EXHIBIT 2.1
MERGER AGREEMENT
DATED AS OF DECEMBER 21, 1995
AMONG RADIUS INC.,
SPLASH TECHNOLOGY, INC.,
SUMMIT SUBORDINATED DEBT FUND, L.P.,
SUMMIT VENTURES IV, L.P.,
SUMMIT INVESTORS II, L.P.,
SPLASH TECHNOLOGY HOLDINGS, INC.
AND
SPLASH MERGER COMPANY, INC.
TABLE OF CONTENTS
PAGE
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ARTICLE I
THE MERGER; EXCHANGE OF SECURITIES........................................2
1.1 CONTRIBUTION OF CSG ASSETS TO COMPANY..............................2
1.2 THE MERGER.........................................................3
1.3 CONVERSION OF SHARES...............................................3
1.4 THE CLOSING OF THE MERGER..........................................3
1.5 POST-CLOSING CONTRIBUTION BY SELLER................................4
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE INVESTORS, HOLDCO AND HOLDCO SUB......................................5
2.1 HOLDCO AND HOLDCO SUB..............................................5
2.2 INVESTOR AUTHORIZATION.............................................7
2.3 FINDERS OR BROKERS.................................................7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND COMPANY......................7
3.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE COMPANY.......8
ARTICLE IV
CONDITIONS PRECEDENT TO THE OBLIGATIONS.......................................20
4.1 REPRESENTATIONS AND WARRANTIES....................................20
4.2 ABSENCE OF LITIGATION.............................................20
4.3 PERFORMANCE OF OBLIGATIONS........................................20
4.4 DOCUMENTATION AT CLOSING..........................................20
4.5 MATERIAL ADVERSE CHANGE...........................................23
4.6 CONDUCT OF BUSINESS; REVENUES.....................................23
4.7 CONSENTS, WAIVERS, ETC............................................23
4.8 ACCOUNTING REVIEW.................................................24
4.9 PERFORMANCE UNDER RESTRICTED STOCK PURCHASE AGREEMENT.............24
4.10 HART-SCOTT-RODINO WAITING PERIOD..................................24
4.11 ASSETS TRANSFER. .................................................24
4.12 ELECTION UNDER SECTION 338(H)(10). ...............................24
4.13 NUBUS EQUIPPED COMPUTERS. ........................................25
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TABLE OF CONTENTS
(CONTINUED)
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ARTICLE V
CONDITIONS PRECEDENT TO SELLER'S AND COMPANY'S OBLIGATIONS...............25
5.1 REPRESENTATIONS AND WARRANTIES....................................25
5.2 ABSENCE OF LITIGATION.............................................25
5.3 PERFORMANCE OF OBLIGATIONS........................................25
5.4 AIRNESS OPINION...................................................25
5.5 CONSENTS, WAIVERS, ETC. ..........................................25
5.6 BOARD OF DIRECTORS................................................26
5.7 HOLDCO CASH.......................................................26
5.8 HART-SCOTT RODINO WAITING PERIOD..................................26
5.9 DOCUMENTATION AT CLOSING..........................................26
5.10 PERFORMANCE UNDER RESTRICTED STOCK PURCHASE AGREEMENT.............28
ARTICLE VI
POST-CLOSING COVENANTS...................................................28
6.1 AFFIRMATIVE COVENANTS OF HOLDCO OTHER THAN REPORTING REQUIREMENTS.28
6.2 NEGATIVE COVENANTS OF HOLDCO......................................30
6.3 REPORTING REQUIREMENTS OF HOLDCO..................................32
6.4 CONFIDENTIALITY...................................................34
6.5 COVENANTS OF SELLER...............................................34
ARTICLE VII
OBLIGATIONS PENDING THE CLOSING..........................................35
7.1 ACCESS............................................................35
7.2 CONDUCT OF COMPANY'S BUSINESS.....................................36
7.3 CONSENTS..........................................................38
7.4 NOTICE OF BREACH..................................................39
7.5 SELLER AND INVESTORS AS STOCKHOLDERS..............................39
7.6 RETENTION OF CSG EARNINGS.........................................39
ARTICLE VIII
OBLIGATIONS AT OR PRIOR TO THE CLOSING...................................40
8.1 EXCLUSIVITY/OTHER OFFERS..........................................40
8.2 OTHER DELIVERIES..................................................40
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TABLE OF CONTENTS
(CONTINUED)
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ARTICLE IX
NATURE AND SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS................................................................41
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES........................41
ARTICLE X
INDEMNIFICATION..........................................................41
10.1 INDEMNIFICATION BY THE SELLER FOR BREACH OF THIS AGREEMENT........41
10.2 INDEMNIFICATION BY THE SELLER FOR EFI LITIGATION..................41
10.3 CLAIMS FOR INDEMNIFICATION OF INVESTORS...........................42
10.4 DEFENSE BY SELLER.................................................42
10.5 TIME LIMITATION ON INDEMNIFICATION OF INVESTORS, HOLDCO AND
COMPANY...........................................................43
10.6 MONETARY LIMITATION ON INDEMNIFICATION OF INVESTORS, HOLDCO AND
COMPANY...........................................................43
10.7 DAMAGES TO INVESTORS..............................................43
10.8 NO WAIVER BY INVESTORS, HOLDCO AND COMPANY........................44
10.9 MATERIALITY.......................................................44
10.10 INDEMNIFICATION BY HOLDCO AND INVESTORS...........................44
10.11 CLAIMS FOR INDEMNIFICATION OF SELLER..............................44
10.12 DEFENSE BY HOLDCO AND INVESTORS...................................44
10.13 TIME LIMITATION ON INDEMNIFICATION OF SELLER......................45
10.14 MONETARY LIMITATION ON INDEMNIFICATION OF SELLER..................45
10.15 NO WAIVER BY SELLER...............................................45
ARTICLE XI
DEFINITIONS AND ACCOUNTING TERMS.........................................46
11.1 CERTAIN DEFINED TERMS.............................................46
11.2 ACCOUNTING TERMS..................................................52
ARTICLE XII
MISCELLANEOUS............................................................52
12.1 NO WAIVER; CUMULATIVE REMEDIES....................................52
12.2 TERMINATION.......................................................52
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TABLE OF CONTENTS
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12.3 AMENDMENTS, WAIVERS AND CONSENTS..................................52
12.4 ADDRESSES FOR NOTICES, ETC........................................53
12.5 COSTS, EXPENSES AND TAXES.........................................54
12.6 BINDING EFFECT; ASSIGNMENT........................................54
12.7 PRIOR AGREEMENTS..................................................54
12.8 SEVERABILITY......................................................54
12.9 GOVERNING LAW.....................................................54
12.10 HEADINGS..........................................................54
12.11 COUNTERPARTS......................................................54
12.12 FURTHER ASSURANCES................................................54
12.13 CONFIDENTIALITY...................................................55
12.14 PRESS RELEASE.....................................................55
12.15 INDEMNIFIED PARTIES...............................................55
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MERGER AGREEMENT
THIS MERGER AGREEMENT (the "Agreement") is made and entered into as of
December 21, 1995, by and among RADIUS INC., a California corporation (the
"Seller"), SPLASH TECHNOLOGY, INC., a Delaware corporation (the "Company"),
SPLASH TECHNOLOGY HOLDINGS, INC., a Delaware corporation ("Holdco"), SPLASH
MERGER COMPANY, INC., a Delaware corporation, ("Holdco Sub") and the entities
listed as Investors on the signature page(s) hereof (the "Investors").
RECITALS
A. The Seller currently operates a Color Server Group ("CSG") which is
engaged in the business of the design, manufacture and sale of color servers for
the color printing market, which such color servers are comprised of computer
software, computer hardware, hardware interfaces to computers and color
photocopying, scanning and printing devices, and the integration of such
elements with computers, computer networks, software and color photocopying,
scanning and printing devices.
B. Immediately prior to the Merger described below, Seller shall
contribute the assets and certain liabilities of CSG to the Company, which shall
be a wholly-owned subsidiary of Seller. Immediately prior to the closing of the
Merger described below, all of Holdco's capital stock shall be held by the
Investors and Holdco Sub shall be a wholly-owned subsidiary of Holdco.
C. Immediately following the transfer of the assets and certain
liabilities of CSG to the Company described above, Holdco Sub shall merge into
and with the Company, with the Company surviving, and the Seller shall receive
from Holdco Series B Redeemable and Convertible Preferred Stock, par value
$0.001, of the Company ("Series B Preferred Stock") convertible into
approximately 19.9% of Holdco Common Stock (post-closing and without considering
dilution by management options) and $21,945,175 in cash. Prior to such Merger,
the management of the Company shall have purchased approximately 6.1% of Holdco
Common Stock (post-closing and without considering dilution by management
options) from Holdco pursuant to a Restricted Stock Purchase Agreement, thus
leaving approximately 74% of Holdco Common Stock (post-closing and without
considering dilution by management options) in the hands of the Investors.
D. The respective boards of directors and stockholders of Holdco Sub
and the Company have approved the merger (the "Merger") of Holdco Sub into and
with the Company pursuant to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein, and subject to the terms and conditions hereinafter set forth, the
parties hereby agree as follows:
ARTICLE I
THE MERGER; EXCHANGE OF SECURITIES
1.1 CONTRIBUTION OF CSG ASSETS TO COMPANY. Immediately prior to the
Effective Time (as hereinafter defined), the Seller shall transfer, assign and
deliver to the Company, and the Company shall accept and receive from the
Seller, all right, title and interest of the Seller, free and clear of all
Liens, other than as specified on Exhibit 1.1A or in the Disclosure Letter (as
hereinafter defined), in and to those tangible and intangible rights, properties
and assets set forth on Exhibit 1.1A hereto (the "Assets"). Immediately prior to
the Effective Time, the Certificate of Incorporation of the Company shall be in
the form of Exhibit 1.1B hereto, and the By-Laws of the Company shall be in the
form of Exhibit 1.1C hereto. The Company shall assume from the Seller all of its
obligations under the contracts, commitments and undertakings which are
specifically identified on Exhibit 1.1A as Contracts (the "Contracts"). Other
than the Company's obligations under the Contracts, the Company shall assume and
agree to perform or discharge, when and as due, only those obligations, claims
and liabilities described on Exhibit 1.1D hereto (the "Assumed Liabilities").
Exhibit 1.1D sets forth all employees and consultants of the Seller that are
realted to CSG and the Business and who will become employees and consultants of
the Company. As part of the same transaction, the Company and the Seller shall
enter into a Corporate Services Agreement mutually agreeable in form and
substance to the Seller and the Investors. Such Corporate Services Agreement
shall specify that the Seller provide the Company with certain tax, accounting,
legal, purchasing, payroll, information services, human resources and other
services (consistent with Past Practices and the provision of all services and
other items provided by the Seller to CSG immediately prior to the date hereof)
for a period extending for 3 months after the date of the Closing. The
consideration to be provided by the Company shall be based on the level of use
of services and market rates for similar services. Such Corporate Services
Agreement shall allow for termination by the Company with respect to any
services or part thereof upon 30 days prior notice to the Seller. Holdco shall
use reasonable efforts to become independent of the Seller with respect to such
services within 30 days of the Closing. The Corporate Services Agreement also
will provide for payment of consideration to the Seller for such services, if
any, provided by the Seller to CSG from January 1, 1996 to the date of the
Closing, to the extent that the Seller was not compensated for such services
previously. Further, as part of the same transaction, the Company and the Seller
shall enter into a Sub-Lease mutually agreeable in form and substance to the
Seller and the Investors. Such Sub-Lease shall specify that the Seller provide
the Company with rental of the real property owned or leased by the Seller that
is to be occupied by the Company for a period extending for 3 months after the
date of the Closing. The consideration to be provided by the Company shall be
based on the amount of rental space actually occupied by the Company and the
rent paid by the Seller for such rental space. Such Sub-Lease shall allow for
termination by the Company with respect to any rental space or part thereof upon
30 days prior notice to the Seller. The Sub-Lease also will provide for payment
of consideration to the Seller for such rental space, if any, provided by the
Seller to CSG from January 1, 1996 to the date of the Closing, to the extent
that the Seller was not compensated for such rental previously. In addition, as
part of the same transaction, the Company and the Seller shall have entered into
a Trademark License Agreement, mutually agreeable in form and substance to the
Seller and the Investors, which shall permit the Company to use certain Seller
trademarks that have been and are expected to be used in the Business for a
period extending 18 months after the date of the Closing. Such Trademark License
Agreement
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shall be in full force and effect and binding upon the parties thereto. Any
sales, use or transfer Taxes or permit or license transfer fees and expenses
relating to the transfer of the Assets from the Seller to the Company or
otherwise due as a result of the transactions contemplated by this Agreement
shall be paid by the Seller.
1.2 THE MERGER.
(a) SURVIVING CORPORATION. Subject to the conditions contained
herein and in accordance with the provisions of this Agreement and the DGCL, at
the Effective Time (as hereinafter defined), Holdco Sub shall be merged with and
into the Company, which, as the corporation surviving in the Merger (the
"Surviving Corporation"), shall continue unaffected and unimpaired by the Merger
to exist under and be governed by the laws of the State of Delaware. At the
Effective Time, the separate existence of Holdco Sub shall cease except to the
extent provided by law in the case of a corporation after its merger into
another corporation.
(b) EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in Sections 259 through 261 of the DGCL.
(c) CERTIFICATE OF INCORPORATION, BY-LAWS, OFFICERS AND DIRECTORS.
The Certificate of Incorporation and By-Laws of the Company, as in effect
immediately prior to the Effective Time, shall continue in full force and effect
as the Certificate of Incorporation and By-Laws of the Surviving Corporation.
The initial board of directors of the Surviving Corporation shall consist of the
initial directors of Holdco Sub and the initial officers of the surviving
corporation shall be as mutually agreed to by the Seller and the Investors, who
all shall serve until their respective successors are duly elected and
qualified.
1.3 CONVERSION OF SHARES. As of the Effective Time, by virtue of the
Merger and without any action on the part of the Seller as the sole stockholder
of the Company or Holdco as the sole stockholder of Holdco Sub:
(a) Each share of common stock, par value of $0.001, of the Company
(the "Company Common Stock") outstanding immediately prior to the Effective Time
shall be converted into (i) 4.282 shares of Series B Preferred Stock and (ii)
the right to receive $21,945.175, payable by wire transfer of federal clearing
house funds.
(b) Each share of the common stock, par value $0.001, of Holdco Sub
(the "Holdco Sub Common Stock") outstanding immediately prior to the Effective
Time shall be converted into one share of Company Common Stock.
1.4 THE CLOSING OF THE MERGER. The closing of the Merger (the "Closing")
shall be held at the office of Wilson Sonsini Goodrich & Rosati, P.C., 650 Page
Mill Road, Palo Alto, California 94304-1050, on such date and at such time as
may be mutually agreed upon, but on or prior to January 31, 1996, unless the
parties agree otherwise. At the Closing, subject to the fulfillment or waiver of
the conditions set forth in Articles IV and V hereof, (a) the parties shall
cause the Merger to be consummated by the
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filing of a certificate of merger, executed and acknowledged in accordance with
the DGCL, with the Secretary of State of Delaware, (b) the Seller shall deliver,
assign, convey and transfer each share of Company Common Stock to Holdco, (c)
Holdco shall deliver, assign, convey and transfer to the Seller the shares of
Series B Preferred Stock that the Seller is entitled to pursuant to Section 1.3
hereof, and (d) Holdco shall transfer to the Seller (or an agent of the Seller,
if previously designated in writing by the Seller) by wire of federal clearing
house funds to such account or accounts as shall have been previously designated
in writing by the Seller, the amount of cash (the "Cash Purchase Price") that
the Seller is entitled to pursuant to Section 1.3 hereof; provided that an
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amount equal to $4,700,000 shall be wired to the escrow account subject to the
Escrow Agreement referred to in Section 4.4(h) rather than directly to an
account of the Seller. The date and time of the effectiveness of the Merger
pursuant to the DGCL shall be herein called the "Effective Time."
1.5 POST-CLOSING CONTRIBUTION BY SELLER.
(a) DELIVERY OF YEAR-END BALANCE SHEET. As soon as practicable
(but in no event later than 60 days) after the date of the Closing, the
Investors shall deliver to the Seller a balance sheet for the Company, prepared
by the Investors' Accountants at the expense of Holdco, as of the close of
business on December 31, 1995 (the "Year-End Balance Sheet") that is prepared in
accordance with Restricted GAAP and, to the extent in accordance with Restricted
GAAP, on a consistent basis with the Interim Balance Sheet.
(b) REVIEW BY SELLER; DISPUTE RESOLUTION.
(i) Promptly following receipt of the Year-End Balance
Sheet, Seller and Seller's Accountants may review the same and, within 30 days
after the date of such receipt, may deliver to the Investors a certificate
signed by a duly authorized officer of the Seller setting forth its objections
to the Year-End Balance Sheet (set forth in reasonable detail), together with a
summary of the reasons therefor and calculations and modifications which, in its
view, are necessary to eliminate such objections. In the event the Seller does
not so object within such 30-day period, the Year-End Balance Sheet shall be
final and binding for the purposes of this Agreement.
(ii) In the event the Seller so objects within such 30-day
period, then the Seller and the Investors shall jointly select a national
accounting firm acceptable to each of the Seller and the Investors (or if they
cannot agree on such selection, a national "big-six" accounting firm will be
selected by lot after eliminating the Seller's Accountants and the Investors'
Accountants) and the firm so selected (the "Additional Accounting Firm") shall
be directed by the Seller and the Investors to conduct a review of the
objections of the Seller to the Year-End Balance Sheet as promptly as reasonably
practicable (and the Seller and the Investors shall use reasonable efforts to
allow and cause the Additional Accounting Firm to conduct such review as
promptly as reasonably practicable) and, upon completion of such review, to
deliver written notice to each of the Seller and the Investors setting forth a
summary of all adjustments to the Year-End Balance Sheet determined necessary by
the Additional Accounting Firm to resolve the objections of the Seller to the
Year-End Balance Sheet (such written notice and related summary being herein
called the "Additional Report"). The Year-End Balance Sheet as adjusted by any
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adjustments as set forth in the Additional Report shall be final and binding,
for purposes of this Agreement.
(iii) Each of the Seller, the Investors, the Seller's
Accountants and the Investors' Accountants and, if applicable, the Additional
Accounting Firm, shall promptly make available to any of the foregoing Persons
such books, records and other information (including work papers) as may be
reasonably requested by any such Person to audit or review the Year-End Balance
Sheet or any objections thereto. The fees and expenses of the Investors'
Accountants related to its services under Section 1.5(a) shall be paid by
Holdco, the fees and expenses of the Investors' Accountants related to its
services under Section 1.5(b) shall be paid by the Investors, the fees and
expenses of the Seller's Accountants related to its services under this Section
1.5 shall be paid by Seller and the fees and expenses, if applicable, of the
Additional Accounting Firm related to its services under this Section 1.5 shall
be paid 50% by the Seller and 50% by the Investors.
(c) CONTRIBUTION BY SELLER. If the Working Capital of the Business
and the Company as of the date of the Closing as reported in the final and
binding Year-End Balance Sheet, is less than negative $554,825, then within five
(5) days of the date that the Year-End Balance Sheet becomes final and binding
in accordance with Section 1.5(b), the Seller shall pay to the Company by wire
transfer of federal clearing house funds the amount by which such Working
Capital is less than negative $554,825. If Seller does not pay any amounts due
under this Section in accordance with the terms of this Section, then the
Company, Holdco and the Investors shall receive indemnification from the Seller
in accordance with Article X and, at their sole election, shall receive payments
for such amounts from the escrow fund described in Section 4.4(h).
(d) PAYMENT BY THE COMPANY. If the Working Capital of the Business
and the Company as of the date of the Closing as reported in the final and
binding Year-End Balance Sheet, is greater than negative $554,825, then within
five (5) days of the date that the Year-End Balance Sheet becomes final and
binding in accordance with Section 1.5(b), the Company shall pay to the Seller
by wire transfer of federal clearing house funds the amount by which such
Working Capital is greater than negative $554,825; provided that, in any event,
such payment by the Company to the Seller shall not exceed $1,554,825. If
Company does not pay all amounts due under this Section in accordance with the
terms of this Section, then the Seller shall receive indemnification from the
Investors, Holdco and the Company in accordance with Article X hereof.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE INVESTORS, HOLDCO AND HOLDCO SUB
2.1 HOLDCO AND HOLDCO SUB. Holdco, Holdco Sub and each Investor, jointly
and severally, represent and warrant to the Seller and the Company that (as of
the date hereof, as of the date of the Closing and as of the Effective Time):
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(a) ORGANIZATION AND UNDERSTANDING. Each of Holdco and Holdco Sub
is a duly organized and validly existing corporation in good standing under the
laws the State of Delaware. The Certificate of Incorporation and the By-Laws of
Holdco are in the form of Exhibit 2.1A and 2.1B, respectively.
(b) CORPORATE ACTION. Holdco has all necessary corporate power and
authority and have taken all corporate action required to make all the
provisions of this Agreement, and any other agreements and instruments executed
in connection herewith, the valid and enforceable obligations of Holdco. Holdco
Sub has all necessary corporate power and authority and has taken all corporate
action required to make all the provisions of this Agreement, and any other
agreements and instruments executed in connection herewith, the valid and
enforceable obligations of the Holdco Sub.
(c) CAPITALIZATION. Immediately prior to the Effective Time, the
authorized capital stock of Holdco shall consist of 10,000,000 shares of common
stock, par value $0.001, of Holdco ("Holdco Common Stock"), 2,002,500 shares of
which shall be outstanding and issued, 15,426 shares of Series A Redeemable
Preferred Stock, par value $0.001, of Holdco ("Series A Preferred Stock"),
15,426 shares of which shall be outstanding and issued, and 4,282 shares of
Series B Preferred Stock, none of which shares shall be issued and outstanding.
Immediately prior to the Effective Time, all such issued shares shall be validly
issued, fully paid and non-assessable and free and clear of all Liens.
Immediately prior to the Effective Time, there will be no options, warrants or
rights to purchase shares of capital stock or other securities authorized,
issued or outstanding, nor will Holdco be obligated in any other manner to issue
shares of its capital stock or other securities. None of the Investors has, and
as of the Closing none of them shall have, granted or sold, and none of the
Investors is, or at the time of Closing neither will be, a party to any
agreement, commitment or understanding, written or oral, providing for the grant
or sale of, options or other rights to purchase or restricting the transfer of,
and none of them is, and at the Closing none will be, obligated to sell or
otherwise transfer, any of securities or capital stock of Holdco to any person
or entity. Immediately prior to the Effective Time, there shall be sufficient
authorized but unissued shares of Holdco Common Stock reserved for issuance to
Seller upon conversion of all shares of Series B Preferred Stock then held by
the Seller into shares of Holdco Common Stock pursuant to the terms of Holdco's
Certificate of Incorporation. Immediately prior to the Effective Time, the
4,282 shares of Series B Preferred Stock to be issued to the Seller shall be
convertible into 497,465 shares of Holdco Common Stock (approximately 19.9% of
the issued and outstanding Holdco Common Stock), which shares have been reserved
for issuance pursuant to the terms of the Certificate of Incorporation of
Holdco. When issued to the Seller, the 4,282 shares of Series B Preferred Stock
will be validly issued, fully paid and non-assessable, and free and clear of all
Liens and will be issued in accordance with the registration and qualification
requirements of federal and any applicable state securities laws. The
authorized capital stock of Holdco Sub consists of 1,000 shares of Holdco Sub
Common Stock, 1,000 shares of which are outstanding and issued to Holdco.
Immediately prior to the Effective Time, Investors shall be the owners of
1,850,000 shares of Holdco Common Stock, 15,426 shares of Series A Preferred
Stock and certain Subordinated Notes of Holdco having a face value of
$8,000,000 (the "Subordinated Notes," together with such shares of Series A
Preferred Stock held by the Investors and the shares of Series B Preferred Stock
to be received by the Seller pursuant to the Merger, are sometimes collectively
referred to as the "Securities") substantially in the form in Exhibit 2.1C.
Immediately prior to the Effective Time, members of the management of the
Company
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shall be the owners of 152,500 shares of Holdco Common Stock, which shares will
have been purchased pursuant to the Restricted Stock Purchase Agreement
referenced in Sections 5.9(h) and 5.10 hereof, assuming delivery, execution and
performance thereunder by the management of the Company of such Restricted Stock
Purchase Agreement and satisfaction of the conditions specified in Sections
5.9(h) and 5.10 hereof.
(d) GOVERNMENT APPROVAL. No authorization, consent, approval,
permits, licenses, exemption of or filing or registration with any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, is or will be necessary for, or in connection with the
execution or delivery by the Investors, Holdco or Holdco Sub of, or for the
performance by the Investors, Holdco or Holdco Sub of their obligations under
this Agreement except for filings to be made, if any to comply with exemptions
from registration or qualification under federal and state security laws and the
expiration of any applicable waiting period pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
(e) LIABILITIES. Neither Holdco nor Holdco Sub has any material
Liabilities, except as contemplated herein.
2.2 INVESTOR AUTHORIZATION. Each Investor further represents that:
(a) Each Investor has duly authorized, executed and delivered this
Agreement and any other agreements and instruments executed in connection
herewith and has all necessary power and authority to do so.
(b) This Agreement and such other agreements and instruments
constitute the valid and binding obligations of each Investor, enforceable
against it in accordance with their respective terms, and all such action to
make such agreements so has been taken.
(c) No consent or approval of any Person is required in connection
with the execution, delivery and performance of this Agreement and such other
agreements and instruments by each Investor which has not heretofore been
obtained.
(d) Execution and performance of this Agreement shall not result in
a material default of other agreements or instruments or any Law by any
Investor.
2.3 FINDERS OR BROKERS. Each Investor, Holdco and Holdco Sub represent
that no Person has or will have, as a result of the transactions contemplated by
this Agreement, any right, interest or valid claim upon or against the Company,
Holdco or the Seller for any commission, fee or other compensation as a finder
or broker because of any act or omission by such Investor, Holdco or Holdco Sub,
and each Investor agrees to indemnify and hold the Seller and the Company
harmless against any such commissions, fees or other compensation.
ARTICLE III
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REPRESENTATIONS AND WARRANTIES OF SELLER AND COMPANY
3.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE COMPANY. Except
as disclosed in a letter delivered by the Company to the Seller prior to the
date hereof (the "Disclosure Letter," which Disclosure Letter shall, when
qualifying a representation or warranty, refer specifically to the Section
number herein of the representation or warranty so qualified), the Seller and
the Company, jointly and severally, represent and warrant to the Investors that
(as of the date hereof, as of the date of the Closing, and as of the Effective
Time):
(a) ORGANIZATION AND STANDING. Each of the Seller and the Company
is a duly organized and validly existing corporation in good standing under the
laws of the jurisdiction in which it is organized and has all requisite
corporate power and authority for the ownership and operation of its properties
and for the carrying on its business, including, without limitation, the
Business as now conducted by CSG and as now proposed to be conducted by the
Company. The Seller, in relation to CSG and the operation of the Assets, is, and
the Company is, or will be as of the Closing, duly qualified and in good
standing as a foreign corporation authorized to do business in all jurisdictions
in which the character of the property owned or leased, or the nature of the
activities conducted, by it makes such qualification necessary other than where
failure to so qualify would not have a material adverse effect upon CSG, the
Business, the Company or the Assets.
(b) CORPORATE ACTION. The Seller has all necessary corporate power
and authority and has taken all corporate action required to make all the
provisions of this Agreement, and any other agreements and instruments executed
by it in connection herewith, the valid and enforceable obligations of the
Seller. The Company has all necessary corporate power and authority and has
taken all corporate action required to make all the provisions of this
Agreement, and any other agreements and instruments executed by it in connection
herewith the valid and enforceable obligations of the Company.
(c) GOVERNMENTAL APPROVAL. No authorization, consent, approval,
permits, licenses, exemption of or filing or registration with any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, is or will be necessary for, or in connection with the
execution or delivery by the Seller or the Company of, or for the performance by
the Seller or the Company of their obligations under this Agreement except for
filings to be made, if any, to comply with exemptions from registration or
qualification under federal and state securities laws and the expiration of any
applicable waiting period pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
(d) LITIGATION. There is no litigation or governmental proceeding
or investigation pending or, to the best knowledge of the Seller and the
Company, threatened against the Seller, the Company or the Assets affecting any
of the Assets or the Business, or, to the best knowledge of the Seller or the
Company, pending or threatened against any officer or key employee of the Seller
whose duties relate to the Business, or the Company that might reasonably be
expected to result, either in any case or in the aggregate, in any material
adverse change in the business, operations, affairs or conditions of CSG, the
Company, the Business, or the Assets taken as a whole, or that might reasonably
be
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expected to call into question the validity of this Agreement or any action
taken or to be taken pursuant hereto.
(e) COMPLIANCE WITH OTHER INSTRUMENTS. The Seller and the Company
are in compliance (i) in all respects with the terms and provisions of their
certificate or articles of incorporation or bylaws, (ii) in all respects with
the terms and provisions of each mortgage, indenture, lease, agreement and other
instrument relating to obligations of the Seller with respect to CSG and the
Company in excess of $50,000 individually or $100,000 in the aggregate, and,
(iii) with all international, foreign, federal, state or local judgments,
decrees, governmental orders, statutes, rules, regulations, permits or licenses
by which either the Company or the Seller (with respect to CSG, the Assets or
the Business) is bound or to which the Assets are subject that, in the case of
any of clauses (ii) or (iii) the default or violation of which might have a
material adverse effect on the Business, the Assets, the Company or CSG or that
might reasonably be expected to call into question the validity of this
Agreement, or any action taken or to be taken pursuant hereto. There is no term
or provision in any of the foregoing documents and instruments and judgments,
orders, statutes, rules, regulations, permits or licenses that materially
adversely affects the Business, the Assets, or the financial condition of CSG or
the Company. Neither the execution and delivery of this Agreement nor the
consummation of any transaction contemplated hereby, has constituted or resulted
in or will constitute or result in a material violation of any term or provision
in the certificate or articles of incorporation or bylaws of the Seller or the
Company or has constituted or resulted in a material default or violation of any
term or provision in any document or instrument to which they are subject.
(f) NO BROKERS OR FINDERS. No Person has or will have, as a result
of the transactions contemplated by this Agreement, any right, interest or valid
claim upon or against the Investors, the Company or Holdco for any commission,
fee or other compensation or as a finder or broker because of any act or
omission by the Seller or the Company or, to the knowledge of the Seller and the
Company, by any other Person.
(g) CAPITALIZATION; STATUS OF CAPITAL STOCK. Immediately preceding
the Effective Time, the Company will have a total authorized capitalization
consisting of 1,000 shares of Company Common Stock, of which 1,000 shares will
be issued to the Seller and outstanding. There will be no options, warrants or
rights to purchase shares of capital stock or other securities authorized,
issued or outstanding, nor will the Company be obligated in any other manner to
issue shares of its capital stock or other securities. Neither of the Seller or
the Company, and as of the Closing neither of them shall have, granted or sold,
and neither of the Seller or the Company is, or at the time of Closing neither
will be, a party to any agreement, commitment or understanding, written or oral,
providing for the grant or sale of, options or other rights to purchase or
restricting the transfer of, and neither of them is, and at the Closing neither
will be, obligated to sell or otherwise transfer, any of securities or capital
stock of the Company to any person or entity except to Holdco pursuant to this
Agreement.
(h) FINANCIAL STATEMENTS. The unaudited pro forma, after giving
effect to the transfer of the Assets to the Company and the assumption by the
Company of the Contracts and the Assumed Liabilities, income statement of CSG
and the Company for the year ended September 30, 1995 (the "Financial
Statements"), and the unaudited pro forma balance sheet of CSG and the Company
as of
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December 8, 1995 (the "Interim Balance Sheet"), copies of which Financial
Statements and Interim Balance Sheet, along with any officers reports, have
heretofore been delivered to Investors and are attached to the Disclosure
Letter, were prepared in accordance with GAAP throughout the periods involved,
and, to the extent consistent with GAAP, in accordance with the Past Practice,
subject to normal year-end adjustments with respect to the Interim Balance
Sheet, and fairly present the financial position and results of operations of
CSG, and on a pro forma basis, the Company for the periods covered.
Notwithstanding the foregoing, the Interim Balance Sheet was prepared in
accordance with Restricted GAAP and fairly presents, as of its date, the Working
Capital of CSG, the Company and the Business, including all liabilites of CSG,
the Company and the Business. The unaudited income statements and cash flow
statements have been presented on a pro forma basis to reflect recurring results
of the Business on a stand-alone basis. All pro forma adjustments to the
Financial Statements and Interim Balance Sheet are set forth in the Disclosure
Letter. The balance sheets within the Financial Statements and Interim Balance
Sheet reflect all of the assets and liabilities which are necessary to conduct,
operate and maintain the Business, and the related income statements originated
from the books, records and accounts of the Seller and the Company described in
Section 3.1(j).
i) INVENTORY. Except as would not have a material adverse effect
on the Business, the Assets, the Company or CSG, all inventory of the Seller and
the Company used in the conduct of the Business, including, without limitation,
raw materials, work-in-process and finished goods, reflected on the Interim
Balance Sheet or acquired since the date thereof was acquired and has been
maintained in the ordinary course of the Business consistent with Past Practice,
is of good and merchantable quality, consists substantially of a quality,
quantity and condition usable, leasable or saleable in the ordinary course of
the Business, is valued at reasonable amounts based on the ordinary course of
the Business during the past six months, and is not subject to any material
write-down or write-off in excess of the inventory reserves set forth on the
Interim Balance Sheet. Neither the Seller nor the Company is under any liability
or obligation with respect to the return of the inventory used in the conduct of
the Business in the possession of wholesalers, retailers or other customers.
(j) BOOKS OF ACCOUNT. The books, records and accounts of the
Seller and the Company maintained with respect to the Business accurately and
fairly reflect, in reasonable detail and in all material respects, the
transactions and the assets and liabilities of the Seller and the Company
related to the Business and being transferred to the Company in accordance with
Section 1.1 hereof.
(k) ACCOUNTS RECEIVABLE. The accounts receivable of the Seller and
the Company arising from the Business as set forth on the Interim Balance Sheet
or arising since the date thereof are valid and genuine, have arisen solely out
of bona fide sales and deliveries of goods, performance of services and other
business transactions in the ordinary course of business consistent with Past
Practice and, to the best knowledge of the Seller and the Company, are not
subject to valid defenses, set-offs or counterclaims. The allowance for doubtful
accounts has been determined in accordance with Restricted GAAP and, to the
extent consistent with Restricted GAAP, in accordance with the Past Practice.
The Disclosure Letter provides true and complete information with respect to the
accounts receivable of the Seller with respect to the Business as of December 8,
1995. All of the accounts receivable included in the Assets (i) have arisen in
the normal course of business, (ii) represent bona fide indebtedness incurred by
the applicable account debtors in the stated amounts reflected on the books of
Seller, subject to
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collection and (iii) will be subject on the date of the Closing, to the best
knowledge of the Seller and the Company, to no prior assignment, lien, set-off
or security interest. To the best of Seller's and the Company's knowledge, such
accounts are not, and as of the date of the Closing will not be, (i) owed by a
person or entity that has sought the protection of any bankruptcy or insolvency
laws, or (ii) the subject of any dispute as to payment.
(l) SEC DOCUMENTS; FINANCIAL STATEMENTS. The Seller has furnished
to the Investors a true and complete copy of each statement, report,
registration statement, definitive proxy statement and other filing filed with
the Securities and Exchange Commission ("SEC") pursuant to the Exchange Act by
Seller since September 30, 1992, and, prior to the Effective Time, the Seller
will have furnished the Investors with true and complete copies of any
additional documents filed with the SEC by the Seller prior to the Effective
Time (collectively, the "Seller SEC Documents"). In addition, the Seller has
made available to the Investors all exhibits to the Seller SEC Documents filed
prior to the date hereof, and will promptly make available to the Investors all
exhibits to any additional Seller SEC Documents filed or incorporated by
reference prior to the Effective Time, in each case limited to those exhibits
which relate to or otherwise affect the Assets and the Business. All documents
required to be filed as exhibits to the Seller SEC Documents and which relate to
or otherwise affect the Assets or the Business have been so filed. As of their
respective filing dates, the Seller SEC Documents complied in all material
respects as to form with the requirements of the Exchange Act and the Securities
Act, and as of their respective filing dates, none of the Seller SEC Documents
contain or contained any untrue statement of a material fact, or omit or omitted
to state a material fact required to be stated therein or necessary to make the
statements made therein relating to CSG, the Assets or the Business, in light of
the circumstances in which they were made, not misleading, except to the extent
corrected by a subsequently filed Seller SEC Document. The financial statements,
including the notes thereto, of Seller that relate in any way to CSG, the Assets
or the Business included in the Seller SEC Documents (the "Seller Financial
Statements") were and are complete and correct in all material respects as of
their respective dates, complied as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto as of their respective dates, and have been
prepared in accordance with GAAP applied on a basis consistent throughout the
periods indicated and consistent with each other (except as may be indicated in
the notes thereto or, in the case of unaudited statements included in Quarterly
Reports on Form 10-Qs, as permitted by Form 10-Q of the SEC). The Seller
Financial Statements fairly present the consolidated financial condition and
operating results of the Seller and its subsidiaries with respect to CSG and the
Business at the dates and during the periods indicated therein (subject, in the
case of unaudited statements, to normal, recurring year-end adjustments). There
has been no change in the Seller accounting policies with respect to CSG, the
Assets, or the Business except as described in the notes to the Seller Financial
Statements.
(m) ABSENCE OF CHANGES. Since December 8, 1995 there has not been
any event, occurrence, circumstance, state of facts or condition of any type,
whether or not in the ordinary course of business and whether or not covered by
insurance, that has materially and adversely affected, or might reasonably be
expected to materially and adversely effect, the Business, the Assets, or the
business, properties, Prospects, or financial condition of CSG or the Company,
taken as a whole, except for any change resulting from general economic
conditions.
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(n) GOOD AND MARKETABLE TITLE. Each of the Seller, in relation to
the Business, CSG and the Assets (as of the date hereof) has, and the Company
(as of the date of the Closing) will have, good and marketable title to, or a
valid leasehold interest in, the Assets, free and clear of all Liens and Claims
and have the right to use all the Assets in the operation of the Business, or
that CSG used in the operation of the Business immediately prior to the
transactions contemplated by Section 1.1 hereof. The Assets are in all material
respects in good condition and repair, ordinary wear and tear excepted, and are
in operating condition for the purpose for which they are currently being used.
The Seller has, and, as of the Closing, the Company will have, legal rights to
all of the intangible Assets, including the Contracts, free and clear of any
Lien.
(o) SUBSIDIARIES. The Company does not control, directly or
indirectly, any other corporation, association, partnership, limited liability
company or other business entity or own any shares of capital stock or other
securities of any other Person. The Company has no subsidiaries.
(p) TAXES AND TAX RETURNS.
(i) (A) the Seller and the Company have duly filed all Tax
Returns which are required by law to be filed by them; (B) the Company and the
Seller, in relation to CSG and the operation of the Business and the Assets,
have duly paid all Taxes due from them (whether or not shown on any Tax Return),
and there are no assessments or claims for payment of Taxes now pending or, to
the best knowledge of the Seller and the Company, threatened, nor is there any
audit of the records of the Company or the Seller, in relation to CSG and
operation of the Business and the Assets, being made or, to the best knowledge
of the Company and the Seller, threatened by any taxing authority; (C) to the
best knowledge of the Company, there are no facts or circumstances which could
reasonably be expected to constitute a valid basis for assessments or claims for
the payment of additional Taxes with respect to such Tax Returns; (D) each Tax
Return of the Company and the Seller, in relation to CSG and the operation of
the Business and the Assets, previously filed, or to be filed in the future
relating to any period up to the date of Closing, is or will be (as the case may
be) correct and complete in all material respects; and (E) the Company and the
Seller, in relation to CSG and the operation of the Business and the Assets, are
not currently the beneficiary of any extension of time within which to file any
Tax Return. The amounts set up as provisions for Taxes, if any, on the pro forma
September 30, 1995 and December 8, 1995 balance sheets of the Company included
in the Financial Statements and Interim Balance Sheet are sufficient for the
payment of all unpaid Taxes of the Company accrued for or applicable to the
periods ended on such date and all years and periods prior thereto and for which
the Company or the Seller in relation to CSG and operation of the Business and
the Assets, at those dates, may have been or is liable. The Company and the
Seller, in relation to CSG and the operation of the Business and the Assets,
have properly withheld and paid, or accrued for payment, when due, to
appropriate state and/or federal authorities, all sales and use taxes, if any,
and all amounts required to be withheld from payments made to its employees,
independent contractors, creditors, stockholders, shareholders or other third
parties and has also paid all employment taxes as required under applicable
laws.
(ii) The Company and the Seller, in relation to CSG, the
Business and the operation of the Assets, have not waived any statute of
limitation in respect of any Taxes or assessments
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by any federal, state, county, local, foreign or other taxing jurisdiction or
agreed to any extension of time with respect to an assessment or deficiency in
any Tax.
(iii) The Company has not made any payments, and is not
obligated to make any payments, nor is the Company a party to any agreement that
under any circumstances could obligate it to make any payments, that would not
be deductible under Section 280G of the Code. The Company has not been a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period specified in Section 897(c)(1)(a)(ii)
of the Code. The Company is not a party to any tax allocation or tax sharing
agreement.
(iv) The Company (A) is not and never has been required to
file a consolidated or combined state or federal income Tax Return with any
other person or entity and (B) is not liable for the Taxes of any person under
Treas. Reg. (S) 1. 1502-6 (or any similar provision of state, local, or foreign
law), as a transferee or successor, by contract or otherwise.
(v) There are no Tax Liens (other than any Lien for current
Taxes not yet due and payable) on any of the Assets. Neither the Company nor
Holdco has or will become liable for any Taxes of CSG, the Seller or any present
or former Affiliate of Seller as a result of the consummation of the
transactions contemplated by this Agreement.
(vi) Seller shall treat the transfer of the Assets described
in Section 1.1 hereof as a taxable transaction for federal and state income tax
purposes.
(q) INSURANCE. Included in the Disclosure Letter is a complete list
of all insurance policies currently maintained by the Company or by the Seller
on behalf of CSG or the Company and in effect, and, with respect to each of such
policies, a general description of the risks covered and claims insured; copies
of all of such policies have been furnished or made available to Investors.
(r) CERTAIN TRANSACTIONS. The Company is not indebted, either
directly or indirectly, to any of the officers, directors, or stockholders of
the Company, or, to their respective spouses or children, in any amount
whatsoever, other than for payment of salary for services rendered and
reasonable expenses, and none of said officers, directors, stockholders or any
members of their immediate families, are indebted to the Company. To the best
knowledge of the Seller and the Company, no officer, director or stockholder of
the Company has any direct or indirect ownership interest in (other than
ownership interests of one percent (1%) or less in companies whose securities
are publicly traded), or any contractual relationship with, any firm,
corporation or other Person with which the Company is Affiliated or with which
the Company has a business relationship, or any firm, corporation or other
Person which competes with the Company. To the best knowledge of the Seller and
the Company, no officer, director or stockholder or shareholder (with respect to
the Seller, only if such shareholder holds greater than 1% of the Seller's
voting securities) of the Seller or the Company, or any member of their
immediate families, are a party to or otherwise an interested party with respect
to any material contract with the Company.
(s) CONTRACTS AND COMMITMENTS.
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(i) Except as expressly contemplated by this Agreement,
neither the Seller, in relation to CSG, the Assets or the Business, nor the
Company is and will be, as of the Closing, a party to, or bound by, any
currently effective and executory written or oral:
(A) collective bargaining agreement with any labor
union;
(B) contract for the employment of any officer,
individual employee, or other person or entity on a full-time, part-time,
consulting or other basis which, in any way, restricts or limits its right to
terminate such contract at will (other than the existence of any law, public
policy, or any oral discussions, or oral statements of policy which might, under
current law, be interpreted as imposing upon the Company any covenant of good
faith and fair dealing, or otherwise generally restrict the Company's ability to
terminate its employees other than on an "at-will" basis or within sixty (60)
days following delivery of such notice);
(C) agreement or indenture relating to the borrowing
of money in excess of $50,000 (in aggregate) or to the mortgaging, pledging,
transfer of a security interest, or otherwise placing a Lien on any Asset or on
any material asset or material group of assets of the Company or the Seller, in
relation to CSG, the Assets or the Business;
(D) guarantee of any obligation in excess of $50,000
(in aggregate);
(E) lease or agreement under which it is the lessee of
or holds or operates any property, real or personal, owned by any other party
other than leases or agreements under which the aggregate annual rental payments
of the Company or the Seller, in relation to CSG, the Assets or the Business, do
not, in the aggregate, exceed $25,000;
(F) agreement or group of related agreements with the
same party or any group of parties who, to the best knowledge of the Seller and
the Company, are Affiliated, which requires an aggregate payment by or to the
Company or the Seller, in relation to CSG, the Assets or the Business, in an
amount in excess of (x) with respect to purchase or sales orders in the ordinary
course of business, $25,000, and (y) with respect to any other contracts,
$50,000;
(G) warranty agreement of the Company or the Seller,
in relation to CSG, the Assets or the Business, with respect to services
provided or products sold, licensed or leased by the Company or the Seller, in
relation to CSG, the Assets or the Business, as seller, licensor or lessor;
(H) contract or agreement prohibiting it from freely
engaging in any business or competing anywhere in the world;
(I) agreement which has not been fully performed and
involves consideration in excess of $25,000 which in the best judgment of the
Seller or the Company is material to the Business;
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(J) Contract; or
(K) instrument, document, or written agreement
relating to any of the Assumed Liabilities and to which the Seller or the
Company is a party.
(ii) The Seller, in relation to CSG, the Business and the
Assets, and the Company have performed in all material respects all obligations
required to be performed by them and are not in material default under, or in
material breach of, or after due inquiry by the officers of the Seller and the
Company, in receipt of any claim of default under or breach of, any material
agreement, all of which are described in the Disclosure Letter, to which any of
them are a party or to which the Assets are subject; the Seller and the Company
have no present expectation or intention of not fully performing all such
obligations; the Seller in relation to CSG, the Business and the Assets, and the
Company do not have any knowledge of any material breach or anticipatory breach
by the other parties to any material contract or commitment, all of which are
described in the Disclosure Letter, to which it is a party or to which any of
CSG or the Assets are subject; and neither the Seller, in relation to CSG, the
Business and the Assets, nor the Company is a party to any contract or contracts
which, either individually or in the aggregate, are reasonably likely to result
in a material loss to CSG, the Business or the Company. There are no warranty
claims or other uninsured claims under completed contracts with respect to the
Business which might involve a material monetary liability which is not reserved
against in the Financial Statements.
(iii) To the best knowledge of the Seller and the Company, no
officer of the Company is a party to any oral or written contract which
prohibits, or materially restricts or limits, or will prohibit or materially
restrict or limit his performance of his duties or the fulfillment of his
obligations as an employee and an officer of the Company.
(iv) a true and correct copy of each of the written contracts
and other documents and a description of the oral contracts which are referred
to in the Disclosure Letter, together with any amendments or written waivers
thereto, have been supplied to the Investors' counsel, Wilson Sonsini Goodrich &
Rosati, P.C.
(t) ERISA.
(i) The Company does not and has not at any time maintained
any employee benefit plan (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), bonus, stock option, stock
purchase, incentive, deferred compensation, supplemental retirement, severance
and other similar fringe or benefit plans, programs or arrangements
(collectively, the "Employee Plans"). Other than as shown in the Disclosure
Letter, neither Seller with respect to the Business nor any ERISA Affiliate of
Seller maintains or has at any time maintained any Employee Plan for the benefit
of any active, retired or former employee of the Business or their spouses or
dependents. For purposes of this Agreement, the term "ERISA Affiliate" shall
refer to all members of the group consisting of all corporations and all trades
or businesses (whether or not incorporated) under common control with the Seller
and/or the Company within the meaning of Section 414 of the Code.
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(ii) No Employee Plan maintained by the Seller or any ERISA
Affiliate of Seller is subject to either Title IV of ERISA or Section 412 of the
Code, and no such Employee Plan which is subject to such provisions has been
terminated within the last six years. No Employee Plan of Seller with respect to
the Business or any ERISA Affiliate of Seller has been administered in violation
of any of the health care continuation coverage requirements of the Consolidated
Omnibus Budget Reconciliation Act of 1985 ("COBRA"). Each Employee Plan of
Seller with respect to the Business or any ERISA Affiliate of Seller intended to
be qualified under Section 401(a) of the Code has either obtained a current
favorable determination letter as to its qualified status (including its
compliance with the Tax Reform Act of 1986) from the Internal Revenue Service or
still has a remaining period of time under applicable Treasury Regulations in
which to apply for such determination letter and make amendments necessary to
obtain a favorable determination. To the best knowledge of the Seller, there are
no pending or anticipated claims (other than claims for benefits incurred in the
ordinary course of plan adminstration) or suits brought by or on behalf of any
of the employees of the Business against or otherwise involving Seller's
Employee Plans, and no event has occurred that would likely lead to any such
claims or suits. All contributions, premiums or other payments due from the
Company to (or under) any such Employee Plan have been fully paid or adequately
provided for on the Company's most recent financial statements.
(u) INTELLECTUAL PROPERTY.
(i) The Disclosure Letter contains a list and description
(showing in each case any product, device, process, service, business or
publication covered thereby, the registered or other owner, expiration date and
number, if any) of all Copyrights, Patent Rights and Trademarks (including all
assumed or fictitious names under which the Seller or the Company is conducting
the Business) owned by, licensed to or used by the Seller or the Company that
are material to the conduct of the Business.
(ii) The Disclosure Letter contains a list and description
(showing in each case any owner, licensor or licensee) of all Software owned by,
licensed to or used by the Seller or the Company that is material to the conduct
of the Business other than "off the shelf" Software obtained for less than
$5,000 individually which are subject to shrink wrap licenses.
(iii) The Disclosure Letter contains a list and description
(showing in each case the parties thereto) of all agreements, contracts,
licenses, sublicenses and assignments which relate to (A) any Copyrights, Patent
Rights or Trademarks listed in the Disclosure Letter, (B) any Trade Secrets
owned by, licensed to or used by the Seller or the Company that are material to
the conduct of the Business or (C) any Software listed in the Disclosure Letter.
(iv) Except for existing licenses or as disclosed in the
Disclosure Letter, the Seller, as of the date hereof, and the Company, as of the
closing date either: (A) owns or will own the entire right, title and interest
(subject to such exceptions as do not materially adversely affect CSG, the
Assets, the Business, or the Company) in and to the Intellectual Property and
Software listed in the Disclosure Letter free and clear of any Lien, except as
would not have a material adverse effect on the Business, the Assets, CSG or the
Company, or (B) has or will have the necessary right and
-16-
license to use the same, and which (together with the services to be provided by
the Seller to the Company pursuant to the License Agreement described in Section
4.4) will enable the Company to conduct the Business as it has been conducted in
the past and as currently conducted, without restrictions that materially
adversely affect the Business as it has been conducted and without additional
material cost. The Seller's Software which is used in the conduct of the
Business, as of the date hereof, and the Company's Software, as of the date of
the Closing, includes those flow charts, diagrams, coding sheets, source code
listings and annotations, programmers' notes, information and work papers that
the Seller or the Company is using to maintain, modify, develop and enhance such
Software.
(v) (A) All registrations for Copyrights, Patent Rights and
Trademarks identified in the Disclosure Letter are valid and in force, and all
applications to register any unregistered copyrights, Patent Rights and
Trademarks so identified are pending and in good standing, and, to the best
knowledge of the Seller and the Company, are all without challenge of any kind;
(B) the Intellectual Property owned by the Seller, in respect of the Assets, the
Business and CSG, and by the Company is valid and enforceable; and (C) the
Seller has, as of the date hereof, and the Company will have, as of the Closing
Date, the sole and exclusive right to bring actions for infringement or
unauthorized use of the Intellectual Property and Software owned by the Seller
or the Company and used in the Business, and, to the best knowledge of the
Seller and the Company, there is no valid basis for any such action, subject, in
the case of each of clause (A), (B) and (C), to such exceptions as do not
materially adversely affect the Business, CSG, the Assets or the Company.
Correct and complete copies of registrations for all registered Copyrights,
Patent Rights and Trademarks identified in the Disclosure Letter (together with
any subsequent correspondence with the U.S. Copyright Office or the U.S. Patent
and Trademark Office, as applicable, or filings relating to the foregoing) have
already been delivered or made available by the Seller to the Investors.
(vi) (A) No infringement by the Seller with respect to the
conduct of the Business or the Company of any Intellectual Property of any other
Person has occurred within the past five years or results in any way from the
operations of the Business and (B) neither the Seller nor the Company has had
notice of, nor, to the best knowledge of the Seller and the Company, is there a
valid basis for, a claim against it that the operations, activities, products,
Software, equipment, machinery or processes of the Business infringe any
Intellectual Property of any other Person, other than, in each case, any
infringement which does not have a material adverse effect on the Business, CSG,
the Assets or the Company.
(vii) (A) No proceedings are pending or, to the best knowledge
of the Seller and the Company, threatened against the Seller or the Company that
challenge the validity or ownership of any Copyright, Patent Right or Trademark
described in the Disclosure Letter; and (B) to the knowledge of the Seller and
the Company, there is no infringing use of any of the same by any other Person.
-17-
(v) ENVIRONMENTAL MATTERS.
(i) Other than Hazardous Materials reasonably necessary for
the conduct of the Business which are properly stored in material compliance
with applicable Environmental Laws, no Hazardous Material is present on any
Company Facility now owned or leased by the Company or the Seller during the
time such property was owned or leased by the Company or the Seller and which is
or was used for the conduct of the Business.
(ii) The Hazardous Material Activities of the Company, and
the Seller, with respect to the operations of CSG, the Business and the Assets,
have been conducted in material compliance with applicable Environmental Laws.
(iii) The Disclosure Letter accurately describes all of the
material Environmental Permits currently held by the Company, and by the Seller,
with respect to the operations of CSG, the Business and the Assets, and, to the
best knowledge of the Seller and the Company, such Environmental Permits are all
of the Environmental Permits necessary for the continued conduct of any
Hazardous Material Activities associated with CSG, the Business and the Assets
as such activities are currently being conducted. All such Environmental
Permits are valid, in full force and effect, and will survive the Closing.
Except as would not have a material adverse effect on the Business, the Assets,
the Company or CSG, to the best knowledge of the Seller and the Company, no
circumstances exist which could cause any Environmental Permit to be revoked,
modified, or rendered non-renewable upon payment of the permit fee or which
could impose upon the Company the obligation to obtain any additional
Environmental Permit. Except as would not have a material adverse effect on the
Business, the Assets, the Company or CSG, all Environmental Permits and all
other consents and clearances required by any Environmental Law or any agreement
to which the Company is bound as a condition to the performance and enforcement
of this Agreement or which are required by any Governmental Authority in
connection with the transactions contemplated by this Agreement have been
obtained or will be obtained prior to the Closing at no cost to the Investors or
Holdco.
(iv) The Company and the Seller, with respect to the
operations of CSG, the Business and the Assets, have transferred or released
Hazardous Materials only to those Disposal Sites described in the Disclosure
Letter. To the best knowledge of the Seller and the Company, no action,
proceeding, liability or claim by a private party or any Governmental Authority,
exists or is threatened, against any Disposal Site or against the Seller or the
Company with respect to any transfer or release of Hazardous Materials to a
Disposal Site in connection with the operations of CSG, the Business and the
Assets and there is no valid basis for such claim except for those actions,
proceedings, liabilities or claims which, if adversely determined would not have
a material adverse effect on the Business, the Assets, the Company or CSG.
(w) COMPLIANCE WITH LAWS. The Company, and the Seller, with respect
to the operation of CSG, the Business and the Assets, have complied in all
respects with all Laws promulgated by any Governmental Authority, except for
such noncompliance as would not have a material adverse effect on the Business,
the Assets, the Company or CSG.
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(x) DISCLOSURE. No representation, warranty or statement by the
Seller or the Company in this Agreement (including the Exhibits hereto), in the
Disclosure Letter, in that certain Business Plan Summary of CSG dated September
18, 1995 (the "Business Plan," which is in the form previously furnished to the
Investors and is included in the Disclosure Letter), in the Seller SEC Dcouments
(taken as a whole), in the Seller Financial Statements (taken as a whole) or in
any written certificate required by this Agreement to be furnished to the
Investors or their counsel pursuant to this Agreement contains or will contain
any untrue statement of material fact or, omits or will omit to state a material
fact necessary to make the statements made herein or therein, in light of the
circumstances under which they were made, not misleading, it being understood
that Investors have not received or been provided with a "prospectus" (as
defined in the Securities Act) with respect the Company, the Seller, CSG or the
Business. To the extent that the foregoing representation and warranty is
interpreted as relating to any projections which may have been delivered by the
Seller or the Company to Investors, the Seller and the Company represent only
that any such projections were prepared in good faith, that the Seller and the
Company believe that there was at the time of the preparation of such
projections a reasonable basis for such projections, and that the Seller and the
Company are not aware of any change in their circumstances or other fact that
has occurred that causes them to believe that CSG and the Company will be unable
to meet the sales and income forecasts set forth in such projections. Seller has
not failed to disclose to the Investors or the Company any fact or circumstance
known to Seller that could reasonably be expected to have a material adverse
effect on CSG, the Business, the Company or the Assets.
(y) NO THIRD PARTY OPTIONS. Other than this Agreement, there are no
existing agreements, options, commitments or rights with, of or to any person to
acquire all or any portion of the Business or any of the Assets or any interest
therein, except for those contracts entered into in the normal course of
business consistent with Past Practice for the sale of inventory of Seller with
respect to CSG.
(z) NECESSARY ASSETS. The Assets are sufficient (and on the date of
the Closing will be sufficient) to permit the Company to conduct, operate and
maintain the Business in all material respects consistent with Past Practice and
as contemplated by the Business Plan.
(aa) CONDITIONS AFFECTING SELLER. To the best knowledge of Seller
and the Company, there is no fact or development with respect to the products,
services, customers, facilities, computer software, data bases, suppliers,
operations or assets of CSG, the Business or the Assets which could materially
adversely affect the Business. Seller has used all commercially reasonable
efforts to keep available for the Company the services of the employees,
customers and suppliers of Seller active in the conduct of the Business and the
maintenance and operation of the Assets whose activities are material to the
Business. To the best of Seller's and the Company's knowledge, the consummation
of the transactions contemplated hereby will not result in any materially
adverse loss of any customer or supplier of the Business.
(bb) PERMITS, LICENSES. (i) There are no governmental permits
necessary for or used by Seller to carry on the Business as now being conducted
or to use and occupy the premises leased or owned by the Seller and used by CSG
or for the Business as now being used, which
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governmental permits are required by currently effective laws, rules and
regulations which have not yet been obtained, or if not obtained, would not have
a material adverse effect on the Business, the Assets, the Company or CSG; (ii)
all such governmental permits are in full force and effect and no proceeding is
pending or, to the best knowledge of Seller and the Company, threatened, to
revoke or limit any such governmental permit except for such revocations or
limitations which would not have a material adverse effect on the Business, the
Assets, the Company or CSG and (iii) Seller is in compliance in all respects
with the terms and conditions of all such governmental permits except for such
non-compliance as could not reasonably be expected to have a material adverse
effect on the Business. No action by Seller, the Investors or the Company is
required in order that all such governmental permits will remain in full force
and effect following the consummation of the transactions provided for herein.
(cc) SELLER INTENT. The Seller has no present intent to transfer the
Holdco Common Stock that it shall hold after the Closing.
(dd) RETENTION OF CSG EARNINGS. As of the date of the Closing and
the Effective Time, the Seller and the Company have complied in all respects
with all terms of Section 7.6 hereof.
ARTICLE IV
CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF THE INVESTORS, HOLDCO AND HOLDCO SUB
The obligations of the Investors, Holdco and Holdco Sub to effect the
Merger at the Closing shall be subject to the fulfillment, or the waiver by the
Investors and Holdco, at or prior to the Closing, of each of the following
conditions (provided that any such waiver, to be effective, must be in writing
and signed by Holdco and each of the Investors):
4.1 REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of the Seller and the Company set forth in Article III hereof shall
be true in all respects on the date of the Closing. The Disclosure Letter
delivered to the Investors by the Seller prior to the date hereof shall not have
been altered or withdrawn.
4.2 ABSENCE OF LITIGATION. There shall be no litigation, whether brought
against the Seller, the Company, Holdco, Holdco Sub, or any of the Investors,
seeking to prevent the consummation of the transactions contemplated by this
Agreement, and, to the best knowledge of the Seller and the Company, no such
litigation shall have been threatened. There shall not be in effect any order
restraining or prohibiting the consummation of the transactions contemplated by
this Agreement and there shall be no proceedings pending with respect thereto.
Other than the EFI Litigation, there shall be no pending or, to the best
knowledge of the Seller, the Company, Holdco, Holdco Sub and the Investors,
threatened litigation, or asserted or unasserted claims, assessments, or other
loss contingencies, materially affecting CSG, the Company, the Business, their
Prospects, or
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the Assets other than as disclosed in the Exhibits delivered pursuant hereto as
of the date of this Agreement.
4.3 PERFORMANCE OF OBLIGATIONS. The Company and the Seller shall have
performed and complied, in all material respects, with all covenants, conditions
and obligations required by this Agreement to have been performed by the Company
and the Seller at or prior to the Closing.
4.4 DOCUMENTATION AT CLOSING. The Investors shall have received prior to
or at the Closing all of the following, each in form and substance satisfactory
to the Investors and their counsel, and all of the following events shall have
occurred prior to or simultaneous with the Closing hereunder:
(a) A copy of all charter documents of the Seller and the Company
certified by the Secretary of State of their respective states of incorporation,
a certified copy of the resolutions of the board of directors and, if required,
the shareholders of the Seller and stockholders of the Company, evidencing
approval of this Agreement and all other matters contemplated hereby, a
certified copy of the bylaws of the Seller and the Company, and certified copies
of all documents evidencing other necessary corporate or other action and
governmental approvals, if any, with respect to this Agreement and the Merger.
(b) An opinion of Fenwick & West, counsel for the Seller, as to
such matters as counsel to the Investors may reasonably request.
(c) A certificate of the Secretary or an Assistant Secretary of the
Seller stating the names of the officers of the Seller authorized to sign this
Agreement and the other documents or certificates to be delivered pursuant to
this Agreement by the Seller or any of its officers, together with the true
signatures of such officers. A certificate of the Secretary or an Assistant
Secretary of the Company stating the names of the officers of the Company
authorized to sign this Agreement and the other documents or certificates to be
delivered pursuant to this Agreement by the Company or any of its officers,
together with the true signatures of such officers. The Investors, Holdco and
Holdco Sub may conclusively rely on such certificates until they shall receive a
further certificate of the Secretary or Assistant Secretary of the Seller or the
Company, as the case may be, canceling or amending a prior certificate and
submitting the signatures of the officers named in such further certificate.
(d) A certificate from the Chief Executive Officer of the Seller
stating that the representations and warranties of the Seller and the Company
contained in Article III hereof and otherwise made by the Seller or the Company
in writing in connection with the transactions contemplated hereby are true and
correct as of the date hereof and as of the date of Closing, as if such
representations and warranties were made on the date of Closing, and that all
conditions required to be performed by the Seller or the Company prior to or at
the Closing have been performed, and, to the best of such Person's knowledge,
that no condition or event has occurred or is continuing or will result from the
execution and delivery of this Agreement, which is a breach by the Seller or the
Company of a material term hereof or would constitute a breach by the Seller or
the
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Company of a material term hereof but for the requirement that notice be given
or time elapse or both. A certificate from the President of the Company stating
that the representations and warranties of the Company contained in Article III
hereof and otherwise made by the Company in writing in connection with the
transactions contemplated hereby are true and correct as of the date hereof and
as of the date of Closing, as if such representations and warranties were made
on the date of Closing, and that all conditions required to be performed by the
Company prior to or at the Closing have been performed, and, to the best of such
Person's knowledge, that no condition or event has occurred or is continuing or
will result from the execution and delivery of this Agreement, which is a breach
by the Company of a material term hereof or would constitute a breach by the
Company of a material term hereof but for the requirement that notice be given
or time elapse or both.
(e) An Invention Assignment and Non-Disclosure Agreement between
each Key Employee of the Company and the Company in the form set forth in
Exhibit 4.4A hereto shall have been executed and delivered by such Key Employee
and the Company and shall be in full force and effect and binding upon the
parties thereto.
(f) A Registration Rights Agreement in the form set forth in
Exhibit 4.4B hereto shall have been executed and delivered by the Seller and the
management of the Company and shall be in full force and effect and binding upon
the parties thereto, assuming execution and delivery thereof by the Investors
and Holdco.
(g) A Stockholders Agreement in the form set forth in Exhibit 4.4C
hereto shall have been executed and delivered by the Seller and the management
of the Company and shall be in full and effect and binding upon the parties
thereto, assuming execution and delivery thereof by the Investors and Holdco.
(h) An Escrow Agreement, mutually acceptable in form and substance
to the Seller and the Investors and providing for an escrow of $4,700,000 for
satisfaction of any claim for indemnification by the Investors, the Company and
Holdco against the Seller pursuant to Article X hereof, shall have been executed
and delivered by the Seller. Subject to any indemnification paid to Holdco, the
Company or the Investors pursuant to Article X hereof, such Escrow Agreement
shall specify that the escrow funds be released to the Seller, and not any other
Person, as follows: (i) 50% of the amount initially placed in escrow shall be
released after both (A) the Year-End Balance Sheet becomes final and binding in
accordance with Section 1.5(b) and (B) the payment of any amount due to the
Investors in accordance with Section 1.5(c) and (ii) the remainder of the amount
initially placed in escrow (the "Escrow Remainder") shall be released to the
Seller, and not any other Person, on the later of (C) the date six months after
the date of the Closing and (D) the date of a final, non-appealable order
dismissing with prejudice the EFI Litigation. Notwithstanding the foregoing, the
Escrow Remainder shall be released to the Seller, and not to any other Person,
if, at any time after the first anniversary of the date of the Closing, each of
the three following conditions are true: (X) the consolidated net worth of the
Seller, as determined in accordance with GAAP, is greater than $5,000,000, (Y)
the Seller has reported positive net income in each of its two most recently
regularly prepared quarterly financial statements, and (Z) to the best knowledge
of the Seller, there are no facts or circumstances that have occurred or that
are reasonably likely to occur, that, taken in aggregate,
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that could reasonably be expected to reduce the consolidated net worth of the
Seller, as determined in accordance with GAAP, to an amount less than $5,000,000
within the next twelve months. In addition, if the Investors reasonably and in
good faith determine that the maximum potential Investor Damages (as defined in
Section 10.1 hereof) that could result from the EFI Litigation is less than
$2,000,000, then the amount of the Escrow Remainder exceeding such maximum
potential Investor Damages shall be released to the Seller, and not to any other
Person. The terms of such Escrow Agreement shall provide that the escrow amount
be kept under the possession and control of an independent financial institution
in a separate account of such institution, and that Holdco have a perfected
security interest in the escrow account and the status of a first-priority
secured creditor with respect to the escrow account. Such Escrow Agreement shall
be in full force and effect and binding on the parties thereto, assuming
execution and delivery by the Investors and Holdco.
(i) A Restricted Stock Purchase Agreement, providing for the
purchase of 152,500 shares of Holdco Common Stock by the management of the
Company at a purchase price of $0.04 per share prior to the Effective Time,
subject to vesting and otherwise mutually agreeable in form and substance to the
Seller and the Investors, shall have been executed and delivered by the
management of the Company. Such Stock Purchase Agreement shall specify vesting
of 50% of the shares purchased by each member of management on the first
anniversary of purchase, and straight-line monthly vesting for the remainder of
shares over the following two years. Such agreement shall be in full force and
effect and binding upon the parties thereto, assuming execution and delivery
thereof by Holdco.
(j) An opinion of patent counsel, addressed to Holdco, the Company
and the Seller, of non-infringement by the Seller and the Company of U.S. Patent
No. 4,941,038, in form and substance acceptable to the Investors and their legal
counsel, which acceptance shall not be unreasonably withheld.
(k) Such UCC financing statements shall have been filed with
respect to the escrow account established pursuant to the Escrow Agreement
referenced in clause (h) above, as may be necessary to ensure that Holdco has
obtained the status of a secured creditor with respect thereto.
(l) To the extent considered reasonably necessary by the Investors,
consents of the creditors of the Seller and any other consents to the
transactions contemplated hereby shall have been obtained.
4.5 MATERIAL ADVERSE CHANGE. There shall not have been, subsequent to
December 8, 1995, any material adverse change in the financial condition of the
Business, CSG's or the Company's assets, liabilities, business, results of
operations, Prospects or customer, supplier or employee relations, or the
Assets.
4.6 CONDUCT OF BUSINESS; REVENUES. The Business shall have been
conducted up until the date of the Closing as usual and consistent with the
practices of the Company prior to December 8, 1995. All practices of CSG, the
Company and the Business, including procurement of inventory and raw materials,
payment of accounts payable, and fulfillment of customer orders shall
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have been conducted to the date of Closing in the ordinary course of business.
Up to and including the date of the Closing, the revenues of CSG and the Company
for the calendar quarter ending on December 31, 1995 shall have been at least
$7,000,000.
4.7 CONSENTS, WAIVERS, ETC. Prior to the Closing, the Seller, the
Investors, Holdco, Holdco Sub and the Company shall have obtained all consents
or waivers, if any, necessary to transfer assets to the Company in accordance
with Section 1.1 hereof (including, but not limited to, those consents or
waivers listed on Exhibit 4.7 hereto), to issue the Securities, to effect the
Merger, and to carry out the transactions contemplated hereby, and all such
consents and waivers shall be in full force and effect. All corporate and other
action and governmental filings necessary to effectuate the terms of this
Agreement, all transactions contemplated by this Agreement (including the
transactions described in Section 1.1) and other agreements and instruments
executed and delivered by the Seller, the Investors, Holdco, Holdco Sub and the
Company in connection herewith shall have been made or taken, except for any
post-sale filing that may be required under federal and state securities laws.
In addition to the documents set forth above, the Seller and the Company shall
have provided or made available to the Investors any other information or copies
of documents that they may reasonably request.
4.8 ACCOUNTING REVIEW. The Investors shall have received, at Holdco's
expense, an accounting review by the Investors' Accountants of all financial
statements relating to CSG, the Business and the Company provided to the
Investors by the Seller or its representatives. Investors' Accountants, at
Holdco's expense, shall have determined that audited financial statements of the
Company, prepared in accordance with GAAP and Regulation S-X promulgated under
the Securities Act throughout the periods involved and fairly presenting the
financial position and result of operations of CSG, and, on a pro forma basis,
the Company for the periods covered, for the years ended September 30, 1993,
1994 and 1995 (the "Audited Financial Statements"), could be readily produced by
the Company from its records within 60 days after the Closing.
4.9 PERFORMANCE UNDER RESTRICTED STOCK PURCHASE AGREEMENT. Prior to the
Effective Time, the management of the Company shall have purchased from Holdco,
in accordance with the terms of a Restricted Stock Purchase Agreement entered
into in accordance with Section 4.4(i), 152,500 shares of Holdco Common Stock at
$0.04 per share, assuming performance by Holdco of its obligations under such
Restricted Stock Purchase Agreement.
4.10 HART-SCOTT-RODINO WAITING PERIOD. Any applicable waiting period
with respect to the Merger under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, shall have expired.
4.11 ASSETS TRANSFER. All documentation pursuant to which the
transactions described in Section 1.1 shall have been presented to the Investors
and Investors' counsel for review and shall have been consistent with this
Agreement and satisfactory in form and substance to the Investors and their
counsel prior to the consummation of such transactions. The consummation of the
transaction pursuant to such documentation shall have been satisfactory in form
and substance to the Investors and their legal counsel. All of the Assets,
including the Contracts, shall have been transferred or
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assigned to the Company free and clear of all Liens, other than the Assumed
Liabilities, and the Investors and their counsel shall have received evidence of
such transfers reasonably satisfactory to them.
4.12 ELECTION UNDER SECTION 338(H)(10). The Seller shall have executed
the Form 8023A prepared in accordance with Section 6.5(d) hereof.
4.13 NUBUS EQUIPPED COMPUTERS. The Investors shall have received
assurances reasonably satisfactory to them that the Company has been allocated
by Apple Computer, Inc., for sale to the Company, 400 Nubus Apple computers
consistent with the needs of the Company.
ARTICLE V
CONDITIONS PRECEDENT TO SELLER'S AND COMPANY'S OBLIGATIONS
The obligations of the Seller and the Company to cause the consummation by
the Company of the Merger at the Closing, of the Seller to contribute the Assets
to the Company prior thereto, and of the Seller and the Company to perform their
other obligations under this Agreement shall be subject to the fulfillment, or
the waiver by the Seller and the Company, at or prior to the Closing, of each of
the following conditions (provided that any such waiver, to be effective, must
be in writing and signed by the Seller and the Company):
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by the Investors, Holdco and Holdco Sub in this Agreement shall have been
true and correct at and as of the date hereof, and they shall be true and
correct at and as of the Closing with the same force and effect as though made
at and as of that time.
5.2 ABSENCE OF LITIGATION. There shall be no litigation, whether
brought against the Seller, the Company, Holdco, Holdco Sub or any of the
Investors, seeking to prevent the consummation of the transactions contemplated
by this Agreement, and, to the best knowledge of Holdco, Holdco Sub, the
Investors, the Seller and the Company, no such litigation shall have been
threatened. There shall not be in effect any order restraining or prohibiting
the consummation of the transactions contemplated by this Agreement and there
shall not be any proceedings pending with respect thereto. There shall be no
pending or, to the best knowledge of the Investors, Holdco and Holdco Sub,
threatened litigation, asserted claims, assessments or other loss contingencies,
materially affecting Holdco other than as set forth in this Agreement.
5.3 PERFORMANCE OF OBLIGATIONS. Investors, Holdco and Holdco Sub shall
have performed and complied, in all material respects, with all of their
covenants, conditions and obligations required by this Agreement to be performed
or complied with by them at or prior to the Closing.
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5.4 FAIRNESS OPINION. Prior to the Closing, the Seller shall have
obtained an opinion by Broadview Associates, L.P. stating that the transactions
contemplated hereby shall be fair to the shareholders of the Seller from a
financial point of view.
5.5 CONSENTS, WAIVERS, ETC. Prior to the Closing, the Seller, the
Investors, Holdco, Holdco Sub, and the Company shall have obtained all consents
or waivers, if any, necessary for the Seller to contribute the Assets to the
Company, for the Company to accept and receive the Assets and assume the
Contracts from the Seller, for the Company to consummate the Merger, for Holdco
to issue the Securities and to carry out the transactions contemplated hereby,
and all such consents and waivers shall be in full force and effect. All
corporate and other action and governmental filings necessary to effectuate the
terms of this Agreement, and other agreements and instruments executed and
delivered by the Seller, the Investors, Holdco, Holdco Sub, and the Company in
connection herewith shall have been made or taken, except for any post-sale
filing that may be required under federal and state securities laws.
5.6 BOARD OF DIRECTORS. The number of members of the board of directors
of Holdco Sub shall have been fixed at five initially consisting of (i) Mr.
Charles Berger (as the initial designee of the Seller); (ii) two designees of
the Investors (one such designee as a Series A Director, as defined in the
Certificate of Incorporation of Holdco); (iii) one additional designee of the
Investors, which designee shall not be Affiliated with any of the parties hereto
and shall have been approved by the Seller and the management of the Company,
whose approval shall not have been unreasonably withheld; and (iv) Kevin
Macgillivray (as the initial designee of the management of the Company).
5.7 HOLDCO CASH. Holdco's accounts shall contain approximately
$23,500,000 in cash and Holdco shall have no Liabilities other than as set forth
in or contemplated by this Agreement and Holdco's authorized officers shall have
executed a certificate to that effect.
5.8 HART-SCOTT RODINO WAITING PERIOD. Any applicable waiting period
with respect to the Merger under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, shall have expired.
5.9 DOCUMENTATION AT CLOSING. The Seller and the Company shall have
received prior to or at the Closing all of the following, each in form and
substance satisfactory to the Seller and the Company and their counsel, and all
of the following events shall have occurred prior to or simultaneous with the
Closing hereunder:
(a) A copy of all charter documents of Holdco and Holdco Sub
certified by the Secretary of their respective states of incorporation, a
certified copy of the resolutions of the board of directors and, if required,
the stockholders of Holdco and Holdco Sub, evidencing approval of this
Agreement, and other matters contemplated hereby, a certified copy of the bylaws
of Holdco and Holdco Sub, and certified copies of all documents evidencing other
necessary corporate or other action and governmental approvals, if any, with
respect to this Agreement, the Merger and the transactions contemplated by this
Agreement.
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(b) An opinion of Wilson Sonsini Goodrich & Rosati, P.C., counsel
for Investors, as to such matters as counsel to the Seller may reasonably
request.
(c) A certificate of the Secretary or an Assistant Secretary of
Holdco stating the names of the officers of Holdco authorized to sign this
Agreement and the other documents or certificates to be delivered pursuant to
this Agreement by Holdco or any of its officers, together with the true
signatures of such officers. A certificate of the Secretary or an Assistant
Secretary of Holdco Sub stating the names of the officers of Holdco Sub
authorized to sign this Agreement and the other documents or certificates to be
delivered pursuant to this Agreement by Holdco Sub or any of its officers,
together with the true signatures of such officers. The Seller and the Company
may conclusively rely on such certificates until they shall receive a further
certificate of the Secretary or Assistant Secretary of Holdco or Holdco Sub, as
the case may be, canceling or amending a prior certificate and submitting the
signatures of the officers named in such further certificate.
(d) A certificate from the Chief Executive Officer of Holdco
stating that the representations and warranties of Holdco and Holdco Sub
contained in Article II hereof and otherwise made by Holdco or Holdco Sub in
writing in connection with the transactions contemplated hereby are true and
correct as of the date hereof and as of the date of Closing, as if such
representations and warranties were made on the date of Closing and that all
conditions required to be performed by Holdco or Holdco Sub prior to or at the
Closing have been performed, and that, to the best of such Person's knowledge,
no condition or event has occurred or is continuing or will result from the
execution and delivery of this Agreement, which is a breach by Holdco or Holdco
Sub of a material term hereof or would constitute a breach by Holdco or Holdco
Sub of a material term hereof but for the requirement that notice be given or
time elapse or both. A certificate from the Chief Executive Officer of Holdco
Sub stating that the representations and warranties of Holdco Sub contained in
Article II hereof and otherwise made by Holdco Sub in writing in connection with
the transactions contemplated hereby are true and correct as of the date hereof
and as of the date of Closing, as if such representations and warranties were
made on the date of Closing and that all conditions required to be performed by
Holdco Sub prior to or at the Closing have been performed, and that, to the best
of such Person's knowledge, no condition or event has occurred or is continuing
or will result from the execution and delivery of this Agreement, which is a
breach by the Company of a material term hereof or would constitute a breach by
the Company of a material term hereof but for the requirement that notice be
given or time elapse or both.
(e) A Registration Rights Agreement in the form set forth in
Exhibit 4.4B hereto shall have been executed and delivered by the Investors and
Holdco and shall be in full force and effect and binding upon the parties
thereto, assuming execution and delivery thereof by Seller and the management of
the Company.
(f) A Stockholders Agreement in the form set forth in Exhibit 4.4C
hereto shall have been executed and delivered by the Investors and Holdco and
shall be in full and effect and binding upon the parties thereto, assuming
execution and delivery thereof by the Seller and the management of the Company.
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(g) Holdco shall have adopted a Management Stock Option Plan
mutually agreeable in form and substance to the Seller and the Investors, which
plan shall reserve for issuance options for 261,758 shares of Holdco Common
Stock. Such plan either shall specify that the board of directors of Holdco
shall specify appropriate vesting for each option granted under the plan, or
shall specify specific vesting provisions for each option issued thereunder that
are mutually agreeable to the Seller and the Investors.
(h) A Restricted Stock Purchase Agreement, providing for the
purchase of 152,500 shares of Holdco Common Stock by the management of the
Company at a purchase price of $0.04 per share, subject to vesting and otherwise
mutually agreeable in form and substance to the Seller and the Investors, shall
have been executed and delivered by Holdco. Such Stock Purchase Agreement shall
specify vesting of 50% of the shares purchased by each member of management on
the first anniversary of purchase, and straight-line monthly vesting for the
remainder of shares over the following two years. Such agreement shall be in
full force and effect and binding upon the parties thereto, assuming execution
and delivery thereof by the management of the Company.
5.10 PERFORMANCE UNDER RESTRICTED STOCK PURCHASE AGREEMENT. Holdco shall
have performed all of its obligations under a Restricted Stock Purchase
Agreement entered into in accordance with Section 5.9(h), unless the management
of the Company has not performed all of their obligations thereunder.
ARTICLE VI
POST-CLOSING COVENANTS
6.1 AFFIRMATIVE COVENANTS OF HOLDCO OTHER THAN REPORTING REQUIREMENTS.
Without limiting any other covenants and provisions hereof, Holdco covenants and
agrees that, after the Closing and for so long as (i) shares of either series of
Preferred Stock or (ii) the Subordinated Notes remain outstanding, Holdco will
perform and observe the following covenants and provisions and will cause each
of its subsidiaries to perform and observe such of the following covenants and
provisions as are applicable to such subsidiaries, and will not, without
approval of the holders of a majority of the shares of Preferred Stock and of a
majority in interest in principal amount of the holders of the Subordinated
Notes, amend or revise any terms of this Section:
(a) PAYMENT OF TAXES AND TRADE DEBT. Pay and discharge, and cause
each of its subsidiaries to pay and discharge, all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits or
business, or upon any properties belonging to it, prior to the date on which
penalties attach thereto, and all lawful claims, which, if unpaid, might become
a lien or charge upon any properties of Holdco or any of its subsidiaries,
provided that neither Holdco nor any subsidiaries shall be required to pay any
such tax, assessment, charge, levy or claim that is being contested in good
faith and by appropriate proceedings if Holdco or its subsidiary concerned shall
have set aside on its books adequate reserves with respect thereto as shall be
determined by its board of directors. Pay on a timely basis the Subordinated
Notes as and when due. Pay and cause each of
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its subsidiaries to pay, when due, or in conformity with customary trade terms,
all lease obligations, all trade debt, and all other Indebtedness incident to
the operations of Holdco or its subsidiaries, except such as are being contested
in good faith and by appropriate proceedings so long as the Company or the
subsidiary concerned shall have set aside on its books adequate reserves with
respect thereto as shall be determined by its board of directors.
(b) MAINTENANCE OF INSURANCE. Maintain, and cause each of its
subsidiaries to maintain, with responsible and reputable insurance companies or
associations, insurance in such amounts and covering such risks as is usually
carried by companies of similar size engaged in similar businesses and owning
similar properties in the same general areas in which Holdco or such subsidiary
operates, but in any event in amounts sufficient to allow Holdco or subsidiaries
to replace any of their properties that might be damaged or destroyed without
additional expenditures by Holdco and its subsidiaries except for reasonable
deductibles. Within sixty (60) days of the date of this Agreement, Holdco shall
use all commercially reasonable efforts to obtain and thereafter maintain term
life insurance payable to Holdco in the amount of $1,000,000 on the life of
Kevin Macgillivray.
(c) PRESERVATION OF CORPORATE EXISTENCE. Except as permitted by
Section 6.2(a), Preserve and maintain, and cause each of its subsidiaries to
preserve and maintain, its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and qualify and remain
qualified, and cause each of its subsidiaries to qualify and remain qualified,
as a foreign corporation in each jurisdiction in which such qualification is
necessary or desirable in view of its business and operations or the ownership
of its properties. Preserve and maintain, and cause each of its subsidiaries to
preserve and maintain, all material licenses and other rights to use patents,
processes, licenses, trademarks, trade names, inventions, intellectual property
rights or copyrights owned or possessed by it and necessary to the conduct of
its business; provided, however, that nothing contained in this Section 6.1(c)
shall require Holdco to bring or maintain a cause of action with respect to the
foregoing.
(d) COMPLIANCE WITH LAWS. Comply, and cause each of its
subsidiaries to comply, in all material respects with all applicable laws,
rules, regulations and orders of any United States' federal or state
governmental authority, noncompliance with which could materially adversely
affect its business or condition, financial or otherwise, except non-compliance
being contested in good faith through appropriate proceedings so long as Holdco
or its subsidiary concerned shall have set up sufficient reserves required under
GAAP with respect to such items and except for such noncompliance as would not
have a material adverse effect on Holdco, its subsidiaries or its business taken
as a whole. Use its best efforts to comply, and cause each of its subsidiaries
to comply, in all material respects with all applicable foreign laws, rules,
regulations and orders of any foreign governmental authority, noncompliance with
which could materially adversely affect its business or condition, financial or
otherwise, except non-compliance being contested in good faith through
appropriate proceedings so long as Holdco or its subsidiary concerned shall have
set up sufficient reserves required under GAAP with respect to such items and
except for such noncompliance as would not have a material adverse effect on
Holdco, its subsidiaries or its business taken as a whole.
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(e) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Keep, and cause each
of its subsidiaries to keep, adequate records and books of account, in which
complete entries will be made in accordance with GAAP, reflecting all financial
transactions of Holdco and such subsidiary, and in which, for each fiscal year,
all proper reserves for depreciation, depletion, obsolescence, amortization,
taxes, bad debts and other purposes in connection within its business shall be
made.
(f) MAINTENANCE OF PROPERTIES, ETC. Maintain and preserve, and
cause each of its subsidiaries to maintain and preserve, all of its properties
necessary or useful in the proper conduct of its business, in good repair,
working order and condition, ordinary wear and tear excepted.
(g) BUDGETS AND BOARD APPROVAL. Prior to the commencement of each
fiscal year, prepare and submit to, and obtain the approval of a majority of the
board of directors of Holdco of a budget and operating plan for the upcoming
fiscal year, including projections or forecasts of capital and operating
expenses, cash flow, and profits and losses, all itemized in reasonable detail
and obtain the approval of such budget and plan not more than sixty (60) days
following the end of the prior fiscal year.
(h) AGREEMENTS. Use its best efforts to cause each officer, Key
Employee, consultant and other personnel, including employees, agents and
contractors who have contributed to or participated in the conception and
development of the intellectual property on behalf of CSG, the Company or Holdco
and all employees now or hereafter employed by Holdco or any of its subsidiaries
promptly to execute an Invention Assignment and Non-Disclosure Agreement
substantially in the form of Exhibit 4.4A hereto or in a form approved by the
board of directors of Holdco.
(i) BOARD OF DIRECTORS; INDEMNIFICATION. The board of directors of
Holdco initially shall consist of five (5) directors. The certificate of
incorporation or bylaws of Holdco and its subsidiaries shall at all times
provide for the indemnification of the board of directors of Holdco and its
subsidiaries to the full extent provided by the law of the jurisdiction in which
Holdco or its concerned subsidiary, as the case may be, is organized. Holdco
and its subsidiaries shall use all commercially reasonable efforts to obtain and
maintain directors and officers liability insurance with coverage and premium
levels consistent with policies carried by companies of similar size. Holdco
and its subsidiaries shall pay for reasonable travel and living expenses of the
members of their board of directors who are not employees of Holdco or its
subsidiaries in attending meetings of their board of directors and committees
thereof and in conducting other business on behalf of Holdco or its concerned
subsidiary, as the case may be.
(j) RESERVATION FOR SERIES B PREFERRED STOCK. As long as any shares
of Series B Preferred Stock remain outstanding, Holdco shall keep reserved
sufficient shares of Holdco Common Stock to allow all of such outstanding shares
of Series B Preferred Stock to convert into the number of shares of Holdco
Common Stock specified by the terms of the Certificate of Incorporation of
Holdco.
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6.2 NEGATIVE COVENANTS OF HOLDCO. Without limiting any other covenants
and provisions hereof, Holdco covenants and agrees that, after the Closing and
for so long as either shares of Preferred Stock or the Subordinated Notes remain
outstanding, it will not without the consent of a majority in interest in
principal amount of the Subordinated Notes and the holders of a majority of the
shares of Preferred Stock take the actions contained in the following covenants
and provisions, and will cause each subsidiary of Holdco to not, without the
consent of a majority in interest in principal amount of the Subordinated Notes
and the holders of a majority of the shares of Preferred Stock take actions
contained in the following covenants and provisions as are applicable to such
subsidiary, and will not, without the approval of the holders of a majority of
the Preferred Stock and of a majority in interest in principal amount of the
holders of the Subordinated Notes, amend or revise any terms of this Section:
(a) MERGER, SALE OF ASSETS, ETC. Merge or consolidate with, or
sell, assign, lease or otherwise dispose of or voluntarily part with the control
of (whether in one transaction or in a series of transactions), a material
portion of its assets (whether now owned or hereinafter acquired) to any Person,
or permit any of its subsidiaries to do any of the foregoing, except for sales
or other dispositions of assets in the ordinary course of business and except
that (1) any wholly-owned subsidiary of Holdco may merge into or consolidate
with or transfer assets to any other wholly-owned subsidiary of Holdco, (2) any
wholly-owned subsidiary of Holdco may merge into or transfer assets to Holdco,
and (3) Holdco may merge any Person into it or otherwise acquire such Person so
long as Holdco is the surviving entity, the holders of voting stock of Holdco
immediately prior to such merger are the holders of more than 50% of Holdco
immediately following such merger, such merger or acquisition does not result in
the violation of any of the provisions of this Agreement and no such violation
exists at the time of such merger or acquisition. The foregoing shall not
prohibit Holdco or any of its subsidiaries from pledging or granting a security
interest in a material portion of its assets, provided that such transaction has
been approved by the board of directors of Holdco.
(b) MAINTENANCE OF OWNERSHIP OF SUBSIDIARIES. Create any
subsidiary that is not a wholly-owned subsidiary, sell or otherwise dispose of
any shares of capital stock of any of its subsidiaries, except to Holdco or
another of its subsidiaries, or permit any of its subsidiaries to issue, sell or
otherwise dispose of any shares of its capital stock or the capital stock of any
of its subsidiaries except to Holdco or another of its subsidiaries; provided,
however, that nothing herein contained shall prevent any merger, consolidation
or transfer of assets permitted by subsection 6.2(a).
(c) DEALINGS WITH AFFILIATES AND OTHERS. Enter into any
transaction, including, without limitation, any loans or extensions of credit or
royalty agreements, with any officer or director of Holdco or any officer or
director of any of its subsidiaries or holder of any class of capital stock of
Holdco, or any member of their respective immediate families or any corporation
or other entity directly or indirectly controlled by one or more of such
officers, directors or stockholders or members of their immediate families
(other than any such transactions in the ordinary course of business which are
in an amount not in excess of $50,000 and loans for purchases of Holdco
securities by employees, officers, directors or consultants and housing loans to
officers and directors, so long as approved by a majority of the disinterested
members of the board of directors of Holdco).
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(d) CHANGE IN NATURE OF BUSINESS. Make, or permit any of its
subsidiaries to make, any material change in the nature of its business as
carried on at the date hereof by CSG or the Company or as contemplated in
written materials delivered to the Investors prior to the date hereof.
(e) DIVIDENDS. While the Preferred Stock is outstanding, declare
or pay any dividends on any class of Holdco's or any of its subsidiaries'
capital stock now or hereafter outstanding (other than dividends on the
Preferred Stock, dividends payable in Holdco Common Stock or dividends payable
by any of Holdco's subsidiaries to either Holdco or another subsidiary that is
the parent of the paying subsidiary), or purchase, redeem or otherwise acquire
or retire any of Holdco's or any of its subsidiaries capital stock of any class
now or hereafter outstanding or otherwise return capital or make distributions
of assets to stockholders as such, other than redemption of the Series A
Preferred Stock and the Series B Preferred Stock pursuant to the Certificate of
Incorporation of Holdco and repurchases of capital stock under other agreements
providing for the repurchase of Holdco stock from employees, officers, directors
or consultants on termination of their relationship with Holdco.
(f) AGREEMENTS WITH EMPLOYEES FOR THE PURCHASE OF SECURITIES.
Except as set forth herein, without approval of a majority of the disinterested
members of the board of directors of Holdco, accelerate or terminate the vesting
schedules under which restrictions on transfer of capital stock of Holdco lapse
over a period of time with respect to capital stock held by employees, officers,
directors or consultants of Holdco, increase the number of shares (such number
to be equitably adjusted in the event of any stock split, combination,
reclassification or other similar event occurring on or after the date of this
Agreement) currently available for exercise under Holdco's stock option plan or
otherwise, or issue, sell or exchange, agree to issue, sell or exchange, or
reserve or set aside for issuance, sale or exchange to directors, officers,
employees and/or consultants shares of Holdco Common Stock, or options
exercisable therefor, except as issued at fair market value, or granted with an
exercise price equal to fair market value, at the time of issuance or grant, to
directors, officers, employees or consultants of Holdco and any of its
subsidiaries.
(g) ISSUANCES OF SECURITIES AND EMPLOYEE STOCK OPTIONS. Except as
set forth herein, issue, sell or exchange, agree to issue, sell or exchange, or
reserve or set aside for issuance, sale or exchange, (i) any equity security of
Holdco (other than Holdco Common Stock), including, without limitation, shares
of Preferred Stock, (ii) any debt security of Holdco that by its terms is
convertible into or exchangeable for any equity security of Holdco, (iii) any
security of Holdco that is a combination of debt and equity, or (iv) any option,
warrant or other right to subscribe for, purchase or otherwise acquire any
equity security or any such debt security, except for (x) Holdco Common Stock
issued as a stock dividend to holders of Holdco Common Stock or upon any
subdivision or combination of shares of Holdco Common Stock, and (y) shares of
Holdco Common Stock (or options to purchase such stock), issued pursuant to
stock plans or arrangements approved by all of the disinterested members of the
board of directors of Holdco.
6.3 REPORTING REQUIREMENTS OF HOLDCO. Holdco will furnish the following
to each holder of the Subordinated Notes, to each holder who owns of record or
beneficially any Preferred Stock, and to each holder of at least 10% of the
issued and outstanding Holdco Common Stock:
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(a) as soon as available and in any event within thirty (30) days
after the end of each fiscal month of Holdco, unaudited Consolidated balance
sheets of Holdco and its subsidiaries as of the end of such month and
Consolidated statements of income and of statements of cash flow of Holdco and
its subsidiaries for the period ending with such month, setting forth in each
case in comparative form the corresponding figures for the corresponding period
of the prior fiscal year, all in reasonable detail and duly certified (subject
to year-end audit adjustments) by the chief executive officer or chief financial
officer of Holdco as having been prepared in accordance with GAAP except for a
lack of customary year end disclosures, footnotes and year end adjustments;
(b) as soon as available and in any event within ninety (90) days
after the end of each fiscal year of Holdco, a copy of the annual audit report
for such year for Holdco and its subsidiaries, including therein consolidated
balance sheets of Holdco and its subsidiaries as of the end of such fiscal year
and consolidated statements of income and retained earnings and of statements of
cash flow of Holdco and its subsidiaries for such fiscal year, setting forth in
each case in comparative form the corresponding figures for the preceding fiscal
year, all duly certified by a "Big Six" independent public accounting firm
selected by Holdco's board of directors;
(c) at the time of delivery of each monthly and annual statement, a
certificate, executed by the chief executive officer or chief financial officer
of Holdco in the case of monthly statements, and Holdco's independent public
accountants in the case of annual statements, stating that such officer or
accountants, as the case may be, has caused Sections 6.1(a) (insofar as it
relates to payment of federal and state income taxes), 6.2(b), 6.2(c), 6.2(f)
and 6.2(g) to be reviewed and has no knowledge of any default by Holdco or any
of its subsidiaries in the performance or observance of any of the provisions of
this Agreement or, if such officer or accountant has such knowledge, specifying
such default and the nature thereof;
(d) promptly upon the request of any holder of at least $250,000 in
principal amount of Subordinated Notes or any Person holding an aggregate of at
least 250 shares of Preferred Stock, any written report submitted to Holdco by
independent public accountants in connection with an annual or interim audit of
the books of Holdco and its subsidiaries made by such accountants;
(e) promptly after the commencement thereof, notice of all actions,
suits and proceedings before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, materially
affecting Holdco and its subsidiaries when considered as a whole;
(f) at least thirty (30) days prior to the commencement of each
fiscal year of Holdco, a copy of the operating plan and budget provided for in
Section 6.1(g);
(g) upon request, to any holder of at least $250,000 in principal
amount of Subordinated Notes or any Person holding an aggregate of at least 250
shares of Preferred Stock, copies of all materials provided to the committees of
the board of directors of Holdco, and to any such holder or Person who is not a
member of the board of directors of Holdco copies of all materials provided to
the board of directors of Holdco and all other information respecting the
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business, properties or the condition or operations, financial or otherwise, of
Holdco or any of its subsidiaries that any Investor may from time to time
reasonably request; provided, however, that Holdco shall not be required to
-------- -------
deliver any such information to the extent that such action would, in the
opinion of counsel to Holdco, be deemed to constitute a waiver of the attorney-
client privilege.
Any person receiving the information distributed pursuant to
subsections (f) and (g) above agrees to hold such information in confidence to
the same extent that would be required of a member of Holdco's board of
directors.
6.4 CONFIDENTIALITY. Any confidential information obtained by any holder
of the Subordinated Notes or the Preferred Stock pursuant to this Agreement
shall be treated as confidential and shall not be disclosed to a third party
without the consent of the board of directors of Holdco, except that such
information shall not be deemed confidential for the purpose of enforcement of
this Agreement or valuation of the Preferred Stock or Subordinated Notes and
except that any such holder may otherwise disclose such information to its
partners if such partners agree to be bound by the restrictions contained in
this Section. At the request of the board of directors of Holdco, any Person to
receive or receiving any information pursuant to this Agreement shall execute
and deliver a reasonable confidentiality agreement in form and substance
reasonably satisfactory to the board of directors of Holdco.
6.5 COVENANTS OF SELLER.
(a) FURTHER ASSET TRANSFER. From and after the date of the Closing,
the Seller agrees to convey, transfer, and assign to the Company, free and clear
of all Liens, any tangible or intangible rights, properties or assets then held
by the Seller (i) that are necessary to permit the Company to conduct, operate
and maintain the Business consistent with Past Practice and as it is proposed to
be conducted, (ii) that are among the Assets, including without limitation, the
Contracts, (iii) the conveyance, transfer or assignment of which would have been
necessary for representations and warranties of the Seller herein to be true and
correct as of the date of the Closing, or (iv) the conveyance, transfer or
assignment of which was or is required by the covenants of the Seller contained
in this Agreement. To the extent that any Contract was not assigned to the
Company because of a limit on assignability of such Contract, the Seller shall
take all actions necessary to pass through to the Company all benefits of such
Contracts and the Company shall perform all obligations of the Seller thereunder
and shall indemnify the Seller with respect to such obligations; provided that
--------
such indemnification shall be contingent on the passing of all benefits of such
Contracts to the Company; provided, further, that compliance of the Seller with
--------- --------
this sentence shall not excuse the Seller from any breach of the
representations, warranties and covenants of the Seller, resulting from such
non-assignment.
(b) EFI NON-INFRINGEMENT OPINION. The Seller shall use its best
efforts to cause the opinion of patent counsel described in Section 4.4(j) to be
updated and delivered to Holdco and the Company if reasonably requested to do so
by Holdco or the Company.
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(c) YEAR-END BALANCE SHEET. The Seller shall cooperate with and
give assistance to the Investors and the Investors' Accountants in relation to
the preparation of the Year-End Balance Sheet. Until the Year-End Balance Sheet
is final and binding in accordance with Section 1.5(b) and until the Audited
Financial Statements have been prepared and finalized, the Seller shall give to
the Additional Accounting Firm, the Investors, Holdco, the Company and their
counsel, accountants and other authorized representatives, on prior request
therefor from the Additional Accounting Firm, the Investors, Holdco, the Company
or such representatives, such access during normal business hours to copies of
the Seller's financial statements, books and records so as to allow the
Investors' Accountants to prepare the Year-End Balance Sheet, so as to allow the
Additional Accounting Firm to resolve disputes as specified in Section 1.5(b),
and so as to allow Holdco, the Company and their accountants to prepare the
Audited Financial Statements.
(d) ELECTION UNDER SECTION 338(H)(10). Seller shall join with
Holdco in preparing a protective joint election on Form 8023A for the Company
under Section 338(h)(10) of the Code and under any applicable similar provisions
of state law with respect to the Merger. The Form 8023A shall be prepared by
advisers of Holdco and executed by those parties hereto required to execute such
form within 90 days after the date of the Closing and filed by Holdco if it so
elects in its sole discretion. Information accompanying the Form 8023A will
reflect the purchase price allocation determined by Holdco; the parties hereto
agree to take no position for any tax or reporting purposes which is contrary to
such allocation.
(e) TAX TREATMENT. The Seller shall treat the formation of the
Company and the transfer of the Assets described in Section 1.1 hereof as a
taxable transaction for federal and state income tax purposes.
ARTICLE VII
OBLIGATIONS PENDING THE CLOSING
Between the date hereof and the Closing, unless this Agreement is
terminated sooner, pursuant to Section 12.2 hereof:
7.1 ACCESS. The Seller shall give to the Investors and their counsel,
accountants and other authorized representatives from and after the date of
execution of this Agreement, on prior request therefor from the Investors or
such representatives, such access during normal business hours to the premises,
employees, agents and consultants of the Seller relating to CSG, the Business or
the Assets, and of the Company, and such copies of the Seller's financial
statements, books and records, and contracts and leases and other documentation
relating to CSG, the Business, the Assets or the Company, so as to enable the
Investors to inspect and evaluate all aspects of the business and operations,
assets, operating results, financial condition, future Prospects,
capitalization, ownership, and legal and regulatory affairs of CSG, the Business
and the Company and to verify the accuracy of the information heretofore
furnished to the Investors and the representations and warranties made in this
Agreement by the Seller or the Company with respect to the foregoing matters.
The Seller
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agrees that it will take no action to prevent or delay CSG or the Company from
furnishing or making available all information reasonably requested by the
Investors. Each of the Investors agrees to conduct its review in a manner
designed to minimize any disruption of the Seller's and the Company's
operations. All information and records obtained by the Investors pursuant to
this Agreement shall be maintained as confidential prior to the Closing and
shall not be disclosed to any third party prior to the Closing without the prior
written consent of the Seller, except (i) in response to legal process;
provided that Investors shall notify the Seller of such legal process so as to
- --------
provide the Seller with a reasonable opportunity to contest the validity thereof
or (ii) to the extent required to comply with applicable law; provided, however,
-------- -------
that prior to making such disclosure, Investors shall use their best efforts to
have such information and records afforded confidential treatment. Seller may
require, as a condition to providing the access described in Section 7.1, that
each Investor and its representatives execute and deliver a confidentiality
agreement in form and substance reasonably satisfactory to the Seller. The
Investors shall not be obligated to maintain as confidential any information
obtained from the Seller or the Company which is publicly available, readily
available from public sources, known to it at the time the information was
disclosed, or which was rightly obtained from a third party. In the event that
this Agreement is terminated prior to the date of the Closing, Investors shall
return all information (and any copies thereof) received by them (from the
Seller or its agents or representatives) and relating to the Seller, the
Company, the Assets, the Business or CSG to the Seller.
7.2 CONDUCT OF COMPANY'S BUSINESS. Unless the Investors give their
prior written consent for actions to be taken to the contrary, from the date of
this Agreement and until the Closing or termination of this Agreement, whichever
first occurs, the Seller and the Company shall, and the Seller shall take no
action to prevent or delay CSG or the Company from being able to (except that
from and after December 31, 1995, all dollar amounts shown in this Section 7.2
shall be considered to be $0):
(a) OPERATION OF BUSINESS. Operate and conduct CSG's and the
Company's business and operations diligently and only in the ordinary course of
business consistent with Past Practice. The Business shall be conducted up until
the date of the Closing as usual and consistent with the practices of the Seller
with respect to the Business prior to December 8, 1995. All practices of CSG,
the Company and the Business, including procurement of inventory and raw
materials, payment of accounts payable, and fulfillment of customers order,
shall be conducted to the date of Closing in the ordinary course of business
consistent with Past Practice. Neither CSG nor the Company shall (i) incur any
new indebtedness or increase the amount due and owing to any lender for borrowed
money, except it may incur indebtedness for up to $50,000 for purposes of
financing equipment purchases or leases, or (ii) increase the compensation or
benefits of an employee, independent contractor or agent or adopt or amend any
commission plan or arrangement or any employee benefit plan or arrangement of
any type which results or may result in an increase in costs or liabilities
thereunder of more than $10,000 per month, in the aggregate, above those
existing on the date hereof, or otherwise lend or advance any sum or extend
credit to any employee, director, shareholder or stockholder or any of their
respective affiliates ;
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(b) ORGANIZATION. Preserve intact CSG's and the Company's
organization and use its reasonable best efforts to retain all employees of and
consultants to the Seller, relating to CSG, the Business and the Assets, and the
Company, commensurate with the requirements of the Business;
(c) VENDORS. Use its reasonable best efforts to retain services of
all vendors, suppliers, agents and consultants used in the Business,
commensurate with the requirements of the Business;
(d) INSURANCE. Maintain insurance (either directly or through the
Corporate Services Agreement described in Section 1.1), including liability and
efforts and omissions insurance, consistent with Past Practice and, unless
comparable insurance is substituted therefor or is not generally available to
businesses of the type conducted by CSG and the Company, not take any action to
terminate or modify, nor permit the lapse or termination of, the present
insurance policies and coverages of the Seller, relating to CSG, the Business
and the Assets, and the Company as set forth in the Disclosure Letter;
(e) LAWSUITS, CLAIMS. Promptly notify the Investors of, and if
requested by the Investors, diligently defend against, all lawsuits, claims,
proceedings or investigations that are, or which any officers of the Company or
the Seller, as a result of events or circumstances known to them, has reason to
believe may be, threatened, brought, asserted or commenced against the Seller in
relation to CSG or the Company or any of their officers or directors, involving
or affecting in any way CSG's or the Company's operations, or any of the Assets,
or the Business or the transactions contemplated hereby; and, without the prior
written consent of the Investors, not settle any action or proceeding which
would materially and adversely affect the Business, the Assets, CSG or the
Company, their business, financial condition or operating results and, without
the prior written consent of the Investors, not release, settle, compromise or
relinquish any claims, causes of action or rights involving more than $50,000
individually or $100,000 in the aggregate which the Company or the Seller may
have against any other persons, including, without limitation, claims or rights
to reimbursement or payment for services rendered by the Company, CSG or the
Seller, in relation to CSG, the Business and the Assets;
(f) CERTAIN CHANGES. Not sell or otherwise dispose, or enter into any
agreement for the sale, of any of the Assets, except for sales of inventory and
obsolete equipment in the ordinary course of business and consistent with Past
Practice, and not permit or allow, or enter into any agreements providing for or
permitting, any of its assets or properties to be subjected to any option or
Lien other than Liens in existence on the date hereof and statutory liens to
secure Taxes that are not yet due and payable, all of which are listed on the
Disclosure Letter;
(g) CONDITION OF ASSETS. Maintain in good working order and
condition, ordinary wear and tear excepted, and in compliance in all material
respects with all applicable laws and regulations, all of the tangible Assets,
wherever located, that are used, leased or owned by the seller or by the
Company;
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(h) AGREEMENTS. Observe and perform all terms, conditions, covenants
and obligations contained in all existing material agreements between the
Seller, in relation to CSG, or the Company and third parties the violation of
which would have, individually or in the aggregate, a material adverse effect on
the Business, the Assets, CSG or the Company or their business, financial
condition, operating results or future Prospects; and, except as required by any
existing agreements, not enter into any new agreements or transactions with
respect to the Company, the Business, the Assets or CSG, or incur any
expenditures, liabilities or obligations, involving more than $50,000
individually or $100,000 in the aggregate, or renew, extend, amend or modify any
existing agreement involving any commitments, obligations, liabilities or
requiring any expenditures that would exceed $50,000 individually or $100,000 in
the aggregate with respect to the Company, the Business, the Assets or CSG; not
take any action which would cause a material breach or violation of or material
default under any material agreement, lease, contract, or other written
instrument, commitment or arrangement, or under any material permit, license,
franchise, judgment, writ or order, applicable to or affecting the Seller in
relation to CSG, or the Company or the Business, and promptly notify the
Investors in writing of the occurrence of any such breach or default; and not
enter into any transaction with respect to the Company, the Business, the Assets
or CSG with any stockholder, shareholder, director or officer or any person or
entity related to or affiliated with any such person other than those
transactions that are described in the Disclosure Letter, if any;
(i) TAXES. Pay, when due, and prior to the imposition or assessment
of any interest, penalties or liens by reason of the non-payment of, all Taxes
assessed against the Seller (as related to the Assets, the Business, CSG or the
Company) or the Company, any of its assets or its operations other than Taxes,
the validity of which is being contested in good faith and for which adequate
reserves have been established in accordance with GAAP;
(j) DIVIDENDS, ETC. Except as contemplated by this Agreement not: (i)
declare or pay any dividends or make any distributions with respect to or redeem
any shares of the Company's capital stock; (ii) accelerate the payment of or
prepay any indebtedness or other obligations of the Company; (iii) approve or
effect any reclassification or recapitalization of the Company or its authorized
or outstanding shares; (iv) merge or consolidate the Seller or the Company with
or sell any of their assets to a third party other than sales of assets in the
ordinary course of business and consistent with Past Practice; (v) approve or
commence any proceedings for the liquidation of the Seller or the Company; or
(vi) enter into any agreement to do any of the foregoing;
(k) CORPORATE MATTERS. Except as expressly contemplated by this
Agreement, not: (i) amend in any manner the Certificate of Incorporation or
Bylaws of the Company; (ii) alter the composition or membership of the Company's
board of directors; (iii) except for shares purchased upon exercise of
outstanding options, authorize or issue any shares of capital stock of the
Company of any class or series; (iv) create or issue any warrants, obligations,
subscriptions, options, convertible securities or other commitments under which
any additional shares of the capital stock of any class or other equity
securities of the Company may be directly or indirectly authorized, issued or
transferred; or (v) agree to do any of the above; and
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(l) LIABILITIES AND EXPENSES. Not: with respect to CSG, the Assets,
the Business or the Company, create or incur (whether as principal, surety or
otherwise) any actual or contingent liabilities or expenses in excess of $25,000
in the aggregate other than liabilities and expenses incurred in the ordinary
course of business consistent with Past Practice.
7.3 CONSENTS. Each party to this Agreement shall use its reasonable best
efforts to obtain or cause to be obtained at the earliest practicable date, and
prior to the Closing, all consents, approvals and licenses, if any, which such
party requires to permit it to consummate the transactions contemplated hereby
without violating any material agreement, contract, instrument or applicable law
or regulation, license or permit, to which it is a party or to which it or its
assets are subject. The parties hereto shall cooperate with each other in their
efforts to obtain all such consents, approvals and licenses.
7.4 NOTICE OF BREACH. Each party to this Agreement will immediately give
notice to the other parties of the occurrence of any event, or the failure of
any event to occur, that results in a breach by it of any representation or
warranty or a failure by it to comply with or fulfill any covenant, condition or
agreement contained herein.
7.5 SELLER AND INVESTORS AS STOCKHOLDERS. The Seller agrees, as the sole
stockholder of the Company prior to the Closing, to cause the Company, and the
Investors agree as the controlling stockholders of Holdco prior to the Closing,
to cause Holdco and Holdco Sub to comply with all of their respective
obligations hereunder to be fulfilled prior to the Closing.
7.6 RETENTION OF CSG EARNINGS. It is the intent of the parties hereto
that all assets and liabilities shown on the Year-End Balance Sheet, all
proceeds and obligations relating to such assets and liabilities, and all
earnings, revenues, income and profits earned by CSG and the Business from and
after December 31, 1995 shall be transferred to the Company immediately prior to
the Effective Time. In addition, it is the intent of the parties hereto that CSG
and the Business be run separately from the remainder of the business of the
Seller for the benefit of Holdco and those who will be Holdco's stockholders
immediately after the Effective Time. In furtherance of these purposes, from and
after December 31, 1995, the Seller shall keep and hold all assets and
liabilities related to, and all revenue and income attributable to, CSG, the
Business and the Assets, including but not limited to those assets and
liabilities shown on the Year-End Balance Sheet, separate from other Seller
assets, revenue, income and liabilities. As of December 31, 1995, all assets
related to, and all revenue and income attributable to CSG, the Business and the
Assets, including but not limited to those assets and liabilities shown on the
Year-End Balance Sheet and all assets, receivables, income and revenue received
by the Seller that relates to CSG, the Business and the Assets, shall be held in
trust for transfer to the Company pursuant to this Agreement. From and after
December 31, 1995, the Seller shall not cause or allow the Company, CSG, the
Business, and the Assets to assume any Liability or to become subject to any
Lien other than pursuant to the assumption of trade payables of CSG and the
Business in the ordinary course of business. From and after December 31, 1995,
any increases in the Working Capital of CSG and any additional receivables
received by the Seller in relation to CSG, the Business and the Assets shall be
held in trust by the Seller for transfer to the Company. From and after December
31, 1995, all cash shown (or to be shown) on the Year-End
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Balance Sheet shall be placed in an account separate from that of all other
funds of the Seller. All cash received by the Seller in relation to CSG, the
Business and the Assets from and after December 31, 1995, as income, conversion
of accounts receivable or otherwise, shall be placed in such separate account
and held there in trust until transferred to the Company pursuant to Section
1.1. No cash shall be paid out of this separate account except for (x) payments
in the ordinary course of business not exceeding $10,000 in the aggregate, (y)
payment in the ordinary course of business of trade payables shown on (or to be
shown on) the final and binding Year-End Balance Sheet, and (z) payment of the
amounts of salary (at the level shown on Exhibit 1.1D), accruing after December
31, 1995 in the ordinary course of business, of those employees and consultants
of the Seller that are listed on Schedule 1.1D as to be employees or consultants
of the Company. In no event shall cash from such separate account be used
to pay obligations accruing on or before December 31, 1995 that are not shown on
the Year-End Balance Sheet, and, to the extent that any such obligations exist,
such obligations shall remain obligations only of the Seller after the Effective
Time. The Company shall not transfer assets or cash, whether as a dividend, an
assumption of liabilities, a payment for deemed or actual federal or state
income taxes, a loan or otherwise, or obligate itself to transfer any assets or
cash, to the Seller (and the Seller shall not receive such from the Company),
prior to the Effective Time. As of and after December 31, 1995, the Seller and
its directors shall owe the Investors the same fiduciary duties with respect to
CSG, the Assets and the Business that the Company and its directors will owe the
holders of Company Common Stock and that Holdco and its directors will owe the
holders of Holdco Common Stock after the Closing. From and after December 31,
1995, the Seller shall operate CSG, the Business and the Assets substantially in
accordance with the projected financial statements set forth in Exhibit 7.6
hereto. The Seller shall take all actions necessary to insure, that, as of the
moment immediately prior to the Effective Time, the Company shall hold all
profits, earnings, revenue, and cash held by the Seller as of December 31, 1995
and shown or to be shown and the Year-End Balance Sheet, or received by the
Seller from and after December 31, 1995 in relation to the operation of CSG, the
Business, the Assets, and the Company or related to any of the items shown on
the Year-End Balance Sheet including, with limitations, accounts receivable.
Any of the requirements of this Section 7.6 may be waived with the prior written
consent of the Investors. In the event of any conflict between this Section 7.6
and any other provision of this Article VII, the provisions of this Section 7.6
shall control.
ARTICLE VIII
OBLIGATIONS AT OR PRIOR TO THE CLOSING
8.1 EXCLUSIVITY/OTHER OFFERS. Unless and until this Agreement has been
terminated in accordance with Section 12.2 below, none of the Investors, Holdco,
Holdco Sub, the Company, or the Seller, or any of their respective
representatives, agents, officers, directors, shareholders, stockholders,
partners or employees, will solicit or accept offers from, provide information
or assistance to, or negotiate or enter into any agreement or understanding
(written or oral) with, any other person or entity regarding (i) the sale,
merger, initial public offering or reorganization of the Company; the sale or
other disposition of, or the granting of any security interest, lien or
encumbrance on, any of the Assets, the Business or CSG other than dispositions
of inventory in the
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ordinary course of business; or (iii) any other transaction which would cause or
result in any change, other than of an immaterial nature, in or adversely affect
the Business, the Assets, or the business of CSG or the Company or otherwise
interfere with the consummation of the transactions contemplated herein.
8.2 OTHER DELIVERIES. At the Closing, the parties hereto shall also
execute and deliver all agreements and instruments referred to in Articles IV, V
and otherwise provided herein.
ARTICLE IX
NATURE AND SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made by Holdco, Holdco Sub and the Investors in Section 2.1(c) hereof
and by the Seller in this Agreement or any other instrument or document
delivered in connection herewith, including the documents contained the Exhibits
hereto and the Disclosure Letter, shall survive until the date one year after
the date of the Closing. Other than as set forth above, all representations and
warranties made by the Investors, Holdco, Holdco Sub, and the Company in this
Agreement or any other instrument or document delivered in connection herewith
shall terminate upon the Closing and shall not survive the Closing. All
covenants made in the Agreement and any other instrument or document delivered
in connection with the Agreement shall survive indefinitely unless this
Agreement or such instrument or document specifically specifies otherwise.
ARTICLE X
INDEMNIFICATION
10.1 INDEMNIFICATION BY THE SELLER FOR BREACH OF THIS AGREEMENT. Subject
to the limitations set forth in this Article, the Seller shall indemnify and
hold harmless the Investors, the Company, Holdco and their respective officers,
directors, employees, successors and assigns (the "Indemnified Investor
Parties") in respect of any and all claims, actions, suits or other proceedings
and any and all losses, costs, expenses, liabilities, fines, penalties, interest
and damages, whether or not arising out of any claim, action, suit or other
proceeding (and including reasonable counsel and accountants' fees and expenses
and all other reasonable costs and expenses of investigation, defense or
settlement of claims and amounts paid in settlement) incurred by, imposed on or
borne by the Indemnified Investor Parties ("Investor Damages") resulting from
the breach of any of the representations, warranties or covenants (including,
but not limited to, the covenant in Section 1.5 hereof) made by the Seller in
this Agreement, the Disclosure Letter, or any agreement, instrument or document
that is attached as an Exhibit to this Agreement. Investor Damages shall
exclude (i) any amount with respect to which the Indemnified Investor Parties
shall be entitled to receive and shall have received payment under any insurance
policy which provides coverage for the liability to which such amount relates
and (ii) the amount of any tax benefit actually received by the Indemnified
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Investor Parties as a result of such Investor Damages, after taking into account
the tax consequences of the indemnification payment for such Investor Damages.
10.2 INDEMNIFICATION BY THE SELLER FOR EFI LITIGATION AND BULK SALES
VIOLATIONS. The Seller shall indemnify and hold harmless the Indemnified
Investor Parties in respect of any and all Investor Damages resulting from the
EFI Litigation and from any violation by the Seller or the Company of the
requirements and provisions of any "bulk-transfer" laws of any jurisdiction in
connection with any of the transactions contemplated herein. Investor Damages
shall exclude any amount with respect to which the Indemnified Investor Parties
shall be entitled to receive and shall have received payment under any insurance
policy which provides coverage for the liability to which such amount relates.
Investor Damages shall exclude (i) any amount with respect to which the
Indemnified Investor Parties shall be entitled to receive and shall have
received payment under any insurance policy which provides coverage for the
liability to which such amount relates and (ii) the amount of any tax benefit
actually received by the Indemnified Investor Parties as a result of such
Investor Damages, after taking into account the tax consequences of the
indemnification payment for such Investor Damages.
10.3 CLAIMS FOR INDEMNIFICATION OF INVESTORS. Whenever any claim shall
arise for indemnification hereunder, the Indemnified Investor Parties making
such claim shall promptly notify the Seller in writing of the claim and, when
known, the facts constituting the basis for such claim and use its reasonable
efforts to cooperate with the Seller to mitigate the Investor Damages suffered
or to be suffered by the such Indemnified Investor Parties; provided that
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failure to give such notice shall not affect any rights or remedies of the
Indemnified Investor Parties hereunder with respect to indemnification for
Investor Damages except to the extent that the Seller is materially prejudiced
thereby. In the event of any claim for indemnification hereunder resulting from
or in connection with any claim or legal proceedings by a third party, the
notice to the Seller shall specify, if known, the amount or an estimate of the
amount of the liability arising therefrom. None of the Indemnified Investor
Parties shall settle or compromise any claim by a third party for which they are
entitled to indemnification hereunder, without the prior written consent of the
Seller (which shall not be unreasonably withheld).
10.4 DEFENSE BY SELLER. In connection with any claim giving rise to
indemnity hereunder or resulting from or arising out of any claim or legal
proceeding by a person who is not a party to this Agreement, the Seller at its
sole cost and expense may, upon written notice to the Indemnified Investor
Parties, assume the defense of any such claim or legal proceeding if it
acknowledges to the Indemnified Investor Parties in writing its obligation to
indemnify the Indemnified Investor Parties with respect to all elements of such
claim, and thereafter diligently conduct the defense thereof with counsel
reasonably acceptable to the Indemnified Investor Parties. The Indemnified
Investor Parties shall be entitled to participate in (but not control) the
defense of any such action with their counsel and at their own expense. If the
Seller does not assume or fails to conduct in a diligent manner the defense of
any such claim or litigation resulting therefrom, (a) the Indemnified Investor
Parties may defend against such claim or litigation, in such manner as they may
deem appropriate, including, but not limited to, settling such claim or
litigation, after giving reasonable notice of the same to the Seller, on such
terms as the Indemnified Investor Parties may deem appropriate (with the
Seller's
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prior written consent, which consent shall not be unreasonably withheld), and
(b) the Seller shall be entitled to participate in (but not control) the defense
of such action, with its counsel and at its own expense. If the Seller
thereafter seeks to question the manner in which the Indemnified Investor
Parties defended such third party claim or the amount or nature of any such
settlement, the Seller shall have the burden to prove by a preponderance of the
evidence that the Indemnified Investor Parties did not defend or settle such
third party claim in a reasonably prudent manner. Notwithstanding the foregoing,
no party shall consent to entry of any judgment or enter into any settlement (or
have any liability for Investor Damages with respect thereto) which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified and indemnifying party of a release from all liability in
respect to such Claim. Each party agrees to cooperate fully with the other, with
such cooperation to include, without limitation, attendance at depositions and
the provision of relevant documents as may be reasonably requested by the
Seller, provided that the Seller will hold the Indemnified Investor Parties
harmless from all of their reasonable expenses, including reasonable attorneys'
fees, incurred in connection with such cooperation by the Indemnified Investor
Parties.
10.5 TIME LIMITATION ON INDEMNIFICATION OF INVESTORS, HOLDCO AND COMPANY.
Except for indemnification claims for Investor Damages resulting from (a) the
EFI litigation, (b) the violation of "bulk-transfer" laws of any jurisdiction by
the Seller or the Company in connection with any of the transactions
contemplated hereby, (c) the violation of any covenants of the Seller made in
this Agreement, the Disclosure Letter, or any agreement, instrument or document
that is attached as an Exhibit to this Agreement, or (d) the failure of the
Seller to pay any obligation greater than $2,000,000 pursuant to Section 1.5(c)
hereof (collectively the "Unlimited Claims"), no claim for indemnification under
this Article may be made or suit instituted by the Indemnified Investor Parties
after the date one year after the date of the Closing. Notwithstanding the
foregoing, this Agreement shall place no such limitation on the Unlimited
Claims.
10.6 MONETARY LIMITATION ON INDEMNIFICATION OF INVESTORS, HOLDCO AND
COMPANY. With respect to any indemnification claims, except for any Unlimited
Claims, made by the Indemnified Investor Parties under this Article, the Seller
shall have no obligation to indemnify the Indemnified Investor Parties for any
Investor Damages which exceed an aggregate cumulative amount equal to the
amount, at the time of such claim, in the escrow fund established in accordance
with the terms of the Escrow Agreement described in Section 4.4(h). Further,
with respect to any indemnification claims, except for the Unlimited Claims,
made by the Indemnified Investor Parties under this Article, the Seller have no
obligation to indemnify the Indemnified Investor Parties until the aggregate
cumulative amount of Investor Damages exceeds $250,000; provided that if the
aggregate cumulative amounts of Investor Damages exceeds $250,000, this Article
X shall provide for payment of indemnification claims for all Investor Damages.
Payment of indemnification pursuant to this Article (except for the Unlimited
Claims, which claims may be made directly against the Seller or the such escrow
fund at the option of the Indemnified Investor Parties, as the case may be,
seeking indemnification), shall be made only from such escrow fund.
Notwithstanding the foregoing, there shall be no limit on the amount of the
Unlimited Claims that may be recovered by the Investors, Holdco and the Company
from the Seller.
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10.7 DAMAGES TO INVESTORS. The Seller acknowledges and agrees that, if
the Company suffers, incurs or otherwise becomes subject to any Investor Damages
as a result of or in connection with any inaccuracy in or breach of any
representation, warranty, covenant or obligation of the Seller or as a result of
the EFI Litigation or violation by the Seller or the Company of "bulk-transfer"
laws, then Holdco and the Investors also shall be deemed, by virtue of their
ownership of the stock of the Company, to have incurred Investor Damages as a
result of or in connection with such inaccuracy or breach in the same amount and
to the same extent as has the Company; provided that the terms of this Section
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10.7 shall not permit the Company, Holdco and the Investors to receive from the
Seller, pursuant to this Article X, an aggregate of indemnification payments
greater than such Investor Damages.
10.8 NO WAIVER BY INVESTORS, HOLDCO AND COMPANY. The Indemnified
Investor Parties shall not be barred from receiving indemnification under this
Article X because any of them had knowledge, prior to the date of Closing or at
any other time, of a breach of representation, warranty or covenant of the
Seller or a violation by the Seller or the Company of any "bulk-transfer" laws
by the Seller or the Company.
10.9 MATERIALITY. For the purposes of determining the amount of Investor
Damages under this Article X, all representations and warranties of the Seller
contained herein or in any instrument, document or agreement contemplated hereby
shall be deemed to be without any materiality or material adverse effect
exceptions or qualifications or any similar exceptions or qualifications that
may be present in such representations and warranties.
10.10 INDEMNIFICATION BY HOLDCO AND INVESTORS. Subject to the
limitations set forth in this Article, the Holdco and the Investors shall
indemnify and hold harmless the Seller and its officers, directors, employees
successors and assigns (the "Indemnified Seller Parties") in respect of any and
all claims, actions, suits or other proceedings and any and all losses, costs,
expenses, liabilities, fines, penalties, interest and damages, whether or not
arising out of any claim, action, suit or other proceeding (and including
reasonable counsel and accountants' fees and expenses and all other reasonable
costs and expenses of investigation, defense or settlement of claims and amounts
paid in settlement) incurred by, imposed on or borne by the Indemnified Seller
Parties ("Seller Damages") resulting from the breach of any of the
representations or warranties of Holdco and the Investors contained in Section
2.1(c) hereof. Seller Damages shall exclude (i) any amount with respect to
which the Indemnified Seller Parties shall be entitled to receive and shall have
received payment under any insurance policy which provides coverage for the
liability to which such amount relates and (ii) the amount of any tax benefit
actually received by the Indemnified Seller Parties as a result of such Seller
Damages, after taking into account the tax consequences of the indemnification
payment for such Seller Damages.
10.11 CLAIMS FOR INDEMNIFICATION OF SELLER. Whenever any claim shall
arise for indemnification hereunder, the Indemnified Seller Parties making such
claim shall promptly notify Holdco and the Investors in writing of the claim
and, when known, the facts constituting the basis for such claim and use its
reasonable efforts to cooperate with the indemnifying party to mitigate the
Seller Damages suffered or to be suffered by such Indemnified Seller Parties;
provided that failure to
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give such notice shall not affect any rights or remedies of the Indemnified
Seller Parties hereunder with respect to indemnification for Seller Damages
except to the extent that Holdco and the Investors are materially prejudiced
thereby. In the event of any claim for indemnification hereunder resulting from
or in connection with any claim or legal proceedings by a third party, the
notice to Holdco and the Investors shall specify, if known, the amount or an
estimate of the amount of the liability arising therefrom. The Indemnified
Seller Parties shall settle or compromise any claim by a third party for which
they are entitled to indemnification hereunder, without the prior written
consent of Holdco and the Investors (which shall not be unreasonably withheld).
10.12 DEFENSE BY HOLDCO AND INVESTORS. In connection with any claim
giving rise to indemnity hereunder or resulting from or arising out of any claim
or legal proceeding by a person who is not a party to this Agreement, Holdco and
the Investors at their sole cost and expense may, upon written notice to the
Indemnified Seller Parties, assume the defense of any such claim or legal
proceeding if they acknowledge to the Indemnified Seller Parties in writing
their obligation to indemnify the Indemnified Seller Parties with respect to all
elements of such claim, and thereafter diligently conduct the defense thereof
with counsel reasonably acceptable to the Indemnified Seller Parties. The
Indemnified Seller Parties shall be entitled to participate in (but not control)
the defense of any such action with its counsel and at its own expense. If
Holdco and the Investors do not assume or fails to conduct in a diligent manner
the defense of any such claim or litigation resulting therefrom, (a) the
Indemnified Seller Parties may defend against such claim or litigation, in such
manner as they may deem appropriate, including, but not limited to, settling
such claim or litigation, after giving reasonable notice of the same to Holdco
and the Investors, on such terms as the Indemnified Seller Parties may deem
appropriate (with the prior written consent of Holdco and the Investors, which
consent shall not be unreasonably withheld), and (b) Holdco and the Investors
shall be entitled to participate in (but not control) the defense of such
action, with their counsel and at their own expense. If Holdco and the Investors
thereafter seek to question the manner in which the Indemnified Seller Parties
defended such third party claim or the amount or nature of any such settlement,
Holdco and the Investors shall have the burden to prove by a preponderance of
the evidence that the Indemnified Seller Parties did not defend or settle such
third party claim in a reasonably prudent manner. Notwithstanding the foregoing,
no party shall consent to entry of any judgment or enter into any settlement (or
have any liability for Seller Damages with respect thereto) which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified and indemnifying party of a release from all liability in
respect to such Claim. Each party agrees to cooperate fully with the other, with
such cooperation to include, without limitation, attendance at depositions and
the provision of relevant documents as may be reasonably requested by Holdco and
the Investors, provided that Holdco and the Investors will hold the Indemnified
Seller Parties harmless from all of their reasonable expenses, including
reasonable attorneys' fees, incurred in connection with such cooperation by the
Indemnified Seller Parties.
10.13 TIME LIMITATION ON INDEMNIFICATION OF SELLER. No claim for
indemnification under this Article may be made or suit instituted by the
Indemnified Seller Parties after the date one year after the date of the
Closing.
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10.14 MONETARY LIMITATION ON INDEMNIFICATION OF SELLER. With respect to
any indemnification claims made by the Indemnified Seller Parties under this
Article, Holdco and the Investors shall have no obligation to indemnify the
Indemnified Seller Parties for any Seller Damages which exceed an aggregate
cumulative amount equal to the $4,282,000. Further, with respect to any
indemnification claims made by the Indemnified Seller Parties under this
Article, Holdco and the Investors have no obligation to indemnify the
Indemnified Seller Parties until the aggregate cumulative amount of Seller
Damages exceeds $250,000; provided that if the aggregate cumulative amounts of
Seller Damages exceeds $250,000, this Article X shall provide for payment of
indemnification claims for all Seller Damages.
10.15 NO WAIVER BY SELLER. The Indemnified Seller Parties shall not be
barred from receiving indemnification under this Article X because any of them
had knowledge, prior to the date of Closing or at any other time, of a breach of
the representations and warranties of Holdco and the Investors made in Section
2.1(c).
ARTICLE XI
DEFINITIONS AND ACCOUNTING TERMS
11.1 CERTAIN DEFINED TERMS. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"Additional Accounting Firm" has the meaning specified in Section
1.5.
"Additional Report" has the meaning specified in Section 1.5.
"Affiliate" (and, with a correlative meaning, "Affiliated") shall
mean, with respect to any Person, any other Person that directly, or through one
or more intermediaries, controls or is controlled by or is under common control
with such first Person, and, if such a Person is an individual, any member of
the immediate family of such individual and any trust whose principal
beneficiary is such individual or one or more members of such immediate family
and any Person who is controlled by any such member or trust. As used in this
definition, "control" (including, with correlative meanings, "controlled by" and
"under common control with") shall mean possession, directly or indirectly, of
power to direct or cause the direction of management or policies (whether
through ownership of securities or partnership or other ownership interests, by
contract or otherwise), and "immediate family" shall mean parents, spouse and
children.
"Agreement" means this Merger Agreement as from time to time amended
and in effect between the parties hereto.
"Assets" has the meaning specified in Section 1.1.
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"Assumed Liabilities" has the meaning specified in Section 1.1.
"Audited Financial Statements" has the meaning specified in Section
4.8.
"Business" means the business of CSG as operated as of December 8,
1995 and the business of the Company as now proposed or contemplated, including
the operations of the Assets.
"Business Plan" has the meaning specified in Section 3.1.
"Cash Purchase Price" has the meaning specified in Section 1.4.
"Claims" means any and all personal injury, property damage,
nuisance, tort, contract or other claims, actions or demands brought at any time
by any Person, any and all demands, actions or claims for investigation,
remediation, removal, closure or other action with respect to Hazardous
Materials, and any and all other investigations, suits, demands, actions, fines,
penalties, claims, enforcement actions, Liens, Liabilities, damages,
deficiencies, injunctions, reasonable attorneys' fees, reasonable experts' fees,
costs and expenses actually paid, imposed or incurred.
"Closing" has the meaning specified in Section 1.4.
"COBRA" has the meaning specified in Section 3.1.
"Code" has the meaning specified in Section 3.1.
"Company" means and shall include Splash Technology, Inc., a
Delaware corporation, and its successors and assigns.
"Company Common Stock" has the meaning specified in Section 1.3.
"Company Facility" shall mean any real property asset (including the
land, the improvements and fixtures thereon, and the ambient air ground water
and surface water thereof and including, but not limited to, the Assets), that
the Seller, the Company or any of their past or present subsidiaries has at any
time owned, operated, occupied, controlled or leased in connection with CSG, the
Business or the Assets.
"Consolidated" when used with reference to any term defined herein
shall mean that term as applied to the accounts of the Company or Holdco, as
appropriate in the context, and its subsidiaries consolidated in accordance with
GAAP after eliminating intercompany items and minority interests.
"Contracts" has the meaning specified in Section 1.1.
"Copyrights" mean U.S. and foreign copyrights, whether registered or
unregistered, and pending applications to register the same.
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"CSG" has the meaning specified in the Recitals.
"DGCL" means the State of Delaware General Corporation Law, as
amended.
"Disclosure Letter" has the meaning specified in Section 3.1.
"Disposal Site" shall mean a landfill, incinerator, disposal agent,
waste hauler or recycler of Hazardous Materials.
"Effective Time" has the meaning specified in Section 1.4.
"EFI Litigation" means any and all litigation or other claims
arising out of or related to U.S. Patent No. 4,941,038 and any divisionals,
continuations in part, or reissues thereof, to case number C95-04110 DLG pending
in United States District Court in the Northern District of California and any
amendments thereto, and any claims for indemnification related to the foregoing.
"Employee Plans" has the meaning specified in Section 3.1.
"Environmental Law" means any Law pertaining to land use, air, soil,
surface water, groundwater (including the protection, cleanup, removal,
remediation or damage thereof), public or employee health or safety or any other
environmental matter, including, without limitation, the following laws as in
effect on the date of the Closing: (a) Clean Air Act (42 U.S.C. (S)7401, et
seq.); (b) Clean Water Act (33 U.S.C. (S)1251, et seq.); (c) Resource
Conservation and Recovery Act (42 U.S.C. (S)6901, et seq.); (d) Comprehensive
Environmental Response Compensation and Liability Act (42 U.S.C. (S)9601, et
seq.); (e) Safe Drinking Water Act (42 U.S.C. (S)300f, et seq.); (f) Toxic
Substances Control Act (15 U.S.C. (S)2601, et seq.); (g) Rivers and Harbors Act
(33 U.S.C. (S)401, et seq.); (h) Endangered Species Act (16 U.S.C. (S)1531, et
seq.); and (i) Occupational Safety and Health Act (29 U.S.C. (S)651, et seq.);
together with any other foreign or domestic laws (federal, state, provincial or
local) relating to Hazardous Materials of Hazardous Materials Activities.
"Environmental Permit" shall mean any approval, permit, license,
clearance or consent required to be obtained from any Person or any Governmental
Authority with respect to a Hazardous Materials Activity which is or was
conducted by the Seller in relation to CSG, the Business, the Assets or the
Company, by the Company or by any of their past or present subsidiaries.
"ERISA" has the meaning specified in Section 3.1.
"ERISA Affiliate" has the meaning specified in Section 3.1.
"Escrow Remainder" has the meaning specified in Section 4.4.
"Exchange Act" means the Securities Exchange Act of 1934, or any
similar federal statute, and the rules and regulations of the Securities and
Exchange Commission (or of any other
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Federal Agency then administering the Exchange Act) thereunder, all as the same
shall be in effect at the time.
"Financial Statements" has the meaning specified in Section 3.1.
"GAAP" means generally accepted accounting principles, consistently
applied.
"Governmental Authority" means any local, state, federal, foreign or
international governmental authority, agency or entity, including, but not
limited to, any court, commission, tribunal or panel having jurisdiction over
the matter at issue.
"Hazardous Materials Activity" shall mean the handling
transportation, transfer, recycling, storage, use, treatment, manufacture,
investigation, removal, remediation, release, exposure of others to, sale, or
distribution of any Hazardous Material or any product containing a Hazardous
Material.
"Hazardous Material" shall mean any material or substance that is
prohibited or regulated by any Environmental Law or that has been designated by
any Governmental Authority to be radioactive, toxic, hazardous or otherwise a
danger to health, reproduction or the environment, including without limitation
asbestos, petroleum, radon gas, and radioactive matter.
"Holdco" has the meaning specified in the Preamble.
"Holdco Common Stock" has the meaning specified in Section 2.1.
"Holdco Sub Common Stock" has the meaning specified in Section 1.3.
"Holdco Sub" has the meaning specified in the Preamble.
"Indemnified Investor Parties" has the meaning specified in Section
10.1.
"Indemnified Seller Parties" has the meaning specified in Section
10.10.
"Intellectual Property" means Copyrights, Patent Rights, Trademarks
and Trade Secrets.
"Interim Balance Sheet" has the meaning specified in Section 3.1.
"Investor Damages" has the meaning specified in Section 10.1.
"Investors" has the meaning specified in the Preamble.
"Investors' Accountants" means Coopers & Lybrand, L.L.P.
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"Key Employee" means and includes the Chairman of the board of
directors, the President, any Vice-President and the Chief Financial Officer of
the Company, Holdco, or any of their subsidiaries, or any person who is not an
officer of Company, Holdco or any of their subsidiaries and is in charge of one
or more of the following functions: sales, marketing, production, or engineering
and technical development or any employee with access to the confidential
information of Holdco or the Company.
"Law" means any national, international, state, or local law,
statute, rule, regulation, ordinance, requirement for approval or permit,
judgment, injunction, decree of any court of applicable jurisdiction, or any
treaty, international understanding, or other rule which has the force of law,
including, without limitation, any Environmental Law.
"Liability" means any direct or indirect liability, indebtedness,
obligation, guarantee or endorsement, either accrued, absolute, contingent or
otherwise, as determined in accordance with GAAP.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
security interest, encumbrance, lien, charge or Claim of any kind, whether
voluntarily incurred or arising by operation of Law or otherwise, including any
agreement to give any of the foregoing, any conditional sale or other title
retention agreement, any lease in the nature thereof, and/or the filing of or
agreement to give any financing statement under the Uniform Commercial Code or
comparable law of any jurisdiction.
"Merger" has the meaning specified in Recitals.
"Past Practice" shall mean the Past Practice of the Seller with
respect to CSG, excluding any practices of the Seller after September 30, 1995
that were not consistent with practices of the Seller prior to September 30,
1995.
"Patent Rights" means U.S. and foreign patents, patent applications
pending or filed between the date hereof and the date of the Closing,
continuations, continuations-in-part, divisions, reissues or patent disclosures.
"Person" means an individual, corporation, partnership, limited
liability company, joint venture, trust, or unincorporated organization, or a
government or any agency or political subdivision thereof.
"Preferred Stock" shall mean the Series A Preferred Stock and the
Series B Preferred Stock.
"Prospects" means the prospects of the Business as described in and
contemplated by the Business Plan.
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"Restricted GAAP" means GAAP, as further limited to those accounting
principles and methods, all consistent with GAAP (except as disclosed on Exhibit
11.0), shown on Exhibit 11.0 hereto.
"SEC" has the meaning specified in Section 3.1.
"Securities Act" means the Securities Act of 1933, as amended, or
any similar Federal statute, and the rules and regulations of the Securities and
Exchange Commission (or of any other Federal agency then administering the
Securities Act) thereunder, all as the same shall be in effect at the time.
"Securities" has the meaning specified in Section 2.1.
"Seller" has the meaning specified in the Preamble.
"Seller Damages" has the meaning specified in Section 10.10.
"Seller Financial Statements" has the meaning specified in Section
3.1.
"Seller SEC Documents" has the meaning specified in Section 3.1.
"Seller's Accountants" shall mean the Seller's auditors and any
other accounting firm otherwise engaged by the Seller.
"Series A Preferred Stock" has the meaning specified in Section 2.1.
"Series B Preferred Stock" has the meaning specified in Section 1.3.
"Software" means computer software programs and software systems,
including, without limitation, all databases, compilations, tool sets,
compilers, higher level "proprietary" languages, related documentation and
materials, whether in source code, object code or human readable form.
"Subordinated Notes" has the meaning specified in Recitals.
"Surviving Corporation" has the meaning specified in Section 1.2.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Tax" or "Taxes" shall mean any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock,
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franchise profits, withholding, social security, unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not.
"Trademarks" mean United States, state and foreign trademarks,
service marks, logos, trade dress and trade names, whether registered or
unregistered, and pending applications to register the foregoing and all
goodwill associated therewith.
"Trade Secrets" mean confidential ideas, trade secrets, know-how,
concepts, methods, processes, formulae, inventions (whether or not patentable),
reports, data, customer lists, mailing lists, business plans, or other
proprietary information that provides the owner with a competitive advantage.
"Unlimited Claims" shall have the meaning set forth in Section 10.5.
"Working Capital" means the aggregate of the cash, net accounts
receivable (less any allowances for doubtful accounts), net value of inventory
(adjusted for all applicable write-downs and write-offs) less liabilities of any
kind, which liabilities will include, but not be limited to, accounts payable,
royalties payable, warranty reserves, accrued bonuses, accrued vacation,
employee expense obligations, deferred revenue, open purchase order commitments,
other commitments or obligations to customers, and liabilities under development
agreements.
"Year-End Balance Sheet" has the meaning specified in Section 1.5.
11.2 ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP, and all other financial data
submitted pursuant to this Agreement shall be prepared and calculated in
accordance with such principles.
ARTICLE XII
MISCELLANEOUS
12.1 NO WAIVER; CUMULATIVE REMEDIES. No failure or delay on the part of
the Seller, the Company, Holdco Sub, Holdco, any Investor, any Indemnified
Party, or any holder of the Subordinated Notes or the Preferred Stock, in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy hereunder. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
12.2 TERMINATION. This Agreement may be terminated prior to the Closing
(i) by the mutual consent of the parties hereto; (ii) by the Seller and the
Company if there has been a material
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misrepresentation or material breach on the part of any of the Investors, Holdco
or Holdco Sub in the representations and warranties of the Investors, Holdco or
Holdco Sub set forth herein, which, if curable, has not been cured within 10
business days after notice thereof by Seller; (iii) by Investors, Holdco, Holdco
Sub, if there has been a material misrepresentation or material breach on the
part of the Company or the Seller in the representations, warranties and
covenants of Seller or the Company set forth herein, which, if curable, has not
been cured within 10 business days after notice thereof by Investors; and (iv)
by any party hereto, if the Closing does not occur by January 31, 1996 for any
reason. Upon termination of this Agreement, no party shall have any further
obligations or liability hereunder. Sections 12.5, 12.13 and 12.14 alone shall
survive the termination of this Agreement.
12.3 AMENDMENTS, WAIVERS AND CONSENTS. Any provision in this Agreement
to the contrary notwithstanding, changes in or additions to this Agreement may
be made, and compliance with any covenant or provision herein or therein set
forth may be omitted or waived, if each of the Seller, the Company, Holdco,
Holdco Sub and the Investors shall consent in writing. Any waiver or consent may
be given subject to satisfaction of conditions stated therein and any waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
12.4 ADDRESSES FOR NOTICES, ETC. Any notices and other communications
required or permitted under this Agreement shall be effective if in writing and
delivered personally or sent by telecopier, Federal Express or registered or
certified mail, postage prepaid, addressed as follows:
If to the Seller or the Company Radius Inc.
(prior to the Closing), to: 215 Moffet Park Drive
Sunnyvale, California 94089-1374
Telecopier: (408) 541-5105
Attention: Charles Berger
with a copy to: Gordon Davidson, Esq.
Fenwick & West
Two Palo Alto Square, Suite 800
Palo Alto, California 94306
Telecopier: (415) 857-0361
If to the Company or Holdco Splash Technology, Inc. or Splash
(after the Closing), to: Technology Holdings, Inc.
c/o Radius Inc.
215 Moffet Park Drive
Sunnyvale, California 94089-1374
Telecopier: (408) 541-5015
Attention: Kevin Macgillivray
If to the Investors, Holdco (before Summit Partners
the Closing), or Holdco Sub, to: 499 Hamilton Avenue, Suite 200
Palo Alto, California 94301
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Telecopier: (415) 321-1188
Attention: Gregory M. Avis
with a copy to: Jeffrey D. Saper, Esq.
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Telecopier: (415) 493-6811
Unless otherwise specified herein, such notices or other communications
shall be deemed effective (a) on the date delivered, if delivered personally,
(b) two business days after being sent, if sent by Federal Express, (c) one
business day after being sent, if sent by telecopier with confirmation of good
transmission and receipt, and (d) three business days after being sent, if sent
by registered or certified mail. Each of the parties herewith shall be entitled
to specify another address by giving notice as aforesaid to each of the other
parties hereto.
12.5 COSTS, EXPENSES AND TAXES. Holdco agrees to pay on demand all costs
and expenses of the Investors in connection with the investigation, preparation,
execution and delivery of this Agreement and any other instruments and documents
to be delivered hereunder and the consummation of the Merger and all other
transactions contemplated hereby and thereby, including the fees and out-of-
pocket expenses of Wilson Sonsini Goodrich & Rosati, P.C., counsel for
Investors, fees for any government filings required by any of the transactions
contemplated hereby, and to pay the legal expenses of the Investors, if this
transaction is completed. In addition, if the Closing occurs, the Seller shall
pay any and all stamp and other taxes payable or determined to be payable in
connection with the execution and delivery of this Agreement and instruments and
documents to be delivered hereunder and the consummation of the transactions
hereunder, and agrees to hold the Investors harmless from and against any and
all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes and filing fees.
12.6 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the Company, the Seller, Holdco, Holdco Sub and
Investors and their respective successors and assigns, except that no party
shall have the right to assign its rights hereunder or any interest herein
without the prior written consent of the other parties.
12.7 PRIOR AGREEMENTS. This Agreement, including all Exhibits hereto and
the Disclosure Letter, constitutes the entire agreement between the parties and
supersedes any prior understandings or agreements concerning the subject matter
hereof.
12.8 SEVERABILITY. The invalidity or unenforceability of any provision
hereto shall in no way affect the validity or enforceability of any other
provision.
12.9 GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the internal laws of the State of California without regard
to principles of conflicts of law.
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12.10 HEADINGS. Article, Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
12.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
12.12 FURTHER ASSURANCES. From and after the date of this Agreement,
upon the reasonable request of the Investors, the Seller, the Company and each
of their subsidiaries shall execute and deliver such instruments, documents and
other writings as may be necessary or desirable to confirm and carry out and to
effectuate fully the intent and purposes of this Agreement.
12.13 CONFIDENTIALITY. Until the date of Closing, any information
relating to the terms of this Agreement and the transactions contemplated hereby
shall be treated as confidential and shall not be disclosed, by any of the
parties hereto, to a third party without the consent of the board of directors
of the Seller and the mutual consent of the Investors except as otherwise
required by federal securities laws. The parties hereto agree to request that
any federal or state security regulator treat as confidential any information
submitted to such regulator with respect to the transactions contemplated by
this Agreement.
12.14 PRESS RELEASE. No party hereto shall release a press release
relating to this Agreement or any of the transactions or documents contemplated
hereby without first submitting a copy of such press release to the other
parties hereto and obtaining the prior approval of such other parties to any
such press release, which approval shall not be unreasonably withheld.
12.15 INDEMNIFIED PARTIES. The Indemnified Investor Parties and
Indemnified Seller Parties that are not parties to this Agreement shall be third
parties beneficiaries hereof for the purposes of Article X.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized and in
accordance with Section 1102 of the DGCL, as of the date first above written.
SELLER:
RADIUS INC.,
a California corporation
By: /s/ Charles W. Berger
----------------------------------------
Name: Charles W. Berger
Title: Chairman and CEO
COMPANY:
SPLASH TECHNOLOGY, INC.
a Delaware corporation
By: /s/ Charles W. Berger
---------------------------------------
Name: Charles W. Berger
Title: Chairman and CEO
HOLDCO:
SPLASH TECHNOLOGY HOLDINGS,INC.
a Delaware corporation
By: /s/ Gregory M. Avis
---------------------------------------
Name:
Title:
HOLDCO SUB:
SPLASH MERGER COMPANY, INC.
a Delaware corporation
By: /s/ Gregory M. Avis
---------------------------------------
Name:
Title:
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INVESTORS:
SUMMIT SUBORDINATED DEBT FUND, L.P.
By: Summit Partners SD, L.P., General Partner
By: Stamps, Woodsum & Co., III, General Partner
By: /s/ Gregory M. Avis
-------------------------------------------
Name:
General Partner
SUMMIT VENTURES IV, L.P.
By: Summit Partners IV, L.P., General Partner
By: Stamps, Woodsum & Co., IV, General Partner
By: /s/ Gregory M. Avis
-------------------------------------------
Name:
General Partner
SUMMIT INVESTORS II, L.P.
By: /s/ Gregory M. Avis
-------------------------------------------
Name:
General Partner