s interest therein and will cause
each such lien to be discharged, if filed, provided that Lessee may contest
such lien upon delivery to Lessor of cash or marketable securities having a
face amount not less than one and one-half (1 1/2) times the face amount of any
such lien.  If such lien is reduced to
final judgment, then and in such event Lessee shall forthwith pay and discharge
said judgment.

Section
13.2           Assumption of Risk.  The Lessee assumes all risk of damage of
Lessee’s property within the Premises which may be caused by water leakage,
fire, windstorm, explosion, failing plaster or other cause, or by the act or
omission of any other tenant in the Building, unless caused by Lessor’s
negligence.

ARTICLE XIV

Section
14.1           Notices.  Any notice given to Lessor shall be in
writing and forwarded to the Lessor at Lessor’s office by registered or
certified mail.  Any notices given to
the Lessee shall be in writing and forwarded to the Lessee at the Premises by
registered or certified mail.  Either
Party may designate another place for service or notices by written direction
served on the other party by registered or certified mail.  Any such notice shall be deemed to have been
received four (4) days after its mailing.

ARTICLE XV

Section
15.1           Relocation of Premises.  Lessor reserves the right to relocate the
Lessee in substitute Premises of equivalent square footage and configuration
within the building upon sixty (60) days written notice to Lessee.  If this right is exercised, Lessor shall, at
its own expense, provide Lessee with paint, wall covering and carpeting at the
new location, comparable to those in the original location, and shall, at
Lessor’s own expense, move Lessee’s office furnishing to the new location.  If the current rental rate at the new
location is less than at the original location, Lessee’s rent hereunder shall
be reduced accordingly.  However, if the
current rental rate at the new location is higher than at the original
location, the Lessee’s rent shall not be increased for the remainder of the
term hereof, except as provided in ARTICLE IV hereof.

ARTICLE XVI

Section
16.1           Notice of Surrender.  At least ninety (90) days before the last
day of the term hereof, Lessee shall give to Lessor a written notice of
intention to surrender the Premises on that date, but nothing contained herein
shall be construed as an extension of the term hereof or as consent of Lessor
to any holding over by Lessee.

Section
16.2           Surrender at End of Term.  Upon the expiration of the term hereof or
sooner termination of this Lease, Lessee agrees to surrender and yield
possession of the Premises to the Lessor peacefully and in good order and
condition, subject only to ordinary wear and reasonable use thereof, and
subject to such damage, destruction or condition as Lessee is not required to
restore or remedy under other terms and provisions of this Lease.  Lessee shall promptly surrender all keys for
the Premises to Lessor at the place then fixed for payment of rent and shall
inform Lessor of combinations on any locks and safes on the Premises.  Any property left in the Premises after the
expiration or termination of this Lease shall be deemed to have been abandoned
by Lessee and the building of Lessor to dispose of as Lessor deems
expedient.  Lessee agrees that, if
Lessee does not surrender to Lessor, at the expiration of the term of this
Lease or upon any termination thereof, then Lessee will pay to Lessor all
damages that Lessor may suffer on account of Lessee’s failure to surrender
possession to Lessor, and will indemnify and save Lessor harmless from and
against all claims made by any succeeding lessee of the Premises against Lessor
on account of such delay.

Section
16.3           Surrender of Premises.  The voluntary or other surrender of this
Lease by Lessee or a mutual cancellation thereof shall not work a merger, and,
at the option of Lessor, shall terminate all or any existing subleases or
subtenancies, or at the option of Lessor, may operate as an assignment to
Lessor of any or all such subleases or subtenancies.

Section
16.4           Holding Over.  In the event Lessee, with Lessor’s consent,
remains in possession of the Premises after the expiration of this Lease and
without the execution of a new lease, such tenancy shall be deemed to be from
month to month, subject to all the conditions, provisions and obligations of
this Lease, at a rental equal to the last rental paid under this Lease, plus
annual increases as more particularly set forth in ARTICLE IV of this Lease.

Section
16.5           Quiet Enjoyment.  The Lessor covenants and agrees with Lessee
that upon Lessee paying said rent and other charges and performing all of the
covenants and provisions aforesaid on Lessee’s part to be observed and
performed, the Lessee shall and may peaceably and quietly have, hold and enjoy
the Premises in accordance with this Lease.

Section
16.6           Light and Air.  Lessee covenants and agrees that no
diminution of light, air or view by any structure which may hereafter be
erected (whether or not by Lessor) shall entitle Lessee to any reduction of
rent hereunder, result in any liability of Lessor to Lessee, or in any other
way affect this Lease.

 

- 5 -

 

ARTICLE XVII

Section
17.1           Insurance.  Lessee agrees to keep in force during the
term hereof, at Lessee’s expense, public liability insurance with limits in the
amount of $1,000,000 for injuries to or death of persons occurring on or about
the Premises and property damage insurance with limits of $500,000.  The limit of any such insurance shall not
however, limit the liability of Lessee hereunder.  Said policy shall name Lessor as an additional insured, and shall
insure Lessor against liability as respects acts, or omissions of Lessee; shall
be issued by an insurance company licensed to do business in the State of Utah;
and shall provide that said insurance shall not be canceled unless ten (10) days
prior written notice to Lessor is first given. 
Insurance required hereunder shall be in companies holding a “General
Policyholders Rating” of at least B plus, or such other rating as may be
required by a lender having a lien on the Premises, as set forth in the most
current issue of “Best’s Insurance Guide”.

Said policy or a certificate thereof shall be delivered to lessor by
lessee upon commencement of the term and upon such renewal of such insurance.

Section
17.2           Subrogation.  As long as their respective insurers so
permit, Lessor and Lessee hereby mutually waive their respective rights of
recovery against each other for any loss insured by fire, extended coverage and
other property insurance policies existing for the benefit of the respective
parties.  Each party shall obtain any
special endorsements, if required by their insurer to evidence compliance with
the aforementioned waiver.

ARTICLE XVIII

Section
18.1           Obedience to Laws.  Lessee shall, at Lessee’s sole cost and
expense, promptly comply with all statutes, ordinances, rules, orders,
regulations and/or requirements of all county, municipal, state, federal, and
other applicable governmental authorities now in force, or which may
hereinafter be in force, pertaining to the Premises.  Lessee shall not use or permit anything to be done in or about
the Premises which will in any way conflict with any statutes, ordinances,
rules, orders, regulations and/or requirements of all county, municipal, state,
federal, and other applicable governmental authorities now in force, or which
may hereinafter be in force.

Section
18.2           Governing Law.  This Lease shall be construed and governed
by the laws of the State of Utah. 
Should any provision of this Lease be illegal or not enforceable under
such laws, it or they shall be considered severable and this Lease and its
conditions shall remain in force and be binding upon the parties as though the
said provisions had never been included.

Section
18.3           Waiver of Liability.  Lessor shall not be liable to Lessee, or
those claiming through or under Lessee, for injury, death or property damage
occurring in, on or about the Building and appurtenances thereto, and Lessee
shall indemnify Lessor and hold it harmless from any claim arising out of any
injury, death or property damage occurring in, on or about the Premises to
Lessee or any employee, customer or invitees of Lessee.

Section
18.4           Time.  Time is of the essence of this Lease and
each and all of its provisions.

Section
18.5           Attorneys’ Fees.  If either Lessor or Lessee shall obtain
legal counsel or bring an action against the other by reason of the breach of
any covenant, warranty or condition hereof, or otherwise arising out of this
Lease the unsuccessful party shall pay to the prevailing party reasonable
attorneys’ fees, which shall be payable whether or not any action is prosecuted
to judgment.  The term “prevailing
party” shall include, without limitation, a party who obtains legal counsel or
brings an action against the other by reason of the other’s breach or default
and obtains substantially the relief sought, whether by compromise, settlement
or judgment.

Section
18.6           Waiver.  No waiver of any condition or covenant of
this Lease by Lessor shall be deemed to imply or constitute a further waiver by
Lessor of any other condition of this Lease. 
The rights and remedies created by this Lease are cumulative and the use
of one remedy shall not be taken to exclude or waive the right to the use of
another.

Section
18.7           Severability.  If any provision of this Lease or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Lease and the application of
such provisions to other persons or circumstances shall not be affected thereby
and shall be enforced to the greatest extent permitted by law.

Section
18.8           Addenda.  Clauses, additional conditions, plats and
riders, if any, signed by Lessor and Lessee and endorsed on or affixed to this
Lease are a part hereof, and in the event of variation or discrepancy the
duplicate original hereof, including such clauses, additional conditions, plats
and riders, if any, held by Lessor shall control.

Section
18.9           Entire Agreement.  This Lease constitutes the entire agreement
between Lessor and Lessee and no representations, express or implied, either
written or oral, not herein set forth shall be binding upon and inure to the
benefit of Lessor or Lessee.  This Lease
shall not be modified by any oral agreement, either express or implied, and all
modifications shall be in writing and signed by both Lessor and Lessee.  No surrender of the premises, or of the
remainder of the term of this Lease shall be valid unless accepted by Lessor in
writing.

Section
18.10         No Waiver.  Failure of Lessor to insist, in any one or
more instances, upon strict performance of any term, covenant, or condition of
this Lease, or to exercise any option herein contained, shall not be construed
as a waiver or relinquishment for the future of such term, covenant, condition
or option, but the same shall continue and remain in full force and
effect.  The receipt by Lessor of rents
with knowledge of a breach in any of the terms, covenants or conditions of this
Lease to be kept or performed by Lessee shall not be deemed a waiver of such breach
and Lessor shall not be deemed to have waived any provisions of this Lease
unless expressed in writing and signed by Lessor.

Section
18.11         Heirs and Assigns.  This Lease and all provisions, covenants and
conditions thereof shall be binding upon and inure to the benefit to the heirs,
legal representatives, successors and assigns of the parties hereto, except
that no person, firm, corporation or court officer holding under or through
Lessee in violation of any of the terms, provisions or conditions of this Lease
shall have any right, interest or equity in or to this Lease, the terms of this
Lease or the Premises covered by this Lease.

Section
18.12         Sale by Lessor.  In the event of a sale or conveyance by
Lessor of the Building, the same shall operate to release Lessor from any
future liability upon any of the covenants or conditions, express or implied,
herein contained in favor of Lessee, and in such event Lessee agrees to look
solely to the responsibility of the successor in interest of Lessor in and to
this Lease.  If any security be given by
Lessee to secure the faithful performance of all or any of the covenants of
this Lease on the part of Lessee, Lessor may transfer and/or deliver the
security, as such, to the successor in interest of Lessor, and thereupon Lessor
shall be discharged from any further liability in reference thereto.  Except as set forth in this Section 18.12
this Lease shall not be affected by any such sale or conveyance.

Section
18.13         Estoppel Certificates.  At any time and from time to time, upon not
less than ten (10) days prior to request by Lessor, Lessee shall execute,
acknowledge and deliver to Lessor a statement certifying the date of
commencement of this Lease, stating without limitation that (a) this Lease is
unmodified and in full force and effect (or if there have been modifications,
that this Lease is in full force and effect as modified and the date and nature
of such modifications); (b) the dates to which the rent has been paid; (c)
Lessee has no claims against Lessor, (d) neither Lessor nor Lessee is in default
under this Lease; and (e) setting forth such other matters as may reasonably be
requested by Lessor.  Lessor and Lessee
intend that by such statement delivered pursuant to this Section 18.13 may be
relied upon any mortgagee or the beneficiary of any Deed of Trust or by any
purchaser as prospective purchaser of the Building.

Section
18.14         Defined Terms: Headings.  The words “Lessor” and “Lessee” as used
herein shall include the plural as well as the singular.  Words used in masculine gender include the
feminine and neuter.  If there be more
than one Lessee, the obligation hereunder imposed upon Lessee shall be joint
and several.  The headings to the
paragraphs of this Lease are not a part of this Lease and shall have no effect
upon the construction or interpretation of any part hereof.

 

IN WITNESS WHEREOF, the
parties hereto have executed this Lease as of the day and year first above
written.

 

	
  LESSOR:

  	
   

  	
  LESSEE:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  HOLLADAY BUILDING EAST L.L.C.

  	
   

  	
  OVERSTOCK.COM

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By and through its Manager Holladay Building

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  East Management Corporation

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By 

  	
  /s/ Jeff Peck

  	
   

  	
  By 

  	
  /s/ Jason Lindsey

  	
   

  
	
  Jeff Peck

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Its: 

  	
  Vice President

  	
   

  	
   

  	
  Its: 

  	
  CFO

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Jason Lindsey

  	
   

  
	
   

  	
   

  	
  (Please print
  signature)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
												

 

- 6 -

 

ADDENDUM A

TENANT
IMPROVEMENTS:

Lessor shall clean the carpet within the Premises and
will provide a $3,000 construction credit. 
Lessee accepts the Premises in “as is” condition.  Any additional tenant improvements shall be
at the sole expense of Lessee and must be pre-approved by Lessor prior to the
commencement of any work in the Premises.

LEASE
SIGNING BONUS:

Upon the commencement of this Lease, Lessor shall
provide Lessee with a Lease Signing Bonus in the amount of $400,000.  Said Lease Signing Bonus can be applied
toward base rent, operating expenses, tenant improvements, etc.

OPERATING
EXPENSES:

Lessee shall pay as additional rent, its proportionate
share of expenses for the Building, Lessor estimates the operating expenses to
be approximately $5.75 per rentable square foot of space per year.  The estimated monthly payment for operating
expenses for the first year shall be [19,444 rsf @ $5.75/12 months] $9,316.92
per month.

SIGNAGE:

Lessee shall have the option to install its name on the
Property monument sign located at the entrance of the property, the building
lobby directory, and by Lessee’s main suite door entrance.  All signage shall conform to the building
shall be at Lessee’s expense.

Lessee shall also have the option to contract with a professional sign
company to install one sign that is 2 feet tall by 16 feet long of the North
West side of the building, subject to the approval and specifications of
governing authorities.  Should Lessee
downsize to less than 20,000 rsf in the building, Lessor shall have the right
to request Lessee to remove its sign, and return the building to its original
condition.  All signage shall conform to
the building standard and shall be pre-approved by Lessor.  All associated expenses relating to said
sign, including but not limited to, installation, maintenance and removal shall
be at Lessee’s
sole expense.  All plans shall be
submitted to Lessor and approved in writing prior to the commencement of any
work.

SECURITY
ACCESS CARDS:

Lessor shall provide Lessee with the first sixty (60)
security access cards, for Lessee and its employees, at no cost to Lessee.  Should Lessee or its employees lose said
access cards or should Lessee require additional access cards, Lessee shall be
responsible for the replacements cost (approximately $11.00 each access card).

ADA
COMPLIANCY:

Lessor will comply with all required ADA standards.

BROKERAGE:

Lessor and Lessee warrant and represent that they have
had no dealings with any outside real estate broker or agent, and know of no
one who is entitled to a commission for this Lease.

RENT FOR
BUILDING KITCHEN/DINING:

Lessee shall pay rent for its proportionate share of
the building Kitchen/Dining Area.  The
parties acknowledge that the Lessee’s proportionate share of the building
Kitchen/Dining Area is 572 rentable square feet and that such number is
included in the net rentable square footage specified in Article I, Section
1.1.  Lessee’s proportionate share of
such Area is determined by multiplying the total area of the Kitchen/Dining
Area by a fraction, the numerator of which is the gross rentable square footage
of the Premises and denominator of which is the gross rentable square footage
for the Building.  Lessee’s share of the
Kitchen/Dining Area shall be subject to adjustment due to increases or
decreases in the gross rentable square footage for the building.

 

- 7 -

 

OLD MILL
CORPORATE CENTER

BUILDING
RULES

I.          RENT

A.           Rent is due on the first (1st) of the month.

B.             Rent shall be paid to Beckstrand and Associates at
P.O. Box 712320, Salt Lake City, UT 84171-2320.

C.             Checks returned due to insufficient funds will be
assessed a $25 service fee.

II.         PROPERTY MANAGEMENT

A.           Old Mill Corporate Center is owned by Holladay
Building East L.L.C. (“Landlord”).

B.             Beckstrand & Associates is the Property Management
Company (“Property Manager”).  Should
you have any maintenance questions or concerns please call (801) 944-7722 and
give the information to whomever answers the phone and the message will be
relayed.

C.             In the event of an emergency after hours, please call
801-267-2054, which is a digital pager. 
Please reserve calls regarding normal repairs to the Property Manager’s
normal business hours, M-F 8:00 am — 5:00 pm.

III.        SIGNS

A.           Standard signs must be used on all office doors and
entrances.  The Property Manager will
order signs and bill the tenant for the purchase price.

B.             All signs are the property of the building and are not
to be removed without the express approval of the Landlord.

IV.       PARKING

A.           In order to leave the most convenient space for
customer’s parking, tenants and their employees are not to park directly in
front of the building or in reserved visitor parking stalls.

B.             Please refrain from parking in the spaces reserved for
the handicapped.  Unauthorized vehicles
parked in these spaces will be towed away at the owner’s expense.

C.             Vehicles should not be left in the parking lot
overnight.  Any vehicle left overnight
without prior consent will be towed away at the owner’s expense.

D.            Any vehicle parked on the premises for the purpose of
selling that vehicle will be towed away at the owner’s expense.

E.              The storage, repairs, or cleaning of vehicles will not
be permitted on the premises.

V.         SECURITY

A.           There is a “No Soliciting” sign posted on the
building.  Please notify the Property
Manager if there is any soliciting on the premises.

B.             The distribution or posting of handbills on the
premises is expressly prohibited.  We
would appreciate being notified if handbills are distributed or posted.

C.             All buildings are equipped with fire
extinguishers.  Please familiarize
yourself with the location of them.

D.            When you leave at the end of the day please make sure
that all windows are closed and that all doors are locked.

E.              Please make sure you turn off your coffee makers and
misc. equipment each night to prevent fire. 
We strongly recommend that all coffee makers be equipped with an
automatic shutoff.

VI.       TRASH DISPOSAL

A.           Tenant may utilize available dumpsters for office
trash can waste only.  Packing skids,
boxes, or garbage from the office or home are not to be placed in or around
dumpsters; Landlord reserves the right to bill Tenant for extra trash pick-ups
as a result.  It is the sole
responsibility of the Tenant to dispose of excessive trash and packaging
material somewhere else.

VII.      SMOKING

A.           Due to the Utah Clean Air Act, tenants must refrain
from smoking in the building, or within 25 feet of the building.  Smoking is permitted only in the designated
smoking area(s) for the building.

VIII.     MISCELLANEOUS

A.           Chair mats are required under all rolling chairs to
protect the carpet.

B.             Any burning of candles is prohibited.

IX.       SECURITY ACCESS CARD

A.           Upon request from Tenant’s authorized representative,
security access cards will be individually programmed and given to Tenant and
its employees.  Tenant will be charged
$11.00 for each lost card or card that is not returned to Landlord.

X.         REKEYING

A.           Tenant must obtain Landlord’s permission before
rekeying any lock(s).  Rekeying of locks
shall be to the building’s grand master system.  Rekeying of locks will be at the expense of the Tenant.  Landlord reserves the right to rekey the
Premises and bill Tenant if Tenant rekeys lock(s) without Landlord’s consent,
or off of building’s grand master system.

XI.       ANIMALS, REFUSE

A.           Tenants shall not allow anything to be placed on the
window of the Premises or to be thrown out of any outside opening of the
Building.  Tenants shall not place or
permit to be placed any obstruction of refuse in any public part of the
Building.

B.             No animal shall be brought into the office, halls,
corridors, elevators or any other part of the Building by Tenants or the
agents, employees or invitees of the Tenants.

XII.      INVOICING

A.           Landlord does not invoice for monthly rents.  Tenant is responsible for keeping track of
annual increases.  As files are audited,
Tenant may be notified as a courtesy, but Landlord is not obligated to do so.

 

- 8 -

 

	
  TENANT: Overstock.com

  	
   

  	
  Term:

  	
   

  	
  Five (5) Years

  	
   

  	
   

  
	
  Monthly Rent Summary per Lease

  	
   

  	
  From/To:

  	
   

  	
  Feb 1, 2002 - Jan 31, 2007

  	
   

  	
   

  
	
  OLD MILL CORPORATE CENTER

  	
   

  	
  Annual Increase:

  	
   

  	
  3.0%

  	
   

  	
   

  
	
  Building:

  	
  6322 South 3000 East

  	
   

  	
  Usable SF:

  	
   

  	
  16,478

  	
   

  	
   

  
	
  Suite: 

  	
  100

  	
   

  	
  Rentable SF:

  	
   

  	
  19,444

  	
   

  	
   

  
	
   

  	
   

  	
  Load Factor:

  	
   

  	
  18.00%

  	
   

  	
   

  
	
  Square Footage
  Breakdown

  	
   

  	
  Security Dep.

  	
   

  	
  $0.00

  	
   

  	
   

  
	
   

  	
  USF

  	
  RSF

  	
   

  	
  Nonrefund:

  	
   

  	
  $0.00

  	
   

  	
   

  
	
  Office

  	
  15,993

  	
  18,872

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Kitchen

  	
  485

  	
  572

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL:

  	
  16,478

  	
  19,444

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
											

 

 

**RENTAL PAYMENT DUE ON THE FIRST OF THE MONTH**

**ESTIMATED
CAM PAYMENT OF $9,316.92 DUE ON THE FIRST OF THE MONTH**

 

	
   

  	
  2002

  	
  2003

  	
  2004

  	
  2005

  	
  2006

  	
  2007

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  JAN

  	
   

  	
  $22,522.63

  	
  $23,198.31

  	
  $23,894.26

  	
  $24,611.09

  	
  $25,349.42

  
	
  FEB

  	
  $22,522.63

  	
  $23,198.31

  	
  $23,894.26

  	
  $24,611.09

  	
  $25,349.42

  	
   

  
	
  MAR

  	
  $22,522.63

  	
  $23,198.31

  	
  $23,894.26

  	
  $24,611.09

  	
  $25,349.42

  	
   

  
	
  APR

  	
  $22,522.63

  	
  $23,198.31

  	
  $23,894.26

  	
  $24,611.09

  	
  $25,349.42

  	
   

  
	
  MAY

  	
  $22,522.63

  	
  $23,198.31

  	
  $23,894.26

  	
  $24,611.09

  	
  $25,349.42

  	
   

  
	
  JUN

  	
  $22,522.63

  	
  $23,198.31

  	
  $23,894.26

  	
  $24,611.09

  	
  $25,349.42

  	
   

  
	
  JUL

  	
  $22,522.63

  	
  $23,198.31

  	
  $23,894.26

  	
  $24,611.09

  	
  $25,349.42

  	
   

  
	
  AUG

  	
  $22,522.63

  	
  $23,198.31

  	
  $23,894.26

  	
  $24,611.09

  	
  $25,349.42

  	
   

  
	
  SEP

  	
  $22,522.63

  	
  $23,198.31

  	
  $23,894.26

  	
  $24,611.09

  	
  $25,349.42

  	
   

  
	
  OCT

  	
  $22,522.63

  	
  $23,198.31

  	
  $23,894.26

  	
  $24,611.09

  	
  $25,349.42

  	
   

  
	
  NOV

  	
  $22,522.63

  	
  $23,198.31

  	
  $23,894.26

  	
  $24,611.09

  	
  $25,349.42

  	
   

  
	
  DEC

  	
  $22,522.63

  	
  $23,198.31

  	
  $23,894.26

  	
  $24,611.09

  	
  $25,349.42

  	
   

  
	
   

  	
  247,748.93

  	
  277,704.03

  	
  286,035.15

  	
  294,616.20

  	
  303,454.69 

  	
  25,349.42

  
	
  NUMBER OF MONTHS:

  	
   

  	
   

  	
  60.00

  	
   

  	
   

  
	
  TOTAL RENT PER TERM OF LEASE:

  	
   

  	
  $1,434,908.42

  	
   

  	
   

  

 

 

	
  ADDITIONAL

  NOTES:

  	
   

  	
   

  	
  Total SF
          19444

  	
  Cost

  Per SF

  
	
  Janitorial

  	
  Landlord

  	
  (Triple Net Lease)

  	
   

  	
   

  	
   

  	
   

  
	
  Utilities:

  	
  Landlord

  	
   

  	
   

  	
  Rent/Mo.

  	
  22,522.63

  	
  13.90

  
	
  Taxes:    

  	
  Landlord

  	
   

  	
   

  	
  T.I. ÷ # Mo.*

  	
  8,940.47

  	
  5.52

  
	
  % Complex:

  	
  12.94%

  	
   

  	
   

  	
  Other/Mo.

  	
  0.00

  	
  0.00

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tenant Improvements: See Addendum “A”

  	
   

  	
  Net Rates:

  	
  $13,582.16

  	
  $8.38

  
	
  Lease Signing Bonus: See Addendum “A”

  	
   

  	
   

  	
   

  	
   

  
	
  Operating Expenses: See Addendum “A”

  	
   

  	
  *Estimated Cost of Tenant Improvements

  
	
  Signage: See Addendum “A”

  	
   

  	
  TI’s

  	
  1,919.16

  	
   

  
	
  Security Access Cards: See Addendum “A”

  	
   

  	
  Signing Bonus

  	
  400,000.00

  	
   

  
	
  ADA Compliancy: See Addendum “A”

  	
   

  	
   

  	
  $401,919.16

  	
   

  
	
  Brokerage: See Addendum “A”

  	
   

  	
   

  	
   

  	
   

  
	
  Building Kitchen/Dining: See Addendum “A”

  	
   

  	
  Interest Rate:

  	
  12.00%

  	
   

  

 

 

 

 

 

 

 

 

 

[graphic display of
premises]

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00034-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00034-of-00352.parquet"}]]