Sample Business Contracts


Earn-Out Agreement - Research Engineers Inc. and Bharat Manglani


                               EARN-OUT AGREEMENT

      THIS EARN-OUT AGREEMENT is entered into this 14th day of September,  1999,
between BHARAT MANGLANI  ("Manglani") and RESEARCH  ENGINEERS,  INC., a Delaware
corporation ("REI").

                                    RECITALS

      A.  Pursuant to an Amended and Restated  Stock  Purchase  Agreement  dated
September 14, 1999 ("Purchase Agreement"), among Manglani, REI, NetGuru Systems,
Inc., a New  Hampshire  corporation  ("NSI"),  and NetGuru  Consulting,  Inc., a
Massachusetts  corporation  ("NCI"),  it is a  condition  to  closing  under the
Purchase  Agreement  ("Closing")  that Manglani and REI execute and deliver this
Agreement to each other.

      B.  Pursuant  to the  Purchase  Agreement,  REI  will  acquire  all of the
outstanding capital stock of NSI and NCI.

      C. The parties  intend to provide for the payment of  additional  Purchase
Price (as that term is defined in the Purchase  Agreement) to Manglani  based on
the financial performance of NSI and NCI following the Closing ("Earn-Out").

                                    AGREEMENT

      1.  Calculation  of Earn-Out.  Manglani's  Earn-Out  shall be based on the
combined  revenues and gross profit  percentage  of NSI and NCI,  determined  as
follows:

            (a) During April 2000, REI's chief financial  officer will determine
the total combined revenues of NSI and NCI for the period April 1, 1999, through
March 31, 2000 ("NetGuru  Revenues")  and the combined  gross profit  percentage
(total gross  profit  divided by total  revenues,  each  determined  in a manner
consistent with the manner in which they were determined for purposes of audited
consolidated  financial  statements  of NSI and NCI for the  fiscal  year  ended
December 31, 1998, of those entities for the same period  ("NetGuru Gross Profit
Percentage").

            (b) If the NetGuru Revenues exceed  $7,500,000 and the NetGuru Gross
Profit Percentage equals or exceeds 29%, then the Earn-Out shall be $300,000.

            (c) If either the NetGuru  Revenues are less than  $6,750,000 or the
NetGuru Gross Profit Percentage is less than 26%, then no Earn-Out shall be due.

            (d) If the  NetGuru  Revenues  equal or  exceed  $6,750,000  and the
NetGuru Gross Profit  Percentage  equals or exceeds 26%, but one or both is less
than the  figures  set forth in clause (b)  above,  then the  Earn-Out  shall be
$300,000  multiplied  by the  percentage  of the figures set forth in clause (b)
that was actually achieved (using the lower percentage). For example, if NetGuru
Revenues are $7,000,000  (which is 93.33% of $7,500,000)  and the Net Guru Gross
Profit  Percentage is 27% (which is 93.10% of 29%),  then the Earn-Out  shall be
93.10% of $300,000, or $279,300.



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      2. Payment of Earn-Out. On or before April 30, 2000, REI's chief financial
officer shall deliver to Manglani a written  calculation of the Earn-Out  earned
(if any),  together  with a check  representing  the amount of the  Earn-Out (if
any).

      3. Resolution of Dispute.  If Manglani  disputes REI's  calculation of the
Earn-Out, he shall so notify REI in writing within ten days after receipt of the
written calculation referred to in Section 2. REI and Manglani shall then submit
the matter to KPMG LLP ("KPMG"),  who shall  calculate the Earn-Out as described
in Section 1. KPMG shall submit its written  calculation  of the Earn-Out to the
parties  simultaneously  with its  completion  of its  audit of REI's  financial
statements for the fiscal year ended March 31, 2000. If KPMG's calculation shows
the  Earn-Out  to be equal to or less than the amount  determined  by REI,  then
Manglani  shall pay KPMG's fees and expenses.  If KPMG's  calculation  shows the
Earn-Out to be greater  than the amount  determined  by REI,  then REI shall pay
KPMG's fees and expenses.

      4.  Conditions  to Receipt of Earn-Out.  In order to receive the Earn-Out,
Manglani  must be  continuously  employed by REI or a subsidiary of REI from the
date of this Agreement through March 31, 2000,  unless terminated  without cause
by REI. For purposes hereof, "cause" shall mean:

            (a)  Manglani's  conviction by, or entry of a plea of guilty or nolo
contendere  in,  a court of  competent  and  final  jurisdiction  for any  crime
involving  moral  turpitude or punishable by  imprisonment  in the  jurisdiction
involved;

            (b)  Manglani's  commission of an act of fraud,  whether prior to or
subsequent to the date hereof upon REI;

            (c)  Manglani's  continuing  repeated willful failure  or refusal to
perform his duties as required by this Agreement,  provided, that termination of
Manglani's  employment pursuant to this paragraph (c) shall not constitute valid
termination for cause unless  Manglani shall have first received  written notice
from the Board of Directors of REI stating with  specificity  the nature of such
failure or refusal and  affording  Manglani at least thirty (30) days to correct
the act or omission complained of; or

            (d)  Gross  negligence,  insubordination,   material   violation  by
Manglani of any duty of loyalty to REI or any other  material  misconduct on the
part of Manglani, provided that termination of Manglani's employment pursuant to
this  paragraph  (d) shall not  constitute  valid  termination  for cause unless
Manglani shall have first received written notice from the Board of Directors of
REI stating with specificity the nature of such failure or refusal and affording
Manglani at least thirty (30) days to correct the act or omission complained of.

      5.    Miscellaneous.

            5.1  Modification and Waiver of Breach. No waiver or modification of
this  Agreement  shall be binding  unless it is in writing signed by the parties
hereto. No waiver of a breach hereof shall be deemed to constitute a waiver of a
future breach, whether of a similar or dissimilar nature.



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            5.2  Assignment. The rights of REI under this Agreement may, without
the  consent  of  Manglani,  be  assigned  by REI,  in its sole  and  unfettered
discretion (a) to any person, firm, corporation,  or other business entity which
at any time, whether by purchase, merger, or otherwise,  directly or indirectly,
acquires  all or  substantially  all of the assets or business of REI, or (b) to
any  subsidiary  or  affiliate of REI, or any  transferee,  whether by purchase,
merger or otherwise,  which directly or indirectly acquires all or substantially
all of the assets of REI or such subsidiary or affiliate.

            5.3  Notices.  All  notices  and  other  communications  required or
permitted  under this Agreement  shall be in writing,  served  personally on, or
mailed by certified or registered United States mail to, the party to be charged
with receipt thereof.  Notices and other communications  served by mail shall be
deemed given hereunder 72 hours after deposit of such notice or communication in
the United  States Post Office as  certified  or  registered  mail with  postage
prepaid and duly addressed to whom such notice or  communication is to be given,
in the case of (a) REI, 22700 Savi Ranch Parkway, Yorba Linda, California 92887,
Attention:   President,   or  (b)  Manglani,   82  Lexington   Street,   Weston,
Massachusetts 02493. Any such party may change said party's address for purposes
of this  Section by giving to the party  intended  to be bound  thereby,  in the
manner provided herein, a written notice of such change.

            5.4  Counterparts.  This Agreement may be executed  in  one or  more
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together shall constitute one and the same Agreement.

            5.5  Construction  of  Agreement.  This Agreement shall be construed
in  accordance  with,  and  governed  by,  the laws of the  State of  California
applicable to agreements executed and to be performed in California.

            5.6  Complete Agreement.    This   Agreement  contains   the  entire
agreement   between  the  parties  hereto  with  respect  to  the   transactions
contemplated  by this Agreement and supersedes all previous oral and written and
all   contemporaneous   oral   negotiations,    commitments,    writings,    and
understandings.

            5.7  Non-Transferability of Interest. None of the rights of Manglani
to receive any form of compensation  payable pursuant to this Agreement shall be
assignable or transferable  except through a testamentary  disposition or by the
laws of descent  and  distribution  upon the death of  Manglani.  Any  attempted
assignment, transfer, conveyance, or other disposition (other than as aforesaid)
of any interest in the rights of Manglani to receive any form of compensation to
be made by REI pursuant to this Agreement shall be void.

            5.8  Severability.    If  any   provision  of  this   Agreement   or
application  thereof to anyone or under any  circumstances  is adjudicated to be
invalid   or   unenforceable   in   any   jurisdiction,   such   invalidity   or
unenforceability  shall not affect any other  provisions or applications of this
Agreement  that  can be  given  effect  without  the  invalid  or  unenforceable
provision or application and shall not invalidate or render  unenforceable  such
provision in any other jurisdiction or under any other circumstance.



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            5.9  Legal  Fees.   If  any  legal  action,   arbitration  or  other
proceeding is brought for the enforcement of this  Agreement,  or because of any
alleged dispute,  breach,  default or  misrepresentation in connection with this
Agreement,  the  successful  or  prevailing  party  shall be entitled to recover
reasonable  attorneys'  fees and  other  costs it  incurred  in that  action  or
proceeding, in addition to any other relief to which it may be entitled.


                                          Research Engineers, Inc.


                                          By:______________________________
                                             Jyoti Chatterjee, President


                                          By:______________________________
                                             Wayne Blair, Secretary





                                          ______________________________
                                          Bharat Manglani


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