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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): February 26, 1999
RESEARCH ENGINEERS, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-28560 22-2356861
(State or Other (Commission File Number) (IRS Employer
Jurisdiction of Identification No.)
Incorporation)
22700 SAVI RANCH PARKWAY
YORBA LINDA, CALIFORNIA 92887
(Address of Principal Executive Offices)
(714) 974-2500
(Registrant's telephone number, including area code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report.)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On February 26, 1999, Research Engineers, Inc. ("the Company")
acquired all of the outstanding stock of R-Cube Technologies, Inc.
("R-Cube"). The stock was acquired from Krishna P. Reddy and
Anuradha Padala, Prakash Rao Pokala and Sucharita Pokala, and
Srinivasa Reddy Malireddy and M. Veda Vathi.
R-Cube is a provider of Information Technology ("IT") Services
headquartered in Cupertino, California.
The acquisition is expected to be accounted for using the purchase
method of accounting. The aggregate purchase price, including
acquisition costs, was approximately $2.6 million. The acquisition was
funded through a $2.32 million line of credit from Imperial Bank, and
operating capital. In determining the purchase price for R-Cube, the
Company took into account the value of companies of similar industry
and size to R-Cube, comparable transactions and the market for such
companies generally.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired
It is impracticable to provide the required financial statements for
the acquired business at the time this Form 8-K is filed. The
registrant shall file the required financial statements under cover
of Form 8-K/A on or before May 12, 1999.
(b) Pro forma financial information.
To be provided on or before May 12, 1999.
(c) Exhibits
2.1 Stock Purchase Agreement dated as of January 18, 1999 among
the Company, R-Cube Technologies, Inc. and Krishna P. Reddy
2.2 Stock Purchase Agreement dated as of January 18, 1999 among
the Company, R-Cube Technologies, Inc. and Prakash Rao Pokala
2.3 Stock Purchase Agreement dated as of January 18, 1999 among
the Company, R-Cube Technologies, Inc. and Srinivasa Reddy
Malireddy
2.4 Credit Agreement dated February 26, 1999 by and between the
Company and Imperial Bank
2.5 General Security Agreement dated February 26, 1999 by and
between the Company and Imperial Bank
2.6 General Security Agreement dated February 26, 1999 by and
between the Company and Imperial Bank
2.7 Note Secured by Deed of Trust in the principal amount
of $2,320,000 dated February 26, 1999 made by the Company in
favor of Imperial Bank
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SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: March 5, 1999
RESEARCH ENGINEERS, INC.
By: /S/ WAYNE BLAIR
-------------------
Wayne Blair
Chief Financial Officer,
Secretary
and Treasurer
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EXHIBIT INDEX
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Exhibit 2.1 Stock Purchase Agreement dated as of January 18, 1999 among
the Company, R-Cube Technologies, Inc. and Krishna P. Reddy
Exhibit 2.2 Stock Purchase Agreement dated as of January 18, 1999 among
the Company, R-Cube Technologies, Inc. and Prakash Rao Pokala
Exhibit 2.3 Stock Purchase Agreement dated as of January 18, 1999 among
the Company, R-Cube Technologies, Inc. and Srinivasa Reddy
Malireddy
Exhibit 2.4 Credit Agreement dated February 26, 1999 by and between the
Company and Imperial Bank
Exhibit 2.5 General Security Agreement dated February 26, 1999 by and
between the Company and Imperial Bank
Exhibit 2.6 General Security Agreement dated February 26, 1999 by and
between the Company and Imperial Bank
Exhibit 2.7 Note Secured by Deed of Trust in the principal amount of
$2,320,000 dated February 26, 1999 made by the Company in favor of
Imperial Bank
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Exhibit 2.1
STOCK PURCHASE AGREEMENT
AMONG
RESEARCH ENGINEERS, INC.
R-CUBE TECHNOLOGIES, INC.
AND
KRISHNA P. REDDY
DATED AS OF
JANUARY 18, 1999
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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
1.3 Adjustment to Purchase Price. .............................1
1.4 Payment of Purchase Price. ................................1
1.5 Review of Final Balance Sheet. ............................2
2. REPRESENTATIONS AND WARRANTIES OF R-CUBE AND SELLERS.............2
2.1 Organization; Good Standing; Qualification and Power. .....2
2.2 Capital Structure..........................................3
2.2.1 Stock. ..............................................3
2.2.2 No Other Commitments. ...............................3
2.3 Authority..................................................3
2.3.1 Corporate Action. ...................................3
2.3.2 Sellers' Authority. .................................3
2.3.3 No Conflict. ........................................3
2.3.4 Governmental Consents. ..............................4
2.4 Financial Statements. .....................................4
2.5 Compliance with Applicable Laws. ..........................4
2.6 Insurance. ................................................4
2.7 Litigation. ...............................................5
2.8 Employee Benefits..........................................5
2.9 Absence of Undisclosed Liabilities. .......................6
2.10 Absence of Certain Changes or Events. .....................6
2.11 No Defaults. ..............................................7
2.12 Certain Agreements. .......................................7
2.13 Taxes......................................................8
2.14 Intellectual Property. ...................................10
2.15 Fees and Expenses. .......................................10
2.16 Environmental Matters.....................................10
2.17 [Intentionally Omitted]. .................................10
2.18 Disclosure. ..............................................10
2.19 Restrictions on Business Activities. .....................10
2.20 Accounts Receivable.......................................10
2.21 Personal Property. .......................................11
2.22 Real Property. ...........................................11
2.23 Warranties. ..............................................11
2.24 Contracts. ...............................................11
2.25 No Goods or Products. ....................................11
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3. REPRESENTATIONS AND WARRANTIES OF REI...........................11
3.1 Organization; Good Standing; Qualification and Power. ....11
3.2 Capital Structure.........................................12
3.2.1 Stock, Options and Warrants. .......................12
3.2.2 No Other Commitments. ..............................12
3.3 Authority.................................................12
3.3.1 Corporate Action. ..................................12
3.3.2 No Conflict. .......................................12
3.3.3 Governmental Consents. .............................13
3.4 SEC Documents.............................................13
3.4.1 SEC Reports. .......................................13
3.4.2 Financial Statements. ..............................13
3.5 Litigation. ..............................................13
3.6 Fees and Expenses. .......................................14
3.7 Disclosure. ..............................................14
3.8 Financial Capacity........................................14
4. R-CUBE AND SELLERS' COVENANTS...................................14
4.1 Notification of Changes. .................................14
4.2 Maintenance of Business. .................................14
4.3 Conduct of Business. .....................................14
4.4 Regulatory Approvals. ....................................16
4.5 Necessary Consents. ......................................16
4.6 Access to Information. ...................................16
4.7 Satisfaction of Conditions Precedent. ....................17
4.8 Confidentiality. .........................................17
4.9 Cooperation in Review of R-CUBE Financial Statements. ....17
5. REI COVENANTS...................................................17
5.1 Regulatory Approvals. ....................................17
5.2 Necessary Consents. ......................................17
5.3 Satisfaction of Conditions Precedent. ....................17
5.4 Confidentiality. .........................................18
6. EMPLOYEE MATTERS................................................18
7. INDEMNIFICATION OF THE PARTIES..................................18
7.1 Indemnification by Sellers................................18
7.2 Indemnification by REI....................................19
7.3 Manner of Indemnification. ...............................19
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8. CLOSING.........................................................19
8.1 Closing Date. ............................................19
8.2 Deliveries by R-CUBE and Sellers at the Closing. .........19
8.3 Delivery by REI at the Closing. ..........................20
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF R-CUBE
AND SELLER......................................................20
9.1 Accuracy of Representations and Warranties. ..............20
9.2 Covenants. ...............................................20
9.3 Compliance with Law. .....................................20
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF REI......................20
10.1 Accuracy of Representations and Warranties. ..............21
10.2 Covenants. ...............................................21
10.3 Completion of Due Diligence...............................21
10.4 Absence of Material Adverse Change. ......................21
10.5 Compliance with Law. .....................................21
10.6 Documents. ...............................................21
10.7 Corporate Opinion. .......................................22
10.8 Other Agreements..........................................22
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF REI,
R-CUBE AND SELLER...............................................22
11.1 Government Consents. .....................................22
11.2 No Legal Action. .........................................22
12. TERMINATION OF AGREEMENT........................................22
12.1 Termination. .............................................22
12.2 Notice of Termination. ...................................23
12.3 Effect of Termination. ...................................23
13. NON-COMPETITION.................................................23
13.1 Definitions...............................................23
13.2 Non-Solicitation of Employees. ...........................24
13.3 Non-Solicitation of Customers. ...........................24
13.4 Additional Agreements.....................................25
13.5 Remedies; Enforceability..................................25
14. SURVIVAL OF REPRESENTATIONS, WARRANTIES
AND COVENANTS...................................................26
15. MISCELLANEOUS...................................................26
15.1 Governing Law. ...........................................26
15.2 Assignment; Binding Upon Successors and Assigns. .........26
15.3 Severability. ............................................26
15.4 Counterparts. ............................................26
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15.5 Other Remedies. ..........................................26
15.6 Amendment and Waivers. ...................................26
15.7 Expenses. ................................................27
15.8 Attorneys' Fees. .........................................27
15.9 Notices. .................................................27
15.10 Construction of Agreement. ...............................28
15.11 No Joint Venture. ........................................28
15.12 Further Assurances. ......................................28
15.13 Absence of Third Party Rights. ...........................28
15.14 Entire Agreement. ........................................28
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iv.
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is entered into as of this
18th day of January, 1999, among Research Engineers, Inc., a Delaware
corporation ("REI"), R-CUBE Technologies, Inc., a California corporation
("R-CUBE"), and Krishna P. Reddy, an individual ("Seller").
RECITALS
A. Srinivasa Reddy Malireddy, an individual, and Prakash Rao Pokala, an
individual (collectively, the "Other Sellers," and together with Seller,
"Sellers"), own, in the aggregate, all of the issued and outstanding shares (the
"Shares") of capital stock of R-CUBE.
B. Seller owns 1,100,000 of the Outstanding Shares ("Seller's Shares").
C. REI desires to purchase from Sellers, and Sellers desire to sell to
REI, the Outstanding Shares on the terms and conditions set forth in this
Agreement and in similar Stock Purchase Agreements (the "Other Agreements") to
be negotiated and entered into between REI and the Other Sellers as of the date
of this Agreement.
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 8 below), Seller shall
transfer, convey, assign and deliver Seller's Shares to REI, and REI shall
acquire, purchase and accept Seller's Shares from Seller.
1.2 Purchase Price. Subject to the adjustments to be made in
accordance with the provisions of Sections 1.3 through 1.5, the purchase
price for Seller's Shares is $1,066,272 (the "Purchase Price").
1.3 Adjustment to Purchase Price. The Purchase Price shall be adjusted
upward by 45.96% of the amount, if any, that the shareholders' equity of
R-CUBE ("Final Shareholders' Equity") as shown on R-CUBE's balance sheet
("Final Balance Sheet") to be prepared by R-CUBE's accountants as at the
Closing Date (defined in Section 8.1) and delivered to REI at the Closing
exceeds $500,000.
1.4 Payment of Purchase Price. The Purchase Price shall be paid by REI
to Seller as follows:
(1) At the Closing,REI shall pay to Seller the Purchase Price; and
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(2) Subject to Section 1.5, within 30 days after the Closing
Date, REI shall pay to Seller in cash the amount of any upward
adjustment to the Purchase Price made pursuant to Section 1.3.
1.5 Review of Final Balance Sheet. REI and its representatives shall
have 15 days to review the Final Balance Sheet. If REI disagrees with
R-CUBE's calculation of the Final Shareholders' Equity, REI shall within 15
days after the Closing Date give written notice to Sellers of such
disagreement specifying in reasonable detail, insofar as possible, the
nature and extent of the disagreement. If REI and Sellers are unable to
resolve any such disagreement within 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 necessary upward adjustment
determined by the accounting firm shall be payable in cash by REI within
three days after REI has been notified of such determination. REI and
Sellers agree that the procedures established by Sections 1.2 through 1.5
shall constitute the exclusive procedures for determining the consideration
to be paid by REI to Sellers for the Shares. Costs incurred pursuant to
this Section 1.5 shall be borne equally by REI and Sellers.
2. REPRESENTATIONS AND WARRANTIES OF R-CUBE AND SELLERS.
Except as set forth in a schedule dated the date of this Agreement
and delivered by R-CUBE and Seller to REI concurrently herewith ("Disclosure
Schedule") specifically identifying the Section of this Agreement requiring the
delivery of such disclosure, R-CUBE and Seller 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: (a) any adverse effect resulting from
conditions affecting the engineering software industry as a whole or the United
States economy as a whole; (b) a failure by R-CUBE to meet internal earnings or
revenue projections; or (c) any disruption of customer or supplier relationships
arising primarily out of or resulting primarily from actions contemplated by the
parties in connection with, or which is primarily attributable to the
announcement of this Agreement and the transactions contemplated hereby, to the
extent attributable thereto.
2.1 Organization; Good Standing; Qualification and Power. R-CUBE 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. R-CUBE does not own, directly or
indirectly,
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shares of capital stock of any other corporation or any equity interest in
any other entity, nor does R-CUBE control, directly or indirectly, any
other corporation, association or business organization. R-CUBE has made
available to REI or its counsel complete and correct copies of the articles
of incorporation and bylaws of R-CUBE, in each case 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 R-CUBE.
2.2 Capital Structure.
2.2.1 Stock. The authorized capital stock of R-CUBE consists of
10,000,000 shares of common stock, no par value per share ("R-CUBE
Common Stock"). As of the date of this Agreement, 3,300,000 shares of
R-CUBE Common Stock are issued and outstanding. All outstanding shares
of the capital stock of R-CUBE are validly issued, fully paid and
nonassessable, are not subject to preemptive rights and are owned by
Sellers free and clear of any liens, security interests, pledges,
agreements, 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 R-CUBE is a party or by which R-CUBE is bound
obligating R-CUBE to issue, deliver or sell, or cause to be issued,
delivered or sold, any shares of capital stock of R-CUBE or securities
convertible into or exchangeable for shares of capital stock of
R-CUBE, or obligating R-CUBE 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 R-CUBE or any Seller is a party with respect
to the voting of the capital stock of R-CUBE.
2.3 Authority.
2.3.1 Corporate Action. R-CUBE 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
R-CUBE and the consummation by R-CUBE of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on
the part of R-CUBE. This Agreement has been duly executed and
delivered by R-CUBE, and this Agreement is the valid and binding
obligation of R-CUBE, 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.
2.3.2 Sellers' Authority. Each of Sellers has full power and
capacity to enter into this Agreement and the Other Agreements. This
Agreement and the Other Agreements have been duly executed and
delivered by Sellers and this Agreement and the Other Agreement are
the valid and binding obligation of Sellers, enforceable in accordance
with their 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
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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 R-CUBE under, any term, condition or provision
of (x) the articles of incorporation or bylaws of R-CUBE 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 R-CUBE 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 R-CUBE in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
2.4 Financial Statements. R-CUBE has furnished to REI copies of: (a)
the unaudited balance sheets of R-CUBE at December 31, 1996, 1997 and 1998,
and the related statements of income for the periods then ended. Prior to
the Closing, R-CUBE shall furnish to REI copies of R-CUBE's audited balance
sheet at December 31, 1998 and the related statement of income for the
period then ended. All financial statements referred to in this Section 2.4
("R-CUBE Financial Statements") are or will be 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 or will fairly present the financial condition of R-CUBE as at the
respective dates thereof and the results of operation of R-CUBE for the
respective periods covered by the statements of income contained in
therein. R-CUBE does not have any material obligations or liabilities,
contingent or otherwise, not fully disclosed by the R-CUBE Financial
Statements.
2.5 Compliance with Applicable Laws. The business of R-CUBE 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. R-CUBE has not been notified by any Governmental Entity
that any investigation or review with respect to R-CUBE is pending or
threatened, nor has any Governmental Entity notified R-CUBE of its
intention to conduct an investigation or review. R-CUBE 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.
2.6 Insurance. R-CUBE maintains and at all times since January 1, 1997
has maintained general liability insurance that R-CUBE believes to be
reasonably prudent for its business. The Disclosure Schedule contains a
complete and correct list of all insurance policies maintained by R-CUBE.
R-CUBE 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. R-CUBE has complied in all material respects with the terms
and provisions of the policies. In the opinion of R-CUBE reasonably formed
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and held, there is no reasonable 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 R-CUBE and Sellers,
threatened against R-CUBE, nor is there any judgment, decree, injunction,
rule or order of any Governmental Entity or arbitrator outstanding against
R-CUBE that, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect. R-CUBE has made available to REI or its
counsel correct and complete copies of all correspondence prepared by its
counsel for R-CUBE's accountants in connection with the last two completed
reviews of R-CUBE's financial statements and any correspondence since the
date of the last review.
2.8 Employee Benefits.
(1) R-CUBE has made available to REI a list of all employees of
R-CUBE and their salaries as of the date of this Agreement. R-CUBE 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
R-CUBE and any employee of R-CUBE, but excluding workers'
compensation, unemployment compensation and other government-mandated
programs) currently or previously maintained, contributed to or
entered into by R-CUBE under which R-CUBE has any present or future
obligation or liability (collectively, "R-CUBE Employee Plans").
Copies of all R-CUBE 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
R-CUBE with respect to any of the R-CUBE Employee Plans. To R-CUBE's
and Sellers' knowledge, each of the R-CUBE 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 R-CUBE Employee Plans except for noncompliance
which would not have a Material Adverse Effect.
(2) R-CUBE 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 R-CUBE Employee
Plans, (ii) is entered into, maintained or contributed to, as the case
may be, by R-CUBE and (iii) covers any employee or former employee of
R-CUBE. The contracts, plans and arrangements described in this
paragraph 2.8(d) are referred to collectively as the "R-CUBE Benefit
Arrangements." To R-CUBE's and Sellers' knowledge, each of the R-CUBE
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 R-CUBE
Benefit Arrangements. R-CUBE has made available to REI or its counsel
a complete and correct copy or description of each of the R-CUBE
Benefit Arrangements.
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(3) There has been no amendment to, written interpretation or
announcement by R-CUBE relating to, or change in employee
participation or coverage under, any of the R-CUBE Employee Plans or
R-CUBE Benefit Arrangements that would increase materially the expense
of maintaining the R-CUBE Employee Plans or R-CUBE Benefit
Arrangements above the level of the expense incurred in respect
thereof for the fiscal year ended December 31, 1998.
(4) To R-CUBE's and Sellers' knowledge, R-CUBE 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.
2.9 Absence of Undisclosed Liabilities. Except as disclosed on the
Disclosure Schedule, at December 31, 1998 (the "R-CUBE Balance Sheet
Date"), (i) R-CUBE had no liabilities or obligations of any nature (matured
or unmatured, fixed or contingent) which were material to R-CUBE, taken as
a whole, and were not provided for in the unaudited December 31, 1998
balance sheet (the "R-CUBE Balance Sheet"), a copy of which has been
delivered to REI; and (ii) all reserves established by R-CUBE and set forth
in the R-CUBE Balance Sheet were reasonably adequate.
2.10 Absence of Certain Changes or Events. Since the R-CUBE Balance
Sheet Date there has not occurred:
(1) any change in the condition (financial or otherwise),
properties, assets, liabilities, businesses, operations, results of
operations or prospects of R-CUBE taken as a whole that could
reasonably constitute a Material Adverse Effect;
(2) any amendments or changes in the articles of incorporation or
bylaws of R-CUBE;
(3) any damage, destruction or loss, whether covered by insurance
or not, that could reasonably constitute a Material Adverse Effect;
(4) any redemption, repurchase or other acquisition of shares of
R-CUBE Common Stock by R-CUBE (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 R-CUBE Common Stock;
(5) any material increase in or modification of the compensation
or benefits payable or to become payable by R-CUBE to any of its
directors or employees, except in the ordinary course of business
consistent with past practice;
(6) any material increase in or modification of any bonus,
pension, insurance or any of the R-CUBE Employee Plans or R-CUBE
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;
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(7) any acquisition or sale of a material amount of property or
assets of R-CUBE, other than in the ordinary course of business
consistent with past practices;
(8) any alteration in any term of any outstanding security of
R-CUBE;
(9) any (A) incurrence, assumption or guarantee by R-CUBE of any
debt for borrowed money; (B) issuance or sale of any securities
convertible into or exchangeable for debt securities of R-CUBE; or (C)
issuance or sale of options or other rights to acquire from R-CUBE,
directly or indirectly, debt securities of R-CUBE or any securities
convertible into or exchangeable for any such debt securities;
(10) any creation or assumption by R-CUBE of any mortgage,
pledge, security interest or lien or other encumbrance on any asset;
(11) 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 R-CUBE, (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;
(12) any entering into, amendment of, relinquishment, termination
or non-renewal by R-CUBE of any contract, lease transaction,
commitment or other right or obligation other than in the ordinary
course of business;
(13) any transfer or grant of an R-CUBE intellectual property
right, other than those transferred or granted in the ordinary course
of business;
(14) any labor dispute or charge of unfair labor practice (other
than routine individual grievances) or, to R-CUBE and Sellers'
knowledge, any activity or proceeding by a labor union or
representative thereof to organize any employees of R-CUBE or any
campaign being conducted to solicit authorization from employees to be
represented by the labor union; or
(15) any agreement or arrangement made by R-CUBE 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. R-CUBE 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 R-CUBE under, any contract or agreement
to which R-CUBE 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
(i) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute, bonus or otherwise) becoming
due to any director or employee of R-CUBE from R-CUBE, under any of the
R-CUBE Employee Plans, R-CUBE Benefit Arrangements or otherwise, (ii)
materially increase
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any benefits otherwise payable under any of the R-CUBE Employee Plans, the
R-CUBE Benefit Arrangements or otherwise or (iii) result in the
acceleration of the time of payment or vesting of any benefits.
2.13 Taxes.
(1) 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.
(2) Except as set forth in the Disclosure Schedule:
(i) As of the Closing, R-CUBE 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 R-CUBE that are required to be filed by or
with respect to R-CUBE on or prior to the Closing, and each
of the Returns shall be, to the knowledge of R-CUBE and
Sellers, true, correct, and complete in all material
respects and shall have been completed in accordance with
applicable law;
(ii) As of the Closing, R-CUBE: (A) will have paid or
accrued in accordance with generally accepted accounting
principles all Taxes concerning or attributable to R-CUBE
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;
(iii) R-CUBE has not been delinquent in the payment of
any Tax nor is there any Tax deficiency outstanding,
proposed or assessed against R-CUBE, nor has R-CUBE 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
R-CUBE is presently in progress, nor has R-CUBE been
notified of any request for an audit or examination;
(v) R-CUBE has no 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 R-CUBE Balance Sheet;
(vi) R-CUBE 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 ending on or after
December 31, 1995;
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(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
("Liens") on the assets of R-CUBE relating or attributable
to Taxes other than liens for sales and payroll taxes not
yet due and payable;
(viii) R-CUBE has no 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 R-CUBE;
(ix) None of the assets of R-CUBE 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) R-CUBE 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 R-CUBE;
(xi) R-CUBE 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) R-CUBE is not a party to a tax sharing,
allocation, indemnification or similar agreement or
arrangement, and R-CUBE does not owe any amount under any
agreement or arrangement;
(xiii) No Return of R-CUBE contains a disclosure
statement under Code Section 6662 (or predecessor provision)
or any similar provision of state, local, or foreign law;
(xiv) R-CUBE is not and has not been at any time a
"United States real property holding corporation" within the
meaning of Code Section 897(c)(2);
(xv) No indebtedness of R-CUBE consists of "corporate
acquisition indebtedness" within the meaning of Code Section
279;
(xvi) R-CUBE has not taken any action not in accordance
with past practice that would have the effect of deferring
any Tax liability of R-CUBE from any period ending on before
the Closing Date to any taxable period ending after the
Closing Date;
(xvii) R-CUBE 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
R-CUBE or any predecessor corporations; and
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(xviii) The tax bases of the assets of R-CUBE for
purposes of determining future amortization, depreciation,
and other federal income tax deductions are accurately
reflected on the tax books and records of R-CUBE.
2.14 Intellectual Property. There are no patents, patent applications,
trademarks, service marks, trademark and service mark applications, trade
names and copyrights material to the lawful and efficient operation of the
business of R-CUBE as presently conducted and as presently proposed to be
conducted.
2.15 Fees and Expenses. Except as set forth on the Disclosure
Schedule, neither R-CUBE nor Sellers have 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. Sellers agree that
any such fees or commissions described in the preceding sentence shall be
the sole responsibility of Sellers, whether or not the Closing occurs.
2.16 Environmental Matters.
(1) To R-CUBE's and Seller's knowledge, none of the properties or
facilities of R-CUBE 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 R-CUBE has owned or leased its
properties and facilities, neither R-CUBE nor, to R-CUBE'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.
(2) During the time that R-CUBE has owned or leased its
properties and facilities, there has been no litigation brought or
threatened against R-CUBE by, or any settlement reached by R-CUBE
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 [Intentionally Omitted].
2.18 Disclosure. No representation or warranty made by R-CUBE or
Sellers in this Agreement or the Other Agreements, nor any document,
written information, written statement, financial statement, certificate or
exhibit prepared and furnished or to be prepared and furnished by Sellers,
R-CUBE or their representatives pursuant to this Agreement or the Other
Agreements or in connection with the transactions contemplated hereby or
thereby, 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 R-CUBE that
has or could reasonably be expected to have the effect of prohibiting or
materially impairing any business practice of R-CUBE,
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any acquisition of property by R-CUBE or the conduct of business by R-CUBE
as currently conducted.
2.20 Accounts Receivable. The accounts receivable shown on the R-CUBE
Balance Sheet as of the R-CUBE 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 R-CUBE reduced by the
reserves for discounts and bad debts taken on the R-CUBE Balance Sheet.
2.21 Personal Property. R-CUBE 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 R-CUBE is in good operating
condition. All of the leases to personal property utilized in the business
of R-CUBE are valid and enforceable against R-CUBE and are not in default
by R-CUBE, or, to the knowledge of R-CUBE or Sellers, are any of the other
parties thereto in default thereof.
2.22 Real Property. R-CUBE does not own any real property. The
Disclosure Schedule contains a list of all leases for real property to
which R-CUBE 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 knowledge of R-CUBE and Sellers,
the real property leased or occupied by R-CUBE, 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 R-CUBE for any improvements made to the real property
leased or occupied by R-CUBE that have not been paid for.
2.23 Warranties. R-CUBE has made no warranties or guarantees relating
to its services other than as implied or required by law. R-CUBE has no
warranty or indemnification obligations relating to patents or other
proprietary rights.
2.24 Contracts. The Disclosure Schedule lists all oral or written
agreements, notes, instruments or contracts to which R-CUBE 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 ("R-CUBE Contracts"). R-CUBE is not in
default in performance of its obligations under any material provisions of
the R-CUBE Contracts. Neither R-CUBE nor Sellers have any knowledge of any
violation of or default under any R-CUBE Contract by any other party
thereto or any knowledge of any intent by any other party to an R-CUBE
Contract not to perform its obligations under any R-CUBE Contract.
2.25 No Goods or Products. R-CUBE does not and has not developed,
sold, marketed or distributed any goods or products.
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3. REPRESENTATIONS AND WARRANTIES OF REI.
REI hereby represents and warrants to R-CUBE and Seller that:
3.1 Organization; Good Standing; Qualification and Power. REI is a
corporation duly incorporated, 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. REI has made
available to R-CUBE or its counsel complete and correct copies of the
certificate of incorporation and bylaws of REI, in each case 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 REI.
3.2 Capital Structure.
3.2.1 Stock, Options and Warrants. The authorized capital stock
of REI consists of 20,000,000 shares of common stock, $.01 par value
per share ("REI Common Stock"), and 5,000,000 shares of Preferred
Stock, $.01 par value per share ("REI Preferred Stock"). At the close
of business on January 13, 1999, 5,680,710 shares of REI Common Stock
were issued and outstanding, and 599,850 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. REI has made
available to R-CUBE true and correct copies of its 1996, 1997 and 1998
Stock Option Plans (each an "REI Plan" and collectively, the "REI
Plans").
3.2.2 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. There
are no voting trusts or other agreements or understandings to which
REI is a party with respect to the voting of the capital stock of REI.
3.3 Authority.
3.3.1 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
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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.
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 under, any term, condition or provision of
(x) the certificate of incorporation or bylaws of REI 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 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.
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 in connection
with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby.
3.4 SEC Documents.
3.4.1 SEC Reports. REI has made available to R-CUBE or its
counsel correct and complete copies of each report, schedule,
registration statement and definitive proxy statement filed by REI
with the Securities and Exchange Commission ("SEC") on or after
January 1, 1997 ("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, as amended, 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.
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
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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 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 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.
3.8 Financial Capacity. REI has the financial capability to pay the
Purchase Price when due.
4. R-CUBE AND SELLERS' COVENANTS.
4.1 Notification of Changes. During the period from the date of this
Agreement until the earlier of the Closing Date or the termination of this
Agreement in accordance with its terms, R-CUBE and Sellers will promptly
notify REI in writing (a) of any event occurring subsequent to the date of
this Agreement that would render any representation or warranty of R-CUBE
or any Seller contained in this Agreement or the Other Agreements, if made
on or as of the date of the event or the Closing Date, untrue or inaccurate
in any material respect, (b) of any Material Adverse Effect and (c) of any
breach by R-CUBE or any Seller of any covenant or agreement contained in
this Agreement or the Other Agreements.
4.2 Maintenance of Business. During the period from the date of this
Agreement until the earlier of the Closing Date or the termination of this
Agreement in accordance with its terms, R-CUBE and Sellers will use their
reasonable commercial efforts to carry on and preserve R-CUBE's business
and its relationships with customers, suppliers, employees and others in
substantially the same manner as it has prior to the date hereof. If R-CUBE
or any Seller becomes aware of any material deterioration in the
relationship with any material customer, material supplier or key employee,
R-CUBE or that Seller will promptly bring that information to the attention
of REI.
4.3 Conduct of Business. During the period from the date of this
Agreement until the earlier of the Closing Date or the termination of this
Agreement in accordance with its terms, R-CUBE will, and Sellers will cause
R-CUBE to, continue to conduct its business and maintain its
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business relationships in the ordinary and usual course and will not,
without the prior written consent of REI:
(1) borrow any money except for amounts that are not in the
aggregate material to the financial condition of R-CUBE, taken as a
whole;
(2) enter into any material transaction not in the ordinary
course of its business;
(3) encumber or permit to be encumbered any of its assets except
in the ordinary course of its business;
(4) dispose of any of its assets except in the ordinary course of
business consistent with past practice;
(5) enter into any material lease or contract for the purchase or
sale or license of any property, real or personal, except in the
ordinary course of business;
(6) fail to maintain its equipment and other assets in good
working condition and repair according in all material respects to the
standards it has maintained to the date of this Agreement, subject
only to ordinary wear and tear;
(7) pay (or make any oral or written commitments or
representations to pay) any bonus, increased salary or special
remuneration to any officer, employee or consultant (except for normal
salary increases consistent with past practices not to exceed 10% per
year) or enter into or vary the terms of any employment, consulting or
severance agreement with any person, pay any severance or termination
pay (other than payments made in accordance with plans or agreements
existing on the date hereof), grant any stock option or issue any
restricted stock, or enter into or modify any agreement or plan of the
type described in Section 2.8;
(8) change accounting methods;
(9) declare, set aside or pay any cash or stock dividend or other
distribution in respect of capital stock, or redeem or otherwise
acquire any of its capital stock (other than pursuant to arrangements
with terminated employees or consultants in the ordinary course of
business consistent with R-CUBE's past practice);
(10) amend or terminate any material contract, agreement or
license to which it is a party except those amended or terminated in
the ordinary course of its business, or which are not material in
amount or effect;
(11) alter in any way its manner of paying payables, collecting
receivables or ordering products and services;
(12) lend any amount to any person or entity, other than (i)
advances for travel and expenses which are incurred in the ordinary
course of business consistent with past
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practice, not material in amount and documented by receipts for the
claimed amounts, or (ii) any loans pursuant to any R-CUBE 401(a) Plan;
(13) guarantee or act as a surety for any obligation, except for
obligations in amounts that are not material;
(14) waive or release any right or claim except for the waiver or
release of non-material claims in the ordinary course of business,
consistent with past practice or the waiver or release of rights or
claims set forth in the Disclosure Schedule;
(15) issue or sell any shares of its capital stock of any class
or any other of its securities, or issue or create any warrants,
obligations, subscriptions, options, convertible securities or other
commitments to issue shares of capital stock, or accelerate the
vesting of any outstanding option or other security;
(16) split or combine the outstanding shares of its capital stock
of any class or enter into any recapitalization or agreement affecting
the number or rights of outstanding shares of its capital stock of any
class or affecting any other of its securities;
(17) merge, consolidate or reorganize with, or acquire any
entity;
(18) conduct any negotiations or agreements of any kind with any
other parties with respect to the sale of the assets or the capital
stock of R-CUBE, or for the merger or sale of R-CUBE with or to any
other entity;
(19) amend its articles of incorporation or bylaws;
(20) license any intellectual property rights of R-CUBE except in
the ordinary course of business consistent with past practice;
(21) agree to any audit assessment by any tax authority;
(22) change any insurance coverage; or
(23) agree to do any of the things described in the preceding
clauses in this Section 4.3.
4.4 Regulatory Approvals. R-CUBE 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. R-CUBE
will use its reasonable efforts to promptly obtain all such authorizations,
approvals and consents.
4.5 Necessary Consents. During the term of this Agreement, R-CUBE will
use its reasonable efforts to obtain such written consents and take such
other actions as may be necessary
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or appropriate in addition to those set forth in Section 4.4 to allow the
consummation of the transactions contemplated hereby.
4.6 Access to Information. Upon the execution of a confidentiality
agreement, the form and substance of which is mutually acceptable to R-CUBE
and REI, R-CUBE and Sellers will allow REI and its agents reasonable access
to the files, books, records and offices of R-CUBE, including, without
limitation, any and all information relating to R-CUBE's taxes,
commitments, contracts, leases, licenses and real, personal and intangible
property and financial condition. R-CUBE and Sellers will cause R-CUBE's
accountants to cooperate with REI and its agents in making available to REI
all financial information reasonably requested, including, without
limitation, the right to examine all working papers pertaining to all tax
returns and financial statements prepared or reviewed by the accountants.
4.7 Satisfaction of Conditions Precedent. During the term of this
Agreement, R-CUBE and Sellers will use reasonable efforts to satisfy or
cause to be satisfied all the conditions precedent that are set forth in
Sections 10 and 11, and R-CUBE and Sellers will use their reasonable
efforts to cause the transactions contemplated by this Agreement to be
consummated.
4.8 Confidentiality. All information concerning REI or any of its
subsidiaries ("REI Subsidiaries") received by R-CUBE or any Seller (other
than that information which is a matter of public knowledge or which has
been published for public distribution or filed as public information with
any governmental authority) shall not at any time, except in connection
with this Agreement and the transactions contemplated hereby, be used for
the advantage of, or disclosed by, R-CUBE or any Seller to any third person
without the prior written consent of REI. R-CUBE and Sellers may disclose
the information on a confidential basis to their affiliates, employees,
officers, agents, auditors, investment bankers, consultants, counsel,
directors, present and prospective lenders, and state and federal
regulatory agencies. This covenant shall expire on completion of the
Closing; provided, however, that if the Closing does not occur, it shall
expire three years after the date of this Agreement.
4.9 Cooperation in Review of R-CUBE Financial Statements. R-CUBE and
Sellers shall cooperate fully with REI and its representatives in their
review of the R-CUBE Financial Statements and the Final Balance Sheet,
including providing access to the information referred to in Section 4.6
and any other information necessary in order to complete their review.
5. REI COVENANTS
5.1 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 R-CUBE may reasonably request, in connection with the
consummation of the transactions contemplated by this Agreement. REI will
use its reasonable efforts to promptly obtain all such authorizations,
approvals and consents.
5.2 Necessary Consents. During the term of this Agreement, REI will
use its reasonable efforts to obtain such written consents and take such
other actions as may be necessary
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or appropriate in addition to those set forth in Section 5.1 to allow the
consummation of the transactions contemplated hereby.
5.3 Satisfaction of Conditions Precedent. During the term of this
Agreement, REI will use its reasonable efforts to satisfy or cause to be
satisfied all the conditions precedent that are set forth in Sections 9 and
11, and REI will use its reasonable efforts to cause the transactions
contemplated by this Agreement to be consummated.
5.4 Confidentiality. All information concerning R-CUBE received by REI
(other than that information which is a matter of public knowledge or which
has been published for public distribution or filed as public information
with any governmental authority) shall not at any time, except in
connection with this Agreement and the transactions contemplated hereby, be
used for the advantage of, or disclosed by, REI to any third person without
the prior written consent of R-CUBE. REI may disclose the information on a
confidential basis to its affiliates, employees, officers, agents,
auditors, investment bankers, consultants, counsel, directors, present and
prospective lenders, and state and federal regulatory agencies and, as
provided elsewhere in this Agreement, may disclose such information in
press releases and like disclosures, filings with the SEC or other
governmental or self-regulatory agencies or as otherwise required. This
covenant shall expire on completion of the Closing; provided, however, that
if the Closing does not occur, it shall expire three years after the date
of this Agreement.
6. EMPLOYEE MATTERS
Following the Closing, all employees of R-CUBE will either (i)
continue to be employees of R-CUBE 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 R-CUBE and, if
necessary, R-CUBE or REI shall continue to sponsor those employees for the
purpose of maintaining such employees' United States resident alien status.
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 R-CUBE or REI following the Closing.
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7. INDEMNIFICATION OF THE PARTIES.
7.1 Indemnification by Sellers
(1) Sellers shall, jointly and severally, indemnify, defend,
protect and hold harmless REI, R-CUBE, each of the REI Subsidiaries,
each of their respective successors and assigns and each of their
respective directors, officers, employees, agents and affiliates (each
an "REI Indemnified Party"), against all losses, claims, damages,
actions, suits, proceedings, demands, assessments, adjustments, costs
and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation ("Losses"))
based upon, resulting from or arising out of (i) any inaccuracy or
breach of any representation or warranty of R-CUBE or Sellers
contained in or made in connection with this Agreement, and (ii) the
breach by R-CUBE or Sellers of, or the failure by R-CUBE or Sellers to
observe, any of their respective covenants or other agreements
contained in or made in connection with this Agreement. The
indemnification provided for in this Section 7.1 shall terminate
twelve months after the Closing Date (and no claims shall be made by
REI under this Section 7.1 thereafter); provided, however, that
Sellers shall indemnify REI for any and all Taxes incurred by or
attributable to R-CUBE prior to the Closing, and the indemnification
period relating to any Taxes shall terminate on the tenth day after
the expiration of the applicable period of limitations on assessments
and collections applicable to such taxes under the Internal Revenue
Code of 1986.
(2) Notwithstanding the foregoing, the aggregate amount to be
paid by Seller under Section 7.1(a) shall not exceed 50% of the
Purchase Price as adjusted pursuant to Section 1.3 and net of any
insurance proceeds received by REI, and Seller shall not be required
to indemnify, defend, protect and hold harmless an REI Indemnified
Party pursuant to Section 7.1(a) for Losses incurred by an REI
Indemnified Party with respect to any inaccuracy or breach of any
representation or warranty of R-CUBE or Sellers contained in Section 2
of this Agreement or the Other Agreements unless and until the
aggregate amount of such Losses exceeds $25,000, at which time the REI
Indemnified Parties shall be entitled to indemnification hereunder
with respect to all such aggregate amount of Losses (including the
first $25,000 of Losses) and any Losses incurred or suffered by them
thereafter.
7.2 Indemnification by REI
(1) REI shall indemnify, defend, protect and hold harmless
Sellers (each a "Seller Indemnified Party") 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. The
indemnification provided for in this Section 7.2 shall terminate
twelve months after the Closing Date (and no claims shall be made by
Sellers under this Section 7.2 thereafter).
(2) Notwithstanding the foregoing, the aggregate amount to be
paid by REI under Section 7.2(a) shall not exceed 50% of the Purchase
Price as adjusted per Section 1.3 and net of any insurance proceeds
received by Sellers, and REI shall not be required to indemnify,
defend, protect and hold harmless a Seller Indemnified Party pursuant
to Section 7.2(a) for Losses
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incurred by a Seller Indemnified Party with respect to any inaccuracy
or breach of any representation or warranty of REI contained in this
Agreement unless and until the aggregate amount of such Losses exceeds
$25,000, at which time the Seller Indemnified Parties shall be
entitled to indemnification hereunder with respect to all such
aggregate amount of Losses (including the first $25,000 of Losses) and
any Losses incurred or suffered by them thereafter.
7.3 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.
8. CLOSING.
8.1 Closing Date. Subject to the termination of this Agreement as
provided in Section 12, the closing of the transactions contemplated by
this Agreement ("Closing") will take place at the offices of Rutan & Tucker
LLP, 611 Anton, Suite 1400, Costa Mesa, California 92626 on the date
following satisfaction of all conditions set forth in Sections 9, 10 and
11, which date shall be within 30 days of the date of this Agreement,
unless another place, time and date is selected by R-CUBE and REI ("Closing
Date").
8.2 Deliveries by R-CUBE and Sellers at the Closing. At the Closing,
R-CUBE and Sellers shall deliver to REI:
(1) Certificates representing all of the Shares, free of liens or
encumbrances, accompanied by duly executed stock powers 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;
(2) The Final Balance Sheet;
(3) The officers' and Sellers' certificates referred to in
Sections 10.1, 10.2 and 10.4; and
(4) The opinion referred to in Section 10.7.
8.3 Delivery by REI at the Closing. At the Closing, REI shall deliver
to Seller a cashier's check or evidence of wire transfer of funds
representing the Purchase Price for the Seller's Shares.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF R-CUBE AND SELLER.
The obligations of R-CUBE and Seller hereunder are subject to the
fulfillment or satisfaction on or before the Closing of each of the
following conditions (any one of which may be waived by R-CUBE and Seller,
but only in a writing signed by R-CUBE and Seller):
9.1 Accuracy of Representations and Warrants. The representations and
warranties of REI set forth in Section 3 shall be true and accurate in
every material respect on and
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as of the Closing Date with the same force and effect as if they had been
made at the Closing except to the extent the failure of the representations
and warranties to be true and accurate in such respects has not had and
could not reasonably be expected to have a Material Adverse Effect, and
R-CUBE shall receive a certificate to that effect executed by REI's Chief
Executive Officer and Chief Financial Officer.
9.2 Covenants. REI shall have performed and complied in all material
respects with all of its covenants required to be performed by it under
this Agreement on or before the Closing, and R-CUBE shall receive a
certificate to that effect signed by REI's Chief Executive Officer and
Chief Financial Officer.
9.3 Compliance with Law. There shall be no order, decree or ruling of
any governmental agency or written threat thereof, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
transactions contemplated by this Agreement, which would prohibit or render
illegal the transactions contemplated by this Agreement.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF REI.
The obligations of REI hereunder are subject to the fulfillment or
satisfaction on or before the Closing, of each of the following conditions
(any one or more of which may be waived by REI, but only in a writing
signed by REI).
10.1 Accuracy of Representations and Warrants. The representations and
warranties of R-CUBE and Sellers set forth in Section 2 of this Agreement
and the Other Agreements shall be true and accurate in every material
respect on and as of the Closing Date with the same force and effect as if
they had been made at the Closing except to the extent the failure of the
representations and warranties to be true and accurate in such respects has
not had and could not reasonably be expected to have a Material Adverse
Effect, and REI shall receive certificates to that effect executed by each
Seller and by R-CUBE's Chief Executive Officer and Chief Financial Officer.
10.2 Covenants. R-CUBE and Sellers shall have performed and complied
in all material respects with all of their covenants required to be
performed by them under this Agreement and the Other Agreements on or
before the Closing, and REI shall receive certificates to that effect
signed by each Seller and by R-CUBE's Chief Executive Officer and Chief
Financial Officer.
10.3 Completion of Due Diligence. REI shall have conducted its due
diligence investigation of R-CUBE and shall have determined, in its sole
and absolute discretion, that the business, records, assets, contracts,
liabilities, operations and other aspects of the business of R-CUBE (the
"Business Aspects") are satisfactory to REI in all respects. REI shall have
seven days (the "Initial Diligence Period") following the date of this
Agreement to use its reasonable efforts to perform its due diligence
investigation of R-CUBE. If, at the expiration of such Initial Diligence
Period, REI shall request additional time to complete its due diligence,
R-CUBE and Sellers may promptly grant or deny such request in their
reasonable discretion. If such request is granted, it shall allow REI a
minimum of three additional working days (the "Extension Diligence Period")
to complete its due diligence investigation. Within two days following the
expiration of the Initial
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Diligence Period and the Extension Diligence Period, if any, REI shall
notify R-CUBE and Sellers as to whether, in REI's sole and absolute
discretion, the Business Aspects are satisfactory to REI in all respects.
10.4 Absence of Material Adverse Change. There shall not have been any
material adverse change in the condition (financial or otherwise),
properties, assets, liabilities, businesses, operations, results of
operations or prospects of R-CUBE, taken as a whole, other than: (a) any
adverse effect resulting from conditions affecting the engineering software
industry as a whole or the United States economy as a whole; (b) a failure
by R-CUBE to meet internal earnings or revenue projections; or (c) any
disruption of customer or supplier relationships arising primarily out of
or resulting primarily from actions contemplated by the parties in
connection with, or which is primarily attributable to the announcement of
this Agreement and the transactions contemplated hereby, to the extent
attributable thereto, and REI shall receive a certificate to that effect
executed by R-CUBE's Chief Executive Officer and Chief Financial Officer.
10.5 Compliance with Law. There shall be no order, decree or ruling by
any governmental agency or written threat thereof, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
transactions contemplated by this Agreement, which would prohibit or render
illegal the transactions contemplated by this Agreement.
10.6 Documents. REI shall have received all written consents,
assignments, waivers, authorizations or other certificates reasonably
deemed necessary by REI to provide for the continuation in full force and
effect of any and all material contracts and leases of R-CUBE and for
R-CUBE to consummate the transactions contemplated hereby except when the
failure to receive the consents, etc., would not have a Material Adverse
Effect.
10.7 Corporate Opinion. REI shall have received the opinion of
R-CUBE's corporate legal counsel based upon reasonably requested
certifications as to factual matters and dated the Closing Date regarding
the status and authority of R-CUBE, the authorization of this Agreement and
the transactions contemplated hereby by R-CUBE, and the binding effect of
this Agreement on R-CUBE and Sellers. The opinion shall be satisfactory to
REI.
10.8 Other Agreements. The closing of the Other Agreements shall occur
simultaneously with the Closing of this Agreement.
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF REI, R-CUBE AND SELLER.
The obligations of REI, R-CUBE and Sellers hereunder are subject to
the fulfillment or satisfaction on or before the Closing, of each of the
following conditions (any one or more of which may be waived by REI, R-CUBE
and Seller, but only in a writing signed by REI, R-CUBE and Seller).
11.1 Government Consents. There shall have been obtained on or before
the Closing such material permits or authorizations, and there shall have
been taken such other action, as may be required to consummate the
transactions contemplated by this Agreement by any
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regulatory authority having jurisdiction over the parties and the actions
herein proposed to be taken, including but not limited to requirements
under applicable federal and state securities laws.
11.2 No Legal Action. No temporary restraining order, preliminary
injunction or permanent injunction or other order preventing the
consummation of the transactions contemplated by this Agreement or the
Other Agreements shall have been issued by any federal or state court and
remain in effect, nor shall any proceeding initiated by the federal
government seeking any of the foregoing be pending.
12. TERMINATION OF AGREEMENT.
12.1 Termination. This Agreement may be terminated at any time prior
to the Closing:
(1) by written agreement of R-CUBE, REI and Seller;
(2) by R-CUBE and Seller, if there has been a breach by REI of
any representation, warranty, covenant or agreement set forth in this
Agreement on the part of REI, or if any representation of REI shall
have become untrue, in either case which has or can reasonably be
expected to have a Material Adverse Effect and which REI fails to cure
prior to the Closing (except that no cure period shall be provided for
a breach by REI which by its nature cannot be cured);
(3) by REI, if there has been a breach by R-CUBE or Seller of any
representation, warranty, covenant or agreement set forth in this
Agreement on the part of R-CUBE or Seller, or if any representation of
R-CUBE or Seller shall have become untrue, in either case which has or
can reasonably be expected to have a Material Adverse Effect and which
R-CUBE or Seller fails to cure prior to the Closing (except that no
cure period shall be provided for a breach by R-CUBE or Seller which
by its nature cannot be cured);
(4) by R-CUBE, Seller or REI, if:
(i)...if all the conditions for Closing shall not have been
satisfied or waived on or before February 28, 1999 other than as
a result of a breach of this Agreement by the terminating party;
or
(ii)..if a permanent injunction or other order by any
federal or state court which would make illegal or otherwise
restrain or prohibit the consummation of the transactions
contemplated by this Agreement shall have been issued and shall
have become final and nonappealable.
12.2 Notice of Termination. Any termination of this Agreement under
Section 12.1 will be effective by the delivery of written notice of the
terminating party to the other parties hereto.
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12.3 Effect of Termination. In the case of any termination of this
Agreement or the Other Agreements as provided in Section 12 of this
Agreement or the Other Agreements, this Agreement shall be of no further
force and effect (except as provided in Section 14) and nothing herein
shall relieve any party from liability for any breach of this Agreement or
the Other Agreements. In case of any termination as a result of a breach by
a party or the failure of a party to satisfy Closing conditions to be
satisfied by it and which are within its control, that party shall bear all
of the expenses (including, without limitation, reasonable legal,
accounting and other advisory fees) of the other parties incurred in
connection with the failed transaction; provided, however, that in no event
shall REI be responsible for payment of the fees and expenses described in
Section 2.15. In all other cases of termination, each party shall be
responsible for its own expenses.
13. NON-COMPETITION.
13.1 Definitions. For purposes of this Section 13, the following terms
shall have the following meanings:
(1) "Customer Non-Solicitation Period" shall mean, with respect
to each Seller, the period commencing on the Closing Date and
continuing for a period of two years after such date; 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 13.3.
(2) The term "Customers" shall mean, with respect to each Seller,
any manager, group or division located in a specific building that,
during the year preceding the date of this Agreement, as of the date
of this Agreement, during the period from the date of this Agreement
to the Closing Date or during the Employee Non-Solicitation Period or
the Customer Non-Solicitation Period is or was a client or customer of
R-CUBE.
(3) The words "directly or indirectly" shall mean: (i) being
personally involved in providing or seeking to provide services to an
Employee, Customer or Prospective Customer; (ii) participating in any
person or enterprise as an owner, partner, limited partner, joint
venturer, controlling member or controlling shareholder; or (iii)
communicating to any such person or enterprise any confidential
information of the business conducted by R-CUBE during the relevant
period.
(4) "Employees" shall mean any employee of R-CUBE as of, or
immediately prior to the date of this Agreement, during the period
from the date of this Agreement to the Closing Date or during the
Employee Non-Solicitation Period or the Customer Non-Solicitation
Period.
(5) "Employee Non-Solicitation Period" shall mean, with respect
to each Seller, the period commencing on the Closing Date and
continuing for a period of two years after such date; 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 13.2. Notwithstanding the foregoing sentence, with respect to
the
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employment of Mr. Deepak Suktbankar, the Employee Non-Solicitation
Period shall be from the date of this Agreement through and including
the date that is 45 days after the Closing Date.
(6) 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.
(7) The term "Prospective Customer" shall mean any manager, group
or division located in a specific building that R-CUBE has contacted,
or has developed a strategy or plan to contact, for the purpose of
acquiring manager, group or division as a customer or client.
13.2 Non-Solicitation of Employees. Sellers recognize that the
Employees are a valuable resource of R-CUBE. 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 R-CUBE.
13.3 Non-Solicitation of Customers. Sellers recognize that customers
are a valuable resource of R-CUBE. 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.
13.4 Additional Agreements. Seller hereby expressly agrees and
acknowledges that:
(1) R-CUBE has protectable business interests with respect to its
Employees, Customers and Prospective Customers, and that competition
with and against such business interests would be harmful to R-CUBE;
(2) the covenants contained in this Section 13 are reasonable as
to time and geographical area and do not place any unreasonable burden
upon each Seller's ability to earn a livelihood;
(3) the public will not be harmed as a result of enforcement of
the covenants contained in this Section 13;
(4) the personal legal counsel for each Seller has reviewed the
covenants contained in this Section 13;
(5) the parties have entered into the covenants contained herein
in connection with and as a condition precedent to the consummation of
the Agreement and the Other Agreements, pursuant to which REI shall
acquire R-CUBE; the agreements, actions, covenants, and promises
contained herein are intended to protect and ensure the value of
R-CUBE, including its goodwill, which actions, covenants, and promises
are a material consideration to REI in connection
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with this Agreement and the Other Agreements; and, to the extent that
the laws of any jurisdiction in which this Agreement or the Other
Agreements 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; and
(6) each Seller understands and agrees to each and every term and
condition contained Section 13 of this Agreement and the Other
Agreements.
13.5 Remedies; Enforceability. Seller recognizes and acknowledges that
irreparable damage will result to REI in the event of a breach by Seller or
any of Seller's affiliates of the provisions of this Section 13, 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 13 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.
14. 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 the earlier of the termination of this Agreement or one
year after the Closing Date, whereupon the representations, warranties and
covenants will expire (except for covenants, such as those contained in
Sections 4.8, 5.4, 7 and 13, that by their terms survive for a longer
period).
15. MISCELLANEOUS.
15.1 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.
15.2 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.
15.3 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
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achieve, to the greatest extent possible, the economic, business and other
purpose of the void unenforceable provision.
15.4 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.
15.5 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.
15.6 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.
15.7 Expenses. Except as provided in Section 12.3, REI, on the one
hand, and Sellers and R-CUBE, on the other, will each bear their own
expenses and legal fees incurred with respect to this Agreement and the
transactions contemplated hereby.
15.8 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).
15.9 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):
<TABLE>
<C> <S>
If to R-CUBE to:........R-CUBE Technologies, Inc.
20410 Town Center Lane, #160
Cupertino, California 95014
Attention: Chief Executive Officer
Telecopier: (408) 255-2042
</TABLE>
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<TABLE>
<C> <S>
With a copy to:.........Gray Cary Ware & Friedenrich LLP
4365 Executive Drive, Suite 1600
San Diego, California 92121-2189
Attention: Christopher M. Smith, Esq.
Telecopier: (619) 677-1477
If to REI to:...........Research Engineers, Inc.
22700 Savi Ranch Parkway
Yorba Linda, California 92887
Attention: Chief Executive Officer
Telecopier: (714) 974-4771
With a copy to:.........Rutan & Tucker, LP
611 Anton, Suite 1400
Costa Mesa, California 92626
Attention: Cristy G. Lomenzo, Esq.
Telecopier: (714) 546-9035
If to Sellers to:.......Krishna P. Reddy
10626 Flora Vista
Cupertino, California 95014
</TABLE>
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.
15.10 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.
15.11 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 to this Agreement. 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.
15.12 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
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transactions described herein and contemplated hereby and to carry into
effect the intents and purposes of this Agreement.
15.13 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.
15.14 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.
29
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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.
REI: RESEARCH ENGINEERS, INC.,
a Delaware corporation
By: /S/ AMRIT K. DAS
--------------------
Amrit K. Das, President
By: /S/ WAYNE L. BLAIR
----------------------
Wayne L. Blair, Secretary
R-CUBE: R-CUBE TECHNOLOGIES, INC.,
a California corporation
By: /S/ KRISHNA P. REDDY
------------------------
Krishna P. Reddy, President
By: /S/ SRINIVASA REDDY MALIREDDY
---------------------------------
Srinivasa Reddy Malireddy,
Secretary
SELLER: /S/ KRISHNA P. REDDY
--------------------
KRISHNA P. REDDY, an individual
I, THE SPOUSE OF SELLER, HAVE EXECUTED THIS AGREEMENT FOR THE PURPOSE OF
CONFIRMING MY CONSENT TO THE CONVEYANCE OF MY COMMUNITY PROPERTY INTEREST, IF
ANY, IN SHARES OF CAPITAL STOCK OF R-CUBE PURSUANT TO THIS AGREEMENT
/S/ ANURADHA PADALA
-------------------
Print Name: Anuradha Padala
30
<PAGE>
Exhibit 2.2
STOCK PURCHASE AGREEMENT
AMONG
RESEARCH ENGINEERS, INC.
R-CUBE TECHNOLOGIES, INC.
AND
PRAKASH RAO POKALA
DATED AS OF
JANUARY 18, 1999
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
DESCRIPTION PAGE NO.
----------- --------
<S> <C>
1. PURCHASE AND SALE OF SHARES......................................1
1.1 Purchase and Sale. ........................................1
1.2 Purchase Price. ...........................................1
1.3 Adjustment to Purchase Price. .............................1
1.4 Payment of Purchase Price. ................................1
1.5 Review of Final Balance Sheet. ............................2
2. REPRESENTATIONS AND WARRANTIES OF R-CUBE AND SELLERS.............2
2.1 Organization; Good Standing; Qualification and Power. .....2
2.2 Capital Structure..........................................3
2.2.1 Stock. ..............................................3
2.2.2 No Other Commitments. ...............................3
2.3 Authority..................................................3
2.3.1 Corporate Action. ...................................3
2.3.2 Sellers' Authority. .................................3
2.3.3 No Conflict. ........................................3
2.3.4 Governmental Consents. ..............................4
2.4 Financial Statements. .....................................4
2.5 Compliance with Applicable Laws. ..........................4
2.6 Insurance. ................................................4
2.7 Litigation. ...............................................5
2.8 Employee Benefits..........................................5
2.9 Absence of Undisclosed Liabilities. .......................6
2.10 Absence of Certain Changes or Events. .....................6
2.11 No Defaults. ..............................................7
2.12 Certain Agreements. .......................................7
2.13 Taxes......................................................8
2.14 Intellectual Property. ...................................10
2.15 Fees and Expenses. .......................................10
2.16 Environmental Matters.....................................10
2.17 [Intentionally Omitted]. .................................10
2.18 Disclosure. ..............................................10
2.19 Restrictions on Business Activities. .....................10
2.20 Accounts Receivable.......................................10
2.21 Personal Property. .......................................11
2.22 Real Property. ...........................................11
2.23 Warranties. ..............................................11
2.24 Contracts. ...............................................11
2.25 No Goods or Products. ....................................11
</TABLE>
i
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<TABLE>
<S> <C>
3. REPRESENTATIONS AND WARRANTIES OF REI...........................11
3.1 Organization; Good Standing; Qualification and Power. ....11
3.2 Capital Structure.........................................12
3.2.1 Stock, Options and Warrants. .......................12
3.2.2 No Other Commitments. ..............................12
3.3 Authority.................................................12
3.3.1 Corporate Action. ..................................12
3.3.2 No Conflict. .......................................12
3.3.3 Governmental Consents. .............................13
3.4 SEC Documents.............................................13
3.4.1 SEC Reports. .......................................13
3.4.2 Financial Statements. ..............................13
3.5 Litigation. ..............................................13
3.6 Fees and Expenses. .......................................14
3.7 Disclosure. ..............................................14
3.8 Financial Capacity........................................14
4. R-CUBE AND SELLERS' COVENANTS...................................14
4.1 Notification of Changes. .................................14
4.2 Maintenance of Business. .................................14
4.3 Conduct of Business. .....................................14
4.4 Regulatory Approvals. ....................................16
4.5 Necessary Consents. ......................................16
4.6 Access to Information. ...................................16
4.7 Satisfaction of Conditions Precedent. ....................17
4.8 Confidentiality. .........................................17
4.9 Cooperation in Review of R-CUBE Financial Statements. ....17
5. REI COVENANTS...................................................17
5.1 Regulatory Approvals. ....................................17
5.2 Necessary Consents. ......................................17
5.3 Satisfaction of Conditions Precedent. ....................17
5.4 Confidentiality. .........................................18
6. EMPLOYEE MATTERS................................................18
7. INDEMNIFICATION OF THE PARTIES..................................18
7.1 Indemnification by Sellers................................18
7.2 Indemnification by REI....................................19
7.3 Manner of Indemnification. ...............................19
</TABLE>
ii
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<TABLE>
<S> <C>
8. CLOSING.........................................................19
8.1 Closing Date. ............................................19
8.2 Deliveries by R-CUBE and Sellers at the Closing. .........19
8.3 Delivery by REI at the Closing. ..........................20
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF R-CUBE
AND SELLER......................................................20
9.1 Accuracy of Representations and Warranties. ..............20
9.2 Covenants. ...............................................20
9.3 Compliance with Law. .....................................20
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF REI......................20
10.1 Accuracy of Representations and Warranties. ..............21
10.2 Covenants. ...............................................21
10.3 Completion of Due Diligence...............................21
10.4 Absence of Material Adverse Change. ......................21
10.5 Compliance with Law. .....................................21
10.6 Documents. ...............................................21
10.7 Corporate Opinion. .......................................22
10.8 Other Agreements..........................................22
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF REI,
R-CUBE AND SELLER...............................................22
11.1 Government Consents. .....................................22
11.2 No Legal Action. .........................................22
12. TERMINATION OF AGREEMENT........................................22
12.1 Termination. .............................................22
12.2 Notice of Termination. ...................................23
12.3 Effect of Termination. ...................................23
13. NON-COMPETITION.................................................23
13.1 Definitions...............................................23
13.2 Non-Solicitation of Employees. ...........................24
13.3 Non-Solicitation of Customers. ...........................24
13.4 Additional Agreements.....................................25
13.5 Remedies; Enforceability..................................25
14. SURVIVAL OF REPRESENTATIONS, WARRANTIES
AND COVENANTS...................................................26
15. MISCELLANEOUS...................................................26
15.1 Governing Law. ...........................................26
15.2 Assignment; Binding Upon Successors and Assigns. .........26
15.3 Severability. ............................................26
15.4 Counterparts. ............................................26
</TABLE>
iii.
<PAGE>
<TABLE>
<S> <C>
15.5 Other Remedies. ..........................................26
15.6 Amendment and Waivers. ...................................26
15.7 Expenses. ................................................27
15.8 Attorneys' Fees. .........................................27
15.9 Notices. .................................................27
15.10 Construction of Agreement. ...............................28
15.11 No Joint Venture. ........................................28
15.12 Further Assurances. ......................................28
15.13 Absence of Third Party Rights. ...........................28
15.14 Entire Agreement. ........................................28
</TABLE>
iv.
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is entered into as of this
18th day of January, 1999, among Research Engineers, Inc., a Delaware
corporation ("REI"), R-CUBE Technologies, Inc., a California corporation
("R-CUBE"), and Prakash Rao Pokala, an individual ("Seller").
RECITALS
A. Krishna P. Reddy, an individual, and Srinivasa Reddy Malireddy, an
individual (collectively, the "Other Sellers," and together with Seller,
"Sellers"), own, in the aggregate, all of the issued and outstanding shares (the
"Shares") of capital stock of R-CUBE.
B. Seller owns 1,100,000 of the Outstanding Shares ("Seller's Shares").
C. REI desires to purchase from Sellers, and Sellers desire to sell to
REI, the Outstanding Shares on the terms and conditions set forth in this
Agreement and in similar Stock Purchase Agreements (the "Other Agreements") to
be negotiated and entered into between REI and the Other Sellers as of the date
of this Agreement.
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 8 below), Seller shall
transfer, convey, assign and deliver Seller's Shares to REI, and REI shall
acquire, purchase and accept Seller's Shares from Seller.
1.2 Purchase Price. Subject to the adjustments to be made in
accordance with the provisions of Sections 1.3 through 1.5, the purchase
price for Seller's Shares is $1,066,272 (the "Purchase Price").
1.3 Adjustment to Purchase Price. The Purchase Price shall be adjusted
upward by 45.96% of the amount, if any, that the shareholders' equity of
R-CUBE ("Final Shareholders' Equity") as shown on R-CUBE's balance sheet
("Final Balance Sheet") to be prepared by R-CUBE's accountants as at the
Closing Date (defined in Section 8.1) and delivered to REI at the Closing
exceeds $500,000.
1.4 Payment of Purchase Price. The Purchase Price shall be paid by REI
to Seller as follows:
(1) At the Closing,REI shall pay to Seller the Purchase Price; and
1
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(2) Subject to Section 1.5, within 30 days after the Closing
Date, REI shall pay to Seller in cash the amount of any upward
adjustment to the Purchase Price made pursuant to Section 1.3.
1.5 Review of Final Balance Sheet. REI and its representatives shall
have 15 days to review the Final Balance Sheet. If REI disagrees with
R-CUBE's calculation of the Final Shareholders' Equity, REI shall within 15
days after the Closing Date give written notice to Sellers of such
disagreement specifying in reasonable detail, insofar as possible, the
nature and extent of the disagreement. If REI and Sellers are unable to
resolve any such disagreement within 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 necessary upward adjustment
determined by the accounting firm shall be payable in cash by REI within
three days after REI has been notified of such determination. REI and
Sellers agree that the procedures established by Sections 1.2 through 1.5
shall constitute the exclusive procedures for determining the consideration
to be paid by REI to Sellers for the Shares. Costs incurred pursuant to
this Section 1.5 shall be borne equally by REI and Sellers.
2. REPRESENTATIONS AND WARRANTIES OF R-CUBE AND SELLERS.
Except as set forth in a schedule dated the date of this Agreement
and delivered by R-CUBE and Seller to REI concurrently herewith ("Disclosure
Schedule") specifically identifying the Section of this Agreement requiring the
delivery of such disclosure, R-CUBE and Seller 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: (a) any adverse effect resulting from
conditions affecting the engineering software industry as a whole or the United
States economy as a whole; (b) a failure by R-CUBE to meet internal earnings or
revenue projections; or (c) any disruption of customer or supplier relationships
arising primarily out of or resulting primarily from actions contemplated by the
parties in connection with, or which is primarily attributable to the
announcement of this Agreement and the transactions contemplated hereby, to the
extent attributable thereto.
2.1 Organization; Good Standing; Qualification and Power. R-CUBE 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. R-CUBE does not own, directly or
indirectly,
2
<PAGE>
shares of capital stock of any other corporation or any equity interest in
any other entity, nor does R-CUBE control, directly or indirectly, any
other corporation, association or business organization. R-CUBE has made
available to REI or its counsel complete and correct copies of the articles
of incorporation and bylaws of R-CUBE, in each case 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 R-CUBE.
2.2 Capital Structure.
2.2.1 Stock. The authorized capital stock of R-CUBE consists of
10,000,000 shares of common stock, no par value per share ("R-CUBE
Common Stock"). As of the date of this Agreement, 3,300,000 shares of
R-CUBE Common Stock are issued and outstanding. All outstanding shares
of the capital stock of R-CUBE are validly issued, fully paid and
nonassessable, are not subject to preemptive rights and are owned by
Sellers free and clear of any liens, security interests, pledges,
agreements, 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 R-CUBE is a party or by which R-CUBE is bound
obligating R-CUBE to issue, deliver or sell, or cause to be issued,
delivered or sold, any shares of capital stock of R-CUBE or securities
convertible into or exchangeable for shares of capital stock of
R-CUBE, or obligating R-CUBE 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 R-CUBE or any Seller is a party with respect
to the voting of the capital stock of R-CUBE.
2.3 Authority.
2.3.1 Corporate Action. R-CUBE 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
R-CUBE and the consummation by R-CUBE of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on
the part of R-CUBE. This Agreement has been duly executed and
delivered by R-CUBE, and this Agreement is the valid and binding
obligation of R-CUBE, 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.
2.3.2 Sellers' Authority. Each of Sellers has full power and
capacity to enter into this Agreement and the Other Agreements. This
Agreement and the Other Agreements have been duly executed and
delivered by Sellers and this Agreement and the Other Agreement are
the valid and binding obligation of Sellers, enforceable in accordance
with their 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
3
<PAGE>
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 R-CUBE under, any term, condition or provision
of (x) the articles of incorporation or bylaws of R-CUBE 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 R-CUBE 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 R-CUBE in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
2.4 Financial Statements. R-CUBE has furnished to REI copies of: (a)
the unaudited balance sheets of R-CUBE at December 31, 1996, 1997 and 1998,
and the related statements of income for the periods then ended. Prior to
the Closing, R-CUBE shall furnish to REI copies of R-CUBE's audited balance
sheet at December 31, 1998 and the related statement of income for the
period then ended. All financial statements referred to in this Section 2.4
("R-CUBE Financial Statements") are or will be 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 or will fairly present the financial condition of R-CUBE as at the
respective dates thereof and the results of operation of R-CUBE for the
respective periods covered by the statements of income contained in
therein. R-CUBE does not have any material obligations or liabilities,
contingent or otherwise, not fully disclosed by the R-CUBE Financial
Statements.
2.5 Compliance with Applicable Laws. The business of R-CUBE 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. R-CUBE has not been notified by any Governmental Entity
that any investigation or review with respect to R-CUBE is pending or
threatened, nor has any Governmental Entity notified R-CUBE of its
intention to conduct an investigation or review. R-CUBE 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.
2.6 Insurance. R-CUBE maintains and at all times since January 1, 1997
has maintained general liability insurance that R-CUBE believes to be
reasonably prudent for its business. The Disclosure Schedule contains a
complete and correct list of all insurance policies maintained by R-CUBE.
R-CUBE 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. R-CUBE has complied in all material respects with the terms
and provisions of the policies. In the opinion of R-CUBE reasonably formed
4
<PAGE>
and held, there is no reasonable 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 R-CUBE and Sellers,
threatened against R-CUBE, nor is there any judgment, decree, injunction,
rule or order of any Governmental Entity or arbitrator outstanding against
R-CUBE that, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect. R-CUBE has made available to REI or its
counsel correct and complete copies of all correspondence prepared by its
counsel for R-CUBE's accountants in connection with the last two completed
reviews of R-CUBE's financial statements and any correspondence since the
date of the last review.
2.8 Employee Benefits.
(1) R-CUBE has made available to REI a list of all employees of
R-CUBE and their salaries as of the date of this Agreement. R-CUBE 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
R-CUBE and any employee of R-CUBE, but excluding workers'
compensation, unemployment compensation and other government-mandated
programs) currently or previously maintained, contributed to or
entered into by R-CUBE under which R-CUBE has any present or future
obligation or liability (collectively, "R-CUBE Employee Plans").
Copies of all R-CUBE 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
R-CUBE with respect to any of the R-CUBE Employee Plans. To R-CUBE's
and Sellers' knowledge, each of the R-CUBE 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 R-CUBE Employee Plans except for noncompliance
which would not have a Material Adverse Effect.
(2) R-CUBE 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 R-CUBE Employee
Plans, (ii) is entered into, maintained or contributed to, as the case
may be, by R-CUBE and (iii) covers any employee or former employee of
R-CUBE. The contracts, plans and arrangements described in this
paragraph 2.8(d) are referred to collectively as the "R-CUBE Benefit
Arrangements." To R-CUBE's and Sellers' knowledge, each of the R-CUBE
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 R-CUBE
Benefit Arrangements. R-CUBE has made available to REI or its counsel
a complete and correct copy or description of each of the R-CUBE
Benefit Arrangements.
5
<PAGE>
(3) There has been no amendment to, written interpretation or
announcement by R-CUBE relating to, or change in employee
participation or coverage under, any of the R-CUBE Employee Plans or
R-CUBE Benefit Arrangements that would increase materially the expense
of maintaining the R-CUBE Employee Plans or R-CUBE Benefit
Arrangements above the level of the expense incurred in respect
thereof for the fiscal year ended December 31, 1998.
(4) To R-CUBE's and Sellers' knowledge, R-CUBE 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.
2.9 Absence of Undisclosed Liabilities. Except as disclosed on the
Disclosure Schedule, at December 31, 1998 (the "R-CUBE Balance Sheet
Date"), (i) R-CUBE had no liabilities or obligations of any nature (matured
or unmatured, fixed or contingent) which were material to R-CUBE, taken as
a whole, and were not provided for in the unaudited December 31, 1998
balance sheet (the "R-CUBE Balance Sheet"), a copy of which has been
delivered to REI; and (ii) all reserves established by R-CUBE and set forth
in the R-CUBE Balance Sheet were reasonably adequate.
2.10 Absence of Certain Changes or Events. Since the R-CUBE Balance
Sheet Date there has not occurred:
(1) any change in the condition (financial or otherwise),
properties, assets, liabilities, businesses, operations, results of
operations or prospects of R-CUBE taken as a whole that could
reasonably constitute a Material Adverse Effect;
(2) any amendments or changes in the articles of incorporation or
bylaws of R-CUBE;
(3) any damage, destruction or loss, whether covered by insurance
or not, that could reasonably constitute a Material Adverse Effect;
(4) any redemption, repurchase or other acquisition of shares of
R-CUBE Common Stock by R-CUBE (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 R-CUBE Common Stock;
(5) any material increase in or modification of the compensation
or benefits payable or to become payable by R-CUBE to any of its
directors or employees, except in the ordinary course of business
consistent with past practice;
(6) any material increase in or modification of any bonus,
pension, insurance or any of the R-CUBE Employee Plans or R-CUBE
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;
6
<PAGE>
(7) any acquisition or sale of a material amount of property or
assets of R-CUBE, other than in the ordinary course of business
consistent with past practices;
(8) any alteration in any term of any outstanding security of
R-CUBE;
(9) any (A) incurrence, assumption or guarantee by R-CUBE of any
debt for borrowed money; (B) issuance or sale of any securities
convertible into or exchangeable for debt securities of R-CUBE; or (C)
issuance or sale of options or other rights to acquire from R-CUBE,
directly or indirectly, debt securities of R-CUBE or any securities
convertible into or exchangeable for any such debt securities;
(10) any creation or assumption by R-CUBE of any mortgage,
pledge, security interest or lien or other encumbrance on any asset;
(11) 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 R-CUBE, (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;
(12) any entering into, amendment of, relinquishment, termination
or non-renewal by R-CUBE of any contract, lease transaction,
commitment or other right or obligation other than in the ordinary
course of business;
(13) any transfer or grant of an R-CUBE intellectual property
right, other than those transferred or granted in the ordinary course
of business;
(14) any labor dispute or charge of unfair labor practice (other
than routine individual grievances) or, to R-CUBE and Sellers'
knowledge, any activity or proceeding by a labor union or
representative thereof to organize any employees of R-CUBE or any
campaign being conducted to solicit authorization from employees to be
represented by the labor union; or
(15) any agreement or arrangement made by R-CUBE 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. R-CUBE 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 R-CUBE under, any contract or agreement
to which R-CUBE 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
(i) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute, bonus or otherwise) becoming
due to any director or employee of R-CUBE from R-CUBE, under any of the
R-CUBE Employee Plans, R-CUBE Benefit Arrangements or otherwise, (ii)
materially increase
7
<PAGE>
any benefits otherwise payable under any of the R-CUBE Employee Plans, the
R-CUBE Benefit Arrangements or otherwise or (iii) result in the
acceleration of the time of payment or vesting of any benefits.
2.13 Taxes.
(1) 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.
(2) Except as set forth in the Disclosure Schedule:
(i) As of the Closing, R-CUBE 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 R-CUBE that are required to be filed by or
with respect to R-CUBE on or prior to the Closing, and each
of the Returns shall be, to the knowledge of R-CUBE and
Sellers, true, correct, and complete in all material
respects and shall have been completed in accordance with
applicable law;
(ii) As of the Closing, R-CUBE: (A) will have paid or
accrued in accordance with generally accepted accounting
principles all Taxes concerning or attributable to R-CUBE
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;
(iii) R-CUBE has not been delinquent in the payment of
any Tax nor is there any Tax deficiency outstanding,
proposed or assessed against R-CUBE, nor has R-CUBE 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
R-CUBE is presently in progress, nor has R-CUBE been
notified of any request for an audit or examination;
(v) R-CUBE has no 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 R-CUBE Balance Sheet;
(vi) R-CUBE 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 ending on or after
December 31, 1995;
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(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
("Liens") on the assets of R-CUBE relating or attributable
to Taxes other than liens for sales and payroll taxes not
yet due and payable;
(viii) R-CUBE has no 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 R-CUBE;
(ix) None of the assets of R-CUBE 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) R-CUBE 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 R-CUBE;
(xi) R-CUBE 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) R-CUBE is not a party to a tax sharing,
allocation, indemnification or similar agreement or
arrangement, and R-CUBE does not owe any amount under any
agreement or arrangement;
(xiii) No Return of R-CUBE contains a disclosure
statement under Code Section 6662 (or predecessor provision)
or any similar provision of state, local, or foreign law;
(xiv) R-CUBE is not and has not been at any time a
"United States real property holding corporation" within the
meaning of Code Section 897(c)(2);
(xv) No indebtedness of R-CUBE consists of "corporate
acquisition indebtedness" within the meaning of Code Section
279;
(xvi) R-CUBE has not taken any action not in accordance
with past practice that would have the effect of deferring
any Tax liability of R-CUBE from any period ending on before
the Closing Date to any taxable period ending after the
Closing Date;
(xvii) R-CUBE 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
R-CUBE or any predecessor corporations; and
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(xviii) The tax bases of the assets of R-CUBE for
purposes of determining future amortization, depreciation,
and other federal income tax deductions are accurately
reflected on the tax books and records of R-CUBE.
2.14 Intellectual Property. There are no patents, patent applications,
trademarks, service marks, trademark and service mark applications, trade
names and copyrights material to the lawful and efficient operation of the
business of R-CUBE as presently conducted and as presently proposed to be
conducted.
2.15 Fees and Expenses. Except as set forth on the Disclosure
Schedule, neither R-CUBE nor Sellers have 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. Sellers agree that
any such fees or commissions described in the preceding sentence shall be
the sole responsibility of Sellers, whether or not the Closing occurs.
2.16 Environmental Matters.
(1) To R-CUBE's and Seller's knowledge, none of the properties or
facilities of R-CUBE 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 R-CUBE has owned or leased its
properties and facilities, neither R-CUBE nor, to R-CUBE'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.
(2) During the time that R-CUBE has owned or leased its
properties and facilities, there has been no litigation brought or
threatened against R-CUBE by, or any settlement reached by R-CUBE
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 [Intentionally Omitted].
2.18 Disclosure. No representation or warranty made by R-CUBE or
Sellers in this Agreement or the Other Agreements, nor any document,
written information, written statement, financial statement, certificate or
exhibit prepared and furnished or to be prepared and furnished by Sellers,
R-CUBE or their representatives pursuant to this Agreement or the Other
Agreements or in connection with the transactions contemplated hereby or
thereby, 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 R-CUBE that
has or could reasonably be expected to have the effect of prohibiting or
materially impairing any business practice of R-CUBE,
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any acquisition of property by R-CUBE or the conduct of business by R-CUBE
as currently conducted.
2.20 Accounts Receivable. The accounts receivable shown on the R-CUBE
Balance Sheet as of the R-CUBE 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 R-CUBE reduced by the
reserves for discounts and bad debts taken on the R-CUBE Balance Sheet.
2.21 Personal Property. R-CUBE 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 R-CUBE is in good operating
condition. All of the leases to personal property utilized in the business
of R-CUBE are valid and enforceable against R-CUBE and are not in default
by R-CUBE, or, to the knowledge of R-CUBE or Sellers, are any of the other
parties thereto in default thereof.
2.22 Real Property. R-CUBE does not own any real property. The
Disclosure Schedule contains a list of all leases for real property to
which R-CUBE 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 knowledge of R-CUBE and Sellers,
the real property leased or occupied by R-CUBE, 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 R-CUBE for any improvements made to the real property
leased or occupied by R-CUBE that have not been paid for.
2.23 Warranties. R-CUBE has made no warranties or guarantees relating
to its services other than as implied or required by law. R-CUBE has no
warranty or indemnification obligations relating to patents or other
proprietary rights.
2.24 Contracts. The Disclosure Schedule lists all oral or written
agreements, notes, instruments or contracts to which R-CUBE 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 ("R-CUBE Contracts"). R-CUBE is not in
default in performance of its obligations under any material provisions of
the R-CUBE Contracts. Neither R-CUBE nor Sellers have any knowledge of any
violation of or default under any R-CUBE Contract by any other party
thereto or any knowledge of any intent by any other party to an R-CUBE
Contract not to perform its obligations under any R-CUBE Contract.
2.25 No Goods or Products. R-CUBE does not and has not developed,
sold, marketed or distributed any goods or products.
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3. REPRESENTATIONS AND WARRANTIES OF REI.
REI hereby represents and warrants to R-CUBE and Seller that:
3.1 Organization; Good Standing; Qualification and Power. REI is a
corporation duly incorporated, 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. REI has made
available to R-CUBE or its counsel complete and correct copies of the
certificate of incorporation and bylaws of REI, in each case 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 REI.
3.2 Capital Structure.
3.2.1 Stock, Options and Warrants. The authorized capital stock
of REI consists of 20,000,000 shares of common stock, $.01 par value
per share ("REI Common Stock"), and 5,000,000 shares of Preferred
Stock, $.01 par value per share ("REI Preferred Stock"). At the close
of business on January 13, 1999, 5,680,710 shares of REI Common Stock
were issued and outstanding, and 599,850 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. REI has made
available to R-CUBE true and correct copies of its 1996, 1997 and 1998
Stock Option Plans (each an "REI Plan" and collectively, the "REI
Plans").
3.2.2 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. There
are no voting trusts or other agreements or understandings to which
REI is a party with respect to the voting of the capital stock of REI.
3.3 Authority.
3.3.1 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
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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.
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 under, any term, condition or provision of
(x) the certificate of incorporation or bylaws of REI 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 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.
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 in connection
with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby.
3.4 SEC Documents.
3.4.1 SEC Reports. REI has made available to R-CUBE or its
counsel correct and complete copies of each report, schedule,
registration statement and definitive proxy statement filed by REI
with the Securities and Exchange Commission ("SEC") on or after
January 1, 1997 ("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, as amended, 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.
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
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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 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 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.
3.8 Financial Capacity. REI has the financial capability to pay the
Purchase Price when due.
4. R-CUBE AND SELLERS' COVENANTS.
4.1 Notification of Changes. During the period from the date of this
Agreement until the earlier of the Closing Date or the termination of this
Agreement in accordance with its terms, R-CUBE and Sellers will promptly
notify REI in writing (a) of any event occurring subsequent to the date of
this Agreement that would render any representation or warranty of R-CUBE
or any Seller contained in this Agreement or the Other Agreements, if made
on or as of the date of the event or the Closing Date, untrue or inaccurate
in any material respect, (b) of any Material Adverse Effect and (c) of any
breach by R-CUBE or any Seller of any covenant or agreement contained in
this Agreement or the Other Agreements.
4.2 Maintenance of Business. During the period from the date of this
Agreement until the earlier of the Closing Date or the termination of this
Agreement in accordance with its terms, R-CUBE and Sellers will use their
reasonable commercial efforts to carry on and preserve R-CUBE's business
and its relationships with customers, suppliers, employees and others in
substantially the same manner as it has prior to the date hereof. If R-CUBE
or any Seller becomes aware of any material deterioration in the
relationship with any material customer, material supplier or key employee,
R-CUBE or that Seller will promptly bring that information to the attention
of REI.
4.3 Conduct of Business. During the period from the date of this
Agreement until the earlier of the Closing Date or the termination of this
Agreement in accordance with its terms, R-CUBE will, and Sellers will cause
R-CUBE to, continue to conduct its business and maintain its
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business relationships in the ordinary and usual course and will not,
without the prior written consent of REI:
(1) borrow any money except for amounts that are not in the
aggregate material to the financial condition of R-CUBE, taken as a
whole;
(2) enter into any material transaction not in the ordinary
course of its business;
(3) encumber or permit to be encumbered any of its assets except
in the ordinary course of its business;
(4) dispose of any of its assets except in the ordinary course of
business consistent with past practice;
(5) enter into any material lease or contract for the purchase or
sale or license of any property, real or personal, except in the
ordinary course of business;
(6) fail to maintain its equipment and other assets in good
working condition and repair according in all material respects to the
standards it has maintained to the date of this Agreement, subject
only to ordinary wear and tear;
(7) pay (or make any oral or written commitments or
representations to pay) any bonus, increased salary or special
remuneration to any officer, employee or consultant (except for normal
salary increases consistent with past practices not to exceed 10% per
year) or enter into or vary the terms of any employment, consulting or
severance agreement with any person, pay any severance or termination
pay (other than payments made in accordance with plans or agreements
existing on the date hereof), grant any stock option or issue any
restricted stock, or enter into or modify any agreement or plan of the
type described in Section 2.8;
(8) change accounting methods;
(9) declare, set aside or pay any cash or stock dividend or other
distribution in respect of capital stock, or redeem or otherwise
acquire any of its capital stock (other than pursuant to arrangements
with terminated employees or consultants in the ordinary course of
business consistent with R-CUBE's past practice);
(10) amend or terminate any material contract, agreement or
license to which it is a party except those amended or terminated in
the ordinary course of its business, or which are not material in
amount or effect;
(11) alter in any way its manner of paying payables, collecting
receivables or ordering products and services;
(12) lend any amount to any person or entity, other than (i)
advances for travel and expenses which are incurred in the ordinary
course of business consistent with past
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practice, not material in amount and documented by receipts for the
claimed amounts, or (ii) any loans pursuant to any R-CUBE 401(a) Plan;
(13) guarantee or act as a surety for any obligation, except for
obligations in amounts that are not material;
(14) waive or release any right or claim except for the waiver or
release of non-material claims in the ordinary course of business,
consistent with past practice or the waiver or release of rights or
claims set forth in the Disclosure Schedule;
(15) issue or sell any shares of its capital stock of any class
or any other of its securities, or issue or create any warrants,
obligations, subscriptions, options, convertible securities or other
commitments to issue shares of capital stock, or accelerate the
vesting of any outstanding option or other security;
(16) split or combine the outstanding shares of its capital stock
of any class or enter into any recapitalization or agreement affecting
the number or rights of outstanding shares of its capital stock of any
class or affecting any other of its securities;
(17) merge, consolidate or reorganize with, or acquire any
entity;
(18) conduct any negotiations or agreements of any kind with any
other parties with respect to the sale of the assets or the capital
stock of R-CUBE, or for the merger or sale of R-CUBE with or to any
other entity;
(19) amend its articles of incorporation or bylaws;
(20) license any intellectual property rights of R-CUBE except in
the ordinary course of business consistent with past practice;
(21) agree to any audit assessment by any tax authority;
(22) change any insurance coverage; or
(23) agree to do any of the things described in the preceding
clauses in this Section 4.3.
4.4 Regulatory Approvals. R-CUBE 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. R-CUBE
will use its reasonable efforts to promptly obtain all such authorizations,
approvals and consents.
4.5 Necessary Consents. During the term of this Agreement, R-CUBE will
use its reasonable efforts to obtain such written consents and take such
other actions as may be necessary
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or appropriate in addition to those set forth in Section 4.4 to allow the
consummation of the transactions contemplated hereby.
4.6 Access to Information. Upon the execution of a confidentiality
agreement, the form and substance of which is mutually acceptable to R-CUBE
and REI, R-CUBE and Sellers will allow REI and its agents reasonable access
to the files, books, records and offices of R-CUBE, including, without
limitation, any and all information relating to R-CUBE's taxes,
commitments, contracts, leases, licenses and real, personal and intangible
property and financial condition. R-CUBE and Sellers will cause R-CUBE's
accountants to cooperate with REI and its agents in making available to REI
all financial information reasonably requested, including, without
limitation, the right to examine all working papers pertaining to all tax
returns and financial statements prepared or reviewed by the accountants.
4.7 Satisfaction of Conditions Precedent. During the term of this
Agreement, R-CUBE and Sellers will use reasonable efforts to satisfy or
cause to be satisfied all the conditions precedent that are set forth in
Sections 10 and 11, and R-CUBE and Sellers will use their reasonable
efforts to cause the transactions contemplated by this Agreement to be
consummated.
4.8 Confidentiality. All information concerning REI or any of its
subsidiaries ("REI Subsidiaries") received by R-CUBE or any Seller (other
than that information which is a matter of public knowledge or which has
been published for public distribution or filed as public information with
any governmental authority) shall not at any time, except in connection
with this Agreement and the transactions contemplated hereby, be used for
the advantage of, or disclosed by, R-CUBE or any Seller to any third person
without the prior written consent of REI. R-CUBE and Sellers may disclose
the information on a confidential basis to their affiliates, employees,
officers, agents, auditors, investment bankers, consultants, counsel,
directors, present and prospective lenders, and state and federal
regulatory agencies. This covenant shall expire on completion of the
Closing; provided, however, that if the Closing does not occur, it shall
expire three years after the date of this Agreement.
4.9 Cooperation in Review of R-CUBE Financial Statements. R-CUBE and
Sellers shall cooperate fully with REI and its representatives in their
review of the R-CUBE Financial Statements and the Final Balance Sheet,
including providing access to the information referred to in Section 4.6
and any other information necessary in order to complete their review.
5. REI COVENANTS
5.1 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 R-CUBE may reasonably request, in connection with the
consummation of the transactions contemplated by this Agreement. REI will
use its reasonable efforts to promptly obtain all such authorizations,
approvals and consents.
5.2 Necessary Consents. During the term of this Agreement, REI will
use its reasonable efforts to obtain such written consents and take such
other actions as may be necessary
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or appropriate in addition to those set forth in Section 5.1 to allow the
consummation of the transactions contemplated hereby.
5.3 Satisfaction of Conditions Precedent. During the term of this
Agreement, REI will use its reasonable efforts to satisfy or cause to be
satisfied all the conditions precedent that are set forth in Sections 9 and
11, and REI will use its reasonable efforts to cause the transactions
contemplated by this Agreement to be consummated.
5.4 Confidentiality. All information concerning R-CUBE received by REI
(other than that information which is a matter of public knowledge or which
has been published for public distribution or filed as public information
with any governmental authority) shall not at any time, except in
connection with this Agreement and the transactions contemplated hereby, be
used for the advantage of, or disclosed by, REI to any third person without
the prior written consent of R-CUBE. REI may disclose the information on a
confidential basis to its affiliates, employees, officers, agents,
auditors, investment bankers, consultants, counsel, directors, present and
prospective lenders, and state and federal regulatory agencies and, as
provided elsewhere in this Agreement, may disclose such information in
press releases and like disclosures, filings with the SEC or other
governmental or self-regulatory agencies or as otherwise required. This
covenant shall expire on completion of the Closing; provided, however, that
if the Closing does not occur, it shall expire three years after the date
of this Agreement.
6. EMPLOYEE MATTERS
Following the Closing, all employees of R-CUBE will either (i)
continue to be employees of R-CUBE 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 R-CUBE and, if
necessary, R-CUBE or REI shall continue to sponsor those employees for the
purpose of maintaining such employees' United States resident alien status.
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 R-CUBE or REI following the Closing.
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7. INDEMNIFICATION OF THE PARTIES.
7.1 Indemnification by Sellers
(1) Sellers shall, jointly and severally, indemnify, defend,
protect and hold harmless REI, R-CUBE, each of the REI Subsidiaries,
each of their respective successors and assigns and each of their
respective directors, officers, employees, agents and affiliates (each
an "REI Indemnified Party"), against all losses, claims, damages,
actions, suits, proceedings, demands, assessments, adjustments, costs
and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation ("Losses"))
based upon, resulting from or arising out of (i) any inaccuracy or
breach of any representation or warranty of R-CUBE or Sellers
contained in or made in connection with this Agreement, and (ii) the
breach by R-CUBE or Sellers of, or the failure by R-CUBE or Sellers to
observe, any of their respective covenants or other agreements
contained in or made in connection with this Agreement. The
indemnification provided for in this Section 7.1 shall terminate
twelve months after the Closing Date (and no claims shall be made by
REI under this Section 7.1 thereafter); provided, however, that
Sellers shall indemnify REI for any and all Taxes incurred by or
attributable to R-CUBE prior to the Closing, and the indemnification
period relating to any Taxes shall terminate on the tenth day after
the expiration of the applicable period of limitations on assessments
and collections applicable to such taxes under the Internal Revenue
Code of 1986.
(2) Notwithstanding the foregoing, the aggregate amount to be
paid by Seller under Section 7.1(a) shall not exceed 50% of the
Purchase Price as adjusted pursuant to Section 1.3 and net of any
insurance proceeds received by REI, and Seller shall not be required
to indemnify, defend, protect and hold harmless an REI Indemnified
Party pursuant to Section 7.1(a) for Losses incurred by an REI
Indemnified Party with respect to any inaccuracy or breach of any
representation or warranty of R-CUBE or Sellers contained in Section 2
of this Agreement or the Other Agreements unless and until the
aggregate amount of such Losses exceeds $25,000, at which time the REI
Indemnified Parties shall be entitled to indemnification hereunder
with respect to all such aggregate amount of Losses (including the
first $25,000 of Losses) and any Losses incurred or suffered by them
thereafter.
7.2 Indemnification by REI
(1) REI shall indemnify, defend, protect and hold harmless
Sellers (each a "Seller Indemnified Party") 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. The
indemnification provided for in this Section 7.2 shall terminate
twelve months after the Closing Date (and no claims shall be made by
Sellers under this Section 7.2 thereafter).
(2) Notwithstanding the foregoing, the aggregate amount to be
paid by REI under Section 7.2(a) shall not exceed 50% of the Purchase
Price as adjusted per Section 1.3 and net of any insurance proceeds
received by Sellers, and REI shall not be required to indemnify,
defend, protect and hold harmless a Seller Indemnified Party pursuant
to Section 7.2(a) for Losses
19
<PAGE>
incurred by a Seller Indemnified Party with respect to any inaccuracy
or breach of any representation or warranty of REI contained in this
Agreement unless and until the aggregate amount of such Losses exceeds
$25,000, at which time the Seller Indemnified Parties shall be
entitled to indemnification hereunder with respect to all such
aggregate amount of Losses (including the first $25,000 of Losses) and
any Losses incurred or suffered by them thereafter.
7.3 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.
8. CLOSING.
8.1 Closing Date. Subject to the termination of this Agreement as
provided in Section 12, the closing of the transactions contemplated by
this Agreement ("Closing") will take place at the offices of Rutan & Tucker
LLP, 611 Anton, Suite 1400, Costa Mesa, California 92626 on the date
following satisfaction of all conditions set forth in Sections 9, 10 and
11, which date shall be within 30 days of the date of this Agreement,
unless another place, time and date is selected by R-CUBE and REI ("Closing
Date").
8.2 Deliveries by R-CUBE and Sellers at the Closing. At the Closing,
R-CUBE and Sellers shall deliver to REI:
(1) Certificates representing all of the Shares, free of liens or
encumbrances, accompanied by duly executed stock powers 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;
(2) The Final Balance Sheet;
(3) The officers' and Sellers' certificates referred to in
Sections 10.1, 10.2 and 10.4; and
(4) The opinion referred to in Section 10.7.
8.3 Delivery by REI at the Closing. At the Closing, REI shall deliver
to Seller a cashier's check or evidence of wire transfer of funds
representing the Purchase Price for the Seller's Shares.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF R-CUBE AND SELLER.
The obligations of R-CUBE and Seller hereunder are subject to the
fulfillment or satisfaction on or before the Closing of each of the
following conditions (any one of which may be waived by R-CUBE and Seller,
but only in a writing signed by R-CUBE and Seller):
9.1 Accuracy of Representations and Warrants. The representations and
warranties of REI set forth in Section 3 shall be true and accurate in
every material respect on and
20
<PAGE>
as of the Closing Date with the same force and effect as if they had been
made at the Closing except to the extent the failure of the representations
and warranties to be true and accurate in such respects has not had and
could not reasonably be expected to have a Material Adverse Effect, and
R-CUBE shall receive a certificate to that effect executed by REI's Chief
Executive Officer and Chief Financial Officer.
9.2 Covenants. REI shall have performed and complied in all material
respects with all of its covenants required to be performed by it under
this Agreement on or before the Closing, and R-CUBE shall receive a
certificate to that effect signed by REI's Chief Executive Officer and
Chief Financial Officer.
9.3 Compliance with Law. There shall be no order, decree or ruling of
any governmental agency or written threat thereof, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
transactions contemplated by this Agreement, which would prohibit or render
illegal the transactions contemplated by this Agreement.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF REI.
The obligations of REI hereunder are subject to the fulfillment or
satisfaction on or before the Closing, of each of the following conditions
(any one or more of which may be waived by REI, but only in a writing
signed by REI).
10.1 Accuracy of Representations and Warrants. The representations and
warranties of R-CUBE and Sellers set forth in Section 2 of this Agreement
and the Other Agreements shall be true and accurate in every material
respect on and as of the Closing Date with the same force and effect as if
they had been made at the Closing except to the extent the failure of the
representations and warranties to be true and accurate in such respects has
not had and could not reasonably be expected to have a Material Adverse
Effect, and REI shall receive certificates to that effect executed by each
Seller and by R-CUBE's Chief Executive Officer and Chief Financial Officer.
10.2 Covenants. R-CUBE and Sellers shall have performed and complied
in all material respects with all of their covenants required to be
performed by them under this Agreement and the Other Agreements on or
before the Closing, and REI shall receive certificates to that effect
signed by each Seller and by R-CUBE's Chief Executive Officer and Chief
Financial Officer.
10.3 Completion of Due Diligence. REI shall have conducted its due
diligence investigation of R-CUBE and shall have determined, in its sole
and absolute discretion, that the business, records, assets, contracts,
liabilities, operations and other aspects of the business of R-CUBE (the
"Business Aspects") are satisfactory to REI in all respects. REI shall have
seven days (the "Initial Diligence Period") following the date of this
Agreement to use its reasonable efforts to perform its due diligence
investigation of R-CUBE. If, at the expiration of such Initial Diligence
Period, REI shall request additional time to complete its due diligence,
R-CUBE and Sellers may promptly grant or deny such request in their
reasonable discretion. If such request is granted, it shall allow REI a
minimum of three additional working days (the "Extension Diligence Period")
to complete its due diligence investigation. Within two days following the
expiration of the Initial
21
<PAGE>
Diligence Period and the Extension Diligence Period, if any, REI shall
notify R-CUBE and Sellers as to whether, in REI's sole and absolute
discretion, the Business Aspects are satisfactory to REI in all respects.
10.4 Absence of Material Adverse Change. There shall not have been any
material adverse change in the condition (financial or otherwise),
properties, assets, liabilities, businesses, operations, results of
operations or prospects of R-CUBE, taken as a whole, other than: (a) any
adverse effect resulting from conditions affecting the engineering software
industry as a whole or the United States economy as a whole; (b) a failure
by R-CUBE to meet internal earnings or revenue projections; or (c) any
disruption of customer or supplier relationships arising primarily out of
or resulting primarily from actions contemplated by the parties in
connection with, or which is primarily attributable to the announcement of
this Agreement and the transactions contemplated hereby, to the extent
attributable thereto, and REI shall receive a certificate to that effect
executed by R-CUBE's Chief Executive Officer and Chief Financial Officer.
10.5 Compliance with Law. There shall be no order, decree or ruling by
any governmental agency or written threat thereof, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
transactions contemplated by this Agreement, which would prohibit or render
illegal the transactions contemplated by this Agreement.
10.6 Documents. REI shall have received all written consents,
assignments, waivers, authorizations or other certificates reasonably
deemed necessary by REI to provide for the continuation in full force and
effect of any and all material contracts and leases of R-CUBE and for
R-CUBE to consummate the transactions contemplated hereby except when the
failure to receive the consents, etc., would not have a Material Adverse
Effect.
10.7 Corporate Opinion. REI shall have received the opinion of
R-CUBE's corporate legal counsel based upon reasonably requested
certifications as to factual matters and dated the Closing Date regarding
the status and authority of R-CUBE, the authorization of this Agreement and
the transactions contemplated hereby by R-CUBE, and the binding effect of
this Agreement on R-CUBE and Sellers. The opinion shall be satisfactory to
REI.
10.8 Other Agreements. The closing of the Other Agreements shall occur
simultaneously with the Closing of this Agreement.
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF REI, R-CUBE AND SELLER.
The obligations of REI, R-CUBE and Sellers hereunder are subject to
the fulfillment or satisfaction on or before the Closing, of each of the
following conditions (any one or more of which may be waived by REI, R-CUBE
and Seller, but only in a writing signed by REI, R-CUBE and Seller).
11.1 Government Consents. There shall have been obtained on or before
the Closing such material permits or authorizations, and there shall have
been taken such other action, as may be required to consummate the
transactions contemplated by this Agreement by any
22
<PAGE>
regulatory authority having jurisdiction over the parties and the actions
herein proposed to be taken, including but not limited to requirements
under applicable federal and state securities laws.
11.2 No Legal Action. No temporary restraining order, preliminary
injunction or permanent injunction or other order preventing the
consummation of the transactions contemplated by this Agreement or the
Other Agreements shall have been issued by any federal or state court and
remain in effect, nor shall any proceeding initiated by the federal
government seeking any of the foregoing be pending.
12. TERMINATION OF AGREEMENT.
12.1 Termination. This Agreement may be terminated at any time prior
to the Closing:
(1) by written agreement of R-CUBE, REI and Seller;
(2) by R-CUBE and Seller, if there has been a breach by REI of
any representation, warranty, covenant or agreement set forth in this
Agreement on the part of REI, or if any representation of REI shall
have become untrue, in either case which has or can reasonably be
expected to have a Material Adverse Effect and which REI fails to cure
prior to the Closing (except that no cure period shall be provided for
a breach by REI which by its nature cannot be cured);
(3) by REI, if there has been a breach by R-CUBE or Seller of any
representation, warranty, covenant or agreement set forth in this
Agreement on the part of R-CUBE or Seller, or if any representation of
R-CUBE or Seller shall have become untrue, in either case which has or
can reasonably be expected to have a Material Adverse Effect and which
R-CUBE or Seller fails to cure prior to the Closing (except that no
cure period shall be provided for a breach by R-CUBE or Seller which
by its nature cannot be cured);
(4) by R-CUBE, Seller or REI, if:
(i)...if all the conditions for Closing shall not have been
satisfied or waived on or before February 28, 1999 other than as
a result of a breach of this Agreement by the terminating party;
or
(ii)..if a permanent injunction or other order by any
federal or state court which would make illegal or otherwise
restrain or prohibit the consummation of the transactions
contemplated by this Agreement shall have been issued and shall
have become final and nonappealable.
12.2 Notice of Termination. Any termination of this Agreement under
Section 12.1 will be effective by the delivery of written notice of the
terminating party to the other parties hereto.
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12.3 Effect of Termination. In the case of any termination of this
Agreement or the Other Agreements as provided in Section 12 of this
Agreement or the Other Agreements, this Agreement shall be of no further
force and effect (except as provided in Section 14) and nothing herein
shall relieve any party from liability for any breach of this Agreement or
the Other Agreements. In case of any termination as a result of a breach by
a party or the failure of a party to satisfy Closing conditions to be
satisfied by it and which are within its control, that party shall bear all
of the expenses (including, without limitation, reasonable legal,
accounting and other advisory fees) of the other parties incurred in
connection with the failed transaction; provided, however, that in no event
shall REI be responsible for payment of the fees and expenses described in
Section 2.15. In all other cases of termination, each party shall be
responsible for its own expenses.
13. NON-COMPETITION.
13.1 Definitions. For purposes of this Section 13, the following terms
shall have the following meanings:
(1) "Customer Non-Solicitation Period" shall mean, with respect
to each Seller, the period commencing on the Closing Date and
continuing for a period of two years after such date; 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 13.3.
(2) The term "Customers" shall mean, with respect to each Seller,
any manager, group or division located in a specific building that,
during the year preceding the date of this Agreement, as of the date
of this Agreement, during the period from the date of this Agreement
to the Closing Date or during the Employee Non-Solicitation Period or
the Customer Non-Solicitation Period is or was a client or customer of
R-CUBE.
(3) The words "directly or indirectly" shall mean: (i) being
personally involved in providing or seeking to provide services to an
Employee, Customer or Prospective Customer; (ii) participating in any
person or enterprise as an owner, partner, limited partner, joint
venturer, controlling member or controlling shareholder; or (iii)
communicating to any such person or enterprise any confidential
information of the business conducted by R-CUBE during the relevant
period.
(4) "Employees" shall mean any employee of R-CUBE as of, or
immediately prior to the date of this Agreement, during the period
from the date of this Agreement to the Closing Date or during the
Employee Non-Solicitation Period or the Customer Non-Solicitation
Period.
(5) "Employee Non-Solicitation Period" shall mean, with respect
to each Seller, the period commencing on the Closing Date and
continuing for a period of two years after such date; 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 13.2. Notwithstanding the foregoing sentence, with respect to
the
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employment of Mr. Deepak Suktbankar, the Employee Non-Solicitation
Period shall be from the date of this Agreement through and including
the date that is 45 days after the Closing Date.
(6) 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.
(7) The term "Prospective Customer" shall mean any manager, group
or division located in a specific building that R-CUBE has contacted,
or has developed a strategy or plan to contact, for the purpose of
acquiring manager, group or division as a customer or client.
13.2 Non-Solicitation of Employees. Sellers recognize that the
Employees are a valuable resource of R-CUBE. 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 R-CUBE.
13.3 Non-Solicitation of Customers. Sellers recognize that customers
are a valuable resource of R-CUBE. 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.
13.4 Additional Agreements. Seller hereby expressly agrees and
acknowledges that:
(1) R-CUBE has protectable business interests with respect to its
Employees, Customers and Prospective Customers, and that competition
with and against such business interests would be harmful to R-CUBE;
(2) the covenants contained in this Section 13 are reasonable as
to time and geographical area and do not place any unreasonable burden
upon each Seller's ability to earn a livelihood;
(3) the public will not be harmed as a result of enforcement of
the covenants contained in this Section 13;
(4) the personal legal counsel for each Seller has reviewed the
covenants contained in this Section 13;
(5) the parties have entered into the covenants contained herein
in connection with and as a condition precedent to the consummation of
the Agreement and the Other Agreements, pursuant to which REI shall
acquire R-CUBE; the agreements, actions, covenants, and promises
contained herein are intended to protect and ensure the value of
R-CUBE, including its goodwill, which actions, covenants, and promises
are a material consideration to REI in connection
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<PAGE>
with this Agreement and the Other Agreements; and, to the extent that
the laws of any jurisdiction in which this Agreement or the Other
Agreements 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; and
(6) each Seller understands and agrees to each and every term and
condition contained Section 13 of this Agreement and the Other
Agreements.
13.5 Remedies; Enforceability. Seller recognizes and acknowledges that
irreparable damage will result to REI in the event of a breach by Seller or
any of Seller's affiliates of the provisions of this Section 13, 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 13 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.
14. 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 the earlier of the termination of this Agreement or one
year after the Closing Date, whereupon the representations, warranties and
covenants will expire (except for covenants, such as those contained in
Sections 4.8, 5.4, 7 and 13, that by their terms survive for a longer
period).
15. MISCELLANEOUS.
15.1 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.
15.2 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.
15.3 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
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achieve, to the greatest extent possible, the economic, business and other
purpose of the void unenforceable provision.
15.4 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.
15.5 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.
15.6 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.
15.7 Expenses. Except as provided in Section 12.3, REI, on the one
hand, and Sellers and R-CUBE, on the other, will each bear their own
expenses and legal fees incurred with respect to this Agreement and the
transactions contemplated hereby.
15.8 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).
15.9 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):
<TABLE>
<C> <S>
If to R-CUBE to:........R-CUBE Technologies, Inc.
20410 Town Center Lane, #160
Cupertino, California 95014
Attention: Chief Executive Officer
Telecopier: (408) 255-2042
</TABLE>
27
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<TABLE>
<C> <S>
With a copy to:.........Gray Cary Ware & Friedenrich LLP
4365 Executive Drive, Suite 1600
San Diego, California 92121-2189
Attention: Christopher M. Smith, Esq.
Telecopier: (619) 677-1477
If to REI to:...........Research Engineers, Inc.
22700 Savi Ranch Parkway
Yorba Linda, California 92887
Attention: Chief Executive Officer
Telecopier: (714) 974-4771
With a copy to:.........Rutan & Tucker, LP
611 Anton, Suite 1400
Costa Mesa, California 92626
Attention: Cristy G. Lomenzo, Esq.
Telecopier: (714) 546-9035
If to Sellers to:.......Prakash Rao Pokala
20063 Merritt Drive
Cupertino, California 95014
</TABLE>
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.
15.10 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.
15.11 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 to this Agreement. 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.
15.12 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
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transactions described herein and contemplated hereby and to carry into
effect the intents and purposes of this Agreement.
15.13 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.
15.14 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.
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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.
REI: RESEARCH ENGINEERS, INC.,
a Delaware corporation
By: /S/ AMRIT K. DAS
--------------------
Amrit K. Das, President
By: /S/ WAYNE L. BLAIR
----------------------
Wayne L. Blair, Secretary
R-CUBE: R-CUBE TECHNOLOGIES, INC.,
a California corporation
By: /S/ KRISHNA P. REDDY
------------------------
Krishna P. Reddy, President
By: /S/ SRINIVASA REDDY MALIREDDY
---------------------------------
Srinivasa Reddy Malireddy,
Secretary
SELLER: /S/ PRAKASH RAO POKALA
-------------------------
PRAKASH RAO POKALA, an individual
I, THE SPOUSE OF SELLER, HAVE EXECUTED THIS AGREEMENT FOR THE PURPOSE OF
CONFIRMING MY CONSENT TO THE CONVEYANCE OF MY COMMUNITY PROPERTY INTEREST, IF
ANY, IN SHARES OF CAPITAL STOCK OF R-CUBE PURSUANT TO THIS AGREEMENT
/S/ SUCHARITA POKALA
----------------------------
Print Name: Sucharita Pokala
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Exhibit 2.3
STOCK PURCHASE AGREEMENT
AMONG
RESEARCH ENGINEERS, INC.
R-CUBE TECHNOLOGIES, INC.
AND
SRINIVASA REDDY MALIREDDY
DATED AS OF
JANUARY 18, 1999
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
DESCRIPTION PAGE NO.
----------- --------
<S> <C>
1. PURCHASE AND SALE OF SHARES......................................1
1.1 Purchase and Sale. ........................................1
1.2 Purchase Price. ...........................................1
1.3 Adjustment to Purchase Price. .............................1
1.4 Payment of Purchase Price. ................................1
1.5 Review of Final Balance Sheet. ............................2
2. REPRESENTATIONS AND WARRANTIES OF R-CUBE AND SELLERS.............2
2.1 Organization; Good Standing; Qualification and Power. .....2
2.2 Capital Structure..........................................3
2.2.1 Stock. ..............................................3
2.2.2 No Other Commitments. ...............................3
2.3 Authority..................................................3
2.3.1 Corporate Action. ...................................3
2.3.2 Sellers' Authority. .................................3
2.3.3 No Conflict. ........................................3
2.3.4 Governmental Consents. ..............................4
2.4 Financial Statements. .....................................4
2.5 Compliance with Applicable Laws. ..........................4
2.6 Insurance. ................................................4
2.7 Litigation. ...............................................5
2.8 Employee Benefits..........................................5
2.9 Absence of Undisclosed Liabilities. .......................6
2.10 Absence of Certain Changes or Events. .....................6
2.11 No Defaults. ..............................................7
2.12 Certain Agreements. .......................................7
2.13 Taxes......................................................8
2.14 Intellectual Property. ...................................10
2.15 Fees and Expenses. .......................................10
2.16 Environmental Matters.....................................10
2.17 [Intentionally Omitted]. .................................10
2.18 Disclosure. ..............................................10
2.19 Restrictions on Business Activities. .....................10
2.20 Accounts Receivable.......................................10
2.21 Personal Property. .......................................11
2.22 Real Property. ...........................................11
2.23 Warranties. ..............................................11
2.24 Contracts. ...............................................11
2.25 No Goods or Products. ....................................11
</TABLE>
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3. REPRESENTATIONS AND WARRANTIES OF REI...........................11
3.1 Organization; Good Standing; Qualification and Power. ....11
3.2 Capital Structure.........................................12
3.2.1 Stock, Options and Warrants. .......................12
3.2.2 No Other Commitments. ..............................12
3.3 Authority.................................................12
3.3.1 Corporate Action. ..................................12
3.3.2 No Conflict. .......................................12
3.3.3 Governmental Consents. .............................13
3.4 SEC Documents.............................................13
3.4.1 SEC Reports. .......................................13
3.4.2 Financial Statements. ..............................13
3.5 Litigation. ..............................................13
3.6 Fees and Expenses. .......................................14
3.7 Disclosure. ..............................................14
3.8 Financial Capacity........................................14
4. R-CUBE AND SELLERS' COVENANTS...................................14
4.1 Notification of Changes. .................................14
4.2 Maintenance of Business. .................................14
4.3 Conduct of Business. .....................................14
4.4 Regulatory Approvals. ....................................16
4.5 Necessary Consents. ......................................16
4.6 Access to Information. ...................................16
4.7 Satisfaction of Conditions Precedent. ....................17
4.8 Confidentiality. .........................................17
4.9 Cooperation in Review of R-CUBE Financial Statements. ....17
5. REI COVENANTS...................................................17
5.1 Regulatory Approvals. ....................................17
5.2 Necessary Consents. ......................................17
5.3 Satisfaction of Conditions Precedent. ....................17
5.4 Confidentiality. .........................................18
6. EMPLOYEE MATTERS................................................18
7. INDEMNIFICATION OF THE PARTIES..................................18
7.1 Indemnification by Sellers................................18
7.2 Indemnification by REI....................................19
7.3 Manner of Indemnification. ...............................19
</TABLE>
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8. CLOSING.........................................................19
8.1 Closing Date. ............................................19
8.2 Deliveries by R-CUBE and Sellers at the Closing. .........19
8.3 Delivery by REI at the Closing. ..........................20
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF R-CUBE
AND SELLER......................................................20
9.1 Accuracy of Representations and Warranties. ..............20
9.2 Covenants. ...............................................20
9.3 Compliance with Law. .....................................20
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF REI......................20
10.1 Accuracy of Representations and Warranties. ..............21
10.2 Covenants. ...............................................21
10.3 Completion of Due Diligence...............................21
10.4 Absence of Material Adverse Change. ......................21
10.5 Compliance with Law. .....................................21
10.6 Documents. ...............................................21
10.7 Corporate Opinion. .......................................22
10.8 Other Agreements..........................................22
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF REI,
R-CUBE AND SELLER...............................................22
11.1 Government Consents. .....................................22
11.2 No Legal Action. .........................................22
12. TERMINATION OF AGREEMENT........................................22
12.1 Termination. .............................................22
12.2 Notice of Termination. ...................................23
12.3 Effect of Termination. ...................................23
13. NON-COMPETITION.................................................23
13.1 Definitions...............................................23
13.2 Non-Solicitation of Employees. ...........................24
13.3 Non-Solicitation of Customers. ...........................24
13.4 Additional Agreements.....................................25
13.5 Remedies; Enforceability..................................25
14. SURVIVAL OF REPRESENTATIONS, WARRANTIES
AND COVENANTS...................................................26
15. MISCELLANEOUS...................................................26
15.1 Governing Law. ...........................................26
15.2 Assignment; Binding Upon Successors and Assigns. .........26
15.3 Severability. ............................................26
15.4 Counterparts. ............................................26
</TABLE>
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15.5 Other Remedies. ..........................................26
15.6 Amendment and Waivers. ...................................26
15.7 Expenses. ................................................27
15.8 Attorneys' Fees. .........................................27
15.9 Notices. .................................................27
15.10 Construction of Agreement. ...............................28
15.11 No Joint Venture. ........................................28
15.12 Further Assurances. ......................................28
15.13 Absence of Third Party Rights. ...........................28
15.14 Entire Agreement. ........................................28
</TABLE>
iv.
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is entered into as of this
18th day of January, 1999, among Research Engineers, Inc., a Delaware
corporation ("REI"), R-CUBE Technologies, Inc., a California corporation
("R-CUBE"), and Srinivasa Reddy Malireddy, an individual ("Seller").
RECITALS
A. Krishna P. Reddy, an individual, and Prakash Rao Pokala, an individual
(collectively, the "Other Sellers," and together with Seller, "Sellers"), own,
in the aggregate, all of the issued and outstanding shares (the "Shares") of
capital stock of R-CUBE.
B. Seller owns 1,100,000 of the Outstanding Shares ("Seller's Shares").
C. REI desires to purchase from Sellers, and Sellers desire to sell to
REI, the Outstanding Shares on the terms and conditions set forth in this
Agreement and in similar Stock Purchase Agreements (the "Other Agreements") to
be negotiated and entered into between REI and the Other Sellers as of the date
of this Agreement.
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 8 below), Seller shall
transfer, convey, assign and deliver Seller's Shares to REI, and REI shall
acquire, purchase and accept Seller's Shares from Seller.
1.2 Purchase Price. Subject to the adjustments to be made in
accordance with the provisions of Sections 1.3 through 1.5, the purchase
price for Seller's Shares is $1,066,272 (the "Purchase Price").
1.3 Adjustment to Purchase Price. The Purchase Price shall be adjusted
upward by 45.96% of the amount, if any, that the shareholders' equity of
R-CUBE ("Final Shareholders' Equity") as shown on R-CUBE's balance sheet
("Final Balance Sheet") to be prepared by R-CUBE's accountants as at the
Closing Date (defined in Section 8.1) and delivered to REI at the Closing
exceeds $500,000.
1.4 Payment of Purchase Price. The Purchase Price shall be paid by REI
to Seller as follows:
(1) At the Closing,REI shall pay to Seller the Purchase Price; and
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(2) Subject to Section 1.5, within 30 days after the Closing
Date, REI shall pay to Seller in cash the amount of any upward
adjustment to the Purchase Price made pursuant to Section 1.3.
1.5 Review of Final Balance Sheet. REI and its representatives shall
have 15 days to review the Final Balance Sheet. If REI disagrees with
R-CUBE's calculation of the Final Shareholders' Equity, REI shall within 15
days after the Closing Date give written notice to Sellers of such
disagreement specifying in reasonable detail, insofar as possible, the
nature and extent of the disagreement. If REI and Sellers are unable to
resolve any such disagreement within 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 necessary upward adjustment
determined by the accounting firm shall be payable in cash by REI within
three days after REI has been notified of such determination. REI and
Sellers agree that the procedures established by Sections 1.2 through 1.5
shall constitute the exclusive procedures for determining the consideration
to be paid by REI to Sellers for the Shares. Costs incurred pursuant to
this Section 1.5 shall be borne equally by REI and Sellers.
2. REPRESENTATIONS AND WARRANTIES OF R-CUBE AND SELLERS.
Except as set forth in a schedule dated the date of this Agreement
and delivered by R-CUBE and Seller to REI concurrently herewith ("Disclosure
Schedule") specifically identifying the Section of this Agreement requiring the
delivery of such disclosure, R-CUBE and Seller 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: (a) any adverse effect resulting from
conditions affecting the engineering software industry as a whole or the United
States economy as a whole; (b) a failure by R-CUBE to meet internal earnings or
revenue projections; or (c) any disruption of customer or supplier relationships
arising primarily out of or resulting primarily from actions contemplated by the
parties in connection with, or which is primarily attributable to the
announcement of this Agreement and the transactions contemplated hereby, to the
extent attributable thereto.
2.1 Organization; Good Standing; Qualification and Power. R-CUBE 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. R-CUBE does not own, directly or
indirectly,
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shares of capital stock of any other corporation or any equity interest in
any other entity, nor does R-CUBE control, directly or indirectly, any
other corporation, association or business organization. R-CUBE has made
available to REI or its counsel complete and correct copies of the articles
of incorporation and bylaws of R-CUBE, in each case 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 R-CUBE.
2.2 Capital Structure.
2.2.1 Stock. The authorized capital stock of R-CUBE consists of
10,000,000 shares of common stock, no par value per share ("R-CUBE
Common Stock"). As of the date of this Agreement, 3,300,000 shares of
R-CUBE Common Stock are issued and outstanding. All outstanding shares
of the capital stock of R-CUBE are validly issued, fully paid and
nonassessable, are not subject to preemptive rights and are owned by
Sellers free and clear of any liens, security interests, pledges,
agreements, 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 R-CUBE is a party or by which R-CUBE is bound
obligating R-CUBE to issue, deliver or sell, or cause to be issued,
delivered or sold, any shares of capital stock of R-CUBE or securities
convertible into or exchangeable for shares of capital stock of
R-CUBE, or obligating R-CUBE 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 R-CUBE or any Seller is a party with respect
to the voting of the capital stock of R-CUBE.
2.3 Authority.
2.3.1 Corporate Action. R-CUBE 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
R-CUBE and the consummation by R-CUBE of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on
the part of R-CUBE. This Agreement has been duly executed and
delivered by R-CUBE, and this Agreement is the valid and binding
obligation of R-CUBE, 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.
2.3.2 Sellers' Authority. Each of Sellers has full power and
capacity to enter into this Agreement and the Other Agreements. This
Agreement and the Other Agreements have been duly executed and
delivered by Sellers and this Agreement and the Other Agreement are
the valid and binding obligation of Sellers, enforceable in accordance
with their 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
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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 R-CUBE under, any term, condition or provision
of (x) the articles of incorporation or bylaws of R-CUBE 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 R-CUBE 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 R-CUBE in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
2.4 Financial Statements. R-CUBE has furnished to REI copies of: (a)
the unaudited balance sheets of R-CUBE at December 31, 1996, 1997 and 1998,
and the related statements of income for the periods then ended. Prior to
the Closing, R-CUBE shall furnish to REI copies of R-CUBE's audited balance
sheet at December 31, 1998 and the related statement of income for the
period then ended. All financial statements referred to in this Section 2.4
("R-CUBE Financial Statements") are or will be 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 or will fairly present the financial condition of R-CUBE as at the
respective dates thereof and the results of operation of R-CUBE for the
respective periods covered by the statements of income contained in
therein. R-CUBE does not have any material obligations or liabilities,
contingent or otherwise, not fully disclosed by the R-CUBE Financial
Statements.
2.5 Compliance with Applicable Laws. The business of R-CUBE 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. R-CUBE has not been notified by any Governmental Entity
that any investigation or review with respect to R-CUBE is pending or
threatened, nor has any Governmental Entity notified R-CUBE of its
intention to conduct an investigation or review. R-CUBE 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.
2.6 Insurance. R-CUBE maintains and at all times since January 1, 1997
has maintained general liability insurance that R-CUBE believes to be
reasonably prudent for its business. The Disclosure Schedule contains a
complete and correct list of all insurance policies maintained by R-CUBE.
R-CUBE 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. R-CUBE has complied in all material respects with the terms
and provisions of the policies. In the opinion of R-CUBE reasonably formed
4
<PAGE>
and held, there is no reasonable 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 R-CUBE and Sellers,
threatened against R-CUBE, nor is there any judgment, decree, injunction,
rule or order of any Governmental Entity or arbitrator outstanding against
R-CUBE that, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect. R-CUBE has made available to REI or its
counsel correct and complete copies of all correspondence prepared by its
counsel for R-CUBE's accountants in connection with the last two completed
reviews of R-CUBE's financial statements and any correspondence since the
date of the last review.
2.8 Employee Benefits.
(1) R-CUBE has made available to REI a list of all employees of
R-CUBE and their salaries as of the date of this Agreement. R-CUBE 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
R-CUBE and any employee of R-CUBE, but excluding workers'
compensation, unemployment compensation and other government-mandated
programs) currently or previously maintained, contributed to or
entered into by R-CUBE under which R-CUBE has any present or future
obligation or liability (collectively, "R-CUBE Employee Plans").
Copies of all R-CUBE 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
R-CUBE with respect to any of the R-CUBE Employee Plans. To R-CUBE's
and Sellers' knowledge, each of the R-CUBE 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 R-CUBE Employee Plans except for noncompliance
which would not have a Material Adverse Effect.
(2) R-CUBE 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 R-CUBE Employee
Plans, (ii) is entered into, maintained or contributed to, as the case
may be, by R-CUBE and (iii) covers any employee or former employee of
R-CUBE. The contracts, plans and arrangements described in this
paragraph 2.8(d) are referred to collectively as the "R-CUBE Benefit
Arrangements." To R-CUBE's and Sellers' knowledge, each of the R-CUBE
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 R-CUBE
Benefit Arrangements. R-CUBE has made available to REI or its counsel
a complete and correct copy or description of each of the R-CUBE
Benefit Arrangements.
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<PAGE>
(3) There has been no amendment to, written interpretation or
announcement by R-CUBE relating to, or change in employee
participation or coverage under, any of the R-CUBE Employee Plans or
R-CUBE Benefit Arrangements that would increase materially the expense
of maintaining the R-CUBE Employee Plans or R-CUBE Benefit
Arrangements above the level of the expense incurred in respect
thereof for the fiscal year ended December 31, 1998.
(4) To R-CUBE's and Sellers' knowledge, R-CUBE 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.
2.9 Absence of Undisclosed Liabilities. Except as disclosed on the
Disclosure Schedule, at December 31, 1998 (the "R-CUBE Balance Sheet
Date"), (i) R-CUBE had no liabilities or obligations of any nature (matured
or unmatured, fixed or contingent) which were material to R-CUBE, taken as
a whole, and were not provided for in the unaudited December 31, 1998
balance sheet (the "R-CUBE Balance Sheet"), a copy of which has been
delivered to REI; and (ii) all reserves established by R-CUBE and set forth
in the R-CUBE Balance Sheet were reasonably adequate.
2.10 Absence of Certain Changes or Events. Since the R-CUBE Balance
Sheet Date there has not occurred:
(1) any change in the condition (financial or otherwise),
properties, assets, liabilities, businesses, operations, results of
operations or prospects of R-CUBE taken as a whole that could
reasonably constitute a Material Adverse Effect;
(2) any amendments or changes in the articles of incorporation or
bylaws of R-CUBE;
(3) any damage, destruction or loss, whether covered by insurance
or not, that could reasonably constitute a Material Adverse Effect;
(4) any redemption, repurchase or other acquisition of shares of
R-CUBE Common Stock by R-CUBE (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 R-CUBE Common Stock;
(5) any material increase in or modification of the compensation
or benefits payable or to become payable by R-CUBE to any of its
directors or employees, except in the ordinary course of business
consistent with past practice;
(6) any material increase in or modification of any bonus,
pension, insurance or any of the R-CUBE Employee Plans or R-CUBE
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;
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(7) any acquisition or sale of a material amount of property or
assets of R-CUBE, other than in the ordinary course of business
consistent with past practices;
(8) any alteration in any term of any outstanding security of
R-CUBE;
(9) any (A) incurrence, assumption or guarantee by R-CUBE of any
debt for borrowed money; (B) issuance or sale of any securities
convertible into or exchangeable for debt securities of R-CUBE; or (C)
issuance or sale of options or other rights to acquire from R-CUBE,
directly or indirectly, debt securities of R-CUBE or any securities
convertible into or exchangeable for any such debt securities;
(10) any creation or assumption by R-CUBE of any mortgage,
pledge, security interest or lien or other encumbrance on any asset;
(11) 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 R-CUBE, (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;
(12) any entering into, amendment of, relinquishment, termination
or non-renewal by R-CUBE of any contract, lease transaction,
commitment or other right or obligation other than in the ordinary
course of business;
(13) any transfer or grant of an R-CUBE intellectual property
right, other than those transferred or granted in the ordinary course
of business;
(14) any labor dispute or charge of unfair labor practice (other
than routine individual grievances) or, to R-CUBE and Sellers'
knowledge, any activity or proceeding by a labor union or
representative thereof to organize any employees of R-CUBE or any
campaign being conducted to solicit authorization from employees to be
represented by the labor union; or
(15) any agreement or arrangement made by R-CUBE 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. R-CUBE 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 R-CUBE under, any contract or agreement
to which R-CUBE 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
(i) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute, bonus or otherwise) becoming
due to any director or employee of R-CUBE from R-CUBE, under any of the
R-CUBE Employee Plans, R-CUBE Benefit Arrangements or otherwise, (ii)
materially increase
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any benefits otherwise payable under any of the R-CUBE Employee Plans, the
R-CUBE Benefit Arrangements or otherwise or (iii) result in the
acceleration of the time of payment or vesting of any benefits.
2.13 Taxes.
(1) 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.
(2) Except as set forth in the Disclosure Schedule:
(i) As of the Closing, R-CUBE 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 R-CUBE that are required to be filed by or
with respect to R-CUBE on or prior to the Closing, and each
of the Returns shall be, to the knowledge of R-CUBE and
Sellers, true, correct, and complete in all material
respects and shall have been completed in accordance with
applicable law;
(ii) As of the Closing, R-CUBE: (A) will have paid or
accrued in accordance with generally accepted accounting
principles all Taxes concerning or attributable to R-CUBE
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;
(iii) R-CUBE has not been delinquent in the payment of
any Tax nor is there any Tax deficiency outstanding,
proposed or assessed against R-CUBE, nor has R-CUBE 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
R-CUBE is presently in progress, nor has R-CUBE been
notified of any request for an audit or examination;
(v) R-CUBE has no 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 R-CUBE Balance Sheet;
(vi) R-CUBE 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 ending on or after
December 31, 1995;
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(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
("Liens") on the assets of R-CUBE relating or attributable
to Taxes other than liens for sales and payroll taxes not
yet due and payable;
(viii) R-CUBE has no 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 R-CUBE;
(ix) None of the assets of R-CUBE 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) R-CUBE 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 R-CUBE;
(xi) R-CUBE 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) R-CUBE is not a party to a tax sharing,
allocation, indemnification or similar agreement or
arrangement, and R-CUBE does not owe any amount under any
agreement or arrangement;
(xiii) No Return of R-CUBE contains a disclosure
statement under Code Section 6662 (or predecessor provision)
or any similar provision of state, local, or foreign law;
(xiv) R-CUBE is not and has not been at any time a
"United States real property holding corporation" within the
meaning of Code Section 897(c)(2);
(xv) No indebtedness of R-CUBE consists of "corporate
acquisition indebtedness" within the meaning of Code Section
279;
(xvi) R-CUBE has not taken any action not in accordance
with past practice that would have the effect of deferring
any Tax liability of R-CUBE from any period ending on before
the Closing Date to any taxable period ending after the
Closing Date;
(xvii) R-CUBE 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
R-CUBE or any predecessor corporations; and
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(xviii) The tax bases of the assets of R-CUBE for
purposes of determining future amortization, depreciation,
and other federal income tax deductions are accurately
reflected on the tax books and records of R-CUBE.
2.14 Intellectual Property. There are no patents, patent applications,
trademarks, service marks, trademark and service mark applications, trade
names and copyrights material to the lawful and efficient operation of the
business of R-CUBE as presently conducted and as presently proposed to be
conducted.
2.15 Fees and Expenses. Except as set forth on the Disclosure
Schedule, neither R-CUBE nor Sellers have 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. Sellers agree that
any such fees or commissions described in the preceding sentence shall be
the sole responsibility of Sellers, whether or not the Closing occurs.
2.16 Environmental Matters.
(1) To R-CUBE's and Seller's knowledge, none of the properties or
facilities of R-CUBE 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 R-CUBE has owned or leased its
properties and facilities, neither R-CUBE nor, to R-CUBE'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.
(2) During the time that R-CUBE has owned or leased its
properties and facilities, there has been no litigation brought or
threatened against R-CUBE by, or any settlement reached by R-CUBE
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 [Intentionally Omitted].
2.18 Disclosure. No representation or warranty made by R-CUBE or
Sellers in this Agreement or the Other Agreements, nor any document,
written information, written statement, financial statement, certificate or
exhibit prepared and furnished or to be prepared and furnished by Sellers,
R-CUBE or their representatives pursuant to this Agreement or the Other
Agreements or in connection with the transactions contemplated hereby or
thereby, 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 R-CUBE that
has or could reasonably be expected to have the effect of prohibiting or
materially impairing any business practice of R-CUBE,
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any acquisition of property by R-CUBE or the conduct of business by R-CUBE
as currently conducted.
2.20 Accounts Receivable. The accounts receivable shown on the R-CUBE
Balance Sheet as of the R-CUBE 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 R-CUBE reduced by the
reserves for discounts and bad debts taken on the R-CUBE Balance Sheet.
2.21 Personal Property. R-CUBE 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 R-CUBE is in good operating
condition. All of the leases to personal property utilized in the business
of R-CUBE are valid and enforceable against R-CUBE and are not in default
by R-CUBE, or, to the knowledge of R-CUBE or Sellers, are any of the other
parties thereto in default thereof.
2.22 Real Property. R-CUBE does not own any real property. The
Disclosure Schedule contains a list of all leases for real property to
which R-CUBE 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 knowledge of R-CUBE and Sellers,
the real property leased or occupied by R-CUBE, 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 R-CUBE for any improvements made to the real property
leased or occupied by R-CUBE that have not been paid for.
2.23 Warranties. R-CUBE has made no warranties or guarantees relating
to its services other than as implied or required by law. R-CUBE has no
warranty or indemnification obligations relating to patents or other
proprietary rights.
2.24 Contracts. The Disclosure Schedule lists all oral or written
agreements, notes, instruments or contracts to which R-CUBE 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 ("R-CUBE Contracts"). R-CUBE is not in
default in performance of its obligations under any material provisions of
the R-CUBE Contracts. Neither R-CUBE nor Sellers have any knowledge of any
violation of or default under any R-CUBE Contract by any other party
thereto or any knowledge of any intent by any other party to an R-CUBE
Contract not to perform its obligations under any R-CUBE Contract.
2.25 No Goods or Products. R-CUBE does not and has not developed,
sold, marketed or distributed any goods or products.
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3. REPRESENTATIONS AND WARRANTIES OF REI.
REI hereby represents and warrants to R-CUBE and Seller that:
3.1 Organization; Good Standing; Qualification and Power. REI is a
corporation duly incorporated, 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. REI has made
available to R-CUBE or its counsel complete and correct copies of the
certificate of incorporation and bylaws of REI, in each case 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 REI.
3.2 Capital Structure.
3.2.1 Stock, Options and Warrants. The authorized capital stock
of REI consists of 20,000,000 shares of common stock, $.01 par value
per share ("REI Common Stock"), and 5,000,000 shares of Preferred
Stock, $.01 par value per share ("REI Preferred Stock"). At the close
of business on January 13, 1999, 5,680,710 shares of REI Common Stock
were issued and outstanding, and 599,850 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. REI has made
available to R-CUBE true and correct copies of its 1996, 1997 and 1998
Stock Option Plans (each an "REI Plan" and collectively, the "REI
Plans").
3.2.2 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. There
are no voting trusts or other agreements or understandings to which
REI is a party with respect to the voting of the capital stock of REI.
3.3 Authority.
3.3.1 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
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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.
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 under, any term, condition or provision of
(x) the certificate of incorporation or bylaws of REI 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 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.
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 in connection
with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby.
3.4 SEC Documents.
3.4.1 SEC Reports. REI has made available to R-CUBE or its
counsel correct and complete copies of each report, schedule,
registration statement and definitive proxy statement filed by REI
with the Securities and Exchange Commission ("SEC") on or after
January 1, 1997 ("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, as amended, 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.
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
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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 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 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.
3.8 Financial Capacity. REI has the financial capability to pay the
Purchase Price when due.
4. R-CUBE AND SELLERS' COVENANTS.
4.1 Notification of Changes. During the period from the date of this
Agreement until the earlier of the Closing Date or the termination of this
Agreement in accordance with its terms, R-CUBE and Sellers will promptly
notify REI in writing (a) of any event occurring subsequent to the date of
this Agreement that would render any representation or warranty of R-CUBE
or any Seller contained in this Agreement or the Other Agreements, if made
on or as of the date of the event or the Closing Date, untrue or inaccurate
in any material respect, (b) of any Material Adverse Effect and (c) of any
breach by R-CUBE or any Seller of any covenant or agreement contained in
this Agreement or the Other Agreements.
4.2 Maintenance of Business. During the period from the date of this
Agreement until the earlier of the Closing Date or the termination of this
Agreement in accordance with its terms, R-CUBE and Sellers will use their
reasonable commercial efforts to carry on and preserve R-CUBE's business
and its relationships with customers, suppliers, employees and others in
substantially the same manner as it has prior to the date hereof. If R-CUBE
or any Seller becomes aware of any material deterioration in the
relationship with any material customer, material supplier or key employee,
R-CUBE or that Seller will promptly bring that information to the attention
of REI.
4.3 Conduct of Business. During the period from the date of this
Agreement until the earlier of the Closing Date or the termination of this
Agreement in accordance with its terms, R-CUBE will, and Sellers will cause
R-CUBE to, continue to conduct its business and maintain its
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business relationships in the ordinary and usual course and will not,
without the prior written consent of REI:
(1) borrow any money except for amounts that are not in the
aggregate material to the financial condition of R-CUBE, taken as a
whole;
(2) enter into any material transaction not in the ordinary
course of its business;
(3) encumber or permit to be encumbered any of its assets except
in the ordinary course of its business;
(4) dispose of any of its assets except in the ordinary course of
business consistent with past practice;
(5) enter into any material lease or contract for the purchase or
sale or license of any property, real or personal, except in the
ordinary course of business;
(6) fail to maintain its equipment and other assets in good
working condition and repair according in all material respects to the
standards it has maintained to the date of this Agreement, subject
only to ordinary wear and tear;
(7) pay (or make any oral or written commitments or
representations to pay) any bonus, increased salary or special
remuneration to any officer, employee or consultant (except for normal
salary increases consistent with past practices not to exceed 10% per
year) or enter into or vary the terms of any employment, consulting or
severance agreement with any person, pay any severance or termination
pay (other than payments made in accordance with plans or agreements
existing on the date hereof), grant any stock option or issue any
restricted stock, or enter into or modify any agreement or plan of the
type described in Section 2.8;
(8) change accounting methods;
(9) declare, set aside or pay any cash or stock dividend or other
distribution in respect of capital stock, or redeem or otherwise
acquire any of its capital stock (other than pursuant to arrangements
with terminated employees or consultants in the ordinary course of
business consistent with R-CUBE's past practice);
(10) amend or terminate any material contract, agreement or
license to which it is a party except those amended or terminated in
the ordinary course of its business, or which are not material in
amount or effect;
(11) alter in any way its manner of paying payables, collecting
receivables or ordering products and services;
(12) lend any amount to any person or entity, other than (i)
advances for travel and expenses which are incurred in the ordinary
course of business consistent with past
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practice, not material in amount and documented by receipts for the
claimed amounts, or (ii) any loans pursuant to any R-CUBE 401(a) Plan;
(13) guarantee or act as a surety for any obligation, except for
obligations in amounts that are not material;
(14) waive or release any right or claim except for the waiver or
release of non-material claims in the ordinary course of business,
consistent with past practice or the waiver or release of rights or
claims set forth in the Disclosure Schedule;
(15) issue or sell any shares of its capital stock of any class
or any other of its securities, or issue or create any warrants,
obligations, subscriptions, options, convertible securities or other
commitments to issue shares of capital stock, or accelerate the
vesting of any outstanding option or other security;
(16) split or combine the outstanding shares of its capital stock
of any class or enter into any recapitalization or agreement affecting
the number or rights of outstanding shares of its capital stock of any
class or affecting any other of its securities;
(17) merge, consolidate or reorganize with, or acquire any
entity;
(18) conduct any negotiations or agreements of any kind with any
other parties with respect to the sale of the assets or the capital
stock of R-CUBE, or for the merger or sale of R-CUBE with or to any
other entity;
(19) amend its articles of incorporation or bylaws;
(20) license any intellectual property rights of R-CUBE except in
the ordinary course of business consistent with past practice;
(21) agree to any audit assessment by any tax authority;
(22) change any insurance coverage; or
(23) agree to do any of the things described in the preceding
clauses in this Section 4.3.
4.4 Regulatory Approvals. R-CUBE 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. R-CUBE
will use its reasonable efforts to promptly obtain all such authorizations,
approvals and consents.
4.5 Necessary Consents. During the term of this Agreement, R-CUBE will
use its reasonable efforts to obtain such written consents and take such
other actions as may be necessary
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or appropriate in addition to those set forth in Section 4.4 to allow the
consummation of the transactions contemplated hereby.
4.6 Access to Information. Upon the execution of a confidentiality
agreement, the form and substance of which is mutually acceptable to R-CUBE
and REI, R-CUBE and Sellers will allow REI and its agents reasonable access
to the files, books, records and offices of R-CUBE, including, without
limitation, any and all information relating to R-CUBE's taxes,
commitments, contracts, leases, licenses and real, personal and intangible
property and financial condition. R-CUBE and Sellers will cause R-CUBE's
accountants to cooperate with REI and its agents in making available to REI
all financial information reasonably requested, including, without
limitation, the right to examine all working papers pertaining to all tax
returns and financial statements prepared or reviewed by the accountants.
4.7 Satisfaction of Conditions Precedent. During the term of this
Agreement, R-CUBE and Sellers will use reasonable efforts to satisfy or
cause to be satisfied all the conditions precedent that are set forth in
Sections 10 and 11, and R-CUBE and Sellers will use their reasonable
efforts to cause the transactions contemplated by this Agreement to be
consummated.
4.8 Confidentiality. All information concerning REI or any of its
subsidiaries ("REI Subsidiaries") received by R-CUBE or any Seller (other
than that information which is a matter of public knowledge or which has
been published for public distribution or filed as public information with
any governmental authority) shall not at any time, except in connection
with this Agreement and the transactions contemplated hereby, be used for
the advantage of, or disclosed by, R-CUBE or any Seller to any third person
without the prior written consent of REI. R-CUBE and Sellers may disclose
the information on a confidential basis to their affiliates, employees,
officers, agents, auditors, investment bankers, consultants, counsel,
directors, present and prospective lenders, and state and federal
regulatory agencies. This covenant shall expire on completion of the
Closing; provided, however, that if the Closing does not occur, it shall
expire three years after the date of this Agreement.
4.9 Cooperation in Review of R-CUBE Financial Statements. R-CUBE and
Sellers shall cooperate fully with REI and its representatives in their
review of the R-CUBE Financial Statements and the Final Balance Sheet,
including providing access to the information referred to in Section 4.6
and any other information necessary in order to complete their review.
5. REI COVENANTS
5.1 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 R-CUBE may reasonably request, in connection with the
consummation of the transactions contemplated by this Agreement. REI will
use its reasonable efforts to promptly obtain all such authorizations,
approvals and consents.
5.2 Necessary Consents. During the term of this Agreement, REI will
use its reasonable efforts to obtain such written consents and take such
other actions as may be necessary
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or appropriate in addition to those set forth in Section 5.1 to allow the
consummation of the transactions contemplated hereby.
5.3 Satisfaction of Conditions Precedent. During the term of this
Agreement, REI will use its reasonable efforts to satisfy or cause to be
satisfied all the conditions precedent that are set forth in Sections 9 and
11, and REI will use its reasonable efforts to cause the transactions
contemplated by this Agreement to be consummated.
5.4 Confidentiality. All information concerning R-CUBE received by REI
(other than that information which is a matter of public knowledge or which
has been published for public distribution or filed as public information
with any governmental authority) shall not at any time, except in
connection with this Agreement and the transactions contemplated hereby, be
used for the advantage of, or disclosed by, REI to any third person without
the prior written consent of R-CUBE. REI may disclose the information on a
confidential basis to its affiliates, employees, officers, agents,
auditors, investment bankers, consultants, counsel, directors, present and
prospective lenders, and state and federal regulatory agencies and, as
provided elsewhere in this Agreement, may disclose such information in
press releases and like disclosures, filings with the SEC or other
governmental or self-regulatory agencies or as otherwise required. This
covenant shall expire on completion of the Closing; provided, however, that
if the Closing does not occur, it shall expire three years after the date
of this Agreement.
6. EMPLOYEE MATTERS
Following the Closing, all employees of R-CUBE will either (i)
continue to be employees of R-CUBE 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 R-CUBE and, if
necessary, R-CUBE or REI shall continue to sponsor those employees for the
purpose of maintaining such employees' United States resident alien status.
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 R-CUBE or REI following the Closing.
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7. INDEMNIFICATION OF THE PARTIES.
7.1 Indemnification by Sellers
(1) Sellers shall, jointly and severally, indemnify, defend,
protect and hold harmless REI, R-CUBE, each of the REI Subsidiaries,
each of their respective successors and assigns and each of their
respective directors, officers, employees, agents and affiliates (each
an "REI Indemnified Party"), against all losses, claims, damages,
actions, suits, proceedings, demands, assessments, adjustments, costs
and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation ("Losses"))
based upon, resulting from or arising out of (i) any inaccuracy or
breach of any representation or warranty of R-CUBE or Sellers
contained in or made in connection with this Agreement, and (ii) the
breach by R-CUBE or Sellers of, or the failure by R-CUBE or Sellers to
observe, any of their respective covenants or other agreements
contained in or made in connection with this Agreement. The
indemnification provided for in this Section 7.1 shall terminate
twelve months after the Closing Date (and no claims shall be made by
REI under this Section 7.1 thereafter); provided, however, that
Sellers shall indemnify REI for any and all Taxes incurred by or
attributable to R-CUBE prior to the Closing, and the indemnification
period relating to any Taxes shall terminate on the tenth day after
the expiration of the applicable period of limitations on assessments
and collections applicable to such taxes under the Internal Revenue
Code of 1986.
(2) Notwithstanding the foregoing, the aggregate amount to be
paid by Seller under Section 7.1(a) shall not exceed 50% of the
Purchase Price as adjusted pursuant to Section 1.3 and net of any
insurance proceeds received by REI, and Seller shall not be required
to indemnify, defend, protect and hold harmless an REI Indemnified
Party pursuant to Section 7.1(a) for Losses incurred by an REI
Indemnified Party with respect to any inaccuracy or breach of any
representation or warranty of R-CUBE or Sellers contained in Section 2
of this Agreement or the Other Agreements unless and until the
aggregate amount of such Losses exceeds $25,000, at which time the REI
Indemnified Parties shall be entitled to indemnification hereunder
with respect to all such aggregate amount of Losses (including the
first $25,000 of Losses) and any Losses incurred or suffered by them
thereafter.
7.2 Indemnification by REI
(1) REI shall indemnify, defend, protect and hold harmless
Sellers (each a "Seller Indemnified Party") 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. The
indemnification provided for in this Section 7.2 shall terminate
twelve months after the Closing Date (and no claims shall be made by
Sellers under this Section 7.2 thereafter).
(2) Notwithstanding the foregoing, the aggregate amount to be
paid by REI under Section 7.2(a) shall not exceed 50% of the Purchase
Price as adjusted per Section 1.3 and net of any insurance proceeds
received by Sellers, and REI shall not be required to indemnify,
defend, protect and hold harmless a Seller Indemnified Party pursuant
to Section 7.2(a) for Losses
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incurred by a Seller Indemnified Party with respect to any inaccuracy
or breach of any representation or warranty of REI contained in this
Agreement unless and until the aggregate amount of such Losses exceeds
$25,000, at which time the Seller Indemnified Parties shall be
entitled to indemnification hereunder with respect to all such
aggregate amount of Losses (including the first $25,000 of Losses) and
any Losses incurred or suffered by them thereafter.
7.3 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.
8. CLOSING.
8.1 Closing Date. Subject to the termination of this Agreement as
provided in Section 12, the closing of the transactions contemplated by
this Agreement ("Closing") will take place at the offices of Rutan & Tucker
LLP, 611 Anton, Suite 1400, Costa Mesa, California 92626 on the date
following satisfaction of all conditions set forth in Sections 9, 10 and
11, which date shall be within 30 days of the date of this Agreement,
unless another place, time and date is selected by R-CUBE and REI ("Closing
Date").
8.2 Deliveries by R-CUBE and Sellers at the Closing. At the Closing,
R-CUBE and Sellers shall deliver to REI:
(1) Certificates representing all of the Shares, free of liens or
encumbrances, accompanied by duly executed stock powers 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;
(2) The Final Balance Sheet;
(3) The officers' and Sellers' certificates referred to in
Sections 10.1, 10.2 and 10.4; and
(4) The opinion referred to in Section 10.7.
8.3 Delivery by REI at the Closing. At the Closing, REI shall deliver
to Seller a cashier's check or evidence of wire transfer of funds
representing the Purchase Price for the Seller's Shares.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF R-CUBE AND SELLER.
The obligations of R-CUBE and Seller hereunder are subject to the
fulfillment or satisfaction on or before the Closing of each of the
following conditions (any one of which may be waived by R-CUBE and Seller,
but only in a writing signed by R-CUBE and Seller):
9.1 Accuracy of Representations and Warrants. The representations and
warranties of REI set forth in Section 3 shall be true and accurate in
every material respect on and
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<PAGE>
as of the Closing Date with the same force and effect as if they had been
made at the Closing except to the extent the failure of the representations
and warranties to be true and accurate in such respects has not had and
could not reasonably be expected to have a Material Adverse Effect, and
R-CUBE shall receive a certificate to that effect executed by REI's Chief
Executive Officer and Chief Financial Officer.
9.2 Covenants. REI shall have performed and complied in all material
respects with all of its covenants required to be performed by it under
this Agreement on or before the Closing, and R-CUBE shall receive a
certificate to that effect signed by REI's Chief Executive Officer and
Chief Financial Officer.
9.3 Compliance with Law. There shall be no order, decree or ruling of
any governmental agency or written threat thereof, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
transactions contemplated by this Agreement, which would prohibit or render
illegal the transactions contemplated by this Agreement.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF REI.
The obligations of REI hereunder are subject to the fulfillment or
satisfaction on or before the Closing, of each of the following conditions
(any one or more of which may be waived by REI, but only in a writing
signed by REI).
10.1 Accuracy of Representations and Warrants. The representations and
warranties of R-CUBE and Sellers set forth in Section 2 of this Agreement
and the Other Agreements shall be true and accurate in every material
respect on and as of the Closing Date with the same force and effect as if
they had been made at the Closing except to the extent the failure of the
representations and warranties to be true and accurate in such respects has
not had and could not reasonably be expected to have a Material Adverse
Effect, and REI shall receive certificates to that effect executed by each
Seller and by R-CUBE's Chief Executive Officer and Chief Financial Officer.
10.2 Covenants. R-CUBE and Sellers shall have performed and complied
in all material respects with all of their covenants required to be
performed by them under this Agreement and the Other Agreements on or
before the Closing, and REI shall receive certificates to that effect
signed by each Seller and by R-CUBE's Chief Executive Officer and Chief
Financial Officer.
10.3 Completion of Due Diligence. REI shall have conducted its due
diligence investigation of R-CUBE and shall have determined, in its sole
and absolute discretion, that the business, records, assets, contracts,
liabilities, operations and other aspects of the business of R-CUBE (the
"Business Aspects") are satisfactory to REI in all respects. REI shall have
seven days (the "Initial Diligence Period") following the date of this
Agreement to use its reasonable efforts to perform its due diligence
investigation of R-CUBE. If, at the expiration of such Initial Diligence
Period, REI shall request additional time to complete its due diligence,
R-CUBE and Sellers may promptly grant or deny such request in their
reasonable discretion. If such request is granted, it shall allow REI a
minimum of three additional working days (the "Extension Diligence Period")
to complete its due diligence investigation. Within two days following the
expiration of the Initial
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<PAGE>
Diligence Period and the Extension Diligence Period, if any, REI shall
notify R-CUBE and Sellers as to whether, in REI's sole and absolute
discretion, the Business Aspects are satisfactory to REI in all respects.
10.4 Absence of Material Adverse Change. There shall not have been any
material adverse change in the condition (financial or otherwise),
properties, assets, liabilities, businesses, operations, results of
operations or prospects of R-CUBE, taken as a whole, other than: (a) any
adverse effect resulting from conditions affecting the engineering software
industry as a whole or the United States economy as a whole; (b) a failure
by R-CUBE to meet internal earnings or revenue projections; or (c) any
disruption of customer or supplier relationships arising primarily out of
or resulting primarily from actions contemplated by the parties in
connection with, or which is primarily attributable to the announcement of
this Agreement and the transactions contemplated hereby, to the extent
attributable thereto, and REI shall receive a certificate to that effect
executed by R-CUBE's Chief Executive Officer and Chief Financial Officer.
10.5 Compliance with Law. There shall be no order, decree or ruling by
any governmental agency or written threat thereof, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
transactions contemplated by this Agreement, which would prohibit or render
illegal the transactions contemplated by this Agreement.
10.6 Documents. REI shall have received all written consents,
assignments, waivers, authorizations or other certificates reasonably
deemed necessary by REI to provide for the continuation in full force and
effect of any and all material contracts and leases of R-CUBE and for
R-CUBE to consummate the transactions contemplated hereby except when the
failure to receive the consents, etc., would not have a Material Adverse
Effect.
10.7 Corporate Opinion. REI shall have received the opinion of
R-CUBE's corporate legal counsel based upon reasonably requested
certifications as to factual matters and dated the Closing Date regarding
the status and authority of R-CUBE, the authorization of this Agreement and
the transactions contemplated hereby by R-CUBE, and the binding effect of
this Agreement on R-CUBE and Sellers. The opinion shall be satisfactory to
REI.
10.8 Other Agreements. The closing of the Other Agreements shall occur
simultaneously with the Closing of this Agreement.
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF REI, R-CUBE AND SELLER.
The obligations of REI, R-CUBE and Sellers hereunder are subject to
the fulfillment or satisfaction on or before the Closing, of each of the
following conditions (any one or more of which may be waived by REI, R-CUBE
and Seller, but only in a writing signed by REI, R-CUBE and Seller).
11.1 Government Consents. There shall have been obtained on or before
the Closing such material permits or authorizations, and there shall have
been taken such other action, as may be required to consummate the
transactions contemplated by this Agreement by any
22
<PAGE>
regulatory authority having jurisdiction over the parties and the actions
herein proposed to be taken, including but not limited to requirements
under applicable federal and state securities laws.
11.2 No Legal Action. No temporary restraining order, preliminary
injunction or permanent injunction or other order preventing the
consummation of the transactions contemplated by this Agreement or the
Other Agreements shall have been issued by any federal or state court and
remain in effect, nor shall any proceeding initiated by the federal
government seeking any of the foregoing be pending.
12. TERMINATION OF AGREEMENT.
12.1 Termination. This Agreement may be terminated at any time prior
to the Closing:
(1) by written agreement of R-CUBE, REI and Seller;
(2) by R-CUBE and Seller, if there has been a breach by REI of
any representation, warranty, covenant or agreement set forth in this
Agreement on the part of REI, or if any representation of REI shall
have become untrue, in either case which has or can reasonably be
expected to have a Material Adverse Effect and which REI fails to cure
prior to the Closing (except that no cure period shall be provided for
a breach by REI which by its nature cannot be cured);
(3) by REI, if there has been a breach by R-CUBE or Seller of any
representation, warranty, covenant or agreement set forth in this
Agreement on the part of R-CUBE or Seller, or if any representation of
R-CUBE or Seller shall have become untrue, in either case which has or
can reasonably be expected to have a Material Adverse Effect and which
R-CUBE or Seller fails to cure prior to the Closing (except that no
cure period shall be provided for a breach by R-CUBE or Seller which
by its nature cannot be cured);
(4) by R-CUBE, Seller or REI, if:
(i)...if all the conditions for Closing shall not have been
satisfied or waived on or before February 28, 1999 other than as
a result of a breach of this Agreement by the terminating party;
or
(ii)..if a permanent injunction or other order by any
federal or state court which would make illegal or otherwise
restrain or prohibit the consummation of the transactions
contemplated by this Agreement shall have been issued and shall
have become final and nonappealable.
12.2 Notice of Termination. Any termination of this Agreement under
Section 12.1 will be effective by the delivery of written notice of the
terminating party to the other parties hereto.
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12.3 Effect of Termination. In the case of any termination of this
Agreement or the Other Agreements as provided in Section 12 of this
Agreement or the Other Agreements, this Agreement shall be of no further
force and effect (except as provided in Section 14) and nothing herein
shall relieve any party from liability for any breach of this Agreement or
the Other Agreements. In case of any termination as a result of a breach by
a party or the failure of a party to satisfy Closing conditions to be
satisfied by it and which are within its control, that party shall bear all
of the expenses (including, without limitation, reasonable legal,
accounting and other advisory fees) of the other parties incurred in
connection with the failed transaction; provided, however, that in no event
shall REI be responsible for payment of the fees and expenses described in
Section 2.15. In all other cases of termination, each party shall be
responsible for its own expenses.
13. NON-COMPETITION.
13.1 Definitions. For purposes of this Section 13, the following terms
shall have the following meanings:
(1) "Customer Non-Solicitation Period" shall mean, with respect
to each Seller, the period commencing on the Closing Date and
continuing for a period of two years after such date; 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 13.3.
(2) The term "Customers" shall mean, with respect to each Seller,
any manager, group or division located in a specific building that,
during the year preceding the date of this Agreement, as of the date
of this Agreement, during the period from the date of this Agreement
to the Closing Date or during the Employee Non-Solicitation Period or
the Customer Non-Solicitation Period is or was a client or customer of
R-CUBE.
(3) The words "directly or indirectly" shall mean: (i) being
personally involved in providing or seeking to provide services to an
Employee, Customer or Prospective Customer; (ii) participating in any
person or enterprise as an owner, partner, limited partner, joint
venturer, controlling member or controlling shareholder; or (iii)
communicating to any such person or enterprise any confidential
information of the business conducted by R-CUBE during the relevant
period.
(4) "Employees" shall mean any employee of R-CUBE as of, or
immediately prior to the date of this Agreement, during the period
from the date of this Agreement to the Closing Date or during the
Employee Non-Solicitation Period or the Customer Non-Solicitation
Period.
(5) "Employee Non-Solicitation Period" shall mean, with respect
to each Seller, the period commencing on the Closing Date and
continuing for a period of two years after such date; 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 13.2. Notwithstanding the foregoing sentence, with respect to
the
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employment of Mr. Deepak Suktbankar, the Employee Non-Solicitation
Period shall be from the date of this Agreement through and including
the date that is 45 days after the Closing Date.
(6) 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.
(7) The term "Prospective Customer" shall mean any manager, group
or division located in a specific building that R-CUBE has contacted,
or has developed a strategy or plan to contact, for the purpose of
acquiring manager, group or division as a customer or client.
13.2 Non-Solicitation of Employees. Sellers recognize that the
Employees are a valuable resource of R-CUBE. 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 R-CUBE.
13.3 Non-Solicitation of Customers. Sellers recognize that customers
are a valuable resource of R-CUBE. 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.
13.4 Additional Agreements. Seller hereby expressly agrees and
acknowledges that:
(1) R-CUBE has protectable business interests with respect to its
Employees, Customers and Prospective Customers, and that competition
with and against such business interests would be harmful to R-CUBE;
(2) the covenants contained in this Section 13 are reasonable as
to time and geographical area and do not place any unreasonable burden
upon each Seller's ability to earn a livelihood;
(3) the public will not be harmed as a result of enforcement of
the covenants contained in this Section 13;
(4) the personal legal counsel for each Seller has reviewed the
covenants contained in this Section 13;
(5) the parties have entered into the covenants contained herein
in connection with and as a condition precedent to the consummation of
the Agreement and the Other Agreements, pursuant to which REI shall
acquire R-CUBE; the agreements, actions, covenants, and promises
contained herein are intended to protect and ensure the value of
R-CUBE, including its goodwill, which actions, covenants, and promises
are a material consideration to REI in connection
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with this Agreement and the Other Agreements; and, to the extent that
the laws of any jurisdiction in which this Agreement or the Other
Agreements 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; and
(6) each Seller understands and agrees to each and every term and
condition contained Section 13 of this Agreement and the Other
Agreements.
13.5 Remedies; Enforceability. Seller recognizes and acknowledges that
irreparable damage will result to REI in the event of a breach by Seller or
any of Seller's affiliates of the provisions of this Section 13, 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 13 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.
14. 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 the earlier of the termination of this Agreement or one
year after the Closing Date, whereupon the representations, warranties and
covenants will expire (except for covenants, such as those contained in
Sections 4.8, 5.4, 7 and 13, that by their terms survive for a longer
period).
15. MISCELLANEOUS.
15.1 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.
15.2 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.
15.3 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
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achieve, to the greatest extent possible, the economic, business and other
purpose of the void unenforceable provision.
15.4 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.
15.5 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.
15.6 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.
15.7 Expenses. Except as provided in Section 12.3, REI, on the one
hand, and Sellers and R-CUBE, on the other, will each bear their own
expenses and legal fees incurred with respect to this Agreement and the
transactions contemplated hereby.
15.8 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).
15.9 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):
<TABLE>
<C> <S>
If to R-CUBE to:........R-CUBE Technologies, Inc.
20410 Town Center Lane, #160
Cupertino, California 95014
Attention: Chief Executive Officer
Telecopier: (408) 255-2042
</TABLE>
27
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<TABLE>
<C> <S>
With a copy to:.........Gray Cary Ware & Friedenrich LLP
4365 Executive Drive, Suite 1600
San Diego, California 92121-2189
Attention: Christopher M. Smith, Esq.
Telecopier: (619) 677-1477
If to REI to:...........Research Engineers, Inc.
22700 Savi Ranch Parkway
Yorba Linda, California 92887
Attention: Chief Executive Officer
Telecopier: (714) 974-4771
With a copy to:.........Rutan & Tucker, LP
611 Anton, Suite 1400
Costa Mesa, California 92626
Attention: Cristy G. Lomenzo, Esq.
Telecopier: (714) 546-9035
If to Sellers to:.......Srinivasa Reddy Malireddy
21195 Granola Road
Cupertino, California 95014
</TABLE>
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.
15.10 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.
15.11 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 to this Agreement. 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.
15.12 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
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transactions described herein and contemplated hereby and to carry into
effect the intents and purposes of this Agreement.
15.13 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.
15.14 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.
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<PAGE>
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.
REI: RESEARCH ENGINEERS, INC.,
a Delaware corporation
By: /S/ AMRIT K. DAS
--------------------
Amrit K. Das, President
By: /S/ WAYNE L. BLAIR
----------------------
Wayne L. Blair, Secretary
R-CUBE: R-CUBE TECHNOLOGIES, INC.,
a California corporation
By: /S/ KRISHNA P. REDDY
------------------------
Krishna P. Reddy, President
By: /S/ SRINIVASA REDDY MALIREDDY
---------------------------------
Srinivasa Reddy Malireddy,
Secretary
SELLER: /S/ SRINIVASA REDDY MALIREDDY
-----------------------------
Srinivasa Reddy Malireddy, an
individual
I, THE SPOUSE OF SELLER, HAVE EXECUTED THIS AGREEMENT FOR THE PURPOSE OF
CONFIRMING MY CONSENT TO THE CONVEYANCE OF MY COMMUNITY PROPERTY INTEREST, IF
ANY, IN SHARES OF CAPITAL STOCK OF R-CUBE PURSUANT TO THIS AGREEMENT
/S/ M. VEDA VATHI
----------------------------
Print Name: M. Veda Vathi
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Exhibit 2.4
CREDIT AGREEMENT
----------------
This Credit Agreement ("Agreement") is made and entered into on February 26,
1999, by and between Research Engineers, Inc. corporation, "Borrower" and
Imperial Bank, a California banking corporation, ("Bank").
Subject to the terms and conditions of this Agreement, any security agreement
executed by Borrower in favor of Bank, any notes executed by Borrower in favor
of Bank, or any other agreements executed in conjunction therewith
(collectively, the "Loan Documents"), Bank shall make the loans and or advances
referred to below to Borrower.
In consideration of mutual covenants and conditions hereof, the parties hereto
agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.01 Revolving Credit Commitment.
(a) Revolving Line of Credit. Subject to the terms and conditions of this
Agreement, provided that no event of default then has occurred and is
continuing, Bank shall, upon Borrower's request make advances ("Revolving
Loans") to Borrower, for the acquisition of R-Cube Technologies, Inc., and
general corporate purposes, in an amount not to exceed $ 2,320,000 (the
"Revolving Line of Credit") until September 1, 2000 (the "Revolving Line of
Credit Maturity Date"). Revolving Loans may be repaid and reborrowed, provided
that all outstanding principal and accrued interest on the Revolving Loans shall
be payable in full on the Revolving Credit Maturity Date.
(b) Revolving Note. The interest rate, principal and interest payments, maturity
date and certain other terms of the Revolving Loan will be contained in a
promissory note dated the date of this agreement, as such may be amended or
replaced from time to time.
1.02 Loan Fee. In addition to any other amounts due, or to become due,
concurrent with the execution hereof, in connection with the Revolving Line of
Credit, Borrower shall pay to Bank a loan fee of Forty Six Thousand Four Hundred
Dollars ($46,400) at the time of execution of this agreement.
1.03 Documentation Fee, Costs and Expenses. In addition to any other amounts
due, or to become due, concurrently with the execution hereof, Borrower agrees
to pay to Bank a documentation fee in the amount of $1,600, and all other costs
and expenses incurred by the Bank in the preparation of this Agreement, the
other Loan Documents and the perfection of any security interest granted to Bank
by Borrower.
1.04 Collateral. Borrower shall grant or cause to be granted to Bank a first
priority lien on any and all personal property assets of Borrower which is
assigned or hereafter is assigned to Bank as security or in which Bank now has
or hereafter acquires a security interest or pursuant to the terms of any
security agreement, an intellectual property security agreement or otherwise as
security for all of Borrower's obligations to Bank, all as may be subject to
Section 5.03 herein. Borrower has also assigned, or has caused
1
<PAGE>
to be assigned, a second "deed of trust" on the real estate property located at
22700 Savi Ranch, Yorba Linda, CA, as collateral for Borrower's obligations to
Bank. Additionally, "Single Premium Deferred Annuities" of Mr. Amrit K. Das,
described in Exhibit 1.11 attached hereto as collateral for Borrower's
obligations to Bank, shall be assigned to Bank.
1.05 Collection of Payments. Borrower authorizes Bank to collect all interest,
fees, costs, and/or expenses due under this Agreement by charging Borrower's
demand deposit account number 08224366 with Bank, or any other demand deposit
account maintained by Borrower with Bank, for the full amount thereof. Should
there be insufficient funds in any such demand deposit account to pay all such
sums when due, the full amount of such deficiency shall be immediately due and
payable by Borrower.
2. REPRESENTATIONS OF BORROWER
Borrower represents and warrants that:
2.01 Existence and Rights. Borrower is a corporation, duly organized and
existing and in good standing under the laws of the state of Delaware. Borrower
is authorized and in good standing to do business in the state of its
incorporation; Borrower has the appropriate powers and adequate authority,
rights and franchises to own its property and to carry on its business as now
conducted, and is duly qualified and in good standing in each state in which the
character of the properties owned by it therein or the conduct of its business
makes such qualification necessary; and Borrower has the power and adequate
authority to make and carry out this Agreement. Borrower has no investment in
any other business entity unless specified in writing to Bank.
2.02 Agreement Authorized. The execution, delivery and performance of this
Agreement and the Loan Documents are duly authorized and do not require the
consent or approval of any governmental body or other regulatory authority; are
not in contravention of or in conflict with any law or regulation or any term or
provision of Borrower's articles of incorporation, by-laws, or similar document
as the case may be, and this Agreement is the valid, binding and legally
enforceable obligation of Borrower in accordance with its terms; subject only to
bankruptcy, insolvency or similar laws affecting creditors rights generally.
2.03 No Conflict. The execution, delivery and performance of this Agreement and
the Loan Documents are not in contravention of or in conflict with any
agreement, indenture or undertaking to which Borrower is a party or by which it
or any of its property may be bound or affected, and do not cause any lien,
charge or other encumbrance to be created or imposed upon any such property by
reason thereof.
2.04 Litigation. Except as disclosed in writing to bank by Borrower, there is no
litigation or other proceeding pending or threatened against or affecting
Borrower which if determined adversely to Borrower or its interest would have a
material adverse effect on the financial condition of Borrower, and Borrower is
not in default with respect to any order, writ, injunction, decree or demand of
any court or other governmental or regulatory authority.
2.05 Financial Condition. The consolidated balance sheet of Borrower, as of
12/31/98, and the related profit and loss statement for the nine month period
ended as of that date, a copy of which has
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heretofore been delivered to Bank by Borrower, and all other statements and data
submitted in writing by Borrower to Bank in connection with this request for
credit are true and correct, and said balance sheet truly presents the financial
condition of Borrower as of the date thereof, and has been prepared in
accordance with generally accepted accounting principles on a basis consistently
maintained. Since such date there have been no material adverse changes in the
financial condition or business of Borrower. Borrower has no knowledge of any
liabilities, contingent or otherwise, at such date not reflected in said balance
sheet, and Borrower has not entered into any special commitments or substantial
contracts which are not reflected in said balance sheet, other than in the
ordinary and normal course of its business, which may have a materially adverse
effect upon its financial condition, operations or business as now conducted.
2.06 Title to Assets. Borrower has good title to its assets, and the same are
not subject to any liens or encumbrances other than those permitted by Section
5.03 hereof.
2.07 Tax Status. Borrower has no liability for any delinquent state, local or
federal taxes, and, if Borrower has contracted with any government agency,
Borrower has no liability for renegotiation of profits.
2.08 Trademarks, Patents. Upon the filing of the copyrights for the software
shown on Exhibit 2.08 attached Borrower will possess all necessary trademarks,
trade names, copyrights, patents, patent rights, and licenses to conduct its
business as now operated, without any known conflict with the valid trademarks,
trade names, copyrights, patents and license rights of others.
2.09 Regulation U. None of the proceeds of any Loan shall be used to purchase or
carry margin stock (as defined within Regulation U of the Board of Governors of
the Federal Reserve system).
2.10 ERISA. All defined benefit pension plans as defined in the Employees
Retirement Income Security Act of 1974, as amended ("ERISA"), of Borrower meet,
as of the date hereof, the minimum funding standards of Section 302 of ERISA,
and no Reportable Event or Prohibited Transaction as defined in ERISA has
occurred with respect to any such plan.
2.11 Year 2000 Compliance. Borrower and its subsidiaries, as applicable, have
reviewed the areas within their operations and business which could be adversely
affected by, and have developed or are developing a program to address on a
timely basis, the Year 2000 Problem and have made related appropriate inquiry of
material suppliers and vendors, and based on such review and program, the Year
2000 Problem will not have a material adverse effect upon its financial
condition, operations or business as now conducted. "Year 2000 Problem" means
the possibility that any computer applications or equipment used by Borrower may
be unable to recognize and properly perform date sensitive functions involving
certain dates prior to and any dates one or after December 31, 1999.
3. CONDITIONS PRECEDENT TO LOAN.
Prior to Bank being obligated to make any Loan pursuant to this
Agreement, Bank must receive all of the following, each of which must be in form
and substance satisfactory to Bank:
3.01 Promissory Note. Original, executed promissory note.
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3.02 Security Agreement. Original, executed security agreement covering the
personal property collateral securing the Loan and/or a deed of trust covering
the real estate collateral.
3.03 Financing Statement. Financing statements executed by Borrower and each
grantor of a security interest.
3.04 Guarantee . Continuing Guarantees in favor of Bank executed by Mr. Amrit K.
Das as an individual and as a Trustee of the A. and P. Das Living Trust
("Guarantor") both in the amount of $2,320,000 .
3.05 Insurance. Borrower shall have delivered to Bank evidence of insurance
coverage required pursuant to that Agreement to Provide Insurance executed by
Borrower, in form, substance, amounts, covering risks and issued by companies
satisfactory to Bank, and where required by Bank, with loss payable endorsements
in favor of Bank.
3.06 Organizational Documents. Copies of the charter/articles of incorporation
or similar document as the case may be, of the Borrower.
3.07 Authorizations. Certified copies of all action taken by the Borrower and
each Guarantor and each grantor of a security interest to authorize the
execution, delivery and performance of the Loan Documents.
3.08 Good Standing . Good standing certificates from the appropriate secretary
of state of the state in which the Borrower is organized and in each state in
which it is required to be qualified to do business.
3.09 Additional Documents. Such other documents as Bank may reasonably deem
necessary.
4. AFFIRMATIVE COVENANTS OF BORROWER
Borrower agrees that so long as it is indebted to Bank, under borrowings, or
other indebtedness, or so long as Bank has any obligation to extend credit to
Borrower it will, unless Bank shall otherwise consent in writing:
4.01 Rights and Facilities. Maintain and preserve all rights, franchises and
other authority adequate for the conduct of its business; maintain its
properties, equipment and facilities in good order and repair; conduct its
business in an orderly manner without voluntary interruption and, if a
corporation or partnership, maintain and preserve its existence.
4.02 Use of Proceeds. Use the proceeds of the Loans only for purposes specified
in Section1 of this Agreement.
4.03 Insurance. Maintain public liability, property damage and workers'
compensation insurance and insurance on all its insurable property against fire
and other hazards with responsible insurance carriers to the extent usually
maintained by similar businesses and/or in the exercise of good business
judgment, and as required by that Agreement to Provide Insurance executed by
Borrower, with the Bank to be shown as Lenders Loss Payee on such policies.
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4.04 Taxes and Other Liabilities. Pay and discharge, before the same become
delinquent and before penalties accrue thereon, all taxes, assessments and
governmental charges upon or against it or any of its properties, and all its
other liabilities at any time existing, except to the extent and so long as:
(a) The same are being contested in good faith and by appropriate proceedings in
such manner as not to cause any materially adverse effect upon its financial
condition or the loss of any right of redemption from any sale thereunder; and
(b) It shall have set aside on its books reserves (segregated to the extent
required by generally accepted accounting practice) deemed by it to be adequate
with respect thereto.
4.05 Records and Reports. Maintain a standard and modern system of accounting in
accordance with generally accepted accounting principles on a basis consistently
maintained; permit Bank's representatives to have access to, and to examine its
properties, books and records at all reasonable times and upon reasonable notice
during normal business hours; and furnish Bank:
(a)Monthly Financial Statement. As soon as available, and in any event within
thirty (30) days after the close of each month, a consolidating balance
sheet, profit and loss statement and reconciliation of Borrower's capital
balance accounts for Borrower's US operation as of the close of such period
and covering operations for the portion of Borrower's fiscal year ending on
the last day of such period, all in reasonable detail and reasonably
acceptable to Bank, in accordance with generally accepted accounting
principles on a basis consistently maintained by Borrower.
(b)Quarterly Financial Statement. As soon as available, and in any event within
forty five (45) days after the close of each quarter, a 10Q report and a
consolidated balance sheet, profit and loss statement and reconciliation of
Borrower's capital balance accounts as of the close of such period and
covering operations for the portion of Borrower's fiscal year ending on the
last day of such period, all in reasonable detail and reasonably acceptable
to Bank, in accordance with generally accepted accounting principles on a
basis consistently maintained by Borrower and certified by an appropriate
officer of Borrower.
(c)Annual Financial Statement. As soon as available, and in any event within
ninety (90) days after and as of the close of each fiscal year of Borrower, a
10K report and a consolidated report of audit of Company, all in reasonable
detail, audited by an independent certified public accountant selected by
Borrower and reasonably acceptable to Bank, in accordance with generally
accepted accounting principles on a basis consistently maintained by Borrower
and certified by an appropriate officer of Borrower.
(d)Officer's Certificate. Within forty five (45) days after the end of each
quarter of Borrower, a certificate of the chief financial officer of
Borrower, stating that Borrower has performed and observed each and every
covenant contained in this Agreement to be performed by it and that no event
has occurred and no condition then exists which constitutes an event of
default hereunder or would constitute such an event of default upon the lapse
of time or upon the giving of notice and the lapse of time specified herein;
or, if any such event has occurred or any such condition exists, specifying
the nature thereof.
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(e)Accounts Receivable And Accounts Payable Agings; Within fifteen (15) days
from each month-end, deliver to Bank, for Borrower's US operation, a detailed
accounts receivable aging reconciled to the general ledger of Borrower, a
detailed accounts payable aging reconciled to the Borrower's general ledger
and setting forth the amount of any book overdraft or the amount of checks
issued but not sent; and within twenty (20) days from each quarter end a
detailed consolidated accounts receivable aging reconciled to the general
ledger of Borrower, a detailed consolidated accounts payable aging reconciled
to the Borrower's general ledger and setting forth the amount of any book
overdraft or the amount of checks issued but not sent. All the foregoing will
be in a form and with such detail as Bank may request from time to time.
(f)Guarantors' Financial Statements. Cause each Guarantor to submit to Bank
such Guarantor's financial statement, confirmed as to its correctness by
Guarantor's signature, either on Bank's form or prepared by an independent
certified public accountant, together with a completed copy of such
Guarantor's federal income tax return for the previous calendar year, no
later than thirty (30) days after filing of same with the Internal Revenue
Service.
(g)Stockholder, Security and Exchange Commission Statements and Reports
Promptly after the same are available, copies of all such proxy statements,
financial statements and reports as Borrower or any subsidiary shall send to
its members or stockholders as appropriate, if any, and copies of all reports
which Borrower or any subsidiary may file with the Securities and Exchange
Commission.
(h)Other Information. Such other information relating to the affairs of
Borrower as the Bank reasonably may request from time to time.
4.06 Current Ratio. Maintain on a quarterly basis a consolidated minimum ratio
of total current assets excluding all amounts due from stockholders, officers
and affiliates divided by total current liabilities including all amounts due to
stockholders, officers and affiliates of 1.50:1.00.
4.07 Effective Tangible Net Worth. Maintain on a quarterly basis a consolidated
Effective Tangible Net Worth (defined as stockholder's equity less any value for
goodwill, trademarks, patents, copyrights, leaseholds, organization expense and
other similar intangible items, and any amounts due from stockholders, officers
and affiliates) plus any Subordinated Debt, meaning debt subordinated to the
obligations of Borrower to Bank, in form and substance satisfactory to Bank, of
not less than Two Million Seven Hundred Thousand Dollars ($2,700,000) plus 70%
of positive net income after taxes for each period.
4.08 Debt to Effective Tangible Net Worth. Maintain on a quarterly basis a
consolidated ratio of total liabilities to Effective Tangible Net Worth (defined
as stockholder's equity less any value for goodwill, trademarks, patents,
copyrights, leaseholds, organization expense and other similar intangible items,
and any amounts due from stockholders, officers and affiliates) plus any
Subordinated Debt, meaning debt subordinated to the obligations of Borrower to
Bank, in form and substance satisfactory to Bank, of not greater than
2.75.00:1.00.
4.09 ERISA. Cause all defined benefit pension plans, as defined in ERISA, of
Borrower to, at all times, meet the minimum funding standards of Section 302 of
ERISA, and ensure that no Reportable Event or Prohibited Transaction, as defined
in ERISA, will occur with respect to any such plan.
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4.10 Laws. At all times comply with, or cause to be complied with, all laws,
statues, rules, regulations, orders and directions of any governmental authority
having jurisdiction over Borrower or Borrower's business.
4.11 Use of Proceeds. Use the proceeds of the Loans only for the purposes
specified in Section 1 herein.
4.12 GAAP. Compliance with all financial covenants shall be calculated based on
generally accepted accounting principles applied on a consistent basis as
maintained by Borrower.
4.13 Year 2000 Compliant. Borrower shall perform all acts reasonably necessary
to ensure that (a) Borrower and any business in which Borrower holds a
substantial interest, and (b) all customers, suppliers and vendors whose
compliance is likely to be material to Borrower's business, become Year 2000
Compliant in a timely manner. Such acts shall include, without limitation,
performing a comprehensive review and assessment of all Borrower's systems and
adopting a detailed plan, with itemized budget, for the remediation, monitoring
and testing of such systems. As used in this paragraph, "Year 2000 Compliant"
shall mean, in regard to any entity, that all software, hardware, firmware,
equipment, goods or systems utilized by or material to the business operations
or financial condition of such entity, will properly perform date sensitive
functions before, during and after the year 2000. Borrower shall, immediately
upon request, provide to Agent such certifications or other evidence of
Borrower's compliance with the terms of this paragraph as Bank may from time to
time require.
4.14 Operating Accounts. Maintain all primary accounts and banking relationship
with the Bank. Maintain, or cause to be maintained, on deposit with Bank,
non-interest bearing demand deposit balances sufficient to compensate Bank for
all services provided by Bank. Balances shall be calculated after reduction for
the reserve requirement of the Federal Reserve Board and uncollected funds. Any
deficiencies shall be charged directly to the Borrower on a monthly basis.
4.15 Notices. Promptly notify Bank in writing of (i) the occurrence of any Event
of Default hereunder or any event which upon notice and lapse of time would be
an Event of Default; (ii) all litigation affecting Borrower where the amount is
$100,000 or more; any substantial dispute which may exist between Borrower and
any governmental regulatory body or law enforcement authority; any change in
Borrower's name or principal place of business; or any other matter which has
resulted or might result in a material adverse change in Borrower's financial
condition or operations.
4.16 Intellectual Property. Within 60 days from the date of this Agreement
Borrower will have registered those copyrights for the software shown on Exhibit
2.08 hereto with the U.S. Copyright Office and will grant Bank a security
interest in such copyrights in form and substance satisfactory to Bank. Borrower
also acknowledges that upon developing, creating or acquiring any intellectual
property it must notify Bank, register such intellectual property and grant Bank
a security interest in accordance with the addendum to the General Security
Agreement executed by Borrower on the date hereof.
5. NEGATIVE COVENANTS OF BORROWER
Borrower agrees that so long as it is indebted to Bank, or so long as Bank has
any obligation to extend credit to Borrower, it will not, without Bank's written
consent:
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5.01 Type of Business; Management; Change in Control. Make any
substantial change in the character of its business or make any change
in its executive management.
5.02 Outside Indebtedness. Create, incur, assume or permit to exist any
indebtedness for borrowed moneys other than Loans from the Bank except
obligations now existing as shown in the financial statement dated 12/31/98,
excluding those obligations being refinanced by Bank, or sell or transfer,
either with or without recourse, any accounts or notes receivable or any moneys
due or to become due.
5.03 Liens and Encumbrances. Create, incur, permit to exist, or assume any
mortgage, pledge, encumbrance, lien or charge of any kind upon any asset now
owned or hereafter acquired by it, other than liens for taxes not delinquent and
liens in Bank's favor and other than liens agreed to in writing by Bank.
5.04 Loans, Investments, Secondary Liabilities. Make any loans or advances to
any person or other entity other than in the ordinary and normal course of its
business as now conducted or make any investment in the securities of any person
or other entity other than the United States Government; or guarantee or
otherwise become liable upon the obligation of any person or other entity,
except by endorsement of negotiable instruments for deposit or collection in the
ordinary and normal course of its business.
5.05 Acquisition or Sale of Business; Merger or Consolidation. Purchase or
otherwise acquire the assets or business of any person or other entity; or
liquidate, dissolve, merge or consolidate, or commence any proceedings therefor;
or sell any assets except in the ordinary and normal course of its business as
now conducted; or sell, lease, assign, or transfer any substantial part of its
business or fixed assets, or any property or other assets necessary for the
continuance of its business as now conducted, including without limitation the
selling of any property or other asset accompanied by the leasing back of the
same.
5.06 Capital Expenditures. Make or incur obligations for fixed or capital
assets, which includes purchase money indebtedness or capital lease obligations
in excess of $25,000 from the date hereof until March 31, 1999 or $100,000 in
any twelve month period thereafter.
5.07 Operating Lease Expenditures. Make or incur obligations for operating
leases for real or personal property in excess of $25,000 from the date hereof
until March 31, 1999 or $100,000 in any twelve (12) month period thereafter.
5.08 Dividends. Declare or pay any dividend or make any other distribution on
any of its capital stock now outstanding or hereafter issued or purchase, redeem
or retire any of such stock other than in dividends or distributions payable in
Borrower's capital stock, except for the repurchase of Borrower's capital stock
from officers, directors, employees or consultants of Borrower upon termination
of their employment with or rendering of service to Borrower.
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6. EVENTS OF DEFAULT
The occurrence of any of the following events of default ("Events of Default")
shall, at Bank's option, terminate Bank's commitment to lend and make all sums
of principal and interest then remaining unpaid on all Borrower's indebtedness
to Bank immediately due and payable, all without demand, presentment or notice,
all of which are hereby expressly waived:
6.01 Failure to Pay. Failure to pay any installment of principal or of interest
on any indebtedness of Borrower to Bank within, five (5) days of its due date.
6.02 Breach of Covenant. Failure of Borrower to perform any other term or
condition of this Agreement or any Loan Document binding upon Borrower.
6.03 Breach of Warranty. Any of Borrower's representations or warranties made
herein or any statement or certificate at any time given in writing pursuant
hereto or in connection herewith shall be false or misleading in any respect.
6.04 Insolvency; Receiver or Trustee. Borrower shall become insolvent; or admit
its inability to pay its debts as they mature; or make an assignment for the
benefit of creditors; or apply for or consent to the appointment of a receiver
or trustee for it or for a substantial part of its property or business.
6.05 Judgments, Attachments. Any money judgment in excess of $ 50,000, writ or
warrant of attachment, or similar process shall be entered or filed against
Borrower or any of its assets and shall remain unvacated, unbonded or unstayed
for a period of ten (10) days or in any event later than five (5) days prior to
the date of any proposed sale thereunder.
6.06 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against Borrower and, if
instituted against it, shall not be dismissed within thirty (30) days
thereafter.
6.07 Revocation of Guarantee. Any guarantee required hereunder is breached or
becomes ineffective; or any Guarantor or subordination creditor disavows or
attempts to revoke or terminate such guarantee or subordination agreement.
6.08 Ownership. Any change in ownership which results in the Guarantor's owning
less than 20 percent (20%) of Borrower's voting stock.
6.09 Cessation of Business...Borrower shall voluntarily suspend its business.
6.10 Adverse Change. Any change which, in the opinion of Bank, is materially
adverse to the financial condition of Borrower or any Guarantor; or should Bank,
for any reason, believe that the prospect of Borrower's payment or performance
hereunder or under any other agreement or instrument with Bank be impaired.
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6.11 Other Defaults. Borrower, or any Guarantor of Borrower's obligations to
Bank, shall commit or do or fail to commit or do any act or thing which would
constitute an event of default under any of the terms of any other agreement,
document or instrument executed or to be executed by it concerning the
obligation to pay money.
6.12 Advances. Notwithstanding anything to the contrary contained herein, Bank
shall have no duty to make advances while any event of default exists
notwithstanding any cure period provided for herein.
7. MISCELLANEOUS PROVISIONS
7.01 Failure or Indulgence Not Waiver. No failure or delay on the part of Bank
or any holder of notes issued hereunder, in the exercise of any power, right or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege. All rights and
remedies existing under this Agreement or any note (s) issued in connection with
a Loan that Bank may make hereunder, are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
7.02 Counterparts; Entire Agreement. This Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement. This Agreement, and the other Loan Documents constitute the entire
understanding among the parties hereto with respect to the subject matter hereof
and supersedes any prior agreements, written or oral, with respect thereto.
7.03 Attorney's Fees. Borrower will pay promptly to Bank without demand after
notice, with interest thereon from the date of expenditure at the rate
applicable to the Loan, reasonable attorneys' fees and all costs and expenses
paid or incurred by Bank in collecting or compromising the Loan after the
occurrence of an Event of Default, whether or not suit is filed. If suit is
brought to enforce any provision of this Agreement, the prevailing party shall
be entitled to recover its reasonable attorneys' fees and court costs in
addition to any other remedy or recovery awarded by the court.
7.04 Additional Remedies. The rights, powers and remedies given to Bank
hereunder shall be cumulative and not alternative and shall be in addition to
all rights, powers and remedies given to Bank by law against Borrower or any
other person, including but not limited to Bank's rights of setoff or banker's
lien.
7.05 Inurement. The benefits of this Agreement shall inure to the successors and
assigns of Bank and the permitted successors and assigns of Borrower.
7.06 Applicable Law. This Agreement and all other agreements and instruments
required by Bank in connection therewith shall be governed by and construed
according to the laws of the state of California, to the jurisdiction of whose
courts the parties hereby agree to submit.
7.07 Offset. In addition to and not in limitation of all rights of offset that
Bank or other holder of the Loan may have under applicable law, Bank or other
holder of any note issued hereunder shall, upon the occurrence of any Event of
Default or any event which with the passage of time or notice would constitute
such an Event of Default, have the right to appropriate and apply to the payment
of the Loan any and all balances, credits, deposits, accounts or monies of
Borrower then or thereafter with Bank
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or other holder, within ten (10) days after the Event of Default, and notice of
the occurrence of any Event of Default by Bank to Borrower.
7.08 Severability. Should any one or more provisions of the Agreement be
determined to be illegal or unenforceable, all other provisions nevertheless
shall be effective.
7.09 Time of the Essence. Time is hereby declared to be of the essence of this
Agreement and of every part hereof.
7.10 Accounting. All accounting terms shall have the meanings applied under
generally accepted accounting principles unless otherwise specified.
7.11 Reference Provision.
(a) Other than (i) nonjudicial foreclosure and all matters in connection
therewith regarding security interests in real or personal property; or (ii) the
appointment of a receiver, or the exercise of other provisional remedies (any
and all of which may be initiated pursuant to applicable law), each controversy,
dispute or claim between the parties arising out of or relating to this Credit
Agreement, any security agreement executed by Borrower in favor of Bank or any
note executed by Borrower in favor of Bank or any other agreement or instrument
issued in favor of Bank by Borrower (collectively in this Section, the
"Agreement") which controversy, dispute or claim is not settled in writing
within thirty (30) days after the "Claim Date" (defined as the date on which a
party subject to this Agreement gives written notice to all other parties that a
controversy, dispute or claim exists), will be settled by a reference proceeding
in California in accordance with the provisions of Section 638 et seq. of the
California Code of Civil Procedure, or their successor section ("CCP"), which
shall constitute the exclusive remedy for the settlement of any controversy,
dispute or claim concerning this Agreement, including whether such controversy,
dispute or claim is subject to the reference proceeding and except as set forth
above, the parties waive their rights to initiate any legal proceedings against
each other in any court or jurisdiction other than the Superior Court in the
County where the Real Property, if any, is located or Los Angeles County if none
(the "Court"). The referee shall be a retired Judge of the Court selected by
mutual agreement of the parties, and if they cannot so agree within forty-five
(45) days after the Claim Date, the referee shall be promptly selected by the
Presiding Judge of the Court (or his representative). The referee shall be
appointed to sit as a temporary judge, with all of the powers for a temporary
judge, as authorized by law, and upon selection should take and subscribe to the
oath of office as provided for in Rule 244 of the California Rules of Court (or
any subsequently enacted Rule). Each party shall have one peremptory challenge
pursuant to CCP ss.170.6. The referee shall (a) be requested to set the matter
for hearing within sixty (60) days after the date of selection of the referee
and (b) try any and all issues of law or fact and report a statement of decision
upon them, if possible, within ninety (90) days of the Claim Date. Any decision
rendered by the referee will be final, binding and conclusive and judgment shall
be entered pursuant to CCP ss.644 in any court in the state of California having
jurisdiction. Any party may apply for a reference proceeding at any time after
thirty (30) days following notice to any other party of the nature of the
controversy, dispute or claim, by filing a petition for a hearing and/or trial.
All discovery permitted by this Agreement shall be completed no later than
fifteen (15) days before the first hearing date established by the referee. The
referee may extend such period in the event of a party's refusal to provide
requested discovery for any reason whatsoever, including, without limitation,
legal objections raised to such discovery or unavailability of a witness due to
absence or illness. No party shall be entitled to "priority" in conducting
discovery. Depositions may be taken by either party upon seven (7) days written
notice, and request for production or inspection of documents shall be responded
to within ten (10) days after service. All disputes relating to discovery which
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cannot be resolved by the parties shall be submitted to the referee whose
decision shall be final and binding upon the parties. Pending appointment of the
referee as provided herein, the Superior Court is empowered to issue temporary
and/or provisional remedies, as appropriate.
(b) Except as expressly set forth in this Agreement, the referee shall determine
the manner in which the reference proceeding is conducted including the time and
place of all hearings, the order of presentation of evidence, and all other
questions that arise with respect to the course of the reference proceeding. All
proceedings and hearings conducted before the referee, except for trial, shall
be conducted without a court reporter except that when any party so requests, a
court reporter will be used at any hearing conducted before the referee. The
party making such a request shall have the obligation to arrange for and pay for
the court reporter. The costs of the court reporter at the trial shall be borne
equally by the parties.
(c) The referee shall be required to determine all issues in accordance with
existing case law and the statutory laws of the state of California. The rules
of evidence applicable to proceedings at law in the state of California will be
applicable to the reference proceeding. The referee shall be empowered to enter
equitable as well as legal relief, to provide all temporary and/or provisional
remedies and to enter equitable orders that will be binding upon the parties.
The referee shall issue a single judgment at the close of the reference
proceeding which shall dispose of all of the claims of the parties that are the
subject of the reference. The parties hereto expressly reserve the right to
contest or appeal from the final judgment or any appealable order or appealable
judgment entered by the referee. The parties hereto expressly reserve the right
to findings of fact, conclusions of laws, a written statement of decision, and
the right to move for a new trial or a different judgment, which new trial, if
granted, is also to be a reference proceeding under this provision.
(d) In the event that the enabling legislation which provides for appointment of
a referee is repealed (and no successor statute is enacted), any dispute between
the parties that would otherwise be determined by the reference procedure herein
described will be resolved and determined by arbitration. The arbitration will
be conducted by a retired judge of the Court, in accordance with the California
Arbitration Act, ss.1280 through ss.1294.2 of the CCP as amended from time to
time. The limitations with respect to discovery as set forth hereinabove shall
apply to any such arbitration proceeding.
7.12 This Agreement may be modified only by a writing signed by all parties
hereto.
This Agreement is executed on behalf of the parties by duly authorized officers
as of the date first above written.
IMPERIAL BANK Research Engineers, Inc.
("Bank") ("Borrower")
By: /S/ LEILA GHOROGHCHI By: /S/ JYOTI CHATTERJEE
--------------------------------- --------------------
Its: Vice President Its: EVP/COO
By: /S/ WAYNE BLAIR
--------------------
Its: CFO and Secretary
12
<PAGE>
Exhibit 1.11
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Surrender Value as
Company Policy # of 1/27/99 Annuitant Owner Beneficiary
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
KP (a) KA00489362 $189,151 Amrit Das Amrit Das Amrit K. Das
KP KA00713744 $ 78,574 Amrit Das Amrit Das Amrit K. Das
KP KA00733340 $ 58,006 Amrit Das Amrit Das Amrit K. Das
KP KA00733341 $ 58,423 Amrit Das Amrit Das Amrit K. Das
KP KA00738223 $ 71,925 Amrit Das Amrit Das Sormistha Das
SU (b) A0095504940 $255,240 Amrit Das Amrit Das Amrit K. Das
USG (c) 542942 $ 85,430 Amrit Das Amrit Das Amrit K. Das
Total $796,749
- ------------------------------------------------------------------------------------
<FN>
a. KP is Keyport Life Insurance
125 High Street
Boston, MA 02110
b. SU is Sun Life Insurance Co. of America
1 SunAmerica Center
Century City
Los Angeles, CA 90067
c. USG USG Annuity & Life Co.
909 Locust Street
Des Moines IA 50309
</FN>
</TABLE>
13
<PAGE>
Exhibit 2.08
SOFTWARE
Borrower to register copyrights for all versions of the following:
<TABLE>
<S> <C>
1. STAAD
STAAD - III
STAAD / PRO
2. AutoCIVIL
3. FABRICAD
4. STARDYNE
</TABLE>
14
<PAGE>
Exhibit 2.5
IMPERIAL BANK
Member FDIC
GENERAL SECURITY AGREEMENT
(Tangible and Intangible Personal Property)
This Agreement is executed on February 26, 1999, by RESEARCH ENGINEERS, INC., A
DELAWARE CORPORATION (hereinafter called "Obligor").
In consideration of financial accommodations given, to be given or continued,
the Obligor grants to IMPERIAL BANK (hereinafter called 'Bank") a security
interest in (a) all property (i) delivered to Bank by Obligor, (ii) which shall
be in Bank's possession or control in any matter or for any purpose, (iii)
described below, (iv) now owned or hereafter acquired by Obligor of the type or
class described below and/or in any supplementary schedule hereto, or in any
financing statement filed by Bank and executed by or on behalf of Obligor; (b)
all deposits accounts of Obligor at Bank and (c) the proceeds, increase and
products of such property, all accessions thereto, and all property which
Obligor may receive on account of such collateral which Obligor will immediately
deliver to Bank (collectively referred to as "Collateral") to secure payment and
performance of all of Obligor's present or future debts or obligations to Bank,
whether absolute or contingent (hereafter referred to as "Debt"). Unless
otherwise defined, words used herein have the meanings given them in the
California Uniform Commercial Code.
Collateral:
A. VEHICLE, VESSEL, AIRCRAFT:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Identification License or
Year Make/Manufacturer Model and Serial No. Registration No. New or Used
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
</TABLE>
Engine or other equipment:
------------------------------------------------------
(For aircraft - original ink signature on copy to FAA)
B. DEPOSIT ACCOUNTS:
Type Account Number Amount $
------------------- ----------------------- --------
In name of
---------------------------------------------------------------------
Depository AND ALL EXTENSIONS OR RENEWALS THEREOF.
-----------------------------
C. ACCOUNTS, INTANGIBLES AND OTHER: (Describe)
All personal property of every kind including furniture, fixtures, equipment and
inventory, including building materials and leasehold improvements of every kind
and nature, all engineering reports, land planning maps, plans, specifications,
and other exhibits prepared in the planning of the real property now owned or
hereafter acquired by Obligor, and all proceeds thereof, intended to be or
actually located at, upon or about or attached or related to the real property
located at
22700 Savi Ranch Parkway, Yorba Linda, CA 92687
-----------------------------------------------
and legally described as shown on Exhibit "A" attached hereto together with the
proceeds of insurance policies issued with respect to said property.
The collateral not in Bank's possession will be located at:
|_| If checked, the Obligor is executing this Agreement as an Accommodation
Debtor only and the Obligor's liability is limited to the security interest
granted in the Collateral described herein. The party being accommodated is
("Borrower"). All the terms and provisions on page 2 hereof are incorporated
herein as though set forth in full, and constitute a part of this Agreement.
Signature
Name (indicate title, if applicable) Address
RESEARCH ENGINEERS, INC., By: /S/ JYOTI CHATTERJEE 22700 Savi Ranch Parkway
A DELAWARE CORPORATION -------------------- Yorba Linda, CA 92687
Jyoti Chatterjee, EVP/COO
By: /S/ WAYNE BLAIR
------------------
Wayne L. Blair, CFO/Secretary
RE 213 E (Rev 9/97) Distribution: Bank/Customer/File Page 1 of 2
<PAGE>
SECURITY AGREEMENT (CONTINUED)
Obligor represents, warrants and agrees:
1. Obligor will immediately pay (a) any Debt when due, (b) Bank's costs of
collecting the Debt, of protecting, insuring or realizing on Collateral, and any
expenditure of Bank pursuant hereto, including attorneys' fees and expenses,
with interest at the rate of 24% per year, or the rate applicable to the Debt,
whichever is less, from the date of expenditure, and (c) any deficiency after
realization of Collateral.
2. Obligor will use the proceeds of any loan that becomes Debt hereunder for the
purpose indicated on the application therefore, and will promptly contract to
purchase and pay the purchase price of any property which becomes Collateral
hereunder from the proceeds of any loan made for that purpose.
3. As to all Collateral in Obligor's possession (unless specifically otherwise
agreed to by Bank in writing), Obligor will:
(a) Have, or has, possession of the Collateral at the location disclosed
to Bank and will not remove the Collateral from the location.
(b) Keep the Collateral separate and identifiable.
(c) Maintain the Collateral in good and saleable condition, repair it if
necessary, clean, feed, shelter, water, medicate, fertilize,
cultivate, irrigate, prune and otherwise deal with the Collateral in
all such ways as are considered good practice by owners of like
property, use it lawfully and only as permitted by insurance policies,
and permit Bank to inspect the Collateral at any reasonable time.
(d) Not sell, contract to sell, lease, encumber or transfer the Collateral
(other than inventory Collateral) until the Debt has been paid, even
though Bank has a security interest in proceeds of such Collateral.
4. As to Collateral which is inventory and accounts, Obligor:
(a) May, until notice from Bank, sell, lease or otherwise dispose of
inventory Collateral in the ordinary course of business only, and
collect the cash proceeds thereof.
(b) Will, upon notice from Bank, deposit all cash proceeds as received in
a demand deposit account with Bank, containing only such proceeds and
deliver statements identifying units of inventory disposed of,
accounts which gave rise to proceeds, and all acquisitions and returns
of inventory as required by Bank.
(c) Will receive in trust, schedule on forms satisfactory to the Bank and
deliver to Bank all non-cash proceeds other than inventory received in
trade.
(d) If not in default, may obtain release of Bank's interest in individual
units of inventory upon request, therefore, payment to Bank of the
release price of such units shown on any Collateral schedule
supplementary hereto, and compliance herewith as to proceeds thereof.
5. As to Collateral which are accounts, chattel paper, general intangibles and
proceeds described in 4(c) above, Obligor warrants, represents and agrees:
(a) All such Collateral is genuine, enforceable in accordance with its
terms, free from default, prepayment, defense and conditions precedent
(except as disclosed to and accepted by Bank in writing), and is
supported by consecutively numbered invoices to, or rights against,
the debtors thereon. obligor will supply Bank with duplicate invoices
or other evidence of Obligor's rights on Bank's request;
(b) All persons appearing to be obligated on such Collateral have
authority and capacity to contract;
(c) All chattel paper is in compliance with law as to form, content and
manner of preparation and execution and has been properly registered,
recorded, and/or filed to protect Obligor's interest thereunder;
(d) If an account debtor shall also be indebted to Obligor on another
obligation, any payment made by him not specifically designated to be
applied on any particular obligation shall be considered to be a
payment on the account in which Bank has a security interest. Should
any remittance include a payment not on an account, it shall be
delivered to Bank and, if no event of default has occurred, Bank shall
pay Obligor the amount of such payment;
(e) Obligor agrees not to compromise, settle or adjust any account or
renew or extend the time of payment thereof without Bank's prior
written consent.
6. Obligor owns all Collateral absolutely, and no other person has or claims any
interest in any Collateral, except as disclosed to and accepted by Bank in
writing. Obligor will defend any proceeding which may affect title to or
Bank's security interest in any Collateral, and will indemnify and hold Bank
free and harmless from all costs and expenses of Bank's defense.
7. Obligor will pay when due all existing or future charges, liens or
encumbrances on and all taxes and assessments now or hereafter imposed on or
affecting the Collateral and, if the Collateral is in Obligor's possession,
the realty on which the Collateral is located.
8. Obligor will insure the Collateral with Bank as loss payee in form and
amounts with companies, and against risks and liability satisfactory to Bank,
and hereby assigns such policies to Bank, agrees to deliver them to Bank at
Bank's request, and authorizes Bank to make any claim thereunder, to cancel
the insurance on Obligor's default, and to receive payment of and endorse any
instrument in payment of any loss or return premium. If Obligor should fail
to deliver the required policy or policies to the Bank, Bank may, at
Obligor's cost and expense, without any duty to do so, get and pay for
insurance naming as the insured, at Bank's option, either both Obligor and
Bank, or only Bank, and the cost thereof shall be secured by this Security
Agreement, and shall be repayable as provided in Paragraph 1 above.
9. Obligor will give Bank any information it requires. All information at any
time supplied to Bank by Obligor (including, but not limited to, the value
and condition of Collateral, financial statements, financing statements, and
statements made in documentary Collateral) is correct and complete, and
Obligor will notify Bank of any adverse change in such information. Obligor
will promptly notify Bank of any change of Obligor's residence. chief
executive office or mailing address.
10.Bank is irrevocably appointed Obligor's attorney-in-fact to do any act which
Obligor is obligated hereby to do, to exercise such rights as Obligor may
exercise, to use such equipment as Obligor might use, to enter Obligor's
premises to give notice of Bank's security interest, and to collect
Collateral and proceeds and to execute and file in Obligor's name any
financing statements and amendments thereto required to perfect Bank's
security interest hereunder, all to protect and preserve the Collateral and
Bank's rights hereunder. Bank may:
(a) Endorse, collect and receive delivery or payment of instruments and
documents constituting Collateral;
(b) Make extension agreements with respect to or affecting Collateral,
exchange it for other Collateral, release persons liable thereon or
take security for the payment thereof, and compromise disputes in
connection therewith;
(c) Use or operate Collateral for the purpose of preserving Collateral or
its value and for preserving or liquidating Collateral.
11.If more than one Obligor signs this Agreement, their liability is joint and
several. Any Obligor who is married agrees that recourse may be had against
separate property for the Debt. Discharge of any Obligor except for full
payment, or any extension, forbearance, change of rate of interest, or
acceptance, release or substitution of Collateral or any impairment or
suspension of Bank's rights against an Obligor, or any transfer of an
Obligor's interest to another shall not affect the liability of any other
Obligor. Until the Debt shall have been paid or performed in full, Bank's
rights shall continue even if the Debt is outlawed. All Obligors waive: (a)
any right to require Bank to proceed against any Obligor before any other, or
to pursue any other remedy; (b) presentment, protest and notice of protest,
demand and notice of nonpayment, demand or performance, notice of sale, and
advertisement of sale; (c) any right to the benefit of or to direct the
application of any Collateral until the Debt shall have been paid; (d) and
any right of subrogation to Bank until Debt shall have been paid or performed
in full.
12.Upon default, at Bank's option, without demand or notice, all or any part of
the Debt shall immediately become due. Bank shall have all rights given by
law, and may sell, in one or more sales, Collateral in any county where Bank
has an office. Bank may purchase at such sale. Sales for cash or on credit to
a wholesaler, retailer or user of the Collateral, or at public or private
auction, are all to be considered commercially reasonable. Bank may require
Obligor to assemble the Collateral and make it available to Bank at the
entrance to the location of the Collateral, or a place designated by Bank.
Defaults shall include:
(a) Obligor's failure to pay or perform this or any agreement with Bank or
breach of any warranty herein, or Borrower's failure to pay or perform
any agreement with Bank.
(b) Any change in Obligor's or Borrower's financial condition which in
Bank's judgment impairs the prospect of Borrower's payment or
performance.
(c) Any actual or reasonably anticipated deterioration of the Collateral
or in the market price thereof which causes it, in Bank's judgment, to
become unsatisfactory as security.
(d) Any levy or seizure against Borrower or any of the Collateral.
(e) Death, termination of business, assignment for creditors, insolvency,
appointment of receiver, or the filing of any petition under
bankruptcy or debtor's relief laws of, by or against Obligor or
Borrower or any guarantor of the Debt.
(f) Any warranty or representation which is false or is believed in good
faith by Bank to be false.
13.Bank's acceptance of partial or delinquent payments or the failure of Bank
to exercise any right or remedy shall not waive any obligation of Obligor or
Borrower or right of Bank to modify this Agreement, or waive any other
similar default.
14.On transfer of all or any part of the Debt, Bank may transfer all or any
part of the Collateral. Bank may deliver all or any part of the Collateral to
any Obligor at any time. Any such transfer or delivery shall discharge Bank
from all liability and responsibility with respect to such Collateral
transferred or delivered. This Agreement benefits Bank's successors and
assigns and binds Obligor's heirs, legatees, personal representatives,
successors and assigns. obligor agrees not to assert against any assignee of
Bank any claim or defense that may exist against Bank. Time is of the
essence. This Agreement and supplementary schedules hereto contain the entire
security agreement between Bank and Obligor. Obligor will execute any
additional agreements, assignments or documents reasonably required by Bank
to carry this Agreement into effect.
15.This Agreement shall be governed by and construed in accordance with the
laws of the State of California, to the jurisdiction of whose courts the
Obligor hereby agrees to submit. Obligor agrees that service of process may
be accomplished by any means authorized by California law. All words used
herein in the singular shall be considered to have been used in the plural
where the context and construction so require.
16.To the extent that Obligor acquires any trademarks, service marks, trade
names and service names and/or the goodwill associated therewith, copyrights,
patents and/or patent applications (collectively 'Intellectual Property),
Obligor shall give prompt notice thereof to Bank and shall take any and all
actions requested from time to time by Bank to perfect Obligor's interest in
such Intellectual Property and to perfect Bank's first priority interest
therein. Without limiting the generality of the foregoing, the Obligor agrees
as follows: Upon Obligor creating, writing, producing or acquiring any
software, computer source codes or other computer programs (collectively, the
'Software'), Obligor shall promptly register such Software with the U.S.
Copyright Office and to the extent Obligor's rights therein are acquired from
any third party, Obligor shall promptly upon such acquisition file with the
U.S. Copyright Office any and all documents necessary to perfect Obligor's
rights therein. Upon Obligor creating, writing, producing or otherwise
acquiring any Software, Obligor shall give prompt notice thereof to Bank.
Obligor shall execute and deliver to Bank any and all copyright mortgages,
UCC financing statements and other documents and instruments which Bank may
request in connection with the Bank perfecting its first priority security
interest in such Software.
RE 213 E (Rev9/97) Page 2 of 2
<PAGE>
EXHIBIT "A"
PARCEL 2 OF PARCEL MAP NO. 86-316, IN THE CITY OF YORBA LINDA, COUNTY OF ORANGE,
STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 270 PAGES 1 AND 2 OF PARCEL
MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
This Exhibit is made a part of that General Security Agreement dated 2/26/99
executed by Research Engineers, Inc., a Delaware corporation
<PAGE>
Exhibit 2.6
GENERAL SECURITY AGREEMENT
(Tangible and Intangible Personal Property)
IMPERIAL BANK
Member FDIC
This Agreement is executed on February 26, 1999 , by RESEARCH ENGINEERS, INC., A
DELAWARE CORPORATION (hereinafter called "Obligor").
In consideration of financial accommodations given, to be given or continued,
the Obligor grants to IMPERIAL BANK (hereinafter called "Bank") a security
interest in (a) all property (i) delivered to Bank by Obligor, (ii) which shall
be in Bank's possession or control in any matter or for any purpose, (iii)
described below, (iv) now owned or hereafter acquired by Obligor of the type or
class described below and/or in any supplementary schedule hereto, or in any
financing statement filed by Bank and executed by or on behalf of Obligor; (b)
all deposits accounts of Obligor at Bank and (c) the proceeds, increase and
products of such property, all accessions thereto, and all property which
Obligor may receive on account of such collateral which Obligor will immediately
deliver to Bank (collectively referred to as "Collateral") to secure payment and
performance of all of Obligor's present or future debts or obligations to Bank,
whether absolute or contingent (hereafter referred to as "Debt"). Unless
otherwise defined, words used herein have the meanings given them in the
California Uniform Commercial Code.
Collateral:
A. VEHICLE, VESSEL, AIRCRAFT:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Identification License or
Year Make/Manufacturer Model and Serial No. Registration No. New or Used
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
</TABLE>
Engine or other equipment:
------------------------------------------------------
(For aircraft - original ink signature on copy to FAA)
B. DEPOSIT ACCOUNTS:
Type Account Number Amount $
------------------- ----------------------- --------
In name of
---------------------------------------------------------------------
Depository AND ALL EXTENSIONS OR RENEWALS THEREOF.
-----------------------------
C. ACCOUNTS, INTANGIBLES AND OTHER: (Describe)
SEE EXHIBIT "A" ATTACHED HERETO AND MADE A PART HEREOF BY THIS REFERENCE.
The collateral not in Bank's possession will be located at: 22700 Savi
Ranch Parkway, Yorba Linda, CA 92687
|_| If checked, the Obligor is executing this Agreement as an Accommodation
Debtor only and the Obligor's liability is limited to the security interest
granted in the Collateral described herein. The party being accommodated is
("Borrower"). All the terms and provisions on page 2 hereof are incorporated
herein as though set forth in full, and constitute a part of this Agreement.
Signature
Name (indicate title, if applicable) Address
RESEARCH ENGINEERS, INC., By: /S/ JYOTI CHATTERJEE 22700 Savi Ranch Parkway
A DELAWARE CORPORATION -------------------- Yorba Linda, CA 92687
Jyoti Chatterjee, EVP/COO
By: /S/ WAYNE BLAIR
------------------
Wayne L. Blair, CFO/Secretary
L 552 E (Rev 9/97) Distribution: Bank/Customer/File Page 1 of 2
<PAGE>
SECURITY AGREEMENT (CONTINUED)
Obligor represents, warrants and agrees:
1. Obligor will immediately pay (a) any Debt when due, (b) Bank's costs of
collecting the Debt, of protecting, insuring or realizing on Collateral, and any
expenditure of Bank pursuant hereto, including attorneys' fees and expenses,
with interest at the rate of 24% per year, or the rate applicable to the Debt,
whichever is less, from the date of expenditure, and (c) any deficiency after
realization of Collateral.
2. Obligor will use the proceeds of any loan that becomes Debt hereunder for the
purpose indicated on the application therefore, and will promptly contract to
purchase and pay the purchase price of any property which becomes Collateral
hereunder from the proceeds of any loan made for that purpose.
3. As to all Collateral in Obligor's possession (unless specifically otherwise
agreed to by Bank in writing), Obligor will:
(a) Have, or has, possession of the Collateral at the location disclosed
to Bank and will not remove the Collateral from the location.
(b) Keep the Collateral separate and identifiable.
(c) Maintain the Collateral in good and saleable condition, repair it if
necessary, clean, feed, shelter, water, medicate, fertilize,
cultivate, irrigate, prune and otherwise deal with the Collateral in
all such ways as are considered good practice by owners of like
property, use it lawfully and only as permitted by insurance policies,
and permit Bank to inspect the Collateral at any reasonable time.
(d) Not sell, contract to sell, lease, encumber or transfer the Collateral
(other than inventory Collateral) until the Debt has been paid, even
though Bank has a security interest in proceeds of such Collateral.
4. As to Collateral which is inventory and accounts, Obligor:
(a) May, until notice from Bank, sell, lease or otherwise dispose of
inventory Collateral in the ordinary course of business only, and
collect the cash proceeds thereof.
(b) Will, upon notice from Bank, deposit all cash proceeds as received in
a demand deposit account with Bank, containing only such proceeds and
deliver statements identifying units of inventory disposed of,
accounts which gave rise to proceeds, and all acquisitions and returns
of inventory as required by Bank.
(c) Will receive in trust, schedule on forms satisfactory to the Bank and
deliver to Bank all non-cash proceeds other than inventory received in
trade.
(d) If not in default, may obtain release of Bank's interest in individual
units of inventory upon request, therefore, payment to Bank of the
release price of such units shown on any Collateral schedule
supplementary hereto, and compliance herewith as to proceeds thereof.
5. As to Collateral which are accounts, chattel paper, general intangibles and
proceeds described in 4(c) above, Obligor warrants, represents and agrees:
(a) All such Collateral is genuine, enforceable in accordance with its
terms, free from default, prepayment, defense and conditions precedent
(except as disclosed to and accepted by Bank in writing), and is
supported by consecutively numbered invoices to, or rights against,
the debtors thereon. obligor will supply Bank with duplicate invoices
or other evidence of Obligor's rights on Bank's request;
(b) All persons appearing to be obligated on such Collateral have
authority and capacity to contract;
(c) All chattel paper is in compliance with law as to form, content and
manner of preparation and execution and has been properly registered,
recorded, and/or filed to protect Obligor's interest thereunder;
(d) If an account debtor shall also be indebted to Obligor on another
obligation, any payment made by him not specifically designated to be
applied on any particular obligation shall be considered to be a
payment on the account in which Bank has a security interest. Should
any remittance include a payment not on an account, it shall be
delivered to Bank and, if no event of default has occurred, Bank shall
pay Obligor the amount of such payment;
(e) Obligor agrees not to compromise, settle or adjust any account or
renew or extend the time of payment thereof without Bank's prior
written consent.
6. Obligor owns all Collateral absolutely, and no other person has or claims any
interest in any Collateral, except as disclosed to and accepted by Bank in
writing. Obligor will defend any proceeding which may affect title to or
Bank's security interest in any Collateral, and will indemnify and hold Bank
free and harmless from all costs and expenses of Bank's defense.
7. Obligor will pay when due all existing or future charges, liens or
encumbrances on and all taxes and assessments now or hereafter imposed on or
affecting the Collateral and, if the Collateral is in Obligor's possession,
the realty on which the Collateral is located.
8. Obligor will insure the Collateral with Bank as loss payee in form and
amounts with companies, and against risks and liability satisfactory to Bank,
and hereby assigns such policies to Bank, agrees to deliver them to Bank at
Bank's request, and authorizes Bank to make any claim thereunder, to cancel
the insurance on Obligor's default, and to receive payment of and endorse any
instrument in payment of any loss or return premium. If Obligor should fail
to deliver the required policy or policies to the Bank, Bank may, at
Obligor's cost and expense, without any duty to do so, get and pay for
insurance naming as the insured, at Bank's option, either both Obligor and
Bank, or only Bank, and the cost thereof shall be secured by this Security
Agreement, and shall be repayable as provided in Paragraph 1 above.
9. Obligor will give Bank any information it requires. All information at any
time supplied to Bank by Obligor (including, but not limited to, the value
and condition of Collateral, financial statements, financing statements, and
statements made in documentary Collateral) is correct and complete, and
Obligor will notify Bank of any adverse change in such information. Obligor
will promptly notify Bank of any change of Obligor's residence. chief
executive office or mailing address.
10.Bank is irrevocably appointed Obligor's attorney-in-fact to do any act which
Obligor is obligated hereby to do, to exercise such rights as Obligor may
exercise, to use such equipment as Obligor might use, to enter Obligor's
premises to give notice of Bank's security interest, and to collect
Collateral and proceeds and to execute and file in Obligor's name any
financing statements and amendments thereto required to perfect Bank's
security interest hereunder, all to protect and preserve the Collateral and
Bank's rights hereunder. Bank may:
(a) Endorse, collect and receive delivery or payment of instruments and
documents constituting Collateral;
(b) Make extension agreements with respect to or affecting Collateral,
exchange it for other Collateral, release persons liable thereon or
take security for the payment thereof, and compromise disputes in
connection therewith;
(c) Use or operate Collateral for the purpose of preserving Collateral or
its value and for preserving or liquidating Collateral.
11.If more than one Obligor signs this Agreement, their liability is joint and
several. Any Obligor who is married agrees that recourse may be had against
separate property for the Debt. Discharge of any Obligor except for full
payment, or any extension, forbearance, change of rate of interest, or
acceptance, release or substitution of Collateral or any impairment or
suspension of Bank's rights against an Obligor, or any transfer of an
Obligor's interest to another shall not affect the liability of any other
Obligor. Until the Debt shall have been paid or performed in full, Bank's
rights shall continue even if the Debt is outlawed. All Obligors waive: (a)
any right to require Bank to proceed against any Obligor before any other, or
to pursue any other remedy; (b) presentment, protest and notice of protest,
demand and notice of nonpayment, demand or performance, notice of sale, and
advertisement of sale; (c) any right to the benefit of or to direct the
application of any Collateral until the Debt shall have been paid; (d) and
any right of subrogation to Bank until Debt shall have been paid or performed
in full.
12.Upon default, at Bank's option, without demand or notice, all or any part of
the Debt shall immediately become due. Bank shall have all rights given by
law, and may sell, in one or more sales, Collateral in any county where Bank
has an office. Bank may purchase at such sale. Sales for cash or on credit to
a wholesaler, retailer or user of the Collateral, or at public or private
auction, are all to be considered commercially reasonable. Bank may require
Obligor to assemble the Collateral and make it available to Bank at the
entrance to the location of the Collateral, or a place designated by Bank.
Defaults shall include:
(a) Obligor's failure to pay or perform this or any agreement with Bank or
breach of any warranty herein, or Borrower's failure to pay or perform
any agreement with Bank.
(b) Any change in Obligor's or Borrower's financial condition which in
Bank's judgment impairs the prospect of Borrower's payment or
performance.
(c) Any actual or reasonably anticipated deterioration of the Collateral
or in the market price thereof which causes it, in Bank's judgment, to
become unsatisfactory as security.
(d) Any levy or seizure against Borrower or any of the Collateral.
(e) Death, termination of business, assignment for creditors, insolvency,
appointment of receiver, or the filing of any petition under
bankruptcy or debtor's relief laws of, by or against Obligor or
Borrower or any guarantor of the Debt.
(f) Any warranty or representation which is false or is believed in good
faith by Bank to be false.
13.Bank's acceptance of partial or delinquent payments or the failure of Bank
to exercise any right or remedy shall not waive any obligation of Obligor or
Borrower or right of Bank to modify this Agreement, or waive any other
similar default.
14.On transfer of all or any part of the Debt, Bank may transfer all or any
part of the Collateral. Bank may deliver all or any part of the Collateral to
any Obligor at any time. Any such transfer or delivery shall discharge Bank
from all liability and responsibility with respect to such Collateral
transferred or delivered. This Agreement benefits Bank's successors and
assigns and binds Obligor's heirs, legatees, personal representatives,
successors and assigns. obligor agrees not to assert against any assignee of
Bank any claim or defense that may exist against Bank. Time is of the
essence. This Agreement and supplementary schedules hereto contain the entire
security agreement between Bank and Obligor. Obligor will execute any
additional agreements, assignments or documents reasonably required by Bank
to carry this Agreement into effect.
15.This Agreement shall be governed by and construed in accordance with the
laws of the State of California, to the jurisdiction of whose courts the
Obligor hereby agrees to submit. Obligor agrees that service of process may
be accomplished by any means authorized by California law. All words used
herein in the singular shall be considered to have been used in the plural
where the context and construction so require.
16.To the extent that Obligor acquires any trademarks, service marks, trade
names and service names and/or the goodwill associated therewith, copyrights,
patents and/or patent applications (collectively 'Intellectual Property),
Obligor shall give prompt notice thereof to Bank and shall take any and all
actions requested from time to time by Bank to perfect Obligor's interest in
such Intellectual Property and to perfect Bank's first priority interest
therein. Without limiting the generality of the foregoing, the Obligor agrees
as follows: Upon Obligor creating, writing, producing or acquiring any
software, computer source codes or other computer programs (collectively, the
'Software'), Obligor shall promptly register such Software with the U.S.
Copyright Office and to the extent Obligor's rights therein are acquired from
any third party, Obligor shall promptly upon such acquisition file with the
U.S. Copyright Office any and all documents necessary to perfect Obligor's
rights therein. Upon Obligor creating, writing, producing or otherwise
acquiring any Software, Obligor shall give prompt notice thereof to Bank.
Obligor shall execute and deliver to Bank any and all copyright mortgages,
UCC financing statements and other documents and instruments which Bank may
request in connection with the Bank perfecting its first priority security
interest in such Software.
L 552 E (Rev 9/97) Page 2 of 2
<PAGE>
Attachment to General Security Agreement
EXHIBIT "A" COLLATERAL DESCRIPTION
----------------------------------
All personal property of Obligor (herein referred to as "Obligor" or "Debtor')
whether presently existing or hereafter created, written, produced or acquired,
including, but not limited to: (i) all accounts receivable, accounts, chattel
paper, contract rights (including, without limitation, royalty agreements,
license agreements and distribution agreements), documents, instruments, money,
deposit accounts and general intangibles including, without limitation, returns,
repossessions, books and records relating thereto, and equipment containing said
books and records, all investment property including securities and securities
entitlement, (ii) all software, computer source codes and other computer
programs (collectively, the "Software Products"), and all common law and
statutory copyrights and copyright registrations, applications for registration,
now existing or hereafter arising, United States of America and foreign,
obtained or to be obtained on or in connection with the Software Products, or
any parts thereof or any underlying or component elements of the Software
Products together with the right to copyright and all rights to renew or extend
such copyrights and the right (but not the obligation) of Bank (herein referred
to as "Bank" or "Secured Party") to sue in its own name and/or in the name of
the Debtor for past, present, and future infringements of copyright, (iii) all
goods including, without limitation, equipment and inventory (including, without
limitation, all export inventory), (iv) all guarantees and other security
therefor, (v) all trademarks, service marks, trade names and service names and
the goodwill associated therewith, (vi) (a) all patents and patent applications
filed in the United States Patent and Trademark Office or any similar office of
any foreign jurisdiction, and interests under patent license agreements,
including, without limitation, the inventions and improvements described and
claimed therein, (b) licenses pertaining to any patent whether Debtor is
licensor or licensee, (c) all income, royalties, damages, payments, accounts and
accounts receivable now or hereafter due and/or payable under and with respect
thereto, including, without limitation, damages and payments for past, present
or future infringements thereof, (d) the right (but not the obligation) to sue
for past, present and future thereof, (e) all rights corresponding thereto
throughout the world in all jurisdictions in which such patents have been issued
or applied for, and (f) the reissues, divisions, continuations, renewals,
extensions and continuations-in-part with any of the foregoing (all of the
foregoing patents and applications and interests under patent license
agreements, together with the items described in clauses (a) through (f) in this
paragraph are sometimes herein individually and collectively referred to as the
"Patents"), and (vii) all products and proceeds including, without limitation,
insurance proceeds, of any of the foregoing.
To the extent that Obligor acquires any trademarks, service marks, trade
names and service names and/or the goodwill associated therewith, copyrights,
patents and/or patent applications (collectively "Intellectual Property"),
Obligor shall give prompt notice thereof to Bank and shall take any and all
actions reasonably requested from time to time by Bank to perfect Obligor's
interest in such Intellectual Property and to perfect Bank's first priority
security interest therein. Without limiting the generality of the foregoing, the
Obligor further agrees as follows: Upon Obligor creating, writing, producing or
acquiring any material software, computer source codes or other computer
programs (collectively, the "Software"), Obligor shall promptly register such
Software with the U.S. Copyright Office before selling or licensing the
Software, and to the extent Obligor's rights therein are acquired from any third
party, Obligor shall promptly upon such acquisition file with the U.S. Copyright
Office any and all documents necessary to perfect Obligor's fights therein. Upon
Obligor creating, writing, producing or otherwise acquiring any material
Software, Obligor shall give prompt notice thereof to Bank. Obligor shall
execute and deliver to Bank any and all copyright mortgages, UCC financing
statements and other documents and instruments which Bank may request in
connection with the Bank perfecting its first priority security interest in such
Software.
RESEARCH ENGINEERS, INC., a Delaware corporation
By:
-------------------------
Jyoti Chatterjee, EVP/COO
By: -------------------------
Wayne L. Blair, CFO/Secretary
<PAGE>
Exhibit 2.7
DO NOT DESTROY THIS NOTE:
When paid, this note, with the Deed of Trust securing same, must be surrendered
to the Trustee for cancellation before reconveyance will be made.
IMPERIAL BANK
INNOVATIVE BUSINESS BANKING;
Member FDIC
NOTE SECURED BY DEED OF TRUST
$2,320,000.00 Costa MesaCalifornia , February 26, 1999
On August 26, 2000 , and as hereinafter provided, for value received, the
undersigned promises to pay to IMPERIAL BANK ("Bank"), a California banking
corporation, or order, at its Orange County Regional office, the principal sum
of $ 2,320,000.00 MAXIMUM or such sums up to the maximum if so stated, as the
Bank may now or hereafter advance to or for the benefit of the undersigned in
accordance with the terms hereof, together with interest from date of
disbursement or N/A , whichever is later, on the unpaid principal balance |_| at
the rate of % per year |X| at the rate of 3.000 % per year in excess of the rate
of interest which Bank has announced as its prime lending rate (the "Prime
Rate"), which shall vary concurrently with any change in such Prime Rate, or $
250.00 , whichever is greater. Interest shall be computed at the above rate on
the basis of the actual number of days during which the principal balance is
outstanding, divided by 360, which shall, for interest computation purposes, be
considered one year.
Interest shall be payable |X| monthly |_| quarterly |_| included with principal
|_| in addition to principal |_| beginning March 26, 1999 , and if not so paid
shall become a part of the principal. All payments shall be applied first to any
late charges owing, then to interest and the remainder, if any, to principal.
|_| (If checked), Principal shall be payable in installments of $ , or more,
each installment on the day of each , beginning .
Any partial prepayment shall be applied to the installments, if any, in
inverse order of maturity. Should default be made in the payment of principal or
interest when due, or in the performance or observance, when due, of any item,
covenant or condition of any deed of trust, security agreement or other
agreement (including amendments or extensions thereof) securing or pertaining to
this note, at the option of the holder hereof and without notice or demand, the
entire balance of principal and accrued interest then remaining unpaid shall (a)
become immediately due and payable, and (b) thereafter bear interest, until paid
in full, at the increased rate of 5% per year in excess of the rate provided for
above, as it may vary from time to time.
Defaults shall include, but not be limited to, the failure of the maker(s) to
pay principal or interest when due; the filing as to each person obligated
hereon, whether as maker, co-maker, endorser or guarantor (individually or
collectively referred to as the "Obligor") of a voluntary or involuntary
petition under the provisions of the Federal Bankruptcy Act; the issuance of any
attachment or execution against any asset of any Obligor; the death of any
Obligor or any deterioration of the financial condition of any Obligor which
results in the holder hereof considering itself, in good faith, insecure.
If any installment payment, interest payment, principal payment or principal
balance payment due hereunder is delinquent ten or more days, Obligor agrees to
pay Bank a late charge in the amount of 5% of the payment so due and unpaid, in
addition to the payment; but nothing in this paragraph is to be construed as any
obligation on the part of the holder of this note to accept payment of any
payment past due or less than the total unpaid principal balance after maturity.
If this note is not paid when due, each Obligor promises to pay all costs and
expenses of collection and reasonable attorney's fees incurred by the holder
hereof on account of such collection, plus interest at the rate applicable to
principal, whether or not suit is filed hereon. Each Obligor shall be jointly
and severally liable hereon and consents to renewals, replacements and
extensions of time for payment hereof, before, at, or after maturity; consents
to the acceptance, release or substitution of security for this note; and waives
demand and protest and the right to assert any statute of limitations. Any
married person who signs this note agrees that recourse may be had against
separate property for any obligations hereunder. The indebtedness evidenced
hereby shall be payable in lawful money of the United States. In any action
brought under or arising out of this note, each Obligor, including successor(s)
or assign(s) hereby consents to the application of California law, to the
jurisdiction of any competent court within the State of California, and to
service of process by any means authorized by California law.
This note is secured by a deed of trust, dated February 26, 1999, to IMPERIAL
BANCORP as Trustee which contains the following provisions: "In the event the
herein described property or any part thereof, or any interest therein is sold,
agreed to be sold, conveyed, transferred, disposed of, further encumbered, or
alienated by trustor or by the operation of law or otherwise, without the
written consent of beneficiary first obtained, all obligations secured by this
instrument, irrespective of the maturity dates expressed therein, at the option
of the holder beneficiary, and without demand or notice shall immediately become
due and payable. Consent to one such transaction shall not be deemed to be a
waiver of the right to require such consent to future or successive
transactions."
No single or partial exercise of any power hereunder, or under any deed of
trust, security agreement or other agreement in connection herewith shall
preclude other or further exercises thereof or the exercise of any other such
power. The holder hereof shall at all times have the right to proceed against
any portion of the security for this note in such order and in such manner as
such holder may consider appropriate, without waiving any rights with respect to
any of the security. Any delay or omission on the part of the holder hereof in
exercising any right hereunder, or under any deed of trust, security agreement
or other agreement, shall not operate as a waiver of such right, or of any other
right, under this note or any deed of trust, security agreement or other
agreement in connection herewith.
L 492 E (Rev 2/1999) Page 1
<PAGE>
REFERENCE PROVISION
1. Other than (i) non-judicial foreclosure and all matters in connection
therewith regarding security interests in real or personal property; or (ii) the
appointment of a receiver, or the exercise of other provisional remedies (any
and all of which may be initiated pursuant to applicable law), each controversy,
dispute or claim between the parties arising out of or relating to this document
("Agreement"), which controversy, dispute or claim is not settled in writing
within thirty (30) days after the "Claim Date" (defined as the date on which a
party subject to the Agreement gives written notice to all other parties that a
controversy, dispute or claim exists), will be settled by a reference proceeding
in California in accordance with the provisions of Section 638 et seq. of the
California Code of Civil Procedure, or their successor section ("CCP"), which
shall constitute the exclusive remedy for the settlement of any controversy,
dispute or claim concerning this Agreement, including whether such controversy,
dispute or claim is subject to the reference proceeding and except as set forth
above, the parties waive their rights to initiate any legal proceedings against
each other in any court or jurisdiction other than the Superior Court in the
County where the Real Property, if any, is located or Los Angeles County if none
(the "Court"). The referee shall be a retired Judge of the Court selected by
mutual agreement of the parties, and if they cannot so agree within forty-five
(45) days after the Claim Date, the referee shall be promptly selected by the
Presiding Judge of the Court (or his representative). The referee shall be
appointed to sit as a temporary judge, with all of the powers for a temporary
judge, as authorized by law, and upon selection should take and subscribe to the
oath of office as provided for in Rule 244 of the California Rules of Court (or
any subsequently enacted Rule). Each party shall have one peremptory challenge
pursuant to CCPss.170.6. The referee shall (a)be requested to set the matter for
hearing within sixty (60) days after the Claim Date and (b) try any and all
issues of law or fact and report a statement of decision upon them, if possible,
within ninety (90) days of the Claim Date. Any decision rendered by the referee
will be final, binding and conclusive and judgment shall be entered pursuant to
CCP ss.644 in any court in the State of California having jurisdiction. Any
party may apply for a reference proceeding at any time after thirty (30) days
following notice to any other party of the nature of the controversy, dispute or
claim, by filing a petition for a hearing and/or trial. All discovery permitted
by this Agreement shall be completed no later than fifteen (15) days before the
first hearing date established by the referee. The referee may extend such
period in the event of a party's refusal to provide requested discovery for any
reason whatsoever, including, without limitation, legal objections raised to
such discovery or unavailability of a witness due to absence or illness. No
party shall be entitled to "priority" in conducting discovery. Depositions may
be taken by either party upon seven (7) days written notice, and request for
production or inspection of documents shall be responded to within ten (10) days
after service. All disputes relating to discovery which cannot be resolved by
the parties shall be submitted to the referee whose decision shall be final and
binding upon the parties. Pending appointment of the referee as provided herein,
the Superior Court is empowered to issue temporary and/or provisional remedies,
as appropriate.
2. Except as expressly set forth in this Agreement, the referee shall
determine the manner in which the reference proceeding is conducted including
the time and place of all hearings, the order of presentation of evidence, and
all other questions that arise with respect to the course of the reference
proceeding. All proceedings and hearings conducted before the referee, except
for trial, shall be conducted without a court reporter, except that when any
party so requests, a court reporter will be used at any hearing conducted before
the referee. The party making such a request shall have the obligation to
arrange for and pay for the court reporter. The costs of the court reporter at
the trial shall be borne equally by the parties.
3. The referee shall be required to determine all issues in accordance with
existing case law and the statutory laws of the State of California. The rules
of evidence applicable to proceedings at law in the State of California will be
applicable to the reference proceeding. The referee shall be empowered to enter
equitable as well as legal relief, to provide all temporary and/or provisional
remedies and to enter equitable orders that will be binding upon the parties.
The referee shall issue a single judgment at the close of the reference
proceeding which shall dispose of all of the claims of the parties that are the
subject of the reference. The parties hereto expressly reserve the right to
contest or appeal from the final judgment or any appealable order or appealable
judgment entered by the referee. The parties hereto expressly reserve the right
to findings of fact, conclusions of law, a written statement of decision, and
the right to move for a new trial or a different judgment, which new trial, if
granted, is also to be a reference proceeding under this provision.
4. In the event that the enabling legislation which provides for appointment
of a referee is repealed (and no successor statute is enacted), any dispute
between the parties that would otherwise be determined by the reference
procedure herein described will be resolved and determined by arbitration. The
arbitration will be conducted by a retired judge of the Court, in accordance
with the California Arbitration Act, ss.1280 through ss.1294.2 of the CCP as
amended from time to time. The limitations with respect to discovery as set
forth hereinabove shall apply to any such arbitration proceeding.
This Note is subject to the provisions of the Credit Agreement dated February
26, 1999 and all amendments thereto and replacements therefor.
RESEARCH ENGINEERS, INC., A DELAWARE
CORPORATION
By: /S/ JYOTI CHATTERJEE
--------------------
Jyoti Chatterjee, EVP/COO
By: /S/ WAYNE BLAIR
--------------------
Wayne L. Blair,
CFO/Secretary
L 492 E (Rev 2/1999) Page 2
