STOCK PURCHASE AGREEMENT
AMONG
RESEARCH ENGINEERS, INC.
e-DESTINATIONS, INC.
AND
VINOD BHINDI
XXXXXXX BHINDI
XXXXXX XXXXXX
AND
JAYENT BHINDI
JANUARY 31, 2000
TABLE OF CONTENTS
DESCRIPTION PAGE NO.
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1. PURCHASE AND SALE OF SHARES.................................................1
1.1 Purchase and Sale. ................................................1
1.2 Purchase Price. ...................................................1
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLERS...................1
2.1 Organization; Good Standing; Qualification and Power...............2
2.2 Capital Structure..................................................2
2.2.1 Stock and Options. .......................................2
2.2.2 No Other Commitments. ....................................2
2.3 Authority..........................................................2
2.3.2 Sellers' Authority. ......................................2
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 ERISA and Other Compliance.........................................4
2.9 Absence of Undisclosed Liabilities. ...............................4
2.10 Absence of Certain Changes or Events. .............................4
2.11 No Defaults........................................................6
2.12 Certain Agreements. ...............................................6
2.13 Taxes..............................................................6
2.14 Intellectual Property..............................................8
2.15 Fees and Expenses..................................................8
2.16 Environmental Matters..............................................8
2.17 Interested Party Transactions. ....................................9
2.18 Disclosure.........................................................9
2.19 Restrictions on Business Activities................................9
2.20 Accounts Receivable................................................9
2.21 Personal Property..................................................9
2.22 Real Property......................................................9
2.23 Contracts.........................................................10
2.24 Investment Representation.........................................10
3. REPRESENTATIONS AND WARRANTIES OF REI......................................10
3.1 Organization; Good Standing; Qualification and Power..............11
3.2 Capital Structure.................................................11
3.3 Authority.........................................................11
3.3.1 Corporate Action.........................................11
3.3.2 No Conflict..............................................11
3.3.3 Governmental Consents....................................12
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DESCRIPTION PAGE NO.
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3.4 SEC Documents.....................................................12
3.4.1 SEC Reports..............................................12
3.4.2 Financial Statements.....................................12
3.5 Litigation........................................................12
3.6 Fees and Expenses.................................................13
3.7 Disclosure........................................................13
4. ADDITIONAL AGREEMENTS......................................................13
4.1 Employee Matters..................................................13
4.2 Employment Agreement..............................................13
4.5 ..................................................................13
4.6 Final Distribution of Retained Earnings...........................13
4.7 Replacement of Bonds..............................................14
5. INDEMNIFICATION OF THE PARTIES.............................................14
5.1 Indemnification by Sellers........................................14
5.2 Indemnification by REI............................................14
5.3 Adjustments to Indemnification Payments...........................14
5.4 Indemnification Procedures........................................15
5.5 Manner of Indemnification.........................................16
6. CLOSING....................................................................16
6.1 Closing Date......................................................16
6.2 Deliveries by the Company and Sellers at the Closing..............16
6.3 Deliveries by REI at the Closing..................................16
7. NON-COMPETITION............................................................17
7.1 Definitions.......................................................17
7.2 Non-Competition...................................................19
7.3 Non-Solicitation of Employees.....................................19
7.4 Non-Solicitation of Customers.....................................19
7.5 Additional Agreements.............................................19
7.6 Remedies; Enforceability..........................................20
8. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS......................20
9. MISCELLANEOUS..............................................................20
9.1 Governing Law.....................................................20
9.2 Assignment: Binding Upon Successors and Assigns...................20
9.3 Severability......................................................20
9.4 Counterparts......................................................20
9.5 Other Remedies....................................................21
9.6 Amendment and Waivers. ...........................................21
9.7 Expenses..........................................................21
9.8 Attorneys' Fees...................................................21
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DESCRIPTION PAGE NO.
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9.9 Notices...........................................................21
9.10 Construction of Agreement.........................................22
9.11 No Joint Venture..................................................22
9.12 Further Assurances................................................22
9.13 Absence of Third Party Rights.....................................23
9.14 Entire Agreement..................................................23
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is entered into as of this
31st day of January, 2000, by and among Research Engineers, Inc., a Delaware
corporation ("REI"), e- Destinations, Inc., a California corporation (the
"Company"), Vinod Bhindi, an individual, Xxxxxxx Bhindi, an individual, Xxxxxx
Xxxxxx, an individual, and Jayent Bhindi, an individual (collectively,
"Sellers").
RECITALS
A. Sellers own, in the aggregate, all of the issued and outstanding
shares (the "Shares") of capital stock of the Company.
B. REI desires to purchase from Sellers, and Sellers desire to sell to
REI, the Shares on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, the parties to this Agreement agree as follows:
1. PURCHASE AND SALE OF SHARES.
1.1 PURCHASE AND SALE. Subject to the terms and conditions set
forth herein, at the Closing (as defined in Section 6.1 below), Sellers shall
transfer, convey, assign and deliver the Shares to REI, and REI shall acquire,
purchase and accept the Shares from Sellers.
1.2 PURCHASE PRICE. The aggregate purchase price for the
Shares shall consist of 30,000 shares of Common Stock, $.01 par value per share,
of REI (the "Stock") valued at $20.92 per share of Stock and options to purchase
up to 50,000 shares of Common Stock (the "Options") with an exercise price of
$20.92 per share in the form of EXHIBIT 1.2(A) attached hereto. The shares of
Stock and Options shall be allocated and paid to the Sellers in the manner
described in EXHIBIT 1.2(B) attached hereto.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
SELLERS.
Except as set forth in a schedule dated the date of this
Agreement and delivered by the Company to REI concurrently herewith (the
"Disclosure Schedule") specifically identifying the Section of this Agreement
requiring the delivery of such disclosure, the Company 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 or travel
industry.
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2.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the state of California, 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. The Company does not have any subsidiaries. The Company has made
available to REI or its counsel complete and correct copies of the articles of
incorporation and bylaws of the Company, 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 of the Company.
2.2 CAPITAL STRUCTURE.
2.2.1 STOCK AND OPTIONS. The authorized capital stock
of the Company consists of 100,000 shares of common stock, no par value per
share (the "Common Stock"), and no shares of preferred stock. At the close of
business on January 31, 2000, 10,000 shares of Common Stock were issued and
outstanding. All outstanding shares of Common Stock are validly issued, fully
paid and nonassessable and not subject to preemptive rights. The shares of
Common Stock owned by each Seller are owned by each such Seller free and clear
of any liens, security interests, pledges, agreement, claims, charges or
encumbrances.
2.2.2 NO OTHER COMMITMENTS. There are no options,
warrants, calls, rights, commitments, conversion rights or agreements of any
character to which the Company is a party or by which the Company is bound
obligating the Company to issue, deliver or sell, or cause to be issued,
delivered or sold, any shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company, or
obligating the Company 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 the Company or any Seller is a party
with respect to the voting of the capital stock of the Company.
2.3 AUTHORITY.
2.3.1 CORPORATE ACTION. The Company 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 the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of the Company.
This Agreement has been duly executed and delivered by the Company and this
Agreement is the valid and binding obligation of the Company, 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.
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2.3.2 SELLERS' AUTHORITY. Each of Sellers has 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.
2.3.3 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 the Company under, any term, condition or provision of (x) the
articles of incorporation or bylaws of the Company 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 the Company or its 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.
2.3.4 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 the Company in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby.
2.4 FINANCIAL STATEMENTS. The Company has furnished to REI
copies of: (a) the unaudited compiled balance sheets of the Company at December
31, 1997 and 1998 and the unaudited balance sheets of the Company for the eleven
months ended November 30, 1999, and the related statements of income for the
periods then ended. All financial statements referred to in this Section 2.4
(the "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 the Company as at the respective dates thereof and the results of operation
of the Company for the respective periods covered by the statements of income
contained in therein. The Company does not have any material obligations or
liabilities, contingent or otherwise, not fully disclosed by Financial
Statements.
2.5 COMPLIANCE WITH APPLICABLE LAWS. The business of the
Company 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. The Company has not been notified by any Governmental
Entity that any investigation or review with respect to the Company is pending
or threatened, nor has any Governmental Entity notified the Company of its
intention to conduct an investigation or review. The Company 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.
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2.6 INSURANCE. The Company maintains and at all times since
1991 has maintained fire and casualty and general liability insurance that the
Company believes to be reasonably prudent for its business. The Disclosure
Schedule contains a complete and correct list and summary description of all
insurance policies maintained by the Company. The Company 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. The Company has complied in all
material respects with the terms and provisions of the policies. No claims have
been made by the Company under any policy of insurance and, in the opinion of
the Company reasonably formed and held, there is no basis on which a claim
should or could be made under any such policy.
2.7 LITIGATION. There is no suit, action, arbitration, demand,
claim or proceeding pending or, to the best knowledge of the Company and
Sellers, threatened against the Company, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against the Company that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
2.8 ERISA AND OTHER COMPLIANCE.
(a) The Company does not maintain, nor has it ever
maintained, any employee benefit plan or arrangement including, but not limited
to, deferred compensation, stock option, stock purchase, bonus, incentive and
severance plans and employee benefit plans as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
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(b) The Company has complied with all the
requirements of Section 4980B of the Internal Revenue Code and the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended, with respect to any
"qualifying event" (as defined in Section 4980B(f)(3) of the Internal Revenue
Code) occurring prior to and including the Closing Date, and no material tax
payable on account of Section 4980B of the Internal Revenue Code has been
incurred with respect to any current or former employees (or their
beneficiaries) of the Company.
2.9 ABSENCE OF UNDISCLOSED LIABILITIES. At December 31, 1999
(the "Balance Sheet Date"), (i) the Company did not have any liabilities or
obligations of any nature (matured or unmatured, fixed or contingent) which were
material to the Company, taken as a whole, and were not provided for in the
consolidated balance sheet of the Company at the Balance Sheet Date, a copy of
which has been delivered to REI (the "Balance Sheet"); and (ii) all reserves
established by the Company and set forth in the Balance Sheet were reasonably
adequate.
2.10 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the Balance
Sheet Date there has not occurred:
(a) any change in the condition (financial or
otherwise), properties, assets, liabilities, businesses, operations, results of
operations or prospects of the Company, taken as a whole, that could reasonably
constitute a Material Adverse Effect;
(b) any amendments or changes in the articles of
incorporation or bylaws of the Company, other than the amendment to the
Company's articles of incorporation and bylaws changing the name of the Company
to e-Destinations, Inc.;
(c) any damage, destruction or loss, whether covered
by insurance or not, that could reasonably constitute a Material Adverse Effect;
(d) any redemption, repurchase or other acquisition
of shares of the Common Stock by the Company (other than pursuant to
arrangements with terminated employees or consultants), or any declaration,
setting aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to the Common Stock;
(e) any material increase in or modification of the
compensation or benefits payable or to become payable by the Company to any of
its directors or employees, except in the ordinary course of business consistent
with past practice;
(f) any material increase in or modification of any
bonus, insurance or any employee arrangement (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;
(g) any acquisition or sale of a material amount of
property or assets of the Company, other than in the ordinary course of business
consistent with past practices;
(h) any alteration in any term of any outstanding
security of the Company;
(i) any (A) incurrence, assumption or guarantee by
the Company of any debt for borrowed money; (B) issuance or sale of any
securities convertible into or exchangeable for debt securities of the Company;
or (C) issuance or sale of options or other rights to acquire from the Company,
directly or indirectly, debt securities of the Company or any securities
convertible into or exchangeable for any such debt securities;
(j) any creation or assumption by the Company of any
mortgage, pledge, security interest or lien or other encumbrance on any asset;
(k) 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 the Company, (ii) other
loans and advances in an aggregate amount which does not exceed $25,000
outstanding at any time and (iii) purchases on the open market of liquid,
publicly traded securities;
(l) any entering into, amendment of, relinquishment,
termination or non- renewal by the Company of any contract, lease transaction,
commitment or other right or obligation other than in the ordinary course of
business;
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(m) any transfer or grant of a right under the IP
Rights (as defined in Section 2.14), other than those transferred or granted in
the ordinary course of business;
(n) 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 the
Company or any campaign being conducted to solicit authorization from employees
to be represented by the labor union; or
(o) any agreement or arrangement made by the Company
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.
2.11 NO DEFAULTS. The Company is not 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 the Company under, any contract or
agreement to which the Company is a party and which would, if terminated or
modified, have a Material Adverse Effect.
2.12 CERTAIN AGREEMENTS. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby will
result in any payment (including, without limitation, severance, unemployment
compensation, golden parachute, bonus or otherwise) becoming due to any director
or employee of the Company from the Company.
2.13 TAXES.
(a) 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, 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.
(b) (i) As of the Closing, the Company will have
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 the Company that are required to be
filed by or with respect to the Company on or prior to the Closing, 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) As of the Closing, the Company: (A)
will have paid or accrued in accordance with generally accepted accounting
principles all Taxes concerning or attributable to the Company relating to
periods ending on or before the Closing regardless of whether reflected on
Returns and (B) will have withheld with respect to their employees all federal
and state income taxes, FICA, FUTA, and other Taxes required to be withheld;
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(iii) The Company has not been delinquent in
the payment of any Tax nor is there any Tax deficiency outstanding, proposed or
assessed against the Company, nor has the Company 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 the Company is presently in progress, nor has the Company been
notified of any request for an audit or examination;
(v) The Company 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 Balance Sheet, and the Company does not have knowledge of any
reasonable basis for the assertion of any liability attributable to the Company,
or any of its assets and operations;
(vi) The Company has made available to REI
or its counsel copies of all federal and state income Tax Returns for all
periods between January 1, 1995 through and including December 31, 1998;
(vii) There are (and as of immediately
following the Closing there will be) no liens, pledges, charges, claims,
security interests, or other encumbrances of any sort (the "Liens") on the
assets of the Company relating or attributable to Taxes other than liens for
sales and payroll taxes not yet due and payable;
(viii) The Company does not have 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 the Company;
(ix) None of the assets of the Company 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) The Company has not filed any consent
agreement under Code Section 341(f) or agreed to have Code Section 341(f) apply
to any disposition of a "subsection (f) asset" (as defined in Code Section
341(f)(4)) owned by the Company;
(xi) The Company 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;
(xii) The Company is not a party to a tax
sharing, allocation, indemnification or similar agreement or arrangement, nor
does the Company owe any amount under any agreement or arrangement;
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(xiii) No Return of the Company contains a
disclosure statement under Code Section 6662 (or predecessor provision) or any
similar provision of state, local, or foreign law;
(xiv) The Company is not nor has it been at
any time a "United States real property holding corporation" within the meaning
of Code Section 897(c)(2);
(xv) No indebtedness of the Company consists
of "corporate acquisition indebtedness" within the meaning of Code Section 279;
(xvi) The Company has not taken any action
not in accordance with past practice that would have the effect of deferring any
Tax liability of the Company from any period ending on before the Closing Date
to any taxable period ending after the Closing Date;
(xvii) The Company 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 the Company or any predecessor corporations;
(xviii) The tax bases of the assets of the
Company for purposes of determining future amortization, depreciation, and other
federal income tax deductions are accurately reflected on the tax books and
records of the Company; and
(xvix) The Company, since the date of its
incorporation, has elected to be treated for tax purposes as an S corporation
under the Code.
2.14 INTELLECTUAL PROPERTY. The Company owns or has acquired
all material Intellectual Property Rights (as defined below), including rights
to sell services, as necessary or required for the conduct of its business as
presently conducted (the Intellectual Property Rights being referred to as the
"IP Rights"), and these rights are reasonably sufficient for the conduct of its
business. 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 (excluding the
name "Bhindi's Travel"), service marks, service xxxx registrations, service xxxx
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.
2.15 FEES AND EXPENSES. The Company 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.
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2.16 ENVIRONMENTAL MATTERS.
(a) None of the properties or facilities of the
Company 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 would
not constitute a Material Adverse Effect. During the time that the Company has
owned or leased its properties and facilities, to the Company's knowledge, no
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.
(b) During the time that the Company has owned or
leased its properties and facilities, there has been no litigation brought or
threatened against the Company by, or any settlement reached by the Company
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.
2.17 INTERESTED PARTY TRANSACTIONS. No officer or director of
the Company or any "affiliate" or "associate" (as those terms are defined in
Rule 405 promulgated under the Securities Act of 1933 (the "Securities Act") of
any such person has had, either directly or indirectly, a material interest in:
(i) any person or entity which purchases from or sells, licenses or furnishes to
the Company any material amount of goods, property, technology or intellectual
or other property rights or services; or (ii) any material contract or agreement
to which the Company is a party or by which it may be bound or affected.
2.18 DISCLOSURE. No representation or warranty made by the
Company 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 the Company 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.
2.19 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no material
agreement, judgment, injunction, order or decree binding upon the Company that
has or could reasonably be expected to have the effect of prohibiting or
materially impairing any business practice of the Company, any acquisition of
property by the Company or the conduct of business by the Company as currently
conducted.
2.20 ACCOUNTS RECEIVABLE. The accounts receivable shown on the
Company Balance Sheet as of the Balance Sheet Date, or thereafter acquired prior
to the date hereof, have been and are (as the case may be) collectible within
120 days from the Closing Date in amounts not less than the aggregate amounts
thereof carried on the books of the Company reduced by the reserves for
discounts and bad debts taken on the Balance Sheet.
2.21 PERSONAL PROPERTY. The Company 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 the Company is in good operating
condition. All of the leases to personal property utilized in the business of
the Company are valid and enforceable against the Company and are not in default
by the Company, or, to the knowledge of the Company or Sellers, are any of the
other parties thereto in default thereof.
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2.22 REAL PROPERTY. The Company does not own any real
property. The Disclosure Schedule contains a list of all leases for real
property to which the Company 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 the Company, the
real property leased or occupied by the Company, 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 the
Company for any improvements made to the real property leased or occupied by the
Company that have not been paid for.
2.23 CONTRACTS. The Disclosure Schedule lists all oral or
written agreements, notes, instruments, or contracts to which the Company 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 (the "Contracts"). The Company is not in
default in performance of its obligations under any material provisions of the
Contracts. Neither the Company nor Sellers have any knowledge of any violation
of any Contract by any other party thereto and have no knowledge of any intent
by any other party to a Contract not to perform its obligations under any
Contract.
2.24 INVESTMENT REPRESENTATION. Each Seller acknowledges that,
upon issuance, the Stock, the Options and the shares of Common Stock underlying
the Options (the "Underlying 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
acquisition of the Stock, Options and Underlying Stock is for investment only,
for his own account and not with a view to "distribution" as that term is used
under the Securities Act, (ii) he is an "accredited investor" as that term is
used in Regulation D under the Securities Act, and (iii) he has received copies
of REI's Form 10-KSB for the fiscal year ended March 31, 1999, and Forms 10-QSB
for the quarters ended June 30, 1999 and September 30, 1999. Each Seller agrees
that he shall not at any time make any sale, pledge, hypothecation, gift or
other transfer of Stock, Options or Underlying 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, Options or Underlying Stock pursuant to
any such exemption, he 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 has been informed that the
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Stock, Options and Underlying Stock must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available and he understands that any sale of the Stock, Options
or Underlying 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, Options or Underlying Stock.
Sellers acknowledge that, except as expressly set forth in the registration
rights agreement attached hereto as Exhibit 4.3, 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, the Options
or the Underlying Stock. Sellers acknowledge that REI shall cause a legend to be
placed on the certificates representing the Stock, the Options and the
Underlying Stock to reflect the foregoing.
3. REPRESENTATIONS AND WARRANTIES OF REI.
REI hereby represents and warrants to the Company and Sellers
that:
3.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER. REI
and each of its subsidiaries ("REI Subsidiaries") 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.
3.2 CAPITAL STRUCTURE. The authorized capital stock of REI
consists of 20,000,000 shares of Common Stock, $.01 par value, 357,143 shares of
Series A 5% Convertible Preferred Stock, $.01 par value per share (the "Series A
Preferred Stock"), 371,429 shares of Series B 5% Convertible Preferred Stock,
$.01 par value per share (the "Series B Preferred Stock") and 4,271,428 shares
of undesignated preferred stock, $.01 par value (the "REI Preferred Stock"). As
of the date hereof and prior to the Closing, 6,418,692 shares of REI Common
Stock are issued and outstanding, 1,183,739 shares of REI Common Stock are
reserved for issuance upon the exercise of outstanding options and warrants to
purchase REI Common Stock, no shares of Series A Preferred Stock are issued and
outstanding, no shares of Series B Preferred Stock are issued and outstanding
and no shares of REI Preferred Stock are issued and outstanding. All outstanding
shares of REI Common Stock and Series B Preferred Stock are validly issued,
fully paid and nonassessable and not subject to preemptive rights. There are no
outstanding rights, options, warrants, subscriptions, calls, convertible
securities or agreements of any character or nature (other than as disclosed
herein) under which REI is or may become obligated to issue or to transfer any
shares of its capital stock of any kind.
3.3 AUTHORITY.
3.3.1 CORPORATE ACTION. REI has all requisite
corporate power and authority to enter into this Agreement and all other
agreements, documents and/or instruments referred to or contemplated herein,
including without limitation the registration rights agreement in the form of
EXHIBIT 4.3 and the option agreement in the form of EXHIBIT 1.2(B)
(collectively, the "Transaction Documents") and to perform its obligations
hereunder and to consummate the transactions contemplated by the Transaction
Documents. The execution and delivery of the Transaction Documents by REI and
the consummation by REI of the transactions contemplated by the Transaction
Documents have been duly authorized by all necessary corporate action on the
part of REI. The Transaction Documents have been duly executed and delivered by
REI and each of the Transaction Documents 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.
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3.3.2 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.
3.3.3 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, the Options
and the Underlying Stock.
3.4 SEC DOCUMENTS.
3.4.1 SEC REPORTS. REI has made available to the
Sellers or their counsel correct and complete copies of each report, schedule,
registration statement and definitive proxy statement filed by REI with the
Securities and Exchange Commission (the "SEC") on or after September 30, 1996
(the "REI SEC Documents"), which are all the documents (other than preliminary
material) that REI was required to file with the SEC on or after that date. As
of their respective dates or, in the case of registration statements, their
effective dates (or if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing), none of the REI SEC Documents
(including all exhibits and schedules thereto and documents incorporated by
reference therein) contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and the REI SEC Documents complied when filed in all
material respects with the then applicable requirements of the Securities Act or
the Securities Exchange Act of 1934 (the "1934 Act"), as the case may be, and
the rules and regulations promulgated by the SEC thereunder. REI has filed all
documents and agreements which were required to be filed as exhibits to the REI
SEC Documents.
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3.4.2 FINANCIAL STATEMENTS. The financial statements
of REI included in the REI SEC Documents complied as to form in all material
respects with the then applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may have been indicated in the
notes thereto or, in the case of the unaudited statements, as permitted by Form
10-QSB promulgated by the SEC) and fairly present the financial position of REI
as at the respective dates thereof and the results of its operations and cash
flows for the respective periods then ended.
3.5 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.
3.6 FEES AND EXPENSES. REI has not paid or has become
obligated to pay any fee or commission to any broker, finder or intermediary in
connection with the transactions contemplated by this Agreement.
3.7 DISCLOSURE. No representation or warranty made by REI in
this Agreement, nor any document, written information, written statement,
financial statement, certificate or exhibits prepared and furnished or to be
prepared and furnished by REI 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.
4. ADDITIONAL AGREEMENTS.
4.1 EMPLOYEE MATTERS. Following the Closing, all employees of
the Company will either (i) continue to be employees of the Company or (ii) be
offered employment by REI. In either case, those employees will be provided
employment benefits that are at least comparable to those they currently receive
from the Company. 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 the Company or REI following the Closing (except with respect
to those employees who become parties to employment agreements pursuant to
Section 4.2).
4.2 EMPLOYMENT AGREEMENT. On the Closing Date, REI and Xxxxxx
Xxxxxx shall enter into an employment agreement substantially in the form
attached hereto as EXHIBIT 4.2.
4.3 REGISTRATION RIGHTS AGREEMENTS. On the Closing Date, REI
and each Seller shall enter into a registration rights agreement substantially
in the form attached hereto as EXHIBIT 4.3.
4.4 LOCKUP AGREEMENTS. On the Closing Date, each Seller shall
deliver to REI a lockup agreement in respect of a portion of the shares of Stock
issued to such Seller hereunder in the form attached hereto as EXHIBIT 4.4.
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4.5 TAX ELECTION. REI and each of the Sellers agree that in
connection with the transactions contemplated by this Agreement, each party
shall make an election under Section 338(h)(10) of the Code after the Closing
and shall execute such documents as are necessary to effectuate such election.
4.6 FINAL DISTRIBUTION OF RETAINED EARNINGS. Within forty-five
(45) days after the Closing, Sellers shall deliver to REI a balance sheet of the
Company at January 31, 2000 (the "Final Balance Sheet"). The Final Balance Sheet
shall be prepared in accordance with generally accepted accounting principles
and shall set forth the amount of retained earnings (the "Retained Earnings"),
if any, of the Company as of such date. REI and its representatives shall have
fifteen (15) days to review the Final Balance Sheet. If REI agrees with Sellers
calculation of Retained Earnings, REI shall pay to Sellers such amount (in
proportion to their prior ownership interest in the Company), via wire transfer
to each Seller's account, within three (3) days of such determination. If REI
disagrees with Sellers calculation of Retained Earnings, REI shall, within
fifteen (15) days after the Closing, give written notice to Sellers of such
disagreement. If REI and Sellers are unable to resolve any such disagreement
within fifteen (15) days after REI gives Sellers notice, the disagreement shall
be referred for final determination to any accounting firm of national
reputation as may be reasonably acceptable to REI and Sellers. REI and Sellers
may submit to the accounting firm any facts that they deem relevant to the
determination, and the determination of the accounting firm shall be conclusive,
non-appealable and binding upon REI and Sellers for all purposes. Any amount of
Retained Earnings determined by the accounting firm shall be payable in the
manner described above, via wire transfer to each Seller's account, by REI
within three (3) days after REI and has been notified of such determination. REI
and Sellers agree that the procedures established by this Section 4.6 shall
constitute the exclusive procedures for determining the amount of Retained
Earnings to be paid by REI to Sellers.
4.7 REPLACEMENT OF BONDS. Within one hundred twenty (120) days
after the Closing, REI shall have replaced the Company's standby letters of
credit issued to ARC and Emirates with REI's letters of credit in such amounts
as are required by each of ARC and Emirates. Seller's agree to cooperate with
REI in obtaining the successful release of the Company's current letters of
credit.
5. INDEMNIFICATION OF THE PARTIES.
5.1 INDEMNIFICATION BY SELLERS. Sellers shall, jointly and
severally, indemnify, defend, protect and hold harmless REI and its respective
successors and assigns and each of its 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 the Company or Sellers contained in or made in
connection with this Agreement, and (ii) the breach by the Company or Sellers
of, or the failure by the Company or Sellers to observe, any of their respective
covenants or other agreements contained in or made in connection with this
Agreement.
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5.2 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.
5.3 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 5 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 5; 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.
5.4 INDEMNIFICATION PROCEDURES.
(a) 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 5.1 or 5.2, 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:
(b) 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;
(c) 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;
(d) 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
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(e) 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 5.4, 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 5.4. The reimbursement of fees, costs and expenses
required by this Section 5.4 shall be made by periodic payments during the
course of the investigation or defense, as and when bills are received or
expenses incurred.
(f) 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 5, 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 5.1 or 5.2, except to the extent that the
indemnifying party is prejudiced by the failure to give such notice.
5.5 MANNER OF INDEMNIFICATION. All indemnification under this
Section 5 shall be effected by the payment of cash, check or delivery of a bank
cashier's check, or by a combination of the foregoing.
6. CLOSING.
6.1 CLOSING DATE. The closing of the transactions contemplated
by this Agreement ("Closing") will take place at the offices of Xxxxx & Xxxxxx
LLP, 000 Xxxxx Xxxxxxxxx, Xxxxx 0000, Xxxxx Xxxx, Xxxxxxxxxx 00000 on the date
hereof ("Closing Date").
6.2 DELIVERIES BY THE COMPANY AND SELLERS AT THE CLOSING. At
the Closing, the Company and Sellers shall deliver to REI;
(a) Certificates representing all of the Shares, free
of liens or encumbrances, duly endorsed by each Seller in favor of REI;
(b) The opinion of Xxxxxxxx X. Xxxxx, Esq. based upon
reasonably requested certifications as to factual matters and dated the Closing
Date regarding the status and authority of the Company, the authorization of
this Agreement and the transactions contemplated hereby by the Company, and the
binding effect of this Agreement on the Company and Sellers;
16
(c) The employment agreement between Xxxxxx Xxxxxx
and REI in form of EXHIBIT 4.2 attached hereto;
(d) The registration rights agreements between each
Seller and REI in the form of EXHIBIT 4.3 attached hereto;
(e) The lockup agreements executed by each Seller in
favor of REI in the form of EXHIBIT 4.4 attached hereto; and
(f) The resignations of each of the Sellers as
directors and officers of the Company.
6.3 DELIVERIES BY REI AT THE CLOSING. At the Closing, REI
shall deliver to Sellers:
(a) Certificates representing the Stock, with
facsimile signatures of appropriate REI officers and endorsement by REI's
transfer agent;
(b) Option agreements representing the Options;
(c) The opinion of Xxxxx & Xxxxxx LLP, based upon
reasonably requested certifications as to factual matters and dated the Closing
Date, regarding the status and authority of REI, the authorization of this
Agreement and the transactions contemplated hereby by REI, and the binding
effect of this Agreement on REI;
(d) The employment agreement between Xxxxxx Xxxxxx
and REI in form of EXHIBIT 4.2 attached hereto;
(e) The registration rights agreements between each
Seller and REI in the form of EXHIBIT 4.3 attached hereto.
7. NON-COMPETITION.
7.1 DEFINITIONS. For purposes of this Section 7, the following
terms shall have the following meanings:
(a) "Business" shall mean the travel agency business
conducted by the Company as of, or immediately preceding the date of this
Agreement, or conducted or developed by REI, the Company or any of their
respective subsidiaries or affiliates during the Non- Competition Period, the
Employee Non-Solicitation Period or the Customer Non-Solicitation Period.
17
(b) "Business Territory" shall mean the areas set
forth in EXHIBIT 7.1(B) attached hereto.
17
(c) "Compete" shall mean, with respect to the
Business: (i) managing, supervising or otherwise participating in a management
or sales capacity; or (ii) otherwise managing, operating, controlling,
participating in the ownership, management or control of, or being connected
with or having any interest in, as a stockholder, agent, partner, lender,
consultant, advisor or otherwise, any business or person that provides goods,
products or services competitive with those provided by the Business; PROVIDED,
HOWEVER, that nothing contained herein will prohibit a Seller from owning less
than one percent of any class of securities listed on a national securities
exchange or traded publicly in the over-the-counter market.
(d) "Customer Non-Solicitation Period" shall mean,
with respect to each Seller, the later of: (i) the period commencing on the
Closing Date and continuing for a period of three years after such date; and
(ii) three years after the termination of such Seller's employment, if any, by
the Company, REI or any of their respective subsidiaries or affiliates;
PROVIDED, HOWEVER, that the Customer Non-Solicitation Period with respect to
each Seller shall be extended by the number of days in which such Seller is or
was engaged in activities constituting a breach of Section 7.4.
(e) The term "Customers" shall mean, with respect to
each Seller, any person that, as of or immediately preceding the date of this
Agreement, or during the Non- Competition Period, the Employee Non-Solicitation
Period or the Customer Non-Solicitation Period is or was a client or customer of
the Company, REI or any of their respective subsidiaries or affiliates relating
to the Business.
(f) The words "directly or indirectly," as they
modify the word "Compete" or "Competing," shall mean: (i) acting as an agent,
representative, consultant, officer, director, member, independent contractor or
employee of any person that is Competing with the Business; (ii) participating
in any such Competing person or enterprise as an owner, partner, limited
partner, joint venturer, member, creditor or shareholder (except as expressly
permitted herein); or (iii) communicating to any such Competing person or
enterprise the names or addresses or any other information concerning any
Customer or any other confidential information of the Business.
(g) "Employees" shall mean: (i) any employee of the
Company, REI or any of their respective subsidiaries or affiliates as of, or
immediately prior to the date of this Agreement or during the Non-Competition
Period, the Employee Non-Solicitation Period or the Customer Non-Solicitation
Period, and who performs services related to the Business; or (ii) any former
employee of the Company, REI or any of their respective subsidiaries or
affiliates whose employment with the Company, REI, or any of their respective
subsidiaries or affiliates ceased less than one year before the date of
co-venturing, solicitation, inducement or recruitment and who performed services
related to the Business.
(h) "Employee Non-Solicitation Period" shall mean,
with respect to each Seller, the later of: (i) the period commencing on the
Closing Date and continuing for a period of three years after such date; and
(ii) three years after the termination of such Seller's employment, if any, by
the Company, REI or any of their respective subsidiaries or affiliates;
PROVIDED, HOWEVER, that the Employee Non-Solicitation Period with respect to
each Seller shall be extended by the number of days in which such Seller is or
was engaged in activities constituting a breach of Section 7.3.
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(i) "Non-Competition Period" shall mean, with respect
to each Seller, the period commencing on the Closing Date and continuing for a
period of three years after such date; PROVIDED, that if any Seller's
employment, if any, with the Company or REI, or any of their respective
subsidiaries or affiliates, is terminated by REI, the Company or any of their
respective affiliates other than for "cause" (as that term is defined in such
Seller's employment agreement) (i.e., without cause), then the provisions of
this subsection (i) shall terminate as of the date of such termination of
employment.
(j) The term "person" shall mean any natural person,
firm, partnership, association, corporation, company, limited liability company,
limited partnership, trust, business trust, Governmental Entity or other entity.
(k) The term "Prospective Customer" shall mean any
person that REI, the Company, or any of their respective subsidiaries or
affiliates has contacted, or has developed a strategy or plan to contact, for
the purpose of acquiring such person as a customer or client.
7.2 NON-COMPETITION. During the Non-Competition Period, no
Seller shall, and no Seller shall permit any of such Seller's affiliates to,
directly or indirectly Compete with the Business in the Business Territory. Set
forth in the Company Disclosure Schedule is a complete and accurate listing of
all states within the United States and all foreign countries and territories in
which the Company has sold or marketed its products or services or conducted its
business within the three- year period prior to the date of this Agreement.
7.3 NON-SOLICITATION OF EMPLOYEES. Sellers recognize that the
Employees are a valuable resource of REI and the Company. Accordingly, during
the Employee Non-Solicitation Period, no Seller shall, either alone or in
conjunction with any other person or entity, directly or indirectly go into
business with any Employee or solicit, induce or recruit any Employee to leave
the employ of REI, the Company, or any of their respective subsidiaries or
affiliates.
7.4 NON-SOLICITATION OF CUSTOMERS. Sellers recognize that the
customers are a valuable resource of REI and the Company. Accordingly, during
the Employee Non-Solicitation Period, no Seller shall, either alone or in
conjunction with any other person or entity, directly or indirectly call on,
solicit, take away, accept as a client, customer or prospective client or
customer, or attempt to call on, solicit, take away, accept as a client,
customer or prospective client or customer a Customer or Prospective Customer.
7.5 ADDITIONAL AGREEMENTS. Each Seller hereby expressly agrees
and acknowledges that:
(a) REI and the Company have protectable business
interests throughout the Business Territory, and that competition with and
against such business interests would be harmful to REI or the Company, as the
case may be;
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(b) the covenants contained in this Section 7 are
reasonable as to time and geographical area and do not place any unreasonable
burden upon each Seller's ability to earn a livelihood;
(c) the public will not be harmed as a result of
enforcement of the covenants contained in this Section 7;
(d) the personal legal counsel for each Seller has
reviewed the covenants contained in this Section 7;
(e) the parties have entered into the covenants
contained herein in connection with and as a condition precedent to the
consummation of the Agreement, pursuant to which REI shall acquire the Company;
the agreements, actions, covenants, and promises contained herein are intended
to protect and ensure the value of Business, including its goodwill, which
actions, covenants, and promises are a material consideration to REI in
connection with the Agreement; and, to the extent that the laws of any
jurisdiction in which this Agreement shall be interpreted, construed, and/or
enforced distinguish between covenants given in connection with the sale of a
business and its goodwill and covenants given in connection with employment,
this covenant will be given the broader interpretation customarily given to
covenants in connection with the sale of a business and the transfer of goodwill
to REI, notwithstanding any employment of each Seller by REI or the Company
following the Closing; and
(f) each Seller understands and agrees to each and
every term and condition contained in this Section 7.
7.6 REMEDIES; ENFORCEABILITY. Each Seller recognizes and
acknowledges that irreparable damage will result to REI in the event of a breach
by that Seller or any of that Seller's affiliates of the provisions of this
Section 7, and, accordingly, in the event of such a breach, REI will be
entitled, in addition to any other legal or equitable damages and remedies to
which it may be entitled or which may be available, to an injunction to restrain
the violation thereof. If any provision of this Section 7 shall be adjudicated
by a court of competent jurisdiction to be invalid or unenforceable because of
the scope, duration, area of its applicability, or any other reason, the court
making such determination will have the power to modify such scope, duration, or
area, or all of them, or to strike an invalid or unenforceable provision, in
whole or in part, to the extent necessary to make such scope, duration, area, or
provision valid and enforceable.
8. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
All representations, warranties and covenants of the parties
contained in 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, whereupon the
representations, warranties and covenants will expire (except for covenants,
such as those contained in Sections 4.5, 5 and 7, that by their terms survive
for a longer period).
20
9. MISCELLANEOUS.
9.1 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.
9.2 ASSIGNMENT: BINDING UPON SUCCESSORS AND 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.
9.3 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.
9.4 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.
9.5 OTHER REMEDIES. 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.
9.6 AMENDMENT AND WAIVERS. Any term 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.
9.7 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.
9.8 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).
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9.9 NOTICES. All notices 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 the Company to: e-Destinations, Inc.
00000 Xxxxxxx Xxxxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: President
Telecopier: (000) 000-0000
With a copy to: Xxxxxxxx X. Xxxxx, Esq.
00000 Xxxxxxx Xxxxxxxxx, Xxxxx X
Xxxxxxx, Xxxxxxxxxx 00000
Telecopier: (000) 000-0000
If to REI to: Research Engineers, Inc.
00000 Xxxx Xxxxx Xxxxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
Telecopier: (000) 000-0000
With a copy to: Xxxxx & Xxxxxx, LLP
000 Xxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Telecopier: (000) 000-0000
If to Sellers to: Vinod Bhindi
00000 Xxxxxxx Xxxxxxxxx
Xxxxxxx, XX 00000
Xxxxxxx Bhindi
00000 Xxxxxxx Xxxxxxxxx
Xxxxxxx, XX 00000
Xxxxxx Xxxxxx
00000 Xxxxxxx Xxxxxxxxx
Xxxxxxx, XX 00000
Jayent Bhindi
00000 Xxxxxxx Xxxxxxxxx
Xxxxxxx, XX 00000
22
With a copy to: Xxxxxxxx X. Xxxxx, Esq.
00000 Xxxxxxx Xxxxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
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.
9.10 CONSTRUCTION OF AGREEMENT. This Agreement has been
negotiated by the respective parties hereto and their attorneys and the language
hereof will not be construed for or against either party. A reference to a
Section or an Exhibit will mean a Section in, or Exhibit to, this Agreement
unless otherwise explicitly set forth. The titles and headings herein are for
reference purposes only and will not in any manner limit the construction of
this Agreement which will be considered as a whole.
9.11 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.
9.12 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.
9.13 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.
9.14 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 hereto. The
express terms hereof control and supersede any course of performance or usage of
trade inconsistent with any of the terms hereof.
23
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: /s/ Xxxxx Xxxxxxxxxx
-----------------------------------
Xxxxx Xxxxxxxxxx, President
By: /s/ Xxxxx X. Xxxxx
-----------------------------------
Xxxxx X. Xxxxx, Secretary
e-DESTINATIONS, INC.,
a California corporation
By: /s/ Vinod Bhindi
-----------------------------------
Vinod Bhindi, President
By: /s/ Xxxxxx Xxxxxx
-----------------------------------
Xxxxxx Xxxxxx, Vice President and
Secretary
/s/ Vinod Bhindi
---------------------------------------
VINOD BHINDI, an individual
/s/ Xxxxxxx Bhindi
---------------------------------------
XXXXXXX BHINDI, an individual
/s/ Xxxxxx Xxxxxx
---------------------------------------
XXXXXX XXXXXX, an individual
/s/ Jayent Bhindi
---------------------------------------
JAYENT BHINDI, an individual
24
DISCLOSURE SCHEDULE
25
EXHIBIT 1.2(a)
FORM OF OPTION AGREEMENT
26
EXHIBIT 1.2(b)
ALLOCATION OF SHARES OF STOCK AND OPTIONS
No. of No. of
Seller Shares of Stock Options
------ --------------- -------
Xxxxxx Xxxxxx 15,000 25,000
Xxxxxxx Bhindi 4,998 8,330
Vinod Bhindi 5,001 8,335
Jayent Bhindi 5,001 8,335
27
EXHIBIT 4.2
EMPLOYMENT AGREEMENT
28
EXHIBIT 4.3
REGISTRATION RIGHTS AGREEMENT
29
EXHIBIT 4.4
LOCKUP AGREEMENT
30
EXHIBIT 7.1(b)
NON-COMPETITION TERRITORY
Counties, Countries and Political Subdivisions
Subject to Covenant Not to Compete
----------------------------------
The following counties in the State of California:
Alameda Orange
Alpine Placer
Xxxxxx Plumas
Butte Riverside
Calaveras Sacramento
Colusa San Xxxxxx
Contra Costa San Bernardino
Del Norte San Francisco
El Dorado San Xxxxxxx
Fresno San Xxxx Obispo
Xxxxx San Mateo
Humboldt Santa Xxxxxxx
Imperial Santa Xxxxx
Inyo Santa Xxxx
Xxxx Shasta
Kings San Diego
Lake Sierra
Lassen Siskiyou
Los Angeles Xxxxxx
Xxxxxx Sonoma
Marin Stanislaus
Mariposa Xxxxxx
Mendocino Tehama
Merced Trinity
Modoc Tulare
Mono Tuolumne
Monterey Ventura
Napa Yolo
Nevada Yuba
All counties and political subdivisions in every state of the United States. All
countries of the world.
31
