EXHIBIT 10.14
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
RESEARCH ENGINEERS, INC.
PACSOFT INCORPORATED
AND
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
AND
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MARCH 31, 1999
TABLE OF CONTENTS
DESCRIPTION PAGE NO.
1. EXCHANGE OF SHARES...............................1
1.1 Exchange of Shares. ....................1
1.2 Consideration and Exchange Ratio. ......1
1.3 Tax Status of the Exchange..............1
2. REPRESENTATIONS AND WARRANTIES OF PACSOFT AND
SELLERS..........................................1
2.1 Organization; Good Standing;
Qualification and Power...............2
2.2 Capital Structure.......................2
2.2.1 Stock........................2
2.2.2 No Other Commitments ........2
2.3 Authority...............................2
2.3.1 Corporate Action.............2
2.3.2 Sellers' Authority...........3
2.3.3 No Conflict..................3
2.3.4 Governmental Consents........3
2.4 Financial Statements. ..................3
2.5 Compliance with Applicable Laws. .......3
2.6 Insurance. .............................3
2.7 Litigation. ............................4
2.8 Employee Benefits. .....................4
2.9 Absence of Undisclosed Liabilities. ....5
2.10 Absence of Certain Changes or Events. .5
2.11 No Defaults. ..........................6
2.12 Certain Agreements. ...................6
2.13 Taxes..................................7
2.14 Intellectual Property..................9
2.15 Fees and Expenses......................9
2.16 Environmental Matters..................10
2.17 Disclosure. ...........................10
2.18 Restrictions on Business Activities. ..10
2.19 Accounts Receivable....................10
2.20 Personal Property. ....................10
2.21 Real Property. ........................10
2.22 Warranties. ...........................11
2.23 Contracts. ............................11
2.24 Products and Distribution. ............11
2.25 Development Tools. ....................12
2.26 Investment Representation. ............12
2.27 Year 2000 Compliance. .................12
3. REPRESENTATIONS AND WARRANTIES OF REI...........13
3.1 Organization; Good Standing;
Qualification and Power..............13
3.2 Capital Structure......................13
3.2.1 Stock, Options and Warrants.13
3.2.2 No Other Commitments........13
3.3 Authority..............................13
3.3.1 Corporate Action............13
3.3.2 No Conflict.................14
3.3.3 Governmental Consents.......14
3.4 Litigation. ...........................14
3.5 Fees and Expenses......................14
4. PACSOFT AND SELLERS COVENANTS...................14
4.1 Regulatory Approvals. .................14
4.2 Necessary Consents. ...................15
4.3 Cooperation in Audit. .................15
5. REI COVENANTS...................................15
5.1 Regulatory Approvals. .................15
5.2 Necessary Consents. ...................15
6. ADDITIONAL AGREEMENTS...........................15
6.1 Employee Matters. .....................15
6.2 Employment Agreement...................15
6.3 PacSoft Office Location. ..............15
6.4 Registration Rights. ..................16
6.4.1 Definitions.................16
6.4.2 Piggyback Registration......16
6.4.3 Obligations of REI..........16
6.4.4 Condition Precedent.........17
6.4.5 Underwriting Requirements...17
6.4.6 Indemnification.............17
6.4.7 Reports Under 1934 Act......19
6.4.8 Lock-up Agreement...........19
6.4.9 Delay of Registration.......19
7. INDEMNIFICATION OF THE PARTIES..................20
7.1 Indemnification by Sellers.............20
7.2 Indemnification by REI.................20
7.3 Adjustments to Indemnification Payments20
7.4 Indemnification Procedures.............20
7.5 Manner of Indemnification. ............21
8. CLOSING......................................... 21
8.1 Closing Date. ......................... 22
8.2 Deliveries by PacSoft and Sellers
at the Closing....................... 22
8.3 Deliveries by REI at the Closing. ..... 22
9. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS....................................... 22
10. MISCELLANEOUS................................... 22
10.1 Governing Law. ........................22
10.2 Assignment; Binding Upon Successors
and Assigns......................... 23
10.3 Severability. .........................23
10.4 Counterparts. .........................23
10.5 Other Remedies. .......................23
10.6 Amendment and Waivers. ................23
10.7 Expenses. .............................23
10.8 Attorneys' Fees. ......................23
10.9 Notices. ..............................23
10.10 Construction of Agreement.............24
10.11 No Joint Venture......................25
10.12 Further Assurances....................25
10.13 Absence of Third Party Rights.........25
10.14 Entire Agreement......................25
10.15 Press Releases........................25
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is entered into as
of this 31st day of March, 1999, by and among Research Engineers, Inc., a
Delaware corporation ("REI"), PacSoft Incorporated, a Washington corporation
("PacSoft"), and ▇▇▇▇▇ ▇▇▇▇▇▇, an individual, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, an individual,
and ▇▇▇ ▇▇▇▇, an individual (collectively, "Sellers").
RECITALS
A. Sellers own, in the aggregate, all of the issued and outstanding shares
("Shares") of capital stock of PacSoft.
B. REI desires to acquire from Sellers the Shares, and Sellers desire to
acquire from REI the Stock (as defined in Section 1.2 below), on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, the parties to this Agreement agree as follows:
EXCHANGE OF SHARES.
Exchange of Shares. Subject to the terms and conditions set forth herein, at the
Closing (as defined in Section 8 below), Sellers shall transfer, convey,
assign and deliver the Shares to REI, and REI shall issue and deliver the
Stock to Sellers.
Consideration and Exchange Ratio. The aggregate consideration to be given in
exchange for the Shares shall consist of 50,000 shares of common stock,
$.01 par value per share, of REI ("Stock"), which results in an exchange
ratio of 83.3333 shares of Stock to be issued in exchange for each Share.
Tax Status of the Exchange. The exchange of the Shares for the Stock is intended
to be a reorganization as described in Section 368(a) of the Internal Revenue
Code of 1986 (the "Internal Revenue Code"), and this Agreement is intended to
be a "plan of reorganization" within the meaning of the regulations
promulgated under Section 368(a) of the Internal Revenue Code.
REPRESENTATIONS AND WARRANTIES OF PACSOFT AND SELLERS.
8
Except as set forth in a schedule dated the date of this Agreement and
delivered by PacSoft to REI concurrently herewith ("Disclosure Schedule")
specifically identifying the Sections of this Agreement requiring the delivery
of such disclosure, PacSoft and Sellers jointly and severally represent and
warrant to REI as set forth below. In this Agreement, any reference to any
event, change or effect being "material" with respect to any entity or group of
entities means any material event, change or effect related to the condition
(financial or otherwise), properties, assets, liabilities, businesses,
operations, results of operations or prospects of such entity or group of
entities taken as a whole. In this Agreement, the term "Material Adverse Effect"
used in connection with a party or any of that party's subsidiaries means any
event, change or effect that is materially adverse to the condition (financial
or otherwise), properties, assets, liabilities, businesses, operations, results
of operations or prospects of that party and its subsidiaries, taken as a whole;
provided, however, that a Material Adverse Effect shall not include any adverse
effect resulting from general economic conditions or conditions affecting the
engineering software market.
Organization; Good Standing; Qualification adn Power. PacSoft is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted, and is duly qualified and in good standing
to do business in each jurisdiction in which the nature of its business or
the ownership or leasing of its properties makes qualification necessary,
other than in jurisdictions where the failure to qualify would not have a
Material Adverse Effect. PacSoft does not have any subsidiaries. PacSoft
has made available to REI or its counsel complete and correct copies of the
certificate or articles of incorporation and bylaws of PacSoft as amended
to the date of this Agreement, and copies of all minutes of meetings and
actions by written consent of shareholders, directors and board committees.
Capital Structure.
Stock. The authorized capital stock of PacSoft consists of 50,000 shares of
Common Stock, $1.00 par value per share ("PacSoft Common Stock"). At the
date of this Agreement, 600 shares of PacSoft Common Stock are issued and
outstanding. All outstanding shares of PacSoft Common Stock are validly
issued, fully paid and nonassessable and not subject to preemptive rights
and are held of record and beneficially by Sellers, free and clear of all
claims, liens and encumbrances. None of the shares of PacSoft Common Stock
was issued in violation of any federal or state securities laws or other
legal requirements.
No Other Commitments. There are no options, warrants, calls, rights,
commitments, conversion rights or agreements of any character to which
PacSoft is a party or by which PacSoft is bound obligating PacSoft to
issue, deliver or sell, or cause to be issued, delivered or sold, any
shares of capital stock of PacSoft or securities convertible into or
exchangeable for shares of capital stock of PacSoft, or obligating PacSoft
to grant, extend or enter into any option, warrant, call, right,
commitment, conversion right or agreement. There are no voting trusts or
other agreements or understandings to which PacSoft or any Sellers is a
party with respect to the voting of the capital stock of PacSoft.
Authority.
Corporate Action. PacSoft has all requisite corporate power and authority to
enter into this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated by this Agreement. The execution
and delivery of this Agreement by PacSoft and the consummation by PacSoft
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of PacSoft. This Agreement has been
duly executed and delivered by PacSoft and this Agreement is the valid and
binding obligation of PacSoft, enforceable in accordance with its terms,
except that such enforceability may be subject to (i) bankruptcy,
insolvency, reorganization or other similar laws affecting or relating to
enforcement of creditors' rights generally and (ii) general equitable
principles.
Sellers' Authority. Sellers have full power and capacity to enter into this
Agreement. This Agreement has been duly executed and delivered by Sellers
and this Agreement is the valid and binding obligation of Sellers,
enforceable in accordance with its terms, except that enforceability may be
subject to (i) bankruptcy, insolvency, reorganization or other similar laws
affecting or relating to enforcement of creditors' rights generally and
(ii) general equitable principles.
No Conflict. Neither the execution, delivery and performance of this
Agreement, nor the consummation of the transactions contemplated hereby nor
compliance with the provisions hereof will conflict with, or result in any
violations of, or cause a default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, amendment,
cancellation or acceleration of any obligation contained in, or the loss of
any material benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the material properties or
assets of PacSoft under any term, condition or provision of (x) the
certificate or articles of incorporation or bylaws of PacSoft or (y) any
loan or credit agreement, note, bond, mortgage, indenture, lease or other
material agreement, judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to PacSoft or its respective properties or assets,
other than any such conflicts, violations, defaults, losses, liens,
security interests, charges, or encumbrances which, individually or in the
aggregate, would not have a Material Adverse Effect.
Governmental Consents. No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency
or commission or other governmental authority or instrumentality, domestic
or foreign (each a "Governmental Entity"), is required to be obtained by
PacSoft in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby.
Financial Statements. PacSoft has furnished to REI copies of: (a) the unaudited
balance sheets of PacSoft at December 31, 1998 and February 28, 1999, and
the related statements of income for the periods then ended. All financial
statements referred to in this Section 2.4 ("PacSoft Financial Statements")
are complete and correct, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the
respective periods, and fairly present the financial condition of PacSoft
at the respective dates thereof and the results of operation of PacSoft for
the respective periods covered by the statements of income contained in
therein. PacSoft does not have any material obligations or liabilities,
contingent or otherwise, not fully disclosed by the PacSoft Financial
Statements.
Compliance with Applicable Laws. The business of PacSoft is not being conducted
in violation of any law, ordinance, regulation, rule or order of any
Governmental Entity where the violation would have a Material Adverse
Effect. PacSoft has not been notified by any Governmental Entity that any
investigation or review with respect to PacSoft is pending or threatened,
nor has any Governmental Entity notified PacSoft of its intention to
conduct an investigation or review. PacSoft has all permits, licenses and
franchises from Governmental Entities required to conduct its business as
now being conducted, except for those whose absence would not have a
Material Adverse Effect.
Insurance. PacSoft maintains and at all times since March 31,1996 has maintained
fire and casualty and general liability insurance that PacSoft believes to
be reasonably prudent for its business. PacSoft has delivered or made
available to REI complete and correct copies of all such policies, together
with all riders and amendments thereto. These policies are in full force
and effect, and all premiums due thereon have been paid. PacSoft has
complied in all material respects with the terms and provisions of the
policies. The Disclosure Schedule sets out all claims made by PacSoft under
any policy of insurance since March 31, 1996 and, in the opinion of PacSoft
reasonably formed and held, there is no basis on which a claim should or
could be made under any such policy.
Litigation. There is no suit, action, arbitration, demand, claim or proceeding
pending or, to the best knowledge of PacSoft and Sellers, threatened
against PacSoft, nor is there any judgment, decree, injunction, rule or
order of any Governmental Entity or arbitrator outstanding against PacSoft
that, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect.
Employee Benefits.
2. PacSoft has made available to REI a list of all employees of
PacSoft and their salaries as of the date of this Agreement. PacSoft has made
available to REI copies or descriptions of all written or formal plans or
agreements involving direct or indirect compensation or benefits (including
any employment agreements entered into between PacSoft and any employee of
PacSoft, but excluding workers' compensation, unemployment compensation and
other government-mandated programs) currently or previously maintained,
contributed to or entered into by PacSoft under which PacSoft has any present
or future obligation or liability (collectively, "PacSoft Employee Plans").
Copies of all PacSoft Employee Plans (and, if applicable, related trust
agreements) and all amendments thereto and written interpretations thereof
(including summary plan descriptions) have been made available to REI or its
counsel. No contributions are due or past due from PacSoft with respect to
any of the PacSoft Employee Plans. To PacSoft's and Sellers' knowledge, each
of the PacSoft Employee Plans has been maintained in compliance with its
terms and with the requirements prescribed by any and all statutes, orders,
rules and regulations that are applicable to the PacSoft Employee Plans
except for noncompliance which would not have a Material Adverse Effect.
3. PacSoft has made available to REI a list of each employment,
severance or other similar contract, arrangement or policy and each plan or
arrangement providing for insurance coverage (including any self-insured
arrangements), workers' benefits, vacation benefits, severance benefits,
disability benefits, death benefits, hospitalization benefits, retirement
benefits, deferred compensation, profit-sharing, bonuses, stock options,
stock purchase, phantom stock, stock appreciation or other forms of incentive
compensation or post-retirement insurance, compensation or benefits for
employees, consultants or directors which (i) is not one of the PacSoft
Employee Plans, (ii) is entered into, maintained or contributed to, as the
case may be, by PacSoft and (iii) covers any employee or former employee of
PacSoft. The contracts, plans and arrangements described in this paragraph
2.8(d) are referred to collectively as the "PacSoft Benefit Arrangements." To
PacSoft's and Sellers' knowledge, each of the PacSoft Benefit Arrangements
has been maintained in substantial compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and
regulations which are applicable to PacSoft Benefit Arrangements. PacSoft has
made available to REI or its counsel a complete and correct copy or
description of each of the PacSoft Benefit Arrangements.
4. There has been no amendment to, written interpretation or
announcement by PacSoft relating to, or change in employee participation or
coverage under, any of the PacSoft Employee Plans or PacSoft Benefit
Arrangements that would increase materially the expense of maintaining the
PacSoft Employee Plans or PacSoft Benefit Arrangements above the level of the
expense incurred in respect thereof for the fiscal year ended December 31,
1998.
5. To PacSoft's and Sellers' knowledge, PacSoft is in compliance
in all material respects with all applicable laws, agreements and contracts
relating to employment, employment practices, wages, hours, and terms and
conditions of employment.
Absence of Undisclosed Liabilities. Except as disclosed on the Disclosure
Schedule, at February 28, 1999 ("PacSoft Balance Sheet Date"), (i) PacSoft
has not had any liabilities or obligations of any nature (matured or
unmatured, fixed or contingent) which were material to PacSoft and were not
provided for in the balance sheet of PacSoft at the PacSoft Balance Sheet
Date, a copy of which has been delivered to REI ("PacSoft Balance Sheet");
and (ii) all reserves established by PacSoft and set forth in the PacSoft
Balance Sheet were reasonably adequate.
Absence of Certain Changes or Events. Since the PacSoft Balance Sheet Date,
there has not occurred:
6. any change in the condition (financial or otherwise),
properties, assets, liabilities, businesses, operations, results of
operations or prospects of PacSoft that could reasonably constitute a
Material Adverse Effect;
7. any amendments or changes in the certificate or articles
of incorporation or bylaws of PacSoft;
8. any damage, destruction or loss, whether covered by
insurance or not, that could reasonably constitute a Material Adverse Effect;
9. any redemption, repurchase or other acquisition of shares of
PacSoft Common Stock by PacSoft, or any declaration, setting aside or payment
of any dividend or other distribution (whether in cash, stock or property)
with respect to PacSoft Common Stock;
10. any material increase in or modification of the compensation
or benefits payable or to become payable by PacSoft to any of its directors
or employees, except in the ordinary course of business consistent with past
practice;
11. any material increase in or modification of any bonus,
pension, insurance or any of the PacSoft Employee Plans or PacSoft Benefit
Arrangements (including, but not limited to, the granting of stock options,
restricted stock awards or stock appreciation rights) made to, for or with
any of its employees, other than in the ordinary course of business
consistent with past practice;
12. any acquisition or sale of a
material amount of property or assets of PacSoft, other
than in the ordinary course of business consistent with
past practices;
13. any alteration in any term of any
outstanding security of PacSoft;
14. any (A) incurrence, assumption or guarantee by PacSoft of
any debt for borrowed money; (B) issuance or sale of any securities
convertible into or exchangeable for debt securities of PacSoft; or (C)
issuance or sale of options or other rights to acquire from PacSoft, directly
or indirectly, debt securities of PacSoft or any securities convertible into
or exchangeable for any such debt securities;
15. any creation or assumption by
PacSoft of any mortgage, pledge, security interest or
lien or other encumbrance on any asset;
16. any making of any loan, advance or capital contribution to
or investment in any person other than (i) travel loans or advances made in
the ordinary course of business of PacSoft, (ii) other loans and advances in
an aggregate amount which does not exceed $10,000 outstanding at any time and
(iii) purchases on the open market of liquid, publicly traded securities;
17. any entering into, amendment of, relinquishment, termination
or non-renewal by PacSoft of any contract, lease transaction, commitment or
other right or obligation other than in the ordinary course of business;
18. any transfer or grant of a right under the PacSoft IP Rights
(as defined in Section 2.14), other than those transferred or granted in the
ordinary course of business;
19. any labor dispute or charge of unfair labor practice (other
than routine individual grievances), any activity or proceeding by a labor
union or representative thereof to organize any employees of PacSoft or any
campaign being conducted to solicit authorization from employees to be
represented by the labor union; or
20. any agreement or arrangement made by PacSoft to take any
action which, if taken prior to the date hereof, would have made any
representation or warranty set forth in this Agreement untrue or incorrect
unless otherwise disclosed.
No Defaults. PacSoft has not been in default under, and there exists no event,
condition or occurrence which, after notice or lapse of time, or both,
would constitute a default by PacSoft under any contract or agreement to
which PacSoft is a party and which would, if terminated or modified, have a
Material Adverse Effect.
Certain Agreements. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, unemployment
compensation, golden parachute, bonus or otherwise) becoming due to any
director or employee of PacSoft from PacSoft, under any of the PacSoft
Employee Plans, PacSoft Benefit Arrangements or otherwise, (ii) materially
increase any benefits otherwise payable under any of the PacSoft Employee
Plans, the PacSoft Benefit Arrangements or otherwise or (iii) result in the
acceleration of the time of payment or vesting of any benefits.
Taxes.
21. For purposes of this Agreement, "Tax" or collectively
"Taxes" means any and all federal, state, local, and foreign taxes,
assessments, and other governmental charges, duties, impositions, and
liabilities, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, estimated,
excise and property taxes, together with all interest, penalties, and
additions imposed with respect to those amounts and any obligations under any
agreements or arrangements with any other person with respect to those
amounts and including any liability for taxes of a predecessor entity.
22. Except as set forth in the
Disclosure Schedule:
(i) PacSoft has prepared and filed all required federal,
state, local, and foreign returns, estimates, information statements, and
reports relating to any and all Taxes ("Returns") concerning or attributable to
PacSoft that are required to be filed by or with respect to PacSoft on or prior
to the date of this Agreement, and each of the Returns shall be true, correct,
and complete in all material respects and shall have been completed in
accordance with applicable law;
(ii) PacSoft: (A) has paid or accrued in accordance with
generally accepted accounting principles all Taxes concerning or attributable to
PacSoft relating to periods ending on or before the date of this Agreement
regardless of whether reflected on Returns and (B) has withheld with respect to
its employees all federal and state income taxes, FICA, FUTA, and other Taxes
required to be withheld;
(iii)....PacSoft has not been delinquent in the payment of any
Tax nor is there any Tax deficiency outstanding, proposed or assessed against
PacSoft, nor has PacSoft executed any waiver of the statute of limitations on or
extending the period for the assessment or collection of any Taxes;
(iv) No audit or other examination of any Return of PacSoft is
presently in progress, nor has PacSoft been notified of any request for an audit
or examination;
(v) PacSoft does not have any liabilities for unpaid federal,
state, local and foreign Taxes which have not been accrued or reserved in
accordance with generally accepted accounting principles on the PacSoft Balance
Sheet, and PacSoft does not have knowledge of any reasonable basis for the
assertion of any liability attributable to PacSoft or any of its assets and
operations;
(vi) PacSoft has made available to REI and its counsel copies
of all federal and state income and all state sales and use Tax Returns for all
periods since December 31, 1995;
(vii)....There are no liens, pledges, charges, claims,
security interests, or other encumbrances of any sort ("Liens") on the assets of
PacSoft relating or attributable to Taxes other than liens for sales and payroll
taxes not yet due and payable;
(viii)...Neither PacSoft nor Sellers has knowledge of any
reasonable basis for the assertion of any claim relating or attributable to
Taxes which, if adversely determined, would result in any Lien on the assets of
PacSoft;
(ix) None of the assets of PacSoft is property that is
required to be treated as owned by any other person pursuant to the "safe harbor
lease" provisions of former Code Section 168(f)(8), and none of the assets is
treated as "tax-exempt use property" within the meaning of Code Section 168(h);
(x) PacSoft has not been included in any "consolidated,"
"unitary," or "combined" Return provided for under the law of the United States
or any state or locality with respect to Taxes for any taxable period;
(xi) PacSoft is not a party to a tax sharing, allocation,
indemnification or similar agreement or arrangement, nor does PacSoft owe any
amount under any agreement or arrangement;
(xii)....No Return of PacSoft contains a disclosure statement
under Code Section 6662 (or predecessor provision) or any similar provision of
state, local, or foreign law;
(xiii)...PacSoft is not nor has it at any time been a "United
States real property holding corporation" within the meaning of Code Section
897(c)(2);
(xiv)....No indebtedness of PacSoft
consists of "corporate acquisition indebtedness" within
the meaning of Code Section 279;
(xv) PacSoft has not taken any action not in accordance with
past practice that would have the effect of deferring any Tax liability of
PacSoft from any period ending on or before the Closing Date to any taxable
period ending after the Closing Date;
(xvi)....PacSoft was not acquired in a "qualified stock
purchase" under Code Section 338(d)(3), and no elections under Code Section
338(g), protective carryover basis elections, or offset prohibition elections
are applicable to PacSoft or any predecessor corporations; and
(xvii)...The tax bases of the assets of PacSoft for purposes
of determining future amortization, depreciation, and other federal income tax
deductions are accurately reflected on the tax books and records of PacSoft.
24
Intellectual Property.
23. PacSoft owns or has acquired all material Intellectual
Property Rights (as defined below), including rights to make, use and sell
goods and services, as necessary or required for the conduct of its business
as presently conducted (the Intellectual Property Rights being referred to as
the "PacSoft IP Rights"), and these rights are reasonably sufficient for the
conduct of its business;
24. the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby will not
constitute a material breach of any instrument or agreement governing any
PacSoft IP Rights ("PacSoft IP Rights Agreements"), will not cause the
forfeiture or termination or give rise to a right of forfeiture or
termination of any PacSoft IP Right or materially impair the right of PacSoft
or REI to use, sell or license any PacSoft IP Right or portion thereof
(except where the breach, forfeiture or termination would not have a Material
Adverse Effect);
25. neither the manufacture, marketing, license, sale or
intended use of any product currently licensed or sold by PacSoft or
currently under development by PacSoft violates any license or agreement
between PacSoft and any third party or infringes any Intellectual Property
Right of any other party; and there is no pending or threatened claim or
litigation contesting the validity, ownership or right to use, sell, license
or dispose of any PacSoft IP Right nor is there any basis for any claim, nor
has PacSoft received any written notice asserting that any PacSoft IP Right
or the proposed use, sale, license or disposition thereof conflicts or will
conflict with the rights of any other party, nor is there any basis for any
assertion; and
26. PacSoft has taken reasonable and practicable steps designed
to safeguard and maintain its proprietary rights in all material PacSoft IP
Rights. All officers, employees and consultants of PacSoft have executed and
delivered to PacSoft an agreement regarding the protection of proprietary
information and the assignment to PacSoft of all Intellectual Property Rights
arising from the services performed for PacSoft by those persons. No current
or prior officer, employee or consultant of PacSoft claims an ownership
interest in any PacSoft IP Rights as a result of having been involved in the
development of that property while employed by or consulting to PacSoft, or
otherwise.
The term "Intellectual Property Rights" shall mean all worldwide
industrial and intellectual property rights, including, without limitation,
patents, patent applications, patent rights, trademarks, trademark
registrations, trademark registration applications, trade names, service marks,
service ▇▇▇▇ registrations, service ▇▇▇▇ registration applications, copyrights,
copyright registrations, copyright registration applications, franchises,
licenses, inventories, know-how, trade secrets, customer lists, proprietary
processes and formulae, all source and object codes, algorithms, architecture,
structure, display screens, layouts, inventions, development tools and all
documentation and media constituting, describing or relating to the above,
including, without limitation, manuals, memoranda and records.
Fees and Expenses. PacSoft has not paid or become obligated to pay any fee or
commission to any broker, finder or intermediary in connection with the
transactions contemplated by this Agreement.
Environmental Matters.
27. None of the properties or facilities of PacSoft is in
violation of any federal, state or local law, ordinance, regulation or order
relating to industrial hygiene or to the environmental conditions on, under
or about the properties or facilities, including, but not limited to, soil
and ground water condition, except where the violations individually or in
the aggregate would not constitute a Material Adverse Effect. During the time
that PacSoft has owned or leased its respective properties and facilities,
neither PacSoft nor, to PacSoft's and Sellers' knowledge, any third party,
has released, used, generated, manufactured or stored on, under or about the
properties or facilities or transported to or from the properties or
facilities any hazardous materials.
28. There has been no litigation brought or threatened against
PacSoft by, or any settlement reached by PacSoft with, any party or parties
alleging the presence, disposal, release or threatened release of any
hazardous materials on, from or under any of the properties or facilities
owned or leased by PacSoft.
Disclosure. No representation or warranty made by PacSoft in this Agreement, nor
any document, written information, written statement, financial statement,
certificate or exhibit prepared and furnished or to be prepared and
furnished by PacSoft or its representatives pursuant hereto or in
connection with the transactions contemplated hereby, when taken together,
contains any untrue statement of a material fact, or omits to state a
material fact necessary to make the statements or facts contained herein or
therein not misleading in light of the circumstances under which they were
furnished.
Restrictions on Business Activities. There is no material agreement, judgment,
injunction, order or decree binding upon PacSoft that has or could
reasonably be expected to have the effect of prohibiting or materially
impairing any business practice of PacSoft, any acquisition of property by
PacSoft or the conduct of business by PacSoft as currently conducted.
Accounts Receivalbe. The accounts receivable shown on the PacSoft Balance Sheet
as of the PacSoft Balance Sheet Date, or thereafter acquired prior to the
date hereof, have been and are (as the case may be) collectible within 90
days from the Closing Date in amounts not less than the aggregate amounts
thereof carried on the books of PacSoft reduced by the reserves for
discounts and bad debts, if any, taken on the PacSoft Balance Sheet.
Personal Property. PacSoft has good title, free and clear of all title defects,
objections and liens, including without limitation, leases, chattel
mortgages, conditional sales contracts, collateral security arrangements
and other title or interest-retaining arrangements, to all of its
machinery, equipment, furniture, inventory and other personal property. All
personal property used in the business of PacSoft is in good operating
condition. All of the leases to personal property utilized in the business
of PacSoft are valid and enforceable against PacSoft and are not in default
by PacSoft or any of the other parties thereto.
Real Property. PacSoft does not own any real property. The Disclosure Schedule
contains a list of all leases for real property to which PacSoft is a
party, the square footage leased with respect to each lease and the
expiration date of each lease. These leases are valid and enforceable and
are not in default. To the best knowledge of PacSoft and Sellers, the real
property leased or occupied by PacSoft, the improvements located thereon,
and the furniture, fixtures and equipment relating thereto (including
plumbing, heating, air conditioning and electrical systems), conform to any
and all applicable health, fire, safety, zoning, land use and building
laws, ordinances and regulations. There are no outstanding contracts made
by PacSoft for any improvements made to the real property leased or
occupied by PacSoft that have not been paid for.
Warranties. PacSoft has made no warranties or guarantees relating to its
products other than as implied or required by law. The Disclosure Schedule
contains a list of all warranty and indemnification obligations of PacSoft
relating to patents and other proprietary rights.
Contracts. TheDisclosure Schedule lists all oral or written agreements, notes,
instruments, or contracts to which PacSoft is a party or by which its
assets or properties may be bound which involve the payment or receipt of
more than $25,000 (on an annual basis), or which have a term of more than
one year, or which involve intellectual property, or which are employment
or consulting agreements ("PacSoft Contracts"). PacSoft is not in default
in performance of its obligations under any material provisions of the
PacSoft Contracts. Neither PacSoft nor Sellers have any knowledge of any
violation of any PacSoft Contract by any other party thereto and have no
knowledge of any intent by any other party to a PacSoft Contract not to
perform its obligations under any PacSoft Contract.
Products and Distribution. The Disclosure Schedule contains a complete list of
the top five software products (by title, determined by aggregate net sales
by PacSoft during the last fiscal year from the title) developed, sold,
published and/or distributed by PacSoft ("PacSoft Developed Products") and
the expected top five products (by title, determined by the projected net
sales for the title in its first year after introduction) under development
or consideration by PacSoft with a scheduled ship date on or prior to
December 31, 1999 ("PacSoft Products Under Development," and collectively
with the PacSoft Developed Products, the "PacSoft Products").
29. The Disclosure Schedule sets forth, for each PacSoft
Product, the following: (i) a list of all material contracts and agreements
(including without limitation all material development, trademark license,
technology license, distribution or other agreements) relating to the PacSoft
Product; (ii) whether the PacSoft Product has been developed internally
(i.e., substantially entirely by employees of PacSoft) or externally (i.e.,
including substantive contributions by one or more independent contractors to
PacSoft) and, if externally, the Disclosure Schedule sets forth the identity
of the significant independent contractors and a list of the material
agreements with those independent contractors; (iii) the material advances
paid or payable, and the material royalties payable, to any third parties
with respect to that PacSoft Product; and (iv) a list of the third parties
with significant distribution or publication rights to that PacSoft Product
together with a description of: (A) the territory in which the third party
has distribution rights; and (B) whether the distribution rights are
exclusive or nonexclusive.
30. The Disclosure Schedule sets forth, for each PacSoft Product
Under Development, the following (as of the date of this Agreement): (i) the
currently scheduled public availability date (which dates PacSoft believes to
be reasonable); (ii) a schedule of development milestone events and any
material related payments, including both milestones already achieved in the
past six months and those scheduled for the future; and (iii) whether any
significant development milestone for the PacSoft Product has been missed in
the past six months by more than 30 days.
Development Tools. The Disclosure Schedule contains a complete list of all
material software development tools used or currently intended to be used
by PacSoft in the development of any of the PacSoft Developed Products,
except for any tools that are generally available and are used in their
generally available form (such as standard compilers) ("PacSoft Development
Tools"). The Disclosure Schedule also sets forth, for each PacSoft
Development Tool: (a) for any PacSoft Development Tool not entirely
developed internally by the employees of PacSoft, the identity of the
independent contractors and consultants involved in a material way in such
development and a list of the material agreements with such independent
contractors and consultants with respect to the PacSoft Development Tools;
(b) a list of any third parties with any rights to receive material
royalties or other payments with respect to such PacSoft Development Tools,
and a schedule of all such royalties payable; (c) a list of any material
restrictions on PacSoft's unrestricted right to use and distribute the
PacSoft Development Tools; and (d) a list of all agreements with third
parties for the use by the third party of the PacSoft Development Tools.
Investment Representation. Each Seller acknowledges that, upon issuance, the
Stock will not have been "registered" and will therefore be "restricted
securities" as these terms are used under the Securities Act and the rules
and regulations thereunder. By their execution of this Agreement, each
Seller agrees, represents and warrants that (i) his or her acquisition of
the Stock is for investment only, for his or her own account and not with a
view to "distribution" as that term is used under the Securities Act, (ii)
he or she is an "accredited investor" as that term is used in Regulation D
under the Securities Act, and (iii) he or she has received copies of REI's
Form 10-KSB for the fiscal year ended March 31, 1998, and Form 10-QSB for
the quarters ended June 30 and September 30, 1998 and December 31, 1999.
Each Seller agrees that he or she shall not at any time make any sale,
pledge, hypothecation, gift or other transfer of Stock except pursuant to
an effective registration statement under the Securities Act or pursuant to
the provisions of Rule 144 under the Securities Act or another exemption
from the registration requirements of the Securities Act, and in accordance
with any applicable state "blue sky" or other securities laws, and that
prior to making any sale or other disposition of Stock pursuant to any such
exemption, he or she shall, if requested by REI, obtain an opinion of
counsel, satisfactory to REI's counsel, that such sale complies with
applicable federal and state securities laws. Each Seller agrees that he or
she has been informed that the Stock must be held indefinitely unless the
Stock is subsequently registered under the Securities Act or an exemption
from such registration is available and he or she understands that any sale
of the Stock made in reliance upon Rule 144, or any other like rule, can be
made only in limited amounts in accordance with the terms and conditions of
those rules and, if those rules are not applicable, any resale may require
compliance with another available exemption under the Securities Act or, in
the alternative, may require registration of the Stock. Sellers acknowledge
that, except as expressly set forth in Section 6.4, REI makes no
representation or covenant that it shall conduct its affairs so as to
permit sales under Rule 144 and REI is under no obligation to register or
repurchase the Stock. Sellers acknowledge that REI shall cause a legend to
be placed on the certificates representing the Stock to reflect the
foregoing.
Year 2000 Compliance. Allcomputer hardware or software owned, used, or provided
by PacSoft, including, but not limited to, microcode, firmware, system and
application programs, files, databases, and computer services, the failure
or disfunctionality of which would either individually or in the aggregate
constitute a Material Adverse Event, is Year 2000 Compliant. The term "Year
2000 Compliant" means that the hardware or software will:
31. process date data from at least
the years 1900 through 2101 without error or
interruption;
32. maintain functionality with
respect to the introduction, processing or output of
records containing dates falling on or after January 1,
2000; and
33. be interoperable with other software or hardware that may
deliver records to, receive records from, or interact with, the hardware or
software in the course of processing data.
REPRESENTATIONS AND WARRANTIES OF REI.
REI hereby represents and warrants to PacSoft and Sellers that:
Organization; Good Standing; Qualification adn Power. REIis a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
Capital Structure.
Stock, Options adn Warrants. Theauthorized capital stock of REI consists of
20,000,000 shares of Common Stock, $.01 par value ("REI Common Stock"), and
5,000,000 shares of Preferred Stock, $.01 par value ("REI Preferred
Stock"). At the close of business on March 31, 1999, 5,688,209 shares of
REI Common Stock were issued and outstanding, and 971,550 shares of REI
Common Stock were reserved for issuance upon the exercise of outstanding
options ("REI Options") and warrants ("REI Warrants") to purchase REI
Common Stock. No shares of REI Preferred Stock are issued or outstanding.
All outstanding shares of REI Common Stock are validly issued, fully paid
and nonassessable and not subject to preemptive rights.
No Other Commitments. Except for the REI Options and REI Warrants disclosed in
or pursuant to Section 3.2.1, there are no options, warrants, calls,
rights, commitments, conversion rights or agreements of any character to
which REI is a party or by which REI is bound obligating REI to issue,
deliver or sell, or cause to be issued, delivered or sold, any shares of
capital stock of REI or securities convertible into or exchangeable for
shares of capital stock of REI, or obligating REI to grant, extend or enter
into any such option, warrant, call, right, commitment, conversion right or
agreement.
Authority.
Corporate Action. REI has all requisite corporate power and authority to enter
into this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated by this Agreement. The execution
and delivery of this Agreement by REI and the consummation by REI of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of REI. This Agreement has been duly executed
and delivered by REI and this Agreement is the valid and binding obligation
of REI, enforceable in accordance with its terms, except that
enforceability may be subject to (i) bankruptcy, insolvency, reorganization
or other similar laws affecting or relating to enforcement of creditors'
rights generally and (ii) general equitable principles.
No Conflict. Neither the execution, delivery and performance of this
Agreement, nor the consummation of the transactions contemplated hereby nor
compliance with the provisions hereof will conflict with, or result in any
violations of, or cause a default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, amendment,
cancellation or acceleration of any obligation contained in, or the loss of
any material benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the material properties or
assets of REI or any of the REI Subsidiaries under, any term, condition or
provision of (x) the certificate or articles of incorporation or bylaws of
REI or any of the REI Subsidiaries or (y) any loan or credit agreement,
note, bond, mortgage, indenture, lease or other material agreement,
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to REI or any of the REI Subsidiaries or their respective
properties or assets, other than any such conflicts, violations, defaults,
losses, liens, security interests, charges or encumbrances which,
individually or in the aggregate, would not have a Material Adverse Effect.
Governmental Consents. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is
required to be obtained by REI or any of the REI Subsidiaries in connection
with the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby, except for securities law filings to
be made in connection with the issuance of the Stock.
Litigation. There is no suit, action, arbitration, demand, claim or proceeding
pending or, to the best knowledge of REI, threatened against REI or any of
the REI Subsidiaries in connection with or relating to the transactions
contemplated by this Agreement or of any action taken or to be taken in
connection herewith or the consummation of the transactions contemplated
hereby.
Fees and Expenses. REI has not paid or become obligated to pay any fee or
commission to any broker, finder or intermediary in connection with the
transactions contemplated by this Agreement.
PACSOFT AND SELLERS COVENANTS.
Regulatory Approvals. PacSoft will promptly execute and file, or join in the
execution and filing of, any application or other document that may be
necessary in order to obtain the authorization, approval or consent of any
governmental body, federal, state, local or foreign, which may be required,
or which REI may reasonably request, in connection with the consummation of
the transactions contemplated by this Agreement. PacSoft will use its best
efforts to promptly obtain all such authorizations, approvals and consents.
Necessary Consents. PacSoft will use its best efforts to obtain such written
consents and take such other actions as may be necessary or appropriate in
addition to those set forth in Section 4.1 to allow the consummation of the
transactions contemplated hereby.
Cooperation in Audit. PacSoft and Sellers shall cooperate fully with REI and its
auditors in having the financial statements of PacSoft audited to the
extent required by SEC and Nasdaq rules and regulations applicable to REI,
including providing access to the information referred to in Section 4.3
and any other information necessary in order to complete the audit. The
audit will be performed by REI's auditors at REI's expense.
REI COVENANTS
Regulatory Approvals. REI will promptly execute and file, or join in the
execution and filing of, any application or other document that may be
necessary in order to obtain the authorization, approval or consent of any
governmental body, federal, state, local or foreign which may be required,
or which PacSoft may reasonably request, in connection with the
consummation of the transactions contemplated by this Agreement. REI will
use its best efforts to promptly obtain all such authorizations, approvals
and consents.
Necessary Consents. REI will use its best efforts to obtain such written
consents and take such other actions as may be necessary or appropriate in
addition to those set forth in Section 5.1 to allow the consummation of the
transactions contemplated hereby.
ADDITIONAL AGREEMENTS.
Employee Matters. PacSoft and Sellers represent and warrant that on or prior to
the date of this Agreement, PacSoft has paid to each of its employees
one-half of the value (at the employee's current rate of pay) of any
vacation hours accrued prior to the Closing in excess of 160 hours, and any
additional accrued vacation hours have been forfeited by the employee.
Following the Closing, all employees of PacSoft will be offered employment
by REI. Those employees will be provided employment benefits that are
similar to those they currently receive from PacSoft. Notwithstanding the
foregoing, REI makes no representation, warranty or promise as to the
length of time that any such employee will remain in the employ of REI
following the Closing (except with respect to those employees who become
parties to employment agreements pursuant to Section 6.2).
Employee Agreement. At the Closing, REI and ▇▇▇▇▇ ▇▇▇▇▇▇ shall enter into an
employment agreement satisfactory in form and substance to REI and ▇▇.
▇▇▇▇▇▇. The employment agreement with ▇▇. ▇▇▇▇▇▇ shall contain
non-competition provisions satisfactory in form and substance to REI and
▇▇. ▇▇▇▇▇▇.
PacSoft Office Location. Following the Closing, the principal office of PacSoft
will be maintained in the general area where it is presently located;
provided, however, that REI makes no representation, warranty or promise as
to the specific length of time that such office will be maintained in such
general area.
Registration Rights.
Definitions. For purposes of Section 6.4:
34. The terms "register,"
"registered," and "registration" refer to a registration effected by
preparing and filing a registration statement in compliance with the Act and
the declaration or ordering of effectiveness of such registration statement;
35. The term "Registrable
Securities" refers to the Stock and any Common Stock of REI issued as a
dividend or other distribution with respect to, or in exchange or in
replacement of, the Stock or such Common Stock, except that the Stock (or any
particular shares of the Stock) shall cease to be Registrable Securities when
and to the extent (i) a registration statement with respect to the sale of
such shares of the Stock has become effective under the Act and the Stock has
been disposed of in accordance with such registration statement; (ii) the
shares of Stock held by any Holder shall have been or may be sold to the
public by that Holder in their entirety in any three month period pursuant to
Rule 144 or any successor provision under the Securities Act; (iii) such
shares of the Stock shall have been otherwise transferred, new certificates
for the Stock not bearing a legend restricting further transfer shall have
been delivered by the Company and subsequent disposition of the Stock does
not require registration or qualification under the Act or any similar state
law then in force in the opinion of legal counsel for REI; or (iv) the Stock
has ceased to be outstanding; and
36. The term "Holder" means
any Seller holding Registrable Securities.
Piggyback Registration. Subject to Section 6.4.5, if at any time REI proposes to
register any of REI Common Stock under the Securities Act on a form that
would also permit the registration of the Registrable Securities, REI
shall, each such time, promptly give each Holder written notice of such
determination. Upon the written request of any Holder delivered to REI
within ten days after mailing of any such notice by REI, REI shall use its
best efforts to cause to be registered under the Securities Act all of the
Registrable Securities that each such Holder has requested be registered.
Obligations of REI. Whenever required under Section 6.4.2 to use its best
efforts to effect the registration of any Registrable Securities, REI
shall, as expeditiously as reasonably possible:
37. Prepare and file with the
SEC a registration statement with respect to such Registrable Securities and
use its best efforts to cause such registration statement to become and
remain effective; provided, however, that in connection with any proposed
registration intended to permit an offering of any securities from time to
time (i.e., a so-called "shelf registration"), the Company shall in no event
be obligated to cause any such registration to remain effective for more than
90 days.
38. Prepare and file with the
SEC such amendments and supplements to such registration statement and the
prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such registration statement.
39. Furnish to the Holders
such numbers of copies of a prospectus, including a preliminary prospectus,
and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
40. Use its best efforts to
register and qualify the securities covered by such registration statement
under such other securities or Blue Sky laws of such jurisdictions as shall
be reasonably appropriate for the distribution of the securities covered by
the registration statement, provided that REI shall not be required in
connection therewith or as a condition thereto to qualify to do business or
to file a general consent to service of process in any such states or
jurisdictions, and further provided that (notwithstanding anything in this
Agreement to the contrary with respect to the bearing of expenses) if any
jurisdiction in which the securities shall be qualified shall require that
expenses incurred in connection with the qualification of such securities in
that jurisdiction be borne by selling shareholders, then such expenses shall
be payable by selling shareholders pro rata, to the extent required by such
jurisdiction.
Condition Precendent. It shall be a condition precedent to the obligations of
REI to take any action pursuant to this Section 6.4 that the Holders shall
furnish to REI such information regarding them, the Registrable Securities
held by them, and the intended method of disposition of such securities as
REI shall reasonably request and as shall be required in connection with
the action to be taken by REI.
Underwriting Requirements. In connection with any offering involving an
underwriting of shares being issued by REI, REI shall not be required under
Section 6.4.2 to include any of the Holders' Registrable Securities in such
underwriting unless the Holders accept the terms of the underwriting as
agreed upon between REI and the underwriters selected by it or them, and
then only in such quantity as will not, in the written opinion of the
underwriters, jeopardize the success of the offering by REI. If the total
amount of securities that all Holders request to be included in such
offering exceeds the amount of securities that the underwriters reasonably
believe compatible with the success of the offering, REI shall only be
required to include in the offering so many of the securities of the
selling Holders as the underwriters believe will not jeopardize the success
of the offering (the securities so included to be apportioned pro rata
among the selling Holders according to the total amount of securities owned
by said selling Holders, or in such other proportions as shall mutually be
agreed to by such selling Holders), provided that no such reduction shall
be made with respect to any securities offered by REI for its own account.
Indemnification. If any Registrable Securities are included in a registration
statement under this Section 6.4:
41. To the extent permitted
by law, REI will indemnify each Holder requesting or joining in a
registration, any underwriter (as defined in the Securities Act) for it, and
each person, if any, who controls such Holder or underwriter within the
meaning of the Securities Act, against any losses, claims, damages, or
liabilities joint or several, to which they may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based on any
untrue or alleged untrue statement of any material fact contained in such
registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein, or necessary to make
the statements therein not misleading, except to the extent the untrue
statement or omission resulted from information that the Holder furnished in
writing to REI expressly for use therein or by the Holder's failure to
deliver a copy of the registration statement or prospectus or any amendments
or supplements thereto to any purchaser after REI has furnished the Holder
with copies of the relevant documents.
42. To the extent permitted
by law, each Holder requesting or joining in a registration will indemnify
REI, each of its directors, each of its officers who have signed the
registration statement, each person, if any, who controls REI within the
meaning of the Securities Act, and each agent and any underwriter for REI
(within the meaning of the Securities Act) against any losses, claims,
damages, or liabilities to which REI or any such director, officer,
controlling person, agent, or underwriter may become subject, under the
Securities Act or otherwise, insofar as such losses, claims damages, or
liabilities (or actions in respect thereto) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact
contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in such
registration statement, preliminary or final prospectus, or amendments or
supplements thereto, in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with
such registration; and each such Holder will reimburse any legal or other
expenses reasonably incurred by REI or any such director, officer,
controlling person, agent, or underwriter in connection with investigating or
defending any such loss, claim, damage, liability, or action. This indemnity
will be in addition to any liability which each Holder may otherwise have.
43. If the indemnification
provided for in paragraphs (a) and (b) above is unavailable to any
indemnified party in respect of any loss, claim, damage, liability or action
referred to herein, then each such indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage,
liability or action in such proportion as is appropriate to reflect the
relative fault of the indemnified parties and the indemnifying parties in
connection with the actions or omissions which resulted in such loss, claim,
damage, liability or action, as well as any other relevant equitable
considerations. No person guilty of fraudulent misrepresentations (within the
meaning of Section 11(f) of the Exchange Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
44. Any person entitled to
indemnification hereunder will: (i) give prompt notice to the indemnifying
party of any claim with respect to which it seeks indemnification; and (ii)
unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist with respect to
such claim, permit such indemnifying party to assume the defense of such
claim with counsel reasonably satisfactory to the indemnified party. The
indemnifying party will not be subject to any liability for any settlement
made without its consent (but such consent will not be unreasonably
withheld). An indemnifying party who is not entitled or elects not to assume
the defense of a claim will not be obligated to pay the fees and expenses of
more than one counsel for all parties indemnified by such indemnifying party
with respect to such claim, unless in the reasonable judgment of any
indemnified party a conflict of interest may exist between such indemnified
party and any other such indemnified parties with respect to such claim.
45. Notwithstanding anything
to the contrary contained in this Agreement, the obligations of REI and
Holders under this Section 6.4 shall survive the completion of any offering
of Registrable Securities.
Reports Under 1934 Act. With a view to making available to the Holders the
benefits of Rule 144 promulgated under the Securities Act and any other
rule or regulation of the SEC that may at any time permit a Holder to sell
securities of REI to the public without registration, REI agrees to use its
best efforts to:
46. Make and keep public
information available as those terms are understood and
defined in Rule 144;
47. File with the SEC in a
timely manner all reports and other documents required
of REI under the Securities Act and the 1934 Act; and
48. Furnish to any Holder so
long as such Holder owns any of the Stock or Registrable Securities forthwith
upon request (i) a written statement by REI that it has complied with the
reporting requirements of Rule 144 and of the Securities Act and the 1934
Act, (ii) a copy of the most recent annual or quarterly report of REI, and
(iii) such other reports and documents so filed by REI as may be reasonably
requested in availing any Holder of any rule or regulation of the SEC
permitting the selling of any such securities without registration.
Lock-up Agreement. Inconsideration for REI agreeing to its obligations under
this Section 6.4, each Holder agrees in connection with any registration of
REI's securities that, upon the request of REI or the underwriters managing
any underwritten offering of REI's securities, not to sell, make any short
sale of, loan, grant any option for the purchase of, or otherwise dispose
of any Registrable Securities (other than those included in the
registration) without the prior written consent of REI or such
underwriters, as the case may be, for such period of time (not to exceed
180 days) from the effective date of such registration as REI or the
underwriters may specify.
Delay of Registration. No Holder shall have any right to take any action to
restrain, enjoin, or otherwise delay any registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Section 6.4.
INDEMNIFICATION OF THE PARTIES.
Indemnification by Sellers. Sellers shall, jointly and severally, indemnify,
defend, protect and hold harmless REI, each of subsidiary of REI, and each
of their respective successors and assigns and each of their respective
directors, officers, employees, agents and affiliates (each an "REI
Indemnified Party"), at all times from and after the date of this Agreement
against all losses, claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses ("Losses") (including
specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation ("Legal Expenses")) based upon, resulting from or
arising out of (i) any inaccuracy or breach of any representation or
warranty of PacSoft or Sellers contained in or made in connection with this
Agreement, and (ii) the breach by PacSoft or Sellers of, or the failure by
PacSoft or Sellers to observe, any of their respective covenants or other
agreements contained in or made in connection with this Agreement.
Indemnification by REI. REI shall indemnify, defend, protect and hold harmless
Sellers (each a "Seller Indemnified Party"), at all times from and after
the date of this Agreement against all Losses based upon, resulting from or
arising out of (i) any inaccuracy or breach of any representation or
warranty of REI contained in or made in connection with this Agreement, and
(ii) the breach by REI of, or the failure by REI to observe, any of its
covenants or other agreements contained in or made in connection with this
Agreement.
Adjustments to Indemnification Payments. Any payment made to any REI Indemnified
Party or any Seller Indemnified Party (each, an "indemnified party")
pursuant to this Section 7 in respect of any claim will be net of any
insurance proceeds realized by and paid to the indemnified party in respect
of any such claim. The indemnified party will use its reasonable efforts to
make insurance claims relating to any claim for which it is seeking
indemnification pursuant to this Section 7; provided, however, that the
indemnified party will not be obligated to make such an insurance claim if
the indemnified party in its reasonable judgment believes the cost of
pursuing such an insurance claim, together with any corresponding increase
in insurance premiums or other chargebacks to the indemnified party, would
exceed the value of the claim for which the indemnified party is seeking
indemnification.
Indemnification Procedures.
49. Promptly after receipt by an indemnified party of notice of
the commencement of any action, suit or proceeding by a person not a party to
this Agreement in respect of which the indemnified party will seek
indemnification hereunder (a "Third Party Action"), the indemnified party
shall notify the party required to provide indemnification (the "indemnifying
party") in writing, but any failure to so notify the indemnifying party shall
not relieve it from any liability that it may have to the indemnified party
under Section 7.1 or 7.2, except to the extent that the indemnifying party is
prejudiced by the failure to give such notice. The indemnifying party shall
be entitled to participate in the defense of such Third Party Action and to
assume control of such defense (including settlement of such Third Party
Action) with counsel reasonably satisfactory to such indemnified party;
provided, however, that:
50. the indemnified party shall be entitled to participate in
the defense of such Third Party Action and to employ counsel at its own
expense (which shall not constitute Legal Expenses for purposes of this
Agreement) to assist in the handling of such Third Party Action;
51. the indemnifying party shall obtain the prior written
approval of the indemnified party before entering into any settlement of such
Third Party Action or ceasing to defend against such Third Party Action, if
pursuant to or as a result of such settlement or cessation, injunctive or
other equitable relief would be imposed against the indemnified party or the
indemnified party would be adversely affected thereby;
52. no indemnifying party shall consent to the entry of any
judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by each claimant or plaintiff to each
indemnified party of a release from all liability in respect of such Third
Party Action; and
53. the indemnifying party shall not be entitled to control the
defense of any Third Party Action unless the indemnifying party confirms in
writing its assumption of such defense and continues to pursue the defense
reasonably and in good faith. After written notice by the indemnifying party
to the indemnified party of its election to assume control of the defense of
any such Third Party Action in accordance with the foregoing, (i) the
indemnifying party shall not be liable to such indemnified party hereunder
for any Legal Expenses subsequently incurred by such indemnified party
attributable to defending against such Third Party Action, and (ii) as long
as the indemnifying party is reasonably contesting such Third Party Action in
good faith, the indemnified party shall not admit any liability with respect
to, or settle, compromise or discharge the claim underlying, such Third Party
Action without the indemnifying party's prior written consent. If the
indemnifying party does not assume control of the defense of such Third Party
Action in accordance with this Section 7.4, the indemnified party shall have
the right to defend and/or settle such Third Party Action in such manner as
it may deem appropriate at the cost and expense of the indemnifying party,
and the indemnifying party will promptly reimburse the indemnified party
therefor in accordance with this Section 7.4. The reimbursement of fees,
costs and expenses required by this Section 7.4 shall be made by periodic
payments during the course of the investigation or defense, as and when bills
are received or expenses incurred.
54. If an indemnified party has actual knowledge of any facts or
circumstances other than the commencement of a Third Party Action which cause
in good faith it to believe that it is entitled to indemnification under this
Section 7, then such indemnified party shall promptly give the indemnifying
party notice thereof in writing, but any failure to so notify the
indemnifying party shall not relieve it from any liability that it may have
to the indemnified party under Section 7.1 or 7.2, except to the extent that
the indemnifying party is prejudiced by the failure to give such notice.
Manner of Indemnification. All indemnification under this Section 7 shall be
effected by the payment of cash or delivery of a bank cashier's check, or
by a combination of the foregoing.
CLOSING.
Closing Date. The closing of the transactions contemplated by this Agreement
("Closing") will take place concurrently with the execution of this
Agreement at the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, unless another place, time and date is
selected by PacSoft and REI ("Closing Date").
Deliveries by PacSoft and Sellers at the Closing. At the Closing, PacSoft and
Sellers shall deliver to REI:
55. Certificates representing all of the Shares, free of liens
and encumbrances, accompanied by duly executed stock powers made by each
Seller in favor of REI with all necessary transfer stamps affixed thereto or
other evidence of payment of applicable stock transfer taxes, if any;
56. All other documents, instruments, consents and other
deliveries required to be delivered by PacSoft and Sellers pursuant to this
Agreement.
Deliveries by REI at the Closing. At the Closing, REI shall deliver to Sellers:
57. Certificates representing the
Stock, with facsimile signatures of appropriate REI
officers and endorsement by REI's transfer agent; and
58. All other documents, instruments, consents and other
deliveries required to be delivered by REI pursuant to this Agreement.
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
All representations, warranties and covenants contained in this
Agreement and any other documents or instruments delivered in connection with
this Agreement will remain operative and in full force and effect, regardless of
any investigation made by or on behalf of the parties to this Agreement, until
three years after the Closing Date, except for covenants that by their terms
survive for a longer period and except (i) with respect to Sellers' obligations
for damages arising with respect to taxes for any period or part thereof prior
to the Closing or any breach of the representations, warranties and covenants
with respect to employee benefits, taxes and environmental laws, which
obligations shall continue until the applicable statute of limitations has
expired and (ii) with respect to Sellers' obligations for damages arising out of
any breach of the representations and warranties contained in Section 2.2 and
elsewhere herein relating to the Shares, which obligations shall continue
forever.
MISCELLANEOUS.
Governing Law. The internal laws of the State of California (irrespective of its
choice of law principles) will govern the validity of this Agreement, the
construction of its terms and the interpretation and enforcement of the
rights and duties of the parties hereto. The parties hereby consent in any
dispute, action, litigation or other proceeding concerning this Agreement
to the jurisdiction of the courts of California, with the County of Orange
being the sole venue for bringing of the action or proceeding.
Assignment; Binding Upon Successors adn Assigns. No party hereto may assign any
of its rights or obligations hereunder without the prior written consent of
the other parties hereto. This Agreement will be binding upon and inure to
the benefit of the parties hereto and their respective successors and
permitted assigns.
Severability. If any provision of this Agreement, or the application thereof,
will for any reason and to any extent be invalid or unenforceable, the
remainder of this Agreement and application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
interest of the parties hereto. The parties further agree to replace such
void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the greatest extent possible,
the economic, business and other purpose of the void unenforceable
provision.
Counterparts. This Agreement may be executed in any number of counterparts, each
of which will be deemed an original as regards any party whose signature
appears thereon and all of which together will constitute one and the same
instrument. This Agreement will become binding when one or more
counterparts hereof, individually or taken together, will bear the
signatures of all the parties reflected hereon as signatories.
OtherRemedies. Except as otherwise provided herein, any and all remedies herein
expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby or by law on such party, and
the exercise of any one remedy will not preclude the exercise of any other.
Amendments and Waivers. Anyterm or provision of this Agreement may be amended,
and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively) only by a writing signed by the party to be bound thereby.
The waiver by a party of any breach hereof or default in the performance
hereof will not be deemed to constitute a waiver of any other default or
any succeeding breach or default.
Expenses. REI, on the one hand, and Sellers, on the other, will each bear their
own expenses and legal fees incurred with respect to this Agreement and the
transactions contemplated hereby. Sellers shall be responsible for all
expenses and legal fees incurred by PacSoft with respect to the negotiation
and entry into this Agreement and the transactions contemplated hereby.
Attorneys' Fees. Should suit be brought to enforce or interpret any part of this
Agreement, the prevailing party will be entitled to recover, as an element
of the costs of suit and not as damages, reasonable attorneys' fees to be
fixed by the court (including, without limitation, costs, expenses and fees
on any appeal).
32
Notices. Allnotices and other communications pursuant to this Agreement shall be
in writing and deemed to be sufficient if contained in a written instrument
and shall be deemed given if delivered personally, telecopied, sent by
nationally-recognized overnight courier or mailed by registered or
certified mail (return receipt requested), postage prepaid, to the parties
at the following address (at such other address for a party as shall be
specified by like notice):
If to PacSoft to: PacSoft Incorporated
▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If to REI to: Research Engineers, Inc.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:... ▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If to Sellers to: ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇
▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
All notices and other communications shall be deemed to have been
received (a) in the case of personal delivery, on the date of delivery, (b) in
the case of a telecopy, when the party receiving the copy shall have confirmed
receipt of the communication, (c) in the case of delivery by
nationally-recognized overnight courier, on the business day following dispatch,
and (d) in the case of mailing, on the third business day following such
mailing.
Construction of Agreement. Thelanguage in all parts of this Agreement shall be
in all cases construed simply according to its fair meaning and not
strictly for or against any party. Whenever the context requires, all words
used in the singular will be construed to have been used in the plural, and
vice versa, and each gender will include any other gender. The captions of
the Sections and Subsections of this Agreement are for convenience only and
shall not affect the construction or interpretation of any of the
provisions of this Agreement. This Agreement has been negotiated between
unrelated parties who are sophisticated and knowledgeable in the matters
contained in this Agreement and who have acted in their own self interest.
In addition, each party affirms that it has been afforded the opportunity
to receive independent advice from its respective legal counsel as to the
advisability of entering into this Agreement and to consult and discuss the
provisions of this Agreement with its respective legal counsel and fully
understands the legal effect of each provision. Accordingly, any rule of
law, including Section 1654 of the California Civil Code, as well as any
other statute, law, ordinance or common law principles or other authority
of any jurisdiction of similar effect, or legal decision that would require
interpretation of any ambiguities in this Agreement against the party who
has drafted it is not applicable and is hereby waived. The provisions of
this Agreement shall be interpreted in a reasonable manner to effect the
purpose of the parties, and this Agreement shall not be interpreted or
construed against any party to this Agreement because that party or any
attorney or representative for that party drafted this Agreement or
participated in the drafting of this Agreement.
No Joint Venture. Nothing contained in this Agreement will be deemed or
construed as creating a joint venture or partnership between any of the
parties hereto. No party is by virtue of this Agreement authorized as an
agent, employee or legal representative of any other party. No party will
have the power to control the activities and operations of any other. The
status of the parties hereto is, and at all times will continue to be, that
of independent contractors with respect to each other. No party will have
any power or authority to bind or commit any other. No party will hold
itself out as having any authority or relationship in contravention of this
Section.
Further Assurances. Each party agrees to cooperate fully with the other parties
and to execute such further instruments, documents and agreements and to
give such further written assurances as may be reasonably requested by any
other party to evidence and reflect the transactions described herein and
contemplated hereby and to carry into effect the intents and purposes of
this Agreement.
Absence of Third Party Rights. No provisions of this Agreement are intended, nor
will be interpreted, to provide or create any third party beneficiary
rights or any other rights of any kind in any client, customer, affiliate,
shareholder or partner of any party hereto or any other person or entity
unless specifically provided otherwise herein, and, except as so provided,
all provisions hereof will be personal solely between the parties to this
Agreement.
Entire Agreement. This Agreement and the schedules and exhibits hereto
constitute the entire understanding and agreement of the parties hereto
with respect to the subject matter hereof and supersede all prior and
contemporaneous agreements or understandings, inducements or conditions,
express or implied, written or oral, between the parties with respect
thereto. The express terms hereof control and supersede any course of
performance or usage of trade inconsistent with any of the terms hereof.
Press Releases. No party will issue or authorize to be issued any press release
or similar announcement concerning this Agreement or any of the transactions
contemplated hereby without the prior written approval of the other parties,
which approval shall be given in order to allow compliance with the
disclosure requirements of applicable securities laws.
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed by their duly authorized respective officers as of the
date first above written.
RESEARCH ENGINEERS, INC.,
a Delaware corporation
By: ____________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, President
PACSOFT INCORPORATED,
a Washington corporation
By: ____________________________
▇▇▇▇▇ ▇▇▇▇▇▇, President
By: ____________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Secretary
___________________________________
▇▇▇▇▇ ▇▇▇▇▇▇, an individual
___________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, an individual
___________________________________
▇▇▇ ▇▇▇▇, an individual
THE UNDERSIGNED SPOUSES HAVE EXECUTED THIS AGREEMENT FOR THE PURPOSE OF
CONFIRMING THEIR CONSENT TO THE CONVEYANCE OF THEIR COMMUNITY PROPERTY INTEREST,
IF ANY, IN SHARES OF CAPITAL STOCK OF PACSOFT PURSUANT TO THIS AGREEMENT.
_____________________________________________________
_________________, spouse of ▇▇▇▇▇ ▇▇▇▇▇▇
_____________________________________________________
_________________, spouse of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
_____________________________________________________
_________________, spouse of ▇▇▇ ▇▇▇▇
