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) September 30, 1999
HomeSeekers.com, Incorporated
(Exact Name of Registrant as Specified in its Charter)
Nevada 0-23835 87-0397464
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
2241 Park Place, Suite E, Minden, Nevada 89423
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (775) 782-2977
N/A
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
Merger Transaction. On September 30, 1999, HomeSeekers.com,
Incorporated, a Nevada corporation ("HomeSeekers"), consummated the acquisition
of Real Estate Information, Inc., a Kentucky corporation ("REI"), pursuant to an
Agreement and Plan of Merger, dated as of September 29, 1999 (the "Merger
Agreement"), by and among HomeSeekers, YMLS, Incorporated, a Nevada corporation
and a wholly owned subsidiary of HomeSeekers ("Merger Sub"), REI and the
stockholders of REI. The Merger Agreement provides for the merger (the "Merger")
of REI with and into Merger Sub with Merger Sub as the surviving corporation in
the Merger. Following the Merger, Merger Sub will change its name to REI. In the
Merger, the outstanding capital stock of REI will be canceled and converted into
HomeSeekers common stock. A brief summary of the terms of the Merger Agreement
and the transactions contemplated thereby are described in a press release
issued by HomeSeekers, a copy of which is filed herewith as Exhibit 99.1 and
incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired. Financial
statements of REI for the periods specified in Rule 3-05(b) of
Regulation S-X will be filed by amendment within 60 days of
the date of this filing.
(b) Pro Forma Financial Information. Pro forma financial
information required pursuant to Article 11 of Regulation
S-X will be filed by amendment within 60 days of
the date of this filing.
(c) Exhibits.
Exhibit No. Description
----------- -----------
2.1 Agreement and Plan of Merger, dated as
of September 29, 1999, by and among
HomeSeekers, Merger Sub, REI and the
stockholders of REI.
10.1 Employment Agreement, effective as of
September 29, 1999, between HomeSeekers
and Mark A. Spraetz.
99.1 Press Release, dated October 12, 1999.
2
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SIGNATURE
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.
Dated: October 15, 1999
HomeSeekers.com, Incorporated
By:/s/ Greg Costley
-------------------
Greg Costley, Chairman and Chief
Executive Officer
3
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EXHIBIT INDEX
Exhibit No. Description
----------- -----------
2.1 Agreement and Plan of Merger, dated as of September 29,
1999, by and among HomeSeekers, Merger Sub, REI and the
stockholders of REI.
10.1 Employment Agreement, effective as of September 29,
1999, between HomeSeekers and Mark A. Spraetz.
99.1 Press Release, dated October 12, 1999.
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into as
of this 29th day of September, 1999 by and among (i) HOMESEEKERS.COM,
INCORPORATED, a Nevada corporation and its assignees ("HomeSeekers"); (ii) YMLS,
INCORPORATED, a Nevada corporation and wholly owned subsidiary of HomeSeekers
("YMLS" or "Sub"); (iii) REAL ESTATE INFORMATION, INC., a Kentucky corporation
("REI"); and (iv) the following named shareholders of REI, who constitute the
owners of all of the issued and outstanding shares of stock of REI
(collectively, "the Shareholders"):
Name of Shareholder Address Number of Shares Owned
- ------------------- ------- ----------------------
MARK A. SPRAETZ 7280 Smokeywoods Lane 46
Cincinnati, OH 45230
D. LYNN SPRAETZ 7280 Smokeywoods Lane 46
Cincinnati, OH 45230
DAWN BERTSCHE, 6595 Kenwood Road 8
TRUSTEE of the Cincinnati, OH 45243
SPRAETZ CHILDRENS'
TRUST
Certain other capitalized terms used herein are defined in Article XII and
throughout this Agreement.
RECITALS
A. REI is in the business of providing electronic publishing and
software development for the real estate listing management industry (the "REI
Business").
B. The Boards of Directors of HomeSeekers, Sub and REI have deemed it
advisable that HomeSeekers and REI combine their operations by a merger of REI
into Sub, under the terms and conditions hereinafter set forth (the "Merger").
C. The Boards of Directors of HomeSeekers, Sub and REI have approved
and adopted this Agreement and intend that the Merger qualify for federal income
tax purposes as a reorganization withing the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
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Agreement and Plan of Merger
Page -2-
D. The Board of Directors of HomeSeekers, Sub and REI have determined
that it is in the best interests of their respective shareholders for
HomeSeekers to acquire all of the issued and outstanding capital stock of REI.
In order to effectuate the acquisition, the parties have agreed, subject to the
terms and conditions set forth in this Agreement, to merge REI with and into Sub
so that Sub continues as a surviving corporation and wholly-owned subsidiary of
HomeSeekers, and the Shareholders will be issued shares of common stock of
HomeSeekers, in exchange for the issued and outstanding equity interests of REI.
TERMS OF AGREEMENT
In consideration of the mutual representations, warranties, covenants
and agreements herein contained and subject to the conditions and other terms
herein contained, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1. The Merger. Upon performance (or waiver) of all covenants and
obligations of the parties contained herein and upon fulfillment (or waiver) of
all conditions to the obligations contained herein, and pursuant to Chapter 92A
of the Nevada Revised Statutes (the "NRS") and the Kentucky Revised Statutes
(the "KRS"), at the Effective Time (as defined below) the following will occur:
(a) REI will be merged with and into Sub, with Sub being the surviving
corporation (the "Surviving Corporation") and the separate existence and
corporate organization of REI will cease, and thereupon Surviving Corporation
will be a wholly-owned subsidiary of HomeSeekers;
(b) Sub, as the Surviving Corporation, will succeed, in so far as
permitted by law, to all property, rights, assets, and privileges shall vest in
Sub and all debts, duties, liabilities and obligations of REI shall become the
debts, duties, liabilities and obligations of the Surviving Corporation in
accordance with the NRS and the KRS;
(c) The Articles of Incorporation and Bylaws of Sub, as in effect
immediately prior to the Effective Time, will be the Articles of Incorporation
and Bylaws of the Surviving Corporation until amended as provided by law; and
(d) The officers and directors of Sub will be the initial officers and
directors of the Surviving Corporation at and after the Effective Time, each to
hold office in accordance with the Articles of Incorporation and Bylaws of the
Surviving Corporation, until his or her respective successor is duly elected and
qualified.
ARTICLE II
PURCHASE PRICE/CONVERSION OF SECURITIES
2.1 Conversion of REI Shares in the Merger. At the Effective Time, by
virtue of the Merger and without any action on the part of REI, HomeSeekers, or
the Shareholders:
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Agreement and Plan of Merger
Page -3-
(a) all shares of common stock, no par value, of REI ("REI
Common Stock") owned by Shareholders shall be canceled and shall cease to exist
from and after the Effective Time; and
(b) each issued and outstanding share of REI Common Stock
shall be converted into, and become exchangeable for, the number of shares of
validly issued, fully paid and nonasssessable common stock, $.001 par value, of
HomeSeekers (rounded to the nearest whole share) ("HomeSeekers Common Stock")
equal to the Conversion Ratio. In this Agreement, the term "Conversion Ratio"
means a fraction, the numerator of which is equal to (i) One Million Dollars
$1,000,000, divided by (ii) the average closing sale price of a share of
HomeSeekers Common Stock as quoted on the Nasdaq Stock Market ("Nasdaq") for the
ten (10) consecutive trading days which precede the third trading day
immediately prior to the Effective Time, as reported (absent manifest error in
the printing thereof) by The Wall Street Journal (Western Edition) (the "Average
Closing Sale Price"); and the denominator of which is equal to one hundred
(100). The consideration referred to in this Section is hereinafter referred to
as the "Merger Consideration."
(c) For each share of HomeSeekers Common Stock into which the
REI shares are converted pursuant to Section 2.1(b) of this Agreement that is
sold by the corresponding Shareholder for an actual sale price of less than the
Average Closing Sale Price on or before the earlier of the first anniversary of
the Effective Date or the 180th day after the date on which that share becomes
the subject of an effective registration statement (the "First Keep-well Date"),
HomeSeekers shall, within 30 days from the First Keep-well Date, deliver to the
Shareholder the number of registered shares of HomeSeekers Common Stock
determined by dividing (i) one fourth (1/4) of the commissions paid on such
sales plus the difference between the Average Closing Sale Price and the actual
sale price for that share, adjusted for stock splits, by (ii) the average
closing sale price of a share of HomeSeekers Common Stock as quoted on the
Nasdaq for the ten (10) consecutive trading days which precede the First
Keep-well Date, as reported (absent manifest error in the printing thereof) by
The Wall Street Journal (Western Edition). Where applicable, for each share of
HomeSeekers Common Stock into which the REI shares are converted pursuant to
Section 2.1(b) of this Agreement that is sold by the corresponding Shareholder
for an actual sale price of less than the Average Closing Sale Price after the
First Keep-well Date but before the the 180th day after the date on which that
share becomes the subject of an effective registration statement (the "Second
Keep-well Date"), HomeSeekers shall, within 30 days from the Second Keep-well
Date, deliver to the Shareholder the number of registered shares of HomeSeekers
Common Stock determined by dividing (i) one fourth (1/4) of the commissions paid
on such sales plus the difference between the Average Closing Sale Price and the
actual sale price for that share, adjusted for stock splits, by (ii) the average
closing sale price of a share of HomeSeekers Common Stock as quoted on the
Nasdaq for the ten (10) consecutive trading days which precede the Second
Keep-well Date, as reported (absent manifest error in the printing thereof) by
The Wall Street Journal (Western Edition). HomeSeekers shall have no obligation
under this Subsection 2.1(c) with respect to any share of HomeSeekers Common
Stock that is not sold on or before the First Keep-Well Date or, where
applicable, the Second Keep-well Date.
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Agreement and Plan of Merger
Page -4-
2.2 Status of Sub Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of any holder of any capital stock of
Sub, each issued and outstanding share of common stock of Sub shall continue
unchanged and remain outstanding as a share of common stock of the Surviving
Corporation.
2.3 Additional Consideration.
(a) Subject to the conditions set forth in this Section, on
the first anniversary of the Effective Time, HomeSeekers shall deliver to the
Shareholders, certificates representing the number of shares (rounded to the
nearest whole share) of common stock of HomeSeekers, $.001 par value per share
determined by dividing (i) Five Hundred Thousand Dollars ($500,000) (the "First
Anniversary Payment"), by (ii) the average closing sale price of a share of
HomeSeekers Common Stock as quoted on the Nasdaq for the ten (10) consecutive
trading days which precede the first anniversary of the Effective Time, as
reported (absent manifest error in the printing thereof) by The Wall Street
Journal (Western Edition) (the "First Anniversary Average Closing Sale Price").
The HomeSeekers Common Stock so delivered shall be allocated among the
Shareholders in proportion to their respective percentage ownership interest of
the REI Common Stock as of the Effective Time. The First Anniversary Payment
shall be reduced by the amount that (i) the proceeds of the sales of any shares
delivered to the Shareholders pursuant to Section 2.1(b) or 2.1(c) of this
Agreement plus (ii) the First Anniversary Average Closing Sale Price multiplied
by the number of shares delivered to the Shareholders pursuant to Section 2.1(b)
or 2.1(c) of this Agreement but not sold before the first anniversary of the
Effective Time, adjusted for stock splits, exceeds One Million One Hundred
Thousand Dollars ($1,100,000).
(b) Subject to the conditions set forth in this Section, on
the second anniversary of the Effective Time, HomeSeekers shall deliver to the
Shareholders, certificates representing the number of shares (rounded to the
nearest whole share) of common stock of HomeSeekers, $.001 par value per share
determined by dividing (i) Five Hundred Thousand Dollars ($500,000) (the "Second
Anniversary Payment"), by (ii) the average closing sale price of a share of
HomeSeekers Common Stock as quoted on the Nasdaq for the ten (10) consecutive
trading days which precede the second anniversary of the Effective Time, as
reported (absent manifest error in the printing thereof) by The Wall Street
Journal (Western Edition) (the "Second Anniversary Average Closing Sale Price").
The HomeSeekers Common Stock so delivered shall be allocated among the
Shareholders in proportion to their respective percentage ownership interest of
the REI Common Stock as of the Effective Time. The Second Anniversary Payment
shall be reduced by the amount that (i) the proceeds of the sales of any shares
delivered to the Shareholders pursuant to Section 2.1(b) or 2.1(c) of this
Agreement plus (ii) the Second Anniversary Average Closing Sale Price multiplied
by the number of shares delivered to the Shareholders pursuant to Section 2.1(b)
or 2.1(c) of this Agreement but not sold before the second anniversary of the
Effective Time, adjusted for stock splits, exceeds One Million Six Hundred
Thousand Dollars ($1,600,000).
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Agreement and Plan of Merger
Page -5-
ARTICLE III
CLOSING
3.1 Time and Place. Subject to the terms and conditions of this
Agreement, the closing of the Merger (the "Closing") shall take place at such
time and place as the parties may agree. The date on which the Closing occurs
shall be referred to as the "Closing Date".
3.2 Filing of Plan of Merger. At the Closing, the parties shall cause
the Merger to be consummated by filing duly executed Articles of Merger, or an
Agreement of Merger, as applicable, with the Secretary of State of the States of
Nevada and Kentucky in such form as HomeSeekers determines is required by and in
accordance with the relevant provisions of the NRS and the KRS (the date and
time of such filing is referred to herein as the "Effective Date" or "Effective
Time").
3.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided under the NRS and the KRS.
3.4 Tax Treatment. The parties hereto acknowledge and agree that they
desire that the Merger contemplated hereby be treated for taxation purposes as a
tax-free reorganization under Section 368 of the Code, each person shall use its
best efforts to take all action necessary for the Merger to be so treated.
3.5 Procedure at the Closing. At the Closing, the parties agree that
the following shall occur:
(a) REI and the Shareholders shall have satisfied each of the
conditions set forth in Article VIII and shall deliver to HomeSeekers the
documents, certificates, opinions, consents and letters required by Article
VIII.
(b) HomeSeekers shall have satisfied each of the conditions
set forth in Article IX and shall deliver to REI and Shareholders the documents,
certificates, consents and letters required by Article IX.
(c) HomeSeekers shall direct its transfer agent to issue the
shares of HomeSeekers Common Stock issuable pursuant to Section 2.1(b),
registered in the name of Shareholders, and shall deliver stock certificates
relating thereto (and cash in lieu of fractional shares thereof) promptly
following surrender of the existing REI stock certificates by the Shareholders.
(d) From and after the Effective Time, the stock transfer
books of REI shall be closed and no transfer of shares of REI Common Stock shall
thereafter be made. If, after the Effective Time, REI Certificates are presented
to HomeSeekers, they shall be canceled and exchanged for the Merger
Consideration in accordance with this Agreement.
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Agreement and Plan of Merger
Page -6-
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF HOMESEEKERS AND SUB
As a material inducement to REI and the Shareholders to enter into this
Agreement and to consummate the transactions contemplated hereby, HomeSeekers
and Sub, jointly and severally, make the following representations and
warranties to REI and the Shareholders:
4.1 Corporate Status. HomeSeekers and Sub are corporations duly
organized, validly existing and in good standing under the laws of the State of
Nevada.
4.2 Corporate Power and Authority. HomeSeekers and Sub have the
corporate power and authority to execute and deliver this Agreement, to perform
their respective obligations hereunder and to consummate the transactions
contemplated hereby. HomeSeekers and Sub have taken all action necessary to
authorize the execution and delivery of this Agreement, the performance of their
obligations hereunder and the consummation of the transactions contemplated
hereby.
4.3 Enforceability. This Agreement has been duly executed and delivered
by HomeSeekers and constitutes a legal, valid and binding obligation of
HomeSeekers, enforceable against HomeSeekers in accordance with its terms,
except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and general equitable principles regardless of
whether such enforceability is considered in a proceeding at law or in equity.
4.4 No Commissions. No broker, finder or investment banker engaged by
HomeSeekers is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement.
4.5 HomeSeekers Common Stock. Upon consummation of the transactions
contemplated hereby and the issuance and delivery of certificates representing
all the shares issuable pursuant to Section 2 of this Agreement (the
"HomeSeekers Shares"), HomeSeekers Shares will be validly issued, fully paid and
non-assessable. The issuance of HomeSeekers Shares will be entitled to the
registration rights set forth in Article XI below and except for the
restrictions described in the legend contained in Section 11.3 of this
Agreement, shall be free, clear and unencumbered.
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Agreement and Plan of Merger
Page -7-
4.6 Capitalization. As of the date hereof, the authorized capital stock
of HomeSeekers consists of Fifty Million (50,000,000) shares of HomeSeekers
Common Stock and Five Million (5,000,000) shares of Series A Convertible Stock.
As of the 31st day of August, 1999, (i) Fifteen Million, Two Hundred Five
Thousand, Seven Hundred Seventy-Eight (15,205,778) shares of HomeSeekers Common
Stock were validly issued and outstanding and (ii) no shares of Series A
Convertible Stock were issued or outstanding. The authorized capital stock of
Sub consists of ten (10) shares of common stock, no par value per share, of
which ten (10) shares are validly issued and outstanding and held of record and
beneficially by HomeSeekers.
4.7 Governmental Approvals and Filings. No approval, authorization,
consent, license, clearance or order of, declaration or notification to, or
filing, registration or compliance with, any governmental or regulatory
authority ("Governmental Authority") is required on the part of HomeSeekers or
Sub in order (a) to permit HomeSeekers and Sub to perform their obligations
under this Agreement, or (b) to prevent the termination of any right, privilege,
license or agreement of HomeSeekers or Sub by reason of the transactions
contemplated by this Agreement, except for the filing of the Merger Agreement
with Nevada and Kentucky.
4.8 No Conflict. Except for the receipt of any required approval of the
shareholders of HomeSeekers and Sub and compliance with the governmental and
regulatory requirements described in Section 4.7 hereof, neither the execution,
delivery and performance of this Agreement by HomeSeekers and Sub nor the
consummation by HomeSeekers and Sub of the transactions contemplated hereby and
thereby, will (a) conflict with, or result in a breach of, any of the terms,
conditions or provisions of HomeSeekers' or Sub's Articles of Incorporation or
Bylaws (or other organizational or charter documents), (b) conflict with, result
in a breach or violation of, give rise to a termination right or a default
under, result in the acceleration of performance under (whether or not after the
giving of notice or lapse of time or both), any mortgage, lien, lease,
agreement, note, bond, indenture, guarantee or instrument or any license or
franchise granted by or to a third party, in each case, that is material to the
business of HomeSeekers or Sub, (c) to the best of HomeSeekers' or Sub's
knowledge conflict with, or result in a violation of, any statute, regulation,
law, ordinance, writ, injunction, order, judgment or decree to which HomeSeekers
or Sub or any of their assets may be subject, (d) give rise to a declaration or
imposition of any lien, charge, security interest or encumbrance of any nature
whatsoever upon any of the assets of HomeSeekers or Sub, (e) adversely affect
any franchise, license, permit or other governmental approval which is material
to HomeSeekers' or Sub's Business or is necessary to enable HomeSeekers or Sub
to carry on its business as presently conducted or is required of any employee
or agent of HomeSeekers or Sub to enable each of them to carry out such person's
duties on behalf of HomeSeekers or Sub, or (f) require the consent of any third
party.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF REI AND SHAREHOLDERS
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Agreement and Plan of Merger
Page -8-
As of the date hereof, except as disclosed in a document referring
specifically to the relevant subsections of this Article V which is delivered by
REI to HomeSeekers prior to execution of this Agreement (the "REI Disclosure
Schedule"), REI, represents and warrants to HomeSeekers and Sub as follows. The
parties acknowledge that REI is the successor to the business of Information
Management Company, LLC, a Kentucky limited liability company ("IMCO"), and that
IMCO transferred substantially all of its operating assets to REI and REI
assumed all the liabilities and obligations of IMCO. Thus, in order to make the
representations and warranties meaningful, the representations and warranties
shall apply REI as well as to the operation of the business of IMCO only as
specifically noted herein.
5.1 Corporate Organization. REI is a corporation duly organized,
validly existing and in good standing under the laws of its state of
incorporation and has all requisite corporate power and authority and all
necessary governmental authorizations to own, lease and operate its properties
and to conduct its business as it is now being conducted. Neither IMCO nor REI
have had or have any Subsidiaries as defined below. REI is duly qualified or
licensed to do business and is in good standing as a foreign corporation in each
state or other jurisdiction in which the nature of its business or operations or
ownership of its property requires such qualification or licensing, except where
the failure to be so qualified or licensed would not, individually or in the
aggregate, materially and adversely affect the condition (financial or other),
business, properties, prospects (as currently contemplated), net worth or
results of operations of REI taken as a whole (collectively, "REI's Business").
The minute books of REI and IMCO, as made available to HomeSeekers, contain
complete and accurate records of all corporate action taken by REI and IMCO
since their respective dates of organization and incorporation. REI has no
direct or indirect interest in or loans to any partnership, corporation, joint
venture, business association or other entity which in the aggregate exceed
$10,000, all of which are listed in REI Disclosure Schedule. REI and IMCO have
delivered to HomeSeekers complete and correct copies of the Articles of
Incorporation and Bylaws of REI and IMCO as amended to the date hereof. As used
in this Agreement, the term "Subsidiary" means a "subsidiary" as defined in Rule
1.01 in Regulation S-X promulgated under the Securities Act of 1933, as amended
(the "Securities Act").
5.2 Capital Structure. The authorized capital stock of REI consists of
one thousand (1,000) shares of Common Stock, no par value. Upon execution of
this Agreement on the date hereof by REI, there were outstanding one hundred
(100) shares of REI Common Stock. REI has provided HomeSeekers and its legal
counsel with a complete and accurate list of (a) all issuances of REI Common
Stock, (b) the names and addresses of all current holders of REI Common Stock,
together with the number and type of shares held by each holder. REI is not
under any obligation to register under the Securities Act any of its presently
outstanding securities or any securities that may subsequently be issued. Except
as provided hereby, there are no agreements or understandings to which REI is a
party with respect to the transfer or voting of shares of the REI Common Stock.
5.3 No Other Agreements to Sell Assets, Merge, Etc. Except as provided
hereby or as disclosed on the REI Disclosure Schedule, neither IMCO nor REI have
any legal obligation, absolute or contingent, to any person or firm to sell
assets other than in the ordinary course of business or to effect any merger,
consolidation or reorganization of REI or to enter into any agreement with
respect thereto.
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Agreement and Plan of Merger
Page -9-
5.4 Authorization; Execution and Delivery. REI has all requisite
corporate power and authority (a) to execute and deliver this Agreement and the
agreements attached as exhibits hereto to which REI is a party (the "REI
Ancillary Agreements"), (b) subject to the approval of this Agreement by the
holders of a majority of the outstanding shares of REI Common Stock, to perform
its obligations under this Agreement and the REI Ancillary Agreements, and (c)
to consummate the transactions contemplated hereby and thereby. This Agreement
has been duly executed and delivered by REI and, subject to obtaining any
necessary approval of holders of a majority of the outstanding shares of the REI
Common Stock, and assuming its due authorization, execution and delivery by
HomeSeekers and Sub, constitutes the legal, valid and binding obligation of REI,
enforceable in accordance with its terms except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and general equitable
principles regardless of whether such enforceability is considered in a
proceeding at law or in equity. The Board of Directors of REI has unanimously
determined that it is advisable and in the best interest of REI's shareholders
for REI to enter into a strategic business combination with HomeSeekers and Sub
upon the terms and subject to the conditions of this Agreement.
5.5 Governmental Approvals and Filings. No approval, authorization,
consent, license, clearance or order of, declaration or notification to, or
filing, registration or compliance with, any Governmental Authority is required
on the part of REI in order (a) to permit REI to perform its obligations under
this Agreement or (b) to prevent the termination of any right, privilege,
license or agreement of REI by reason of the transactions contemplated by this
Agreement, except for the filing of the Merger Agreement with Nevada and
Kentucky.
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Agreement and Plan of Merger
Page -10-
5.6 No Conflict. Except for the receipt of any required approval of the
shareholders of REI, compliance with the governmental and regulatory
requirements described in Section 5.5 hereof and except for the obligations
noted in the REI Disclosure Schedule, neither the execution, delivery and
performance of this Agreement and REI Ancillary Agreements by REI nor the
consummation by REI of the transactions contemplated hereby and thereby, will
(a) conflict with, or result in a breach of, any of the terms, conditions or
provisions of REI's Articles of Incorporation or Bylaws (or other organizational
or charter documents), (b) conflict with, result in a breach or violation of,
give rise to a termination right or a default under, result in the acceleration
of performance under (whether or not after the giving of notice or lapse of time
or both), any mortgage, lien, lease, agreement, note, bond, indenture, guarantee
or instrument or any license or franchise granted by or to a third party, in
each case, that is material to REI's Business or that is referenced in REI
Disclosure Schedule, (c) to REI and Shareholders' Knowledge, conflict with, or
result in a violation of, any statute, regulation, law, ordinance, writ,
injunction, order, judgment or decree to which REI or any of its assets may be
subject, (d) give rise to a declaration or imposition of any lien, charge,
security interest or encumbrance of any nature whatsoever upon any of the assets
of REI, (e) adversely affect any franchise, license, permit or other
governmental approval which is material to REI's Business or is necessary to
enable REI to carry on its business as presently conducted or is required of any
employee or agent of REI to enable each of them to carry out such person's
duties on behalf of REI, or (f) require the consent of any third party.
5.7 Financial Statements; Absence of Undisclosed Liabilities.
(a) IMCO has furnished HomeSeekers with the balance sheets of
IMCO as of October 31, 1997 and 1998, and the related statements of operations,
cash flows and changes in shareholders' equity for each of the years ended
October 31, 1997 and 1998, and the unaudited balance sheet and related
statements of operations, cash flows and changes in shareholders' equity for the
ten month period ended August 31, 1999 (collectively, the "IMCO Financial
Statements"). IMCO Financial Statements, including the notes, if any, thereto,
(i) have been prepared based on, and accurately reflect, the books of IMCO; (ii)
have been prepared based on accounting principles consistently applied in all
material respects through the periods involved; (iii) present fairly the
financial position of IMCO as of the respective dates thereof and the results of
operations and cash flows of IMCO for the respective periods indicated therein.
During the eighteen month period ended October 31, 1998, there has been no
change in IMCO's accounting principles, methods or policies, except as described
in any notes to IMCO Financial Statements and except that the unaudited interim
financial statements (A) are subject to normal year-end adjustments which are
not expected to be material in the aggregate and (B) do not include footnotes.
(b) Except for obligations incurred in the ordinary course of
business or obligations described in the REI Disclosure Schedule, neither IMCO
nor REI has no liabilities of any nature, whether accrued, absolute, contingent
or otherwise, and whether due or to become due, which were not disclosed or
provided for in IMCO Financial Statements or the notes thereto other than
obligations not required to be disclosed or provided for under generally
accepted accounting principles and liabilities incurred since December 31, 1998,
which are not individually or in the aggregate, material to REI's Business.
There are no loss contingencies (as such term is used in Statement of Financial
Accounting Standards No. 5) which were not adequately provided for in IMCO
Financial Statements or reflected in the notes thereto.
(c) To REI and Shareholders' Knowledge, the accounts
receivable of REI shown on the IMCO Financial Statements at are collectible in
the ordinary and usual course of business, and REI has not been notified of any
debtor's intention to assert any defense or right of set-off that may be or any
claim of set-off, other than as reflected in the allowance for doubtful accounts
shown on the balance sheet contained in the IMCO Financial Statements. To REI
and Shareholders' Knowledge, the reserve for doubtful accounts is adequate, and
the values at which accounts receivable are carried on the IMCO Financial
Statements reflect the policies of IMCO and REI consistent with IMCO's past
practice are based on accounting principles consistently applied in all material
respects.
<PAGE>
Agreement and Plan of Merger
Page -11-
(d) IMCO and REI make and keep accurate books and records
reflecting in all material respects its assets and maintain internal accounting
controls which provide reasonable assurance that (i) transactions are executed
in accordance with management's authorization, (ii) transactions are recorded to
permit preparation of IMCO and REI's financial statements and to maintain
accountability in all material respects for the assets of REI, and (iii) access
to the assets of REI is permitted only in accordance with management's
authorization.
5.8 Absence of Changes. Since August 31, 1999 (a) except for generally
known industry developments and changes, there has been no Material Adverse
Change in REI's Business or any event known to REI that is reasonably expected
to cause a Material Adverse Change in REI's Business; (b) there has been no
damage, destruction or loss (whether or not covered by insurance) materially and
adversely affecting any assets material to REI's Business; (c) except as
disclosed on the REI Disclosure Schedule, REI has conducted its business only in
the ordinary course consistent with past practice; and (d) except as disclosed
on the REI Disclosure Schedule, no event described in Section 6.2 or Section 6.3
hereof has occurred.
5.9 Contracts and Commitments.
(a) Except as disclosed on the REI Disclosure Schedule,
neither IMCO nor REI is a party or subject to:
(i) Any union contract or collective bargaining
agreement or any employment contract, providing for future compensation with any
officer, consultant, director or employee which is not terminable by it on
thirty (30) days' notice or less without penalty or obligation to make payments
related to such termination, other than (A) (in the case of employees other than
executive officers) such severance agreements as are not different from standard
arrangements offered to employees generally in the ordinary course of business
consistent with REI's past practices, a description of which is set forth in the
REI Disclosure Schedule and (B) such agreements as may be imposed or implied by
law;
(ii) Any written plans, contracts or arrangements,
written or oral, which collectively require aggregate payments by REI in excess
of $10,000 for bonuses, pensions, deferred compensation, severance pay or
benefits, retirement payments, profit-sharing, or the like;
(iii) Any joint marketing, joint development or joint
venture contract or arrangement or any other agreement which has involved or is
expected to involve a sharing of profits with other persons;
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Agreement and Plan of Merger
Page -12-
(iv) Any existing OEM agreement, distribution
agreement, volume purchase agreement, or other similar agreement in which the
annual amount involved in 1998 exceeded, or is expected to exceed in 1999 or any
subsequent year, $10,000 or pursuant to which IMCO or REI has granted or
received most favored customer provisions or exclusive marketing rights related
to any product, group of products or territory;
(v) Any lease for real or personal property pursuant
to which the amount of payments which IMCO or REI is required to make on an
annual basis exceeds $10,000;
(vi) Any material agreement, contract, mortgage,
indenture, lease, instrument, license, franchise, permit, concession,
arrangement, commitment or authorization which may be, by its terms, terminated
or breached by reason of the execution of this Agreement, or any REI Ancillary
Agreement, the closing of the Merger, or the consummation of the transactions
contemplated hereby or thereby;
(vii) Except for trade indebtedness incurred in the
ordinary course of business, any instrument evidencing or related in any way to
indebtedness in excess of $10,000 incurred in the acquisition of companies or
other entities or indebtedness in excess of $10,000 for borrowed money by way of
direct loan, sale of debt securities, purchase money obligation, conditional
sale, guarantee, indemnification or otherwise;
(viii) Any license agreement, either as licensor or
licensee;
(ix) Any contract containing covenants purporting to
limit REI's freedom to compete in any line of business or in any geographic area
or with any third party; or
(x) Any agreement, contract or commitment relating to
capital expenditures and involving future obligations in excess of $10,000.
(xi) Any other written agreement, contract or
commitment which is material to IMCO's Business.
(b) Except for payment delays on the part of customers and
except as disclosed on the REI Disclosure Schedule, each agreement, contract,
mortgage, indenture, plan, lease, instrument, permit, concession, franchise,
arrangement, license and commitment listed in the REI Disclosure Schedule is
valid and binding on REI and is in full force and effect, and neither REI nor to
REI and Shareholders' Knowledge, any other party thereto, has breached any
material provision of, or is in default under the terms of, any such agreement,
contract, mortgage, indenture, plan, lease, instrument, permit, concession,
franchise, arrangement, license or commitment which would have a Material
Adverse Effect on the REI Business.
(c) Except as disclosed on the REI Disclosure Schedule, none
of the 20 largest customers of REI during the twelve month period ended August
31, 1999 (determined on the basis of revenues during such period) has
terminated, or has notified IMCO or REI in writing that it intends to terminate,
the amount of its business with REI.
<PAGE>
Agreement and Plan of Merger
Page -13-
(d) There is no settlement agreement with REI involving a
legal or contract dispute, judgment, injunction, order or decree binding upon
IMCO or REI which has the effect of prohibiting or materially impairing any
material current business practice of REI, any acquisition of material property
by REI or the conduct of business by REI as currently conducted.
5.10 Legal Proceedings. IMCO and REI are not in violation of, and have
not received any written notice of any violation of (a) any applicable statute,
law, regulation, ordinance, writ, injunction, order, judgment or decree, the
effect of which violation could, individually or in the aggregate, have a
Material Adverse Effect to REI's Business, or (b) any provision of the Articles
of Incorporation or Bylaws (or other organizational or charter document) of IMCO
or REI. Neither IMCO nor REI has not been notified of any order, writ,
injunction, judgment or decree outstanding, or legal, administrative,
arbitration or other proceeding, action, suit or governmental investigation or
inquiry against or relating to IMCO or REI or its assets or business ("REI Legal
Proceedings") pending or, to REI and Shareholders' Knowledge, threatened which
could, individually or in the aggregate, have a Material Adverse Effect on the
REI Business. To REI and Shareholders' Knowledge, there are no claims, against
or relating to IMCO or REI or its assets or business, which pending or
threatened REI Legal Proceedings or claims would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on REI's Business.
There is no REI Legal Proceeding which in any manner challenges or seeks to
prevent, enjoin, alter or delay any of the transactions contemplated hereby.
There are no existing liabilities that require REI to indemnify its officers and
directors for acts or omissions by such persons or existing agreements to
provide indemnification for such liabilities.
5.11 ERISA Matters.
(a) The REI Disclosure Schedule lists, with respect to IMCO
and REI, (i) all material employee benefit plans (as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), (ii)
each loan to a non-officer employee in excess of $5,000, loans to officers and
directors and any stock option, stock purchase, phantom stock, stock
appreciation right, supplemental retirement, severance, sabbatical, medical,
dental, vision care, disability, employee relocation, cafeteria benefit (Code
Section 125) or dependent care (Code Section 129), life insurance or accident
insurance plans, programs or arrangements, (iii) all bonus, pension, profit
sharing, savings, deferred compensation or incentive plans, programs or
arrangements, (iv) other fringe or employee benefit plans, programs or
arrangements that apply to senior management of IMCO and that do not generally
apply to all employees, and (v) any current or former employment or executive
compensation or severance agreements, written or otherwise, as to which
unsatisfied obligations of IMCO of greater than $5,000 remain for the benefit
of, or relating to, any present or former employee, consultant or director of
IMCO (together, the "IMCO Employee Plans").
<PAGE>
Agreement and Plan of Merger
Page -14-
(b) IMCO has furnished to HomeSeekers a copy of each of the
IMCO Employee Plans and has, with respect to each IMCO Employee Plan which is
subject to ERISA reporting requirements, provided copies of the Form 5500
reports filed for the plan year ended October 31, 1998. Any IMCO Employee Plan
intended to be qualified under Section 401(a) of the Code has either obtained
from the Internal Revenue Service a favorable determination letter as to its
qualified status under the Code, including all amendments to the Code effected
by the Tax Reform Act of 1986 and subsequent legislation, or has applied to the
Internal Revenue Service for such a determination letter prior to the expiration
of the requisite period under applicable Treasury Regulations or Internal
Revenue Service pronouncements in which to apply for such determination letter
and to make any amendments necessary to obtain a favorable determination. IMCO
has also furnished HomeSeekers with the most recent Internal Revenue Service
determination letter issued with respect to each such IMCO Employee Plan, and
nothing has occurred since the issuance of each such letter which could
reasonably be expected to cause the loss of the tax-qualified status of any IMCO
Employee Plan subject to Code Section 401(a).
(c) (i) None of the IMCO Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person; (ii) there has
been no "prohibited transaction," as such term is defined in Section 406 of
ERISA and Section 4975 of the Code, with respect to any IMCO Employee Plan,
which could reasonably be expected to have, in the aggregate, a Material Adverse
Effect; (iii) each IMCO Employee Plan has been administered in accordance with
its terms and to REI and Shareholders' Knowledge, in compliance with the
requirements prescribed by any and all statutes, rules and regulations
(including ERISA and the Code), except as would not have, in the aggregate, a
Material Adverse Effect, and IMCO has performed all obligations required to be
performed by it under, is not in any material respect in default, under or
violation of, and have no knowledge of any material default or violation by any
other party to, any of the IMCO Employee Plans; (iv) IMCO is not subject to any
liability or penalty under Sections 4976 through 4980 of the Code or Title I of
ERISA with respect to any of the IMCO Employee Plans; (v) to REI and
Shareholders' Knowledge, all material contributions required to be made by IMCO
to any IMCO Employee Plan have been made on or before their due dates and a
reasonable amount has been accrued for contributions to each IMCO Employee Plan
for the current plan years; (vi) with respect to each IMCO Employee Plan, no
"reportable event" within the meaning of Section 4043 of ERISA (excluding any
such event for which the thirty (30) day notice requirement has been waived
under the regulations to Section 4043 of ERISA) nor any event described in
Section 4062, 4063 or 4041 or ERISA has occurred; and (vii) no IMCO Employee
Plan is covered by, and IMCO has not incurred any liability under Title IV of
ERISA or Section 412 of the Code. With respect to each IMCO Employee Plan
subject to ERISA as either an employee pension plan within the meaning of
Section 3(2) of ERISA or an employee welfare benefit plan within the meaning of
Section 3(1) of ERISA, IMCO has prepared in good faith and timely filed all
requisite governmental reports (which were true and correct as of the date
filed) and has properly and timely filed and distributed or posted all notices
and reports to employees required to be filed, distributed or posted with
respect to each such IMCO Employee Plan. No suit, administrative proceeding,
action or other litigation has been brought, or to REI and Shareholders'
Knowledge is threatened, against or with respect to any such REI Employee Plan,
including any audit or inquiry by the IRS or United States Department of Labor.
IMCO is not a party to, or has not made any contribution to or otherwise
incurred any obligation under, any "multi employer plan" as defined in Section
3(37) of ERISA.
<PAGE>
Agreement and Plan of Merger
Page -15-
(d) With respect to each IMCO Employee Plan, to REI and
Shareholders' Knowledge, IMCO has complied with (i) the applicable health care
continuation and notice provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA"), and (ii) the applicable requirements of
the Family Leave Act of 1993 and the regulations thereunder, except to the
extent that such failure to comply would not, in the aggregate, have a Material
Adverse Effect.
(e) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee or other service
provider of IMCO to severance benefits or any other payment (including, without
limitation, unemployment compensation, golden parachute or bonus), except as
expressly provided in this Agreement, or (ii) accelerate the time of payment or
vesting of any such benefits, or increase the amount of compensation or benefits
due any such employee or service provider.
5.12 Taxes.
(a) For purposes of this 5.12 and other provisions of
this Agreement relating to Taxes, the following definitions shall apply:
(i) The term "Taxes" shall mean all taxes, however
denominated, including any interest, penalties or other additions to tax that
may become payable in respect thereof, (A) imposed by any federal, territorial,
state, local or foreign government or any agency or political subdivision of any
such government, which taxes shall include, without limiting the generality of
the foregoing, all income or profits taxes (including but not limited to,
federal income taxes and state income taxes), payroll and employee withholding
taxes, unemployment insurance, social security taxes, sales and use taxes, ad
valorem taxes, excise taxes, franchise taxes, gross receipts taxes, business
license taxes, occupation taxes, real and personal property taxes, stamp taxes,
environmental taxes, transfer taxes, workers' compensation, Pension Benefit
Guaranty Corporation premiums and other governmental charges, and other
obligations of the same or of a similar nature to any of the foregoing, which
are required to be paid, withheld or collected, (B) any liability for the
payment of amounts referred to in (A) as a result of being a member of any
affiliated, consolidated, combined or unitary group, or (C) any liability for
amounts referred to in (A) or (B) as a result of any obligation to indemnify
another person.
(ii) The term "Returns" shall mean all reports,
estimates, declarations of estimated tax, information statements and returns
relating to, or required to be filed in connection with, any Taxes, including
information returns or reports with respect to backup withholding and other
payments to third parties.
<PAGE>
Agreement and Plan of Merger
Page -16-
(b) All Returns required to be filed by or on behalf of REI
and IMCO have been duly filed on a timely basis and such Returns are true,
complete and correct. All Taxes shown to be payable on such Returns or on
subsequent assessments with respect thereto, and all payments of estimated Taxes
required to be made by or on behalf of REI and IMCO under Section 6655 of the
Code or comparable provisions of state, local or foreign law, have been paid in
full on a timely basis, and no other Taxes are payable by REI or IMCO with
respect to items or periods covered by such Returns (whether or not shown on or
reportable on such Returns) or with respect to any period prior to the date of
this Agreement. REI and IMCO have withheld and paid over all Taxes required to
have been withheld and paid over, and complied with all information reporting
and backup withholding requirements, including maintenance of required records
with respect thereto, in connection with amounts paid or owing to any employee,
creditor, independent contractor, or other third party. There are no liens on
any of the assets of REI with respect to Taxes, other than liens for Taxes not
yet due and payable or for Taxes that REI is contesting in good faith through
appropriate proceedings and for which appropriate reserves have been
established. Neither REI nor IMCO has at any time been a member of any
partnership or joint venture for a period for which the statue of limitations
for any Tax potentially applicable as a result of such membership has not
expired. No liability for Taxes of REI has been incurred (or prior to Closing
will be incurred) since the date of the Financial Statements other than in the
ordinary course of business.
(c) REI has made available to HomeSeekers true and complete
copies of (i) relevant portions of income tax audit reports, statements of
deficiencies, closing or other agreements received by or on behalf of REI or
IMCO relating to Taxes, and (ii) all federal and state income or franchise tax
Returns and state sales and use tax Returns for or including REI or IMCO for all
periods ending on and after July 31, 1999.
(d) The Returns for the period beginning April 15, 1997 to the
present of or including REI and IMCO have never been audited by a government or
taxing authority, nor is any such audit in process, or, to REI and Shareholders'
Knowledge, pending. No deficiencies have been asserted (either in writing or
verbally) with respect to Taxes of REI or IMCO, and neither REI nor IMCO has
received notice (either in writing or verbally) that it has not filed a Return
or paid Taxes required to be filed or paid. Neither REI nor IMCO is a party to
any action or proceeding for assessment or collection of Taxes, against REI,
IMCO, or any of their assets. No waiver or extension of any statute of
limitations is in effect with respect to Taxes or Returns of REI or IMCO.
5.13 Intellectual Property.
<PAGE>
Agreement and Plan of Merger
Page -17-
(a) REI owns or has the exclusive right to use, make, sell,
license, or sublicense and bring actions for infringement of all REI Products
(as defined below) and Intellectual Property Rights (as defined below) developed
by or for REI or that are used in the business of REI as currently conducted.
All of the REI Products and REI Intellectual Property Rights are owned by REI
free and clear of any rights or claims of any former employees, consultants,
officers and directors of REI and former employers of all current and former
employees, consultants, officers and directors of REI. All taxes and fees,
including, without limitation, patent and trademark registration and prosecution
fees and all professional fees in connection therewith pertaining to the REI
Intellectual Property Rights, due and payable on or before the date hereof, have
been paid by REI.
(b) REI's current products and products under development are
listed on the REI Disclosure Schedule (collectively, "REI's Products"). Except
as disclosed on the REI Disclosure Schedule, no person has a license to make,
use or distribute or the right to acquire such a license with respect to any
current or future version of any REI Product or any REI Product that is under
development, and no agreement to which REI is a party will restrict the
Surviving Corporation or HomeSeekers from charging customers for any such new
version. Except as disclosed on the REI Disclosure Schedule, no agreement for
the support or maintenance of REI Products obligates REI, or would obligate the
Surviving Corporation or HomeSeekers after the Effective Time to provide any
improvement, enhancement, change in functionality or other alteration in the
performance of the REI Products.
(c) Except as disclosed on the REI Disclosure Schedule, no
person has a right to receive a royalty or other payment in respect of any REI
Product or REI Intellectual Property Rights pursuant to any contractual
arrangements entered into by REI. Except as disclosed on the REI Disclosure
Schedule, neither IMCO nor REI has had licenses granted, sold or otherwise
transferred by or to it nor other agreements to which it is a party, relating in
whole or in part to any REI Product or REI Intellectual Property Rights.
(d) Except as disclosed on the REI Disclosure Schedule, the
execution, delivery and performance of this Agreement and the REI Ancillary
Agreements, the consummation of the Merger and the consummation of the other
transactions contemplated hereby and thereby (including without limitation the
continued conduct by HomeSeekers after the Merger of REI's Business as presently
conducted and the incorporation of any REI Product or REI Intellectual Property
Right in any product of HomeSeekers or the Surviving Corporation) will not
breach, violate or conflict with any instrument or agreement governing any such
REI Product or REI Intellectual Property Right necessary or required for, or
used in, the conduct of the business of REI as presently conducted and will not
cause the forfeiture or termination or give rise to a right of forfeiture or
termination of any such REI Product or REI Intellectual Property Right or
materially impair the right of HomeSeekers or the Surviving Corporation to use,
sell, license or dispose of, either as part or all of an REI Product or
subsequent to the Closing Date as part or all of a product of HomeSeekers or the
Surviving Corporation, or to bring any action for the infringement of, any such
REI Product or REI Intellectual Property Right or portion thereof.
<PAGE>
Agreement and Plan of Merger
Page -18-
(e) REI's Business and the development, manufacture,
marketing, license, sale or use of any REI Product or REI Intellectual Property
Right does not and will not violate any license or agreement to which REI is a
party, infringe any Intellectual Property Right of any other party; there is no
pending or, to REI and Shareholders' Knowledge, threatened claim or litigation
contesting the validity, ownership or right to use, sell, license or dispose of
any REI Intellectual Property Right used in the conduct of the business of REI
as presently conducted nor, to REI and Shareholders' Knowledge, is there any
basis for any such claim, nor has REI received any written notice asserting that
any REI Intellectual Property Right or the proposed use, sale, license or
disposition thereof conflicts or will conflict with the rights of any other
party. To REI and Shareholders' Knowledge, there is no infringement on the part
of any third party of REI's Intellectual Property Rights.
(f) Each of REI and IMCO has taken reasonable and practicable
steps to maintain the secrecy and confidentiality of, and its proprietary rights
in, all REI Intellectual Property Rights used in the conduct of REI's Business.
To REI and Shareholders' Knowledge, none of REI's employees, consultants,
officers or directors is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
conflict with their obligation to use their best efforts to promote the
interests of REI in the REI Business or that would conflict with the REI
Business. It is currently not necessary nor will it be necessary for REI to
utilize in the REI Business nor will REI utilize in the REI Business any
inventions of any of such persons or entities (or people it currently intends to
hire) made or owned prior to their employment by or affiliation with REI, nor is
it or will it be necessary to utilize any other assets or rights of any such
persons or entities (or people it currently intends to hire) made or owned prior
to their employment with or engagement by REI, in violation of any registered
patents, trade names, trademarks or copyrights or any other limitations or
restrictions to which any such person or entity is a party or to which any of
such assets or rights may be subject, except to the extent that such utilization
would not have a Material Adverse Effect on the REI Business. To REI and
Shareholders' Knowledge, none of REI's or IMCO's consultants, officers,
directors or shareholders that has had knowledge or access to information
relating to REI's Business has taken, removed or made use of any proprietary
documentation, manuals, products, materials, or any other tangible item from his
previous employer relating to the business as conducted of such previous
employer which has resulted in REI's or IMCO's access to or use of such
proprietary items in REI's Business, and REI will not gain access to or make use
of any such proprietary items in REI's Business, except to the extent that any
such activities would not have a Material Adverse Effect on REI's Business.
(g) Neither IMCO nor REI is in violation of any license,
sublicense, or agreement described on the REI Disclosure Schedule except such
violations as do not materially impair REI's rights under such license,
sublicense or agreement.
<PAGE>
Agreement and Plan of Merger
Page -19-
(h) The REI Disclosure Schedule contains a complete and
accurate list of all applications, filings and other formal actions made or
taken (including any results thereof) pursuant to federal, state, local and
foreign laws by REI to perfect or protect its interest in REI Intellectual
Property Rights, including, without limitation, all patents, patent
applications, trademarks, trademark applications, service marks and copyright
registrations. As used herein, the term "Intellectual Property Rights" means the
following intellectual property rights: domestic and foreign patents, patent
applications, patent rights, trademarks, trademark registrations, trademark
applications, trade names, service marks, service mark applications, copyrights,
copyright applications, computer software, licenses, trade secrets, trade
rights, proprietary formulae, inventions, development tools, designs, plans,
specifications, technical information and other proprietary rights, whether or
not registered, and all documentation and media relating to the above, and the
term "REI Intellectual Property Right" shall mean Intellectual Property Rights
owned by or granted exclusively or nonexclusively to REI .
5.14 Environmental Matters.
(a) The operations of REI comply in all material respects with
all federal, state and local environmental, health and safety laws, statutes and
regulations.
(b) The operations of REI are not the subject of any judicial
or administrative proceeding alleging the violation of any federal, state or
local environment, health or safety law, statute or regulation.
(c) The operations of REI are not the subject of any federal
or state investigation pursuant to which REI has been ordered to respond to a
release of any hazardous or toxic waste, substance or constituent or other
substance, into the environment in violation of law.
(d) Neither IMCO nor REI has filed any notice under federal or
state law indicating past or present treatment, storage or disposal requiring a
Part B permit or designation of "interim status" as defined under 40 C.F.R.
Parts 260-270 or any state equivalent of a hazardous or toxic waste as defined
therein or reporting a spill or release of a hazardous or toxic waste, substance
or constituent or other substance, into the environment except in accordance
with applicable law.
(e) Neither IMCO nor REI has released, as defined in the
Comprehensive Environmental Response Compensation and Liability Act (42 U.S.C.
Section 9601 et seq.), any hazardous substance as defined therein into the
environment.
(f) Except as dislosed on the REI Disclosure Schedule, None of
the operations of REI involve the generation, transportation, treatment or
disposal as defined under 40 C.F.R. Parts 260-270 or any state equivalent of
hazardous waste as defined therein requiring a Part B permit or designation of
"interim status".
(g) To REI and Shareholders' Knowledge, no underground storage
tanks or surface impoundments are on the premises of REI.
(h) To REI and Shareholders' Knowledge, no lien in favor of
any governmental authority for (i) any liability under federal or state
environmental laws or regulations, or (ii) damages arising from or costs
incurred by such governmental authority in response to a release of a hazardous
or toxic waste, substance or constituent or other substance, into the
environment has been filed or attached to the premises currently occupied by
REI.
<PAGE>
Agreement and Plan of Merger
Page -20-
(i) REI has no environmental permits.
(j) Neither IMCO nor REI has received written notice of any
claim of injury due to exposure of any person to, hazardous materials
manufactured, stored, used, distributed, disposed of, released or controlled by
IMCO or REI.
(k) To REI and Shareholders' Knowledge, no hazardous materials
are present on any property which has been owned, leased or occupied by IMCO or
REI, for the conduct of its business in violation of any federal, state or local
law and which could result in a material financial liability to REI.
(l) No claim, complaint, or administrative proceeding has been
brought or is currently pending against IMCO or REI with respect to hazardous or
toxic waste, substances or constituents or other substances or as to the
investigation or remediation of hazardous or toxic waste, substances or
constituents or other substances.
As used herein "federal, state and local environmental, health and
safety laws, statutes or regulations" means any and all laws, rules,
regulations, orders, treaties, statutes and codes promulgated by any local,
state, federal or international governmental authority or agency which has
jurisdiction over any portion of the current operations of REI, which prohibits,
regulates or controls any hazardous material or the transportation, storage,
transfer, recycling, use, treatment, manufacture, investigation, removal,
remediation, release, exposure of others to, sale or distribution of hazardous
materials including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. Section 9601 et seq.), the
Hazardous Material Transportation Act (49 U.S.C. Section 1801 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the
Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seq.), the Clean
Air Act (42 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act, as
amended (15 U.S.C. Section 2601 et seq.), and the Occupational Safety and Health
Act (29 U.S.C. Section 651 et seq.), as these laws have been amended or
supplemented to date and any analogous state or local statutes and the
regulations promulgated to date pursuant thereto.
As used herein, "hazardous or toxic waste, substance or constituent or
other substance" means those substances which are regulated by or form the basis
of liability under any federal, state and local environmental, health and safety
laws, statutes or regulations because they are radioactive, toxic, hazardous or
otherwise a danger to health, reproduction or the environment, including,
without limitation: (a) asbestos, (b) oil and petroleum products, (c)
explosives, (d) radioactive substances, pollutants or wastes, (e) urea
formaldehyde-containing building materials, (f) polychlorinated biphenyls, (g)
radon gas, and (h) ultra-hazardous or toxic substances, pollutants or wastes.
<PAGE>
Agreement and Plan of Merger
Page -21-
5.15 Interests of Officers and Directors. Except as disclosed in the
REI Disclosure Schedule, no officer or director of REI or any "affiliate" or
"associate" (as those terms are defined in Rule 405 promulgated under the
Securities Act) of any such person has had, either directly or indirectly, a
material interest in: (a) any person or entity which purchases from or sells,
licenses or furnishes to REI any goods, property, technology or intellectual or
other property rights or services; (b) any contract or agreement to which REI is
a party or by which it may be bound or affected; or (c) any property, real or
personal, tangible or intangible, used in or pertaining to REI's Business,
including any interest in the REI Intellectual Property Rights.
5.16 Title to Properties; Absence of Liens and Encumbrances; Condition
of Equipment.
(a) The REI Disclosure Schedule lists all facilities occupied
by REI or IMCO since April 15, 1997 and indicates the nature of REI's or IMCO's
interest in such facilities. REI has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of their
tangible properties and assets, real, personal and mixed, used in its business,
free and clear of any liens, charges, pledges, security interests or other
encumbrances, except as reflected in the IMCO Financial Statements or on the REI
Disclosure Schedule or except for such imperfections of title and encumbrances,
if any, which are not substantial in character, amount or extent, and which do
not materially detract from the value, or interfere with the present use, of the
property subject thereto or affected thereby.
(b) The equipment owned or leased by REI is, taken as a whole,
(i) adequate for the conduct of REI's Business consistent with past practice,
(ii) suitable for the uses to which it is currently employed, (iii) in operating
condition, (iv) regularly and properly maintained, and (v) not obsolete or in
need of immediate renewal or replacement, except for renewal or replacement in
the ordinary course of business.
5.17 Regulatory Matters; Governmental Licenses.
(a) REI has obtained all consents, approvals, registrations,
certifications, authorizations, permits and licenses of, and has made all
filings with, or notifications to, all Governmental Authorities pursuant to
applicable requirements of all federal, state or local and, to REI and
Shareholders' Knowledge, foreign, laws, ordinances, governmental rules or
regulations applicable to REI and its business, including but not limited to,
all such laws, ordinances, governmental rules or regulations relating to
registration of REI's products (including proposed products) and certification
of its facilities.
(b) Neither REI nor IMCO is in default with respect to any
order of any court, governmental authority or arbitration board or tribunal to
which REI or IMCO is a party or is subject.
5.18 Labor Matters.
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Agreement and Plan of Merger
Page -22-
(a) REI is and IMCO has been in compliance in all material
respects with all currently applicable laws and regulations respecting
employment, discrimination in employment, terms and conditions of employment and
wages and hours and occupational safety and health and employment practices, and
are not engaged in any unfair labor practice, where such compliance would
reasonably be expected to be necessary to avoid, individually or in the
aggregate, a Material Adverse Effect on REI's Business. Neither REI nor IMCO has
received any written notice from any Governmental Authority, and there has not
been asserted before any Governmental Authority, any claim, action or proceeding
to which REI or IMCO is a party or involving REI or IMCO, and there is neither
pending nor, to REI and Shareholders' Knowledge, threatened any investigation or
hearing concerning REI or IMCO arising out of or based upon any such laws,
regulations or practices. Except as is not material to REI's Business, neither
REI nor IMCO has given to or received from, or anticipates giving to or
receiving from, any employee of REI notice of termination of employment. The REI
Disclosure Schedule sets forth the terms pursuant to which all amounts may be
payable (whether currently or in the future) to current or former officers,
directors, or employees of REI as a result of or in connection with the Merger.
(b) Neither IMCO nor REI is a party to any labor agreement
with respect to its employees with any labor organization, union, group or
association and there are no employee unions (nor any other similar labor or
employee organizations) under local statutes, custom or practice. Neither REI
nor IMCO has experienced any attempt by organized labor or its representatives
to make REI or IMCO conform to demands of organized labor relating to its
employees or to enter into a binding agreement with organized labor that would
cover the employees of REI. To REI and Shareholders' Knowledge, there is no
labor strike or labor disturbance pending or threatened against REI nor is any
grievance currently being asserted. Neither IMCO nor REI has experienced a work
stoppage.
5.19 Insurance. The REI Disclosure Schedule contains a complete and
accurate list of all policies or binders of fire, liability, title, worker's
compensation, product liability and other forms of insurance maintained by REI.
REI is not in default under any of such policies or binders, and REI has not
failed to give any notice or to present any claim under any such policy or
binder in a due and timely fashion. There are no facts known to IMCO or to REI
upon which an insurer might be justified in reducing coverage under the Business
Insurance Policy. There are no outstanding unpaid claims under any such policies
or binders. All policies and binders are in full force and effect on the date
hereof and shall be kept in full force and effect through the Effective Time.
5.20 Brokers. No broker, finder or investment banker engaged by REI,
IMCO, or any Shareholder is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement..
5.21 Vote Required. The affirmative votes of the holders of a majority
of the outstanding shares of REI Common Stock are the only votes of the holders
of any class or series of REI Stock necessary to approve this Agreement and the
Merger.
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Agreement and Plan of Merger
Page -23-
5.22 Investment Representations. Each Shareholder hereby separately
represents and warrants to HomeSeekers that:
(a) Such Shareholder is knowledgeable of HomeSeekers's
business affairs and financial condition, and has acquired sufficient
information about HomeSeekers to reach an informed and knowledgeable decision to
acquire the HomeSeekers Shares. The Shareholder is acquiring the HomeSeekers
Shares for his or her own account for investment purposes only and not with a
view to, or for the resale in connection with, any "distribution" thereof for
purposes of the Securities Act.
(b) The Shareholder understands that the HomeSeekers Shares
have not yet been registered under the Securities Act or in any state in
reliance upon specific exemptions therefrom, which exemptions depend upon, among
other things, the bona fide nature of the Shareholder's investment intent as
expressed herein.
(c) By reason of the Shareholder's business or financial
experience or the business or financial experience of my professional advisors
who are unaffiliated with HomeSeekers, the Shareholder has the capacity to
protect his or her own interests in the acquisition of the HomeSeekers Shares.
(d) The Shareholder understands that the HomeSeekers Shares
will constitute "restricted securities" under Rule 144 promulgated under the
Securities Act, and that the Shareholder's ability to resell the HomeSeekers
Shares (subject to the Shareholders rights under Article XI below) will be
limited accordingly.
5.23 Disclosure. No representation or warranty made by REI or the
Shareholders in this Agreement, nor any document, written information,
statement, financial statement, certificate, schedule or exhibit prepared and
furnished or to be prepared and furnished by IMCO, REI or the Shareholders
pursuant hereto or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact.
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Agreement and Plan of Merger
Page -24-
5.24 Transfer of Assets to REI. REI and the Shareholders represent and
warrant that IMCO has effectively conveyed to REI all of IMCO's right title and
interest to all assets of IMCO, other than those assets listed on the REI
Disclosure Schedule, including, without limitation, (a) all types of the assets
described in the Draft Audit Report dated September 29, 1999 prepared by
Albright Persing & Associates in connection with HomeSeekers' due diligence in
this matter (the "Audit Report"); (b) all tangible personal property,
furnishings, fixtures, equipment, machinery, parts, accessories, inventory and
any other property (the "IMCO Personal Property"); (c) all contracts,
agreements, equipment leases, warranties, and other rights or agreements,
whether written or oral (the "IMCO Contracts"); (d) all real estate leases
together with all of IMCO's interest in any security deposits, prepaid rent,
leasehold improvements and appurtenances to leased property (the "IMCO Real
Property Leases"); and (e) all of IMCO's right, title and interest in and to the
trade names, logos, copyrights, service marks, trademarks, patents, patent
applications, other Intellectual Property Rights, licenses, and goodwill (the
"IMCO Intangible Property") (collectively, the "IMCO Assets"). REI has full
right to convey the IMCO Assets to the Surviving Corporation in connection with
this Agreement.
ARTICLE VI
COVENANTS OF REI
6.1 Regular Course of Business. Except as otherwise consented to in
writing by HomeSeekers or otherwise disclosed on the REI Disclosure Schedule,
prior to the Effective Time REI shall conduct its business in the ordinary and
usual course consistent with past practice and shall use reasonable efforts to
maintain and preserve intact its business organization, keep available the
services of its officers and employees and maintain positive relations with
licensors, licensees, suppliers, contractors, distributors, customers and others
having business relationships with it. REI shall promptly notify HomeSeekers of
any event or occurrence not in the ordinary course of business and will not
enter into or amend any agreement or take any action which reasonably could be
expected to have a Material Adverse Effect on REI's Business.
6.2 Restricted Activities and Transactions. Except as provided herein
or as otherwise consented to in writing by HomeSeekers, upon execution of this
Agreement and prior to the Effective Time, REI will not:
(a) propose, adopt or permit an amendment of REI's Articles of
Incorporation or REI's Bylaws;
(b) issue, sell, encumber or deliver, or agree to issue, sell,
encumber or deliver, any shares of any class of capital stock of REI or any
securities convertible into any such shares or convertible into securities in
turn so convertible, or any options, warrants, or other rights calling for the
issuance, sale or delivery of any such shares or convertible securities or
authorize or propose any change in its equity capitalization;
(c) split, combine or reclassify any of its capital stock or
issue or authorize or propose the issuance or authorization of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock or repurchase, redeem or otherwise acquire any shares of its
capital stock,
(d) mortgage or pledge any of its assets, tangible or
intangible;
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Agreement and Plan of Merger
Page -25-
(e) except in the ordinary course of business: (i) borrow, or
agree to borrow, any funds or voluntarily incur, assume or become subject to,
whether directly or by way of guarantee or otherwise, any obligation or
liability (absolute or contingent), (ii) cancel or agree to cancel any debts or
claims, (iii) lease, sell or transfer, agree to lease, sell or transfer, or
grant or agree to grant any preferential rights to lease or acquire, any of its
assets, property or rights (except for (A) dispositions of obsolete or worthless
assets, (B) sales of immaterial assets not in excess of $10,000 in the aggregate
and (C) leases of equipment in the ordinary course of business pursuant to
commitments as set forth in the REI Disclosure Schedule), or (iv) make or permit
any material amendments or termination of any material contract, agreement,
license or other right to which it is a party;
(f) grant any increase in compensation to any employee or
director (except for annual increases in salary or wages of, and bonus grants
made to, employees in the ordinary course of business consistent with past
practice, which increases or grants have been consented to in writing by
HomeSeekers and have been listed in the REI Disclosure Schedule), or adopt any
new Plan or similar arrangements or agreements (except in each case as
specifically provided in this Agreement or as required by law), or enter into or
amend any employment, severance or similar arrangement;
(g) accelerate, amend or change the period of exercisability
of any rights to purchase securities of REI or change the vesting period of any
restricted stock of REI or authorize cash payments in exchange for any
outstanding REI Options;
(h) hire any management personnel or terminate any employee of
REI, except in the ordinary course of business involving a person with an annual
salary of less than $30,000 and only (in the case of a new hire) pursuant to an
at-will arrangement without any severance benefits;
(i) acquire control or ownership of any other corporation,
association, joint venture, partnership, business trust or other business
entity, or acquire control or ownership of all or a substantial portion of the
assets of any of the foregoing, or incorporate or form, or cause to be
incorporated or formed, any corporation, association, joint venture,
partnership, business trust or other business entity, or merge, consolidate or
otherwise combine with any other corporation (except as provided for in this
Agreement), or otherwise acquire or agree to acquire any assets which are
material, individually or in the aggregate, to the REI Business;
(j) transfer any REI assets or liabilities to any new REI
Subsidiary;
(k) pay, discharge or satisfy any claims, liabilities or
obligations (whether absolute, accrued, contingent or otherwise), other than the
payment, discharge or satisfaction of in the ordinary course of business
consistent with past practice of liabilities reflected or reserved against in
the REI Financial Statements;
(l) except in the ordinary course of business, enter into or
agree to enter into any transaction material to REI's Business;
(m) except in the ordinary course of business, transfer or
license to any person or entity, or otherwise extend, amend or modify, any
rights to the REI Intellectual Property Rights;
<PAGE>
Agreement and Plan of Merger
Page -26-
(n) enter into or amend any agreements pursuant to which any
other party is granted most favored customer status or exclusive marketing,
distribution or other similar rights with respect to any products of REI;
(o) violate, amend or otherwise modify the material terms of
any of the contracts set forth on the REI Disclosure Schedule;
(p) commence a lawsuit other than for the routine collection
of bills or to enforce REI's rights under this Agreement, or settle a lawsuit;
(q) change the accounting methods or practices followed by
REI, including any change in any assumption underlying, or method of
calculating, any bad debt, contingency or other reserve, except as may be
required by changes in generally accepted accounting principles, make or change
any material Tax election, adopt or change any Tax accounting method, file any
material Return or any amendment to a material Return, enter into any material
closing agreement, settle any material Tax claim or assessment, or consent to
any extension or waiver of the limitation period applicable to any material Tax
claim or assessment, without the prior consent of HomeSeekers, which consent
will not be unreasonably withheld (for purposes of this covenant a "material"
Tax Return, closing agreement, Tax claim or assessment shall mean a Tax
liability with respect to each such item in excess of $10,000);
(r) take any action that would result in any of the
representations and warranties of REI set forth in this Agreement becoming
untrue;
(s) make any changes in its investment portfolio other than
the reinvestment of the proceeds of maturing, redeemed or prepaid securities,
obligations or other investments into United States Treasury securities maturing
ninety (90) days or less from the date of investment;
(t) allow or permit to be done any act by which any of its
insurance policies may be suspended, impaired or canceled;
(u) fail to comply in any material respect with all laws
applicable to it; or
(v) authorize or propose any of the foregoing, or enter into
any contract, agreement, commitment or arrangement to do any of the foregoing.
6.3 Dividends and Distributions; Repurchases. Except as otherwise
consented to in writing by HomeSeekers prior to the Effective Time, REI will not
declare or pay any dividend on its capital stock in cash, stock or property, and
will not redeem, repurchase or otherwise acquire any shares, or rights to
acquire shares, of its capital stock.
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Agreement and Plan of Merger
Page -27-
6.4 Advice of Changes. REI will promptly advise HomeSeekers in writing
of (a) any event occurring subsequent to the date of this Agreement which would
render any representation or warranty of REI contained in this Agreement, if
made on or as of the date of such event or the date of the Closing, untrue or
inaccurate or (b) any Material Adverse Change in REI's Business.
6.5 Negotiation With Others. From and after the date of this Agreement
until the earlier of the Effective Time or the termination of this Agreement in
accordance with its terms, REI shall not, directly or indirectly, (a) solicit,
initiate discussions or engage in negotiations with any person (whether such
negotiations are initiated by REI or otherwise) or take any other action
intended or designed to facilitate the efforts of any person, other than
HomeSeekers, relating to the possible acquisition of REI (whether by way of
merger, purchase of capital stock, purchase of assets or otherwise) or any
material portion of its or their capital stock or assets (with any such efforts
by any such person, including without limitation a firm proposal to make such an
acquisition, to be referred to as an "Acquisition Proposal"), (b) provide
information with respect to REI to any person, other than HomeSeekers, relating
to a possible Acquisition Proposal by any person, other than HomeSeekers, (c)
enter into an agreement with any person, other than HomeSeekers, providing for a
possible Acquisition Proposal, or (d) make or authorize any statement,
recommendation or solicitation in support of any possible Acquisition Proposal
by any person other than by HomeSeekers. In addition, REI agrees to immediately
cease any and all existing activities, discussions or negotiations with any
parties conducted prior to the date hereof with respect to the foregoing.
Notwithstanding the foregoing, nothing contained in this Agreement shall prevent
the Board of Directors of REI (or its agents pursuant to its instruction) from
taking any of the following actions: if REI shall receive from a third party an
unsolicited written proposal from a third party to acquire 100% of REI and its
entire business through a merger, consolidation, stock purchase, purchase of all
or substantially all of its assets, or otherwise, and (ii) if the Board of
Directors has made a good faith determination, based upon the advice of its
legal counsel set forth in a written opinion or memorandum from such counsel
that it would be a violation of its fiduciary duties to the shareholders of REI
to do otherwise, REI may, without breaching this Section 6.5, furnish
information to and enter into negotiations with such third party. Further, if in
the reasonable good faith judgment of the REI Board of Directors any such
written proposal is reasonably likely to be consummated and is more favorable to
the shareholders of REI from a financial perspective than the terms of the
Merger (a "Superior Proposal"), nothing contained in this Agreement shall
prevent the REI Board of Directors from approving, accepting and recommending to
the shareholders of REI a Superior Proposal, if the Board of Directors has made
a good faith determination, based upon the advice of its legal counsel set forth
in the written opinion or memorandum from such counsel, that it would be a
violation of its fiduciary duties to the shareholders of REI to do otherwise;
provided that in each such event REI notifies HomeSeekers of such determination
by the REI Board of Directors and provides HomeSeekers with a true and complete
copy of the Superior Proposal received from such third party and of all
documents containing or referring to information of REI that is supplied to such
third party. Except to the extent expressly referenced in this Section 6.5,
nothing in this Section 6.5 shall relieve REI from complying with the other
terms of this Agreement, including, without limitation, the provisions of
Section 6.2.
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Agreement and Plan of Merger
Page -28-
6.6 Acquisition Proposals. REI will provide HomeSeekers with immediate
notice of any inquiry or offer REI receives from or on behalf of any third party
of the type referred to in Section 6.5 hereof, including in such notice the
identity of the third party and a complete description of any such inquiry or
offer, and will provide HomeSeekers with immediate notice if REI provides or
furnishes any information to any third party relating to a possible Acquisition
Proposal.
6.7 Consents, Approvals and Filings. REI will use its best efforts to
comply as promptly as practicable with the governmental requirements specified
in Section 5.5 hereof and to assist Sub in obtaining on or before the Closing
all necessary approvals, authorizations, consents, licenses, clearances or
orders of Governmental Authorities referred to in such section or of other
persons referred to in Section 5.6 or the REI Disclosure Schedule.
6.8 Access to Records and Properties. HomeSeekers may, prior to the
Effective Time, through its employees, agents and representatives, continue to
conduct or cause to be conducted a detailed review of the business, financial
condition, properties, assets, books and records of REI. REI agrees to assist
HomeSeekers in conducting such review and investigation and will provide, and
will cause its independent public accountants to provide (subject to
HomeSeekers's agreement to any hold-harmless or indemnity reasonably required by
such independent public accountants), HomeSeekers and its employees, agents and
representatives full access to, and complete information concerning all aspects
of the business of REI, including its books, records (including Returns filed or
in preparation), personnel and premises, the audit work papers and other records
relating to REI of its independent public accountants. Except as provided in
Section 10.4, neither any investigation by HomeSeekers nor the receipt by
HomeSeekers of any data or information from REI, its independent public
accountants and other representatives or advisors will affect the right of
HomeSeekers or Sub to rely on the representations, warranties or covenants of
REI or the right of HomeSeekers to terminate this Agreement as provided in
Section 13.1 hereof.
ARTICLE VII
CERTAIN AGREEMENTS AND COVENANTS OF THE PARTIES
7.1 Further Assurances. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of the terms of this Agreement and the transactions contemplated hereby and to
satisfy the conditions set forth in Articles VIII and IX. The Shareholders shall
cause REI to comply with all of the covenants of REI under this Agreement.
7.2 Confidentiality; Publicity. The parties shall not disclose the
terms of this transaction to any third party nor make any public announcement
related to this Agreement or the transactions contemplated hereby without the
prior written approval of the other parties hereto except as required by law.
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Agreement and Plan of Merger
Page -29-
7.3 Trading in HomeSeekers Common Stock. Except as otherwise expressly
consented to by HomeSeekers, from the date of this Agreement until the Effective
Time, neither the Shareholders nor any of its Affiliates will directly or
indirectly purchase or sell (including short sales) any shares of HomeSeekers
Common Stock in any transactions effected on Nasdaq or otherwise. The
Shareholders agree that for a period of one hundred eighty (180) days after the
Closing Date, the Shareholders will not directly or indirectly sell or purchase
or enter into any agreement, contract or arrangement to sell or purchase any put
or call options or other derivative securities (including shorts sales) with
respect to HomeSeekers Common Stock (including, without limitation, HomeSeekers
Shares) or enter into any other agreements, contracts or arrangements providing
for the alteration of the Shareholder's investment risk with respect to any
shares of HomeSeekers Common Stock; provided that nothing in this paragraph will
be deemed to limit or prohibit the Shareholders from exercising his/her rights
under Article XI below.
7.4 This section has been intentionally left blank.
7.5 Post-Closing Adjustments.
(a) For the purpose of this Agreement, the "Net Book Value" shall be
the amount by which the aggregate book amount of the total assets of REI at the
Effective Time, as determined in accordance with this Section and as shown on
the Closing Balance Sheet (as hereinafter defined in Section 7.5(b)) exceeds the
aggregate book amount of the total liabilities of REI at the Effective Time, as
determined in accordance with this Section and as shown on the Closing Balance
Sheet.
(b) The Net Book Value shall be determined in U.S. Dollars from the
statements of total assets and total liabilities of REI as of the Effective Time
(the "Closing Balance Sheet"). The Closing Balance Sheet shall be prepared in
accordance with United States generally accepted accounting principles ("GAAP")
applied on a basis consistent with those applied in the preparation of the Audit
Report (to the extent that the principles applied in the preparation thereof
were in accordance with GAAP) and auditing procedures will be carried out in
accordance with generally accepted auditing standards or as HomeSeekers and the
Shareholders have otherwise agreed in writing. The parties shall cooperate in
the preparation of the Closing Balance Sheet and the compilation of the
information to be used in the preparation thereof, and shall use their
respective best efforts to cause their respective accountants to make available
to each other their respective work papers with respect to the Closing Balance
Sheet.
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Agreement and Plan of Merger
Page -30-
(c) Notwithstanding the restrictions contained in Article VI, REI may
declare and pay a cash dividend to its shareholders of record on the day
immediately preceding the Closing Date (the "Pre-close Date"). However, in the
event the Net Book Value is less than One Hundred Forty Five Thousand Five
Hundred Sixty-seven Dollars ($145,567), then HomeSeekers shall make a written
demand on the Shareholders for the amount by which $145,567 exceeds the Net Book
Value (the "Shareholder Adjustment Payment"). The Shareholder Adjustment Payment
shall be paid by the Shareholders to HomeSeekers within ten (10) business days
from the date of the demand by one of the following three methods, at the
election of the Shareholders: (i) wire transfer of immediately available funds;
(ii) delivery by the Shareholders to HomeSeekers of the number of shares of
HomeSeekers Common Stock determined by dividing the Shareholder Adjustment
Payment by the average closing sale price of a share of HomeSeekers Common Stock
as quoted on the Nasdaq for the ten (10) consecutive trading days which precede
the date of delivery of shares, as reported (absent manifest error in the
printing thereof) by The Wall Street Journal (Western Edition); or (iii)
delivery by the Shareholders to HomeSeekers of a promissory note in the amount
of the Shareholder Adjustment Payment, bearing interest at an interest rate not
less than prime, with a maturity date of not more than one (1) year from the
date of the note, and providing for set-off by HomeSeekers of any of its
obligations under this Agreement in the event of default on the note. The
Shareholders' obligations to make payments pursuant to this Section is
independent of, and in addition to, the indemnity obligations set forth in
Article X of this Agreement.
(d) In the event the Net Book Value is more than One Hundred Forty Five
Thousand Five Hundred Sixty-seven Dollars ($145,567), then the Shareholders
shall make a written demand on HomeSeekers for the aggregate amount by which the
Net Book Value exceeds $145,567 ("HomeSeekers Adjustment Payment"). The
HomeSeekers Adjustment Payment shall be paid by HomeSeekers to the Shareholders
within ten (10) business days from the date of the demand by one of the
following two methods, at the election of HomeSeekers: (i) wire transfer of
immediately available funds; or (ii) delivery by HomeSeekers to the Shareholders
of the aggregate number of registered shares of HomeSeekers Common Stock
(divided among the Shareholders pursuant to written instructions signed by all
of the Shareholders) determined by dividing the HomeSeekers Adjustment Payment
by the average closing sale price of a share of HomeSeekers Common Stock as
quoted on the Nasdaq for the ten (10) consecutive trading days which precede the
date of delivery of shares, as reported (absent manifest error in the printing
thereof) by The Wall Street Journal (Western Edition). HomeSeekers' obligations
to make payments pursuant to this Section is independent of, and in addition to,
the indemnity obligations set forth in Article X of this Agreement and the
Merger Consideration.
7.6 Approval of Shareholders. REI shall (a) cause a meeting of its
shareholders to be duly called and held in accordance with the laws of the State
of Kentucky, applicable federal and state securities laws and REI's Articles of
Incorporation and By-Laws as soon as reasonably practicable for the purpose of
voting on the adoption and approval of this Agreement and the Merger (the
"Proposal"); (b) recommend to its shareholders approval of the Proposal; and (c)
use its best efforts to obtain the necessary approval of its shareholders. The
Shareholders agree to vote for the Merger and the transactions contemplated in
this Agreement and against any other business combination proposal not involving
HomeSeekers.
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Page -31-
7.7 Release of Shareholders' Personal Guarantees. With respect to any
obligation of REI to William and Cindy Andrews (collectively, the "Andrews") or
to BankVest or Star Bank that is identified on the REI Disclosure Schedule as
being personally guaranteed by any of the Shareholders, HomeSeekers shall,
within 180 days after the Effective Date, either cause the obligation to be
satisfied or cause the Shareholders to be released from the personal guarantee.
With respect to any obligation of REI to Greentree Vendor Services Corp. for
Lease Agreement No. 40365804 for computer equipment that is personally
guaranteed by any of the Shareholders, within 180 days of the equipment coming
into the possession of HomeSeekers or Sub, HomeSeekers shall either cause the
obligation to be satisfied (as to the time period during which HomeSeekers or
Sub is able to use the equipment) or cause the Shareholders to be released from
the personal guarantee.
7.8 Reorganization. From and after the date hereof and until the
Effective Time, each of the parties will use its reasonable best efforts to take
any action (or not knowingly fail to take any action) which is not materially
burdensome to each party which is necessary for qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code.
7.9 Dissolution. The Shareholders agree to cause IMCO to be dissolved
as a limited liability company as promptly as is reasonably practical after the
Effective Time and termination of certain employee benefit plans.
7.10 401(k) Plan. REI and the Shareholders agree to cause the 401(k)
plan of IMCO / REI to be frozen and to refuse to accept any contributions from
the date of this Agreement until the 401(k) plan is terminated. Provided that
the 401(k) plan remains frozen and does not accept contributions subsequent to
the Closing Date, HomeSeekers shall pay the administrative expenses of the
401(k) plan until it is terminated. REI and the Shareholders agree to cause the
401(k) plan to be terminated as soon as it can be terminated in compliance with
ERISA.
7.11 Sales Tax Claims. In the event a Government Authority seeks to
recover sales taxes from HomeSeekers or Sub for sales to REI or IMCO customers
prior to the Effective Time, the Shareholders agree to cooperate with
HomeSeekers and to vigorously enforce the sales tax reimbursement provisions
contained in the contracts between REI and its customers and in the contracts
between IMCO and its customers.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF HOMESEEKERS
The obligations of HomeSeekers to effect the transactions contemplated
hereby shall be subject to the fulfillment at or prior to the Closing Date of
the following conditions, any or all of which may be waived in whole or in part
by HomeSeekers.
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Agreement and Plan of Merger
Page -32-
8.1 Accuracy of Representations and Warranties and Compliance with
Obligations. The representations and warranties of the Shareholders and REI
contained in this Agreement shall be true and correct in all material respects
at and as of the Closing Date with the same force and effect as though made at
and as of that time except (i) for changes specifically permitted by or
disclosed pursuant to this Agreement, and (ii) that those representations and
warranties which address matters only as of a particular date shall remain true
and correct as of such date. The Shareholders and REI shall have performed and
complied with all of their obligations required by this Agreement to be
performed or complied with at or prior to the Closing Date, including these
obligations set forth in Article VII herein.
8.2 No Material Adverse Change or Destruction of Property. Between the
date hereof and the Closing Date, (i) there shall have been no Material Adverse
Change of REI or the Business, (ii) there shall have been no adverse federal,
state or local legislative or regulatory change affecting in any material
respect the service, or products of REI or the Business, and (iii) none of the
Assets shall have been materially damaged by fire, flood, casualty, riot or
other cause (regardless of insurance coverage for such damage).
8.3 Corporate Certificate. REI shall have delivered to HomeSeekers (i)
copies of the Articles of Incorporation and Bylaws of REI as in effect
immediately prior to the Closing Date, (ii) copies of resolutions adopted by its
Board of Directors and Shareholders authorizing the transactions contemplated by
this Agreement, (iii) written resignations of REI's officers and Board of
Directors and (iv) a certificate of good standing issued by the Secretary of
State of the Commonwealth of Kentucky as of a date not more than ten (10) days
prior to the Closing Date, certified in the case of subsections (i) and (ii) as
of the Closing Date by the Secretary of REI as being true, correct and complete.
8.4 Consents. REI and Shareholders shall have received consents to the
transactions contemplated hereby and waivers of rights to terminate or modify
any material rights or obligations of REI and the Shareholders from any person
from whom such consent or waiver is required under any Contract to which the
Shareholders, REI or the Assets are bound as of a date not more than ten (10)
days prior to the Closing Date, or who, as a result of the transactions
contemplated hereby, would have such rights to terminate or modify such
contracts, either by the terms thereof or as a matter of law.
8.5 No Adverse Litigation. There shall not be pending or threatened any
action or proceeding by or before any court or other governmental body which
shall seek to restrain, prohibit, invalidate or collect damages arising out of
the transactions contemplated hereby, and which, in the judgment of HomeSeekers,
makes it inadvisable to proceed with the transactions contemplated hereby.
8.6 Due Diligence Review. HomeSeekers shall have completed their due
diligence review of REI, the Assets and the business pursuant to Section 6.8,
and shall be satisfied with the results of such review and assessment.
8.7 Employment Agreement. Mark Spraetz shall have entered into the
Employment Agreement in the form attached hereto as Exhibit 2.
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Agreement and Plan of Merger
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8.8 Lien Releases. All Liens encumbering or otherwise affecting the
Business or the Assets shall have been released in form and substance acceptable
to HomeSeekers.
8.9 Opinion of Counsel. HomeSeekers shall have received an opinion
dated as of the Closing Date, from counsel to REI and the Shareholders in form
and substance acceptable to HomeSeekers.
8.10 Securities Laws. HomeSeekers shall have received all necessary
consents and otherwise complied with any securities laws applicable to the
issuance of HomeSeekers Shares in connection with the transactions contemplated
hereby.
ARTICLE IX
CONDITIONS TO THE
OBLIGATIONS OF REI AND THE SHAREHOLDERS
The obligations of REI and the Shareholders to effect the transactions
contemplated hereby shall be subject to the fulfillment at or prior to the
Closing Date of the following conditions, any or all of which may be waived in
whole or in part by the Shareholders:
9.1 Accuracy of Representations and Warranties and Compliance with
Obligations. The representations and warranties of HomeSeekers contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing Date with the same force and effect as though made at and as of that
time except (i) for changes specifically permitted by or disclosed pursuant to
this Agreement, and (ii) that those representations and warranties which address
matters only as of a particular date shall remain true and correct as of such
date. HomeSeekers shall have performed and complied in all material respects
with all of its obligations required by this Agreement to be performed or
complied with at or prior to the Closing Date.
9.2 Consideration and Deposits. At the Closing, HomeSeekers shall have
(a) delivered to the Shareholders the HomeSeekers Shares (b) instructed its
transfer agent to issue the HomeSeekers Shares; and (c) made the appropriate
deposit into the Escrow.
9.3 Employment Agreement. HomeSeekers shall have caused Mark Spraetz to
enter into the Employment Agreement in the form attached hereto as Exhibit 2.
9.4 Corporate Certificate. HomeSeekers shall have delivered to REI a
copy of a resolution adopted by its Board of Directors authorizing the
transactions contemplated by this Agreement, as of the Closing Date by the
Secretary of HomeSeekers as being true, correct and complete.
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9.5 Consents. REI and Shareholders shall have received consents to the
transactions contemplated hereby and waivers of rights to terminate or modify
any material rights or obligations of REI and the Shareholders from any person
from whom such consent or waiver is required under any Contract to which the
Shareholders, REI or the Assets are bound as of a date not more than ten (10)
days prior to the Closing Date, or who, as a result of the transactions
contemplated hereby, would have such rights to terminate or modify such
contracts, either by the terms thereof or as a matter of law.
9.6 No Adverse Litigation. There shall not be pending or threatened any
action or proceeding by or before any court or other governmental body which
shall seek to restrain, prohibit, invalidate or collect damages arising out of
the transactions contemplated hereby, and which, in the judgment of REI, makes
it inadvisable to proceed with the transactions contemplated hereby.
9.7 Opinion of Counsel. REI shall have received an opinion dated as of
the Closing Date, from counsel to HomeSeekers in form and substance acceptable
to REI.
9.8 Securities Laws. REI shall have received all necessary consents and
otherwise complied with any securities laws applicable to the issuance of
HomeSeekers Shares in connection with the transactions contemplated hereby.
ARTICLE X
INDEMNIFICATION
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Agreement and Plan of Merger
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10.1 Agreement by Shareholders to Indemnify. The Shareholders (the
"Shareholder Indemnitors") agree to jointly and severally indemnify and hold
HomeSeekers and their Affiliates, officers, directors, and agents thereof
(collectively, the "HomeSeekers Indemnitees") harmless from and against the
aggregate of all expenses, losses, costs, deficiencies, liabilities and damages
(including, without limitation, related counsel and paralegal fees and expenses)
incurred or suffered by the HomeSeekers Indemnitees (collectively, "HomeSeekers
Indemnifiable Damages") resulting from or arising out of (i) any breach of a
representation or warranty made by the Shareholders or REI in or pursuant to
this Agreement, (ii) any breach of the covenants or agreements made by the
Shareholders or REI in this Agreement, or (iii) any material inaccuracy in any
certificate delivered by the Shareholders or REI pursuant to this Agreement. If
it is determined, as provided, that any of the HomeSeekers Indemnitees is
entitled to indemnification, indemnification shall be effected by redelivery to
HomeSeekers of shares of the common stock of HomeSeekers held in escrow as
provided in Section 10.5, such shares valued utilizing the same method as
utilized for the Average Closing Sale Price described in Section 2.1(b) (the
"Average Closing Sale Price Method") as of the date the shares are transferred
from the escrow. The indemnity obligation of the Shareholders, with the
exception of the obligations set forth in Section 7.5 of this Agreement, shall
be limited in the aggregate in all events to the shares of the common stock of
HomeSeekers held in escrow as provided in Section 10.5. With the exception of
the obligations set forth in Section 7.5 of this Agreement, Shareholders will
have no liability for HomeSeekers Indemnifiable Damages until the aggregate
total of the HomeSeekers Indemnifiable Damages exceeds $10,000 and then only for
the amount by which such HomeSeekers Indemnifiable Damages exceeds $10,000.
10.2 Agreement by HomeSeekers to Indemnify. HomeSeekers (the
"HomeSeekers Indemnitor") agrees to hold Shareholders (collectively, the "REI
Indemnitees") harmless from and against the aggregate of all expenses, losses,
costs, deficiencies, liabilities and damages (including, without limitation,
related counsel and paralegal fees and expenses) incurred or suffered by the REI
Indemnitees (collectively, "REI Indemnifiable Damages") resulting from or
arising out of (i) any breach of a representation or warranty made HomeSeekers
or Sub in or pursuant to this Agreement, (ii) any breach of the covenants or
agreements made by HomeSeekers or Sub in this Agreement, or (iii) any material
inaccuracy in any certificate delivered by HomeSeekers pursuant to this
Agreement. The indemnity obligation of HomeSeekers, with the exception of the
obligations set forth in Article II, Section 7.5, Section 7.7, and Article XI of
this Agreement, shall be limited in the aggregate in all events to $333,000.
With the exception of the obligations set forth in Article II, Section 7.5,
Section 7.7, and Article XI of this Agreement, HomeSeekers will have no
liability for REI Indemnifiable Damages until the aggregate total of the REI
Indemnifiable Damages exceeds $10,000 and then only for the amount by which such
REI Indemnifiable Damages exceeds $10,000.
10.3 Survival of Representations and Warranties. Subject to the
limitations below, each of the representations and warranties made by REI, the
Shareholders and HomeSeekers in this Agreement or pursuant hereto shall survive
the Closing of the transactions contemplated hereby. Each party shall have the
right to fully rely on the representations, warranties, covenants and agreements
of the other parties contained in this Agreement or in any other documents or
papers delivered in connection herewith. Each representation, warranty, covenant
and agreement of the parties contained in this Agreement is independent of each
other representation, warranty, covenant and agreement. No party will have
liability for indemnification with respect to (a) any representation or
warranty, or (b) covenant or obligation to be performed and complied with prior
to the Closing Date unless on or before two (2) years from the Effective Time
the indemnitee notifies the indemnitor of a claim specifying the factual basis
of that claim in reasonable detail to the extent then known by the indemnitee. A
claim for indemnification or reimbursement not based upon any representation or
warranty or any covenant or obligation to be performed and complied with prior
to the Effective Time may be made at any time, subject to the applicable statute
of limitations.
10.4 Known Claims. Notwithstanding the other provisions of this Article
X, no indemnitee shall be entitled to indemnification under this Agreement with
respect to claims for which the factual basis was specifically and completely
disclosed in an exhibit or schedule to this Agreement or in the Draft Audit
Report prepared by Albright Persing & Associates in connection with HomeSeekers'
due diligence in this matter.
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Page -36-
10.5 Escrow. On the Closing Date, one third of the shares of
HomeSeekers common stock that the Shareholders are entitled to receive pursuant
to Section 2.1(b) of this Agreement shall instead be delivered on behalf of the
Shareholders to an escrow agent mutually agreed upon by the parties (the "Escrow
Agent"). The escrow shall be subject to the following terms and conditions:
(a) All fees and expenses of the escrow agent shall be borne
equally by the parties.
(b) Additional shares received by the Shareholders with
respect to shares held in escrow, as a result of stock dividends and stock
splits shall be delivered to the Escrow Agent and shall be subject to the terms
of this Agreement;
(c) The Escrow Agent shall hold the shares deposited until the
two year anniversary of the Closing Date, whereupon the Escrow Agent shall
release to each of the Shareholders that Shareholder's pro rata portion of
shares remaining in the fund after payment to the Indemnified Parties of all of
its indemnity claims, approved as provided in this Agreement, except that in the
event a claim that may result in indemnification under this Agreement remains
undetermined as of the two year anniversary of the Closing Date, an adequate
number of shares and cash, if any, shall be retained in escrow to provide for
payment of any such claim. Notwithstanding the above, on the one year
anniversary of the Closing Date, the Escrow Agent shall retain that number of
shares and amount of cash, if any, having a value equal to the sum of (a)
$333,000 plus (b) the estimated amount of any claim for indemnification pending
as of the one year anniversary of the Closing Date as determined utilizing the
Average Closing Sale Price Method as of the one year anniversary of the Closing
Date, and Escrow Agent shall release the balance of the shares in escrow to each
of the Shareholders in an amount equal to that Shareholder's pro rata portion of
the shares to be released. For example, if the Closing Sale Price for a share of
HomeSeekers common stock on the first anniversary of the Closing date is $33.30,
and if the unsatisfied indemnity claims are for $99,900, the Escrow Agent shall
retain in escrow 10,000 shares plus 3,000 shares to satisfy the indemnity claim.
(d) In the event of any claim by any of the Indemnified
Parties for indemnification, the Indemnified Party shall give written notice to
the Shareholders, and the parties shall attempt to reach agreement in respect to
that claim. If the parties fail to reach agreement within 30 days after notice
of a claim has been given, the issue shall be submitted to arbitration in
accordance with the rules and requirements of the CPR Center for Dispute
Resolution. The decision of the arbitrator shall be final and binding on all
parties, and appropriate instructions in conformity with that decision shall
immediately be given by the arbitrator to the Escrow Agent, who is authorized
and directed to rely on such instructions.
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Agreement and Plan of Merger
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(e) Provided that the Shareholders verify that they have
already sold all of the shares of HomeSeekers Common Stock described in Section
2.1(b) of this Agreement that are not held in escrow pursuant to this Article X,
then through written instructions signed by all of the Shareholders, the
Shareholders may instruct the Escrow Agent to sell shares of HomeSeekers Common
Stock described in Section 2.1(b) of this Agreement on the open market before
the First Keep-well Date or, if applicable, the Second Keep-well Date. In such
event, the Escrow Agent shall retain in escrow all proceeds of such sales
together with any shares of HomeSeekers Common Stock required to be delivered to
the Shareholders on account of such sales pursuant to Section 2.1(c) of this
Agreement.
ARTICLE XI
SECURITIES LAW MATTERS
The Shareholders shall have the following registration rights with
respect to HomeSeekers Shares issued to them hereunder:
11.1 Registration. Within 150 days of this Agreement, HomeSeekers shall
file a Registration Statement on Form S-3 under the Securities Act covering all
of the shares issued by HomeSeekers pursuant to this Agreement.
11.2 Disposition of Shares. The Shareholders agree not to sell,
transfer or otherwise dispose of any HomeSeekers Shares, except pursuant to (a)
an exemption from the registration requirements under the Securities Act, which
does not require the filing by HomeSeekers with the SEC of any registration
statement, offering circular or other document, in which case, each such
Shareholder shall first supply to HomeSeekers an opinion of counsel (which
counsel and opinions shall be satisfactory to HomeSeekers) that such exemption
is available, or (b) an effective registration statement filed by HomeSeekers
with the SEC under the Securities Act.
11.3 Legends. The certificates representing HomeSeekers Shares shall
bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF BY THE SHAREHOLDER EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND IN COMPLIANCE WITH
APPLICABLE SECURITIES LAWS OF ANY STATE WITH RESPECT THERETO,
OR IN ACCORDANCE WITH AN OPINION OF COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER THAT AN EXEMPTION FROM
SUCH REGISTRATION IS AVAILABLE.
HomeSeekers may, unless a registration statement is in effect covering such
shares, place stop transfer orders with its transfer agents with respect to such
certificates in accordance with federal securities laws.
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Page -38-
ARTICLE XII
DEFINITIONS
12.1 Defined Terms. As used herein, the following terms shall have the
following meanings:
"Affiliate" shall have the meaning ascribed to it in Rule
12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended, as in effect on the date hereof.
"Contract" means any indenture, lease, sublease, license, loan
agreement, mortgage, note, indenture, restriction, will, trust,
commitment, obligation or other contract, agreement or instrument,
whether written or oral.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Governmental Authority" means any nation or government, any
state, regional, local or other political subdivision thereof, and any
entity or official exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
"Lien" means any mortgage, deed of trust, pledge, security
interest, encumbrance, lien or charge of any kind (including, but not
limited to, any conditional sale or other title retention agreement,
any lease in the nature thereof, and the filing of or agreement to give
any financing statement under the Uniform Commercial Code or comparable
law or any jurisdiction in connection with such mortgage, pledge,
security interest, encumbrance, lien or charge).
"Material Adverse Change (or Effect)"means a change (or
effect), in the condition (financial or otherwise), properties, assets,
liabilities, rights, obligations, operations, business or prospects of
REI which change (or effect) individually or in the aggregate, is
materially adverse to such condition, properties, assets, liabilities,
rights, obligations, operations, business or prospects.
"Person" means an individual, partnership, corporation,
limited liability company, business trust, joint stock company, estate,
trust, unincorporated association, joint venture, Governmental
Authority or other entity, of whatever nature.
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Agreement and Plan of Merger
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"Register", "registered" and "registration" refer to a
registration of the offering and sale of securities effected by
preparing and filing a registration statement in compliance with the
Securities Act and the declaration or ordering of the effectiveness of
such registration statement.
"REI and Shareholders' Knowledge" means the actual knowledge
of REI and the Shareholders and the knowledge that should have been
acquired by REI, IMCO, and the Shareholders in the prudent management
of REI and IMCO.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shareholder Transaction Fees" means all legal, accounting,
tax, consulting, appraisal and financial advisory and other fees and
expenses, including any transfer taxes, fees and expenses and the cost
of title insurance and surveys, incurred, paid, or payable by REI or
the Shareholders in connection with the transactions contemplated
hereby.
12.2 Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the defined
meanings when used in any certificates, reports or other documents made or
delivered pursuant hereto or thereto, unless the context otherwise requires.
(b) Terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) As used herein, the neuter gender shall also denote the
masculine and feminine, and the masculine gender shall also denote the neuter
and feminine, where the context so permits.
ARTICLE XIII
TERMINATION, AMENDMENT AND WAIVER
13.1 Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) by mutual written consent of all of the parties hereto at
any time prior to the Closing; or
(b) by HomeSeekers in the event of a material breach by the
Shareholders or REI of any provision of this Agreement; or
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Agreement and Plan of Merger
Page -40-
(c) by HomeSeekers or the Shareholders if the Closing shall
not have occurred by October 31, 1999.
(d) by REI in the event of a material breach by HomeSeekers of
any provision of this Agreement; or
(e) by REI if the Closing shall not have occurred by October
31, 1999.
13.2 Effect of Termination. Except as provided in Article X and the
provisions of Section 7.2, in the event of termination of this Agreement
pursuant to Section 13.1, this Agreement shall forthwith become void; provided,
however, that nothing herein shall relieve any party from liability for the
willful breach of any of its representations, warranties, covenants or
agreements set forth in this Agreement.
ARTICLE XIV
GENERAL PROVISIONS
14.1 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered (and shall
be deemed delivered) by certified or registered mail (first class postage
pre-paid), guaranteed overnight delivery, or facsimile transmission if such
transmission is confirmed by delivery by certified or registered mail (first
class postage pre-paid) or guaranteed overnight delivery, to the following
addresses and facsimile numbers (or to such other addresses or facsimile numbers
which such party shall designate in writing to the other party):
(a) if to HomeSeekers:
HomeSeekers, Incorporated
2241 Park Place, Suite E
Minden, NV 89423
Attn: Greg Johnson, Chairman/CEO
Telephone: (775) 782-2977
Facsimile: (775) 782-2934
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Agreement and Plan of Merger
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with a copy to:
Jenkins & Carter
501 Hammill Lane
Reno, NV 89511-1004
Attn: Nathan M. Jenkins, Esq.
Telephone: (775) 829-7800
Facsimile: (775) 829-0511
(b) if to REI:
Real Estate Information, Inc.
7280 Smokeywoods Lane
Cincinnati, Ohio 45230
Telephone:
Facsimile:
(c) if to the Shareholders:
Mark and D. Lynn Spraetz
7280 Smokeywoods Lane
Cincinnati, Ohio 45230
with a copy to:
Stephen A. Kappers, Esq.
Cors & Bassett
537 E. Pete Rose Way, Suite 400
Cincinnati, Ohio 45202
Telephone: (513) 852-8208
Facsimile: (513) 852-8222
14.2 Entire Agreement. This Agreement (including the REI Disclosure
Schedule and Exhibits attached hereto) and other documents delivered at the
Closing pursuant hereto, contains the entire understanding of the parties in
respect of its subject matter and supersedes all prior agreements and
understandings (oral or written) between or among the parties with respect to
such subject matter. The REI Disclosure Schedule and Exhibits constitute a part
hereof as though set forth in full above.
<PAGE>
Agreement and Plan of Merger
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14.3 Expenses. Except as otherwise provided herein, the parties shall
pay their own fees and expenses, including their own counsel fees, incurred in
connection with this Agreement or any transaction contemplated hereby.
14.4 Waiver. This Agreement may not be modified, amended, supplemented,
canceled, or discharged, except by written instrument executed by all parties.
The failure of any party to enforce any of the provisions of this Agreement
shall not be deemed a waiver of any provisions or of the right of the party
thereafter to enforce any provisions.
14.5 Assignment. The rights and obligations of this Agreement shall
bind and inure to the benefit of the parties and their respective successors and
assigns. Except as expressly provided herein, the rights and obligations of this
Agreement may not be assigned by any party hereto .
14.6 Counterparts; Facsimile. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument. Executed copies of this
Agreement of this Agreement may be delivered by facsimile, and delivery of
executed facsimile copies to the parties and their counsel shall be deemed to be
a delivery of a duplicate original and sufficient delivery to result in entry to
this Agreement by the transmitting party; provided, however, that within ten
(10) days thereafter a signed duplicate original shall be forwarded to the party
to whom a facsimile copy was forwarded.
14.7 Governing Law, Jurisdiction and Waiver of Venue. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Nevada regardless of the fact that any of the parties hereto may be or may
become a resident of a different country, state, or jurisdiction. Any suit,
action, or proceeding arising out of, or with respect to, this Agreement shall
be filed in a court of competent jurisdiction within the County of Washoe, State
of Nevada or in the U.S. District Court for the District of Nevada, Northern
Division. The parties hereby consent to the personal jurisdiction of such courts
within the County of Washoe, State of Nevada and the U.S. District Court for the
District of Nevada, Northern Division. The parties hereby waive any objections
to venue in such courts with Washoe County, State of Nevada and the U.S.
District Court for the District of Nevada, Northern Division.
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14.8 Representation by Counsel. Each party hereto represents and agrees
with the other that it has been represented by independent counsel of its own
choosing; it has had the full right and opportunity to consult with its
respective attorneys and other advisors and has availed itself of this right and
opportunity; its authorized officers have carefully read and fully understand
this Agreement in its entirety and have had it fully explained to them by such
party's counsel; it is fully aware of the contents hereof and the meaning,
intent and legal effect thereof; and its authorized officer is competent to
execute this Agreement and has executed this Agreement free from coercion,
duress or undue influence. Each party and its counsel cooperated in the drafting
and preparation of this Agreement and the documents referred to herein.
Accordingly, any rule of law or any legal decision that would require
interpretation of any ambiguities in this Agreement against the party that
drafted it is of no application and is hereby expressly waived. The provisions
of this Agreement shall be interpreted in a reasonable manner to effect the
intentions of the parties and this Agreement.
14.9 Attorneys' Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to receive from the other its reasonable attorneys' fees, costs, and
necessary disbursements in addition to any other relief to which such party may
be entitled.
14.10 Interpretation. If necessary to give effect to the terms and
provisions hereof, the masculine, feminine, and neuter gender of the singular
and plural number shall each be deemed to include the other whenever the context
so indicates. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be valid and effective under applicable law,
such provision shall be ineffective to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or the remaining
provisions of this Agreement. The parties acknowledge and agree that this
Agreement is the product of mutual negotiation and that no part herein shall be
construed against either party as the author hereof, and that this provision is
expressly made binding on any legal tribunal for any purpose.
14.11 Severability. In case any provision of this Agreement shall, for
any reason, be held to be invalid, unenforceable, or illegal, such provision
shall be severed from this Agreement, and such invalidity, unenforceable or
illegality shall not affect any other provisions of this Agreement.
14.12 Headings. Headings in this Agreement are inserted for convenience
and identification only and are in no way intended to describe, interpret,
define, limit the scope, extent or intent of this Agreement or any provision
hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
HOMESEEKERS.COM, INCORPORATED,
a Nevada corporation
By: /s/ Greg Costley
------------------------------------------
Name: Greg Costley
----------------------------------------
Title: Chief Executive Officer
---------------------------------------
REAL ESTATE INFORMATION, INC.,
a Kentucky corporation
By: /s/ Mark A. Spraetz
------------------------------------------
Name: Mark A. Spraetz
----------------------------------------
Title: President
---------------------------------------
YMLS, INCORPORATED, a Nevada corporation
By: /s/ Greg Costley
------------------------------------------
Name: Greg Costley
----------------------------------------
Title: Secretary
---------------------------------------
SHAREHOLDERS:
/s/ Mark A. Spraetz
---------------------------------------------
Mark Spraetz
/s/ D. Lynn Spraetz
---------------------------------------------
D. Lynn Spraetz
/s/ Dawn Bertsche
---------------------------------------------
Dawn Bertsche, Trustee of the Spraetz
Childrens' Trust
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Page -45-
LIST OF OMITTED SCHEDULES *
SCHEDULE 5.1 Corporate Organization
SCHEDULE 5.2 Current Shareholders
SCHEDULE 5.3 Other Agreements To Sell Assets, Merge, Etc.
SCHEDULE 5.5 Governmental Approvals and Filings
SCHEDULE 5.6 Conflicts
SCHEDULE 5.7 Claims
SCHEDULE 5.8 Absence of Changes
SCHEDULE 5.9 Contracts
SCHEDULE 5.11 ERISA Matters
SCHEDULE 5.13 Intellectual Property
SCHEDULE 5.15 Interests Of Officers And Directors
SCHEDULE 5.16 Title to Properties
SCHEDULE 5.18 Insurance
* Homeseekers.com, Incorporated undertakes to furnish to the Securities and
Exchange Commission with copies of any omitted Schedule upon request.
EMPLOYMENT AGREEMENT
--------------------
THIS Employment Agreement (the "Agreement"), effective this 29th day of
September, 1999, is made by and among HOMESEEKERS.COM, INCORPORATED
("HomeSeekers"), a Nevada corporation, and MARK A. SPRAETZ ("Employee").
WHEREAS, HomeSeekers, YMLS, Incorporated, a Nevada corporation ("Sub"),
Real Estate Information, Inc. a Kentucky corporation ("REI"), Employee, D. Lynn
Spraetz, and Dawn Bertsche, Trustee of the Spraetz Childrens' Trust, have
entered into that certain Agreement and Plan of Merger of even date herewith
(the "Merger Agreement");
WHEREAS, pursuant to the closing of the Merger Agreement, HomeSeekers
wishes to employ Employee as Executive Vice President of HomeSeekers' MLS
Division, with such other duties and responsibilities as HomeSeekers may
reasonably assign to Employee consistent with the nature and character of such
employment (the "Position");
WHEREAS, pursuant to the closing of the Agreement and Plan of Merger,
Employee wishes to accept such employment subject to the terms and conditions of
this Agreement;
NOW, THEREFORE, pursuant to the closing of the Agreement and Plan of
Merger, in consideration of such employment and other valuable consideration,
receipt of which is hereby acknowledged, HomeSeekers and Employee agree as
follows:
SECTION 1. EMPLOYMENT.
HomeSeekers hereby employs Employee, and Employee hereby accepts
employment, as Executive Vice President of HomeSeekers' MLS Division, with such
other duties and responsibilities as HomeSeekers may reasonably assign to
Employee consistent with the nature and character of such employment.
SECTION 2. TERM.
2.1 Term. The term of this Agreement shall be three years, beginning on
October 1, 1999 (the "Commencement Date").
2.2 Termination of Employment by Death. Employee's employment with
HomeSeekers shall terminate automatically upon Employee's death.
2.3 Termination of Employment by Disability. HomeSeekers shall have the
right to discharge Employee during any period in which Employee is disabled.
Employee shall be considered disabled if, based upon the results of a qualified
physician's examination, Employee is prevented, after reasonable accommodation
by HomeSeekers, from properly performing his duties due to a mental or physical
illness, sickness, or other condition for a period of ninety (90) days in any
twelve (12) month period.
<PAGE>
Employment Agreement
Mark A. Spraetz
Page -2-
2.4 Termination of Employment for Cause. HomeSeekers shall have the
right to discharge Employee at any time for cause. For this purpose, "cause"
shall mean the occurrence of any of the following, while Employee is employed by
HomeSeekers:
(a) Employee willfully engages in any misconduct that
demonstratably and materially injures HomeSeekers or
any subsidiary of HomeSeekers, monetarily or
otherwise;
(b) Employee fails to perform any lawful directive or
duty consistent with the Position assigned to him by
HomeSeekers' Chief Executive Officer or his designee
for more than ten (10) days after being delivered a
written demand for performance that identifies such
failure;
(c) Employee is convicted in a final non-appealable
manner of, or pleads nolo contendere to, (i) any
criminal violation involving dishonesty, fraud, or
breach of trust; or (ii) any felony;
(d) Employee commits any material act of dishonesty,
fraud, misrepresentation or other act of moral
turpitude;
(e) Employee willfully or habitually neglects any of the
Employee's duties that he is required to perform
under the terms of this Agreement for a period of
more than ten (10) business days after being
delivered a written demand for performance that
identifies such failure;
(f) Employee engages in gross misconduct; or
(g) Employee knowingly violates any fiduciary duty owed
to HomeSeekers.
2.5 Termination of Employment for Any Other Reason. HomeSeekers may
terminate Employee's employment at any time upon thirty (30) days written notice
to Employee.
2.6 Obligations of Employee on Termination. Employee acknowledges and
agrees that all property, including keys, credit cards, books, manuals, records,
reports, notes, contracts, customer lists, confidential information, copies of
any of the foregoing and any equipment furnished to Employee by HomeSeekers,
belong to HomeSeekers and shall be promptly returned to HomeSeekers upon
termination of employment.
<PAGE>
Employment Agreement
Mark A. Spraetz
Page -3-
2.7 Obligations of HomeSeekers upon Termination. If Employee's
employment is terminated by HomeSeekers, this Agreement shall terminate as
provided by its terms and HomeSeekers' obligations to Employee under this
Agreement shall be limited to (i) the prorated payment of Employee's salary
through the date of termination to the extent not paid by then; (ii) the payment
of earned and accrued bonus or incentive payments due Employee, if any, at the
time of termination under any bonus or incentive plans in which Employee
participated prior to termination; and (iii) the payment of any reimbursable
business expenses that were incurred by Employee prior to termination in
accordance with HomeSeekers' policies and that were not reimbursed by
HomeSeekers at the time of the termination of this Agreement. As of the date of
termination of this Agreement, HomeSeekers' obligations to Employee under this
Agreement shall terminate and HomeSeekers will have no further obligation to pay
Employee or his estate, beneficiaries, or legal representatives any compensation
or any other amounts, except as otherwise provided by law.
2.8 Obligations of HomeSeekers upon Termination Other than for Cause.
If Employee's employment is terminated by HomeSeekers other than for cause, this
Agreement shall terminate as provided by its terms and HomeSeekers' obligations
to Employee under this Agreement shall be limited to (i) payment of a sum equal
to twelve (12) months base salary specified in Section 3.1 of this Agreement;
(ii) the payment of earned bonus or incentive payments due Employee, if any, at
the time of termination under any bonus or incentive plans in which Employee
participated prior to termination; (iii) the payment of any reimbursable
business expenses that were incurred by Employee prior to termination in
accordance with HomeSeekers' policies and that were not reimbursed by
HomeSeekers at the time of the termination of this Agreement; and (iv) stock
options granted to Employee pursuant to 3.4 hereunder shall immediately vest as
of the date of any such termination as though the date of termination had
occurred after the last day of the next succeeding date of this Agreement; e.g.,
if termination occurs during the second year of employment, all options that
would otherwise vest on the second anniversary of the Commencement Date will
immediately vest as of the date of termination (in addition to the previously
vested first year options). As of the date of termination of this Agreement, and
on payment of any sums due hereunder, HomeSeekers' obligations to Employee under
this Agreement shall terminate and HomeSeekers will have no further obligation
to pay Employee or his estate, beneficiaries, or legal representatives any
compensation or any other amounts, except as otherwise provided by law.
SECTION 3. COMPENSATION.
3.1 Base Salary. As compensation for services rendered under this
Agreement, Employee shall be entitled to receive a salary of One Hundred Ten
Thousand Dollars ($110,000) per year. Such salary shall be payable bi-weekly in
accordance with HomeSeekers' customary practices for peer employees. HomeSeekers
shall withhold and deduct from the salary all taxes required by federal and
state laws and any other authorized deductions. HomeSeekers will review
Employee's salary at least annually. HomeSeekers may in its sole discretion
increase Employee's base salary.
3.2 Commissions. Unless Employee's commission plan is changed or
modified pursuant to Section 3.2(e) of this Agreement, Employee shall be paid
sales commission on the following basis:
<PAGE>
Employment Agreement
Mark A. Spraetz
Page -4-
(a) Employee shall be paid (i) Three Thousand Dollars ($3,000)
for his direct "up front" sales to new customers of MLS systems with a Net Sales
Price of up to Sixty Thousand Dollars ($60,000); (ii) Three Thousand Dollars
($3,000) plus ten percent (10%) of the portion of the Net Sales Price exceeding
$60,000 of his direct "up front" sales to new customers of MLS systems; (iii)
five percent (5%) of Net Sales Price of ongoing maintenance and other services
performed by HomeSeekers in connection with an MLS system directly sold by
Employee; and (iv) Twenty-five Cents ($0.25) for each active listing sent to
www.homeseekers.com from a real estate broker or other entity that has sent its
listings to www.homeseekers.com for the twelve (12) previous months. For purpose
of this Agreement, "Net Sales Price" shall mean HomeSeekers' actual invoice
price, exclusive of shipping charges and sales tax, if any, less customary trade
discounts actually granted to the purchaser of any of the above-described
products.
(b) Employee's sales commission shall be deemed earned when
payment for the above-described products and services is received in full by
HomeSeekers from the customer.
(c) Sales commissions shall be paid to Employee within 20 days
of the end of each calendar month based on payments received by HomeSeekers from
customers during the preceding calendar month.
(d) Employee shall not be entitled to any commissions on
orders from customers who later cancel or refuse to accept delivery of such
orders. If a customer cancels a portion of an order, Employee's commission on
that order shall be reduced proportionately. In any such event, the amount of
commission previously paid to Employee on sales of the above-described products
that have since been returned or not accepted by a customer shall be deducted by
HomeSeekers from any commissions earned and due to Employee.
(e) HomeSeekers reserves the right to change or modify the
commission plan annually.
3.3 Bonus. In addition to the annual base salary set forth in paragraph
3.1 of this Agreement and the commissions set forth in paragraph 3.2 of this
Agreement, Employee shall be entitled to a quarterly target bonus that shall be
based on performance standards established by HomeSeekers President of the MLS
Division and that shall equal a maximum bonus opportunity of thirty-five percent
(35%) of the then current salary for the preceding quarter to the extent that
the Employee attains the maximum performance standards. The performance
standards applied to Employee shall be established no later than thirty (30)
days following the Commencement Date, and may include individual and corporate
objectives, as well as qualitative and quantitative standards.
<PAGE>
Employment Agreement
Mark A. Spraetz
Page -5-
3.4 Stock Options. Pursuant to the HomeSeekers 1996 Stock Option Plan,
HomeSeekers shall grant Employee 50,000 common stock options on the Commencement
Date. Pursuant to the HomeSeekers 1996 Stock Option Plan, the per share price
required to exercise each stock option granted hereunder shall be the closing
bid price of the stock on the date of grant. One-third of the stock options
granted hereunder shall vest on the first anniversary of the Commencement Date,
provided that Employee remains employed by HomeSeekers. One-third of the stock
options granted hereunder shall vest on the second anniversary of the
Commencement Date, provided that Employee remains employed by HomeSeekers. The
remaining one-third of the stock options granted hereunder shall vest on the
third anniversary of the Commencement Date, provided that Employee remains
employed by HomeSeekers. Each stock option granted hereunder shall have a life
of three years after vesting.
SECTION 4. FRINGE BENEFITS.
4.1 Welfare Benefit Plans. As Employee becomes eligible, Employee may
participate in and shall receive benefits under welfare benefit plans, policies,
and programs, including medical, dental, disability, and life insurance plans
and programs made available by HomeSeekers to other peer employees of
HomeSeekers.
4.2 Retirement Plans. As Employee becomes eligible, Employee shall be
entitled to participate in all retirement plans, policies and programs made
available by HomeSeekers to other peer employees of HomeSeekers.
4.3 Business Expenses. HomeSeekers shall reimburse Employee for all
reasonable business-related expenses incurred by Employee in connection with his
employment with HomeSeekers, including entertainment, travel, meals, and lodging
in accordance with the policies, practices, and procedures in effect generally
with respect to other peer employees of HomeSeekers.
4.4 Changes by Company. HomeSeekers reserves the right to modify,
suspend, or discontinue any and all of the above-mentioned plans, practices,
policies, and programs at any time as long as such action is taken generally
with respect to all peer employees of HomeSeekers.
SECTION 5 EMPLOYEE OBLIGATION.
5.1 Duties of Employee. Employee, as Executive Vice President of
HomeSeekers MLS Division, shall perform such duties and responsibilities as
HomeSeekers may reasonably assign to Employee which are consistent with the
nature and the character of the Position in accordance with the best interest of
HomeSeekers, subject to the direction and authority of the President of MLS 2000
or his designee. The parties agree that during the performance of this
Agreement, Employee shall remain located in and operate from Cincinnati, Ohio
and Employer shall not require Employee to change his principal place of
residence or business location for any reason. Employee shall travel on
HomeSeekers business as is reasonably required in the discharge of his duties,
but shall generally not be required to travel in excess of one-third of the
time.
<PAGE>
Employment Agreement
Mark A. Spraetz
Page -6-
5.2 Services to HomeSeekers only. The Employee shall devote his
productive time, ability and attention during the normal working day to the
business of HomeSeekers during the term of this Agreement. The Employee shall
not directly or indirectly render any services of a business, commercial or
professional nature to any person or firm that is engaged in a business similar
to that of or in direct competition with the Employer without the prior written
consent of HomeSeekers.
5.3 Company Policies. Employee agrees to abide by the policies, rules,
regulations or usages applicable to Employee as established by HomeSeekers for
all employees from time to time and provided to Employee in writing, and to
perform the duties assigned to him faithfully and loyally.
5.4 Limitations on Authority. Employee shall comply with the policies
set forth in HomeSeekers' document entitled "Delegation of Spending Authority,"
and all amendments thereto. Notwithstanding any other provision in this
Agreement to the Contrary, Employee shall not take any of the following actions
on behalf of HomeSeekers or any of its subsidiaries without the express, written
prior approval of HomeSeekers' Chief Executive Officer:
(a) Borrow or obtain credit or execute any guarantee;
(b) Permit any customer of HomeSeekers to become indebted
to HomeSeekers outside of the ordinary course of
business;
(c) Purchase or cause the expenditure of funds for
capital equipment;
(d) Sell or transfer any capital asset of HomeSeekers;
(e) Execute any contract or make any commitment for the
purchase or sale of HomeSeekers' products outside of
the ordinary course of business;
(f) Execute any lease of real or personal property; and
(g) Issue or cause to be issued any public announcement
or press release with respect to HomeSeekers'
financial results.
SECTION 6. ACCESS TO CONFIDENTIAL INFORMATION; NONCOMPETE.
6.1 Covenant Not to Compete.
<PAGE>
Employment Agreement
Mark A. Spraetz
Page -7-
(a) Employee acknowledges that HomeSeekers has created and
maintains Internet web sites at URL HomeSeekers.com and at URL CityNet.com on
which it displays multiple listing data, real estate brokers and agents, and
provides related services. The above enumerated items are referred to in this
Agreement as the "Internet MLS Business Activities" of HomeSeekers and / or its
subsidiaries as of the date of this Agreement. Employee acknowledges that
HomeSeekers has established MLS 2000 for the purpose of providing, marketing,
and servicing Internet based MLS systems. Employee acknowledges that Employee
has been employed in a management capacity by REI, which is in the business of
providing, marketing, and servicing legacy and/or Internet based MLS systems.
Employee acknowledges that, by virtue of the closing of the Agreement and Plan
of Merger, REI has been merged into a subsidiary of HomeSeekers and has thereby
become a subsidiary of HomeSeekers, and that the confidential information,
customers, and other assets of REI have become the property of HomeSeekers and
its subsidiaries. Employee acknowledges that, in connection with the foregoing,
HomeSeekers and its subsidiaries have accumulated valuable Confidential
Information including, but not limited to, trade secrets, know-how, technology,
contracts, copyrights, trademarks, patents, software, products, proprietary
information, marketing plans, sources of supply, business strategies, customer
lists, prospects, source codes, object codes, and other intellectual property
and business records(the "Confidential Information"). "Confidential Information"
does not include: (i) any information in the public domain; or (ii) any
information received unsolicited from a third party under no obligation of
secrecy. Employee recognizes and acknowledges that all such Confidential
Information shall be and remain the property of HomeSeekers. Employee further
acknowledges that, as a key management employee, Employee will be involved, on a
high level, in the development, implementation and management of the business
strategies and plans of MLS 2000. By virtue of Employee's unique and sensitive
position and special background, employment of Employee by a competitor of
HomeSeekers represents a serious competitive danger to HomeSeekers, and the use
of Confidential Information about HomeSeekers' business, strategies and plans
can and would constitute a valuable competitive advantage over HomeSeekers.
(b) In view of the foregoing, Employee agrees to maintain as
secret and confidential all Confidential Information described in Section 6.1(a)
of this Agreement relating to HomeSeekers. During Employee's employment by
HomeSeekers and after the termination of Employee's employment, Employee shall
not, without prior written authorization and consent of HomeSeekers' Chief
Executive Officer, or as may otherwise be required by law or legal process, use
or communicate or disclose any such Confidential Information for as long as such
Confidential Information remains confidential.
(c) In view of the foregoing, Employee covenants and agrees
that during the period of Employee's employment and for a period of one (1) year
thereafter, Employee shall not directly or indirectly:
(i) entice, persuade, or induce any individual who
presently is, or at any time during the period of his employment hereunder was
an employee of HomeSeekers or any HomeSeekers subsidiary, to terminate or
refrain from renewing or extending his or her employment with HomeSeekers or any
HomeSeekers subsidiary or to become employed by or enter into a contractual
relationship with Employee or a business in which Employee is involved in
business activities which are directly in competition with the Internet MLS
Business Activities of HomeSeekers or any HomeSeekers subsidiary;
<PAGE>
Employment Agreement
Mark A. Spraetz
Page -8-
(ii) engage or be engaged, in any capacity, directly
or indirectly, including but not limited as employee, agent, consultant,
partner, joint venturer, independent contractor, manager, executive, owner or
security holder (except as a passive investor holding less than a 1% equity
interest in any enterprise) in any business entity engaged in business
activities which are directly in competition with the Internet MLS Business
Activities of HomeSeekers or any HomeSeekers subsidiary;
(iii) call upon any person who is, at that time, an
employee of HomeSeekers or any HomeSeekers subsidiary in a management capacity
for the purpose or with the intent of enticing such employee away from or out of
the employ of HomeSeekers or any HomeSeekers subsidiary;
(iv) call upon any person or entity which is, at that
time, or which has been, within one (1) year prior to that time, a customer of
HomeSeekers or any HomeSeekers subsidiary for the purpose of soliciting or
selling products or services in direct competition with the Internet MLS
Business Activities of HomeSeekers or any HomeSeekers subsidiary;
(v) call upon any prospective acquisition candidate
of HomeSeekers or any HomeSeekers subsidiary known to Employee during his
employment by HomeSeekers, on the Employee's own behalf or on behalf of any
competitor.
(vi) disclose or contact customers, whether in
existence or proposed, of HomeSeekers or any HomeSeekers subsidiary to any
person, firm, partnership, corporation or business for any reason or purpose
which is directly competitive with the Internet MLS Business Activities of
HomeSeekers or any HomeSeekers subsidiary.
The geographic scope of this covenant not to compete shall be any market in
which HomeSeekers or any HomeSeekers subsidiary displays real estate listings or
markets multiple listing services.
6.2 Continuing Obligations. Subject to the limitations of Section
6.1(c), this entire Section 6 of this Agreement shall survive the termination or
expiration of this Agreement. Employee agrees that, for one (1) year following
his termination of employment with HomeSeekers, Employee shall inform
HomeSeekers of the identification of Employee's employer and the nature of such
employment or of Employee's self-employment.
<PAGE>
Employment Agreement
Mark A. Spraetz
Page -9-
6.3 Injunctive Relief. The parties agree and acknowledge that the
restrictions contained in this Section are reasonable in scope and duration, and
are necessary to protect the Internet MLS Business Activities of HomeSeekers and
its subsidiaries. The parties intend that the covenants contained in this
Section shall be construed as a series of separate covenants, (a) one for each
country, county, city and state (or comparable political subdivision) in the
geographic scope set forth in Section 6.1 of this Agreement, and, within such
territorial divisions, (b) one for each month to which Employee is bound by such
covenants. Except for geographic coverage, each such separate covenant shall be
deemed identical in terms to the covenant contained in the preceding paragraphs.
If, in any judicial proceeding, a court shall refuse to enforce any of the
separate covenants (or any part thereof) deemed included in such paragraphs,
then such unenforceable covenant (or such part) shall be deemed eliminated from
this Agreement for the purpose of those proceedings to the extent necessary to
permit the remaining separate covenants (or portions thereof) to be enforced by
such court. It is the intent of the parties that the covenants set forth herein
be enforced to the maximum degree permitted by applicable law. In the event that
the provisions of this Section should ever be deemed to exceed the scope, time
or geographic limitations of applicable law regarding covenants not to compete,
then such provisions shall be reformed to the maximum scope, time or geographic
limitations, as the case may be, permitted by applicable laws. The parties
further agree and acknowledge that any breach of this Section will cause
irreparable injury to HomeSeekers and upon any breach or threatened breach of
any provision of this Section, HomeSeekers shall be entitled to injunctive
relief, specific performance or other equitable relief, without the necessity of
posting bond.
6.4 Other Remedies. The undertakings herein shall not be construed as
any limitation upon the remedies HomeSeekers might, in the absence of this
Agreement, have at law or in equity.
SECTION 7. GENERAL PROVISIONS.
7.1 Entire Agreement. This Agreement contains the entire understanding
of the parties in respect of its subject matter and supersedes all prior
agreements and understandings (oral or written) between or among the parties
with respect to such subject matter.
7.2 Waiver. This Agreement may not be modified, amended, supplemented,
canceled or discharged, except by written instrument executed by all parties.
The failure of any party to enforce any of the provisions of this Agreement
shall not be deemed a waiver of any provisions or of the right of the party
thereafter to enforce any provisions.
7.3 Assignment. This Agreement is personal to Employee and shall not be
assigned by Employee. Any such assignment shall be null and void.
7.4 Severability. In case any provision of this Agreement shall, for
any reason, be held to be invalid, unenforceable, or illegal, such provision
shall be severed from this Agreement, and such invalidity, unenforceable or
illegality shall not affect any other provisions of this Agreement.
<PAGE>
Employment Agreement
Mark A. Spraetz
Page -10-
7.5 Counterparts; Facsimile. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument. Executed copies of this
Agreement of this Agreement may be delivered by facsimile, and delivery of
executed facsimile copies to the parties and their counsel shall be deemed to be
a delivery of a duplicate original and sufficient delivery to result in entry to
this Agreement by the transmitting party; provided, however, that within ten
(10) days thereafter a signed duplicate original shall be forwarded to the party
to whom a facsimile copy was forwarded.
7.6 Governing Law, Jurisdiction and Waiver of Venue. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Nevada regardless of the fact that any of the parties hereto may be or may
become a resident of a different country, state, or jurisdiction. Any suit or
action arising out of this Agreement shall be filed in a court of competent
jurisdiction within the County of Washoe, State of Nevada. The parties hereby
consent to the personal jurisdiction of such courts within Washoe County, State
of Nevada. The parties hereby waive any objections to venue in such courts
within Washoe County, State of Nevada.
7.7 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered (and shall
be deemed delivered) by certified or registered mail (first class postage
pre-paid), guaranteed overnight delivery, or facsimile transmission if such
transmission is confirmed by delivery by certified or registered mail (first
class postage pre-paid) or guaranteed overnight delivery, to the following
addresses and facsimile numbers (or to such other addresses or facsimile numbers
which such party shall designate in writing to the other party):
(a) if to HomeSeekers:
HomeSeekers.com, Incorporated
6490 South McCarran Blvd., Suite 28
Minden, NV 89423
Attn: Greg Costley, Chairman/CEO
Telephone: (775) 827-6886
Facsimile: (775) 827-8182
with a copy to:
Jenkins & Carter
501 Hammill Lane
Reno, NV 89511
Attn: Nathan M. Jenkins, Esq.
Telephone: (775) 829-7800
Facsimile: (775) 829-0511
(b) if to the Employee:
Mark A. Spraetz
7280 Smokeywoods Lane
Cincinnati, Ohio 45230
Telephone: (513) 624-0606
<PAGE>
Employment Agreement
Mark A. Spraetz
Page -11-
Facsimile:
with a copy to:
Stephen A. Kappers, Esq.
Cors & Bassett
537 E. Pete Rose Way, Suite 400
Cincinnati, Ohio 45202
Telephone: (513) 852-8208
Facsimile: (513) 852-8222
7.8 Attorneys' Fees. In the event of any dispute between the parties
arising out of this Agreement, the prevailing party shall be entitled, in
addition to any other rights and remedies it may have, to recover its reasonable
attorney fees and costs.
7.9 Acknowledgment by Employee. Employee represents that he is
knowledgeable and sophisticated as to business matters, including the subject
matter of this Agreement, that he has read this Agreement, and that he
understands its terms. Employee acknowledges that prior to assenting to the
terms of this Agreement he has been given a reasonable time to review it, to
consult with counsel of his own choice, and to negotiate at arms length with
HomeSeekers as to its terms and contents.
<PAGE>
Employment Agreement
Mark A. Spraetz
Page -12-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
HOMESEEKERS.COM, INCORPORATED,
a Nevada corporation
By: /s/ Greg Costley
--------------------------------------
Name: Greg Costley
------------------------------------
Title: Chief Executive Officer
-----------------------------------
EMPLOYEE:
/s/ Mark A. Spraetz
-----------------------------------------
Mark A. Spraetz
Tuesday October 12, 7:31 am Eastern Time
Company Press Release
SOURCE: HomeSeekers.com, Inc.
HomeSeekers.com Acquires 40 Multiple Listing Service Customers in Midwest and
Completes Merger with Terradatum
Conference Call Scheduled
RENO, Nev., Oct. 12 /PRNewswire/ -- HomeSeekers.com, Inc. (Nasdaq: HMSK - news)
announced today that it has acquired Information Management Company, LLC of
Cincinnati, Ohio ("IMCO"), expanding the Company's geographic reach
significantly and providing access to new business and extended services. The
acquisition was financed through issuance of HomeSeekers.com common stock valued
at approximately $2 million. IMCO operates 40 Multiple Listing Services of
residential real estate throughout Ohio, Indiana, Kentucky, Oklahoma, Tennessee
and West Virginia. The company is profitable, with approximately $2 million
annually in revenues.
The Company also announced today it completed its merger with Terradatum, LLC of
Santa Rosa, CA, a leading provider of technology-based solutions for the MLS
real estate market. HomeSeekers will integrate Terredatum's patented MLSWeb(TM)
and Intranet MLS system with its own technology to create a user-friendly and
efficient Internet-based MLS software. The merger is expected to significantly
enhance the Company's e-commerce from MLS sales, agent revenue and broker
relationships.
"The IMCO deal is a further strengthening of our MLS operations that complements
the finalization of our merger with Terradatum and our MLS2000 product line,
creating combined revenues of over $5 million," said Greg Costley, Chairman and
CEO of HomeSeekers.com. This $5 million in revenue sources represents only
broker fees for listing services. HomeSeekers also has a desktop product that
could generate a multiple of that figure in advertising revenues.
"When these entities are connected to HomeSeekers.com, the real estate
residential listing information flow will be in real time," Mr. Costley
continued. "While daily updates are advantageous on an overall basis, in certain
fast moving real estate markets it is absolutely critical to have fresh data.
With this latest acquisition, we have more than reached critical mass in both
experience and customer support capabilities." Mark Spraetz, CEO of IMCO, will
serve as Executive Vice President for HomeSeekers' MLS web Division. "We are
pleased to be part of the Homeseekers.com MLS Division," commented Mr. Spraetz.
"By combining the best of HomeSeeker's MLS2000, Terradatum's MLSWeb and our
robust distributed systems into a new product called XMLSWeb(TM), we feel that
HomeSeekers has introduced the premier Internet MLS solution that meets and
exceeds the speed requirements of busy real estate professionals. It is my
belief that successful agents in the future will require sophisticated
technology to interface with the home buying consumer in the Internet space."
Ira Luntz, President of the MLS Division added, "We can now serve MLS
organizations both large and small. The addition of Terradatum and IMCO means we
will be able to deliver fast, complete stand-alone Internet MLS systems with
distributed desktop and Palmtop solutions today." Conference Call
HomeSeekers.com also announced it will hold a Conference Call at 4:30 ET on
Tuesday, October 12, 1999. To access the call dial 800-633-8757 reservation #
13319110. Playback will be available for 48 hours following the Call by dialing
800-633-8284 reservation # 13319110 (Outside the U.S. dial 619-812-6440).
HomeSeekers.com, Inc., (http://www.homeseekers.com) a leading provider of
on-line residential real estate listing information for use by real estate
consumers and professionals, mortgage and title insurance companies and others,
is dedicated to delivering Web-related technology to simplify and expedite real
estate transactions. The Company currently has aggregated approximately 800,000
real estate listings on its Web site, which is the largest universe on the
Internet of listings that are updated on a daily basis.
In conjunction with the provisions of the new "Safe Harbor" section of the
Private Securities Litigation Reform Act of 1995, this news release may contain
forward-looking statements pertaining to future anticipated projected plans,
performance and developments, as well as other statements relating to future
operations. All such forward-looking statements are necessarily only estimates
of future results and there can be no assurance that actual results will not
materially differ from expectations. Further information on potential factors
which could affect HomeSeekers.com Incorporated are included in the company's
reports filed with the Securities and Exchange Commission. SOURCE:
HomeSeekers.com, Inc.
