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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): March 16, 2000
ACTUATE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-24607 94-3193197
- ------------------------------ ------- ----------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
701 Gateway Boulevard, South San Francisco, California 94080
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (650) 837-2000
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Item 2. Acquisition or Disposition of Assets
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Actuate Corporation ("Actuate"), a Delaware corporation, acquired all
the assets of EnterpriseSoft, a sole proprietorship, in exchange for cash and
shares of Actuate Common Stock (the "Exchange"). The Exchange was accomplished
pursuant to the terms of an Asset Purchase Agreement (attached as Exhibit 2.1
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hereto), dated March 16, 2000 (the "Purchase Agreement"), by and between Actuate
and EnterpriseSoft. The terms of the Purchase Agreement reflected the arm's-
length negotiations among the parties.
Pursuant to the terms of the Purchase Agreement, all the assets of
EnterpriseSoft, which included certain intellectual property and computer
equipment, were exchanged for 100,000 shares of Actuate Common Stock and
$2,450,000 from the Company's cash account. The computer equipment acquired was
used in the development of software and Actuate intends to use such equipment in
the same manner. Under the terms of the Purchase Agreement, approximately ten
percent (10%) of the aggregate consideration to be received by EnterpriseSoft
was placed in an escrow account with Greater Bay Trust Company as security for
the agreement of the Owners to indemnify Actuate for certain contingencies.
Item 7. Financial Statements and Exhibits.
(a) The Registrant is not required to file the financial statements of
EnterpriseSoft.
(b) The Registrant is not required to file pro forma financial
information in connection with the acquisition.
(c) Exhibits:
Exhibit Description
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2.1 Form of Purchase Agreement dated March 16, 2000, by and
between Actuate Corporation and EnterpriseSoft.
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SIGNATURES
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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.
Actuate Corporation
Date: March 27, 2000 /s/ William P. Garvey
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William P. Garvey
Secretary
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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
by and between
Actuate Corporation, a Delaware corporation, and
EnterpriseSoft, a sole Proprietorship
Dated as of March 16, 2000
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TABLE OF CONTENTS
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Page
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ARTICLE I - BASIC TRANSACTION................................................. 1
1.1 Purchase and Sale of Assets; Description of Assets to be Acquired.. 1
1.2 Assumed Liabilities................................................ 3
1.3 Unassumed Liabilities.............................................. 3
1.4 Consideration...................................................... 3
1.5 The Closing........................................................ 3
1.6 Arbitration........................................................ 3
1.7 Allocation of Purchase Price....................................... 4
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF SELLER........................ 4
2.1 Organization; Qualification; Good Standing.......................... 4
2.2 Capitalization...................................................... 4
2.3 Authority.......................................................... 5
2.4 Financial Information.............................................. 5
2.5 Liabilities........................................................ 6
2.6 Absence of Certain Changes and Events.............................. 6
2.7 Taxes.............................................................. 7
2.8 Compliance With Law................................................ 9
2.9 Proprietary Rights................................................. 9
2.10 Restrictive Documents or Orders................................... 10
2.11 Contracts and Commitments......................................... 10
2.12 Operating Condition............................................... 10
2.13 Assets............................................................ 11
2.14 Title to the Property............................................. 11
2.15 Litigation........................................................ 11
2.16 No Conflict or Default............................................ 11
2.17 Third Party Consents.............................................. 11
2.18 Labor Relations................................................... 12
2.19 Brokers' and Finders' Fees/Contractual............................ 12
2.20 Interested Party Relationships.................................... 12
2.21 Environmental and Safety Matters.................................. 12
2.22 Customers......................................................... 12
2.23 Employee Benefit Plans............................................ 13
2.24 Insurance......................................................... 14
2.25 Accounts Receivable............................................... 15
2.26 Books and Records................................................. 15
2.27 Complete Disclosure............................................... 15
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF PURCHASER..................... 15
3.1 Organization, Standing and Capital Structure....................... 15
3.2 Authorization...................................................... 15
3.3 SEC Filings; Financial Statements.................................. 15
3.4 Compliance with Other Instruments.................................. 16
</TABLE>
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<TABLE>
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3.5 Compliance With Law................................................ 16
3.6 Consents........................................................... 16
ARTICLE IV - COVENANTS....................................................... 17
4.1 Best Efforts....................................................... 17
4.2 Notices and Consents............................................... 17
4.3 Operation of Business.............................................. 17
4.4 Full Access........................................................ 19
4.5 Covenants Against Disclosure....................................... 19
4.6 Further Assurances................................................. 19
4.7 Advice of Changes.................................................. 19
4.8 Employees, Bonuses and Termination Payments....................... 20
4.9 Cooperation by Seller.............................................. 20
4.10 Negotiation with Others............................................ 20
4.11 Payment of Taxes................................................... 21
4.12 Registration of Shares............................................. 21
ARTICLE V - CONDITIONS PRECEDENT TO OBLIGATIONS................................ 22
5.1 Conditions to Obligations of Purchaser............................. 22
5.2 Conditions to Obligations of Seller................................ 24
ARTICLE VI - INDEMNIFICATION................................................. 24
6.1 Survival of Representations and Warranties......................... 24
6.2 Indemnification of Purchaser....................................... 25
6.3 Escrow Fund........................................................ 25
6.4 Damage Threshold................................................... 26
6.5 Escrow Period...................................................... 26
6.6 Claims; Objections to Claims....................................... 26
6.7 Payment of Claims.................................................. 27
6.8 Resolution of Conflicts; Arbitration............................... 27
6.9 Seller's Agent..................................................... 28
6.10 Distribution Upon Termination of Escrow Period..................... 28
6.11 Actions of the Seller's Agent...................................... 28
6.12 Third-Party Claims................................................. 29
ARTICLE VII - TERMINATION.................................................... 29
7.1 Termination by Mutual Consent...................................... 29
7.2 Effect of Termination.............................................. 30
ARTICLE VIII - MISCELLANEOUS PROVISIONS...................................... 30
8.1 Notice............................................................. 30
8.2 Entire Agreement................................................... 30
8.3 Binding Effect; Assignment......................................... 30
8.4 Captions........................................................... 31
8.5 Expenses of Transactions; Taxes.................................... 31
8.6 Waiver; Consent.................................................... 31
</TABLE>
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<TABLE>
<CAPTION>
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8.7 Third-Party Beneficiaries.......................................... 31
8.8 Counterparts and Facsimiles........................................ 31
8.9 Severability....................................................... 31
8.10 Incorporation of Exhibits and Schedules........................... 31
8.11 Governing Law..................................................... 32
</TABLE>
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LIST OF SCHEDULES
1.1(b) Listed Contract
1.1(d) Intellectual Property
1.1(k) Other Properties
2.1 Organization; Capital Structure
2.2(a)-(e) Capitalization
2.5 Liabilities
2.13 Disclosure Regarding Assets
2.14 Permitted Liens
2.15 Litigation
2.16 Conflicts or Defaults
2.17 Third Party Consents
2.18 Labor Relations
2.22 Customers
2.23 Employee Benefit Plans
2.24 Insurance Policies
2.25 Accounts Receivable
2.27 Complete Disclosure
LIST OF EXHIBITS
A Allocation of Purchase Price
B Assignment and Assumption Agreement
C Escrow Agreement
D Employment Agreements
E Stock Restriction Agreement
F Non-Competition and Non-Solicitation Agreement
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ASSET PURCHASE AGREEMENT
THIS AGREEMENT dated as of March 16, 2000, is by and between Actuate
Corporation (a Delaware corporation) and EnterpriseSoft (a sole proprietorship).
WHEREAS, Actuate Corporation ("Purchaser") is currently engaged in,
among other things, the business of developing, marketing and selling software;
WHEREAS, EnterpriseSoft (the "Seller") is also engaged in, among other
things, the business of developing, marketing and selling software (the
"Business");
WHEREAS, Purchaser proposes to acquire designated assets and assume
designated liabilities (the "Acquisition") of the Business from the Seller; and
WHEREAS, following the Acquisition, the Business related to the Assets
(as hereafter defined) shall be conducted through Purchaser;
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereby agree as follows:
ARTICLE I
BASIC TRANSACTION
1.1 Purchase and Sale of Assets; Description of Assets to be Acquired.
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At the losing (as hereafter defined), subject to the terms and conditions of
this Agreement and for the consideration set forth in Section 1.4 hereof, and
except as provided in Section 1.1(l), below, Seller agrees to convey, sell,
transfer, assign, and deliver to Purchaser, and Purchaser shall purchase from
Seller, all right, title, and interest throughout the world of Seller at the
Closing in and to the assets, properties, and rights (contractual or otherwise)
of the Business of every kind, nature, and description, personal, tangible and
intangible, known or unknown, wherever located, including, without limitation,
the following:
(a) Personal Property. All interests in equipment, leasehold
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improvements, furniture, computer hardware, office supplies and other tangible
personal property (the "Personal Property");
(b) Contracts. All claims and rights under all agreements,
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contracts, contract rights, licenses, purchase and sale orders, quotations, and
other executory commitments (collectively, the "Contracts"), including, without
limitation, those listed on Schedule 1.1(b) (the "Listed Contracts") hereto to
---------------
the extent the rights and claims thereunder arise after the Closing and relate
to goods delivered or to be delivered or to services performed or to be
performed after the Closing, including, but not limited to, accounts receivable;
(c) Permits. All transferable franchises, licenses, permits,
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consents, authorizations, and approvals of any federal, state, or local
regulatory, administrative, or other
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governmental agency or body (those franchises, licenses, permits, consents,
authorizations, approvals and permits are hereinafter referred to as the
"Governmental Permits");
(d) Intellectual Property. All trade secrets, financial
---------------------
information, product plans, client and customer lists, client and customer
account information (including customer payment histories), contractor and
consultant and employee lists, contractor and consultant and employee work
histories and account information, marketing plans and strategies, forecasts and
other business information, improvements, inventions, formulas, ideas, research
and development information, works of authorship, processes, computer programs,
applications, algorithms, techniques, schematics, designs, plans, proposals,
know-how, data, patents, patent applications, trademarks and their associate
goodwill, trademark applications, copyrights and their respective moral rights,
copyright applications, design rights, trade secret rights and other rights
(including, without limitation, all rights to the trademarks and patents listed
on Schedule 1.1(d) hereto) owned, used, licensed or held for use by Seller
---------------
(including, without limitation, any applications for or extensions, renewals,
continuations or divisions of any of the foregoing (the "Intellectual
Property")).
(e) Documents. Copies of all books of account, records, general
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ledgers, documents, sales invoices, correspondence, lists, accounts payable and
payroll records, federal and state tax returns (including schedules thereto),
files, papers, studies, reports and all other papers and records (the
"Records");
(f) Warranty Rights. All rights, if any, under express or
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implied warranties from suppliers of Seller;
(g) Causes of Action. All of Seller's causes of action,
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judgments, and claims or demands of whatever kind or description;
(h) Goodwill. All goodwill;
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(i) Claims. All claims, deposits, prepayments, refunds, causes
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of action, choses in action, rights of recovery, rights of set off, and rights
of recoupment;
(j) Real Property. All real property interests, including
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without limitation, leaseholds and subleaseholds therein, improvements,
fixtures, and fittings thereon, and easements, rights-of-way, and other
appurtenances thereto; and
(k) Other Properties. Such other properties or assets as are
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listed on Schedule 1.1(k) hereto.
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(l) Excluded Assets. Seller shall not be obligated to transfer
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to Purchaser any cash, bank accounts, money market accounts, or any other cash-
equivalent accounts maintained by Seller.
The assets, properties and rights to be conveyed, sold, transferred,
assigned, and delivered to Purchaser pursuant to this Section 1.1 are sometimes
hereinafter collectively referred to as the "Assets."
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Notwithstanding anything to the contrary in this Agreement, to the
extent that the assignment hereunder of any of the Assets shall require the
consent of any other party (or in the event that any of the same shall be
nonassignable), neither this Agreement nor any action taken pursuant to its
provisions shall constitute an assignment or an agreement to assign if such
assignment or attempted assignment would constitute a breach of any such Assets
or result in the loss or diminution thereof.
1.2 Assumed Liabilities. Buyer hereby agrees as of the Closing to
-------------------
assume, satisfy or perform when due all liabilities and obligations of Seller in
respect of each of the Listed Contracts to the extent (but only to the extent)
each of such obligations arise after the Closing (the "Assumed Liabilities")
whether or not a claim has been asserted in connection therewith prior to the
Closing and excluding without limitation, (i) obligations relating to breach, if
any, of the Contracts occurring prior to the Closing; and (ii) debts relating to
services rendered, but not paid for as of the Closing.
1.3 Unassumed Liabilities. With the exception of the Assumed
---------------------
Liabilities, Buyer shall not, by the execution, delivery and performance of this
Agreement, or otherwise, assume or otherwise be responsible for any liability or
obligation of any nature, or claims of such liability or obligation, matured or
unmatured, liquidated or unliquidated, fixed or contingent, or known or unknown,
whether arising out of acts or occurrences prior to, at or after the date
hereof. Without limiting the generality of the foregoing, Seller shall remain
liable for all liabilities and obligations to federal, state, local or other
taxes of any kind incurred before the Closing, to any product warranty claim
initiated prior to the Closing, or to Seller's personnel with respect to
payroll, overtime, accrued vacation time, holiday time, severance arrangements
or workers' compensation of any nature which are accrued but unpaid as of the
Closing or which accrue as a result of the consummation of the transactions
contemplated herein.
1.4 Consideration. Subject to the provisions of an escrow as
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provided in Article VI hereof, in consideration for the Assets and the other
forms of consideration to be given by Seller, and in full payment therefor,
Purchaser will deliver to the Seller upon the Closing, two million four hundred
fifty thousand dollars ($2,450,000) ("Cash Consideration") in cash payable by
bank cashier's check or wire transfer and 100,000 shares of Common Stock of
Purchaser, par value $0.001 per share (the "Shares"); provided, however, that
the Shares shall be delivered to Seller within 10 business days of the Closing.
1.5 The Closing. Subject to termination of this Agreement as
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provided in Article VII below, the closing of the Acquisition contemplated by
this Agreement shall take place at the offices of Actuate Corporation, San
Mateo, California, on such date that the conditions of closing set forth in
Article V hereof have been satisfied or waived, or such other place as the
parties hereto may mutually select (the "Closing").
1.6 Arbitration. Any controversy pursuant to this Agreement, shall
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be finally determined by arbitration in San Mateo county, California, in
accordance with the then-current Commercial Arbitration Rules of the American
Arbitration Association then in effect (the "Rules"), and judgment upon the
award rendered by the arbitrators may be entered in any court of competent
jurisdiction. For purposes of such arbitration, three arbitrators shall be
chosen in
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accordance with the Rules. There shall be limited discovery prior to the
arbitration hearing (the "Hearing") as follows: (a) exchange of witness lists
and copies of documentary evidence and documents related to or arising out of
the issues to be arbitrated, (b) depositions of all party witnesses, and (c)
such other depositions as may be allowed by the arbitrators upon a showing of
good cause. Depositions shall be conducted in accordance with the California
Code of Civil Procedure. The arbitrators shall award to the prevailing party its
costs and expenses (including counsel fees) of any such arbitration.
Notwithstanding the amount in controversy, the Expedited Procedures as set forth
in the Rules shall apply. The parties hereby agree that to the extent
practicable, the Hearing shall take place within one hundred twenty (120) days
of the selection of the arbitrators. The arbitration proceeding shall be
conducted in confidence and no party thereto shall disclose to any other person
any matters disclosed at or in connection with the hearing unless required to do
so by law or pursuant to a court order.
1.7 Allocation of Purchase Price. The consideration given for the
----------------------------
Assets shall be allocated among the Assets and in the manner provided for in
Exhibit A ("Allocation of Purchase Price"), which the parties acknowledge will
- ---------
be prepared by mutual agreement of the parties within sixty (60) days of the
Closing, using the allocation methods and principles required by Section 1060 of
the Internal Revenue Code of 1986, as amended, (the "Code") and the Treasury
Regulations promulgated thereunder. Neither Purchaser nor Seller shall take any
position inconsistent with such allocation, and any and all filings with and
reports made to any Taxing authority will be consistent with that allocation.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
The Seller hereby represents and warrants to Purchaser and Actuate
that, except as set forth in a Schedule hereto, specifically referring to the
applicable section of this Article II, delivered by the Seller to Purchaser and
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, counsel to
Purchaser:
2.1 Organization; Qualification; Good Standing.
------------------------------------------
(a) Seller (i) is a proprietorship under the laws of the state of
its organization, (ii) has the authority to own, lease and operate its
properties and to conduct the Business as now conducted and (iii) is duly
qualified, licensed and authorized to do business and is in good standing in all
jurisdictions in which the ownership, leasing or operating of its respective
properties or the conduct of the Business requires such qualification and/or
license, except where the failure to be so qualified and/or licensed to do
business would not have a material adverse effect on Seller or the Business.
(b) Seller does not own any equity interest, directly or
indirectly, in any other entity or control any other entity.
2.2 Capitalization.
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(a) As of the date of this Agreement, Sandeep Jain owns all of
the Seller as a sole proprietorship.
(b) Except as set forth in Schedule 2.2(b), there are no options,
---------------
preemptive rights, calls, subscriptions, commitments, or other instruments,
understandings, or agreements outstanding giving any person or entity the right
to acquire any interest in Seller nor are there any commitments to issue or
execute any of the foregoing.
(c) Except as set forth in Schedule 2.2(c), no person or entity
---------------
has any rights for or relating to the registration of any interest in Seller or
any successor thereto.
(d) Seller has no minute books or stock records.
(e) The individual and/or entities set forth in Schedule 2.2(e),
---------------
collectively, are the record and beneficial owners of all of the interests in
Seller as more specifically set forth in Schedule 2.2(e). No other person or
---------------
entity has, nor until after the Closing will have, any equity or other ownership
interest in Seller of any nature whatsoever.
2.3 Authority.
---------
(a) Seller has full power and authority to enter into this
Agreement, the Assignment and Assumption Agreement attached as Exhibit B hereto,
---------
and the Escrow Agreement attached as Exhibit C hereto (collectively, the
---------
"Related Agreements"), to execute, deliver and perform their obligations
hereunder and thereunder, and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the Related
Agreements, the performance by Seller of its obligations hereunder and
thereunder, and the consummation of the transactions contemplated hereby and
thereby, have been duly and validly authorized by all necessary action on the
part of Seller. Each of this Agreement and the Related Agreements is a legal,
valid and binding obligation of Seller, enforceable against Seller in accordance
with their respective terms, subject to (i) any applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws relating to or affecting
the enforcement of creditors' rights generally, (ii) the discretion of a court
ordering specific performance and other equitable remedies, and (iii) general
principles of equity regardless of whether raised in a proceeding at law or in
equity.
(b) No consent, approval, order or authorization of, or
registration, declaration of, or qualification or filing with, any court,
administrative agency, commission, regulatory authority or other governmental or
administrative body or instrumentality, whether domestic or foreign (a
"Governmental Entity"), is required by or with respect to Seller in connection
with the execution and delivery of this Agreement and the Related Agreements by
Seller or the consummation by Seller of the transactions contemplated hereby or
thereby.
2.4 Financial Information. Seller has delivered to Purchaser the
---------------------
unaudited balance sheets and related statements of combined operations and cash
flows prepared in connection with the operation of the Business for the fiscal
years ended December 31, 1997, 1998, and 1999 (the "Financial Statements"). The
Financial Statements are complete and correct
5
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in all material respects, have been prepared on a consistent basis throughout
the periods indicated and with each other and present fairly and accurately the
financial condition of the Business as of the respective dates thereof. All of
Seller's general ledgers, books and records are located at Seller' principal
place of business in California.
2.5 Liabilities. Except as set forth on Schedule 2.5, Seller has no
----------- ------------
liabilities arising in connection with or affecting the Business or the Assets
(contingent, absolute, accrued or unaccrued, liquidated or unliquidated, or
otherwise) other than those reflected in the Financial Statements, or those as
to which an adequate reserve therefor has been established and is adequately
reflected in the Financial Statements. Except as set forth on Schedule 2.5,
------------
there are no debts, liabilities or obligations with respect to Seller or to
which the Assets are subject, liquidated, unliquidated, accrued absolute,
contingent or otherwise, in excess of $10,000 individually or in excess of
$25,000 in the aggregate.
2.6 Absence of Certain Changes and Events. Since December 31, 1999,
-------------------------------------
there has not been in connection with or affecting the Business or the Assets:
(a) Any material adverse change in the financial condition,
results of operation, assets, liabilities or prospects of Seller or the
Business, or any occurrence, circumstance, or in the aggregate that would result
in any such material adverse change;
(b) Any event, including, without limitation, shortage of
materials or supplies, fire, explosion, accident, requisition or taking of
property by any governmental agency, flood, drought, earthquake, or other
natural event, riot, act of God or a public enemy, or damage, destruction, or
other casualty, whether covered by insurance or not, that has had a material
adverse effect on Seller, the Business or the Assets or any such event that
would have a material adverse effect on Seller, the Business or the Assets;
(c) Any material transaction relating to or involving Seller, the
Business, or the Assets taken as a whole which was entered into or carried out
by any of Seller other than in the ordinary course of business or in connection
with this Agreement;
(d) Any material change made by Seller in the method of operating
the Business, including, but not limited to, changes in collection practices or
changes in the granting of discounts;
(e) Any material change by Seller in accounting or tax practices
or procedure;
(f) Any sale, lease or disposition of, or any agreement to sell,
lease, or dispose of the Assets other than in the ordinary course of business
and consistent with prior practice, other than in connection with this
Agreement;
(g) Any material modification, waiver, change, amendment, release,
rescission, accord and satisfaction, or termination of, or with respect to, any
material term, condition, or provision of any material contract, agreement,
proprietary right, license, permit or other instrument to which Seller is a
party and relating to or affecting the Business or the Assets
6
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other than any satisfaction by performance in accordance with the terms thereof
in the ordinary course of business and consistent with prior practice;
(h) Any event permitting any of the Assets to be subjected to any
pledge, encumbrance, security interest, lien, charge, or claim of any kind
whatsoever (direct or indirect) (collectively, "Liens"), other than (a)
mechanic's, materialmen's, landlord's, lessor's, carrier's, warehousemen's or
similar liens incurred in the ordinary course of business or (b) liens for
taxes, assessments or other governmental charges not yet due (collectively,
"Permitted Liens");
(i) Any increase in compensation or any adoption of, or increase
in, any bonus, incentive compensation, pension, profit sharing, retirement,
insurance, medical reimbursement or other employee benefit plan, payment or
arrangement to, for, or with any of Seller, other than in the ordinary course of
business;
(j) Any notice (written or unwritten) from any employee earning
more than $40,000 per year in base pay and commissions (a "Key Employee") of
Seller that such Key Employee has terminated, or intends to terminate, such Key
Employee's service with Seller;
(k) Any material adverse change in the Business' relationship with
any vendor or contractor, or the occurrence of any condition or event with
respect to any vendor, contractor or customer, that is reasonably likely to have
material adverse effect on Seller, the Business or the Assets taken as a whole;
(l) Any waiver of any rights of material value relating to the
Business or the Assets by Seller without corresponding benefit;
(m) Any disposition or abandonment of any of Seller' trademarks,
trade names, patents, copyrights or other intellectual property rights or
proprietary trade secrets or processes, necessary or incidental to the conduct
of the Business; or
(n) Any other event or condition of any character that materially
adversely affects the Business or the Assets.
2.7 Taxes.
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(a) Seller has completed and duly and timely filed in correct form
with the appropriate United States, state and local governmental agencies and
with the appropriate foreign countries and political subdivisions thereof, all
Returns (as hereinafter defined) required to be filed on or prior to the date
hereof and will complete and duly and timely file in correct form with the
appropriate United States, state and local governmental agencies and with the
appropriate foreign countries and political subdivisions thereof, all Returns
required to be filed after the date hereof. All of such Returns that have been
filed were accurate and complete as filed and all of such Returns that will be
filed will be accurate and complete when filed. Seller has paid in full all
Taxes (as hereinafter defined), assessments or deficiencies (A) shown to be due
on those Returns that have been filed or (B) claimed to be due by any Taxing
authority or otherwise due or owing, except as to such Taxes as disputed in good
faith by Seller. Seller has
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made all withholdings of Tax required to be made under all applicable United
States, foreign, state and local tax laws and regulations; and such withholdings
have been or will be paid to the respective governmental agencies when due and
to the extent not yet due have been set aside in accounts for purposes of such
payment.
(b) The Assets are not subject to any liens for Taxes, except
liens for current ad valorem Taxes not yet due, and neither Purchaser nor any
affiliate thereof will become directly or indirectly liable for, and no lien,
claim or encumbrance will be placed upon the Assets with respect to, (A) any
Taxes attributable to the ownership or use of the Assets with respect to periods
prior to and including the date of Closing (other than ad valorem Taxes not yet
due and payable as of the Closing) or (B) any other Taxes (regardless of whether
attributable to periods prior to and including the Closing) imposed upon Seller
or attributable to the actions or activities of Seller. There is no contract,
agreement, plan or arrangement, including but not limited to the provisions of
this Agreement or any exhibit or annex hereto, covering any director, officer,
employee and consultant (each, a "Service Provider") that, individually or
collectively, could give rise to the payment of any amount by Purchaser or its
affiliates that would not be deductible pursuant to Section 280G or Section 162
of the Internal Revenue Code of 1986, as amended (the "Code"). None of the
Assets consist of stock of another corporation or entity treated as such for tax
purposes.
(c) No issues have been raised (nor to the knowledge of Seller are
any currently pending) by any Taxing authority in connection with any of the
Returns. No extensions or waivers of statutes of limitations with respect to the
Returns have been given by or requested from Seller. No Returns are presently
under examination and no assessments or deficiencies with respect to the Returns
are presently being contested by Seller. Seller is not a party to or bound by
(and, except for this Agreement, prior to the Closing will not become a party to
or bound by) any Tax indemnity, Tax sharing or Tax allocation agreement. None of
the assets of Seller, directly or indirectly, secures any debt the interest on
which is tax exempt under Section 103(a) of the Code. None of the assets of
Seller is "tax-exempt use property" within the meaning of Section 168(h) of the
Code.
(d) For purposes of this Agreement:
(i) "Tax" (and, with correlative meaning, "Taxes," "Taxable"
and "Taxing") means (A) any net income, alternative or add-on minimum tax, gross
income, gross receipts, sales , use, ad valorem, transfer, franchise, profits,
license, withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property, environmental or windfall profit tax, custom, duty or other
tax, governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or any penalty, addition to tax or additional amount
imposed by any governmental, regulatory or administrative entity or agency
responsible for the imposition of any such tax (domestic or foreign), (B) any
liability for the payment of any amounts of the type described in (A) as a
result of being a member of an affiliated, consolidated, combined, unitary or
other group for any Taxable period and (C) any liability for the payment of any
amounts of the type described in (A) or (B) as a result of any express or
implied obligation to indemnify any other person.
8
<PAGE>
(ii) The term "Returns" means all returns, declarations,
reports, statements and other documents required to be filed in respect of
Taxes, and the term "Return" means any one of the foregoing Returns.
2.8 Compliance With Law. To the Seller's best knowledge, Seller has
-------------------
complied and is in compliance with all applicable federal, state and local laws,
statutes, licensing requirements, rules, and regulations and judicial or
administrative or zoning decisions. Seller has been granted all licenses,
permits (temporary and otherwise), authorizations, and approvals from federal,
state, and local government regulatory or zoning agencies or bodies necessary to
carry on the Business and maintain the Assets, all of which are currently valid
and in full force and effect, other than where the failure to be valid or in
full force and effect would not have material adverse effect on the Business.
All transferable Governmental Permits shall be (i) transferred to Purchaser as
of the Closing and (ii) valid and in full force and effect upon the consummation
of the transactions contemplated by this Agreement to the same extent as
applicable to Seller prior to the Acquisition. There is no order issued,
investigation, or proceeding pending or threatened, or notice served with
respect to any material violation of any law, ordinance, order, writ, decree,
rule, or regulation issued by any federal, state, local, or foreign court or
governmental agency or instrumentality applicable to Seller. Seller has valid
use permits for the Business and its operations, other than those the failure of
which to obtain will not have a material adverse effect on the Business.
2.9 Proprietary Rights.
------------------
(a) All Intellectual Property requiring the execution and filing
with an appropriate governmental agency, including without limitation, the
Patent and Trademark Office, has been so indicated in Schedule 1.1(d) hereto.
---------------
The Intellectual Property includes all patents, patent applications, trademarks,
trademark applications, trade names, copyrights and associated moral rights,
copyright applications, trade secrets, information, proprietary rights and
processes necessary for the Business as now conducted without any conflict with
or infringement upon the rights of others. Seller is the sole owner of all
right, title and interest in and to all Intellectual Property free and clear of
all liens, encumbrances, claims, rights of use and restrictions whatsoever.
Except as set forth in
Schedule 2.9, there are no outstanding options, licenses or agreements of any
- ------------
kind relating to the Intellectual Property nor are Seller a party to any
options, licenses or agreements of any kind with respect to the logo, trademark
and trade name rights, software, databases, source code patents, patent rights,
copyrights, trade secrets, processes and proprietary licenses, information,
proprietary rights and processes of any other person or entity which relates to
the Business or Assets.
(b) Neither the Intellectual Property nor any other processes,
methods, or operations employed by Seller, now or in the past, infringes upon
any proprietary rights, or intellectual property of any other person, firm,
corporation, or other entity. There is not pending or, to the knowledge of
Seller, threatened any claim or litigation contesting the right of Seller to
engage in or employ any such processes, methods, operations, or the Proprietary
Rights. To the knowledge of Seller, no Service Provider at the date hereof or as
of the Closing is in violation of any material term of any employment contract,
proprietary information or inventions agreement, or any other contract or
agreement relating to the relationship of any such Service Provider with
9
<PAGE>
Seller or, to the knowledge of Seller, any previous employer. To Seller'
knowledge, no Service Provider as of the date hereof or as of the Closing 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 the Business or which would
conflict with the Business as conducted or as proposed to be conducted.
2.10 Restrictive Documents or Orders. Seller is not party to or bound
-------------------------------
under any agreement, contract, order, judgment, or decree, or any similar
restriction that adversely affects (i) the continued operation by Purchaser of
the Business after the Closing on substantially the same basis as said Business
was theretofore operated or (ii) the consummation of the transactions
contemplated by this Agreement. Seller is not party to or bound under, and at no
time have been a party to or bound under, any franchise agreement(s).
2.11 Contracts and Commitments.
-------------------------
(a) Except for the Listed Contracts and except for this Agreement,
there are no agreements or contracts, whether or not in writing, to which Seller
is a party that may: (i) involve obligations (contingent or otherwise) of Seller
in excess of $10,000; (ii) involve the license of any Intellectual Property to
or from Seller; (iii) contain provisions restricting and/or affecting the
development, distribution or sales of Seller or the Business' products or
services; (iv) relate to any aspect of the Business and in which any person who
was or is a manager, officer or director of Seller (or any person, firm
partnership, trust or corporation affiliated with any such persons) has a
material interest; (v) involve any joint venture or partnership contract or
arrangement or any other agreement which has involved or is expected to involve
a sharing of profits with other persons; (vi) involve any agreement containing
covenants purporting to limit the freedom of Seller to compete in any line of
business or geographic area or involve the distribution of Seller' or the
Business' products or services; (vii) involve any agreement of indemnification
regarding Seller and/or the Business; (viii) establish any powers of attorney
regarding Seller and/or the Business, (ix) obligate Seller for the repayment of
borrowed money; or (x) involve any other agreement, contract or commitment which
is material to Seller as a whole.
(b) Seller has performed all obligations to be performed by it
under the terms of each Listed Contract, and are not in default thereunder. No
event or omission has occurred that but for the giving of notice or lapse of
time or both would constitute a default by Seller under any such Listed
Contract. Each such Listed Contract is valid and binding on all parties thereto
and in full force and effect, and to Seller' knowledge, no other party to any of
the Listed Contracts is in default thereunder. Seller has received no written or
unwritten notice of any default, cancellation, or termination in connection with
any such Listed Contract. Each Listed Contract, and all rights and interests of
Seller thereunder, shall have been assigned to Purchaser at the Closing, and no
consents or approvals of any third parties are required in connection with such
assignments.
2.12 Operating Condition. To Seller' knowledge, the Assets that are
-------------------
necessary to operate the Business as the Business was operated by Seller
immediately prior to the Closing
10
<PAGE>
are, taken as a whole, in adequate and suitable condition for the purposes for
which they are presently being used.
2.13 Assets. Except as set forth on Schedule 2.14, the Assets include
------ -------------
all Intellectual Property and all of the property in which Seller has any right,
title and interest. Such Assets include all the assets necessary to operate the
Business in the same manner as the Business was operated by Seller immediately
prior to the Closing. No entity affiliated with Seller owns, or has any interest
in, any Asset used in the operation of the Business.
2.14 Title to the Property. Seller has good and marketable title to
---------------------
the Assets, free and clear of any Liens other than those Permitted Liens
specifically identified on Schedule 2.14 hereto. By virtue of the deliveries
-------------
made at the Closing, Purchaser will obtain good and marketable title to the
Assets, free and clear of any Liens other than the Permitted Liens specifically
identified on Schedule 2.14 hereto.
-------------
2.15 Litigation. Except as set forth on Schedule 2.15, Seller has not
---------- -------------
engaged in nor is it planning to engage in, nor has it received any threat of,
any litigation, arbitration, investigation, or other proceeding relating to
Seller or Seller's employees or consultants ("Service Providers"), benefit
plans, properties, Intellectual Property, the Business, or the Assets, licenses,
permits, or goodwill of Seller, or affecting this Agreement, the Related
Agreements or the actions taken or contemplated in connection herewith and
therewith, nor, to Seller' knowledge, is there any reasonable basis therefor.
Seller represent that they are not bound by any judgment, decree, injunction,
ruling or order of any court, governmental, regulatory or administrative
department, commission, agency or instrumentality, arbitrator or any other
person that has or could have a material adverse effect on the Business, Assets
or the results of operations, prospects or financial condition of the Business
or Seller.
2.16 No Conflict or Default. Except as set forth on Schedule 2.16,
---------------------- -------------
neither the execution and delivery of this Agreement and the Related Agreements,
nor compliance with the terms and provisions hereof and thereof, including
without limitation, the consummation of the transactions contemplated hereby and
thereby, will violate any statute, regulation, or ordinance of any governmental
or administrative authority or conflict with or result in the breach of any
term, condition, or provision of the Certificate of Incorporation or Bylaws of
Seller or of any agreement, deed, contract, mortgage, indenture, writ, order,
decree, legal obligation, or instrument to which any of Seller is a party or by
which it or any of the Assets of Seller are or may be bound (including, without
limitation, the Listed Contracts), or constitute a default (or an event which,
with the lapse of time or the giving of notice, or both, would constitute a
default) thereunder.
2.17 Third Party Consents. Except as set forth on Schedule 2.17, no
-------------------- -------------
consent, approval, or authorization of any person, agency or third party or on
the part of Seller is required in connection with the consummation of the
transactions contemplated hereunder, including without limitation the assignment
to Purchaser of the Listed Contracts.
11
<PAGE>
2.18 Labor Relations.
---------------
(a) Seller has not failed to comply in any material respect with
Title VII of the Civil Rights Act of 1964, as amended, the Occupational Safety
and Health Act of 1970, as amended, all applicable federal, state, and local
laws, rules, and regulations relating to employment, and all applicable laws,
rules and regulations governing payment of minimum wages and overtime rates, and
the withholding and payment of taxes from compensation of employees.
(b) There are no labor disputes pending or, to the knowledge of
any of Seller, threatened between Seller and any Service Providers or any labor
union or other collective bargaining unit representing any of the Service
Providers.
(c) Seller has never entered into a collective bargaining
agreement or other labor union contract relating to the Business or applicable
to the Service Providers.
(d) Except as set forth on Schedule 2.18, there are no oral or
-------------
written employment or separation or severance agreements or benefits
continuation obligations on the part of Seller.
2.19 Brokers' and Finders' Fees/Contractual''. Seller represents that
--------------------------------------
it has not taken any action that obligates Seller to pay any fees or expenses of
any broker or finder in connection with the origin, negotiation, or execution of
this Agreement, the Related Agreements, or in connection with any transactions
contemplated hereby or thereby. Seller represent that it is not, nor is any
agent or representative of Seller, subject to any agreement, letter of intent,
or understanding of any kind which prohibits, limits, or restricts Seller from
negotiating, entering into, and consummating this Agreement, the Related
Agreements, and the transactions contemplated hereby and thereby.
2.20 Interested Party Relationships. Neither Seller nor any
------------------------------
corporation, partnership, or other entity that, directly or indirectly, alone or
together with others, controls, is controlled by, or is in common control with
Seller nor, to the Seller' knowledge, any Service Provider, agent, or
representative of Seller who is a Service Provider at the date hereof or at the
date of the Closing, has any financial interest (other than the ownership of
accounts receivable or accounts payable in the ordinary course of business),
direct or indirect, in any vendor, contractor or customer, or any party to any
Listed Contract.
2.21 Environmental and Safety Matters. To Seller's best knowledge,
--------------------------------
Seller is not in violation of any applicable statute, law or regulation relating
to the environment or occupational health and safety, and no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation.
2.22 Customers. Except as set forth on Schedule 2.22, no single client
--------- -------------
or customer of Seller has accounted for more than five percent (5%) of the total
sales of the Business during the three fiscal years ended December 31, 1999. No
Customer has terminated its relationship with Seller during the one (1) year
period preceding the Closing, and none of such
12
<PAGE>
Customers has notified Seller of an intention to terminate, or alter in any
material adverse way, its relationship with Seller. Seller is not aware of any
events or facts that would lead it to believe that any such Customer will not
continue to purchase Seller's services at substantially the same level as
currently purchased by such Customer.
2.23 Employee Benefit Plans.
----------------------
(a) Schedule 2.23 lists, with respect to Seller, any subsidiary
--- -------------
of Seller and any trade or business (whether or not incorporated) which is
treated as a single employer with any Seller (an "ERISA Affiliate") within the
meaning of Section 414(b), (c), (m) or (o) of the Code, (i) all 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 $10,000, 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 Seller 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 (together, the "Seller Employee Plans").
(b) Seller has furnished to the Purchaser a copy of each of the
Seller Employee Plans and related plan documents (including trust documents,
insurance policies or contracts) and have, with respect to each Seller Employee
Plan which is subject to ERISA reporting requirements, provided copies of the
Form 5500 reports filed for the last plan year. Any Seller 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, or has
been established under a standardized prototype plan for which an Internal
Revenue Service opinion letter has been obtained by the plan sponsor and is
valid as to the adopting employer. Seller has also furnished the Purchaser with
the most recent Internal Revenue Service determination or opinion letter issued
with respect to each such Seller Employee Plan.
(c) (i) None of the Seller 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 Seller Employee Plan,
(iii) each Seller Employee Plan has been administered in accordance with its
terms and in compliance with the requirements prescribed by any and all
statutes, rules and regulations (including ERISA and the Code), and Seller and
each subsidiary or ERISA Affiliate have performed all material obligations
required to be performed by them under, are not in any material respect in
default under or violation of, and have no knowledge of any
13
<PAGE>
material default or violation by any other party to, any of the Seller Employee
Plans; (iv) neither Seller nor any subsidiary or ERISA Affiliate is 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 Seller Employee Plans; (v) all material
contributions required to be made by Seller or ERISA Affiliate to any Seller
Employee Plan have been made on or before their due dates and a reasonable
amount has been accrued for contributions to each Seller Employee Plan for the
current plan years; and (vi) no Seller Employee Plan is covered by, and neither
Seller nor any subsidiary or ERISA Affiliate has incurred or expects to incur
any liability under Title IV of ERISA or Section 412 of the Code. With respect
to each Seller 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, Seller has prepared in good faith
and timely filed all requisite governmental reports (which were true and correct
as of the date filed) and have 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 Seller Employee Plan. No suit, administrative
proceeding, action or other litigation has been brought, or to the knowledge of
Seller, is threatened, against or with respect to any such Seller Employee Plan,
including any audit or inquiry by the IRS or United States Department of Labor.
Neither Seller nor other ERISA Affiliate is a party to, or has made any
contribution to or otherwise incurred any obligation under, any "multiemployer
plan" as defined in Section 3(37) of ERISA.
(d) With respect to each Seller Employee Plan, Seller has complied
with (i) the applicable health care continuation and notice provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") and the
proposed regulations thereunder and (ii) the applicable requirements of the
Family Leave Act of 1993 and the regulations thereunder.
(e) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee or other service
provider of Seller or any other ERISA Affiliate 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 benefits, or increase the
amount of compensation due any such employee or service provider.
(f) There has been no amendment to, written interpretation or
announcement (whether or not written) by Seller or, to Seller' knowledge, any
other ERISA Affiliate, or change in participation or coverage under, any Seller
Employee Plan which would materially increase the expense of maintaining such
Plan above the level of expense incurred with respect to that Plan in the
Financial Statements.
2.24 Insurance. Seller maintains policies of insurance covering the
---------
Assets in types and amounts customary for similarly-sized companies engaged in
similar businesses. To Seller' knowledge, Seller is in compliance with each of
such policies such that none of the coverage provided under such policies has
been invalidated, and Seller has not received any written notice of cancellation
of any such policies. Schedule 2.24 lists and describes all of Seller' insurance
-------------
policies covering the Assets in effect immediately prior to the Closing.
14
<PAGE>
2.25 Accounts Receivable. Schedule 2.25 sets forth an aging of
------------------- -------------
accounts receivable of Seller as of December 31, 1999 in the aggregate and by
customer (0-30 days, 30-90 days and greater than 90 days) that corresponds to
accounts receivable on the balance sheet in the Financial Statements.
2.26 Books and Records. The books and records of Seller to which
-----------------
Purchaser and its accountants and attorneys have been given access are the true
books and records of Seller and fairly reflect the underlying facts and
transactions consistent with normal bookkeeping practices so as to permit the
financial statements derived therefrom to be prepared in accordance with past
practices.
2.27 Complete Disclosure. Except as set forth on Schedule 2.27, no
------------------- -------------
representation or warranty by Seller and no exhibit, schedule, statement,
certificate, or other writing furnished to Purchaser pursuant to this Agreement
or the Related Agreements or in connection with the transactions contemplated
thereby, contains any untrue statement of a material fact or omits to state any
fact necessary to make the statements contained herein and therein not
materially misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller that, except as set
forth in a Schedule hereto specifically referring to the application section of
this Article III delivered by Purchaser to Seller:
3.1 Organization and Standing. Purchaser is a corporation duly
-------------------------
organized, validly existing, and in good standing under the laws of the state of
Delaware.
3.2 Authorization. Purchaser has full corporate power and authority to
-------------
enter into this Agreement and the Related Agreements, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby, including, without limitation, the execution and delivery of this
Agreement and the Related Agreements. Purchaser has taken all necessary and
appropriate corporate action with respect to the execution and delivery of this
Agreement and the Related Agreements. This Agreement and the Related Agreements
constitute valid and binding obligations of Purchaser, enforceable in accordance
with their respective terms; subject to (i) any applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws relating to or affecting
the enforcement of creditors' rights generally, (ii) the discretion of a court
ordering specific performance and other equitable remedies, and (iii) general
principles of equity regardless of whether raised in a proceeding at law or in
equity. No consent, approval, order or authorization of, or registration,
declaration of, or qualification or filing with, any Governmental Entity, is
required by or with respect to Purchaser in connection with the execution and
delivery of this Agreement and the Related Agreements by Purchaser or the
consummation by Purchaser of the transactions contemplated hereby or thereby.
3.3 SEC Filings; Financial Statements.
---------------------------------
15
<PAGE>
(a) Purchaser has delivered to the Seller accurate and complete
copies (including copies of exhibits) of each report, effective registration
statement (on a form other than Form S-8) and definitive proxy statement filed
by Purchaser with the Securities and Exchange Commission ("SEC") between
January 1, 1999 and the date of this Agreement (the "Purchaser SEC
Documents"). As of the time it was filed with the SEC (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date
of such filing): (i) each of the Purchaser SEC Documents complied in all
material respects with the applicable requirements of the Securities Act or
the Securities Exchange Act of 1934, as amended (the "Exchange Act") (as the
case may be); and (ii) none of the Purchaser SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) The financial statements contained in the Purchaser SEC
Documents: (i) complied in all material respects with the published rules and
regulations of the SEC applicable thereto; (ii) were prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods covered, except as may be indicated in the notes to
such financial statements and (in the case of unaudited statements) as
permitted by Form 10-Q of the SEC, and except that unaudited financial
statements may not contain footnotes and are subject to year-end audit
adjustments; and (iii) fairly present the financial position of Purchaser and
its subsidiaries as of the respective dates thereof and the results of
operations of Purchaser for the periods covered thereby.
3.4 Compliance with Other Instruments. The execution and delivery of
---------------------------------
this Agreement and the Related Agreements by Purchaser, the consummation of
the transactions contemplated hereby and thereby, and the compliance with the
terms hereof and thereof by Purchaser do not conflict with or result in a
breach of any terms of, or constitute a default under their respective charter
documents or any agreement with any third party.
3.5 Compliance With Law. Purchaser has materially complied and is in
-------------------
material compliance with all applicable federal, state and local laws,
statutes, rules, and regulations and judicial or administrative decisions.
Purchaser has been granted all material licenses, permits (temporary and
otherwise), authorizations, and approvals from federal, state, and local
government regulatory agencies or bodies necessary to carry on its business,
all of which are currently valid and in full force and effect, other than
where the failure to be valid or in full force and effect would not have
material adverse effect. There is no order issued, investigation, or
proceeding pending or threatened, or notice served with respect to any
material violation of any law, ordinance, order, writ, decree, rule, or
regulation issued by any federal, state, local, or foreign court or
governmental agency or instrumentality applicable to Purchaser.
3.6 Consents. No consent, approval, order, or authorization or
--------
registration, qualification, designation, declaration, or filing with any
federal, state, local, or provincial governmental authority, is required in
connection with the consummation of the transactions contemplated hereunder
other than as contemplated herein.
16
<PAGE>
3.7 Authority.
---------
(a) Purchaser has full power and authority to enter into this
Agreement, and the Related Agreements, to execute, deliver and perform their
obligations hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Related Agreements, the performance by Purchaser of its obligations
hereunder and thereunder, and the consummation of the transactions contemplated
hereby and thereby, have been duly and validly authorized by all necessary
action on the part of Purchaser. Each of this Agreement and the Related
Agreements is a legal, valid and binding obligation of Purchaser, enforceable
against Seller in accordance with their respective terms, subject to (i) any
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
relating to or affecting the enforcement of creditors' rights generally, (ii)
the discretion of a court ordering specific performance and other equitable
remedies, and (iii) general principles of equity regardless of whether raised in
a proceeding at law or in equity.
ARTICLE IV
COVENANTS
4.1 Best Efforts. Each party hereto shall use its best efforts
------------
consistent with reasonable business practice to take all actions and to do all
things necessary, proper and advisable to consummate the transactions
contemplated by this Agreement.
4.2 Notices and Consents. Seller shall use its reasonable best
--------------------
efforts to obtain, at its expense, all such waivers, permits, consents to
assignments and other consents, approvals or other authorizations from third
parties and Governmental Entities, and to effect all such consents,
registrations, filings and notices with or to third parties and Governmental
Entities, as may be required by or with respect to Seller in connection with the
transactions contemplated by this Agreement
4.3 Operation of Business. Except as contemplated by this Agreement,
---------------------
during the period from the date of this Agreement to the Closing, Seller shall
conduct its Business and operations only in the ordinary course of business in
compliance with all applicable laws and regulations, and to the extent
consistent therewith use all reasonable efforts to preserve intact its current
business organization, keep its physical assets in good working condition, keep
available the services of their current officers, employees, consultants and
contractors, and preserve their relationships with clients, customers, suppliers
and others having business dealings with them to the end that their goodwill and
ongoing business dealings shall not be impaired in any material respect. Without
limiting the generality of the foregoing, prior to the Closing, Seller shall
not, without the written consent of Purchaser:
(a) issue, sell, deliver or agree to commit to issue, sell or
deliver (whether through the issuance or granting of options, warrants,
commitments, subscriptions, interests, rights to purchase or otherwise) or
authorize the issuance, sale or delivery of, or redeem or repurchase, any
interest of Seller;
17
<PAGE>
(b) repurchase, any stock of any class or any other securities or
interests or any rights, warrants or options to acquire any such stock or other
securities;
(c) except as required to disburse any cash to Sandeep Jain to comply
with Section 1.1(l), declare, set aside or pay any distribution (whether in cash
or property or any combination thereof) in respect of its interests;
(d) create, incur or assume any debt or liability not currently
outstanding (including obligations in respect of capital leases), except in the
ordinary course of business, assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any other person or entity, or make any loans, advances or
capital contributions to, or investments in, any other person or entity;
(e) enter into, adopt or amend any Seller Employee Plans or any
employment or severance agreement or arrangement of the type described in
Section 2.23 or increase in any manner the compensation or fringe benefits of,
or materially modify the employment terms of, its directors, officers or
employees, generally or individually, or adopt or modify any other compensation
plan, or pay any benefit not required by the terms in effect on the date hereof
of any existing Seller Employee Plan or accelerate, or agree to accelerate the
vesting of any outstanding options, warrants or benefits, except in the ordinary
course of business;
(f) acquire, sell, lease, encumber or dispose of any assets or property
(including without limitation any shares or other equity interests in or
securities of any subsidiary or any corporation, partnership, limited liability
company, association or other business organization or division thereof), other
than purchases and sales of assets in the ordinary course of business, or sales
or disposition of the non-purchased limited liability companies;
(g) change in any material respect its accounting methods, principles
or practices, except insofar as may be required by a generally applicable change
in GAAP;
(h) discharge or satisfy any security interest or pay any obligation or
liability other than in the ordinary course of business;
(i) mortgage or pledge any of the Assets or subject any such Assets to
any security interest;
(j) sell, assign, transfer or license any Intellectual Property;
(k) enter into, amend, terminate, take or omit to take any action that
would constitute a violation of or default under, or waive any rights under, any
Listed Contract or agreement;
(l) make or commit to make any capital expenditure in excess of $1,000
per item;
(m) hire any employee;
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(n) except as required to disburse any cash to Sandeep Jain to
comply with Section 1.1(l), make any cash disbursement in excess of $10,000;
(o) initiate any litigation;
(p) take any action or fail to take any action permitted by this
Agreement with the knowledge that such action or failure to take action would
result in (i) any of the representations and warranties of Seller set forth in
this Agreement becoming untrue or (ii) any of the conditions hereunder not being
satisfied;
(q) agree in writing or otherwise to take any of the foregoing
actions.
4.4 Full Access. Seller shall allow Purchaser, after reasonable
-----------
notice, to have full access (at all reasonable times, and in a manner so as not
to interfere with normal business operations of Seller) to all premises,
properties, financial and accounting records, contracts, other records and
documents, and personnel, of or pertaining to Seller.
4.5 Covenants Against Disclosure. The parties agree to maintain the
----------------------------
confidentiality of the terms and conditions of this Agreement, except to the
extent required by law or pursuant to the public reporting obligations of
Purchaser or as necessary to consummate the transactions contemplated herein.
No party shall disseminate (except to the parties to this Agreement) any press
release or announcement concerning the transactions contemplated by this
Agreement or the Related Agreements or the parties hereto or thereto without the
prior written consent of Seller and Purchaser except as required under the
public reporting obligations of Purchaser or as required by law.
4.6 Further Assurances. Following the Closing, Seller shall use its
------------------
commercially reasonable efforts to obtain any consents and approvals of, or
effect the notification of or filing with, each person or authority, whether
private or governmental, whose consent or approval is required in order to
permit the consummation of the Acquisition and the transactions contemplated
hereby and to enable Purchaser to conduct and operate the Business substantially
as presently conducted. Following the Closing, each party shall prepare,
execute, and deliver such further instruments, and shall take or cause to be
taken such other or further action, as any party shall reasonably request of any
other party at any time or from time to time in order to consummate the terms
and provisions of this Agreement, provided that in any such case the requesting
party shall pay the reasonable out-of-pocket costs incurred by the party
complying with such request. Seller shall also reasonably cooperate with any
audits of the Financial Statements and shall execute any such representation
letters satisfactory to their respective certified public accountants with
respect thereto that are reasonably requested by Purchaser or its certified
public accountants.
4.7 Advice of Changes. For a period of one year, the Seller will
-----------------
promptly advise Purchaser in writing of any event occurring subsequent to the
date of this Agreement that would demonstrate that its representations or
warranties herein were untrue or inaccurate in any material respect as of the
date of the Closing, provided, however, no disclosure made by Seller to
Purchaser pursuant to this Section 4.7 shall give rise to any liability of
Seller to Purchaser if
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made prior to the Closing. If appropriate, Seller may fulfill its obligations
under this Section 4.7 prior to the Closing by updating the applicable
disclosure schedules attached to this Agreement and notifying Purchaser of such
changes in writing.
4.8 Employees, Bonuses and Termination Payments.
-------------------------------------------
(a) At or before the Closing or within fifteen days thereafter,
Seller shall pay all amounts due as of the date of the Closing to all Service
Providers by way of salaries, bonuses, vacation, incentive, commission,
severance or termination payments and shall pay or cause to be paid over to the
appropriate Governmental Entities or other appropriate persons or entities all
withheld taxes, social security and other payments accrued and payable with
respect to such Service Providers through the Closing.
(b) Seller shall promptly provide, or use its best efforts to
cause any administrator of any Seller Employee Plan to provide, to Purchaser or
its designee at any time before or after the Closing, all information in the
custody or control of Seller requested by Purchaser or their designee to (i)
determine whether there have been any failures to comply with the continuation
health care requirements of COBRA on or prior to the Closing, and (ii) correct
any such failures.
4.9 Cooperation by Seller. Seller shall provide Purchaser with (i) such
---------------------
assistance as may reasonably be requested by Purchaser in connection with the
preparation of any Return or in connection with any audit or other examination
by any taxing authority or any judicial or administrative proceedings relating
to liability for Taxes, (ii) any records or other information which may be
relevant to any such Return, audit or examination, proceeding or determination,
and (iii) any final determination of any such audit or examination, proceeding
or determination that affects any amount required to be shown on any Return of
the other for any period. Without limiting the generality of the foregoing,
Seller shall retain, until the applicable statute of limitations (including any
extensions) have expired, copies of all Returns, supporting work schedules and
other records or information which may be relevant to such Returns for all tax
periods or portions thereof ending before or including the Closing and shall not
destroy or otherwise dispose of any such records without first providing the
Purchaser with a reasonable opportunity to review and copy the same.
4.10 Negotiation with Others. Until March 25, 2000, Seller shall not
-----------------------
(nor will it permit any of its directors, stockholders, employees, agents,
representatives or affiliates to),directly or indirectly, take any of the
following actions with any party other than Purchaser and its designees: (i)
solicit, encourage, initiate or participate in any negotiations or discussions
with respect to any offer or proposal to acquire all or substantially all of
Seller' business and properties whether by merger, purchase of assets or equity
interest, tender offer or otherwise, or the sale, transfer or issuance of any
equity interests of Seller, (ii) disclose any information not customarily
disclosed to any person concerning Seller' business and properties or afford to
any person or entity access to its properties, books or records in connection
with a transaction of the type referred to in clause (i), or (iii) assist or
cooperate with any person to make any proposal to consummate a transaction of
the type referred to in clause (i). In the event Seller shall receive any offer
or proposal, directly or indirectly, of the type referred to in clause (i) or
(iii) above, or
20
<PAGE>
any request for disclosure or access pursuant to clause (ii) above, it shall
immediately inform Purchaser as to any such offer or proposal and will cooperate
with Purchaser by furnishing any information with respect to such offer or
proposal it may reasonably request.
4.11 Payment of Taxes. Except as to such Taxes as may be disputed in
----------------
good faith, Seller will pay in full when due all Taxes imposed upon Seller or
with respect to its assets arising from any periods prior to and including the
Closing, whether due before or after the date hereof.
4.12 Registration of Shares.
----------------------
(a) Promptly after the Closing, and no later than three (3)
months after the Closing, Purchaser shall prepare and file with the SEC a
registration statement on Form S-3 or such successor or other appropriate form
(such registration statement and the prospectus included therein being referred
to as the "S-3") for resale of the Shares by the holders of such shares, and
their permitted transferees (collectively, the "New Actuate Stockholders").
Purchaser shall use reasonable commercial efforts to file the S-3 and have the
S-3 declared effective under the Securities Act within six (6) months following
the Closing. Purchaser shall make reasonable commercial efforts to cause the S-3
to continue to be effective and the prospectus contained therein to be updated
to enable the New Actuate Stockholders to resell the Shares provided that such
resales shall take place over the Nasdaq Stock Market or such other national
market as Purchaser Common Shares may be traded. Purchaser shall also take any
action required to be taken under any applicable state securities laws in
connection with the issuance of Shares and the resale of those shares pursuant
to the S-3.
(b) Any New Actuate Stockholder selling stock registered under the
S-3 shall indemnify Purchaser, its officers and directors, each underwriter and
selling broker, if any, and each person, if any, who controls Purchaser, against
liability (including liability under the Securities Act and the Exchange Act
arising by reason of any statement contained in the S-3, that such New Actuate
Stockholder provided to Purchaser in writing explicitly for use in the S-3,
being false or misleading or omitting to state a material fact necessary to be
stated in order that the statements made in the S-3, in the circumstances in
which they are made, not be misleading.
(c) Purchaser shall indemnify each New Actuate Stockholder selling
stock registered under the Registration Statement (including any underwriter,
broker or dealer through whom such shares may be sold) and each person, if any,
who controls such New Actuate Stockholder or any such underwriter, broker, or
dealer within the meaning of Section 15 of the Securities Act, against liability
(including liability under the Securities Act and Exchange Act) arising by
reason of any statement (other than a statement provided by any New Actuate
Stockholder as described above) in the S-3 included therein being false or
misleading or omitting to state a material fact necessary to be stated in order
that the statements made in or incorporated by reference in the S-3, in the
circumstances in which they are made, not be misleading. Purchaser may suspend
sales of Shares pursuant to the S-3 if it determines in good faith that such
statements are materially misleading or contain material omissions, provided
that Purchaser shall make a corrective filing as soon as practicable.
21
<PAGE>
(d) The obligations of Purchaser pursuant to this Section 4.12
shall expire on the earlier of (i) the sale or other disposition of all of the
Shares, or (ii) the ability of all New Actuate Stockholders to dispose of all
Shares within a single three (3) month period pursuant to Rule 144.
(e) Purchaser shall bear all costs and expenses associated with
the registration of such Shares and the preparation and filing of the S-3 (as
described in this Section 4.12), including, without limitation, printing
expenses, legal fees and disbursements of counsel to Purchaser, "blue sky"
expenses, accounting fees and filing fees, but not including underwriting
commissions or similar charges and legal fees and disbursements of counsel to
the selling New Actuate Stockholders.
(f) In the event that Form S-3 is not available at the time that
it is required to be filed, the registration statement shall be filed on the
successor to Form S-3 or if there is no clear successor form, or if the Seller
is not eligible to use Form S-3 or a successor form, then the registration
statement shall be filed using such form as may be available that is least
burdensome for Purchaser.
(g) Purchaser agrees that its obligation to register the Shares
under Form S-3 shall not be subject to any offset for the failure of the Seller
to perform under the terms of this Agreement or to perform as an employee. The
parties agree that damages are an insufficient remedy for the breach of the
obligation of Purchaser to file the required Form S-3, and that the remedies
available to the Seller may include, but not be limited to, such equitable
relief as a court of competent jurisdiction may deem appropriate.
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS
5.1 Conditions to Obligations of Purchaser. Each and every
--------------------------------------
obligation of Purchaser to be performed at the Closing shall be subject to the
satisfaction as of on or before the Closing of the following conditions (unless
waived in writing by Purchaser):
(a) The representations and warranties of Seller are true on the
date of the Closing, and Seller shall be in compliance with all covenants
required to be complied with as of the Closing.
(b) The approval of the Acquisition and all transactions
contemplated by this Agreement by the Seller, in accordance with applicable laws
and regulatory requirements.
(c) The Closing shall have occurred on or before March 31, 2000.
(d) Completion of legal, financial and technical "due diligence"
investigation by Purchaser and representatives of Purchaser, the results of
which are satisfactory to Purchaser in Purchaser's sole discretion.
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<PAGE>
(e) The obtaining of all material consents and approvals
required under Seller's charter documents, outstanding debt or any other
outstanding contracts of Seller, under applicable law, or otherwise, and the
making of all material or significant filings which are necessary or which
Purchaser deems appropriate in connection with the Acquisition.
(f) Seller shall have obtained all consents and approvals
required to consummate the transactions contemplated by this Agreement and the
Related Agreements, unless otherwise waived by mutual agreement.
(g) There shall be no pending or threatened lawsuit challenging
the Acquisition, the Agreement, the Related Agreements or the transactions
contemplated hereby and thereby, by any body or agency of the federal, state, or
local government or by any third party, and the consummation of the Acquisition
shall not have been enjoined by a court of competent jurisdiction as of the
Closing.
(h) Purchaser shall have received evidence (in the form of UCC-3
termination statements and a recent UCC-1 financing statement search), at or
prior to the Closing, satisfactory to it of Seller's title to all of the Assets
and Seller's right to fully convey all such Assets described herein free and
clear of all Liens, other than the Permitted Liens specifically identified on
Schedule 2.14.
(i) Seller shall have delivered to Purchaser a certificate
executed by an officer of Purchaser, dated the date of the Closing, to the
effect that the conditions set forth in subsections (a) and (b) of this Section
5.1 have been satisfied.
(j) Purchaser shall have received fully executed copies of the
Related Agreements.
(k) Purchaser and each of Sandeep Jain and Rohit Colaco shall
have entered into an Employment Agreement, dated on or before the date hereof,
in the form attached hereto as Exhibit D.
---------
(l) Purchaser and Sandeep Jain shall have entered into a Stock
Restriction Agreement, dated on or before the date hereof, in the form attached
hereto as Exhibit E.
---------
(m) Purchaser and Sandeep Jain shall have entered into a Non-
Competition and Non-Solicitation Agreement, dated on or before the date hereof,
in the form attached hereto as Exhibit F.
---------
(n) Seller, Purchaser and Greater Bay Trust Company ("Escrow
Agent") shall have entered into an escrow agreement ("Escrow Agreement") in the
form attached hereto as Exhibit C and an assignment agreement in favor of the
---------
Escrow Agent.
(o) Seller and Purchaser shall have entered into an Assignment
and Assumption Agreement in the form attached hereto as Exhibit B.
---------
23
<PAGE>
5.2 Conditions to Obligations of Seller. Each and every obligation
-----------------------------------
of Seller, to be performed at the Closing shall be subject to the satisfaction
as of or before such time of the following conditions (unless waived in writing
by Seller):
(a) The representations and warranties of Purchaser are true on
the date of the Closing, and Purchaser be in compliance with all covenants
required to be complied with as of the Closing.
(b) Purchaser shall have obtained all consents and approvals
(including consents from governmental authorities) required to consummate the
transactions contemplated by this Agreement and the Related Agreements.
(c) Purchaser shall have delivered to Seller a certificate
executed by an officer of Purchaser, dated the date of the Closing, to the
effect that the conditions set forth in subsections (a) and (b) of this Section
5.2 have been satisfied.
(d) There shall be no pending or threatened lawsuit challenging
the Acquisition, the Agreement, the Related Agreements or the transactions
contemplated hereby and thereby, by any body or agency of the federal, state, or
local government or by any third party, and the consummation of the transaction
shall not have been enjoined by a court of competent jurisdiction as of the
Closing.
(e) Seller shall have received fully executed copies of each of
the Related Agreements to which he, she or it is a party.
(f) The Closing shall have occurred on or before March 31, 2000.
(g) Purchaser and Seller shall have entered into an Assignment
and Assumption Agreement in the form attached hereto as Exhibit B.
---------
ARTICLE VI
ESCROW AND INDEMNIFICATION
6.1 Survival of Representations and Warranties.
------------------------------------------
(a) Notwithstanding any investigation conducted at any time by
or on behalf of any party and notwithstanding any actual or implied knowledge or
notice of any facts or circumstances which the parties may have as a result of
such investigation or otherwise, the parties will be entitled to rely upon the
other party's respective representations, warranties and covenants set forth in
this Agreement. The representations and warranties of Purchaser shall terminate
upon the Closing. The representations, warranties, covenants and agreements of
Seller shall survive the Closing and continue in full force and effect until the
expiration of the Escrow Period (as defined in section 6.5) at which time such
representations, warranties, covenants and agreements of Seller and liability
with respect thereto will terminate.
24
<PAGE>
(b) As used in this Article VI, except as otherwise indicated in
this Article VI, any reference to a representation or warranty in any section of
this Agreement shall include the schedule relating to such section.
6.2 Indemnification of Purchaser.
----------------------------
(a) Seller hereby agrees, severally, to indemnify and hold
harmless Purchaser and its affiliates against any and all losses, liabilities,
damages, demands, claims, suits, actions, judgments, causes of action,
assessments, costs, and expenses, including, without limitation, interest,
penalties, reasonable attorneys' fees, any and all expenses incurred in
investigating, preparing, and defending against any litigation, commenced or
threatened, and any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation, asserted against, resulting from, imposed upon, or
incurred by Purchaser or its affiliates directly or indirectly, as a result of
or arising from any inaccuracy in or breach or nonfulfillment of any of the
representations, warranties, covenants, or agreements made by Seller in this
Agreement or any facts or circumstances constituting such an inaccuracy, breach,
or nonfulfillment (all of which shall also be referred to collectively as
"Damages"), including, without limitation, the following:
(i) Any liabilities, indebtedness or obligations of Seller
sought to be imposed on Purchaser, whether such liabilities or obligations are
contingent or otherwise or direct or indirect, in existence on or prior to the
Closing or otherwise or based on any events, facts, or circumstances in
existence prior to or in connection with the Acquisition or in connection with
or arising from any activities or the operations of Seller (collectively, the
"Liabilities"), which Liabilities relate to any services rendered or products or
goods sold or transferred, or to any omission with respect thereto, by Seller
prior to the Closing;
(ii) Any Liabilities of Seller imposed upon Purchaser as
transferee of the Assets other than those expressly assumed in Section 1.2
hereof, including, without limitation, any Liability arising out of obligations
of Seller (including, without limitation, any obligations under any employee
benefit, profit sharing, or pension or welfare plan) or out of Seller' status as
employer or otherwise.
"Damages" as used herein is not limited to matters asserted by third parties,
but includes Damages incurred or sustained by Purchaser or its subsidiaries in
the absence of claims by a third party.
6.3 Escrow Fund.
-----------
(a) As security for the indemnity provided for in Section 6.2
hereof, fifteen thousand (15,000) of the Shares shall be deposited by Purchaser
in an escrow account with Greater Bay Trust Company as Escrow Agent (the "Escrow
Agent"), within 10 business days after the Closing, such deposit, to constitute
an escrow fund (the "Escrow Fund") to be governed by the terms set forth in this
Agreement and the provisions of the Escrow Agreement to be executed and
delivered pursuant to Section 5.1. The provisions of the Escrow Agreement shall
correspond and not conflict with the terms of this Article VI. Subject to the
provisions of
25
<PAGE>
this Article VI, Purchaser shall be entitled to obtain indemnity from the Escrow
Fund for Damages covered by the indemnity provided for in Section 6.2 of this
Agreement.
(b) All fees and costs in connection with the Escrow Fund shall
be paid by Purchaser.
6.4 Damage Threshold. Purchaser may not receive any payment from the
----------------
Escrow Fund unless and until an Officer's Certificate (as defined in Section 6.6
below) identifying Damages, which in the aggregate exceeds $25,000 (the "Damage
Threshold"), has been delivered to the Escrow Agent as provided in Section 6.6
below and such amount is determined pursuant to this Article VI to be payable,
in which case Purchaser shall receive cash equal to the amount of Damages in
excess of $25,000, except as otherwise provided in this Article VI.
6.5 Escrow Period. The Escrow Fund and Escrow Agreement shall
-------------
terminate either (i) on the date twelve (12) months following the Closing (the
"Termination Date"), provided that on such date there remain no unsatisfied or
contested claims which have been specified in an Officer's Certificate delivered
to the Escrow Agent prior to the Termination Date, or (ii) if such unsatisfied
or contested claims exist on the Termination Date, then on the date that all
amounts in the Escrow Fund will have been finally and fully paid pursuant to the
terms of this Article VI.
6.6 Claims; Objections to Claims.
----------------------------
(a) No claim of Purchaser for Damages against the Escrow Fund
will be paid unless, on or before the Termination Date, the Escrow Agent has
received a certificate signed by the chief financial or president of Purchaser
(an "Officer's Certificate") specifying:
(i) that Purchaser has incurred, paid or properly accrued
(in accordance with local GAAP) Damages or that a claim or dispute exists in
respect of facts or circumstances existing prior to the Closing that could,
unless successfully defended, entitle Purchaser to Damages, in an aggregate
stated amount with respect to which Purchaser is entitled to payment from the
Escrow Fund pursuant to this Agreement; and
(ii) in reasonable detail the individual items of Damages
included in the amount so stated, the date each such item was incurred, paid or
properly accrued (in accordance with local GAAP), or the basis for such
anticipated liability, and the specific nature of the breach of representation,
warranty or covenant to which such item is related.
(b) At the time of delivery of any Officer's Certificate to the
Escrow Agent pursuant to Section 6.6(a), a duplicate copy of such Officer's
Certificate shall be delivered to the Seller's Agent (along with a copy of any
supporting documents reasonably available to Purchaser that relate to the claims
set forth in the Officer's Certificate). For a period of forty-five (45) days
after such delivery to the Seller's Agent, the Escrow Agent shall make no
distribution from Escrow unless the Escrow Agent shall have received written
authorization from the Seller's Agent to make such delivery. After the
expiration of such forty-five (45) day period, the Escrow
26
<PAGE>
Agent shall make delivery of Shares in the Escrow Fund in accordance with
Section 6.7 hereof, provided that no such payment may be made if the Seller's
Agent shall object in a written statement to the claim made in the Officer's
Certificate, and such statement shall have been delivered to the Escrow Agent
and to Purchaser prior to the expiration of such forty-five (45) day period.
6.7 Payment of Claims. Upon receipt by the Escrow Agent on or
-----------------
before the Termination Date of an Officer's Certificate for a claim for Damages
against the Escrow Fund, the Escrow Agent shall:
(a) If there are no objections presented by Seller's Agent
pursuant to Section 6.6(b) of this Agreement with respect to such claim, deliver
to Purchaser Shares (valued at the then fair market value of such Shares) from
the Escrow Fund in an amount necessary to indemnify Purchaser for the Damages
claimed, provided, however that no payment shall be made from the Escrow Fund
until Damages are actually incurred or paid.
(b) If objections to the claim have been presented pursuant to
Section 6.6(b) hereof, then Escrow Agent shall make no payment in relation to
such claim until and unless (A) the Escrow Agent receives a copy of a joint
memorandum from Seller's Agent and Purchaser or an award rendered by the
arbitrator, pursuant to the provisions of Section 6.8 hereof, in which case the
Escrow Agent shall make payment as instructed in the joint memorandum or such
award; or (B) the Purchaser notifies Escrow Agent that no Damages will be
required to be incurred or paid or otherwise withdraws its claims. If (B) occurs
after the Termination Date, then amounts held in Escrow in relation to such
withdrawn claim shall be distributed to Seller in accordance with Section 6.10
below.
6.8 Resolution of Conflicts; Arbitration.
------------------------------------
(a) In case the Seller's Agent shall object in writing pursuant
to Section 6.6(b) to any claim or claims by Purchaser made in any Officer's
Certificate delivered pursuant to Section 6.6(a), the Seller's Agent and
Purchaser shall attempt in good faith for sixty (60) days to agree upon the
rights of the respective parties with respect to each of such claims. If the
Seller's Agent and Purchaser should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both parties and shall be furnished to
the Escrow Agent. The Escrow Agent shall be entitled to rely on any such
memorandum and shall distribute the cash from the Escrow Fund in accordance with
the terms thereof.
(c) If the parties have not resolved the dispute during such
sixty (60) day period, then the parties shall proceed with arbitration as set
forth in Section 1.7 herein.
(d) A copy of any award resulting from the arbitration shall be
furnished to the Escrow Agent, which shall distribute funds from the Escrow Fund
in accordance with its terms.
27
<PAGE>
6.9 Seller's Agent.
--------------
(a) Sandeep Jain shall be constituted and appointed as the
Seller's Agent for and on behalf of the Seller to give and receive notices and
communications, to authorize delivery to Purchaser of the cash from the Escrow
Fund in satisfaction of claims by Purchaser, to object to such deliveries, to
agree to, negotiate, enter into settlements and compromises of, and demand
arbitration and comply with orders of courts and awards of arbitrators with
respect to such claims, and to take all actions necessary or appropriate in the
judgment of the Seller's Agent for the accomplishment of the foregoing. Such
agency may be changed by the holders of a majority in interest of the Escrow
Fund from time to time upon not less than ten (10) days' prior written notice to
Purchaser. The Seller's Agent may resign upon thirty (30) days' notice to the
parties to this Agreement. No bond shall be required of the Seller's Agent, and
the Seller's Agent shall receive no compensation for his services. Notices or
communications to or from the Seller's Agent shall constitute notice to the
Seller.
(b) The Seller's Agent shall not be liable for any act done or
omitted hereunder as Seller's Agent while acting in good faith and in the
exercise of reasonable judgment, and any act done or omitted pursuant to the
advice of counsel shall be conclusive evidence of such good faith. The Seller
shall indemnify the Seller's Agent and hold him harmless against any loss,
liability or expense incurred without gross negligence or bad faith on the part
of the Seller's Agent and arising out of or in connection with the acceptance or
administration of his duties hereunder.
(c) The Seller's Agent shall have reasonable access to
information about Seller and the reasonable assistance of Seller's officers and
employees for purposes of performing its duties and exercising its rights
hereunder, provided that the Seller's Agent shall treat confidentially and not
disclose any nonpublic information from or about Seller to anyone (except on a
need to know basis to individuals who agree to treat such information
confidentially).
6.10 Distribution Upon Termination of Escrow Period. Within five (5)
----------------------------------------------
business days following the Termination Date, the Escrow Agent shall deliver to
the Seller all of the Shares in the Escrow Fund in excess of any amount of cash
reasonably necessary to satisfy any unsatisfied or contested claims for Damages
specified in an Officer's Certificate delivered to the Escrow Agent on or before
the Termination Date with respect to facts and circumstances existing prior to
the Closing Date. As soon thereafter as any such individual unsatisfied or
contested claim has been resolved, the Escrow Agent shall make payment in
accordance with Section 6.7 hereof and deliver to the Seller all Shares
remaining in the Escrow Fund which are not required to satisfy other unsatisfied
or contested claims. As soon as all such unsatisfied or contested claims have
been resolved, the Escrow Agent shall deliver to the Seller all Shares
remaining in the Escrow Fund.
6.11 Actions of the Seller's Agent. 'A decision, act, consent or
-----------------------------
instruction of the Seller's Agent shall constitute a decision of the Seller and
shall be final, binding and conclusive upon each the Seller, and the Escrow
Agent and Purchaser may rely upon any decision, act, consent or instruction of
the Seller's Agent as being the decision, act, consent or
28
<PAGE>
instruction of the Seller. The Escrow Agent and Purchaser are hereby relieved
from any liability to any person for any acts done by them in accordance with
such decision, act, consent or instruction of the Seller's Agent.
6.12 Third-Party Claims. In the event Purchaser becomes aware of a
------------------
third-party claim which Purchaser believes may result in a claim for Damages
against the Escrow Fund before the Termination Date, Purchaser shall promptly
notify the Seller's Agent of such claim, and the Seller's Agent shall be
entitled, at his expense, to participate in any defense of such claim.
Purchaser shall have the right in its sole discretion to settle any such claim;
provided, however, that Purchaser may not effect the settlement of any such
claim without the consent of the Seller's Agent, which consent shall not be
unreasonably withheld. In the event that the Seller's Agent has consented to
any such settlement, the Seller's Agent before the Termination Date shall have
no power or authority to object under Section 6.6 or any other provision of this
Article VI to the amount of any claim by Purchaser against the Escrow Fund for
indemnity with respect to such settlement.
ARTICLE VII
TERMINATION
7.1 Termination by Mutual Consent. At any time prior to the
-----------------------------
Closing, this Agreement may be terminated as provided below:
(a) Purchaser and Seller may terminate this Agreement by mutual
written consent;
(b) Purchaser may terminate this Agreement if (i) there has been
a material breach of any representation, warranty or covenant of Seller set
forth herein, which breach is not curable or, if curable, is not cured within
ten (10) days after written notice of such breach is given by Purchaser to
Seller;
(c) Seller may terminate this Agreement if (i) there has been a
material breach of any representation, warranty or covenant of Purchaser set
forth herein, which breach is not curable or, if curable, is not cured within
ten (10) days after written notice of such breach is given by Seller to
Purchaser;
(d) Purchaser may terminate this Agreement by giving written
notice to Seller if the Closing shall not have occurred on or before March 31,
2000 by reason of the failure of any condition precedent under Section 5.1 or
5.2 hereof (unless the failure results primarily from a breach by Purchaser of
any representation, warranty or covenant contained in this Agreement); or
(e) Seller may terminate this Agreement by giving written notice
to Purchaser if the Closing shall not have occurred on or before March 31, 2000
by reason of the failure of any condition precedent under Section 5.1 or 5.2
hereof (unless the failure results
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primarily from a breach by Seller of any representation, warranty or covenant
contained in this Agreement).
7.2 Effect of Termination. If any party terminates this Agreement
---------------------
pursuant to Section 7.1, all obligations of the parties hereunder shall
terminate without any liability of any party to any other party (except for any
liability of any party for breaches of this Agreement).
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 Notice. All notices and other communications required or
------
permitted under this Agreement shall be delivered to the parties at the address
set forth below, or at such other address that they designate by notice to all
other parties in accordance with this Section 8.1. Any party delivering notice
to Purchaser shall deliver a copy to: Actuate Corporation, Attn: Chief Financial
Officer, 999 Baker Way, Suite 200, San Mateo, California 94404. Any party
delivering notice to Seller shall deliver a copy to: Sandeep Jain, 845 Mowry
Ave., Suite 120, Fremont, CA 94536. All notices and communications shall be
deemed to have been received unless otherwise set forth herein: (i) in the case
of personal delivery, on the date of such delivery; (ii) in the case of telex or
facsimile transmission, on the date on which the sender receives confirmation by
telex or facsimile transmission that such notice was received by the addressee,
provided that a copy of such transmission is additionally sent by mail as set
forth in (iv) below; (iii) in the case of overnight air courier, on the second
business day following the day sent, with receipt confirmed by the courier; and
(iv) in the case of mailing by first class certified or registered mail, postage
prepaid, return receipt requested, on the fifth business day following such
mailing.
8.2 Entire Agreement. This Agreement, the exhibits and schedules
----------------
hereto, and the documents referred to herein embody the entire agreement and
understanding of the parties hereto with respect to the subject matter hereof,
and supersede all prior and contemporaneous agreements and understandings, oral
or written, relative to said subject matter. The parties acknowledge and agree
that each is relying solely on the representations and warranties contained
herein and therein and the schedules, exhibits, and other materials specifically
referred to herein, in determining whether to enter into this Agreement and the
Related Agreements to which each is a party.
8.3 Binding Effect; Assignment. This Agreement and the various
--------------------------
rights and obligations arising hereunder shall inure to the benefit of and be
binding upon Seller and its respective successors and permitted assigns, and
Purchaser and its respective successors and permitted assigns. Neither this
Agreement nor any of the rights, interests, or obligations hereunder shall be
transferred or assigned (by operation of law or otherwise) by any of the parties
hereto without the prior written consent of the other parties and except that
Purchaser's rights hereunder may be assigned in connection with a merger of
Purchaser with or into a third party or a sale of all or substantially all of
Purchaser's assets.
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8.4 Captions. The article and section headings of this Agreement
--------
are inserted for convenience only and shall not constitute a part of this
Agreement in construing or interpreting any provision hereof.
8.5 Expenses of Transaction; Taxes. Seller shall pay in full all
------------------------------
professional fees and expenses incurred by Seller and the Business in connection
with this Agreement and the Related Agreements, and the transactions
contemplated hereby and thereby. Purchaser shall pay in full all professional
fees and expenses incurred by Purchaser in connection with this Agreement and
the Related Agreements, and the transactions contemplated hereby and thereby.
Seller shall pay all applicable sales, use, excise, transfer, documentary and
any other similar taxes or arising out of the purchase and sale of the Assets.
8.6 Waiver; Consent. This Agreement may not be changed, amended,
---------------
augmented, or discharged (other than by performance), in whole or in part,
except by a writing executed by the parties hereto, and no waiver of any of the
provisions or conditions of this Agreement or any of the rights of a party
hereto shall be effective or binding unless such waiver shall be in writing and
signed by the party claimed to have given or consented thereto. Except to the
extent that a party hereto may have otherwise agreed in writing, no waiver by
that party of any condition of this Agreement or breach by the other party of
any of its obligations or representations hereunder or thereunder shall be
deemed to be a waiver of any other condition or subsequent or prior breach of
the same or any other obligation or representation by the other party, nor shall
any forbearance by the first party to seek a remedy for any noncompliance or
breach by the other party be deemed to be a waiver by the first party of its
rights and remedies with respect to such noncompliance or breach.
8.7 Third-Party Beneficiaries. Except as otherwise expressly
-------------------------
provided for in this Agreement, nothing herein, expressed or implied, is
intended or shall be construed to confer upon or give to any person, firm,
corporation, or legal entity, other than the parties hereto, any rights,
remedies, or other benefits under or by reason of this Agreement.
8.8 Counterparts and Facsimiles. This Agreement may be executed
---------------------------
simultaneously in multiple counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument. All signatures may be delivered by facsimile which shall be as
binding as if an original. All facsimile signatures shall be followed by an
exchange of original signatures as soon as possible thereafter.
8.9 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
8.10 Incorporation of Exhibits and Schedules. The exhibits and
---------------------------------------
schedules and recitals identified in this Agreement are incorporated herein by
reference and made a part hereof.
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8.11 Governing Law. This Agreement shall in all respects be
-------------
construed in accordance with and governed by the laws of the State of California
as applied to agreements among California residents entered into and to be
performed entirely within California.
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IN WITNESS WHEREOF, the parties hereto have caused this Asset Purchase
Agreement to be executed as of the day and year first above written.
ACTUATE CORPORATION
By:
---------------------------
Its:
--------------------------
ENTERPRISESOFT
By:
---------------------------
Sandeep Jain
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