<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 27, 1996
REGISTRATION NO. 333-09591
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SPLASH TECHNOLOGY HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 3577 77-0418472
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
555 DEL REY AVENUE
SUNNYVALE, CALIFORNIA 94086
(408) 328-6300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
KEVIN K. MACGILLIVRAY
PRESIDENT
AND CHIEF EXECUTIVE OFFICER
SPLASH TECHNOLOGY HOLDINGS, INC.
555 DEL REY AVENUE
SUNNYVALE, CALIFORNIA 94086
(408) 328-6300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
Jeffrey D. Saper, Esq. Carla S. Newell, Esq.
Howard S. Zeprun, Esq. Anthony M. Allen, Esq.
Brett D. Byers, Esq. GUNDERSON DETTMER STOUGH
WILSON SONSINI GOODRICH & ROSATI, VILLENEUVE FRANKLIN & HACHIGIAN, LLP
Professional Corporation 600 Hansen Way, Second Floor
650 Page Mill Road Palo Alto, California 94304
Palo Alto, California 94304 (415) 843-0500
(415) 493-9300
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
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If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_] ______________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_] ______________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) PRICE(1)(2) FEE
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<S> <C> <C> <C> <C>
Common Stock, $0.001 par
value................. 2,990,000 shares $13.00 $38,870,000 $13,403.45
==================================================================================
</TABLE>
(1) Includes up to 390,000 shares of Common Stock ($5,070,000 aggregate
offering price) which may be purchased by the Underwriters to cover over-
allotments, if any.
(2) Estimated pursuant to Rule 457(a) solely for the purpose of calculating
the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS +
+OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
SEPTEMBER 27, 1996
2,600,000 Shares
[LOGO OF SPLASH APPEARS HERE]
Common Stock
--------
All of the 2,600,000 shares of Common Stock offered hereby are being sold by
Splash Technology Holdings, Inc. ("Splash" or the "Company"). Prior to the
Offering, there has been no public market for the Common Stock of the Company.
It is currently estimated that the initial public offering price will be
between $11.00 and $13.00 per share. See "Underwriting" for a discussion of
factors to be considered in determining the initial public offering price. The
Company has applied to have its Common Stock approved for quotation on the
Nasdaq National Market under the symbol "SPLH."
--------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO DISCOUNTS AND TO
PUBLIC COMMISSIONS(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share..................................... $ $ $
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Total(3)...................................... $ $ $
</TABLE>
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(1) See "Underwriting" for information relating to indemnification of the
Underwriters and other matters.
(2) Before deducting expenses payable by the Company estimated at $1,200,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
390,000 additional shares of Common Stock solely to cover over-allotments,
if any. To the extent that the option is exercised, the Underwriters will
offer the additional shares at the Price to Public shown above. If the
option is exercised in full, the total Price to Public, total Underwriting
Discounts and Commissions and total Proceeds to Company will be $ , $
and $ , respectively. See "Underwriting."
--------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, and subject
to the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made at the
offices of Alex. Brown & Sons Incorporated, Baltimore, Maryland, on or about
, 1996.
Alex. Brown & Sons Montgomery Securities
INCORPORATED
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE>
This page contains a large copy of the Splash logo above the text "When You're
Serious About Color(TM)." This page also includes the following text:
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
Inside front cover fold out
- ---------------------------
This page contains a picture of a Splash color server (including an Apple
Macintosh computer) and Xerox photocopier. In addition, this page contains
twelve other pictures of documents produced, at least in part, with Splash. The
page also includes the following text:
Desktop Publishing -- With Splash, high quality color brochures, flyers, and
newsletters can be printed quickly and cost effectively from the desktop.
Office Graphics -- Multiple users across a corporate network can use Splash for
color charts, graphs, and high-impact presentations.
The front, inside and back covers of this prospectus were created, revised and
proofed in-house using Splash.
Graphic Arts -- Splash's specialized color and workflow capabilities can be
used in a variety of graphic arts applications.
Professional Color Publishing -- Splash technology enables magazine publishers
to produce high quality pre-proofs before going to press.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and consolidated financial statements and
notes thereto, appearing elsewhere in this Prospectus. This Prospectus contains
forward-looking statements that involve risks and uncertainties. The Company's
actual results may differ materially from the results discussed in such
forward-looking statements. Factors that may cause such a difference include,
but are not limited to, those discussed in "Risk Factors." Unless the contexts
otherwise specifies, references in this Prospectus to "Splash" and the
"Company" refer to Splash Technology Holdings, Inc. and its subsidiaries,
including its principal operating subsidiary, Splash Technology, Inc., as well
as predecessor entities.
THE COMPANY
Splash develops, produces and markets color servers that provide an
integrated link between desktop computers and digital color laser copiers and
enable such copiers to provide high quality, high speed, networked color
printing. These hybrid systems, consisting of color servers and digital color
laser copiers (referred to as connected or multifunction copiers), support
multiple uses including image scanning, image manipulation, printing and
photocopying. The Company's products feature advanced color correction, color
calibration and separations support, ease of use, time-saving workflow
functionality, simulation of many color monitors and printing presses, and
automatic correction for certain printing workflow problems.
Commercial color printing customarily involves multiple iterations of
complex, labor-intensive and costly steps, including design and composition,
color retouching and other manipulation, color separation, image setting and
proofing, and, finally, preparation of printing plates and printing on a large,
expensive commercial press. The process involves high fixed costs and
considerable time, and historically has been justified only for printing in
large volumes. The broader use of desktop color displays, desktop publishing
software, and desktop-based color scanners, as well as the increased
availability of digital color copiers and networked and desktop color printers,
has enabled a greater amount of color design and print preparation to be
performed more rapidly and at lower costs than previously possible. Although
the quality of both color copiers and desktop color displays has improved in
recent years, users hoping to take advantage of such improvements have faced
considerable difficulties due to the complexities inherent in color technology,
thus creating a need for advanced, integrated, high quality, easy-to-use, and
cost-effective color printing solutions.
Splash servers transform color copiers into effective network-based system
solutions for a variety of color printer applications from commercial and short
run printing to desktop publishing and office color printing. The Company's
products utilize open systems that can be readily integrated with corporate
networks, enabling easy access by a broad range of end users. The use of open
systems enables the Company to concentrate its development resources on value-
added solutions for end users, and provides greater flexibility by allowing use
of standard peripheral products and software. The Company believes it was the
first among its direct competitors to commercially offer a number of
significant features for multifunction copiers, including features in the areas
of color calibration, color corrections, color separations and scanning.
Splash sells its Professional Color Imaging ("PCI") Series color server
products to two of the leading providers of color copiers, Xerox Corporation
(including its affiliate in Europe, Rank Xerox) ("Xerox") and Fuji Xerox
Company Ltd. ("Fuji Xerox"). These original equipment manufacturers ("OEMs")
integrate the Company's color servers with their digital color copiers and sell
the connected systems to end users through a worldwide direct distribution
network. Users of the Company's color servers include magazine publishers,
advertising firms, graphic arts firms, publishing services providers, prepress
and printing firms, and Fortune 500 companies with in-house graphics, marketing
and advertising and publishing needs.
Splash Technology Holdings, Inc. was incorporated in Delaware in December
1995. The Company's business operated as the Color Server Group ("CSG")
division of SuperMac Technology, Inc. ("SuperMac") from late 1992 to August
1994, and after the merger of SuperMac into Radius, Inc. ("Radius") as the CSG
division of Radius from August 1994 until January 1996. In January 1996, the
Company was acquired by an investor group led by certain entities affiliated
with Summit Partners, L.P. and Sigma Partners, L.P. (the "Acquisition"). The
Company's executive offices are located at 555 Del Rey Avenue, Sunnyvale, CA
94086, and its telephone number is (408) 328-6300. See "Acquisition" and
"Certain Transactions."
3
<PAGE>
THE OFFERING
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<C> <S>
Common Stock offered by the Company.......... 2,600,000 shares
Common Stock to be outstanding after the
offering made hereby (the "Offering")....... 11,920,624 shares(1)
Use of proceeds.............................. For repayment of subordinated
promissory notes, redemption of
Series A Preferred Stock, and
general corporate purposes
including working capital. See
"Use of Proceeds."
Proposed Nasdaq National Market symbol....... SPLH
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS)
<TABLE>
<CAPTION>
SPLASH
TECHNOLOGY
PREDECESSOR BUSINESS HOLDINGS, INC.
----------------------- --------------
YEAR ENDED NINE MONTHS ENDED
SEPTEMBER 30, JUNE 30,
--------------- ----------------------
1994 1995 1995 1996(2)
------- ------- ------- --------------
(PRO FORMA)
(UNAUDITED)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Net revenue............................. $16,354 $30,472 $20,343 $ 31,334
Cost of net revenue..................... 12,068 20,723 13,737 19,882
------- ------- ------- --------
Gross profit............................ 4,286 9,749 6,606 11,452
------- ------- ------- --------
Research and development................ 1,999 3,295 2,034 3,122
Sales and marketing..................... 562 2,076 1,505 1,494
General and administrative.............. 377 891 667 955
Amortization and write-off of
technology............................. -- -- -- 22,729
------- ------- ------- --------
Income (loss) from operations........... 1,348 3,487 2,400 (16,848)
Interest expense, net................... -- -- -- 406
------- ------- ------- --------
Income (loss) before provision for
income taxes........................... 1,348 3,487 2,400 (17,254)
Provision for (benefit from) income
taxes.................................. 99 1,395 960 (6,929)
------- ------- ------- --------
Net income (loss)....................... $ 1,249 $ 2,092 $ 1,440 $(10,325)
======= ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------
ACTUAL AS ADJUSTED(3)
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<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital.......................................... $ 5,955 $10,345
Total assets............................................. 28,502 32,892
Long term debt........................................... 8,600 --
Stockholders' equity..................................... 7,522 20,273
</TABLE>
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(1) Based on the number of shares outstanding as of June 30, 1996. Excludes an
aggregate of approximately 250,000 shares of Common Stock issuable on the
exercise of options and warrants outstanding as of June 30, 1996 at a
weighted average exercise price of $0.47 per share; approximately 14,000
shares of Common Stock issuable on the exercise of options granted after
June 30, 1996; approximately 2,350,000 shares of Common Stock reserved for
future grants under the Company's 1996 Stock Option Plan; and 175,000
shares of Common Stock reserved for issuance under the Company's 1996
Employee Stock Purchase Plan. Also excludes 15,426 shares of Series A
Preferred Stock to be redeemed upon the closing of the Offering. See "Use
of Proceeds," "Management--Compensation Plans" and Notes 8 and 12 of Notes
to Consolidated Financial Statements.
(2) Represents the results of operations of CSG for the four months ended
January 31, 1996 plus the results of operations of the Company for the five
months ended June 30, 1996. There were no significant pro forma
adjustments.
(3) Adjusted to reflect the sale of 2,600,000 shares of Common Stock offered by
the Company hereby at an assumed public offering price of $12.00 per share,
after deducting estimated underwriting discounts and commissions and
estimated offering expenses and application of the net proceeds therefrom.
See "Use of Proceeds" and "Capitalization."
--------------
This Prospectus includes trademarks and trade names of the Company and other
corporations.
--------------
Except for the Consolidated Financial Statements and as otherwise noted, all
information in this Prospectus has been adjusted to give effect to (i) the
conversion of each outstanding share of Series B Preferred Stock into Common
Stock upon the closing of the Offering and (ii) the filing of an Amended and
Restated Certificate of Incorporation on or prior to the closing of the
Offering to effect a 3.5-for-1 split of the Common Stock and to increase the
authorized number of shares of Common Stock and Preferred Stock. See
"Capitalization," "Description of Capital Stock" and "Underwriting."
4
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
shares of Common Stock offered hereby. This Prospectus contains forward-
looking statements that involve risks and uncertainties. The Company's actual
results may differ materially from the results discussed in such forward-
looking statements. Factors that may cause such a difference include, but are
not limited to, those discussed below.
Short Period of Independent Operations; No Assurance of Future
Profitability. Prior to the Acquisition in January 1996, the business of the
Company had been operated as a division of Radius and, prior to the merger of
SuperMac into Radius, as a division of SuperMac. Moreover, Splash was
dependent on Radius through May 1996 for certain financial and administrative
services and related support functions. Accordingly, the Company has had
limited experience operating as an independent entity, and there can be no
assurance that the Company will be able to operate effectively as an
independent company. Moreover, the Company only began implementing independent
accounting systems, financial, operational and management controls, and
reporting systems and procedures in February 1996. The Company believes that
further improvements in financial, management and operational controls will
continue to be needed to manage any expansion of the Company's operations. The
failure to implement such improvements could have a material adverse effect
upon the Company's business, operating results and financial condition.
Although the Company's net revenue has increased each year since fiscal
1994, the Company's limited history of operations as an independent entity
make reliable predictions of future operating results difficult or impossible.
In particular, the Company's recent revenue growth should not be considered
indicative of future results. There can be no assurance that any of the
Company's business strategies will be successful or that the Company will be
able to sustain growth on a quarterly or annual basis. Although the Company
was profitable for the first nine months of fiscal 1996 (pro forma and before
purchase accounting adjustments) and the first five months of independent
operations through June 30, 1996 (before purchase accounting adjustments),
there can be no assurance that the Company will continue to be profitable on
an annual or quarterly basis in the future. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Fluctuations in Operating Results; Seasonal Purchasing Patterns. The
Company's operating results have fluctuated and will likely continue to
fluctuate in the future on a quarterly and annual basis as a result of a
number of factors, many of which are outside the Company's control. These
fluctuations are in part due to the purchasing patterns of the Company's two
customers, Xerox and Fuji Xerox. These customers have historically made, and
are expected to continue to make, a significant portion of their purchases of
the Company's products in the second half of the Company's fiscal year. As a
result, the Company's sales have historically been significantly lower, and
are expected to continue to be lower, in the first quarter of the Company's
fiscal year than in the immediately preceding fourth quarter. In addition, any
increases in inventories by the Company's customers could also result in
variations in the timing of purchases by such customers. For example, in May
1996, as the Company transitioned from its Power Series line of products to
its PCI Series line of products, Xerox informed Splash that it held in its
inventory a substantial quantity of Power Series products accumulated since
January 1996. As a result of the Company's product transition and Xerox's
accumulation of inventory of these products, sales of Power Series products
shipped to Xerox between January 1996 and April 1996 are recorded as net
revenue when Xerox sells these products to end users. All other Power Series
and PCI Series product sales are recorded as net revenue upon shipment to the
OEM customer. There can be no assurance that the Company will receive
sufficient inventory information from its OEM customers over time or that the
Company will be able to prevent a recurrence of a similar problem in the
future. In addition, announcements by the Company or its competitors of new
products and technologies could cause customers to defer purchases of the
Company's existing products. In the event that anticipated orders
5
<PAGE>
from end users fail to materialize, or delivery schedules are deferred or
canceled as a result of the above factors or other unanticipated factors, it
would materially and adversely affect the Company's business, operating
results and financial condition.
Results in any period could also be affected by changes in market demand,
competitive market conditions, sales promotion activities by the Company, its
OEM customers or its competitors, market acceptance of new or existing
products, sales of color copiers with which the Company's products are
compatible, the cost and availability of components, the mix of the Company's
customer base and sales channels, the amount of any third party funding of
development expenses, the mix of products sold, the Company's ability to
effectively expand its sales and marketing organization, the Company's ability
to attract and retain key technical and managerial employees, and general
economic conditions. As a result, the Company believes that period-to-period
comparisons of its results of operations are not necessarily meaningful and
should not be relied upon as indicative of future performance. Due to all of
the foregoing factors, the Company's operating results in one or more future
periods may be subject to significant fluctuations. In the event this results
in the Company's financial performance being below the expectations of public
market analysts and investors, the price of the Company's Common Stock would
be materially and adversely affected.
The Company's gross margin is affected by a number of factors, including
product mix, product pricing, and manufacturing and component costs. The
Company may be required to reduce prices in response to competitive pressure
or increase spending to pursue new market opportunities. In this regard, in
the event of significant price competition in the market for color copier
servers or competitive systems, the Company could be at a significant
disadvantage compared to its competitors, many of which have substantially
greater resources (and, in the case of the Company's principal competitor,
Electronics for Imaging, Inc. ("EFI"), lower product costs) than the Company
and therefore could more readily withstand an extended period of downward
pricing pressure. Any decline in average selling prices of a particular
product which is not offset by a reduction in production costs or by sales of
other products with higher gross margins would decrease the Company's overall
gross margin and adversely affect the Company's operating results. The Company
establishes its expenditure levels for product development and other operating
expenses based on projected sales levels and margins, and expenses are
relatively fixed in the short term. Moreover, the Company's overall expense
level is expected to increase as the Company builds corporate infrastructure
to replace services previously provided by Radius and to support expansion of
operations. Accordingly, if sales are below expectations in any given period,
the adverse impact of the shortfall on the Company's operating results may be
increased by the Company's inability to adjust spending in the short term to
compensate for the shortfall. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Emerging Color Server Market. The market for the Company's color server
products has only recently begun to develop. Because the markets for digital
color copiers and connected color servers are relatively new, and because
current and future competitors are likely to continue to introduce competing
solutions, it is difficult to predict the rate at which these markets will
grow, if at all. If the color server market fails to grow, or grows more
slowly than anticipated, the Company's business, operating results and
financial condition will be adversely affected. The Company intends to
continue to spend resources educating potential customers about color servers.
However, there can be no assurance that such expenditures will enable the
Company's products to achieve any additional degree of market acceptance.
Moreover, the Company has historically focused on certain segments of the
market (the prepress and graphic arts segments) and has had only limited
penetration to date into the broader office segment or other market segments.
There can be no assurance the Company will be able to maintain or increase its
presence in its existing market segments or to successfully penetrate such
additional market segments. See "Business--Industry Background," "--Markets
and Customers" and "--Competition."
6
<PAGE>
Dependence on Xerox and Fuji Xerox. The Company's products operate only with
certain color laser copiers offered by Xerox and Fuji Xerox, and the Company
currently sells its products solely to Xerox and Fuji Xerox, which resell the
Company's products on an OEM basis to their color copier end users. Sales to
Xerox in fiscal 1994 and 1995 and the nine months ended June 30, 1996 accounted
for approximately 40%, 41% and 49%, respectively, of the Company's net revenue,
and sales to Fuji Xerox in such periods accounted for approximately 60%, 59%
and 51%, respectively, of net revenue. As a result, sales of the Company's
products have been and will continue to be heavily influenced by the market
acceptance of the Xerox and Fuji Xerox color copiers with which the Company's
products operate and the sales efforts of Xerox and Fuji Xerox with respect to
Splash products. Xerox and Fuji Xerox face substantial competition from other
manufacturers of color copiers, including Canon Inc. ("Canon"), which the
Company believes has the largest share of the worldwide market for color
copiers. If sales of the color copiers of Xerox and Fuji Xerox with which
Splash's products are compatible decrease, the Company's business, operating
results and financial condition would be materially and adversely affected.
Similarly, if Xerox or Fuji Xerox were to introduce color copiers that are not
compatible with the Company's products, or if Xerox or Fuji Xerox were to
introduce color copiers that already contain a significant portion of the
functionality of the Company's products so as to render the Company's products
unnecessary, the Company's business, operating results and financial condition
would be materially and adversely affected. In addition, Fuji Xerox color
copiers are produced in a single location in Japan, and any disruption of
production at such facility could materially and adversely affect the Company's
business, operating results and financial condition.
As a result of its reliance on Xerox and Fuji Xerox, the Company currently
has a very small sales and marketing organization and has limited experience
with direct sales efforts. Any change in the sales and marketing efforts of
Xerox or Fuji Xerox with respect to Splash's products, including any reduction
in the size or effectiveness of the Xerox or Fuji Xerox sales and marketing
forces, or changes in incentives for Xerox or Fuji Xerox salespersons to sell
Splash products or color servers produced by competitors of Splash, could have
a material adverse effect on the Company's business, operating results and
financial condition.
Xerox currently sells a substantial number of color servers made by companies
other than Splash, including those of the Company's principal competitor, EFI,
and Fuji Xerox has recently commenced sales of EFI color servers. Either Xerox
or Fuji Xerox may choose to promote the use of color servers manufactured by
competitors of the Company to the detriment of sales of the Company's products,
may choose to manufacture color servers themselves, may choose to manufacture
only color copiers that are not compatible with Splash products, or may
otherwise reduce or cease purchases and sales of Splash color servers. The
Company does not have contracts with Xerox and Fuji Xerox with respect to its
PCI Series products and is currently operating on a purchase order basis with
these customers. Although the Company is currently negotiating an agreement
with Xerox and Fuji Xerox for its PCI Series products, there can be no
assurance that any such agreement will be completed or that the Company will
continue to receive orders from Xerox or Fuji Xerox. Any decrease in the level
of sales to Xerox or Fuji Xerox would have a material adverse effect on the
Company's business, operating results and financial condition.
Inventory Risks. Xerox and Fuji Xerox may from time to time carry excess
inventory of Splash color servers, inaccurately project future demand for
Splash products or fail to optimally manage their ordering of Splash products,
any of which could result in a significant decrease in orders from such
customers in subsequent periods. For example, in May 1996, as the Company
transitioned from its Power Series line of products to its PCI Series line of
products, Xerox informed Splash that it held in its inventory a substantial
quantity of Power Series products accumulated since January 1996. Xerox has
indicated to Splash that, to eliminate this inventory and to permit Xerox to
introduce the new PCI Series products, Xerox substantially reduced the selling
prices of the Power Series products beginning in June 1996. Sales by Xerox of
the Power Series products at a discount may have resulted or could result in
reduced sales of the Company's PCI Series products and Xerox may not be able to
continue to sell
7
<PAGE>
Splash products at historical levels once it returns to a policy of not
discounting Splash products. Further, the reduced margin that Xerox will
experience as a result of its efforts to sell off its inventory of the Power
Series products may impair Splash's relationship with Xerox and thus could
result in reduced future sales of Splash products by Xerox. Xerox may have
difficulty selling color server kits for the Power Series products, which do
not include a computer platform, because these units require the use of an
Apple Power Macintosh based upon the NuBus architecture no longer used in
Apple Power Macintosh computers. Thus, a purchaser of the earlier generation
color server kit must either already possess a NuBus based Apple Power
Macintosh or purchase one used. Moreover, although Xerox has no commercial
right of return with respect to the Company's products, there can be no
assurance that the Company will not elect to make accommodations to Xerox in
light of its status as a significant customer. Reduced sales of Splash
products by Xerox or any financial or other accommodation made to Xerox could
have a material adverse effect on the business, operating results and
financial condition of Splash. There can be no assurance that the Company will
receive sufficient inventory information from Xerox or other customers over
time or that the Company will in any event be able to prevent recurrence of a
similar problem in the future, which could have a material adverse effect on
the Company's business, operating results and financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Dependence on Adobe Systems Incorporated. The Company's products depend on
the PostScript page description language software developed by Adobe Systems
Incorporated ("Adobe") and licensed by the Company from Adobe on a non-
exclusive basis. Any delay in the release of future versions of PostScript by
Adobe or in the upgrade of the Company's products to be compatible with future
versions of PostScript, or any material defects in any future versions of
PostScript software, could have a material adverse effect on the Company's
business, operating results and financial condition. The Company is required
to pay a royalty for each copy of PostScript that is incorporated in Splash
products, which royalty constitutes a substantial portion of the total
manufactured cost of the Company's products. In addition, the Company is
required to permit testing by Adobe of the beta release version of the
Company's products, and the Company cannot begin shipping any version until
such version meets Adobe's quality standards. The license agreement between
the Company and Adobe expires in September 1997, subject to renewal upon
mutual consent. There can be no assurance that Adobe will continue to enjoy
its leadership position in the market, renew the current license at the end of
its term or license future versions of PostScript to Splash on terms favorable
to Splash or at all. If the license agreement between Adobe and the Company is
terminated for any reason or the Company's relationship with Adobe is
impaired, the Company could be required to change to an alternative page
description language which would require the expenditure of significant
resources and time and could significantly limit the marketability of the
Company's products. Any increase in royalties payable to Adobe also could have
a material adverse effect on the Company's operating results. In addition, the
Adobe PostScript software is incorporated in the products of certain of the
Company's competitors. The Company's business could be materially and
adversely affected if Adobe were to make available to the Company's
competitors future versions of Adobe PostScript software that include
enhancements to the Adobe PostScript software that were originally developed
or implemented by Splash. See "Business--Competition" and "--Intellectual
Property."
Dependence on Apple Computer, Inc. All of the Company's current products
require the use of an Apple Power Macintosh computer as a computer platform.
Apple has recently experienced significant financial difficulties and losses
in market acceptance, and its products have particularly low levels of market
acceptance in the office color printing market into which the Company is
seeking to expand. If Apple were to discontinue production of the Power
Macintosh models with which Splash products operate or were unable to provide
or otherwise cease to provide an acceptable level of end user customer
support, the Company's business, operating results and financial condition
would be materially and adversely affected. For example, Apple phased out the
manufacture of Power Macintosh products based on the NuBus architecture in the
second half of calendar 1995 in favor of Power Macintosh
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products based on the PCI bus architecture. As a result, the Company had to
expend significant resources and faced substantial risk of technological
failure or lack of market acceptance in developing and introducing its PCI-
based products. Any efforts of the Company to migrate its products to a
different computer platform would require a substantial expenditure of
resources and time, and there can be no assurance that any such products can
be successfully developed or introduced in a timely fashion and at competitive
cost or otherwise achieve widespread market acceptance. See "Business--
Manufacturing."
Dependence on Single Product Line. Substantially all of Splash's current
shipments consist, and are expected to continue to consist, of the Company's
PCI Series of color server products. Because of this product concentration, a
decline in demand for or pricing of these products would have a material
adverse effect on the Company's business, operating results and financial
condition, whether as a result of a decline in sales of complementary Xerox
and Fuji Xerox copiers; a further decline in the market for Apple Power
Macintosh computers; increased sales by Xerox or Fuji Xerox of color servers
offered by competitors of the Company or developed internally by Xerox or Fuji
Xerox; new product introductions by competitors; price competition; or
technological change. Any decline in the market for this product line or any
failure to timely produce new and enhanced products would have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business--Products and Technology."
Rapid Technological Change; Dependence on New Product Introductions. The
graphics and color reproduction, color processing and personal computing
markets are characterized by rapid changes in customer requirements, frequent
introductions of new and enhanced products, and continuing and rapid
technological advancement. To compete successfully, the Company must continue
to design, develop, manufacture and sell new products that provide
increasingly higher levels of performance and reliability, take advantage of
technological advancements and changes and respond to new customer
requirements. The Company's success in designing, developing, manufacturing
and selling new products will depend on a variety of factors, including the
identification of market demand for new products, product selection, timely
implementation of product design and development, product performance, cost-
effectiveness of current products and products under development, effective
manufacturing processes and the success of promotional efforts.
The Company has recently transitioned its product offerings from its Power
Series products to its PCI Series products, and there can be no assurance that
the PCI Series or any future products will achieve widespread market
acceptance. In addition, the Company has in the past experienced delays in the
development of new products and the enhancement of existing products, and such
delays may occur in the future. If the Company is unable, due to resource
constraints or technological or other reasons, to develop and introduce new
products or versions in a timely manner, or if such new products or releases
do not achieve timely and widespread market acceptance, it would have a
material adverse effect on the Company's business, operating results and
financial condition. See "Business--Products and Technology" and "--Research
and Development."
Competition. The markets for the Company's products are characterized by
intense competition and rapid change. The Company competes directly with other
independent manufacturers of color servers and with copier manufacturers, and
indirectly with printer manufacturers and others. The Company has a number of
direct competitors for color server products, the most significant of which is
EFI. Splash also faces competition from copier manufacturers that offer
internally developed color server products, such as a non-PostScript color
server offered by Fuji Xerox, or that incorporate color server features into
their copiers. In addition, the Company faces competition from desktop color
laser printers that offer increasing speed and color server capability. As
component prices decrease and the processing power and other functionality of
copiers, printers and computers increases, it becomes more likely that copier,
printer and computer manufacturers will continue to add color server
functionality to their systems, which could reduce the market for the
Company's existing line of products.
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The Company also competes indirectly with manufacturers of electronic color
prepress systems, which offer similar functionality for the short-run and
commercial printing market as is provided by the Company's products. The
Company also competes indirectly with providers of color separation, color
editing and page layout software. While such software typically is
complementary to the Company's systems, such software can also be competitive
with the Company's systems and may become increasingly competitive to the
extent that the providers of such software extend the functionality of their
products in future releases.
Many of the Company's current and potential direct and indirect competitors
have longer operating histories, are substantially larger, and have
substantially greater financial, technical, manufacturing, marketing and other
resources than Splash. A number of these current and potential competitors also
have substantially greater name recognition and a significantly larger
installed base of products than the Company, which could provide leverage to
such companies in their competition with Splash. The Company expects
competition to increase to the extent the color server market grows, and such
increased competition may result in price reductions, reduced gross margins and
loss of market share, any of which could materially adversely affect the
Company's business, operating results and financial condition. As a result of
their greater resources, many of such competitors are in a better position than
Splash to withstand significant price competition or downturns in the economy.
There can be no assurance that Splash will be able to continue to compete
effectively, and any failure to do so would have a material adverse effect upon
the Company's business, operating results and financial condition. See
"Management Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Competition."
Management of Expanding Operations. The growth in the Company's business has
placed, and any further expansion would continue to place, a significant strain
on the Company's limited personnel, management and other resources. The
Company's ability to manage any future expansion effectively will require it to
attract, train, motivate and manage new employees successfully, to integrate
new management and employees into its overall operations and to continue to
improve its operational, financial and management systems. In this regard, the
Company's Chief Financial Officer and Vice President, Finance and
Administration joined the Company on March 29, 1996, and the Company currently
does not have and has been searching for a Vice President, Sales and Marketing.
Moreover, the Company expects to increase significantly the size of its
domestic and international sales support staff and the scope of its sales and
marketing activities, and to hire additional research and development
personnel. The Company's failure to manage any expansion effectively, including
any failure to integrate new management and employees or failure to continue to
implement and improve financial, operational and management controls, systems
and procedures, could have a material adverse effect on the Company's business,
operating results and financial condition.
Dependence on Third Party Manufacturers. The Company outsources the
manufacture of its products to third party subcontract manufacturers including
Manufacturing Services, Ltd. ("MSL"), located in Sunnyvale, California and
Logistix Incorporated ("Logistix") located in Fremont, California. MSL
purchases the components used in Splash boards from its component suppliers and
performs double-sided active surface mount assembly, in-circuit test,
functional test and system test of the printed circuit boards used in the
Splash PCI Series products, on a turnkey basis. MSL also performs in-warranty
and out-of-warranty repair of failed boards for the Splash PCI Series products.
The Company directly purchases Apple Power Macintosh computers, monitors and
memory, and furnishes these components, as well as the MSL-assembled boards, to
Logistix for final assembly. Logistix directly purchases a small portion of the
components used in Splash color servers and does all final assembly and system
configuration. Other subcontract manufacturers perform similar services with
respect to the Splash Power Series product line.
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While the Company's subcontract manufacturers conduct quality control and
testing procedures specified by the Company, the Company has from time to time
experienced manufacturing quality problems. Although the Company does not
believe any such problem had a material adverse effect on the Company's
business, there can be no assurance that quality problems will not occur again
in the future or that any such problem would not have a material adverse
effect on the Company's business, operating results and financial condition.
If the Logistix, MSL or other third party manufacturing facilities utilized
by the Company become unavailable to the Company, or if the manufacturing
operations at these facilities are slowed, interrupted or terminated, the
Company's business, operating results and financial condition could be
adversely affected. Although the Company believes that there are a variety of
companies available with the capability to provide the Company with such
services, there can be no assurance that the Company would be able to enter
into alternative third party manufacturing arrangements on terms satisfactory
to the Company, in a timely fashion, or at all. See "Business--Manufacturing."
Dependence on Component Availability and Cost. The Company purchases
components comprising a significant portion of the total cost of its color
servers. The balance of the inventory required to manufacture the Company's
products is purchased by Logistix. The Company currently sources most of its
Power Macintosh computers that serve as the platforms for its color servers
exclusively from Apple. The Company is currently operating on a purchase order
basis with Apple.
Certain components necessary for the manufacture of the Company's products
are obtained from a sole supplier or a limited group of suppliers. These
include Apple Power Macintosh computers, certain ASICs and other semiconductor
components. The Company does not maintain any long-term agreements with any of
its suppliers of components. Because the purchase of certain key components
involves long lead times, in the event of unanticipated increases in demand
for the Company's products, the Company could be unable to manufacture certain
products in a quantity sufficient to meet end user demand. The Company also
purchases memory modules from a single supplier. Although other sources are
available, a change in memory supplier could require time to effect and could
impact production. This risk would be exacerbated in times of memory supply
shortages. Any inability to obtain adequate deliveries of any of the
components or any other circumstance that would require the Company to seek
alternative sources of supply could affect the Company's ability to ship its
products on a timely basis, which could damage relationships with current and
prospective customers and could therefore have a material adverse effect on
the Company's business, financial condition and operating results. Moreover,
there can be no assurance that alternative sources of supply would be
available on reasonably acceptable terms, on a timely basis, or at all. The
Company has from time to time experienced shortages in deliveries of ASICs
from Toshiba Corporation, which shortages have impacted production volume
capabilities. In order to attempt to mitigate the risk of such shortages in
the future, the Company intends to increase its inventory of components for
which the Company is dependent upon sole or limited source suppliers. As a
result, the Company may be subject to an increasing risk of inventory
obsolescence in the future, which could materially and adversely affect its
operating results and financial condition.
The market prices and availability of certain components, particularly
memory and other semiconductor components and, to a lesser extent, Apple Power
Macintosh computers, which collectively represent a substantial portion of the
total manufactured cost of the Company's products, have fluctuated
significantly in the past. Significant fluctuations in the future could have a
material adverse effect on the Company's operating results and financial
condition. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business--Manufacturing."
Dependence on Proprietary Technology; Reliance on Third Party Licenses. The
Company relies in part on trademark, copyright and trade secret law to protect
its intellectual property in the United States and abroad. The Company seeks
to protect its software, documentation and other written materials
11
<PAGE>
under trade secret and copyright laws, which afford only limited protection and
there can be no assurances that the steps taken by the Company will prevent
misappropriation of its technology. The Splash software included as a part of
the Company's products is sold pursuant to "shrink wrap" licenses that are not
signed by the end user and, therefore, may be unenforceable under the laws of
certain jurisdictions. The Company does not own any issued patent. There can be
no assurance that any trademark or copyright owned by the Company, or any
patent, trademark or copyright obtained by the Company in the future, will not
be invalidated, circumvented or challenged, that the rights granted thereunder
will provide competitive advantages to the Company or that any of the Company's
pending or future patent applications will be issued with the scope of the
claims sought by the Company, if at all. In addition, the laws of some foreign
countries do not protect the Company's proprietary rights as fully as do the
laws of the United States. Thus, effective intellectual property protection may
be unavailable or limited in certain foreign countries. There can be no
assurance that the Company's means of protecting its proprietary rights in the
United States or abroad will be adequate or that competition will not
independently develop technologies that are similar or superior to the
Company's technology, duplicate the Company's technology or design around any
patent of the Company. Moreover, litigation may be necessary in the future to
enforce the Company's intellectual property rights, to determine the validity
and scope of the proprietary rights of others or to defend against claims of
infringement or invalidity. Such litigation could result in substantial costs
and diversion of management time and resources and could have a material
adverse effect on the Company's business, operating results and financial
condition.
There have been substantial amounts of litigation in the computer and related
industries regarding intellectual property rights, and there can be no
assurance that third parties will not claim infringement by the Company of
their intellectual property rights. In particular, EFI filed suit against
Radius in November 1995, alleging infringement of an EFI patent by Splash's
predecessor, CSG, and requesting unspecified monetary damages and injunction
relief. The technology which is the subject of the patent claim was acquired by
Splash in the Acquisition, and EFI could add Splash as a defendant to this suit
at any time. Although a portion of the purchase price in the Acquisition was
placed in escrow pending resolution of the EFI litigation, there can be no
assurance that any such litigation against Splash would not have a material
adverse effect on the Company's business, operating results and financial
condition. The addition of Splash as a defendant in the EFI suit or any other
claims that the Company is infringing on proprietary rights of others, with or
without merit, could be time consuming to defend, result in costly litigation,
divert management's attention and resources, and cause product shipment delays.
If the Company were found to be infringing on the intellectual property rights
of any third party, the Company could be subject to liabilities for such
infringement, which liabilities could be material, and could be required to
seek licenses from other companies or to refrain from using, manufacturing or
selling certain products or using certain processes. Although holders of
patents and other intellectual property rights often offer licenses to their
patent or other intellectual property rights, no assurance can be given that
licenses would be offered or that the terms of any offered license would be
acceptable to the Company. Any need to redesign the products or enter into any
royalty or licensing agreement could have a material adverse effect on the
Company's business, operating results and financial condition.
The Company relies upon certain software licensed from third parties. There
can be no assurance that the software licensed by the Company will continue to
provide competitive features and functionality or that licenses for software
currently utilized by the Company or other software which the Company may seek
to license in the future will be available to the Company on commercially
reasonable terms. The loss of, or inability to maintain, existing licenses
could result in shipment delays or reductions until equivalent software or
suitable alternative products could be developed, identified, licensed and
integrated, and the inability to license key new software that may be
developed, on commercially reasonable terms, would have a material adverse
effect on the Company's competitive position. Any such event would materially
adversely affect the Company's business, operating results and financial
condition. See "Acquisition," "Business--Intellectual Property" and "Certain
Transactions."
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Need for Additional Capital. The Company believes that in order to remain
competitive it may require additional financial resources over the next
several years for working capital, research and development, expansion of
sales and marketing resources, and capital expenditures. The Company believes
that it will be able to fund planned expenditures for at least the next twelve
months from a combination of the proceeds of the Offering, cash flow from
operations and existing cash balances. Assuming completion of the Offering and
the application of $27.8 million of the net proceeds therefrom for repayment
of the subordinated notes and redemption of the Series A Preferred Stock, the
Company would have had as of June 30, 1996 approximately $10.3 million in
working capital, including approximately $11.0 million in cash and cash
equivalents. The Company's operations generated cash flow of $6.8 million
during the nine months ended June 30, 1996. The Company believes that it will
be able to satisfy its cash requirements for at least the next twelve months
from a combination of the proceeds of the Offering, cash flow from operations
and the Company's bank line of credit. However, upon completion of the
Offering, the Company will continue to have limited capital resources and may
require additional capital sooner. There can be no assurance that the Company
will be able to obtain additional financing as needed on acceptable terms or
at all. See "Use of Proceeds," "Capitalization," "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" and "Certain Transactions."
Risk of Product Defects. The Company's products consist of hardware and
software developed by Splash and others. Products such as those of the Company
may contain undetected errors when first introduced or when new versions are
released, and the Company has in the past discovered software and hardware
errors in certain of its new products after their introduction. Although the
Company has not experienced material adverse effects resulting from any errors
to date, there can be no assurance that errors would not be found in new
versions of Splash products after commencement of commercial shipments, or
that any such errors would not result in a loss of or delay in market
acceptance and have a material adverse effect upon the Company's business,
operating results and financial condition. In addition, errors in the
Company's products (including errors in licensed third party software)
detected prior to new product release could result in delay in the
introduction of new products and incurring of additional expense, which also
could have a material adverse effect upon the Company's business, operating
results and financial condition. See "Business--Products and Technology."
International Sales. All sales to Fuji Xerox are international sales. As a
result, international sales accounted for approximately 60%, 59% and 51% of
net revenue in fiscal 1994 and 1995 and in the nine months ended June 30,
1996, respectively. In addition, although all sales to Xerox are U.S. sales,
Xerox has a significant international customer base, and the Company believes
that a significant portion of Splash products purchased by Xerox are resold
outside the United States. The Company expects that direct and indirect
international sales will continue to represent a substantial portion of its
net revenue for the foreseeable future. While the Company's international
sales are presently denominated in U.S. dollars, fluctuations in currency
exchange rates could cause the Company's products to become relatively more
expensive to end users in a particular country, leading to pressure to reduce
the U.S. dollar denominated price to the Company's OEM customers, which could
in turn result in a reduction in net revenue and profitability. The Company's
business, operating results and financial condition would be materially
adversely affected if foreign markets do not continue to develop. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Sales and Marketing."
Financial Difficulties of a Major Shareholder; Potential Sales of Common
Stock. Radius, which will beneficially own approximately 14.6% of the
outstanding shares of the Common Stock immediately following the Offering, has
faced significant financial difficulties in recent periods, including the
period before the Acquisition, and continues to face such difficulties. Radius
has certain rights to demand that the Company register Radius' shares of
Common Stock under the Securities Act of 1933, as amended (the "Securities
Act"), which registration would permit the sale by Radius of the shares
registered in the public market. If Radius were to enter bankruptcy, Radius
might have the ability to sell a substantial portion of its holdings of Common
Stock in the public market without regard to requirements for registration of
such shares under the Securities Act or the requirements of Rule 144
promulgated under
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<PAGE>
the Securities Act and may have the ability to avoid its obligations under the
lock-up agreement with respect to Common Stock held by it. Sales of
substantial amounts of the shares of Common Stock held by Radius in the public
market or the prospect of such a sale could adversely affect the market price
of the Company's Common Stock. See "Principal Stockholders."
Dependence on Key Personnel. Because of the nature of the Company's
business, the Company is highly dependent on the continued service of, and on
its ability to attract and retain, qualified technical, marketing, sales and
managerial personnel, including senior members of management. The competition
for such personnel is intense, and the loss of any of such persons, as well as
the failure to recruit additional key technical and sales personnel in a
timely manner, would have a material adverse effect on the Company's business
and operating results. There can be no assurance that the Company will be able
to continue to attract and retain the qualified personnel necessary for the
development of its business. The Company currently does not have employment
contracts with any of its employees and does not maintain key person life
insurance policies on any of its employees. See "Business--Employees" and
"Management."
Control By Principal Stockholders, Officers and Directors; Antitakeover
Effects of Certificate of Incorporation and Delaware Law. Immediately
following the Offering, the Company's principal stockholders, officers,
directors and their affiliates will beneficially own approximately 74.6% of
the outstanding shares of the Common Stock. As a result, such persons, acting
together, would have the ability to control all matters requiring stockholder
approval, including the election of directors and approval of significant
corporate transactions. In addition, effective upon the closing of the
Offering, the Board of Directors will have the authority to issue up to
5,000,000 shares of undesignated Preferred Stock, to determine the powers,
preferences and rights and the qualifications, limitations or restrictions
granted to or imposed upon any unissued series of undesignated Preferred
Stock, and to fix the number of shares constituting any series and the
designation of such series, without any further vote or action by the
Company's stockholders. The Preferred Stock could be issued with voting,
liquidation, dividend and other rights superior to the rights of the Common
Stock. The concentration of ownership and the issuance of Preferred Stock
under certain circumstances could have the effect of delaying or preventing a
change in control of the Company. The Company's Certificate of Incorporation
also provides for a classified board of directors such that only approximately
one-third of the board is selected at each annual meeting of stockholders. A
classified board may have the effect of deferring or discouraging a charge in
control of the Company. The Company's Certificate of Incorporation also
eliminates cumulative voting in the election of directors. See "Principal
Stockholders" and "Description of Capital Stock."
Benefit of Transaction to Existing Stockholders. The Offering will provide
substantial benefits to existing stockholders of the Company, particularly
Radius and certain entities affiliated with Summit Partners, L.P. and Sigma
Partners, L.P. The existing stockholders of the Company will benefit from the
creation of a public market for the Common Stock held by them after the
closing of the Offering. In addition, the Company will use approximately $15.4
million of the proceeds of the Offering to redeem all outstanding shares of
the Company's Series A Preferred Stock and approximately $8.0 million of the
proceeds to repay all outstanding subordinated promissory notes. Upon the
closing of the Offering, the shares of Common Stock then held by Radius will
have an aggregate market value of approximately $20.9 million, based upon an
assumed public offering price of $12.00 per share. Certain entities affiliated
with Summit Partners, L.P. which previously acquired shares of Common Stock
and Series A Preferred Stock for an aggregate of $14.0 million in cash and
subordinated promissory notes for an aggregate of $8.0 million in cash (i)
will receive approximately $13.9 million of the proceeds of the Offering upon
the redemption of all outstanding shares of the Company's Series A Preferred
Stock coincident with the closing of the Offering, (ii) will receive
approximately $8.0 million of the proceeds of the Offering upon repayment of
outstanding subordinated promissory notes, and (iii) will hold, upon the
closing of the Offering, shares of Common Stock having an aggregate value
equal to approximately $70.7 million, based on an assumed public offering
price of $12.00 per share. Certain entities affiliated with
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<PAGE>
Sigma Partners, L.P. which acquired shares of Common Stock and Series A
Preferred Stock for an aggregate of approximately $1.5 million in cash (i)
will receive approximately $1.5 million of the proceeds of the Offering upon
the redemption of all outstanding shares of the Company's Series A Preferred
Stock coincident with the closing of the Offering and (ii) will hold, upon the
closing of the Offering, shares of Common Stock having an aggregate value
equal to approximately $7.0 million based on an assumed public offering price
of $12.00 per share. See "Use of Proceeds" and "Principal Stockholders."
Shares Eligible for Future Sale. Sale of substantial amounts of shares in
the public market or the prospect of such sales could adversely affect the
market price of the Company's Common Stock. Upon completion of the Offering,
the Company will have outstanding 11,920,624 shares of Common Stock. Of these
shares, with the exception of the 2,600,000 shares offered hereby, all shares
of Common Stock held by current stockholders are subject to lock-up agreements
under which the holders of such shares have agreed not to sell or otherwise
dispose of any of their shares for a period of 180 days after the date of this
Prospectus without the prior written consent of the Representatives of the
Underwriters. After the 180-day period, approximately 1,120,000 shares will be
eligible for sale under Rules 144 and 701 promulgated pursuant to the
Securities Act. The remaining approximately 8,225,000 shares held by existing
stockholders will become eligible for sale from time to time in the future
under Rule 144. In addition, the Company intends to file a registration
statement under the Securities Act, upon the effectiveness of the Offering or
shortly thereafter, covering the sale of shares of Common Stock reserved for
issuance under the Company's 1996 Stock Option Plan and 1996 Employee Stock
Purchase Plan. As of June 30, 1996, there were options outstanding to purchase
a total of approximately 240,000 shares of the Company's Common Stock, all of
which are subject to 180-day lock-up agreements, and approximately 2,350,000
additional shares reserved for future option grants. Approximately 240,000
shares issuable upon exercise of such options will be eligible for purchase
and resale into the public market 180 days after the date of this Prospectus
in reliance upon Rule 701. Upon completion of the offering, the 4,282 shares
of Series B Preferred Stock owned by Radius will convert into 1,741,129 shares
of the Company's Common Stock, which are subject to a 180-day lockup
agreement. If Radius were to enter bankruptcy and were allowed to sell its
shares of the Company's Common Stock without regard to the lock-up agreement
with respect to its shares of Common Stock or the restrictions of Rule 144
under the Securities Act, such additional shares of Common Stock would become
eligible for resale into the public market at an indeterminate date after the
date of this Prospectus. Certain existing stockholders, including Radius and
funds affiliated with Summit Partners, L.P. and Sigma Partners, L.P., holding
an aggregate of approximately 8,750,000 shares of Common Stock and the holder
of a warrant to purchase 8,750 shares of Common Stock also will be entitled to
registration rights with respect to their shares of Common Stock after the
Offering. See "Management--Compensation Plans," "Shares Eligible for Future
Sale," "Underwriting" and "Description of Capital Stock--Registration Rights."
No Prior Trading Market for Common Stock; Potential Volatility of Stock
Price. Prior to the Offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market will
develop or be sustained after the Offering. The initial public offering price
will be determined through negotiations between the Company and the
representatives of the Underwriters based on several factors and may not be
indicative of the market price of the Common Stock after the Offering. The
market price of the shares of Common Stock may be highly volatile and may be
significantly affected by factors such as actual or anticipated fluctuations
in the Company's operating results, change in estimates or recommendations by
securities analysts, litigation by or against the Company, announcements of
technical innovations, new products or new contracts by the Company, its
competitors or their end users, developments with respect to patents or
proprietary rights, general market conditions and other factors, certain of
which could be unrelated to, or outside the control of, the Company. The stock
market has from time to time experienced significant price and volume
fluctuations that have particularly affected the market prices for securities
of technology companies and that have often been unrelated to the operating
performance of particular companies. These broad market fluctuations may
adversely affect the market price of the Common Stock. In the past, following
15
<PAGE>
periods of volatility in the market price of a company's securities, securities
class action litigation has been initiated against the issuing company. There
can be no assurance that such litigation will not occur in the future with
respect to the Company. Such litigation could result in substantial costs and a
diversion of management's attention and resources, which could have a material
adverse effect on the Company's business and operating results. Any settlement
or adverse determination in such litigation could also subject the Company to
significant liability, which could have a material adverse effect on the
Company's financial condition. See "Underwriting."
Dilution. The initial public offering price is substantially higher than the
net tangible book value per share of the Common Stock. Investors purchasing
shares of Common Stock in the Offering will therefore incur immediate and
substantial dilution in net tangible book value per share. To the extent that
outstanding options and warrants to purchase the Company's Common Stock are
exercised, there will be further dilution. See "Dilution."
Dividend Policy; Restrictions on Payment of Dividends. The Company has never
declared or paid cash on its Common Stock. The Company currently intends to
retain any earnings for use in its business and does not anticipate paying any
cash dividends on its Common Stock in the foreseeable future. In addition, the
Company's borrowing arrangements, including the Company's line of credit and
outstanding subordinated promissory notes (which notes will be repaid out of
the proceeds of the Offering) prohibit the payment of cash dividends without
the lender's prior written consent. See "Dividend Policy."
16
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,600,000 shares of
Common Stock offered by the Company hereby at an assumed initial public
offering price of $12.00 per share, after deducting underwriting discounts and
commissions and estimated offering expenses, are estimated to be $27.8 million
($32.2 million if the Underwriters' over-allotment option is exercised in
full). The Company will use approximately $15.4 million of the proceeds of the
Offering to redeem all outstanding shares of the Company's Series A Preferred
Stock, which are held by entities affiliated with Summit Partners, L.P. and
Sigma Partners, L.P., and approximately $8.0 million to repay all outstanding
subordinated promissory notes, which are held by entities affiliated with
Summit Partners. The subordinated notes bear interest at a rate of 12% and
require principal repayments beginning January 30, 2001. The Series A Preferred
Stock and the subordinated notes were issued in connection with the
Acquisition. The remaining net proceeds will be used for working capital and
general corporate purposes. A portion of the net proceeds may also be used for
investments in or acquisitions of complementary businesses, products or
technologies, although no such transactions are currently under negotiation.
Pending such uses, the Company expects to invest the net proceeds in short-
term, interest-bearing securities. See "Certain Transactions."
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its Common Stock.
The Company currently intends to retain any earnings for use in its business
and does not anticipate paying any cash dividends on its Common Stock in the
foreseeable future. In addition, the Company's borrowing arrangements,
including the Company's line of credit and outstanding subordinated promissory
notes (which notes will be repaid out of the proceeds of the Offering) prohibit
the payment of cash dividends without the lender's prior written consent. See
"Risk Factors -- Dividend Policy; Restrictions on Payment of Dividends."
ACQUISITION
On January 30, 1996, the Company was acquired by an investor group (the
"Acquisition Group") led by certain entities affiliated with Summit Partners,
L.P. and certain entities affiliated with Sigma Partners, L.P. The Acquisition
was effected through the following series of transactions: (i) the Acquisition
Group formed and capitalized a new corporation, the Company, called Splash
Technology Holdings, Inc., a Delaware corporation; (ii) the Company formed and
capitalized a new wholly-owned subsidiary, Splash Merger Company, Inc., a
Delaware corporation; (iii) Radius created a new corporation, Splash
Technology, Inc., a Delaware corporation, into which Radius placed
substantially all of the assets and liabilities of its Color Server Group in
exchange for all of the capital stock of Splash Technology, Inc.; and (iv)
Splash Merger Company, Inc. was merged with and into Splash Technology, Inc.,
thereby effecting the Acquisition. As a result of these transactions, the
surviving corporation in the merger was Splash Technology, Inc., a wholly-owned
subsidiary of the Company, which in turn was owned principally by the
Acquisition Group. As a result of these transactions, Radius received (i) a
payment of approximately $21.9 million in cash on January 30, 1996
(approximately $2.35 million of which remains in escrow for the benefit of the
Company and its stockholders, as described below), (ii) an aggregate of 4,282
shares of Series B Preferred Stock of the Company, which are convertible into a
total of 1,741,129 shares of Common Stock of the Company (representing
approximately 19% of the outstanding Common Stock of the Company on an as-
converted basis prior to the Offering), and (iii) a payment of approximately
$1.5 million in cash on June 9, 1996. None of the entities within the
Acquisition Group which are affiliated with Summit Partners, L.P. or Sigma
Partners, L.P. were affiliated with Radius immediately prior to the
Acquisition. Entities affiliated with Sigma Partners, L.P. collectively held
more than 5% of the outstanding capital stock of SuperMac until January 1993
and Lawrence G. Finch was a director of Radius until October 1995.
17
<PAGE>
The Acquisition was funded by the purchase of approximately $15.5 million of
Series A Preferred Stock and Common Stock by entities associated with Summit
Partners, L.P. and entities associated with Sigma Partners, L.P. and the
purchase of $8.0 million of subordinated promissory notes by entities
associated with Summit Partners, L.P. As a result of an independent third party
valuation, the Series A Preferred Stock was valued at $14.7 million and the
subordinated promissory notes were valued at $8.6 million.
In connection with the Acquisition, the parties entered into an escrow
agreement providing for an escrow of $4.7 million for satisfaction of possible
claims for indemnification by Splash Technology, Inc., Splash Technology
Holdings, Inc. and its stockholders against Radius. An amount equal to
approximately $2.35 million remains in escrow pending (i) a final, non-
appealable order dismissing with prejudice the EFI litigation, (ii) the
attainment by Radius of certain financial tests or (iii) the discretionary
decision by Splash Technology Holdings, Inc. and its stockholders to release
the amount in escrow. See "Risk Factors--Dependence on Proprietary Technology;
Reliance on Third Party Licenses" and "Business--Intellectual Property."
In connection with the Acquisition and related transactions, entities
affiliated with Summit Partners, L.P. and Sigma Partners, L.P. acquired an
aggregate of 5,888,749 shares of Common Stock and 586,249 shares of Common
Stock, respectively, representing 63.2% and 6.3% of the Company's outstanding
Common Stock immediately prior to the Offering. In addition, entities
affiliated with Summit Partners, L.P. and Sigma Partners, L.P. acquired an
aggregate of 13,933 shares and 1,493 shares, respectively, of Series A
Preferred Stock of the Company and entities affiliated with Summit Partners,
L.P. acquired subordinated promissory notes of the Company in the aggregate
principal amount of $8.0 million. The subordinated promissory notes are
required to be repaid at face value plus accrued and unpaid interest, and the
Series A Preferred Stock is required to be redeemed at a price of $1,000 per
share plus accrued and unpaid dividends, upon certain events including an
initial public offering at a price of at least $3.43 per share and aggregate
gross proceeds (net of underwriting discounts) to the Company of at least $35.0
million. It is anticipated that the subordinated promissory notes will be
repaid and the Series A Preferred Stock will be redeemed out of the proceeds of
the Offering even at a lesser amount of aggregate gross proceeds to the
Company. See "Use of Proceeds," "Certain Transactions," "Principal
Stockholders" and "Description of Capital Stock."
The Acquisition constituted a leveraged transaction and was accounted for as
a purchase. As of January 30, 1996, the Company had approximately $12.6 million
in assets and approximately $9.6 million of liabilities. Immediately following
the Acquisition, the Company had $18.2 million in assets and $19.7 million of
liabilities. The proceeds from the Offering will be used primarily to repay the
$8.0 million in subordinated promissory notes and redeem the $15.4 million of
outstanding Series A Preferred Stock issued in connection with the Acquisition.
See "Use of Proceeds," "Capitalization," "Management's Discussion and Analysis
of Financial Condition and Results of Operations," "Certain Transactions" and
"Principal Stockholders."
18
<PAGE>
CAPITALIZATION
The following table sets forth as of June 30, 1996: (i) the actual
capitalization of the Company, (ii) the capitalization of the Company on a pro
forma basis to give effect to the conversion into Common Stock of all
outstanding shares of Series B Preferred Stock upon the closing of the
Offering, and (iii) the pro forma capitalization of the Company as adjusted to
give effect to the receipt of the estimated net proceeds from the initial
public offering of $27.8 million at an assumed public offering price of $12.00
per share, the application of the net proceeds therefrom and the filing of the
Company's Amended and Restated Certificate of Incorporation upon the closing of
the Offering. See "Use of Proceeds."
<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------------
PRO AS
ACTUAL FORMA ADJUSTED
-------- -------- --------
(IN THOUSANDS, EXCEPT FOR
SHARE DATA)
<S> <C> <C> <C>
Long-term debt(1)............................... $ 8,600 $ 8,600 $ --
-------- -------- --------
Stockholders' equity
Preferred Stock:
Authorized: 19,708 shares, actual and pro
forma; 5,000,000 shares as adjusted
Series A Preferred Stock, par value $.001 per
share: Authorized: 15,426 shares, actual and
pro forma; issued and outstanding: 15,426
shares, actual and pro forma and no shares as
adjusted..................................... $ 1 $ 1 $ --
Series B Preferred Stock, par value $.001 per
share: Authorized, issued and outstanding:
4,282 shares actual; no shares pro forma or
as adjusted.................................. 1 -- --
Common Stock, par value $.001 per share:
Authorized: 50,000,000 shares; issued and
outstanding: 7,579,495 shares actual, 9,320,624
shares pro forma and 11,920,624 shares as
adjusted(2).................................... 8 9 12
Additional paid-in capital...................... 19,456 19,456 32,206
Accumulated deficit(3).......................... (11,944) (11,944) (11,945)
-------- -------- --------
Total stockholders' equity.................... 7,522 7,522 20,273
-------- -------- --------
Total capitalization........................ $ 16,122 $ 16,122 $ 20,273
======== ======== ========
</TABLE>
- --------
(1) Represents subordinated promissory notes having a face amount of $8.0
million, which have been valued at $8.6 million pursuant to an independent
valuation. See Note 5 of Notes to Consolidated Financial Statements.
(2) Excludes an aggregate of approximately 250,000 shares of Common Stock
issuable on exercise of options and warrants outstanding as of June 30,
1996; approximately 14,000 shares of Common Stock issuable on exercise of
options granted after June 30, 1996; approximately 2,350,000 shares of
Common Stock reserved for future grants under the Company's 1996 Stock
Option Plan; and 175,000 shares of Common Stock reserved for issuance under
the Company's 1996 Employee Stock Purchase Plan. See "Use of Proceeds,"
"Management--Compensation Plans" and Note 8 of Notes to Consolidated
Financial Statements.
(3) Accumulated deficit has been adjusted for the effects of a gain of $600,000
(less associated taxes of $240,000) relating to the early extinguishment of
subordinated debt, offset in part by a loss of $361,000 on retirement of
the Series A Preferred Stock and net of conversion of the Series B
Preferred Stock.
19
<PAGE>
DILUTION
The pro forma net tangible book value of the Company at June 30, 1996, giving
effect to the conversion of all outstanding shares of Series B Preferred Stock
into Common Stock upon or prior to the closing of the Offering, was
approximately $6.4 million, or $0.69 per share of Common Stock. "Pro forma net
tangible book value" per share represents the amount of total tangible assets
of the Company less total liabilities, divided by the number of shares of
Common Stock outstanding. After giving effect to the sale by the Company of
2,600,000 shares of Common Stock offered hereby at an assumed initial public
offering price of $12.00 per share (after deducting the underwriting discounts
and commissions and estimated Offering expenses), the pro forma net tangible
book value of the Company at June 30, 1996 would have been approximately $34.2
million, or $2.87 per share. This represents an immediate increase in net
tangible book value of $2.18 per share to existing stockholders and an
immediate dilution of $9.13 per share to new investors. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price.............................. $12.00
Pro forma net tangible book value before the Offering............ $ .69
Increase attributable to new investors........................... 2.18
-----
Pro forma net tangible book value after the Offering............... 2.87
------
Pro forma net tangible book value dilution to new investors........ $ 9.13
======
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1996, the
differences in the total consideration paid and the average price per share
paid by the Company's existing stockholders and the new investors with respect
to the 2,600,000 shares of Common Stock to be sold by the Company. The
calculations in this table with respect to shares of Common Stock to be
purchased by new investors in the Offering reflect an assumed initial public
offering price of $12.00 per share:
<TABLE>
<CAPTION>
SHARES AVERAGE
PURCHASED TOTAL CONSIDERATION PRICE
-------------- --------------------- PER
NUMBER PERCENT AMOUNT PERCENT SHARE
------ ------- ---------- ---------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Existing stockholders.............. 9,321 78.2% $ 301 1.0% $ 0.03
New investors...................... 2,600 21.8 31,200 99.0 12.00
------ ----- ---------- --------
Total............................ 11,921 100.0% $ 31,501 100.0%
====== ===== ========== ========
</TABLE>
The foregoing computations exclude, as of June 30, 1996, an aggregate of
approximately 250,000 shares of Common Stock issuable on exercise of
outstanding options and warrants at a weighted average exercise of $0.47 per
share. To the extent outstanding options and warrants are exercised, there will
be further dilution to new investors. See "Risk Factors--Dilution,"
"Management--Compensation Plans" and "Description of Capital Stock."
20
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated statement of operations data presented below for
the years ended September 30, 1994 and 1995, the four months ended January 31,
1996 and the five months ended June 30, 1996, and the selected consolidated
balance sheet data as of September 30, 1994 and 1995 and June 30, 1996 are
derived from, and are qualified by reference to, the audited consolidated
financial statements and notes thereto included elsewhere in this Prospectus.
The selected consolidated statement of operations data for the nine months
ended June 30, 1995 are derived from unaudited consolidated financial
statements included elsewhere in this Prospectus, have been prepared on the
same basis as the annual consolidated financial statements and, in the opinion
of management, contain all adjustments, consisting only of normal recurring
adjustments necessary for a fair presentation of the operating results and
financial position for such periods and as of such dates. The consolidated
operating results for the four months ended January 31, 1996 and five months
ended June 30, 1996 are not necessarily indicative of the results to be
expected for the full year or any other future period.
The financial statements for the periods prior to January 31, 1996 reflect
the operations of the CSG division of Radius and SuperMac, adjusted to reflect
operations as a separate corporation. The financial statements after January
31, 1996 reflect the consolidated operations of the Company after accounting
for the Acquisition using the purchase method of accounting. Operating results
subsequent to January 31, 1996 reflect (i) interest on the debt incurred in
connection with the Acquisition, (ii) non-recurring, non-cash charges relating
to the write-off of in-process research and development projects and the
amortization of purchased technology, and (iii) an income tax benefit from the
net operating loss associated with the Acquisition.
The data set forth on the following page are qualified in their entirety by,
and should be read in conjunction with, "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the consolidated
financial statements, notes thereto and other financial and statistical
information appearing elsewhere in this Prospectus.
21
<PAGE>
<TABLE>
<CAPTION>
SPLASH
TECHNOLOGY
PREDECESSOR BUSINESS HOLDINGS, INC.
--------------------------------------- --------------
FISCAL YEAR
ENDED NINE MONTHS FOUR MONTHS FIVE MONTHS
SEPTEMBER 30, ENDED ENDED ENDED
--------------- JUNE 30, JANUARY 31, JUNE 30,
1994 1995 1995 1996 1996
------- ------- ----------- ----------- --------------
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Net revenue............. $16,354 $30,472 $20,343 $13,008 $ 18,326
Cost of net revenue..... 12,068 20,723 13,737 8,427 11,455
------- ------- ------- ------- --------
Gross profit............ 4,286 9,749 6,606 4,581 6,871
------- ------- ------- ------- --------
Operating expenses:
Research and
development.......... 1,999 3,295 2,034 1,498 1,624
Sales and marketing... 562 2,076 1,505 688 806
General and
administrative....... 377 891 667 287 668
Amortization of
purchased technology
and write-off of in-
process technology... -- -- -- -- 22,729
------- ------- ------- ------- --------
Total operating
expenses........... 2,938 6,262 4,206 2,473 25,827
------- ------- ------- ------- --------
Income (loss) from
operations............. 1,348 3,487 2,400 2,108 (18,956)
Interest expense, net... -- -- -- 18 388
------- ------- ------- ------- --------
Income (loss) before
provision for income
taxes.................. 1,348 3,487 2,400 2,090 (19,344)
Provision for (benefit
from) income taxes..... 99 1,395 960 836 (7,765)
------- ------- ------- ------- --------
Net income (loss)....... $ 1,249 $ 2,092 $ 1,440 $ 1,254 $(11,579)
======= ======= ======= ======= ========
Net income (loss) per
share(1)............... $ (1.25)
========
Shares used in computing
per share amounts(1)... 9,580
========
</TABLE>
<TABLE>
<CAPTION>
SPLASH
PREDECESSOR TECHNOLOGY
BUSINESS HOLDINGS, INC.
------------- --------------
SEPTEMBER 30,
------------- JUNE 30,
1994 1995 1996
------ ------ --------------
(IN THOUSANDS)
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital.................................... $4,126 $2,318 $ 5,955
Total assets....................................... 7,383 9,688 28,502
Long term debt..................................... -- -- 8,600
Total liabilities.................................. 3,057 6,985 20,980
Equity............................................. 4,326 2,703 7,522
</TABLE>
- --------
(1) See Note 2 of Notes to Consolidated Financial Statements for an explanation
of the method used to determine the number of shares used to compute per
share amounts.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results
of Operations and other parts of this Prospectus contain forward-looking
statements that involve risks and uncertainties. The Company's actual results
may differ materially from the results discussed in such forward-looking
statements. Factors that may cause such a difference include, but are not
limited to, those discussed in "Risk Factors."
OVERVIEW
The Company operated as the CSG division of SuperMac from late 1992 to
August 1994 and, after the merger of SuperMac into Radius, as the CSG division
of Radius from August 1994 until January 1996. In January 1996, Splash was
acquired by an investor group in a leveraged transaction. See "Acquisition"
and "Certain Transactions." References below to the results of operations for
the nine months ended June 30, 1996 refer to the results of operations of CSG
for the four months ended January 31, 1996 plus the results of operations of
the Company for the five months ended June 30, 1996.
The Company sells pre-configured color server systems and board-level server
kits to two OEM customers, Xerox and Fuji Xerox, which integrate the Company's
color servers with their color copiers and sell such connected systems on a
worldwide basis. Sales to Xerox accounted for approximately 40%, 41% and 49%
of net revenue in fiscal 1994, fiscal 1995 and the nine months ended June 30,
1996, respectively. Sales to Fuji Xerox accounted for approximately 60%, 59%
and 51% of net revenue in fiscal 1994, fiscal 1995 and the nine months ended
June 30, 1996, respectively. The Company expects that sales to Xerox and Fuji
Xerox will continue to account for all or a substantial portion of its net
revenue for the foreseeable future. As a result, sales of the Company's
products have been and will continue to be heavily influenced by the market
acceptance of the Xerox and Fuji Xerox color copiers with which the Company's
products operate and the sales efforts of Xerox and Fuji Xerox with respect to
Splash products. See "Risk Factors--Dependence on Xerox and Fuji Xerox."
Substantially all net revenue has been derived from the sale of systems and
color server kits. The Company's policy is to recognize revenue at the time of
shipment of its products to its OEM customers, which have no right to return
products. From inception to September 30, 1993, the Company was engaged
principally in research and development, and recorded approximately $1.3
million of net revenue from product shipments and $1.6 million of research and
development costs. The Company began shipping board-level color server kits in
fiscal 1993 and pre-configured color server systems in fiscal 1995. In May
1996, the Company made the transition from its Power Series products to its
new PCI Series products, and continues to offer Power Series products only as
server kits in limited quantities and as warranty and replacement parts. In
May 1996, Xerox informed Splash that it held in its inventory a substantial
quantity of Power Series products accumulated since January 1996. As a result
of the Company's product transition and Xerox's accumulation of inventory of
these products, sales of Power Series products shipped to Xerox between
January and April 1996 are recorded as net revenue when Xerox sells these
products to end users. All other Power Series and PCI Series product sales are
recorded upon shipment to the OEM customer.
The Company has achieved significant growth in net revenue and operating
income each year since fiscal 1994, before purchase accounting adjustments.
However, there can be no assurance that the Company will continue to grow at
similar rates in the future, if at all. In addition, the Company's overall
expense level is expected to increase as the Company builds corporate
infrastructure and expands its operations. Accordingly, the Company believes
that period-to-period comparisons of its financial results should not be
relied upon as an indication of future performance. Although the Company was
profitable for the first nine months of fiscal 1996 (pro forma and before
purchase accounting adjustments) and the first five months of independent
operations through June 30, 1996 (before purchase accounting
23
<PAGE>
adjustments), there can be no assurance that the Company will continue to be
profitable on an annual or quarterly basis in the future.
The Company establishes its expenditure levels for operating expenses based
on projected sales levels and margins, and expenses are relatively fixed in
the short term. Moreover, the Company expects to expand its sales and
marketing, technical and customer support, research and product development
and administrative activities. Accordingly, if sales are below expectations in
any given quarter, the adverse impact of the shortfall in revenues on
operating results may be increased by the Company's inability to adjust
spending in the short term to compensate for the shortfall.
RESULTS OF OPERATIONS
The following table sets forth consolidated statement of operations data as
a percentage of revenue for the periods indicated.
<TABLE>
<CAPTION>
SPLASH
TECHNOLOGY
PREDECESSOR BUSINESS HOLDINGS, INC.
----------------------------- --------------
YEAR ENDED
SEPTEMBER 30, NINE MONTHS ENDED JUNE 30,
--------------- --------------------------
1994 1995 1995 1996
------ ------ ----------- --------------
(UNAUDITED) (PRO FORMA)
<S> <C> <C> <C> <C>
Net revenue......................... 100% 100% 100% 100%
Cost of net revenue................. 74 68 68 63
------ ------ --- ---
Gross margin........................ 26 32 32 37
------ ------ --- ---
Operating expenses:
Research and development.......... 12 11 10 10
Sales and marketing............... 3 7 7 5
General and administrative........ 3 3 3 3
Amortization of purchased
technology and write-off of in-
process technology............... -- -- -- 73
------ ------ --- ---
Total operating expenses........ 18 21 20 91
------ ------ --- ---
Income (loss) from operations....... 8 11 12 (54)
Interest expense, net............... -- -- -- 1
------ ------ --- ---
Income (loss) before provision for
income taxes....................... 8 11 12 (55)
Provision for (benefit from) income
taxes.............................. -- 4 5 (22)
------ ------ --- ---
Net income (loss)................... 8% 7% 7% (33)%
====== ====== === ===
</TABLE>
Net Revenue. The Company's net revenue increased 86% to $30.5 million in
fiscal 1995 from $16.4 million in fiscal 1994, and increased 54% to $31.3
million in the nine months ended June 30, 1996 from $20.3 million in the nine
months ended June 30, 1995. These increases were primarily attributable to
higher unit sales of systems and color server kits. In addition, the Company
has experienced a shift toward higher priced, pre-configured color server
systems from lower priced color server kits, particularly in the third quarter
of fiscal 1995 with the introduction of the Company's Power Series product
line and in the third quarter of fiscal 1996 with the introduction of the
Company's PCI Series product line. For example, since the Company's
introduction of the PCI Series product line, Fuji Xerox has shifted its
product purchases from substantially all kits to substantially all pre-
configured systems. There can be no assurance that Fuji Xerox or Xerox will
not change its mix of product purchases again in the future. Any sales mix
shift toward kits would result in lower average selling prices and impact net
revenue. Net revenue has also been and may continue to be impacted by the
Company's sales mix of systems and kits in greater or lesser memory
configurations.
24
<PAGE>
Through April 1996, the Company derived substantially all of its revenue
from color server products designed for NuBus-based Apple Macintosh computers,
including the Power Series product line originally introduced in fiscal 1995
and the Company's original Splash color server kit products introduced in
fiscal 1993. Beginning in mid-calendar 1995, Apple began to transition from a
NuBus architecture in its high end Power Macintosh products to a PCI bus
architecture. Accordingly, Splash developed its initial PCI bus-based product
line, the PCI Series, and commenced shipment of such product line in May 1996.
The Company does not expect that sales of Power Series products will represent
any material portion of net revenue in the future other than any net revenue
recognized from the sale to end users of the remaining Power Series products
held by Xerox. See "--Overview" and "Risk Factors--Dependence on Xerox and
Fuji Xerox."
All sales to Fuji Xerox are international sales. As a result, international
sales accounted for 60% and 59% of net revenues in fiscal 1994 and 1995,
respectively, and accounted for approximately 59% and 51% of net revenue in
the nine months ended June 30, 1995 and 1996, respectively. In addition,
although all sales to Xerox are U.S. sales, Xerox has a significant
international customer base and the Company believes that a significant
portion of Splash products purchased by Xerox are resold outside the United
States. The Company expects that direct and indirect international sales will
continue to represent a substantial portion of its net revenue for the
foreseeable future. While the Company's international sales are presently
denominated in U.S. dollars, fluctuations in currency exchange rates could
cause the Company's products to become relatively more expensive to end users
in a particular country, leading to pressure to reduce the U.S. dollar
denominated price to the Company's OEM customers, which could in turn result
in a reduction in net revenue and profitability. See "Risk Factors--
International Sales."
Gross Margin. Cost of net revenue consists primarily of the costs of Apple
Power Macintosh computers (in the case of pre-configured systems), memory, and
royalties for Adobe PostScript software, plus, to a lesser extent, the cost of
other components, additional third party software license fees and royalties,
and manufacturing services. Gross margins increased to 32% in fiscal 1995 from
26% in fiscal 1994, and increased to 37% in the nine months ended June 30,
1996 from 32% in the nine months ended June 30, 1995. The increases in gross
margin were primarily due to economies of scale derived from higher sales
volumes and increases in pricing due to product improvements from additional
software features, partially offset by a sales shift toward certain lower
margin pre-configured server models. The gross margin for the nine months
ended June 30, 1996 as compared to the nine months ended June 30, 1995 also
increased due to reductions in component costs achieved through new product
designs and favorable component pricing. The Company expects that gross
margins will fluctuate from period to period and may decrease in future
periods. Gross margin is affected by a number of factors, including product
mix, product pricing and manufacturing and component costs. The Company may
also be required to reduce prices in response to competitive pressure. Any
decline in average selling prices of a particular product which is not offset
by a reduction in production costs or by sales of other products with higher
gross margins would decrease the Company's overall gross margin and adversely
affect the Company's operating results. See "Risk Factors--Fluctuations in
Operating Results; Seasonal Purchasing Patterns."
Research and Development. Research and development expenses consist
primarily of compensation and related costs, consulting fees and depreciation
of equipment. Research and development expenses increased 65% to $3.3 million
in fiscal 1995 from $2.0 million in fiscal 1994, and increased 53% to $3.1
million in the nine months ended June 30, 1996 from $2.0 million in the nine
months ended June 30, 1995. As a percentage of net revenue, however, research
and development decreased to 11% in fiscal 1995 from 12% in fiscal 1994, and
was 10% of net revenue in each of the nine month periods ended June 30, 1995
and 1996. These increases in the absolute dollar amount of these expenses were
primarily attributable to increased staffing and associated support required
to enhance the Company's product line and, in fiscal 1995 and 1996, to
introduce the Company's Power Series and
25
<PAGE>
PCI Series product lines, respectively. Except for charges related to the
Acquisition, all research and development costs to date have been expensed as
incurred. In view of current projects under development and contemplated,
research and development expenses are expected to increase in absolute dollars
in future periods, although they may vary as a percentage of net revenue. See
"Business--Research and Development."
Sales and Marketing. Sales and marketing expenses consist primarily of
salaries and related costs, consulting fees, trade show costs and marketing
materials. Sales and marketing expenses increased 269% to $2.1 million in
fiscal 1995 from $562,000 in fiscal 1994 and remained relatively constant at
$1.5 million in the nine months ended June 30, 1996 and the nine months ended
June 30, 1995. Such expenses represented 7%, 3%, 5% and 7% of net revenue for
such respective periods. The increase in the absolute dollar amount of these
expenditures were primarily related to expansion of the Company's sales
support and marketing staff and associated costs, primarily to increase the
Company's level of support for Xerox's sales organization. The Company intends
to continue to increase sales and marketing expenses in order to enhance sales
support capabilities and to pursue promotional programs designed to improve
name and product recognition in the end user community. Accordingly, sales and
marketing expenses are expected to increase in absolute dollars in future
periods, although they may vary as a percentage of net revenue.
General and Administrative. General and administrative expenses prior to
January 31, 1996 consisted primarily of an allocation of overhead expenses by
Radius and SuperMac based on headcount. Since February 1, 1996, general and
administrative expenses have consisted primarily of compensation and related
costs, and consulting and professional fees. General and administrative
expenses increased 136% to $891,000 in fiscal 1995 from $377,000 in fiscal
1994, representing 3% of net revenue for each respective period, and increased
43% to $955,000 in the nine months ended June 30, 1996 from $667,000 in the
nine months ended June 30, 1995, representing 3% of net revenue in each such
period. The increase from 1994 to 1995 was primarily due to increased salary
and related costs due to increased headcount. The increase in the first nine
months of 1996 was primarily related to the Company's efforts to enhance its
corporate infrastructure to replace services provided by Radius prior to the
Acquisition, and to support expansion of the Company's operations. The Company
believes that its general and administrative expenses will increase in
absolute dollars in the foreseeable future as it continues to implement
additional management and operational systems, expands its administrative
staff and incurs additional costs relating to being a public company.
Acquisition-Related and Non-Operating Expenses. In the nine months ended
June 30, 1996, the Company recorded certain costs related to the Acquisition,
including a write-off of $19.3 million of in-process research and development,
and the amortization in full through May 1996 of $3.4 million of purchased
technology. These in-process research and development projects related to the
development of the Company's PCI Series product line. Substantially all the
research and development costs incurred from the Acquisition through May 1996
(the time of the PCI Series product launch) were for the development of the
PCI Series products. Through June 30, 1996, the Company had incurred interest
costs pursuant to the subordinated notes and line of credit established in
connection with the Acquisition, offset in part by interest earned on short-
term investments.
Provision for Income Taxes. The Company accounts for income taxes in
accordance with the Financial Accounting Standards Board's Statement of
Financial Accounting Standard No. 109 "Accounting for Income Taxes." For
fiscal 1994, 1995 and the nine month periods ended June 30, 1995 and 1996, the
Company estimated a provision for income taxes as if CSG had been operating as
a separate company. In addition, as a result of the Acquisition, the Company
recorded a deferred tax asset of approximately $9.1 million and realized a
corresponding credit to the provision for income taxes, arising from the
difference in treatment of acquired intangible assets for tax and financial
reporting purposes. The Company has not reduced the deferred tax asset by a
valuation allowance as it is more likely than not that all of the deferred tax
asset will be realized through future taxable income.
26
<PAGE>
QUARTERLY RESULTS
The following tables set forth consolidated statements of operations data for
the seven quarters in the period ended June 30, 1996, both in dollar amounts
and as percentages of net revenue. This information has been derived from
unaudited financial statements that, in the Company's opinion, reflect all
normal recurring adjustments that the Company considers necessary to present a
fair statement of the results of operations in the quarterly periods. The data
set forth should be read in conjunction with the financial statements and notes
thereto appearing elsewhere in this Prospectus. The operating results for any
quarter are not necessarily indicative of results for future quarters. The
following tables set forth consolidated statements of operations data.
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------
DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1994 1995 1995 1995 1995 1996 1996
-------- -------- -------- --------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenue............. $4,559 $6,346 $9,438 $10,129 $7,206 $ 10,791 $13,337
Cost of net revenue..... 3,042 4,171 6,524 6,986 4,847 6,871 8,164
------ ------ ------ ------- ------ -------- -------
Gross profit........... 1,517 2,175 2,914 3,143 2,359 3,920 5,173
------ ------ ------ ------- ------ -------- -------
Operating expenses
Research and
development........... 372 825 837 1,261 1,256 884 982
Sales and marketing.... 281 504 720 571 568 438 488
General and
administrative........ 222 223 222 224 236 188 531
Amortization of
purchased technology
and write-off of in-
process technology.... -- -- -- -- -- 21,027 1,702
------ ------ ------ ------- ------ -------- -------
Total operating
expenses............ 875 1,552 1,779 2,056 2,060 22,537 3,703
------ ------ ------ ------- ------ -------- -------
Income (loss) from
operations.......... 642 623 1,135 1,087 299 (18,617) 1,470
Interest expense, net... 197 209
------ ------ ------ ------- ------ -------- -------
Income (loss) before
income taxes.......... 642 623 1,135 1,087 299 (18,814) 1,261
Provision for (benefit
from) income taxes..... 257 249 454 435 120 (7,550) 501
------ ------ ------ ------- ------ -------- -------
Net income (loss)...... $ 385 $ 374 $ 681 $ 652 $ 179 $(11,264) $ 760
====== ====== ====== ======= ====== ======== =======
<CAPTION>
AS A PERCENTAGE OF NET REVENUE
-----------------------------------------------------------------
DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1994 1995 1995 1995 1995 1996 1996
-------- -------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenue............. 100% 100% 100% 100% 100% 100% 100%
Cost of net revenue..... 67 66 69 69 67 64 61
------ ------ ------ ------- ------ -------- -------
Gross profit........... 33 34 31 31 33 36 39
------ ------ ------ ------- ------ -------- -------
Operating expenses
Research and
development........... 8 13 9 12 18 8 7
Sales and marketing.... 6 8 8 6 8 4 4
General and
administrative........ 5 3 2 2 3 2 4
Amortization of
purchased technology
and write-off of in-
process technology.... -- -- -- -- -- 195 13
------ ------ ------ ------- ------ -------- -------
Total operating
expenses............ 19 24 19 20 29 209 28
------ ------ ------ ------- ------ -------- -------
Income (loss) from
operations.......... 14 10 12 11 4 (173) 11
Interest expense, net... 2 1
------ ------ ------ ------- ------ -------- -------
Income (loss) before
income taxes.......... 14 10 12 11 4 (175) 10
Provision for (benefit
from) income taxes..... 6 4 5 5 2 (71) 4
------ ------ ------ ------- ------ -------- -------
Net income (loss)...... 8% 6% 7% 6% 2% (104)% 6%
====== ====== ====== ======= ====== ======== =======
</TABLE>
27
<PAGE>
The Company's net revenue increased on a sequential quarterly basis from the
first quarter of fiscal 1995 to the fourth quarter of fiscal 1995, and the
same pattern was followed for the first three quarters of fiscal 1996.
Increases within each year reflected higher unit sales quarter to quarter due
to increasing market acceptance of the Company's products. In addition, the
Company has experienced shifts in sales to its higher-priced color server
systems from its lower-priced color server kits, particularly beginning in the
third quarters of fiscal 1995 and 1996 with the introductions of the Power
Series and PCI Series product lines, respectively. The gross margins decreased
in the second half of fiscal 1995 primarily due to a sales shift toward
certain lower margin pre-configured server systems. The subsequent increases
in gross margins for each of the first three quarters in fiscal 1996 were
primarily due to the reductions in component costs achieved through redesigns
of the Power Series boards, new product line designs, continued economies of
scales from higher sales volumes and favorable component pricing, particularly
computers and memory. Memory prices have experienced significant fluctuations
in the past and there can be no assurances that current pricing trends will
continue. The Company expects that gross margins will fluctuate quarter to
quarter and may decrease in the future. See "Risk Factors--Fluctuations in
Operating Results; Seasonal Purchasing Patterns."
Research and development expenses have fluctuated from quarter to quarter
due in part to periodic third party funding of development efforts, which
totaled approximately $337,000, $543,000 and $453,000 in fiscal 1994, fiscal
1995 and the nine months ended June 30, 1996 respectively, ranging from $0 to
approximately $300,000 per quarter in the periods presented. Third party
funding of development is included in net revenue and costs of net revenue for
such products. In addition, research and development spending generally
increased quarter to quarter in fiscal 1995 as the Company expanded its
development efforts, and decreased in the second and third quarters of fiscal
1996 due to elimination of overhead charges by Radius following the
Acquisition. There can be no assurance that the Company will continue to
receive third party funding of any of its future development projects. Sales
and marketing expenses increased in the third quarter of fiscal 1995 and third
quarter of fiscal 1996 due to marketing efforts in connection with the
introduction of Splash's Power Series and PCI Series products, respectively.
General and administrative expenses decreased in the second quarter of fiscal
1996 as the Company discontinued use of Radius' administrative services and
increased in the third quarter of fiscal 1996 as the Company began adding its
own administrative infrastructure.
The Company's operating results have fluctuated and will likely continue to
fluctuate in the future on a quarterly and annual basis as a result of a
number of factors, many of which are outside the Company's control. These
fluctuations are in part due to the purchasing patterns of the Company's two
customers, Xerox and Fuji Xerox. These customers have historically made, and
are expected to continue to make, a significant portion of their purchases of
the Company's products in the second half of the Company's fiscal year. As a
result, the Company's sales have historically been significantly lower, and
are expected to continue to be lower, in the first quarter of the Company's
fiscal year than the immediately preceding fourth quarter. In addition, any
increases in inventories by the Company's customers could also result in
variations in the timing of purchases by such customers. In addition,
announcements by the Company or its competitors of new products and
technologies could cause customers to defer purchases of the Company's
existing products. In the event that anticipated orders from end users fail to
materialize, or delivery schedules are deferred or canceled as a result of the
above factors or other unanticipated factors, it would materially and
adversely affect the Company's business, operating results and financial
condition.
Results in any period could also be affected by changes in market demand,
competitive market conditions, sales promotion activities by the Company, its
OEM customers or its competitors, market acceptance of new or existing
products, sales of color copiers with which the Company's products are
compatible, the cost and availability of components, the mix of the Company's
customer base and sales channels, the amount of any third party funding of
development expenses, the mix of products sold, the Company's ability to
effectively expand its sales and marketing organization, the Company's ability
to attract and retain key technical and managerial employees, and general
economic conditions. As a result,
28
<PAGE>
the Company believes that period-to-period comparisons of its results of
operations are not necessarily meaningful and should not be relied upon as
indicative of future performance. Due to all of the foregoing factors, the
Company's operating results in one or more future periods may be subject to
significant fluctuations. In the event this results in the Company's financial
performance being below the expectations of public market analysts and
investors, the price of the Company's stock would be materially and adversely
affected.
LIQUIDITY AND CAPITAL RESOURCES
From fiscal 1994 until the Acquisition in January 1996, the Company satisfied
its liquidity requirements through cash flow generated from operations. The
Company had limited cash balances following the Acquisition and satisfied its
cash needs through a $4.0 million revolving line of credit and cash flow from
operations.
As of June 30, 1996, the Company had $6.6 million of cash and cash
equivalents and had repaid all borrowings under the bank line of credit.
Borrowings are available under the line of credit based on a percentage of
eligible accounts receivable, and at June 30, 1996, borrowings of $3.4 million
were available. Borrowings under the line of credit bear interest at a rate of
prime plus three-quarters of one percent. The line of credit expires on January
31, 1997. The Company also had outstanding an aggregate of $8.0 million of
subordinated promissory notes issued to stockholders in connection with the
Acquisition. The subordinated promissory notes bear interest at a rate of 12%
per annum, payable quarterly. Such notes are payable in 2001 and 2002, or
earlier if certain events occur, including the Offering, and will be paid in
full out of the proceeds of the Offering. (The notes were valued at
$8.6 million by an independent third party valuation.) See Notes 4 and 5 of
Notes to Consolidated Financial Statements.
The Company's operating activities provided $4.2 million in cash in fiscal
1995, primarily due to increases in accounts payable, other accrued
liabilities, royalties payable and income taxes payable, offset in part by an
increase in inventories. For the nine months ended June 30, 1996, the Company
generated $6.8 million in cash from operations, primarily due to decreases in
accounts receivable and increases in other accrued liabilities, deferred
revenue and income taxes payable, partially offset by decreases in royalties
payable.
Notwithstanding an increase in net revenue over the respective periods,
accounts receivable decreased to $4.7 million at September 30, 1995 from $5.3
million at September 30, 1994. This was due to the introduction and significant
shipments of a new product series in late fiscal 1994 causing the resulting
accounts receivable balance to be unusually high at September 30, 1994. The
accounts receivable balance further decreased to $4.0 million at June 30, 1996
as the Company implemented its own cash collection procedures after becoming
independent from Radius, significantly reducing days sales outstanding.
Inventories increased to $4.0 million at September 30, 1995 from $1.3 million
at September 30, 1994 primarily due to a delay in product shipments at the end
of fiscal 1995. Trade accounts payable, other accrued liabilities and royalties
payable increased to $5.6 million at September 30, 1995 from $2.3 million at
September 30, 1994, primarily due to a slowdown in vendor payments imposed by
Radius, of which the Company was a division at such dates.
Investing activities used $444,000 in cash in fiscal 1995 and $22.9 million
in cash in the nine months ended June 30, 1996. These amounts represented
purchases of property and equipment and, in the nine months ended June 30,
1996, $22.5 million in cash used in connection with the Acquisition. Financing
activities used $3.7 million in cash in fiscal 1995, consisting of cash
transfers to Radius and provided $23.6 million in cash in the nine months ended
June 30, 1996, consisting primarily of financing related to the Acquisition.
The Company has no material commitments other than obligations under
operating leases. See Note 6 of Notes to Consolidated Financial Statements.
29
<PAGE>
The Company expects to use $23.4 million of the net proceeds of the Offering
for repayment of the subordinated promissory notes payable to stockholders and
redemption of its Series A Preferred Stock. See Notes 5 and 7 of Notes to
Consolidated Financial Statements. The remaining net proceeds, if any, will be
used for working capital and general corporate purposes. Assuming completion
of the Offering and the application of the net proceeds therefrom, the Company
would have had, as of June 30, 1996, approximately $10.3 million in working
capital, including approximately $11.0 million in cash and cash equivalents.
The Company believes that it will be able to satisfy its cash requirements for
at least the next twelve months from a combination of the proceeds of the
Offering, cash flow from operations and the Company's bank line of credit.
However, upon completion of the Offering, the Company will continue to have
limited capital resources and may require additional capital sooner. There can
be no assurance that the Company will be able to obtain additional financing
as needed on acceptable terms or at all. See "Use of Proceeds,"
"Capitalization," "Risk Factors--Need for Additional Capital" and "Certain
Transactions."
30
<PAGE>
BUSINESS
This Business section and other parts of this Prospectus contain forward-
looking statements that involve risks and uncertainties. The Company's actual
results may differ materially from the results discussed in such forward-
looking statements. Factors that may cause such a difference include, but are
not limited to, those discussed in "Risk Factors."
Splash develops, produces and markets color servers that provide an
integrated link between desktop computers and digital color laser copiers and
enable such copiers to provide high quality, high speed, networked color
printing and scanning. These hybrid systems, consisting of color servers and
digital color laser copiers (referred to as connected or multifunction
copiers), support multiple uses including image scanning, image manipulation,
printing and photocopying. The Company's products feature advanced color
correction, color calibration and separations support, ease of use, time-
saving workflow functionality, simulation of many color monitors and printing
presses, and automatic correction for certain printing workflow problems.
Splash's color servers are commonly accessed by users across networks of
Windows-based personal computers, Apple personal computers and UNIX-based
computers.
INDUSTRY BACKGROUND
The use of color in communications media is becoming ubiquitous. Just as
photography, television, computer monitors and newspapers have migrated from
black and white to color, a similar transition is occurring in electronic
printing. Advances in computer-based color graphics, printing and imaging
technology are fueling increased demand for the ability to produce color
printed materials more easily, more frequently, in smaller batches, and at
lower cost.
Commercial color printing customarily involves a number of complex, labor
intensive and costly steps. Accordingly, color largely has been reserved for
high end and high volume applications, and printing of commercial quality
materials such as magazines, catalogs, brochures and sales material has been
performed primarily by professional independent printing companies. The images
to be printed are typically designed and composed by an end user's in-house
staff or a design house or advertising agency. The images are passed to a
service bureau for prepress preparation, which involves input by a high-
quality scanner (or, more recently, acceptance in electronic file format from
the designer) and other preparation for printing. Preparation for printing
includes color retouching and other manipulation and then separation into the
four colors--cyan, magenta, yellow and black ("CMYK")--utilized by large,
four-color commercial presses. The separated CMYK files are transferred
electronically to an imagesetter which generates a separate CMYK film for each
color. These films are then used to print a pre-proof via a film proofer.
Color separation and proofing are typically performed by service bureaus or,
at times, by commercial printers. These steps are often repeated several times
to ensure that the proof matches the end user's expectations. Once the proof
is approved by the end user, the commercial printer utilizes the CMYK films to
prepare printing plates and then print the job on a large, expensive
commercial press. Each step in the proofing and prepress process is
technically complex, time consuming, labor intensive and costly, and multiple
cycles are often required. Accordingly, the process involves high fixed costs
and considerable time, and historically has been justified only for printing
in large volumes.
31
<PAGE>
The following diagram depicts the steps involved in a typical commercial
printing process, showing the repetition of certain of the key steps prior to
the final print run.
[A graphic diagram appears here and depicts certain steps within the typical
commercial printing process.]
The broad use of high quality desktop color displays, desktop publishing
software such as Adobe Photoshop and QuarkXPress, and desktop-based color
scanners, as well as the increased availability of digital color copiers and
networked and desktop color printers, has enabled a greater amount of the color
design and production workflow to be performed more rapidly and at lower costs
than was previously possible. As a result, the different organizations in the
traditional printing workflow have begun to broaden their service offerings,
with resultant overlap of roles. For example, end users and designers are
seeking to perform a greater degree of color preparation and to review a
greater number of design proofs earlier in the process, and service bureaus are
seeking to expand their service offerings with faster and lower cost color
alternatives. End users, service bureaus and traditional commercial printers
are all seeking to expand their internal capabilities for inexpensive, low
volume, high quality color printing of final output. In the emerging end user
office market in particular, the improvements in color copier technology make
possible inexpensive production of a broad range of color materials, including
sales brochures, product literature and internal communications.
The use of color printing has historically been limited because color
printing involves significantly greater complexities and requires substantially
more memory and processing power than black and white printing. For example,
accurate printed replication of an electronic color image displayed on a
monitor is difficult to achieve because the monitor creates color by projecting
light in the three display colors of red, green and blue ("RGB")--an additive
process of light creation--while printed output is created through the mixing
of the four CMYK ink colors on paper--a subtractive process of light
absorption. Each display, scanning and printing device has unique color
properties that must be managed and adjusted during production, and each device
must be continually recalibrated over time. The variety of papers, ink and
printing processes also results in variations, as do changes in temperature and
humidity. In addition, different applications and devices may combine multiple
color and file formats when producing an image, resulting in issues of
compatibility and consistency.
The complexities inherent in color reproduction and printing have created a
need for advanced, easy-to-use and cost-effective color printing solutions. As
a result, digital laser color copiers and associated color servers are becoming
increasingly prevalent across a broader printing market. However, the different
segments of the broader market demand a variety of different capabilities. In
the
32
<PAGE>
commercial printer segment, printing companies are seeking means to broaden
their market through high quality solutions that can be offered at lower cost;
in design houses and service bureaus, color professionals require both superior
color quality and tools that enhance productivity in color production workflow;
and in the office market, ease of use is as critical as high quality results,
to make technology accessible to a broad range of end users with limited
special expertise in color. Accordingly, as color servers become more prevalent
and broadly used, there is a demand for solutions that offer more powerful
features and more accurate color capabilities with greater ease of use.
THE SPLASH SOLUTION
Splash color servers provide an integrated link between computers and color
copiers and address the demand for high performance, cost effective digital
color printing. The Company's color servers turn a color copier into an
effective network-based solution for a variety of color printing applications
from commercial and short-run printing to desktop publishing and office color
printing. The Company's products feature advanced color correction, color
calibration and separations support, ease of use, time-saving workflow
functionality, simulation of many color monitors and printing presses, and
automatic correction for certain workflow problems.
The diagram below is an example of how Splash color servers and connected
digital color copiers can eliminate certain costly and time consuming steps in
the printing workflow.
[A graphic diagram appears here and depicts an example of certain steps in the
printing process using a Splash color server and a connected color copier.]
Splash servers utilize open systems that can be readily integrated with
corporate networks enabling easy access by a broad range of end users. The
Company's products use Adobe PostScript and are based on the Apple Power
Macintosh computer, both of which are widely used by color graphics
professionals. The Company's servers support popular network protocols,
including AppleTalk for Apple Macintosh networks, Novell IPX for Windows-based
personal computer networks and TCP/IP for UNIX-based networks. Open systems
enable the Company to concentrate its development resources on value-added
solutions for end users, including improved color quality, workflow and overall
productivity, while being able to leverage ongoing enhancements in hardware,
software and computer performance from IBM, Motorola, Apple and Adobe. Open
systems also provide users with greater flexibility by allowing the use of
standard peripheral products and software. The Company believes that its open
systems approach and color expertise have enabled it to provide innovative,
high performance products.
33
<PAGE>
The diagram below reflects the connection between a Splash color server and
a color copier and a network containing Windows PCs, Mac OS computers and UNIX
workstations via the use of Novell, AppleTalk and TCP/IP network protocols.
[A graphic diagram appears here and depicts the integration of a Splash color
server and a connected color server within a computer network.]
STRATEGY
Splash's objective is to extend its position as a leading provider of
innovative, high quality color server solutions. To achieve this objective,
the Company's business strategy includes the following key elements:
Leverage Technology Expertise. Splash seeks to leverage its expertise in
color technology, application workflow, software and hardware design and
computer systems integration to continue to offer innovative, easy-to-use,
color server products. The Company believes that its technological leadership
has permitted it to offer a number of significant features for multifunction
copiers prior to its direct competitors. For example, Splash was first to
market with a number of key features in the areas of color calibration, color
correction, CMYK separation and mixed RGB/CMYK printing.
Support Open Systems. Splash intends to continue to utilize standards-based
open systems to enable it to bring new products to market more quickly and to
permit operation with a wide variety of computer networks, devices and
complementary software. Splash provides color servers based on open systems
and popular networking protocols in order to focus the Company's development
efforts on advanced software and hardware designs that optimize color quality
and consistency, workflow efficiency and ease of use.
34
<PAGE>
Broaden Markets and Product Lines. Splash intends to continue to pursue the
markets for connected copiers in pre-proof and prepress applications and to
migrate its products to additional computer platforms in order to address both
the high end of the color server market and the broader, office color printing
market. The Company also intends to develop color servers for a wider range of
Xerox and Fuji Xerox color copiers in order to provide systems with different
feature sets across a range of price points and may consider offering color
servers for the systems of additional copier manufacturers.
Expand Sales and Marketing Organizations. Splash intends to expand its sales
and marketing organizations on a worldwide basis in order to support its Xerox
and Fuji Xerox OEM relationships. The Company believes that such expansion
will allow it to better leverage the resources offered by Xerox, Fuji Xerox
and their affiliates, which are among the leading providers of digital color
copiers and have extensive worldwide sales organizations. Splash is seeking to
further develop sales through these channels in Europe and other geographic
regions in which the Company has had lower market penetration.
PRODUCTS AND TECHNOLOGY
Product Lines
Splash offers both pre-configured color server systems and board-level
server kits. The pre-configured color server systems include a Splash copier
interface board and frame buffer installed in an Apple Power Macintosh
computer and feature Splash software, a color display, a keyboard and an
interface cable. The server kits do not include the computer, display and
keyboard, thereby allowing the customer or reseller to install the Splash
color server on a locally procured or existing compatible system. Splash
products are sold under the Splash brand worldwide except in Japan, where they
are sold under the SM ICS brand name of Fuji Xerox. The fundamental
architectures of the SM ICS and Splash products are substantially identical
other than localization differences for user interface and documentation.
Splash's primary product line is the Splash Professional Color Imaging
("PCI") Series, which was first introduced in the second calendar quarter of
1996. These products use the newest Apple Power Macintosh computers and are
compatible with the PCI bus architecture. The Splash Power Series product
line, based on a design originally launched in 1993 and updated over the years
with successive software releases, uses the NuBus architecture found in
earlier Apple Power Macintosh computers. The Company continues to offer, in
limited quantities, Power Series products, primarily board level kits and
spare parts. The retail prices of Splash PCI Series servers range from $22,000
to $35,000 in the United States and (Yen)2,560,000 to (Yen)3,760,000 in Japan,
and the retail prices of Splash PCI Series kits range from $17,000 to $29,000
in the United States in each case depending on model and configuration. The
Splash PCI kits are currently not sold in the Japanese market. See "Risk
Factors--Dependence on Xerox and Fuji Xerox" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
35
<PAGE>
The Company's products vary primarily by available frame buffer memory.
Memory configuration impacts print quality, scan resolution and the ability to
scan images of larger sizes. The Company's principal products are as follows:
<TABLE>
<CAPTION>
FRAME
PRODUCT COMPUTER HARDWARE DISPLAY BUFFER
------- ----------------- ------- ------
<S> <C> <C> <C>
PCI Series Servers
Splash PCI 1280 Server Power PC 604/120 MHz 149 color 128 MB RAM
Splash PCI 640 Server Power PC 604/120 MHz 149 color 64 MB RAM
Splash PCI 320 Server Power PC 604/120 MHz 149 color 32 MB RAM
PCI Series Kits(1)
Splash PCI 1280 Kit * * 128 MB RAM
Splash PCI 640 Kit * * 64 MB RAM
Splash PCI 320 Kit * * 32 MB RAM
Power Series Servers
Splash P105 Pro PowerPC 601/100 MHz NuBus 179 color 128 MB RAM
Splash P85 PowerPC 601/80 MHz NuBus 179 color 72 MB RAM
Splash P70 PowerPC 601/66 MHz NuBus 149 color 72 MB RAM
Power Series Kits(2)
Splash Power Kit Pro * * 128 MB RAM
Splash Power Kit * * 72 MB RAM
</TABLE>
- --------
* Customer supplied.
(1) Compatible hosts for PCI Series Kits are: Apple Power Macintosh 7200, 7500,
7600, 8500, 9500.
(2) Compatible hosts for Power Series Kits are: Apple Power Macintosh 7100, 8100
(non-AV configurations).
Product Features and Technology
Splash servers are based on open systems, enabling the Company to leverage
the development efforts of computer and operating system suppliers, and thereby
concentrate its development resources in those areas specific to the concerns
of color users. This open systems approach has provided an advantage in
bringing innovative color and workflow solutions to the market rapidly. It has
also enabled the Company to provide its customers with performance increases by
taking advantage of improvements in industry standard computers.
The Company's products include a Splash-designed copier interface board
integrated with a standard computer system and Splash software written for the
server and its networked clients. The Splash PCI Series copier interface board
uses double-sided surface mount technology and includes a number of advanced
design features such as a proprietary application specific integrated circuit
(ASIC), certain other custom ASICs and a large frame buffer--all in a single-
slot PCI form factor.
Splash software includes: driver software written for several different types
of client workstations; server software including network interface, spooling,
and imaging engine modules that reside on the standard computer system; and
server software including print interface and device control modules that
reside on the Splash board itself. These software modules are layered on a
standard computer operating system to provide compatibility with a variety of
off-the-shelf peripherals and third-party software applications.
The combination of Splash-engineered technology and an open systems approach
has enabled the Company to introduce a number of technical innovations to
market prior to any of its direct competitors. Innovations first introduced to
market by Splash include techniques that enhance color quality, such as
accurate printing of RGB monitor blues (avoiding the common blue to purple
shift upon printing); techniques that enhance print quality, such as traps and
overprints (as described below); and features
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that enhance productivity workflow, such as advanced color calibration
capabilities and the ability to interpret and print multiple RGB formats or
mixed RGB and CMYK formats from the same electronic file.
The following describes these and other key features offered by Splash.
CMYK Separation Support. Splash's CMYK separation capability enables users
to employ page layout and publishing software to print pre-proofs from color
copiers that incorporate overprinting (overlapping mixing of colors) and
Desktop Color Separations (high-resolution separation files). This feature
allows the printing of high quality pre-proofs and thereby saves professional
color publishing end users time and money by reducing the number of cycles of
film proofs required for the design and production process.
Splash Match. Splash Match is a unique color management solution that
permits rapid, automatic and accurate color correction of image files. The
user can select among a variety of color profiles--including RGB monitor
matching and CMYK press matching--through "check box" selections within a
printing window in the graphical user interface from a networked client.
Splash ColorCal. Splash ColorCal is a fast, easy-to-use calibration utility
that utilizes a unique randomized calibration target and a copier's built-in
digital scanning capability for calibration. By making calibration fast and
simple and eliminating the need for separate, expensive densitometers, Splash
provides a mechanism for frequent calibration that assures reproducible,
consistent color. All Splash Match color profiles (RGB and CMYK) are updated
simultaneously upon completion of calibration. Splash Match also provides an
"expert mode" of operation that allows the user to customize a copier's output
to the unique print characteristics of a given press intended for final
printing.
Splash AccuColor. Splash AccuColor, implemented as part of Splash Match,
allows for more accurate translation and printing of monitor blues without the
significant purple shift that occurs with almost all other printing
alternatives. This is a performance advantage in printing applications where
the desired goal is producing output that comes as close as possible to
matching the RGB colors on a user's display. Splash AccuColor allows for
screen-to-press matching through the use of one of several Splash press
profiles selectable in Adobe Photoshop.
Splash IntelliColor. Splash IntelliColor compensates for mistakes commonly
made during the design process such as mixing different RGB file formats or
combining RGB and CMYK formats in the same document. Images combined in the
same file are separately and accurately color corrected. This capability is
independent of the end user's application or computer workstation.
Splash Scan and Splash Print. Both Splash Scan and Splash Print are Adobe
Photoshop Plug-in modules that provide 400-dpi, 24-bit color scanning from the
copier and ultra high-speed bit map printing to a copier, respectively. In
this way, scans can be made, retouched and printed locally without tying up
the network.
Splash Colortone. Splash Colortone enhances the print quality of color
servers that have limited frame buffer memory. Splash Colortone delivers true,
continuous tone (contone) or near-contone quality output optimized to the
available frame buffer memory. Splash Colortone is automatically engaged
whenever the Splash server has too little memory to print a given page size
with full color quality. The Splash Colortone feature can print with either a
2:1 memory savings, yielding near-contone quality, or a 4:1 memory savings,
yielding prints with some but often minimal degradation. Splash automatically
switches back to true contone printing when sufficient memory is available.
Splash Edit. Splash Edit is a utility that enables the user to change
certain print settings at the Splash server after the print job has been sent
by the user across the network. Changeable print settings include number of
copies, tray selection, color correction choice, page range and sorter.
Because these settings can be changed at the Splash server next to the copier,
the user saves time by not having to return to the client computer to resend
the file.
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SALES AND MARKETING
Splash sells its PCI Series color server products to two of the leading
providers of color copiers, Xerox and Fuji Xerox. These OEMs integrate the
Company's color servers with their digital color copiers and sell the connected
systems to end users through a worldwide direct distribution network. Xerox
sells primarily in North America, South America and (through its affiliate,
Rank Xerox) Europe, while Fuji Xerox sells primarily in Japan and the Asia
Pacific region. Xerox and Fuji Xerox each provide primary customer service
through their worldwide networks, while Splash provides backup support to Xerox
and Fuji Xerox. These relationships allow Splash to provide strong customer
support at the local level as well as providing Splash with a valuable source
of input for product enhancement. Splash believes that the strength of Xerox
and Fuji Xerox in the office equipment market provides the Company with a
significant opportunity to expand its presence in the end user office printing
market.
Xerox and Fuji Xerox sell Splash products as well as competing color servers
with their products. The Company does not have contracts with Xerox and Fuji
Xerox with respect to its PCI Series products and is currently operating on a
purchase order basis with these customers. Although the Company is currently
negotiating an agreement with Xerox and Fuji Xerox for its PCI Series products,
there can be no assurance that any such agreement will be completed or that the
Company will continue to receive orders from Xerox or Fuji Xerox. Any change in
the level of sales to Xerox or Fuji Xerox would have a material adverse effect
on the Company's business, operating results and financial condition. See "Risk
Factors--Dependence on Xerox and Fuji Xerox."
Revenue from Xerox constituted 40%, 41% and 49% of Splash net revenue in
fiscal 1994, 1995 and the first nine months of fiscal 1996, respectively.
Revenue from Fuji Xerox constituted 60%, 59% and 51% of Splash net revenue in
fiscal 1994, 1995 and the first nine months of fiscal 1996, respectively. See
"Risk Factors--Dependence on Xerox and Fuji Xerox."
As of June 30, 1996, the Company employed six people in sales and marketing.
These people support Xerox's sales force while Fuji Xerox is supported by its
own personnel. Splash's sales and marketing personnel typically provide support
to Xerox and Fuji Xerox through sales literature, periodic training, customer
symposia, pre-sales support and joint sales calls. The Company also
participates in industry trade shows and conferences, publishes articles in
trade and technical journals, distributes sales and product literature and has
a public relations plan intended to generate coverage of the Company's products
and technology by editors of trade journals.
Splash believes that in order to increase its market penetration and enhance
brand awareness, it must expand its sales and marketing efforts. The Company
plans to recruit and hire additional field personnel in Europe, the United
States and the Asia Pacific region, as well as to expand its marketing
programs. There can be no assurance that the Company will be able to hire
additional personnel, expand its marketing programs or that the Company will be
able to increase its market penetration.
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MARKETS AND CUSTOMERS
Splash products are employed by users in five principal markets: commercial
and short-run printing, prepress and photo labs, graphic arts and professional
color publishing, print-for-pay and office color printing. The Company to date
has focused principally on the prepress and graphic arts markets, where end
users who are discerning about color and print quality require high quality
innovative color server solutions. The Company believes that the emerging use
of color in a variety of printing applications is creating an opportunity for
the Company's products in the other market segments. Below is a diagram
showing the five markets in which Splash products are sold.
[A graphic diagram appears here and lists the five principal markets in which
Splash products sell. (These five markets are listed as: "Commercial/Short-
Run," "Prepress and Photo Labs," "Graphic Arts and Professional Color
Publishing," "Print-for-Pay" and "Office Color Printing.")]
Commercial and Short-Run Printing. The commercial printing market represents
the highest quality and highest volume color printing production. Firms in
this market typically have their roots in traditional offset press printing,
in which output is developed in-house at businesses and other organizations,
prepared for printing by service bureaus and trade shops (which often perform
prepress services as described below) and then delivered to the commercial
printer for printing on large, expensive printing presses. In recent years,
many firms in the commercial printing market have begun to expand into
prepress and short-run printing services. These firms use color server-based
printing devices to more rapidly and less expensively produce pre-proofs of
color output. In addition, many of these firms have begun to use color server-
based printing devices as a less expensive alternative for printing in smaller
quantities. End users of Splash products in this segment include Applied
Computer Services, Inc. and R.R. Donnelley & Sons Company.
Prepress and Photo Labs. The prepress market consists of service bureaus and
trade shops which handle complex color production for end users that intend to
send print jobs to short-run and commercial printing firms for high quality or
high volume printing, as well as photo labs which provide high-end
photographic services. Prepress firms work closely with end users and the
local commercial printers that perform the print jobs. Prepress firms provide
high end scanning, image retouching, imagesetter output of color separation
films for proofing and, in some cases, the production of contract proofs which
serve as the standard for the commercial print run. Firms in this market are
utilizing color server-based printing devices as a means to reduce the cost
and turnaround time for image design, modification and pre-proofing. End users
of Splash products in this segment include the Digital Cafe, a wholly-owned
subsidiary of Boston Photo Imaging and smaller, local operators.
Graphic Arts and Professional Color Publishing. The graphic arts and
professional color publishing market consists of in-house creative staffs and
advertising agencies and design firms. These creative
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professionals perform extensive color design and layout, but historically have
not performed print production. Users typically utilize networked personal
computers and workstations for color design and use color server-based
printing devices for conceptual and comprehensive designs as well as pre-
proofs. Users typically compose the color image to be printed utilizing
applications such as Adobe Photoshop, Adobe Illustrator, QuarkXPress and Adobe
PageMaker. End users of Splash products in this segment include DRC
Advertising, Hearst Magazines and Gibson Greetings, Inc.
Print-for-Pay. Print-for-pay firms provide a broad range of walk-in services
including faxing, copying and desktop publishing. Recently these firms have
begun to use connected color copiers to offer expanded color printing and
copier services. Users in this market segment range from franchised and local
storefronts traditionally focused on black and white copying services to
specialized firms. End users of Splash products in this segment include PIP
Printing.
Office Color Printing. The office color printing market consists of
networked office printing and central reproduction departments in businesses
and other organizations. These organizations, which have typically used black
and white laser printers and desktop color ink jet printers for production of
word processed documents, spreadsheets and presentations, are increasingly
using connected copiers to produce materials such as product brochures and
internal communications. This market segment is still emerging, but the
Company believes the ability of color servers to operate across corporate
networks will help expand this market.
MANUFACTURING
The Company outsources the manufacture of its products to third party
subcontract manufacturers including MSL, located in Sunnyvale, California, and
Logistix, located in Fremont, California. MSL purchases the components used in
Splash boards from its suppliers and performs double-sided active surface
mount assembly, in-circuit test, functional test and system test of the
printed circuit boards used in the Splash PCI Series products, on a turnkey
basis. MSL also performs in-warranty and out-of-warranty repair of failed
boards for the Splash PCI Series products. The Company purchases Apple Power
Macintosh computers, monitors and memory, and furnishes these components as
well as the MSL-assembled boards to Logistix for final assembly. Logistix
directly purchases a small portion of the components used in Splash color
servers and does all final assembly and system configuration. Other
subcontract manufacturers perform similar services with respect to the Splash
Power Series product line.
While the Company's subcontract manufacturers conduct quality control and
testing procedures specified by the Company, the Company has from time to time
experienced manufacturing quality problems. Although the Company does not
believe any such problem had a material adverse effect on the its business,
there can be no assurance that quality problems will not occur again in the
future or that any such problem will not have a material adverse effect on its
business, operating results and financial condition.
If the Logistix, MSL or other third party manufacturing facilities utilized
by the Company become unavailable to the Company, or if the manufacturing
operations at these facilities are slowed, interrupted or terminated, the
Company's business, operating results and financial condition could be
materially and adversely affected. Although the Company believes that there
are other companies available with the capability to provide the Company with
such services, there can be no assurance that the Company would be able to
enter into alternative third party arrangements on terms satisfactory to the
Company, on a timely basis, or at all. See "Risk Factors--Dependence on Third
Party Manufacturers."
Certain components necessary for the manufacture of the Company's products
are obtained from a sole supplier or a limited group of suppliers. These
include Apple Power Macintosh computers, certain ASICs and other semiconductor
components. The Company does not maintain any long-term agreements with any of
its suppliers of components. Because the purchase of certain key components
involves long
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lead times, in the event of unanticipated increases in demand for the Company's
products, the Company could be unable to manufacture certain products in a
quantity sufficient to meet end user demand. In addition, Apple has recently
experienced significant financial difficulties and losses in market acceptance,
and its products have particularly low levels of market acceptance in the
office color printing market into which the Company is seeking to expand. If
Apple were to discontinue production of the Power Macintosh models with which
Splash products operate or were unable to provide or otherwise cease to provide
an acceptable level of end user customer support, the Company's business,
operating results and financial condition would be materially and adversely
affected. The Company also purchases memory modules from a single supplier.
Although other sources are available, a change in memory supplier could require
time to effect and could impact production. This risk would be exacerbated in
times of short memory supply. Any inability to obtain adequate deliveries of
any of the components or any other circumstance that would require the Company
to seek alternative sources of supply could affect the Company's ability to
ship its products on a timely basis, which could damage relationships with
current and prospective customers and could therefore have a material adverse
effect on the Company's business, financial condition and operating results.
Moreover, there can be no assurance that alternative sources of supply would be
available on reasonably acceptable terms, on a timely basis, or at all. The
Company has from time to time experienced shortages in deliveries of ASICs from
Toshiba Corporation, which shortages have impacted production volume
capabilities. In order to attempt to mitigate the risk of such shortages in the
future, the Company intends to increase its inventory of components for which
the Company is dependent upon sole or limited source suppliers. As a result,
the Company may be subject to an increasing risk of inventory obsolescence in
the future, which could materially and adversely affect the operating results
and financial condition. See "Risk Factors--Dependence on Component
Availability and Cost" and "--Dependence on Apple Computer, Inc."
The market prices and availability of certain components, particularly memory
and other semiconductor components and, to a lesser extent, Apple Power
Macintosh computers, which collectively represent a substantial portion of the
total manufactured cost of the Company's products, have fluctuated
significantly in the past. Significant fluctuations in the future could have a
material adverse effect on the Company's business, operating results and
financial condition. See "Risk Factors--Fluctuations in Operating Results;
Seasonal Purchasing Patterns," "--Dependence on Component Availability and
Cost" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
RESEARCH AND DEVELOPMENT
Splash's research and development efforts are focused on color science,
application workflow, ASIC and board design, software and computer systems
integration and the continued development of new and enhanced products. The
Company also works closely with key technology partners including Adobe, Apple,
Fuji Xerox and Xerox.
The Company has historically devoted a significant amount of its resources to
research and development. As of June 30, 1996, the Company had 23 employees
engaged in research and development. Research and development expenses in
fiscal 1994 and 1995 and the first nine months of fiscal 1996 were $2.0
million, $3.3 million and $3.1 million, respectively.
The graphics and color reproduction, color processing and personal computing
markets are characterized by rapid changes in customer requirements, frequent
introductions of new and enhanced products, and continuing and rapid
technological advancement. To compete successfully, the Company must continue
to design, develop, manufacture and sell new products that provide increasingly
higher levels of performance and reliability, take advantage of technological
advancements and changes and respond to new customer requirements. The
Company's success in designing, developing, manufacturing and selling new
products will depend on a variety of factors, including the identification of
market demand for new products, product selection, timely implementation of
product design and development,
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product performance, cost-effectiveness of products under development,
effective manufacturing processes and the success of promotional efforts.
The Company has recently transitioned its product offerings from its Power
Series products to its PCI Series products, and there can be no assurance that
the PCI Series or any future products will achieve widespread market
acceptance. In addition, the Company has in the past experienced delays in the
development of new products and the enhancement of existing products, and such
delays may occur in the future. If the Company is unable, due to resource
constraints or technological or other reasons, to develop and introduce new
products or versions in a timely manner, or if such new products or releases do
not achieve timely and widespread market acceptance, it would have a material
adverse effect on the Company's business, operating results and financial
condition. See "Risk Factors--Rapid Technological Changes; Dependence on New
Product Introductions."
COMPETITION
The markets for the Company's products are characterized by intense
competition and rapid change. The Company competes directly with other
independent manufacturers of color servers and with copier manufacturers, and
indirectly with printer manufacturers and others. Splash has a number of direct
competitors for color server products, the most significant of which is EFI.
Splash also faces competition from copier manufacturers that offer internally
developed color server products, such as a non-PostScript color server offered
by Fuji Xerox, or that incorporate color server features into their copiers. In
addition, the Company faces competition from desktop color laser printers that
offer increasing speed and color capability. As component prices decrease and
the processing power and other functionality of copiers, printers and add color
server functionality to their systems, it becomes more likely that copier,
printer and computer manufacturers will continue to add color server
functionality to their systems, which could reduce the market for the Company's
existing line of products.
The Company also competes indirectly with manufacturers of electronic color
prepress systems, which offer similar functionality for the short-run and
commercial printing market as is provided by the Company's products. The
Company also competes indirectly with providers of color separation, color
editing and page layout software. While this software typically is
complementary to the Company's systems, it may also be competitive and may
become increasingly competitive to the extent that the providers of such
software extend the functionality of their products in future releases. See
"Risk Factors--Dependence on Adobe Systems Incorporated."
The Company believes that the principal competitive factors in its markets
are product features, functionality and performance; strength of distribution
channels, including sales capability and after-market support; brand name
recognition and market share; and price. The Company believes that it competes
favorably with respect to product features, functionality and performance,
including color and print quality and the open architecture of the Company's
systems. Splash was the first to introduce a number of significant features to
the multifunction color copier market, and its products currently provide
certain features and functionality not offered by competitors. However,
Splash's competitors also offer certain unique features and functionality that
are not offered by the Company. EFI also has substantially greater name
recognition and a significantly larger installed base than the Company, its
products operate with a broader range of color photocopier systems and its
products are generally priced less than those of Splash. EFI has historically
had higher operating margins than Splash which could allow EFI to increase
pricing pressure on Splash or to respond more effectively to any third party
pricing pressures. The Company also believes that it competes favorably in many
distribution channels addressed by Xerox and Fuji Xerox, but the Company's
products do not support the range of products from different manufacturers
supported by EFI and other competitors, and the Company's relationship with the
Xerox distribution channel is currently not as strong in certain geographical
areas, such as Europe, where the Company historically has had a smaller market
presence and lesser support capabilities.
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Many of the Company's current and potential direct and indirect competitors
have longer operating histories, are substantially larger, and have
substantially greater financial, technical, manufacturing, marketing and other
resources than Splash. A number of these current and potential competitors also
have substantially greater name recognition and a significantly larger
installed base of products than the Company, which could provide leverage to
such companies in their competition with Splash. The Company expects
competition to increase to the extent the color server market grows, and such
increased competition may result in price reductions, reduced gross margins and
loss of market share, any of which could materially adversely affect the
Company's business, operating results and financial condition. As a result of
their greater resources, many of such competitors are in a better position than
Splash to withstand significant price competition or downturns in the economy.
There can be no assurance that Splash will be able to continue to compete
effectively, and any failure to do so would have a material adverse effect upon
the Company's business, operating results and financial condition. See "Risk
Factors--Competition."
INTELLECTUAL PROPERTY
The Company relies in part on trademark, copyright and trade secret law to
protect its intellectual property in the United States and abroad. The Company
seeks to protect its software, documentation and other written materials under
trade secret and copyright laws, which afford only limited protection and there
can be no assurance that the steps taken by the Company will prevent
misappropriation of its technology. The Splash software included as a part of
the Company's products is sold pursuant to "shrink wrap" licenses that are not
signed by the end user and, therefore, may be unenforceable under the laws of
certain jurisdictions. The Company does not own any issued patent. There can be
no assurance that any trademark or copyright owned by the Company, or any
patent, trademark or copyright obtained by the Company in the future, will not
be invalidated, circumvented or challenged, that the rights granted thereunder
will provide competitive advantages to the Company or that any of the Company's
pending or future patent applications will be issued with the scope of the
claims sought by the Company, if at all. In addition, the laws of some foreign
countries do not protect the Company's proprietary rights as fully as do the
laws of the United States. Thus, effective intellectual property protection may
be unavailable or limited in certain foreign countries. There can be no
assurance that the Company's means of protecting its proprietary rights in the
United States or abroad will be adequate or that competition will not
independently develop technologies that are similar or superior to the
Company's technology, duplicate the Company's technology or design around any
patent of the Company. Moreover, litigation may be necessary in the future to
enforce the Company's intellectual property rights, to determine the validity
and scope of the proprietary rights of others, or to defend against claims of
infringement or invalidity. Such litigation could result in substantial costs
and diversion of management time and resources and could have a material
adverse effect on the Company's business, operating results and financial
condition.
There have been substantial amounts of litigation in the computer and related
industries regarding intellectual property rights, and there can be no
assurance that third parties will not claim infringement by the Company of
their intellectual property rights. In particular, EFI filed suit against
Radius in November 1995, alleging infringement of an EFI patent by Splash's
predecessor, CSG and requesting unspecified monetary damages and injunctive
relief. The technology which is the subject of the patent claim was acquired by
Splash in the Acquisition, and EFI could add Splash as a defendant to the suit
at any time. Although a portion of the purchase price in the Acquisition was
placed in escrow pending resolution of the EFI litigation, there can be no
assurance that any such litigation against Splash would not have a material
adverse effect on the Company's business, operating results and financial
condition. The addition of Splash as a defendant in this suit or any other
third party claims that the Company is infringing on proprietary rights of
others, with or without merit, could be time consuming to defend, result in
costly litigation, divert management's attention and resources, and cause
product shipment delays. If the Company were found to be infringing on the
intellectual property rights of any third party, the Company could be subject
to liabilities for such infringement, which liabilities could be material, and
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could be required to seek licenses from other companies or to refrain from
using, manufacturing or selling certain products or using certain processes.
Although holders of patents and other intellectual property rights often offer
licenses to their patent or other intellectual property rights, no assurance
can be given that licenses would be offered or that the terms of any offered
license would be acceptable to the Company. Any need to redesign the products
or enter into any royalty or licensing agreement could have a material adverse
effect on the Company's business, operating results and financial condition.
See "Certain Transactions."
The Company has been required to place the source code for certain of its
software in escrow for the benefit of Xerox, and such software will be released
to Xerox in the event that the Company either files bankruptcy and as a result
is unable to deliver products for the thirty (30) days of the previously
committed date, or ceases operations.
The Company relies upon certain software licensed from third parties. There
can be no assurance that the software licensed by the Company will continue to
provide competitive features and functionality or that licenses for software
currently utilized by the Company or other software which the Company may seek
to license in the future will be available to the Company on commercially
reasonable terms. The loss of, or inability to maintain, existing licenses
could result in shipment delays or reductions until equivalent software or
suitable alternative products could be developed, identified, licensed and
integrated, and the inability to license key new software that may be
developed, on commercially reasonable terms, would have a material adverse
effect on the Company's competitive position. Any such event would materially
adversely affect the Company's business, operating results and financial
condition. See "Risk Factors--Dependence on Proprietary Technology; Reliance on
Third Party Licenses" and "--Dependence on Adobe Systems Incorporated."
EMPLOYEES
As of June 30, 1996, the Company employed 40 people, including 23 in research
and development, 5 in operations, 6 in sales and marketing, and 6 in a general
and administrative capacity. The Company also employs a number of temporary
employees and consultants on a contract basis. None of the Company's employees
is represented by a labor union with respect to his or her employment by the
Company. The Company has not experienced any work stoppages and considers its
relations with its employees to be good.
The Company's future success will depend, in part, upon its ability to
attract and retain qualified personnel. Competition for qualified personnel in
the Company's industry is intense, and there can be no assurance that the
Company will be successful in retaining its key employees or that it will be
able to attract skilled personnel necessary for the development of its
business. See "Risk Factors--Dependence on Key Personnel."
FACILITIES
The Company's principal operations are located in a leased facility of
approximately 24,000 square feet in Sunnyvale, California. The lease on this
building expires in 2001, and the Company has an option to extend the lease for
a period of up to five additional years. The Company also leases three office
suites in Paris, France, primarily for sales and marketing efforts in Europe.
The initial lease term on these offices expires in April 1998, and the lease is
automatically renewed every three months after April 1998 unless one of the
parties to the lease gives prior notice of termination. The Company believes
that its existing facilities are adequate to meet its needs for the foreseeable
future.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY PERSONNEL
The following table sets forth certain information regarding the executive
officers, directors and other key personnel of the Company as of June 30,
1996:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Kevin K. Macgillivray*** 37 President, Chief Executive Officer and Director
Joan P. Platt 42 Chief Financial Officer and
Vice President, Finance and Administration
Timothy D. Kleffman 38 Vice President, Engineering Operations
Christine A. Beheshti 34 Vice President, Software Engineering
Gregory M. Avis(1)*** 37 Director
Charles W. Berger(1)** 42 Director
Peter Y. Chung(2)* 28 Director
Lawrence G. Finch(2)** 62 Director
Richard A. Falk 37 Chief Scientist
</TABLE>
- --------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
* Class I Director
** Class II Director
*** Class III Director
Kevin K. Macgillivray has served as President and Chief Executive Officer of
the Company since the Acquisition in January 1996. From April 1995 until the
Acquisition, Mr. Macgillivray was Vice President and General Manager of the
Publishing Division of Radius, a manufacturer of computer video cards and
display products, which included the CSG. From May 1993 to April 1995, Mr.
Macgillivray held other managerial positions within Radius and SuperMac, which
merged into Radius in 1994. From May 1991 to May 1993, Mr. Macgillivray was
Vice President and General Manager of Oce Graphics USA, a computer peripherals
manufacturer. Mr. Macgillivray received a B.S. in Mechanical Engineering from
Stanford University.
Joan P. Platt joined the Company in March 1996 as Vice President, Finance
and Administration and Chief Financial Officer. From October 1986 to March
1996, Ms. Platt was a general practice partner at Coopers & Lybrand L.L.P., a
public accounting firm. Prior to 1986, Ms. Platt was a staff accountant and
manager in the business advisory, accounting and audit practice of Coopers &
Lybrand L.L.P. Ms. Platt received a B.S. in Business Administration from The
Pennsylvania State University.
Timothy D. Kleffman has served as Vice President, Engineering Operations of
the Company since the Acquisition. Mr. Kleffman was Director of Printer
Systems within the CSG at Radius and SuperMac from October 1992 until the
Acquisition. From August 1985 to October 1992, Mr. Kleffman held various
management positions at ROLM Corporation. Mr. Kleffman received a B.S. in
Electrical and Computer Engineering from the University of California, Davis.
Christine A. Beheshti has served as Vice President, Software Engineering of
the Company since the Acquisition. From March 1993 until the Acquisition, Ms.
Beheshti held various engineering management positions with Radius and
SuperMac. From December 1990 to March 1993, Ms. Beheshti worked for ROLM
Corporation, where she held various software development, management and
engineering positions. Ms. Beheshti received a B.S. in Computer Science from
the University of Wisconsin.
45
<PAGE>
Gregory M. Avis has been a director of the Company since its formation in
December 1995. Mr. Avis has served as a General Partner of Summit Partners,
L.P., a venture capital partnership, since 1987 and has served as a Managing
Partner of Summit Partners, L.P. since 1990. Mr. Avis is also a director of
CMG Information Services, Inc. and Digital Link Corporation. Mr. Avis received
a B.A. in Political Economy from Williams College and an M.B.A. from Harvard
Business School.
Charles W. Berger has been a director of the Company since the Acquisition
in January 1996. Mr. Berger has served as Chief Executive Officer, President
and a director of Radius, a computer peripherals manufacturer, since March
1993 and has been the Chairman of the Board of Directors of Radius since March
1994. From April 1992 until he joined Radius, Mr. Berger was Senior Vice
President, Worldwide Sales, Operations and Support for Claris Corporation, a
software subsidiary of Apple, a personal computer manufacturer, that develops
and markets application software. From March 1989 to April 1992, Mr. Berger
held various executive positions at Sun Microsystems, Inc. and its
subsidiaries. Mr. Berger received a B.S. in Business Administration from
Bucknell and an M.B.A. from Santa Clara University.
Peter Y. Chung has been a director of the Company since its formation in
December 1995. Mr. Chung has served as a Senior Associate at Summit Partners,
L.P., a venture capital partnership, since August 1994. From August 1989 to
July 1992, Mr. Chung was employed by Goldman, Sachs & Co., an investment
banking firm. Mr. Chung received an A.B. in Economics from Harvard College and
an M.B.A. from Stanford University.
Lawrence G. Finch has been a director of Splash since the Acquisition in
January 1996. Mr. Finch has served as a General Partner of Sigma Partners,
L.P., a venture capital firm, since January 1989. Mr. Finch is also a director
of Phoenix Technologies Ltd., a developer of computer firmware and software.
Richard A. Falk has served as Splash's Chief Scientist since the Acquisition
in January 1996. From October 1992 until the Acquisition, Mr. Falk served in
various engineering positions with SuperMac and Radius. From August 1983 to
October 1992, Mr. Falk worked for ROLM Corporation in a variety of
development, engineering and management positions. Mr. Falk received a B.A. in
Physical Sciences and an M.B.A. from the University of California, Berkeley.
The Company's Board of Directors shall be divided into three classes upon
the closing of the Offering. The initial term of the Class I directors expires
at the Company's annual meeting of stockholders in 1997, the initial term of
the Class II directors expires at the Company's annual meeting of stockholders
in 1998, and the initial term of the Class III directors expires at the
Company's annual meeting of stockholders in 1999. Thereafter, the term of each
class of directors shall be three years. All directors hold office until the
annual meeting of stockholders at which their respective class is subject to
reelection and until their successors are duly elected and qualified, or until
their earlier resignation or removal. Officers serve at the discretion of the
Board and are elected annually. There are no family relationships among the
directors or officers of the Company.
BOARD COMMITTEES
The Board of Directors has had a Compensation Committee and an Audit
Committee since July 1996. The Compensation Committee makes recommendations to
the Board concerning salaries and incentive compensation for the Company's
officers and employees and administers the Company's 1996 Stock Option Plan
and 1996 Employee Stock Purchase Plan. The Audit Committee aids management in
the establishment and supervision of the Company's financial controls,
evaluates the scope of the annual audit, reviews audit results, consults with
management and the Company's independent auditors prior to the presentation of
financial statements to stockholders and, as appropriate, initiates inquiries
into aspects of the Company's financial affairs.
46
<PAGE>
DIRECTOR COMPENSATION
Directors receive no cash remuneration for serving on the Board of Directors,
although directors are reimbursed for all reasonable expenses incurred by them
in attending Board and Committee meetings. Non-employee directors are eligible
to receive stock options under the 1996 Stock Option Plan. See "--Compensation
Plans."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors currently consists of
Messrs. Avis and Berger. Neither of these individuals were at any time since
the formation of the Company, an officer or employee of the Company. No
executive officer of the Company serves as a member of the board of directors
or compensation committee of any entity that has one or more executive officers
serving as a member of the Company's Board of Directors or Compensation
Committee.
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS
The Company does not currently have any employment contract in effect with
its Chief Executive Officer or any other Named Executive Officer (as defined
below).
EXECUTIVE COMPENSATION
The following table set forth a summary of the compensation paid by Radius
during the fiscal year ended September 30, 1995 to the Company's Chief
Executive Officer and the Company's other most highly compensated executive
officers (collectively, the "Named Executive Officers") for services rendered
in all capacities to Radius.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
PREDECESSOR BUSINESS
-----------------------------------------------------
1995 ANNUAL LONG TERM
COMPENSATION COMPENSATION
------------------ ------------------
NAME AND PRINCIPAL SECURITIES ALL OTHER
POSITION(1) SALARY($) BONUS($) UNDERLYING OPTIONS COMPENSATION($)
------------------ --------- -------- ------------------ ---------------
<S> <C> <C> <C> <C>
Kevin K. Macgillivray.... $137,711 $35,500 -- --
President, Chief
Executive Officer and
Director
Timothy D. Kleffman...... $127,284 $36,000 -- --
Vice President,
Engineering Operations
Christine A. Beheshti.... $125,000 $24,000 -- --
Vice President, Software
Engineering
</TABLE>
- --------
(1) In March 1996, the Company hired Joan P. Platt as Vice President, Finance
and Administration and Chief Financial Officer. Ms. Platt's annualized
compensation and target bonus are $135,000 and $25,000, respectively.
OPTION GRANTS IN LAST FISCAL YEAR
The Company was formed in December 1995 and effected the Acquisition in
January 1996. Accordingly, the Company did not grant any stock options to the
Named Executive Officers during the fiscal year ended September 30, 1995. In
February 1996, the Company granted options to purchase shares of the Company's
Common Stock at an exercise price of $0.14 per share to the following executive
officers: (i) Kevin K. Macgillivray received options to purchase an aggregate
of 48,124 shares,
47
<PAGE>
(ii) Timothy D. Kleffman received options to purchase an aggregate of 48,124
shares and (iii) Christine A. Beheshti received options to purchase an
aggregate of 48,124 shares. In March 1996, the Company granted options to
purchase an aggregate of 96,659 shares of the Company's Common Stock at an
exercise price of $.29 per share to Joan P. Platt.
COMPENSATION PLANS
1996 STOCK OPTION PLAN
The Company's 1996 Stock Option Plan (the "1996 Plan") was adopted in January
1996 and amended in July 1996. The 1996 Plan provides for the grant to
employees of the Company (including officers and employee directors) of
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), and for the grant of
nonstatutory stock options to employees and consultants of the Company. The
1996 Plan is administered by the Board of Directors or a Committee of the Board
of Directors (the "Administrator"), which selects the optionees, determines the
number of shares to be subject to each option and determines the exercise price
of each option. The 1996 Plan authorizes the issuance of an aggregate of up to
3,150,000 shares of Common Stock. As of June 30, 1996, approximately 575,000
shares had been issued under the 1996 Plan, options for approximately 240,000
shares were outstanding, and approximately 2,350,000 shares remained available
for future grants. The exercise price of all incentive stock options granted
under the 1996 Plan must be at least equal to the fair market value of the
Common Stock on the date of grant. The exercise price of all nonstatutory stock
options granted under the 1996 Plan shall be determined by the Administrator.
With respect to any participant who owns stock possessing more than 10% of the
voting power of all classes of stock of the Company, the exercise price of any
incentive stock option granted must equal at least 110% of the fair market
value on the grant date and the maximum term of the option must not exceed five
years. The term of all other options granted under the 1996 Plan may not exceed
ten years.
In the event of a merger of the Company with or into another corporation or a
sale of substantially all the Company's assets, the 1996 Plan requires that
each outstanding option be assumed or an equivalent option substituted by the
successor corporation; provided, however, that in the event the successor
corporation refuses to assume or substitute for the outstanding options, such
options will become fully vested and exercisable for a period of fifteen days
after notice from the Administrators. Unless terminated sooner, the 1996 Plan
will terminate ten years from its effective date. The Board has authority to
amend or terminate the 1996 Plan, provided that no such action may impair the
rights of the holder of any outstanding options without the written consent of
such holder.
1996 EMPLOYEE STOCK PURCHASE PLAN
The Company's 1996 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted in July 1996 and will become effective upon the closing of the
Offering. A total of 175,000 shares of Common Stock has been reserved for
issuance under the Purchase Plan. The Purchase Plan is intended to qualify
under Section 423 of the Code. Offering periods may be up to 24 months in
duration and may include several purchase periods as determined by the Board.
The initial offering period will commence on the date of the Offering and end
on the last business day on or prior to April 30, 1997, and subsequent offering
periods are initially expected to be May 1 to October 31 and November 1 to
April 30 of each year. Employees are eligible to participate if they are
regularly employed by the Company for at least twenty hours per week and more
than five months in any calendar year.
The Purchase Plan permits eligible employees to purchase Common Stock through
payroll deductions, which may not exceed 10% of an employee's base compensation
(20% in the first offering period), including commissions, bonuses and
overtime, at a price equal to 85% of the fair market value of the Common Stock
at the beginning of each offering period or the purchase date, whichever is
lower. In the event of certain changes in control of the Company, the Purchase
Plan provides that the Board
48
<PAGE>
of Directors will shorten the offering period by setting a new purchase date to
occur before the change in control event. Unless terminated sooner, the
Purchase Plan will terminate ten years after its effective date. The Board of
Directors has authority to amend or terminate the Purchase Plan provided no
such action may adversely affect the rights of any participant.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Amended and Restated Certificate of Incorporation limits the
liability of directors to the fullest extent permitted by the Delaware General
Corporation Law (the "Delaware Law"). Under the Delaware Law, a director's
liability to a company or its stockholders may not be limited with respect to
(i) any breach of his duty of loyalty to the company or its stockholders, (ii)
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) unlawful payments or dividends or unlawful
stock repurchases or redemptions, or (iv) transactions from which the director
derived an improper personal benefit.
The Company's Bylaws provide that the Company shall indemnify its officers
and directors and may indemnify its employees and other agents to the fullest
extent permitted under the Delaware Law. The Company has also entered into
agreements to indemnify its directors and executive officers, in addition to
the indemnification provided for in the Company's Bylaws. The Company believes
that these provisions and agreements are necessary to attract and retain
qualified directors and executive officers. The Company's Bylaws also permit it
to secure insurance on behalf of any officer, director, employee or other agent
for any liability arising out of his or her actions, regardless of whether the
Delaware Law would permit indemnification.
There is no pending litigation or proceeding involving any director, officer,
employee or agent of the Company where indemnification will be required or
permitted. The Company is not aware of any pending or threatened litigation or
proceeding that might result in a claim for such indemnification.
49
<PAGE>
CERTAIN TRANSACTIONS
On January 30, 1996, the Company was acquired by an investor group (the
"Acquisition Group") led by certain entities affiliated with Summit Partners,
L.P. and certain entities affiliated with Sigma Partners, L.P. The Acquisition
was effected through the following series of transactions: (i) the Acquisition
Group formed and capitalized a new corporation, the Company, called Splash
Technology Holdings, Inc., a Delaware corporation; (ii) the Company formed and
capitalized a new wholly-owned subsidiary, Splash Merger Company, Inc., a
Delaware corporation; (iii) Radius created a new corporation, Splash
Technology, Inc., a Delaware corporation, into which Radius placed
substantially all of the assets and liabilities of its Color Server Group in
exchange for all of the capital stock of Splash Technology, Inc.; and (iv)
Splash Merger Company, Inc. was merged with and into Splash Technology, Inc.,
thereby effecting the Acquisition. As a result of these transactions, the
surviving corporation in the merger was Splash Technology, Inc., a wholly-owned
subsidiary of the Company, which in turn was owned principally by the
Acquisition Group. As a result of these transactions, Radius received (i) a
payment of approximately $21.9 million in cash on January 30, 1996
(approximately $2.35 million of which remains in escrow for the benefit for the
Company and its stockholders, as described below), (ii) an aggregate of 4,282
shares of Series B Preferred Stock of the Company, which are convertible into a
total of 1,741,129 shares of Common Stock of the Company (representing
approximately 19% of the outstanding Common Stock of the Company on an as-
converted basis prior to the Offering), and (iii) a payment of approximately
$1.5 million in cash on June 9, 1996. None of the entities within the
Acquisition Group which are affiliated with Summit Partners, L.P. or Sigma
Partners, L.P. were affiliated with Radius immediately prior to the
Acquisition. Entities affiliated with Sigma Partners, L.P. collectively held
more than 5% of the outstanding capital stock of SuperMac until January 1993
and Lawrence G. Finch was a director of Radius until October 1995.
The Acquisition was funded by the purchase of approximately $15.5 million of
Series A Preferred Stock and Common Stock by entities associated with Summit
Partners, L.P. and entities associated with Sigma Partners, L.P. and the
purchase of $8.0 million of subordinated promissory notes by entities
associated with Summit Partners, L.P. The following table shows the aggregate
amount of Common Stock, Series A Preferred Stock and subordinated promissory
notes acquired by each of the principal parties in connection with the initial
capitalization of Splash Technology Holdings, Inc. and the amount and type of
consideration contributed therefor.
<TABLE>
<CAPTION>
PRINCIPAL
PURCHASE PURCHASE AMOUNT OF
PRICE SHARES OF PRICE FOR SUBORDINATED
SHARES OF FOR SERIES A SERIES A PROMISSORY
COMMON COMMON PREFERRED PREFERRED NOTES
STOCK STOCK STOCK STOCK PURCHASED TOTAL
--------- -------- --------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Entities associated with
Summit Partners, L.P. . 5,888,749 $67,300 13,933 $13,933,000 $8,000,000 $22,000,300
Entities associated with
Sigma Partners, L.P. .. 586,249 6,700 1,493 1,493,000 -- 1,499,700
Management.............. 533,748 6,100 -- -- -- 6,100
--------- ------- ------ ----------- ---------- -----------
Total................. 7,008,746 $80,100 15,426 $15,426,000 $8,000,000 $23,506,100
========= ======= ====== =========== ========== ===========
</TABLE>
In connection with the Acquisition, the parties entered into an escrow
agreement providing for an escrow of $4.7 million for satisfaction of possible
claims for indemnification by Splash Technology, Inc., Splash Technology
Holdings, Inc. and its stockholders against Radius. An amount equal to
approximately $2.35 million remains in escrow pending (i) a final, non-
appealable order dismissing with prejudice the EFI litigation, (ii) the
attainment by Radius of certain financial tests, or (iii) or the discretionary
decision by Splash Technology Holdings, Inc. and its stockholders to release
the amount in escrow. See "Risk Factors--Dependence on Proprietary Technology;
Reliance on Third Party Licenses" and "Business--Intellectual Property."
50
<PAGE>
In connection with the Acquisition, and related transactions, entities
affiliated with Summit Partners, L.P. and Sigma Partners, L.P. acquired an
aggregate of 5,888,749 shares of Common Stock and 586,249 shares of Common
Stock, respectively, representing 63.2% and 6.3% of the Company's outstanding
Common Stock immediately prior to the Offering. In addition, entities
affiliated with Summit Partners, L.P. and Sigma Partners, L.P. acquired an
aggregate of 13,933 shares and 1,493 shares, respectively, of Series A
Preferred Stock of the Company and entities affiliated with Summit Partners,
L.P. acquired subordinated promissory notes of the Company in the aggregate
principal amount of $8.0 million. The subordinated promissory notes are
required to be repaid at face value plus accrued and unpaid interest, and the
Series A Preferred Stock is required to be redeemed at a price of $1,000 per
share plus accrued and unpaid dividends, upon certain events including an
initial public offering at a price of at least $3.43 per share and aggregate
gross proceeds (net of underwriting discounts) to the Company of at least $35.0
million. It is anticipated that the subordinated promissory notes will be
repaid and the Series A Preferred Stock will be redeemed out of the proceeds of
the Offering even at a lesser amount of aggregate gross proceeds to the
Company. See "Use of Proceeds," "Principal Stockholders" and "Description of
Capital Stock."
The Acquisition constituted a leveraged transaction. As of January 30, 1996,
the Company had approximately $12.6 million in assets and approximately $9.6
million of liabilities. Immediately following the Acquisition, the Company had
$18.2 million in assets and $19.7 million of liabilities. The proceeds from the
Offering will be used primarily to repay the face value of $8.0 million in
subordinated promissory notes and redeem the face value of the $15.4 million of
outstanding Series A Preferred Stock issued in connection with the Acquisition.
See "Acquisition," "Use of Proceeds," "Capitalization," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Principal Stockholders."
51
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of June 30, 1996 and as
adjusted to reflect the sale of the shares of Common Stock offered hereby with
respect to (i) each person (or group of affiliated persons) known by the
Company to own beneficially more than 5% of the outstanding shares of Common
Stock, (ii) each of the Company's directors, (iii) each of the Named Executive
Officers, and (iv) all directors and executive officers as a group.
<TABLE>
<CAPTION>
PERCENT OF
TOTAL (1)(2)
NUMBER OF --------------------
SHARES BENEFICIALLY BEFORE THE AFTER THE
NAME OF BENEFICIAL OWNER OWNED(1) OFFERING OFFERING
------------------------ ------------------- ---------- ---------
<S> <C> <C> <C>
Summit Partners, L.P.(3)(4)........... 5,888,749 63.2% 49.4%
499 Hamilton Avenue, Suite 200
Palo Alto, CA 94301
Gregory M. Avis(3)(4)................. 5,888,749 63.2 49.4
Peter Y. Chung(3)(4).................. -- -- --
Sigma Partners, L.P.(5)(6)............ 586,249 6.3 4.9
2884 Sand Hill Road, Suite 121
Menlo Park, CA 94025
Lawrence G. Finch(5)(6)............... 586,249 6.3 4.9
Radius Inc.(7)........................ 1,741,129 18.7 14.6
215 Moffett Park Drive
Sunnyvale, CA 94089
Charles W. Berger(7).................. 1,741,129 18.7 14.6
Kevin K. Macgillivray(8).............. 242,216 2.6 2.0
Joan P. Platt(9)...................... 96,659 1.0 *
Timothy D. Kleffman(10)............... 193,706 2.1 1.6
Christine A. Beheshti(11)............. 145,161 1.6 1.2
All directors and executive officers
as a group (8 persons)(3)(5)(7)(12).. 8,893,869 95.4 74.6
</TABLE>
- --------
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that
person, shares of Common Stock subject to options or warrants held by that
person that are currently exercisable or exercisable within 60 days of
June 30, 1996 are deemed outstanding. Such shares, however, are not deemed
outstanding for the purposes of computing the percentage ownership of any
other person. Except as indicated in the footnotes to this table and
pursuant to applicable community property laws, each stockholder named in
the table has sole voting and investment power with respect to the shares
set forth opposite such stockholder's name.
(2) Percentage of ownership is based on 9,320,624 shares of Common Stock
outstanding on June 30, 1996 and shares of Common Stock outstanding after
completion of the Offering. Shares owned do not include 15,426 shares of
Series A Preferred Stock, all shares of which are held by affiliates of
Summit Partners, L.P. and Sigma Partners, L.P. and all of which are to be
redeemed upon the closing of the Offering. See "Description of Capital
Stock." Assumes no exercise of the Underwriters' over-allotment option.
52
<PAGE>
(3) Includes 5,254,812, 224,175 and 409,762 shares of Common Stock held of
record by Summit Ventures IV, L.P., Summit Investors III, L.P. and Summit
Subordinated Debt Fund, L.P., respectively. Summit Partners IV, L.P. is a
General Partner of Summit Ventures IV, L.P. and Summit Partners SD, L.P.
is a General Partner of Summit Subordinated Debt Fund, L.P. Stamps,
Woodsum & Co., IV is a General Partner of Summit Ventures IV, L.P. and
Stamps, Woodsum & Co., III is a General Partner of Summit Subordinated
Debt Fund, L.P. Gregory M. Avis, a director of the Company, is a General
Partner of Stamps, Woodsum & Co., III, Stamps, Woodsum & Co., IV and
Summit Investors III, L.P. See Note (4).
(4) Includes shares described in Note (3) above. Mr. Avis, a director of the
Company, is a general partner of affiliates of Summit Partners, L.P. Mr.
Avis exercises shared investment and voting power with respect to such
shares, but disclaims beneficial ownership of such shares.
(5) Includes 489,520, 89,106, and 7,623 shares of Common Stock held by Sigma
Partners III, L.P., Sigma Associates III, L.P., and Sigma Investors III,
L.P., respectively. Sigma Management III is a General Partner of Sigma
Partners III, L.P., Sigma Associates III, L.P. and Sigma Investors III,
L.P. Mr. Finch, a director of the Company, is General Partner of Sigma
Partners, L.P. See Note (6).
(6) Includes shares described in Note (5) above. Mr. Finch, a director of the
Company, is a General Partner of Sigma Partners, L.P. Mr. Finch exercises
shared investment and voting power with such shares, but disclaims
beneficial ownership of such shares.
(7) Includes 1,741,129 shares beneficially owned by Radius Inc. Mr. Berger, a
director of the Company, is Chairman of the Board of Directors and Chief
Executive Officer of Radius Inc.
(8) Includes 242,216 shares that are subject to a right of repurchase in favor
of the Company which expires ratably through February 2000.
(9) Includes 96,659 shares that are subject to a right of repurchase in favor
of the Company which expires ratably through March 2000.
(10) Includes 193,706 shares that are subject to a right of repurchase in favor
of the Company which expires ratably through February 2000.
(11) Includes 145,161 shares that are subject to a right of repurchase in favor
of the Company which expires ratably through February 2000.
(12) Includes 677,742 shares that are subject to a right of repurchase in favor
of the Company which expires ratably through March 2000.
53
<PAGE>
DESCRIPTION OF CAPITAL STOCK
After giving effect to the filing of an Amended and Restated Certificate of
Incorporation on or prior to the closing of the Offering, the authorized
capital stock of the Company will consist of 50,000,000 shares of Common Stock,
par value $0.001 per share, and 5,000,000 shares of Preferred Stock, par value
$0.001 per share.
The following summary of certain provisions of the Common Stock and Preferred
Stock does not purport to be complete and is subject to, and qualified in its
entirety by, the provisions of the Company's Amended and Restated Certificate
of Incorporation, which is included as an exhibit to the Registration Statement
of which this Prospectus is a part, and by the provisions of applicable law.
COMMON STOCK
As of June 30, 1996, there were 9,320,624 shares of Common Stock outstanding
held of record by approximately 33 stockholders, as well as options and
warrants to purchase an aggregate of approximately 250,000 shares of Common
Stock. The holders of Common Stock are entitled to one vote per share on all
matters to be voted on by the stockholders. Subject to preferences that may be
applicable to outstanding shares of Preferred Stock, if any, the holders of
Common Stock are entitled to receive ratably such dividends as may be declared
from time to time by the Board of Directors out of funds legally available
therefor. In the event of the liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to share ratably in all
assets remaining after payment of liabilities, subject to prior liquidation
rights of Preferred Stock, if any, then outstanding. The Common Stock has no
preemptive conversion rights or other subscription rights. There are no
redemption or sinking funds provisions applicable to the Common Stock. All
outstanding shares of Common Stock are fully paid and non-assessable, and the
shares of Common Stock to be outstanding upon completion of the Offering will
be fully paid and non-assessable.
PREFERRED STOCK
Effective upon the closing of the Offering, redemption of outstanding Series
A Preferred Stock and automatic conversion of outstanding Series B Preferred
Stock, the Company will be authorized to issue 5,000,000 shares of undesignated
Preferred Stock. The Board of Directors will have the authority to issue the
undesignated Preferred Stock in one or more series and to fix the rights,
preferences, privileges and restrictions granted to or imposed upon any wholly
unissued shares of undesignated Preferred Stock and to fix the number of shares
constituting any series in the designations of such series, without any further
vote or action by the stockholders. The Board of Directors, without stockholder
approval, can issue Preferred Stock with voting and conversion rights which
could adversely affect the voting power of the holders of Common Stock. The
issuance of Preferred Stock may have the effect of delaying, deferring or
preventing a change in control of the Company. The Company has no present plan
to issue Preferred Stock.
WARRANT
In connection with the Acquisition, the Company issued to Imperial Bancorp
(the "Warrantholder") a warrant to purchase an aggregate of 8,750 shares of
Common Stock at a price of $0.01 per share. The warrant terminates on January
31, 2001. The Warrantholder has certain rights to registration of its shares of
Common Stock issuable upon exercise of such warrant.
REGISTRATION RIGHTS
Under the terms of the Registration Rights Agreement dated as of January 30,
1996 among the Company and certain holders of its securities (the "Rights
Agreement"), following the closing of the Offering, the holders of
approximately 8,750,000 shares of Common Stock and the holder of a warrant to
purchase 8,750 shares of Common Stock (the "Registrable Securities") will be
entitled to certain rights with respect to the registration of such shares of
Common Stock under the Securities Act. Under the
54
<PAGE>
Rights Agreement, if the Company proposes to register any of its Common Stock
under the Securities Act, certain holders of Registrable Securities are
entitled to notice of such registration and to include their Registrable
Securities therein; provided, among other conditions, that the underwriters
have the right to limit the number of shares included in any such registration.
Beginning six months after the closing of the Offering, the holders of at least
fifty percent (50%) of the Registrable Securities have the right to require the
Company, on not more than two occasions, to file a registration statement under
the Securities Act in order to register all or any part of their Registrable
Securities. The Company may, in certain circumstances, defer such registration
and the underwriters have the right, subject to certain limitations, to limit
the number of shares included in such registrations. Further, the holders of
Registrable Securities may require the Company to register all or any portion
of their Registrable Securities on Form S-3, when such form becomes available
to the Company, subject to certain conditions and limitations.
ANTITAKEOVER EFFECTS OF PROVISIONS OF CERTIFICATE OF INCORPORATION, BYLAWS AND
DELAWARE LAW
The Company's Certificate of Incorporation and Bylaws, as amended and
restated on or prior to the closing of the Offering, among other things, (i)
permit vacancies on the Board of Directors that may occur between annual
meetings and any newly created seats to be filled only by the Board of
Directors and not by the stockholders, subject to any rights of holders of the
Preferred Stock that may be granted by the Board of directors in the future,
(ii) limit the rights of stockholders to call special meetings of stockholders,
(iii) provide for classification of the Board of Directors into three classes
having terms of three years each, and (iv) provide that the Board of Directors,
without action by the stockholders, may issue and fix the rights and
preferences of shares of Preferred Stock. These provisions may have the effect
of delaying, deferring or preventing a change of control of the Company without
further action by the stockholders, may discourage bids for the Common Stock at
a premium over the market price of the Common Stock, may adversely affect the
market price of, and the voting and other rights of, the holders of the Common
Stock and could have the effect of discouraging certain attempts to acquire the
Company or remove incumbent management, including incumbent members of the
Company's Board of Directors, even if some or a majority of the Company's
stockholders deemed such an attempt to be in their best interests. See "Risk
Factors--Control by Principal Stockholders, Officers and Directors;
Antitakeover Effects of Certificate of Incorporation and Delaware Law" and
"Management--Executive Officers, Directors and Key Personnel."
The Company is subject to Section 203 of the Delaware General Corporation Law
("Section 203"). Section 203 prohibits a publicly held Delaware corporation
from engaging in a "business combination" with an "interested stockholder" for
a period of three years after the date of the transaction in which the person
became an interested stockholder, unless (i) prior to such date, the board of
directors of the corporation approves either the business combination of the
transaction that resulted in the stockholder becoming an interested
stockholder, (ii) upon consummation of the transaction that resulted in the
stockholder becoming an interested stockholder, the interested stockholder owns
at least 85% of the outstanding voting stock, excluding certain shares held by
employee directors and employee stock plans, or (iii) on or after the
consummation date the business combination is approved by the board of
directors and by the affirmative vote of at least 66 2/3% of the outstanding
voting stock that is not owned by the interested stockholder. For purposes of
Section 203, a "business combination" includes, among other things, a merger,
asset sale or other transaction resulting in a financial benefit to the
interested stockholder, and an "interested stockholder" is generally a person
who, together with affiliates and associates, owns (or within three years, did
own) 15% or more of the corporation's voting stock.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is The First National
Bank of Boston. Its telephone number is (617) 575-2000.
LISTING
The Company has applied to list its Common Stock on the Nasdaq National
Market under the trading symbol "SPLH."
55
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no public market for securities of the
Company. No prediction can be made as to the effect, if any, that market sales
of shares or the availability of shares for sale will have on the market price
prevailing from time to time. Nevertheless, sales of substantial amounts of
Common Stock of the Company in the public market after the lapse of the
restrictions described below could adversely affect the prevailing market price
and the ability of the Company to raise equity capital in the future at a time
and place which it deems appropriate.
Upon completion of the Offering, the Company will have 11,920,624 shares of
Common Stock outstanding, assuming no exercise of the Underwriters' over-
allotment option, no exercise of outstanding options and no exercise of
warrants after June 30, 1996. Of this amount, the 2,600,000 shares offered
hereby and no additional shares will be available for immediate sale in the
public market as of the date of this Prospectus. Approximately 1,120,000
additional shares will be available for sale in the public market following the
expiration of the 180-day lockup agreements with the Representatives of the
Underwriters or the Company, subject in some cases to compliance with the
volume and other limitations of Rule 144.
<TABLE>
<CAPTION>
DAYS AFTER DATE SHARES ELIGIBLE FOR
OF THIS PROSPECTUS SALE COMMENT
------------------ ------------------- -------
<C> <C> <S>
Upon Effectiveness...... 0 Freely tradeable shares sold
in Offering and shares
saleable under Rule 144(k)
that are not subject to 180-
day lockup
180 days................ approximately 1,120,000 Lockup released; shares
saleable under Rules 144 and
701
Thereafter.............. approximately 8,225,000 Restricted securities held
for two years or less
</TABLE>
In general, under Rule 144 a person (or persons whose shares are aggregated)
who has beneficially owned shares for at least two years is entitled to sell
within any three-month period commencing 90 days after the date of this
Prospectus a number of shares that does not exceed the greater of (i) 1% of the
then outstanding shares of Common Stock (approximately 120,000 shares
immediately after the Offering) or (ii) the average weekly trading volume
during the four calendar weeks preceding such sale, subject to the filing of a
Form 144 with respect to such sale. A person (or persons whose shares are
aggregated) who is not deemed to have been an affiliate of the Company at any
time during the 90 days immediately preceding the sale who has beneficially
owned his or her shares for at least three years is entitled to sell such
shares pursuant to Rule 144(k) without regard to the limitations described
above. Persons deemed to be affiliates must always sell pursuant to Rule 144,
even after the applicable holding periods have been satisfied.
The Company is unable to estimate the number of shares that will be sold
under Rule 144, as this will depend on the market price for the Common Stock of
the Company, the personal circumstances of the sellers and other factors. Prior
to the Offering, there has been no public market for the Common Stock, and
there can be no assurance that a significant public market for the Common Stock
will develop or be sustained after the Offering. Any future sale of substantial
amounts of the Common Stock in the open market may adversely affect the market
price of the Common Stock offered hereby.
The Company, its directors, executive officers, stockholders with
registration rights and certain other stockholders have agreed pursuant to the
Underwriting Agreement and other agreements that they will not sell any Common
Stock without the prior consent of Alex. Brown & Sons Incorporated for a period
of 180 days from the date of this Prospectus (the "180-day Lockup Period"),
except that the Company may, without such consent, grant options and sell
shares pursuant to the 1996 Plan and the Purchase Plan.
56
<PAGE>
The Company intends to file a registration statement on Form S-8 under the
Securities Act to register the approximately 2,550,000 shares of Common Stock
issuable upon the exercise of options or reserved for issuance under the 1996
Plan and the 175,000 shares of Common Stock reserved for issuance under the
Purchase Plan within 180 days after the date of this Prospectus, thus
permitting the resale of such shares by nonaffiliates in the public market
without restriction under the Securities Act.
Any employee or consultant to the Company who purchased his or her shares
pursuant to a written compensatory plan or contract is entitled to rely on the
resale provisions of Rule 701, which permits nonaffiliates to sell their Rule
701 shares without having to comply with the public information, holding
period, volume limitation or notice provisions of Rule 144 and permits
affiliates to sell their Rule 701 shares without having to comply with the Rule
144 holding period restrictions, in each case commencing 90 days after the date
of this Prospectus. As of June 30, 1996, the holders of options exercisable
into approximately 240,000 shares of Common Stock will be eligible to sell
their shares in reliance upon Rule 701 or pursuant to the Form S-8 upon the
expiration of the 180-day Lockup Period. Upon completion of the offering, the
4,282 shares of Series B Preferred Stock owned by Radius will automatically
convert to 1,741,129 shares of the Company's Common Stock. If Radius were to
enter bankruptcy and were allowed to sell its shares of the Company's Common
Stock without regard to the restrictions of Rule 144 under the Securities Act,
such additional shares of Common Stock would become eligible for resale into
the public market at an indeterminate date after the date of this Prospectus.
In addition, after the Offering, the holders of approximately 8,750,000
shares of Common Stock and the holder of a warrant to purchase 8,750 shares of
Common Stock will be entitled to certain rights with respect to registration of
such shares under the Securities Act. Registration of such shares under the
Securities Act would result in such shares becoming freely tradeable without
restriction under the Securities Act (except for shares purchased by affiliates
of the Company) immediately upon the effectiveness of such registration. See
"Description of Capital Stock--Registration Rights."
57
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their Representatives,
Alex. Brown & Sons Incorporated and Montgomery Securities, have severally
agreed to purchase from the Company the following respective numbers of shares
of Common Stock at the initial public offering price less the underwriting
discounts and commissions set forth on the cover page of this Prospectus.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ----------- ---------
<S> <C>
Alex. Brown & Sons Incorporated.......................................
Montgomery Securities.................................................
---------
Total............................................................. 2,600,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all shares of the Common Stock offered hereby if any of such shares
are purchased.
The Company has been advised by the Representatives of the Underwriters that
the Underwriters propose to offer the shares of Common Stock to the public at
the initial public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $ per share. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share to certain other dealers. After the
initial public offering, the offering price and other selling terms may be
changed by the Representatives of the Underwriters.
The Company has granted to the Underwriters an option, exercisable not later
than 30 days after the date of this Prospectus, to purchase up to 390,000
additional shares of Common Stock at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Common Stock to be purchased by
it shown in the above table bears to 390,000 and the Company will be obligated,
pursuant to the option, to sell such shares to the Underwriters. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of Common Stock offered hereby. If purchased, the
Underwriters will offer such additional shares on the same terms as those on
which the 2,600,000 shares are being offered.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.
The Company and all stockholders of the Company have agreed not to offer,
sell or otherwise dispose of any shares of Common Stock for a period of 180
days after the effective date of the Offering without the prior written consent
of Alex. Brown & Sons Incorporated, except that the Company may issue, and
grant options to purchase, shares of Common Stock under its current stock
option and purchase plans and other currently outstanding options and warrants.
In addition, the Company may issue shares of Common Stock in connection with
corporate acquisitions.
58
<PAGE>
The Representatives of the Underwriters have advised the Company that the
Underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.
Prior to the Offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price for the Common
Stock will be determined by negotiations between the Company and the
Representatives of the Underwriters. Among the factors to be considered in such
negotiations will be prevailing market conditions, the results of operations of
the Company in recent periods, the market capitalizations, the price-earnings
ratios, the price-sales ratios, the market prices generally of securities and
stages of development of other companies that the Company and the
Representatives of the Underwriters believe to be comparable to the Company,
estimates of the business potential of the Company and its industry in general
and the present state of the Company's development.
LEGAL MATTERS
The validity of the issuance of shares of Common Stock offered hereby will be
passed upon for the Company by Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Palo Alto, California. Certain legal matters in connection with
the Offering will be passed upon for the Underwriters by Gunderson Dettmer
Stough Villeneuve Franklin & Hachigian, LLP, Palo Alto, California. Jeffrey D.
Saper, a member of Wilson Sonsini Goodrich & Rosati, Professional Corporation,
is the Secretary of the Company.
EXPERTS
The consolidated balance sheets of the Company as of September 30, 1994 and
1995 and June 30, 1996 and the consolidated statements of income cash flows for
each of the two years in the period ended September 30, 1995, the four months
ended January 1996, and the five months ended June 30, 1996; and statement of
parent company investment for each of the two years in the period ended
September 30, 1995 and the four months ended January 31, 1996 and the
consolidated statement of stockholders' equity for the five months ended June
30, 1996, included in this Prospectus have been so included in reliance on the
report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of such firm as experts in auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 with respect to the shares
of Common Stock offered hereby, of which this Prospectus forms a part. In
accordance with the rules of the Commission, this Prospectus omits certain
information contained in the Registration Statement. For further information
with respect to the Company and the securities offered hereby, reference is
made to the Registration Statement and the exhibits and schedules filed
therewith. Statements contained in this Prospectus concerning the provisions of
such documents are necessarily summaries of such documents and each such
statement is qualified in its entirety by reference to the copy of the
applicable document filed with the Commission as an exhibit to the Registration
Statement. Copies of the Registration Statement and the exhibits and schedules
thereto may be inspected, without charge, at the offices of the Commission, or
obtained at prescribed rates from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
maintains a Web site that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission at http://www.sec.gov.
The Company intends to furnish to its stockholders annual reports containing
audited consolidated financial statements and quarterly reports for the first
three quarters of each fiscal year containing unaudited summary financial
information.
59
<PAGE>
SPLASH TECHNOLOGY HOLDINGS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants......................................... F-2
Consolidated Financial Statements:
Consolidated Balance Sheets as of September 30, 1994, 1995 and June 30,
1996................................................................... F-3
Consolidated Statements of Operations for the years ended September 30,
1994 and 1995; the four months ended January 31, 1996 and the five
months ended June 30, 1996............................................. F-4
Consolidated Statements of Stockholders' Equity for the five months
ended June 30, 1996.................................................... F-5
Predecessor Business Statement of Parent Company Investment for the
years ended September 30, 1994 and 1995 and the four months ended
January 31, 1996....................................................... F-6
Consolidated Statements of Cash Flows for the years ended September 30,
1994 and 1995; the four months ended January 31, 1996 and the five
months ended June 30, 1996............................................. F-7
Notes to Consolidated Financial Statements................................ F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Splash Technology Holdings, Inc.
We have audited the accompanying consolidated balance sheet of Splash
Technology Holdings, Inc. and its subsidiaries as of June 30, 1996 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the five months ended June 30, 1996. We have also audited the
balances sheets at September 30, 1994 and 1995, and the statements of
operations, cash flows and parent company investment of the Predecessor
Business for the years ended September 30, 1994 and 1995, and the four months
ended January 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Splash Technology Holdings, Inc. and its subsidiaries as of June 30, 1996,
and the consolidated results of their operations and their cash flows for the
five months ended June 30, 1996, in conformity with generally accepted
accounting principles. Also in our opinion, the financial statements of the
Predecessor Business referred to above present fairly, in all material
respects, the financial position of the Predecessor Business as of September
30, 1994 and 1995 and the results of its operations and its cash flows for the
years ended September 30, 1994 and 1995 and for the four months ended January
31, 1996, in conformity with generally accepted accounting principles.
Coopers & Lybrand l.l.p.
San Jose, California
July 23, 1996, except for Note 12, the dates for which are July 31, 1996 and
September 6, 1996.
F-2
<PAGE>
SPLASH TECHNOLOGY HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1994 AND 1995 AND JUNE 30, 1996
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
PREDECESSOR SPLASH TECHNOLOGY
BUSINESS HOLDINGS, INC.
------------- ---------------------
PRO FORMA
SEPTEMBER 30, (NOTE 2)
------------- JUNE 30, JUNE 30,
1994 1995 1996 1996
------ ------ -------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................. $ -- $ -- $ 6,601
Accounts receivable, net of allowance for
doubtful accounts of $16, $84 and $300
as of September 30, 1994 and 1995 and
June 30, 1996, respectively.............. 5,274 4,716 4,037
Inventories............................... 1,287 3,965 3,945
Prepaid expenses and other current
assets................................... -- -- 119
Deferred income taxes..................... 622 622 3,633
------ ------ --------
Total current assets.................... 7,183 9,303 18,335
Property and equipment, net................ 200 385 679
Deferred income taxes...................... -- -- 8,249
Other long term assets..................... -- -- 1,239
------ ------ --------
Total assets............................ $7,383 $9,688 $ 28,502
====== ====== ========
LIABILITIES
Current liabilities:
Trade accounts payable.................... $ 772 $2,538 $ 2,154
Other accrued liabilities................. 331 1,074 1,955
Royalties payable......................... 1,233 1,978 1,070
Deferred revenue.......................... -- -- 5,227
Income taxes payable...................... 721 1,395 1,974
------ ------ --------
Total current liabilities............... 3,057 6,985 12,380
Subordinated promissory notes payable to
stockholders.............................. -- -- 8,600
------ ------ --------
Total liabilities....................... 3,057 6,985 20,980
------ ------ --------
Commitments (Note 6)
STOCKHOLDERS' EQUITY
Preferred stock:
Authorized: 5,000,000 shares
Series A preferred stock, par value $.001
per share:
Authorized: 15,426 shares; issued and
outstanding: 15,426 shares; liquidation
value: $15,735,000..................... -- -- 1 $ 1
Series B preferred stock, par value $.001
per share:
Authorized, issued and outstanding:
4,282 shares as of June 30, 1996 and no
shares pro forma; liquidation value:
$4,338,000............................. -- -- 1 --
Parent company investment.................. 4,326 2,703 -- --
Common stock, par value $.001:
Authorized: 10,000,000 shares as of June
30, 1996, 50,000,000 shares pro forma;
issued and outstanding: 7,579,495 shares
as of June 30, 1996 and 9,320,624 shares
pro forma................................ -- -- 8 9
Additional paid-in capital................. -- -- 19,456 19,456
Retained earnings (accumulated deficit).... -- -- (11,944) (11,944)
------ ------ -------- --------
Total stockholders' equity................. 4,326 2,703 7,522 $ 7,522
------ ------ -------- --------
Total liabilities and stockholders'
equity................................. $7,383 $9,688 $ 28,502
====== ====== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
SPLASH TECHNOLOGY HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SPLASH
TECHNOLOGY
PREDECESSOR BUSINESS HOLDINGS, INC.
--------------------------------------- --------------
YEAR ENDED NINE MONTHS FOUR MONTHS
SEPTEMBER 30, ENDED ENDED FIVE MONTHS
--------------- JUNE 30, JANUARY 31, ENDED JUNE 30,
1994 1995 1995 1996 1996
------- ------- ----------- ----------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenue............. $16,354 $30,472 $20,343 $13,008 $ 18,326
Cost of net revenue..... 12,068 20,723 13,737 8,427 11,455
------- ------- ------- ------- --------
Gross profit.......... 4,286 9,749 6,606 4,581 6,871
------- ------- ------- ------- --------
Operating expenses:
Research and
development.......... 1,999 3,295 2,034 1,498 1,624
Sales and marketing... 562 2,076 1,505 688 806
General and
administrative....... 377 891 667 287 668
Amortization of
purchased technology
and write-off of in-
process technology... -- -- -- -- 22,729
------- ------- ------- ------- --------
Total operating
expenses........... 2,938 6,262 4,206 2,473 25,827
------- ------- ------- ------- --------
Income (loss) from
operations............. 1,348 3,487 2,400 2,108 (18,956)
Interest expense, net... -- -- -- 18 388
------- ------- ------- ------- --------
Income (loss) before
provision for income
taxes.................. 1,348 3,487 2,400 2,090 (19,344)
Provision for (benefit
from) income taxes..... 99 1,395 960 836 (7,765)
------- ------- ------- ------- --------
Net income (loss)....... $ 1,249 $ 2,092 $ 1,440 $ 1,254 $(11,579)
======= ======= ======= ======= ========
Net loss per share...... $ (1.25)
========
Shares used in computing
per share amounts...... 9,580
========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
SPLASH TECHNOLOGY HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
PREFERRED STOCK
--------------------------- RETAINED
SERIES A SERIES B COMMON STOCK ADDITIONAL EARNINGS
------------- ------------- ---------------- PAID-IN (ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT) TOTAL
------ ------ ------ ------ --------- ------ ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, February 1,
1996
Issuance of preferred
stock:
Series A............... 15,426 $ 1 -- $-- -- $-- $14,699 $ -- $ 14,700
Series B............... -- -- 4,282 1 -- -- 4,099 -- 4,100
Issuance of common
stock................. -- -- -- -- 7,008,746 8 198 -- 206
Exercise of employee
stock options for
cash.................. -- -- -- -- 570,758 -- 95 -- 95
Accretion for dividends
on Series A and B
preferred stock....... -- -- -- -- -- -- 365 (365) --
Net loss............... -- -- -- -- -- -- -- (11,579) (11,579)
------ --- ----- --- --------- --- ------- -------- ---------
Balances, June 30, 1996. 15,426 $ 1 4,282 $1 7,579,504 $ 8 $19,456 $(11,944) $ 7,522
====== === ===== === ========= === ======= ======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
SPLASH TECHNOLOGY HOLDINGS, INC.
PREDECESSOR BUSINESS STATEMENT
OF PARENT COMPANY INVESTMENT
(IN THOUSANDS)
<TABLE>
<S> <C>
Balance, October 1, 1993............................................... $ (20)
Net change in parent company investment................................ 3,097
Net income............................................................. 1,249
------
Balance, September 30, 1994............................................ 4,326
Net change in parent company investment................................ (3,715)
Net income............................................................. 2,092
------
Balance, September 30, 1995............................................ 2,703
Net change in parent company investment................................ (12)
Net income............................................................. 1,254
------
Balance, January 31, 1996.............................................. $3,945
======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
SPLASH TECHNOLOGY HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SPLASH
TECHNOLOGY
PREDECESSOR BUSINESS HOLDING, INC.
----------------------------------------- -------------
YEAR ENDED NINE MONTHS FOUR MONTHS
SEPTEMBER 30, ENDED ENDED FIVE MONTHS
---------------- JUNE 30, JANUARY 31, ENDED
1994 1995 1995 1996 JUNE 30, 1996
------- ------- ----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income (loss)..... $ 1,249 $ 2,092 $ 1,440 $ 1,254 $(11,579)
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation and
amortization......... 80 259 82 102 57
Provision for
doubtful accounts.... 16 68 -- 17 199
Purchased and in-
process technology... -- -- -- -- 22,729
Deferred income
taxes................ (622) -- -- 622 (11,014)
Changes in assets and
liabilities:
Accounts receivable. (3,947) 490 419 (4,597) 5,059
Inventories......... (513) (2,678) (2,678) 2,231 (2,211)
Prepaid expenses and
other current
assets............. -- -- -- -- (119)
Other long term
assets............. -- -- -- -- (118)
Trade accounts
payable............ (914) 1,766 1,049 (2,391) 2,008
Other accrued
liabilities........ 317 743 108 1,986 (1,042)
Royalties payable... 796 745 (47) 1,434 (2,302)
Deferred revenue.... -- -- -- 905 2,157
Income taxes
payable............ 721 674 239 (559) 1,974
------- ------- ------- ------- --------
Net cash provided
by (used in)
operating
activities....... (2,817) 4,159 612 1,004 5,798
------- ------- ------- ------- --------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase of property
and equipment........ (280) (444) (333) (63) (306)
Acquisition of Color
Server Group from
Radius (net of cash
acquired)............ -- -- -- -- (22,492)
------- ------- ------- ------- --------
Net cash used in
investing
activities....... (280) (444) (333) (63) (22,798)
------- ------- ------- ------- --------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from Series
A preferred stock.... -- -- -- -- 14,700
Proceeds from common
stock................ -- -- -- -- 206
Proceeds from
subordinated debt.... -- -- -- -- 8,600
Exercise of stock
options for cash..... -- -- -- -- 95
Net change in Parent
Company Investment... 3,097 (3,715) (279) (12) --
------- ------- ------- ------- --------
Net cash provided by
(used in) financing
activities............ 3,097 (3,715) (279) (12) 23,601
------- ------- ------- ------- --------
Net increase in cash... -- -- -- 929 6,601
Cash and cash
equivalents at
beginning of period... -- -- -- -- --
------- ------- ------- ------- --------
Cash and cash
equivalents at end of
period................ $ -- $ -- $ -- $ 929 $ 6,601
======= ======= ======= ======= ========
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW
INFORMATION:
Taxes paid............ $ -- $ -- $ -- $ -- $ 1,275
Interest paid......... $ -- $ -- $ -- $ -- $ 198
NON-CASH FINANCING
ACTIVITIES:
Accretion of
preferred stock...... $ -- $ -- $ -- $ -- $ 365
Issuance of Series B
preferred stock...... $ -- $ -- $ -- $ -- $ 4,100
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
SPLASH TECHNOLOGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. RECENT REORGANIZATION AND BASIS OF PRESENTATION
Splash Technology Holdings, Inc. (the "Company"), through its wholly-owned
subsidiaries Splash Technology, Inc., Splash Foreign Sales Corporation and
Splash Technology S.a.r.l., develops, produces and markets color servers, which
consist of computer hardware and software systems that provide an integrated
link between desktop computers and digital color copiers and enable such
copiers to provide high speed and quality networked color printing and
scanning. The Company sells its color servers through two original equipment
manufacturers ("OEMs") who integrate the Company's color servers into connected
digital color photocopier systems which are sold to end users in North and
South America, Europe, Asia, Australia, Japan, New Zealand, Africa and the
Middle East. The Company operates in one business segment.
The business of the Company was previously operated as the unincorporated
Color Server Group of SuperMac Technology Inc. ("SuperMac") until August 1994
when SuperMac merged with Radius Inc. ("Radius"). In January 1996, the assets
and liabilities of the Color Server Group of Radius were transferred by Radius
into its newly created wholly-owned subsidiary, Splash Technology, Inc. In
December 1995, Splash Technology Holdings, Inc. was incorporated in Delaware
and was capitalized by the sale of Series A preferred stock and common stock
and subordinated debt to an investor group led by certain affiliates of Summit
Partners, L.P., and Sigma Partners, L.P. On January 31, 1996, Splash
Technology, Inc. merged with a wholly-owned subsidiary of Splash Technology
Holdings, Inc. and as part of the consideration for the merger, Splash
Technology Holdings, Inc. issued Series B preferred stock to Radius. The
surviving corporation in the merger was Splash Technology, Inc., a wholly-owned
subsidiary of the Company.
The acquisition of Splash Technology, Inc. was regarded as a purchase of net
assets accounted for under the purchase method of accounting as of January 31,
1996. The total purchase price of $27,843,000 (including the costs of the
acquisition of $321,000), consisting of cash and the fair value of Series B
preferred stock of $4,100,000, has been allocated to the net assets acquired
based on their estimated fair values as of January 31, 1996. The two principal
components of the initial excess purchase price allocation included in-process
research and development projects ($19,324,000) and existing purchased
technology ($3,405,000). The Company allocated a portion of the purchase price
to various in-process research and development projects that had identifiable
economic value and expensed this value as of the date of the acquisition. The
purchased technology is related to the Company's Power Series product for which
the Company was developing a replacement product at the time of the acquisition
due to the discontinuance of the Apple CPU architecture on which the Power
Series product relied. The Company transitioned to the new product in May 1996
and accordingly, the fair value of the purchased technology was fully amortized
over the four months to May 31, 1996.
The fair value of the assets acquired (net of cash acquired of $929,000) and
liabilities assumed were as follows:
<TABLE>
<S> <C>
In-process technology............................................ $19,324
Purchased technology............................................. 3,405
Receivables...................................................... 9,296
Inventories...................................................... 1,734
Property and equipment........................................... 430
Other long term assets........................................... 1,121
Payables......................................................... (147)
Other accrued liabilities........................................ (6,049)
Deferred revenue................................................. (2,200)
-------
$26,914
=======
</TABLE>
F-8
<PAGE>
SPLASH TECHNOLOGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Of the purchase consideration, $2,350,000 remains in escrow pending
resolution of certain events including unasserted claims.
The Predecessor Business's financial statements presented herein include the
results of operations and cash flows for the years ended September 30, 1994 and
1995, and for the four months ended January 31, 1996 and the balance sheets as
of September 30, 1994 and 1995, as if the Color Server Group existed as a
corporation separate from Radius and SuperMac during such periods on a
historical basis. The Company's financial statements presented herein include
the results of operations and cash flows for the five months ended June 30,
1996 and the balance sheet as of that date. Results for the four months ended
January 31, 1996 and the five months ended June 30, 1996 are not necessarily
indicative of the results for the entire year.
Radius and SuperMac each performed certain corporate headquarter functions on
behalf of the Color Server Group and provided certain marketing, technology,
human resource and financial and accounting services. Costs associated with
these services have been allocated to the Color Server Group based on relative
headcount, which management believes to be a reasonable basis for allocation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries, Splash Technology, Inc. and
Splash Technology S.a.r.l. All significant intercompany transactions between
the entities have been eliminated.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition
Revenue is generally recognized upon shipment of the product to the customer.
The Company generally does not grant rights of return. In May 1996, the Company
made the transition from its Power Series products to its new PCI Series
products. In calendar year 1996, one of the Company's OEM customers accumulated
a substantial quantity of the Power Series product. Due to the transition of
products and the accumulation of Power Series product, the Company is
recognizing revenue from the sales of the Power Series product upon
notification from the OEM that the product has been sold to their end user. At
June 30, 1996, the Company had deferred revenue of $5,120,000 from sales of
Power Series products to one of its OEM customers.
Warranties
The Company's products are generally warranted for 15 months. Estimated
future costs of repair, replacement, or customer accommodations are reflected
in the accompanying consolidated financial statements.
Research and Development
Costs incurred in the research and development of new software products are
expensed as incurred until technological feasibility has been established. To
date, the establishment of technological feasibility
F-9
<PAGE>
SPLASH TECHNOLOGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
of the Company's products and general release substantially coincide. As a
result, the Company has not capitalized any software development costs since
such costs have not been significant.
Income Taxes
The Company uses the liability method to calculate deferred income taxes. The
realization of deferred tax assets is based on historical tax positions and
expectations about future taxable income.
Income taxes have been provided in the Predecessor Business statements of
operations as if the Predecessor Business was a separate taxable entity. Since
the division was not a separate taxable entity but was included in the
consolidated income tax returns of the Radius and SuperMac companies, the
current benefit from or provision for U.S. federal and state income taxes was
ultimately assumed to be receivable from or payable to Radius or SuperMac in
the period presented. In accordance with the merger agreement with Radius, the
Company is not required to repay Radius for the utilization of their tax losses
against the Company's taxable income as a Predecessor Business. Such benefits
are reflected as capital contributions as of each fiscal year end.
Cash and Cash Equivalents
All highly liquid investments with an original, or remaining, maturity of
three months or less at the date of purchase and money market funds are
considered cash equivalents.
Cash and cash equivalents consist primarily of deposits with banks in the
United States.
Financial Instruments
The Company's financial instruments, including borrowings under the line of
credit and the subordinated promissory notes payable to stockholders, are
stated at fair value.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined on
a first-in, first-out basis.
Property and Equipment
Property and equipment are stated at cost and are depreciated using the
straight line method over their estimated useful lives ranging from three to
seven years or, in the case of leasehold improvements, the lease period, if
shorter. Upon disposal, the assets and related accumulated depreciation are
removed from the Company's accounts, and the resulting gains or losses are
reflected in the statements of income. The Predecessor Business' accounting
policy was to expense all items of property and equipment upon acquisition.
Accordingly, appropriate adjustments have been included in the financial
statements to reflect the capitalization and depreciation of property and
equipment during the periods presented.
Concentration of Credit-Risks
Cash and cash equivalents are deposited with major banks in the United States
and France. Deposits in these banks may exceed the amount of insurance provided
on such deposits. The Company has not experienced any losses on its deposits of
cash and cash equivalents.
The Company sells its products to two OEM customers who distribute the
Company's products with their own color photocopier systems on a worldwide
basis. The Company performs ongoing credit evaluations of its customers. The
Company does not require collateral for its receivables and maintains
F-10
<PAGE>
SPLASH TECHNOLOGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
an allowance for potential credit losses. At June 30, 1996, the accounts
receivable balance is comprised primarily of these two customers, which
represent 57% and 37% of accounts receivable.
Certain components necessary for the manufacture of the Company's products
are obtained from a sole supplier or a limited group of suppliers. These
include Apple Power Macintosh computer, certain ASICs and other semiconductor
components.
Recent Pronouncements
During March 1995, the Financial Accounting Standards Board issued Statement
No. 121 (SFAS 121), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," which requires the Company to review for
impairment of long-lived assets, certain identifiable intangibles, and goodwill
related to those assets whenever events or changes in circumstances indicate
that the carrying amount of an asset might not be recoverable. In certain
situations, an impairment loss would be recognized. SFAS 121 will become
effective for the Company's year ending September 30, 1997.
During October 1995, the Financial Accounting Standards Board issued
Statement No. 123 (SFAS No. 123), "Accounting for Stock-Based Compensation,"
which established a fair value based method of accounting for stock-based
compensation plans and requires additional disclosures for those companies who
elect not to adopt the new method of accounting. The Company intends to
continue to account for stock options under APB Opinion No. 25, "Accounting for
Stock Issued to Employees." SFAS No. 123 will be effective for fiscal years
beginning after December 15, 1995, and will require the Company to provide
additional disclosures in the financial statements for the year ending
September 30, 1997.
Computation of Net Loss Per Share
Net loss per share is computed using the weighted average number of common
and dilutive common equivalent shares outstanding during the period. Dilutive
common equivalent shares consist of the incremental common shares issuable upon
conversion of convertible preferred stock (using the "if converted" method) and
stock options and warrants (using the treasury stock method) as if converted
for all periods presented.
The Company has computed common and dilutive common equivalent shares in
determining the number of shares used in calculating earnings per share for all
periods presented pursuant to the Securities and Exchange Commission Staff
Accounting Bulletin (SAB) No. 83. SAB 83 requires the Company to include all
common shares and all common share equivalents issued during the 12 month
period preceding the filing date of an initial public offering in its
calculation of the number of shares used to determine earnings per share as if
the shares had been outstanding for all periods presented. Net loss for the
purposes of the computation reflects the dividend accretion on the shares of
preferred stock.
Unaudited Interim Financial Information
The accompanying interim statements of operations and cash flows for the nine
months ended June 30, 1995 together with the related notes are unaudited but
include all adjustments, consisting of only normal recurring adjustments, which
the Company considers necessary to present fairly, in all material respects,
the results of operations and cash flows for the period ended June 30, 1995.
Results for the nine months ended June 30, 1995 are not necessarily indicative
of results for an entire year.
F-11
<PAGE>
SPLASH TECHNOLOGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Unaudited Pro Forma Information
In conjunction with the initial public offering, all of the Company's
outstanding Series B preferred stock will be converted into shares of Common
Stock as described in Note 7. The pro forma effect of these conversions has
been reflected in the accompanying pro forma balance sheet assuming the
conversion had occurred June 30, 1996 and is unaudited.
3. BALANCE SHEET DETAIL (IN THOUSANDS)
Inventories
<TABLE>
<CAPTION>
SPLASH
PREDECESSOR TECHNOLOGY
BUSINESS HOLDINGS, INC.
------------- --------------
SEPTEMBER 30,
------------- JUNE 30,
1994 1995 1996
------ ------ --------------
<S> <C> <C> <C>
Raw materials................................... $ 714 $ 591 $1,593
Work in process................................. 81 166 --
Finished goods.................................. 492 3,208 2,352
------ ------ ------
$1,287 $3,965 $3,945
====== ====== ======
</TABLE>
Property and Equipment
<TABLE>
<CAPTION>
SPLASH
PREDECESSOR TECHNOLOGY
BUSINESS HOLDINGS, INC.
------------- --------------
SEPTEMBER
30,
------------- JUNE 30,
1994 1995 1996
----- ------ --------------
<S> <C> <C> <C>
Furniture and fixtures........................ $ 81 $ 201 $270
Computer equipment............................ 199 523 241
Leasehold improvements........................ -- -- 80
Trade show booth.............................. -- -- 145
----- ------ ----
280 724 736
Less accumulated depreciation and
amortization................................. (80) (339) (57)
----- ------ ----
$ 200 $ 385 $679
===== ====== ====
</TABLE>
4. REVOLVING CREDIT FACILITY
In January 1996, the Company entered into an agreement with a bank to borrow
up to a maximum of $4,000,000 under a revolving line of credit subject to a
borrowing base of 80% and 70% of eligible domestic and foreign accounts
receivable, respectively. The line bears interest at prime rate plus 0.75%, is
collateralized by accounts receivable, owned property and equipment and
inventory of the Company and matures on January 31, 1997. The agreement
contains dividend restrictions and certain financial covenants concerning
required liquidity, net worth and indebtedness ratios as well as required
profitability. The Company has no borrowings outstanding under the line of
credit as of June 30, 1996.
5. SUBORDINATED PROMISSORY NOTES PAYABLE TO STOCKHOLDERS
The Company issued subordinated promissory notes payable to stockholders,
with a face value totaling $8,000,000, which bear interest at 12%, payable
quarterly. The subordinated promissory notes were issued to certain
stockholders concurrent with the issuance of the Series A preferred stock and
the fair value of the notes was established at $8,600,000 by an independent
third party valuation. In the event
F-12
<PAGE>
SPLASH TECHNOLOGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
of liquidation, merger or a firm commitment underwriting pursuant to a public
offering of common stock at a price of at least $3.43 per share with aggregate
gross proceeds (net of underwriting discounts) to the Company of at least
$35,000,000, all principal and accrued interest shall be payable immediately
("Qualified Liquidity Event"). In the event that a public offering does not
qualify as a Qualified Liquidity Event, the interest rate increases to 15%. In
the event that a Qualified Liquidity Event is not consummated on or before
January 30, 2001, then all outstanding principal must be paid in two equal
installments on January 30, 2001 and 2002. The notes are subordinate to the
Revolving Credit Facility (see Note 4).
6. COMMITMENTS
The Company leases certain office facilities under noncancelable operating
leases which expire in April 2001. The Company is responsible for taxes,
insurance and maintenance expenses related to the leased facilities. Under the
term of certain lease agreements, the leases may be extended, at the Company's
options, and certain of the leases provide for adjustments of the minimum
monthly rent.
Future minimum annual lease payments under the leases are as follows (in
thousands):
<TABLE>
<CAPTION>
PERIOD
ENDING
------
<S> <C>
June 30, 1997........................... $384
June 30, 1998........................... 398
June 30, 1999........................... 412
June 30, 2000........................... 427
June 30, 2001........................... 442
</TABLE>
Rent expense for the five months ended June 30, 1996 was $83,960.
7. PREFERRED STOCK
The Company has authorized and issued 15,426 shares of Series A preferred
stock at a face value of $1,000 per share and 4,282 shares of Series B
preferred stock in a non cash transaction as part of the consideration for the
merger. The valuation of the Series A and Series B preferred stock by an
independent third party resulted in values of $14,700,000 and $4,100,000,
respectively for those instruments. The rights, preferences and privileges of
the Series A and Series B preferred stock are as follows:
Liquidation Rights
The preferred stock has certain liquidation preferences over the common stock
in the event of a liquidating event such as a dissolution of the affairs of the
Company or a take-over by another corporation. The liquidation preferences
entitle the preferred stockholders to receive $1,000 per share in addition to
amounts due on unpaid dividends which have been accrued or declared. The Series
A preferred stockholders have preference over the Series B preferred
stockholders in determining the order of liquidation payout. The preferred
stock does not participate in the distribution of assets remaining after the
liquidation preference has been paid.
Conversion Rights
The Series A preferred stock has no conversion rights. The Series B preferred
stockholders have the right at any time to convert each share of preferred
stock into common stock at the specified conversion rate per share, which
currently is 406.616 shares of common stock for each share of preferred stock.
The conversion rate will be adjusted for stock splits and recapitalization. In
the event of a public offering of
F-13
<PAGE>
SPLASH TECHNOLOGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
the Company's common stock where the net proceeds received by the Company
equals or exceeds $35,000,000 and the offering price is at least $3.43 per
share, or in the event of a merger or sale of the Company where the
consideration or proceeds equals or exceeds $50,000,000, all shares of the
Series B preferred stock automatically convert into shares of common stock at
the specified conversion rate.
Redemption Rights
The Company may redeem all or any of the shares of the Series A preferred
stock at any time. The Company may also redeem all or any of the shares of the
Series B preferred stock at any time but only if there are no shares of the
Series A preferred stock then outstanding.
The Company is required to redeem all of the shares of the Series A preferred
stock in the event of a public offering of the Company's common stock or a
merger or sale of the Company meeting the quantitative criteria disclosed in
the paragraph concerning conversion rights above. Provided there are no shares
of the Series A preferred stock then outstanding, the Company is required to
redeem the shares of the Series B preferred stock, one half on January 1, 2002
and one half on January 1, 2003. The redemption price for each share of
preferred stock will be $1,000, plus any unpaid and accrued dividends.
Voting Rights
The Series B preferred stockholders are entitled to vote on all matters with
the holders of common stock as if on an as converted basis. The Series A
preferred stockholders have no rights to vote other than to elect one director
to the Board of Directors. The other five directors are elected by the common
stockholders in conjunction with the Series B preferred stockholders.
Dividend Rights
The preferred stockholders will be entitled to receive dividends in
preference to the common stockholders. In addition, the Series A preferred
stockholders also have preference to the Series B preferred stockholders. From
the date of issuance until January 1, 1997, there shall be no cumulative
dividends payable to the preferred stockholders. After that date, cumulative
dividends are payable when and if declared or accumulate as part of the shares'
liquidation preferences as follows:
<TABLE>
<CAPTION>
DIVIDENDS PER SHARE
-------------------
SERIES A SERIES B
-------------------
<S> <C> <C>
January 2, 1997 to January 1, 1998.................... $ 60 $ 60
January 2, 1998 to January 1, 1999.................... $ 80 $ 60
January 2, 1999, and thereafter....................... $ 100 $ 60
</TABLE>
The carrying amounts of both Series A and Series B have been increased by
amounts representing dividends not currently declared or paid but which will be
payable under the dividend rights of the respective series of preferred stock.
The increases have been effected by a charge against retained earnings.
8. COMMON STOCK
On January 31, 1996, the Company sold 7,008,746 shares of common stock for
$80,100. The shares have been valued at $206,000 based on a independent third
party appraisal. The Company has granted certain registration rights to certain
holders of common shares, options, warrants and convertible securities in the
event of any registration of shares by the Company under the Securities Act.
F-14
<PAGE>
SPLASH TECHNOLOGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In connection with the line of credit, the Company issued the bank a warrant
to purchase 8,750 shares of common stock with an exercise price of $0.011 per
share. The warrant is not exercisable until the earlier of January 31, 1997, an
initial public offering, or an asset sale or merger.
Stock Options and Repurchase Agreements
The Company reserved 916,153 shares of common stock for issuance under its
stock option plan as of January 30, 1996. Under this plan, the Board of
Directors may grant incentive or nonstatutory stock options at a price not less
than 100% or 85%, respectively, of fair market value of common stock, as
determined by the Board of Directors, at grant date. Options under the plan are
immediately exercisable. Stock issued through option exercises are subject to
the Company's right of repurchase at the original exercise price. The number of
shares subject to repurchase generally decrease by 25% of the options shares
one year after the grant date, and thereafter, ratably over 48 months.
Activity for the Company's stock option is summarized as follows:
<TABLE>
<CAPTION>
AVERAGE
PRICE
AVAILABLE OUTSTANDING PER SHARE AMOUNT
--------- ----------- ----------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Options authorized.......... 916,153 -- -- --
Options granted............. (822,080) 822,080 $0.14-$1.71 $212
Options canceled............ 13,128 (13,128) $0.14 (2)
Options exercised........... -- (570,749) $0.14-$1.71 (95)
-------- -------- ----
Balances, June 30, 1996..... 107,201 238,203 $0.14-$1.71 $115
======== ======== ====
</TABLE>
At June 30, 1996, all options and shares outstanding under the Plan were
subject to repurchase.
9. BUSINESS SEGMENTS, EXPORTS AND MAJOR CUSTOMERS
The Company operates in a single industry segment encompassing the
development, manufacture, sales and support of high performance color servers.
The Company sells its products and services to customers in the United States
and Japan. Net revenue from export sales accounted for 40%, 59% and 43% of
total revenues for the years ended September 30, 1994, 1995 and the five months
ended June 30, 1996. All of export sales were made to Japan.
In the years ended September 30, 1994 and 1995 and the five months ended June
30, 1996, two customers accounted for 40% and 60%; 41% and 59%; and 57% and 43%
of total revenues, respectively. In addition, although all sales made to the
Company's U.S. based customers are considered U.S. sales, this customer has a
significant international customer base, and the Company believes that a
significant portion of the Company's products purchased by the customer are
resold outside the U.S.
F-15
<PAGE>
SPLASH TECHNOLOGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. INCOME TAXES
The provision for (benefit from) income taxes consists of the following (in
thousands):
<TABLE>
<CAPTION>
SPLASH
TECHNOLOGY
PREDECESSOR BUSINESS HOLDINGS, INC.
--------------------------- --------------
FISCAL YEAR
ENDED FOUR MONTHS FIVE MONTHS
SEPTEMBER 30, ENDED ENDED
--------------- JANUARY 31, JUNE 30,
1994 1995 1996 1996
------ ------- ----------- --------------
<S> <C> <C> <C> <C>
Current:
Federal......................... $ 522 $ 1,095 $192 $ 2,551
State........................... 199 300 22 698
------ ------- ---- --------
721 1,395 214 3,249
------ ------- ---- --------
Deferred:
Federal......................... $ (537) $ -- $537 $ (9,365)
State........................... (85) -- 85 (1,649)
------ ------- ---- --------
(622) -- 622 (11,014)
------ ------- ---- --------
$ 99 $ 1,395 $836 $ (7,765)
====== ======= ==== ========
</TABLE>
The Company's effective tax rate differs from the statutory federal income
tax rate as shown in the following schedule:
<TABLE>
<CAPTION>
SPLASH
TECHNOLOGY
PREDECESSOR BUSINESS HOLDINGS, INC.
---------------------------- --------------
FISCAL YEAR
ENDED FOUR MONTHS FIVE MONTHS
SEPTEMBER 30, ENDED ENDED
--------------- JANUARY 31, JUNE 30,
1994 1995 1996 1996
------- ------ ----------- --------------
<S> <C> <C> <C> <C>
Tax provision (benefit from) at
federal statutory rate........ 34.0% 34.0% 34.0% (34.0)%
State taxes, net of federal tax
benefit....................... 6.1 6.1 6.1 (6.1)
Net operating losses........... (33.3) -- -- --
Other.......................... 0.6 (0.1) (0.1) --
------- ------ ---- -----
7.4% 40.0% 40.0% (40.1)%
======= ====== ==== =====
</TABLE>
The components of the deferred tax asset are as follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------- JUNE 30,
1994 1995 1996
------ ------ --------
<S> <C> <C> <C>
Deferred tax assets:
In-process and purchased technology................ $ -- $ -- $ 8,865
Receivable allowances.............................. 6 34 80
Inventory valuation allowance...................... 231 221 334
Warranty accruals.................................. 55 128 92
State taxes........................................ 68 102 240
Deferred revenue................................... -- -- 2,055
All other.......................................... 262 137 216
------ ------ -------
Total deferred tax assets........................ 622 622 11,882
Long-term portion of in-process and purchased
technology........................................ -- -- 8,249
------ ------ -------
Current portion of deferred tax asset............ $ 622 $ 622 $ 3,633
====== ====== =======
</TABLE>
F-16
<PAGE>
SPLASH TECHNOLOGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At June 30, 1996, the Company assessed the recoverability of the deferred tax
asset and based on its expectations about taxable income for future periods,
determined that it was more likely than not that the deferred tax asset would
be recovered.
11. EMPLOYEE BENEFIT PLAN
The Company adopted the Splash Technology, Inc. 401(k) Profit Sharing Plan
(the Plan) effective April 1996, which qualifies under Section 401(k) of the
Internal Revenue Code of 1986, as amended, and covers essentially all
employees. Each eligible employee may elect to contribute to the Plan, through
payroll deductions, up to 15% of compensation, subject to certain limitations.
The Company, at its discretion, may make additional contributions on behalf of
non-highly compensated employees. All employer contributions are 100% vested
after four years. During the five months ended June 30, 1996, there were no
Company contributions.
12. SUBSEQUENT EVENTS
On July 31, 1996, the Board of Directors of the Company authorized an
amendment to the Company's Amended and Restated Certificate of Incorporation to
increase the Company's authorized number of shares to an aggregate of
50,000,000 shares of common stock, par value $.001 per share and 5,000,000
shares of preferred stock, par value $.001 per share.
On July 31, 1996, the Board of Directors adopted a payroll deduction Employee
Stock Purchase Plan, effective upon the closing of the planned initial public
offering of the common stock, and reserved an aggregate of 175,000 shares of
common stock for issuance thereunder and also amended and restated the 1996
Stock Option Plan and increased the aggregate number of shares of common stock
reserved for issuance thereunder to 3,150,000 shares.
On September 6, 1996, the Board of Directors declared a common stock split of
3.5 shares to one and authorized management of the Company to file a
Registration Statement with the Securities and Exchange Commission permitting
the Company to sell 2,600,000 shares of its common stock with a price range
from $11 to $13 per share to the public. Further, the Board of Directors has
directed that the proceeds from the offering will be used to retire the
subordinated debt and Series A preferred stock at their fair value. In
addition, on September 6, 1996 Radius agreed that, pursuant to the Company's
planned public offering, it will convert its Series B preferred stock to common
stock at the applicable conversion price.
F-17
<PAGE>
Inside back cover
- -----------------
This page includes eight pictures depicting examples of the Splash software
interface and printouts that illustrate features of Splash products. The page
also includes the following text:
Splash's ColorCal is a fast, easy-to-use calibration utility that uses the
copier's built-in digital scanning capability for calibration.
ColorCal's expert tools enable users to create custom color profiles.
ColorCal utilizes a unique customized calibration target to provide
reproducible, consistent color.
Splash supports CMYK separations.
Splash offers point-and-click color correction capabilities for Windows and Mac
OS users.
Printing mixed file types in a single document without Splash results in
inaccurate color.
With Splash, mixed file types or mixed RGB and CMYK images in a single document
are accurately color corrected.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PRO-
SPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEI-
THER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 5
Use of Proceeds........................................................... 17
Dividend Policy........................................................... 17
Acquisition............................................................... 17
Capitalization............................................................ 19
Dilution.................................................................. 20
Selected Consolidated Financial Data...................................... 21
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 23
Business.................................................................. 31
Management................................................................ 45
Certain Transactions...................................................... 50
Principal Stockholders.................................................... 52
Description of Capital Stock.............................................. 54
Shares Eligible for Future Sale........................................... 56
Underwriting.............................................................. 58
Legal Matters............................................................. 59
Experts................................................................... 59
Additional Information.................................................... 59
Index to Consolidated Financial Statements................................ F-1
</TABLE>
------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR NOT PAR-
TICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACT-
ING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2,600,000 Shares
[LOGO OF SPLASH APPEARS HERE]
Common Stock
-------------
PROSPECTUS
-------------
Alex. Brown & Sons
INCORPORATED
Montgomery Securities
, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable in connection with the sale of
the Common Stock being registered hereby. All amounts are estimates except the
SEC registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID BY
REGISTRANT
----------
<S> <C>
SEC Registration Fee............................................. $ 13,403
NASD Filing Fee.................................................. 4,387
Nasdaq National Market Application Fee........................... 50,000
Printing......................................................... 145,000
Legal Fees and Expenses.......................................... 275,000
Accounting Fees and Expenses..................................... 410,000
Blue Sky Fees and Expenses....................................... 10,000
Director and Officer Liability Insurance......................... 250,000
Custodial Fees................................................... 2,500
Transfer Agent and Registrar Fees................................ 5,000
Miscellaneous.................................................... 34,710
----------
Total.......................................................... $1,200,000
==========
</TABLE>
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
1.1* Form of Underwriting Agreement.
2.1* Merger Agreement, dated 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.
2.2* Amendment No. 1 to Merger Agreement dated January 30, 1996.
3.1* Certificate of Incorporation of Registrant.
3.2* Form of Amended and Restated Certificate of Incorporation of
Registrant.
3.3* Bylaws of Registrant.
3.4* Form of Amended and Restated Bylaws of Registrant.
3.5* Form of Amended and Restated Certificate of Incorporation of
Registrant to be filed after the closing of the Offering, the
redemption of the Series A Preferred Stock and the conversion of the
Series B Preferred Stock.
4.1 Warrant, dated January 31, 1996, issued by Registrant to Imperial
Bancorp.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1* Form of Indemnification Agreement.
10.2* 1996 Stock Option Plan and form of Stock Option Agreement.
10.3 1996 Employee Stock Purchase Plan and form of Subscription Agreement.
10.4* Registration Rights Agreement dated January 30, 1996 among the
Registrant and certain stockholders of the Registrant.
10.5+ Configurable Postscript Interpreter OEM License Agreement dated
September 18, 1992 between the Registrant and Adobe Systems
Incorporated.
10.5a+ Amendment No. 2 and Appendix No. 2 to Configurable Postscript
Interpreter OEM License Agreement dated September 18, 1992 between the
Registrant and Adobe Systems Incorporated.
10.6+ Xerox and SMT Hardware Purchase and Software Development/License
Agreement between the Registrant and Xerox Corporation dated November
13, 1993.
10.6a* Attachments I and II to Xerox and SMT Hardware Purchase and Software
Development/License Agreement between the Registrant and Xerox
Corporation dated November 13, 1993.
10.7* Property Lease covering Registrant's facilities in Sunnyvale,
California.
10.8* Security and Loan Agreement dated January 31, 1996, between the
Registrant and Imperial Bank.
11.1* Computation Regarding Earnings Per Share.
21.1 Subsidiaries of Registrant.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2* Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation
(included in Exhibit 5.1).
24.1* Power of Attorney (see page II-4).
</TABLE>
- --------
* Previously Filed.
+ Confidential treatment requested.
(b) Financial Statement Schedules
Schedule II--Valuation and Qualifying Accounts
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this amendment to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Sunnyvale, State of California, on September 27, 1996.
SPLASH TECHNOLOGY HOLDINGS, INC.
By: /s/ Kevin K. Macgillivray
------------------------------
KEVIN K. MACGILLIVRAY,
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1933, THIS
AMENDMENT TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Kevin K. Macgillivray Director, President and September 27, 1996
- ------------------------------------------- Chief Officer (Principal
KEVIN K. MACGILLIVRAY Executive Officer)
Joan P. Platt* Chief Financial Officer September 27, 1996
- ------------------------------------------- and Vice President,
JOAN P. PLATT Finance and
Administration (Principal
Financial and Accounting
Officer)
Gregory M. Avis* Director September 27, 1996
- -------------------------------------------
GREGORY M. AVIS
Charles W. Berger* Director September 27, 1996
- -------------------------------------------
CHARLES W. BERGER
Peter Y. Chung* Director September 27, 1996
- -------------------------------------------
PETER Y. CHUNG
Lawrence G. Finch* Director September 27, 1996
- -------------------------------------------
LAWRENCE G. FINCH
*By: /s/ Kevin K. Macgillivray
--------------------------------------
KEVIN K. MACGILLIVRAY,
ATTORNEY-IN-FACT
</TABLE>
II-3
<PAGE>
SPLASH TECHNOLOGY HOLDINGS, INC.
REPORT ON FINANCIAL STATEMENT SCHEDULE
In connection with our audit of the consolidated financial statements of
Splash Technology Holdings, Inc., and its subsidiaries as of June 30, 1996 and
for the five months ended June 30, 1996, and in connection with our audit of
the Predecessor Business as of September 30, 1994 and 1995, and for the years
then ended and for the four months ended January 31, 1996, which financial
statements are included in the Prospectus, we have also audited the financial
statement schedules listed in Item 16(b) herein.
In our opinion, this financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
Coopers & Lybrand L.L.P.
San Jose, California
July 23, 1996, except for Note 12, the dates for which are July 31, 1996
and September 6, 1996.
II-4
<PAGE>
SCHEDULE II
FINANCIAL STATEMENT SCHEDULE
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
VALUATION FOR DOUBTFUL BALANCE AT BALANCE AT
ACCOUNTS BEGINNING OF PERIOD ADDITIONS DEDUCTIONS END OF PERIOD
---------------------- ------------------- --------- ---------- -------------
<S> <C> <C> <C> <C>
Years ended:
September 30, 1994(1)... $ -- $ 16 $ -- $ 16
==== ==== ===== ====
September 30, 1995(1)... $ 16 $ 68 $ -- $ 84
==== ==== ===== ====
Four months ended
January 31, 1996(1).... $ 84 $ 17 $ -- $101
==== ==== ===== ====
Five months ended
June 30, 1996.......... $101 $199 $ -- $300
==== ==== ===== ====
<CAPTION>
VALUATION FOR INVENTORY BALANCE AT BALANCE AT
RESERVES BEGINNING OF PERIOD ADDITIONS DEDUCTIONS END OF PERIOD
----------------------- ------------------- --------- ---------- -------------
<S> <C> <C> <C> <C>
Years ended:
September 30, 1994(1)... $ -- $575 $ -- $575
==== ==== ===== ====
September 30, 1995(1)... $575 $ -- $ (25) $550
==== ==== ===== ====
Four months ended
January 31, 1996(1).... $550 $ -- $(550) $ --
==== ==== ===== ====
Five months ended
June 30, 1996.......... $ -- $832 $ -- $832
==== ==== ===== ====
<CAPTION>
VALUATION FOR WARRANTY BALANCE AT BALANCE AT
RESERVES BEGINNING OF PERIOD ADDITIONS DEDUCTIONS END OF PERIOD
---------------------- ------------------- --------- ---------- -------------
<S> <C> <C> <C> <C>
Years ended:
September 30, 1994(1)... $ -- $136 $ -- $136
==== ==== ===== ====
September 30, 1995(1)... $136 $181 $ -- $317
==== ==== ===== ====
Four months ended
January 31, 1996(1).... $317 $ -- $(176) $141
==== ==== ===== ====
Five months ended June
30, 1996............... $141 $232 $ -- $373
==== ==== ===== ====
</TABLE>
- --------
(1) Predecessor Business.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
1.1* Form of Underwriting Agreement.
2.1* Merger Agreement, dated 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.
2.2* Amendment No. 1 to Merger Agreement dated January 30, 1996.
3.1* Certificate of Incorporation of Registrant.
3.2* Form of Amended and Restated Certificate of Incorporation of
Registrant.
3.3* Bylaws of Registrant.
3.4* Form of Amended and Restated Bylaws of Registrant.
3.5* Form of Amended and Restated Certificate of Incorporation of
Registrant to be filed after the closing of the Offering, the
redemption of the Series A Preferred Stock and the conversion of the
Series B Preferred Stock.
4.1 Warrant, dated January 31, 1996, issued by Registrant to Imperial
Bancorp.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1* Form of Indemnification Agreement.
10.2* 1996 Stock Option Plan and form of Stock Option Agreement.
10.3 1996 Employee Stock Purchase Plan and form of Subscription Agreement.
10.4* Registration Rights Agreement dated January 30, 1996 among the
Registrant and certain stockholders of the Registrant.
10.5+ Configurable Postscript Interpreter OEM License Agreement dated
September 18, 1992 between the Registrant and Adobe Systems
Incorporated.
10.5a+ Amendment No. 2 and Appendix No. 2 to Configurable Postscript
Interpreter OEM License Agreement dated September 18, 1992 between the
Registrant and Adobe Systems Incorporated.
10.6+ Xerox and SMT Hardware Purchase and Software Development/License
Agreement between the Registrant and Xerox Corporation dated November
13, 1993.
10.6a* Attachments I and II to Xerox and SMT Hardware Purchase and Software
Development/License Agreement between the Registrant and Xerox
Corporation dated November 13, 1993.
10.7* Property Lease covering Registrant's facilities in Sunnyvale,
California.
10.8* Security and Loan Agreement dated January 31, 1996, between the
Registrant and Imperial Bank.
11.1* Computation Regarding Earnings Per Share.
21.1 Subsidiaries of Registrant.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2* Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation
(included in Exhibit 5.1).
24.1* Power of Attorney (see page II-4).
</TABLE>
- --------
* Previously Filed.
+ Confidential treatment requested.
<PAGE>
EXHIBIT 4.1
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION, THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Corporation: Splash Technology Holdings, Inc., a Delaware Corporation
Number of Shares: Two-thousand five-hundred (2,500)
Class of Stock: Common
Initial Exercise Price: Four Cents ($0.04) per share
Issue Date: January 31, 1996
Expiration Date: January 31, 2001 (subject to Section 4.1)
THIS WARRANT CERTIFIES THAT, in consideration of the payment of $1.00 and
for other good and valuable consideration, IMPERIAL BANCORP ("Holder") is
entitled to purchase the number of fully paid and nonassessable shares of the
class of securities (the "Shares") of the corporation (the "Company") at the
initial exercise price per Share (the "Warrant Price") all as set forth above
and as may be adjusted pursuant to Article 2 of this Warrant, subject to the
provisions and upon the terms and conditions set forth of this Warrant.
ARTICLE 1. EXERCISE
--------
1.1 Method of Exercise. Holder may exercise this Warrant by delivering
------------------
this Warrant and a duly executed Notice of Exercise in substantially the form
attached as Appendix 1 to the principal office of the Company. Unless Holder is
exercising the conversion right set forth in Section 1.2, Holder shall also
deliver to the Company a check for the aggregate Warrant Price for the Shares
being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as specified
----------------
in Section 1.1, Holder may from time to time convert this Warrant, in whole or
in part, into a number of Shares determined by dividing (and rounding down to
the nearest whole share) (a) the aggregate fair market value of the Shares or
other securities otherwise issuable upon exercise of this Warrant minus the
aggregate Warrant Price of such Shares by (b) the fair market value of one
Share. The fair market value of the Shares shall be determined pursuant to
Section 1.3.
<PAGE>
1.3 Fair Market Value. If the Shares are traded regularly in a public
-----------------
market, the fair market value of the Shares shall be the closing price of the
Shares (or the closing price of the Company's stock into which the Shares are
convertible) reported for the business day immediately before Holder delivers
its Notice of Exercise to the Company. If the Shares are not regularly traded in
a public market, the Board of Directors of the Company shall determine fair
market value in its reasonable good faith judgment. The foregoing
notwithstanding, if Holder advises the Board of Directors in writing that Holder
disagrees with such determination, then the Company and Holder shall promptly
agree upon a reputable investment banking firm or valuation professional to
undertake such valuation. If the valuation of such investment banking firm or
valuation professional is more than 10% greater than that determined by the
Board of Directors, then all fees and expenses of such investment banking firm
or valuation professional shall be paid by the Company. In all other
circumstances, such fees and expenses shall be paid by Holder.
1.4 Delivery of Certificate and New Warrant. Promptly after Holder
---------------------------------------
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.5 Replacement of Warrants. On receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.6 Repurchase on Sale, Merger or Consolidation of the Company.
----------------------------------------------------------
1.6.1 "Acquisition". For the purpose of this Warrant,
-----------
"Acquisition" means any sale, license, or other disposition of all or
substantially all of the assets (including intellectual property) of the
Company, or any reorganization, consolidation, or merger of the Company where
the holders of the Company's securities immediately prior to the transaction
beneficially own less than 50% of the outstanding voting securities of the
surviving entity immediately following the transaction.
1.6.2 Assumption of Warrant. If upon the closing of any
---------------------
Acquisition the successor entity assumes the obligations of this Warrant, then
this Warrant shall be exercisable for the same amount and type of securities,
cash, and property as would be payable for the Shares issuable upon exercise of
the unexercised portion of this Warrant as if such Shares were outstanding on
the record date for the Acquisition and subsequent closing. If upon the closing
of any Acquisition the successor entity assumes the obligations of this Warrant,
the exercise price of the Warrant shall be adjusted such that the exercise price
for the amount of securities, cash and property as would be payable for the
Shares issuable upon exercise of the unexercised portion of this Warrant as if
such Shares were outstanding on the record date for the Acquisition and
subsequent closing, is set at an amount equal to the Warrant Price, and such
that the aggregate exercise price for this Warrant is set such that it is equal
to the Warrant Price multiplied by the number of the Shares.
-2-
<PAGE>
1.6.3 Non-assumption; Conversion. If upon the closing of any
--------------------------
Acquisition the successor entity does not assume the obligations of this Warrant
and Holder has not otherwise exercised this Warrant in full, then the
unexercised portion of this Warrant shall be deemed to have been automatically
converted pursuant to Section 1.2 and thereafter the Holder shall participate in
the Acquisition on the same terms as other holders of the same class of
securities of the Company; provided that, at the election of the successor
--------
entity, the Holder may receive securities that are Equivalent Nonvoting
Securities (as hereinafter defined) to the securities that the Holder would
receive in exchange for the Shares pursuant to the Acquisition. "Equivalent
Nonvoting Security", with respect to any security (a "first security") issued or
to be issued by any person or entity, shall mean a security (an "equivalent
security") of such person or entity that is identical in rights and benefits to
such first security, except that (a) the equivalent security shall not be
entitled to vote on any matter on which holders of voting securities of such
person or entity are entitled to vote, other than as required by applicable law
or with respect to any amendment or repeal of any provision of the Certificate
of Incorporation or Bylaws of such person or entity or any other agreement or
instrument pursuant to which the equivalent security was issued which provision
specifically affects such equivalent security, (b) subject to such reasonable
restrictions as any affected Holder subject to banking law and regulations (a
"Regulated Holder") may request (including, without limitation, any restriction
necessary to prevent the violation by such Regulated Holder of any provision of
applicable banking law and regulations with respect to its ownership of voting
securities), the equivalent security shall be convertible in a one-to-one ratio
into the first security and (c) the terms of the equivalent security shall
include such provisions requested by any affected Regulated Holder as are
reasonable and equitable to ensure that (i) the equivalent security is treated
comparably to the first security with respect to dividends, distributions, stock
splits, reclassifications, capital reorganizations, mergers, consolidations and
other similar events and transactions, (ii) the conversion right provided in
clause (b) above is equitably protected and (iii) the acquisition of the
- ----------
equivalent security will not cause such Regulated Holder to violate applicable
banking law and regulations.
1.6.4 Non-assumption; Purchase. Notwithstanding the provisions of
------------------------
Section 1.6.3, if upon the closing of any Acquisition the successor entity does
not assume the obligations of this Warrant and Holder has not otherwise
exercised this Warrant in full and if the securities that would otherwise be
provided to a Regulated Holder in respect of the Warrant pursuant to the terms
of Section 1.6.3 are securities of a type that the Regulated Holder is not
permitted to hold for any period of time under then applicable banking law and
regulations, then the Company shall purchase the unexercised portion of this
Warrant for cash upon the closing of any Acquisition for an amount equal to (a)
the fair market value (as determined by the Board of Directors of the Company in
its reasonable good faith judgment) of any consideration that would have been
received by Holder in consideration of the Shares had Holder exercised the
unexercised portion of this Warrant immediately before the record date for
determining the shareholders entitled to participate in the proceeds of the
Acquisition, less (b) the aggregate Warrant Price of the Shares, but in no event
less than zero.
-3-
<PAGE>
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
-------------------------
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
----------------------------
dividend on its common stock (or the Shares if the Shares are securities other
than common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or, if the
Shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Holder would have been entitled had Holder owned the Shares of record
as of the date the dividend or subdivision occurred.
2.2 Reclassification, Exchange or Substitution. Subject to Section 4.1,
------------------------------------------
upon any reclassification, exchange, substitution, or other event that results
in a change of the number and/or class of the securities issuable upon exercise
or conversion of this Warrant, Holder shall be entitled to receive, upon
exercise or conversion of this Warrant, the number and kind of securities and
property that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. The Company or its successor shall promptly issue to Holder a new
Warrant for such new securities or other property. The new Warrant shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 2 including, without limitation,
adjustments to the Warrant Price and to the number of securities or property
issuable upon exercise of the new Warrant. The provisions of this Section 2.2
shall similarly apply to successive reclassifications, exchanges, substitutions,
or other events.
2.3 Adjustments for Combinations, Etc. If the outstanding Shares are
---------------------------------
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the number of shares issuable upon the exercise of the Warrant shall
be proportionately decreased.
2.4 No Impairment. The Company shall not, by amendment of its Articles
-------------
of Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out all the provisions of this Article 2 and in
taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment.
2.5 Certificate as to Adjustments. Upon each adjustment of the Warrant
-----------------------------
Price, the Company at its expense shall promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.
-4-
<PAGE>
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
--------------------------------------------
3.1 Representations and Warranties. The Company hereby represents and
------------------------------
warrants to the Holder that all Shares which may be issued upon the exercise of
the purchase right represented by this Warrant, and all securities, if any,
issuable upon conversion of the Shares, shall, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable, and free of any liens
and encumbrances of or by the Company except for restrictions on transfer
provided for herein or under applicable federal and state securities laws.
3.2 Notice of Certain Events. If the Company proposes at any time (a)
------------------------
to declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; or (d)
to merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up, then, in connection with each such event, the Company shall
give Holder (1) at least 10 days prior written notice of the date on which a
record will be taken for such dividend, distribution, or subscription rights
(and specifying the date on which the holders of common stock will be entitled
thereto); and (2) in the case of the matters referred to in (c) and (d) above at
least 10 days prior written notice of the date when the same will take place
(and specifying the date on which the holders of common stock will be entitled
to exchange their common stock for securities or other property deliverable upon
the occurrence of such event).
3.3 Information Rights. So long as the Holder holds this Warrant and/or
------------------
any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all communiques to the shareholders of the Company, (b)
within ninety (90) days after the end of each fiscal year of the Company, the
annual audited financial statements of the Company certified by independent
public accountants of recognized standing and (c) within thirty (30) days after
the end of each of the first eleven months of each fiscal year, the Company's
monthly, unaudited financial statements.
ARTICLE 4. MISCELLANEOUS.
-------------
4.1 Term: Notice of Expiration. The Warrant shall not become
--------------------------
exercisable until immediately prior to the earlier of (i) the closing of an
Acquisition, (ii) the completion of a fully distributed, firm commitment
underwritten public offering of the common stock of the Company registered under
the Securities Act of 1993, as amended, or (iii) one year after the date of
original issuance of this Warrant. Notwithstanding any provision of this Warrant
to the contrary, this Warrant shall expire and cease to be exercisable upon the
closing of an Acquisition. The Company shall give Holder written notice of
Holder's right to exercise this Warrant in the form attached as Appendix 2 not
less than 10 days before an Acquisition.
-5-
<PAGE>
4.2 Legends. This Warrant and the Shares (and the securities issuable,
-------
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS
COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 Compliance with Securities Laws on Transfer. This Warrant and the
-------------------------------------------
Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company). The Company
shall not require Holder to provide an opinion of counsel if the transfer is to
an affiliate of Holder or if there is no material question as to the
availability of current information as referenced in Rule 144(c), Holder
represents that it has complied with Rule 144(d) and (e) in reasonable detail,
the selling broker represents that it has complied with Rule 144(f), and the
Company is provided with a copy of Holder's notice of proposed sale.
4.4 Transfer Procedure. Subject to the provisions of Section 4.3,
------------------
Holder may transfer all or part of this Warrant or the Shares issuable upon
exercise of this Warrant (or the securities issuable, directly or indirectly,
upon conversion of the Shares, if any) by giving the Company notice of the
portion of the Warrant being transferred setting forth the name, address and
taxpayer identification number of the transferee and surrendering this Warrant
to the Company for reissuance to the transferee(s) (and Holder, if applicable).
Unless the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of this Warrant to any person or entity who directly
competes with the Company.
4.5 Notices. All notices and other communications from the Company to
-------
the Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such Holder from time
to time.
4.6 Waiver. This Warrant and any term hereof may be changed, waived,
------
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
-6-
<PAGE>
4.7 Attorneys' Fees. In the event of any dispute between the parties
---------------
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
4.8 Governing Law. This Warrant shall be governed by and construed in
-------------
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
Splash Technology Holdings, Inc.
By:/s/ Kevin Macgillivray
------------------------------------------
Name: Kevin Macgillivray
Title: President and CEO
By:/s/ Jeffrey Saper Secretary
------------------------------------------
Name:Jeffrey Saper
----------------------------------------
(Print)
Title: Corporate Secretary
-7-
<PAGE>
APPENDIX 1
----------
NOTICE OF EXERCISE
------------------
1. The undersigned hereby elects to purchase__________shares of the
Common Stock of Splash Technology Holdings, Inc. pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase price of such
shares in full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This conversion
is exercised with respect to_________of the Shares covered by the Warrant.
[STRIKE PARAGRAPH THAT DOES NOT APPLY.]
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name as is specified below:
_____________________________
(Name)
_____________________________
_____________________________
(Address)
_____________________________
3. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
_____________________________________________
(Signature)
______________________________
(Date)
-8-
<PAGE>
APPENDIX 2
----------
NOTICE THAT WARRANT IS ABOUT TO EXPIRE
--------------------------------------
__________, ____
Mr. Kenneth W. Le Deit
Commercial Loan Officer
Imperial Bank
Special Markets Group
2460 Sand Hill Road, Suite 102
Menlo Park, CA 94025
Dear Ken:
This is to advise you that the Warrant issued to you described below may
expire on or about __________, ____ because of the scheduled or anticipated
closing of an Acquisition (as defined in the Warrant).
Issuer:
Issue Date:
Class of Security Issuable:
Exercise Price Per Share:
Number of Shares Issuable:
Please contact _________________________________________ with any questions
[(name of contact person at (phone number)]
you may have concerning exercise of the Warrant. This is your only notice of
pending expiration.
_____________________________________________
(Name of Issuer)
By:__________________________________________
Title:_______________________________________
-9-
<PAGE>
EXHIBIT 10.3
SPLASH TECHNOLOGY, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1996 Employee Stock Purchase
Plan of Splash Technology, Inc.
1. Purpose. The purpose of the Plan is to provide employees of the Company
-------
and its Designated Subsidiaries with an opportunity to purchase Common Stock of
the Company through accumulated payroll deductions. It is the intention of the
Company to have the Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Internal Revenue Code of 1986, as amended. The provisions of
the Plan, accordingly, shall be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code.
2. Definitions.
-----------
(a) "Board" shall mean the Board of Directors of the Company, or a
-----
committee of the Board appointed in accordance with Section 13.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" shall mean the Common Stock of the Company.
------------
(d) "Company" shall mean Splash Technology, Inc., and any Designated
-------
Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross earnings
------------
including commissions, overtime, shift premium, incentive compensation,
incentive payments, bonuses and other compensation.
(f) "Designated Subsidiaries" shall mean the Subsidiaries which have
-----------------------
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the
--------
Company for tax purposes whose customary employment with the Company is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each Offering Period.
---------------
<PAGE>
(i) "Exercise Date" shall mean the last trading day of each Purchase
-------------
Period, if any, or each Offering Period.
(j) "Fair Market Value" shall mean, as of any date, the value of Common
-----------------
Stock determined as follows:
(1) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable, or;
(2) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock on
the date of such determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable, or;
(3) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the Board.
(4) For purposes of the Enrollment Date under the first Offering
Period under the Plan, the Fair Market Value shall be the initial price to the
public as set forth in the final Prospectus included within the registration
statement in Form S-1 filed with the Securities and Exchange Commission for the
initial public offering of the Company's Common Stock.
(k) "Offering Period" shall mean the period beginning with the date an
---------------
option is granted under the Plan and ending with the date determined by the
Board. During the term of the Plan, the duration of each Offering Period shall
be determined from time to time by the Board, provided that no Offering Period
may exceed twenty-four (24) months in duration. If determined by the Board, an
Offering Period may include one or more Purchase Periods. The first Offering
Period shall begin on the effective date of the Company's initial public
offering of its Common Stock that is registered with the Securities and Exchange
Commission (the "Effective Date") and shall end on the last Trading Day on or
before April 30, 1997.
(l) "Plan" shall mean this Employee Stock Purchase Plan.
----
(m) "Purchase Price" shall mean an amount equal to 85% of the Fair
--------------
Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.
(n) "Purchase Period" shall mean the period commencing on an Enrollment
---------------
Date or after an Exercise Date and which is of such duration as the Board shall
determine.
-2-
<PAGE>
(o) "Reserves" shall mean the number of shares of Common Stock covered
--------
by each option under the Plan which have not yet been exercised and the number
of shares of Common Stock which have been authorized for issuance under the Plan
but not yet placed under option.
(p) "Subsidiary" shall mean a corporation, domestic or foreign, of
----------
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock exchanges
-----------
and the Nasdaq System are open for trading.
3. Eligibility.
-----------
(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
4. Offering and Purchase Periods. The Plan shall be implemented by
-----------------------------
consecutive, overlapping Offering Periods, each of which shall be of such
duration (not to exceed 24 months) as the Board shall determine from time to
time in its discretion, and each of which shall consist of such number of
Purchase Periods as the Board shall determine from time to time in its
discretion. The Plan shall continue until terminated in accordance with Section
19 hereof. The first Offering Period shall commence on the Effective Date and
shall end on the last Trading Day on or before April 30, 1997. Unless otherwise
specified by the Board, the Offering Periods shall be six months in duration
without any Purchase Periods with the first Offering Period commencing on the
Effective Date and ending on April 30, 1997, as aforesaid, and the second
commencing on May 1, 1997, and ending on October 31, 1997. The Board shall
have the power to change the duration of Offering Periods (including the
commencement dates thereof) at any time or from time to time, provided that
(except as the shareholders may otherwise approve) any such change shall be
effected only with respect to Offering Periods commencing at least five (5) days
following the date on which the change is announced.
-3-
<PAGE>
5. Participation.
-------------
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office prior
to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
------------------
(a) At the time a participant files his or her subscription agreement,
he or she shall elect to have payroll deductions made on each pay day during the
Offering Period in an amount not exceeding ten percent (10%) of the Compensation
which he or she receives on each pay day during the Offering Period, provided,
however, that for purposes of the first Offering Period, the maximum payroll
deduction shall not exceed twenty percent (20%) of the Compensation which a
participant receives during the first Offering Period.
(b) All payroll deductions made for a participant shall be credited to
his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the Plan
as provided in Section 10 hereof, or may increase or decrease the rate of his or
her payroll deductions during the Offering Period by completing or filing with
the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at such time during any
Offering Period, or, if applicable, any Purchase Period which is scheduled to
end during the current calendar year (collectively, the "Current Offering
Period") that the aggregate of all payroll deductions which were previously used
to purchase stock under the Plan in a prior Offering Period, or, if applicable,
prior Purchase Period which ended during that calendar year plus all payroll
deductions accumulated with respect to the Current Offering Period equal
$21,250. Payroll deductions shall recommence at the rate provided in such
participant's subscription agreement at the beginning of the first Offering
Period, or, if applicable, first Purchase
-4-
<PAGE>
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at the
time some or all of the Company's Common Stock issued under the Plan is disposed
of, the participant must make adequate provision for the Company's federal,
state, or other tax withholding obligations, if any, which arise upon the
exercise of the option or the disposition of the Common Stock. At any time, the
Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period, each
---------------
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Offering Period, or Purchase
Period, if applicable, more than 5,000 shares (subject to any adjustment
pursuant to Section 19), and provided further that such purchase shall be
subject to the limitations set forth in Sections 3(b) and 12 hereof. Exercise
of the option shall occur as provided in Section 8 hereof, unless the
participant has withdrawn pursuant to Section 10 hereof. The option shall
expire on the last day of the Offering Period.
8. Exercise of Option.
------------------
(a) Unless a participant withdraws from the Plan as provided in Section
10 hereof, his or her option for the purchase of shares shall be exercised
automatically on the Exercise Date, and the maximum number of full shares
subject to option shall be purchased for such participant at the applicable
Purchase Price with the accumulated payroll deductions in his or her account. No
fractional shares shall be purchased; any payroll deductions accumulated in a
participant's account which are not sufficient to purchase a full share shall be
retained in the participant's account for the subsequent Offering Period or, if
applicable, Purchase Period subject to earlier withdrawal by the participant as
provided in Section 10 hereof. Any other monies left over in a participant's
account after the Exercise Date shall be returned to the participant. During a
participant's lifetime, a participant's option to purchase shares hereunder is
exercisable only by him or her.
(b) In the event, on a given Exercise Date, the number of shares with
respect to which options are to be exercised exceeds 50,000 shares (post split)
for the calendar year , the Company shall make a pro rata allocation of the
shares remaining below the 50,000 share limit in as uniform a manner as shall be
practicable and as it shall determine to be equitable. Notwithstanding the above
sentence, the 50,000 share limit shall apply seperately to the first Offering
Period under the Plan.
-5-
<PAGE>
9. Delivery. As promptly as practicable after each Exercise Date on which
--------
a purchase of shares occurs, the Company shall arrange the delivery to each
participant, as appropriate, of the shares purchased upon exercise of his or her
option.
10. Withdrawal; Termination of Employment.
-------------------------------------
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his or her account shall be paid to such participant promptly after
receipt of notice of withdrawal and such participant's option for the Offering
Period shall be automatically terminated, and no further payroll deductions for
the purchase of shares shall be made for such Offering Period. If a participant
withdraws from an Offering Period, payroll deductions shall not resume at the
beginning of the succeeding Offering Period unless the participant delivers to
the Company a new subscription agreement.
(b) Upon a participant's ceasing to be an Employee, for any reason, he
or she shall be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period but
not yet used to exercise the option shall be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto under
Section 14 hereof, and such participant's option shall be automatically
terminated. The preceding sentence notwithstanding, a participant who receives
payment in lieu of notice of termination of employment shall be treated as
continuing to be an Employee for the participant's customary number of hours per
week of employment during the period in which the participant is subject to such
payment in lieu of notice.
(c) A participant's withdrawal from an Offering Period shall not have
any effect upon his or her eligibility to participate in any similar plan which
may hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the participant
withdraws.
11. Interest. No interest shall accrue on the payroll deductions of a
--------
participant in the Plan.
12. Stock.
-----
(a) The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be 175,000 shares (post
split), subject to adjustment upon changes in capitalization of the Company as
provided in Section 18 hereof. If, on a given Exercise Date, the number of
shares with respect to which options are to be exercised exceeds the number of
shares then available under the Plan, the Company shall make a pro rata
allocation of the shares remaining available for purchase in as uniform a manner
as shall be practicable and as it shall determine to be equitable.
-6-
<PAGE>
(b) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.
13. Administration.
--------------
(a) Administrative Body. The Plan shall be administered by the Board
-------------------
or a committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
(b) Rule 16b-3 Limitations. Notwithstanding the provisions of
----------------------
Subsection (a) of this Section 13, in the event that Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
any successor provision ("Rule 16b-3") provides specific requirements for the
administrators of plans of this type, the Plan shall be administered only by
such a body and in such a manner as shall comply with the applicable
requirements of Rule 16b-3. Unless permitted by Rule 16b-3, no discretion
concerning decisions regarding the Plan shall be afforded to any committee or
person that is not "disinterested" as that term is used in Rule 16b-3.
14. Designation of Beneficiary.
--------------------------
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such partici pant's death subsequent to an Exercise
Date on which the option is exercised but prior to delivery to such participant
of such shares and cash. In addition, a participant may file a written
designation of a beneficiary who is to receive any cash from the participant's
account under the Plan in the event of such participant's death prior to
exercise of the option. If a participant is married and the designated
beneficiary is not the spouse, spousal consent shall be required for such
designation to be effective.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
-7-
<PAGE>
15. Transferability. Neither payroll deductions credited to a participant's
---------------
account nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and distribution
or as provided in Section 14 hereof) by the participant. Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds from
an Offering Period in accordance with Section 10 hereof.
16. Use of Funds. All payroll deductions received or held by the Company
------------
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts shall be maintained for each participant
-------
in the Plan. Statements of account shall be given to participating Employees at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
18. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
---------------------------------------------------------------------
Merger or Asset Sale.
--------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the Reserves, as well as the price per share and
the number of shares of Common Stock covered by each option under the Plan which
has not yet been exercised, shall be proportionately adjusted for any increase
or decrease in the number of issued shares of Common Stock resulting from a
stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of shares of Common Stock effected without receipt of consideration by
the Company; provided, however, that conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration". Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Offering Periods shall terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
--------------------
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, any Offering Periods then in progress shall be
shortened by setting a new Exercise Date (the "New Exercise Date") and any
Offering Periods then in progress shall end on the New Exercise Date. The New
Exercise Date shall be before the date of the Company's proposed sale or merger.
The Board shall notify each participant in writing, at least ten (10) business
days prior to the New Exercise
-8-
<PAGE>
Date, that the Exercise Date for the participant's option has been changed to
the New Exercise Date and that the participant's option shall be exercised
automatically on the New Exercise Date, unless prior to such date the
participant has withdrawn from the Offering Period as provided in Section 10
hereof.
19. Amendment or Termination.
------------------------
(a) The Board may at any time and for any reason terminate or amend
the Plan. Except as provided in Section 18 hereof, no such termination can
affect options previously granted, provided that an Offering Period may be
terminated by the Board on any Exercise Date if the Board determines that the
termination of the Plan is in the best interests of the Company and its
shareholders. Except as provided in Section 18 hereof, no amendment may make any
change in any option theretofore granted which adversely affects the rights of
any participant. To the extent necessary to comply with Section 423 of the Code
(or any successor rule or provision or any other applicable law or regulation),
the Company shall obtain shareholder approval in such a manner and to such a
degree as required.
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
20. Notices. All notices or other communications by a participant to the
-------
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. Conditions Upon Issuance of Shares. Shares shall not be issued with
----------------------------------
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
-9-
<PAGE>
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
22. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 19 hereof.
-10-
<PAGE>
EXHIBIT A
---------
SPLASH TECHNOLOGY, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: ___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. _____________________________________________________ hereby elects to
participate in the Splash Technology, Inc. 1996 Employee Stock Purchase
Plan (the "Employee Stock Purchase Plan") and subscribes to purchase shares
of the Company's Common Stock in accordance with this Subscription
Agreement and the Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
____% of my Compensation on each payday (from 1 to 20% for the first
Offering Period) during the Offering Period in accordance with the Employee
Stock Purchase Plan. (Please note that no fractional percentages are
permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in
all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is subject
to shareholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and spouse only):
___________________________________________________________________________
____________.
6. I understand that if I dispose of any shares received by me pursuant to the
Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after the
Exercise Date, I will be treated for federal income tax purposes as having
received ordinary income at the time of such disposition in an amount equal
to the excess of the fair market value of the shares at the time such
shares were purchased by me over the price which I paid for the shares. I
-
hereby agree to notify the Company in writing
---------------------------------------------
<PAGE>
within 30 days after the date of any disposition of my shares and I will
------------------------------------------------------------------------
make adequate provision for Federal, state or other tax withholding
-------------------------------------------------------------------
obligations, if any, which arise upon the disposition of the Common Stock.
-------------------------------------------------------------------------
The Company may, but will not be obligated to, withhold from my
compensation the amount necessary to meet any applicable withholding
obligation including any withholding necessary to make available to the
Company any tax deductions or benefits attributable to sale or early
disposition of Common Stock by me. If I dispose of such shares at any time
after the expiration of the 2-year and 1-year holding periods, I understand
that I will be treated for federal income tax purposes as having received
income only at the time of such disposition, and that such income will be
taxed as ordinary income only to the extent of an amount equal to the
lesser of (1) the excess of the fair market value of the shares at the time
of such disposition over the purchase price which I paid for the shares, or
(2) 15% of the fair market value of the shares on the first day of the
Offering Period. The remainder of the gain, if any, recognized on such
disposition will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon
my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)______________________________________________
(First) (Middle) (Last)
___________________________ ___________________________________
Relationship
___________________________________
(Address)
-2-
<PAGE>
Employee's Social
Security Number: ____________________________________
Employee's Address: ____________________________________
____________________________________
____________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:_____________________ ________________________________________
Signature of Employee
_______________________________________
Spouse's Signature (If beneficiary other
than spouse)
-3-
<PAGE>
EXHIBIT B
---------
SPLASH TECHNOLOGY, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Splash
Technology, Inc. 1996 Employee Stock Purchase Plan which began on ____________,
19____ (the "Enrollment Date") hereby notifies the Company that he or she hereby
withdraws from the Offering Period. He or she hereby directs the Company to pay
to the undersigned as promptly as practicable all the payroll deductions
credited to his or her account with respect to such Offering Period. The
undersigned understands and agrees that his or her option for such Offering
Period will be automatically termi nated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to participate
in succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.
Name and Address of Participant:
________________________________
________________________________
________________________________
Signature:
________________________________
Date:___________________________
<PAGE>
EXHIBIT 10.5
ADOBE CONFIDENTIAL
CONFIGURABLE POSTSCRIPT(R) INTERPRETER
OEM LICENSE AGREEMENT
DATED AS OF SEPTEMBER 18, 1992
BETWEEN
SUPERMAC TECHNOLOGY INCORPORATED
AND
ADOBE SYSTEMS INCORPORATED
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. DEFINITIONS............................................................. 1
1.1 Adobe Information................................................. 1
1.2 Adobe Software.................................................... 1
1.3 Adobe Trademarks.................................................. 2
1.4 Coded Font Programs............................................... 2
1.5 Computer System................................................... 2
1.6 CPST Application.................................................. 2
1.7 CPST Application Appendix......................................... 3
1.8 Demonstration Program(s).......................................... 3
1.9 Designated Output Device(s)....................................... 3
1.10 Documentation..................................................... 3
1.11 End User.......................................................... 3
1.12 Internal Improvements............................................. 3
1.13 Licensed System................................................... 3
1.14 Other Adobe-Supplied Software..................................... 3
1.15 PostScript Language Addendum...................................... 3
1.16 PPD File.......................................................... 4
1.17 Subsidiary........................................................ 4
1.18 Trademark......................................................... 4
1.19 Typeface.......................................................... 4
2. LICENSE GRANTS.......................................................... 4
2.1 License to Sublicense Certain Software and Documentation.......... 4
2.2 [*]............................................................... 7
2.3 Conveyance of License Only........................................ 7
2.4 Similar Products.................................................. 7
2.5 Reverse Engineering............................................... 8
</TABLE>
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
-i-
<PAGE>
<TABLE>
<S> <C>
3. DEVELOPMENT, DELIVERY AND ACCEPTANCE.................................... 8
3.1 Agreement on Future CPSI Applications............................. 8
3.2 Adobe Software Development........................................ 8
3.3 Custom Product Development........................................ 8
3.4 OEM-Loaned Equipment and Related Materials........................ 8
3.5 PPD File.......................................................... 9
3.6 Adobe Deliverables................................................ 9
3.7 OEM Modification; Adobe Assistance................................ 9
3.8 Testing........................................................... 9
3.9 PostScript Language Addendum...................................... 11
4. PROPRIETARY RIGHTS...................................................... 11
4.1 Adobe Ownership................................................... 11
4.2 Adobe Trade Secrets............................................... 11
4.3 Unauthorized Distribution or Copying.............................. 11
4.4 No Modifications.................................................. 11
5. TERM OF AGREEMENT....................................................... 12
6. EXPORT.................................................................. 12
7. PAYMENTS................................................................ 12
7.1 CPSI Application Payments......................................... 12
7.2 Coded Font Program Royalties...................................... 12
7.3 Other Payments.................................................... 12
7.4 Taxes............................................................. 13
7.5 Payment of Royalties.............................................. 13
7.6 When Royalties Are Earned......................................... 13
7.7 Right of Audit.................................................... 13
7.8 ITC Typefaces..................................................... 14
8. OEM SUPPORT............................................................. 14
9. COPYRIGHT AND OTHER NOTICES............................................. 14
9.1 Copyright Notices................................................. 14
9.2 Restricted Rights................................................. 15
9.3 Foreign Government Agreements..................................... 15
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
LICENSE TO USE ADOBE TRADEMARKS: NONGENERIC ADVERTISING...................... 15
10.1 Trademark License................................................. 15
10.2 Ownership of Trademarks........................................... 16
10.3 Quality Standards................................................. 16
10.4 Infringement Proceedings.......................................... 17
10.5 OEM's Use of Trademarks........................................... 17
10.6 Trademark Registrations........................................... 17
11. WARRANTIES.............................................................. 17
11.1 Infringement...................................................... 17
11.2 Adobe Software Warranty........................................... 18
11.3 Limitations on Warranties......................................... 18
12. INTERNAL IMPROVEMENTS; CONTINUING SUPPORT............................... 19
12.1 Internal Improvements............................................. 19
12.2 Continuing Support................................................ 19
13. CANCELLATION............................................................ 19
13.1 Cancellation by Adobe for Cause................................... 19
13.2 Cancellation by OEM for Cause..................................... 19
13.3 Bankruptcy........................................................ 19
13.4 Obligations on Cancellation, Termination or Expiration............ 19
14. LIMITATION OF LIABILITY................................................. 20
15. GENERAL................................................................. 21
15.1 Governing Law..................................................... 21
15.2 Notices........................................................... 21
15.3 Injunctive Relief................................................. 21
15.4 No Agency......................................................... 21
15.5 Force Majeure..................................................... 21
15.6 Waiver............................................................ 22
15.7 Severability...................................................... 22
15.8 Headings.......................................................... 22
15.9 Confidentiality of Agreement...................................... 22
15.10 No Patent License................................................. 22
15.11 Assignment........................................................ 22
15.12 Attorneys' Fees................................................... 22
15.13 Full Power........................................................ 23
15.14 Forum............................................................. 23
15.15 Entire Agreement.................................................. 23
SIGNATORIES............................................................. 23
</TABLE>
-iii-
<PAGE>
EXHIBITS
--------
<TABLE>
<CAPTION>
Paragraph
Title Exhibit Reference
- ----- ------- ---------
<S> <C> <C>
Description of Adobe Software A 1.2, Exhibit F
Adobe Trademarks B 1.3
Coded Font Programs C Recitals, 1.4, 1.4.1,
1.4.2, 1.19, 2.1.1,
10.1, 10.2, Exhibit F
Reproduction Locations D 2.1.1, 2.1.2, 2.1.5,
2.1.8
Minimum Terms of End User Agreement E 2.1.9
Sample Form of CPSI Application Appendix F 3.1
</TABLE>
-iv-
<PAGE>
ADOBE SYSTEMS INCORPORATED
CONFIGURABLE POSTSCRIPT INTERPRETER
OEM LICENSE AGREEMENT
THIS AGREEMENT is between ADOBE SYSTEMS INCORPORATED, a California
corporation having a place of business at 1585 Charleston Road, P.O. Box 7900,
Mountain View, California 94039-7900 ("Adobe), and SuperMac Technology, Inc., a
Delaware corporation having a place of business at 485 Potrero Ave, Sunnyvale,
CA 94086 ("OEM"). This Agreement is effective as of September 18, 1992.
RECITALS:
A. Adobe owns certain computer programs, known collectively as the
Configurable PostScript Interpreter software, which converts the PostScript
language text into a raster image to control raster devices such as CRT
displays, dot-matrix printers, laser printers, and photo typesetters. (Adobe and
PostScript are trademarks of Adobe registered in the United States.)
B. Adobe also has rights to the Roman Initial lnstallation Coded Font
Programs identified in Exhibit C ("Coded Font Programs") hereto and the Roman
---------
Additional Coded Font Programs, if any, and Other Coded Font Programs, if any,
identified in the applicable CPSI Application Appendix.
C. OEM wishes to license the object code of the Configurable PostScript
Interpreter software and the Coded Font Programs for incorporation in mutually
agreeable OEM application programs for use in mutually agreeable computer system
environments.
OEM and Adobe therefore agree as follows:
AGREEMENT:
---------
1. DEFINITIONS.
-----------
1.1 Adobe Information. "Adobe Information" shall mean the Adobe
-----------------
Software, Other Adobe-Supplied Software, Coded Font Programs, Demonstration
Program(s), Typefaces, Trademarks, Documentation and the Adobe Trademarks.
1.2 Adobe Software. "Adobe Software" shall mean (i) the computer
--------------
programs known collectively as the Configurable PostScript Interpreter software
as
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
1
<PAGE>
provided by Adobe to OEM hereunder and without any OEM modifications or
additions thereto, but not including the Demonstration Program(s), (ii) any
other software programs identified in Exhibit A ("Description of Adobe
---------
Software") or designated as "Adobe Software" in any CPSI Application Appendix
hereto, and (iii) any corrections, changes, alterations or enhancements to the
Adobe Software, including Internal Improvements, supplied by Adobe to OEM
pursuant to the terms hereof or any corrections or updates to the Adobe Software
supplied to OEM by Adobe under the terms of a Continuing Support Agreement
between the parties.
1.3 Adobe Trademarks. "Adobe Trademarks" shall mean (i) the trademarks,
----------------
stylistic marks and distinctive logotypes set forth in Exhibit B ("Adobe
---------
Trademarks"), and (ii) other marks and logotypes as Adobe may from time to time
designate during the term of this Agreement.
1.4 Coded Font Programs. "Coded Font Programs" shall mean the Roman
-------------------
Initial Installation Coded Font Programs, Roman Additional Coded Font Programs,
if any, and Other Coded Font Programs, if any, encoded in a special format (as
specified in Exhibit C ("Coded Font Programs") or in the applicable CPSI -
---------
Application Appendix hereto)) and in encrypted form for delivery to OEM. The
term Coded Font Programs does not include any Roman Initial Installation Coded
Font Programs, Roman Additional Coded Font Programs or Other Coded Font Programs
which Adobe is not entitled to license to Adobe's OEM customers; provided,
however, that such limitation does not apply to the Coded Font Programs
identified in Exhibit C ("Coded Font Programs") or in any CPSI Application
---------
Appendix.
1.4.1 Roman Initial Installation Coded Font Programs. "Roman
----------------------------------------------
Initial Installation Coded Font Programs" shall mean the digitally encoded
machine readable outline programs for the Typefaces identified in Exhibit C
---------
("Coded Font Programs") or in a CPSI Application Appendix hereto, and
distributed for use as a part of a licensed System.
1.4.2 Roman Additional Coded Font Programs. "Roman Additional
------------------------------------
Coded Font Programs" shall mean the digitally encoded machine readable outline
programs for the Roman Typefaces identified in Exhibit C ("Coded Font Programs")
---------
or in a CPSI Application Appendix hereto, and distributed for use as a part of a
licensed System.
1.4.3 Other Coded Font Programs. "Other Coded Font Programs" shall
-------------------------
mean the Coded Font Programs (which may include, but are not limited to, Coded
Font Programs for Japanese Typefaces), which are identified in a CPSI
Application Appendix hereto, and which are distributed for use as a part of a
Licensed System.
1.5 Computer System. "Computer System" shall mean one (1) computer with
---------------
operating system software, associated raster display and a Designated
-2-
<PAGE>
Output Device, all of which must be set forth in the applicable CPSI Application
Appendix.
1.6 CPST Application. "CPSI Application" shall mean any mutually
----------------
agreeable application program running in a Computer System environment, as
identified in a CPSI Application Appendix hereto, which incorporates all Or Part
Of the Adobe Software.
1.6.1 CPSI Application Appendix. "CPSI Application Object" shall
-------------------------
mean the object code version of a CPSI Application.
1.7 CPST Application Appendix. "CPSI Application Appendix" shall mean
-------------------------
any CPSI Application Appendix to this Agreement pursuant to which an OEM will
be using the Adobe Software to create a CPSI Application for use as part of a
new Licensed System described therein.
1.8 Demonstration Program(s). "Demonstration Program(s)" shall mean
------------------------
program(s), both in source and/or object code form, which are intended to
provide OEM with an example of how to integrate the Adobe Software into an
application program.
1.9 Designated Output Device(s). "Designated Output Device(s)" shall
---------------------------
mean any output device designated as such in a CPSI Application Appendix and
which has been approved by Adobe for use in conjunction with the CPSI
Application Object to generate output.
1.10 Documentation. "Documentation" shall mean (i) the PostScript
------------- ----------
Language Reference Manual, Second Edition, as printed in English by Addison-
- -----------------------------------------
Wesley, current as of April, 1991, or such other version of the PostScript
Language Reference Manual as specified in a CPSI Application Appendix, (ii) the
PostScript Language Addendum Template, (iii) any Adobe supplement thereto
specific to the Adobe Software licensed hereunder (the "CPSI Supplement"), (iv)
any other Documentation for Adobe Software identified in a CPSI Application
Appendix hereto and (v) any updates, enhancements, substitutions, replacements
or modifications thereof delivered to OEM by Adobe during the term of this
Agreement.
1.11 End User. "End User" shall mean a single individual using the CPSI
--------
Application Object on a single Computer System for its ordinary and customary
business or for personal purposes, and not for redistribution.
1.12 Internal Improvements. "Internal Improvements" shall mean
---------------------
modifications and enhancements to the Adobe Software which are designed by Adobe
to correct or improve the performance of the Adobe Software and which are
generally provided free of charge to Adobe's OEM customers, but shall not
include
-3-
<PAGE>
Adobe Software with enhanced functionality marketed by Adobe as a separate
product.
1.13 Licensed System. "Licensed System" shall mean the Computer System,
---------------
CPSI Application Object and Coded Font Programs.
1.14 Other Adobe-Supplied Software. "Other Adobe-Supplied Software" shall
-----------------------------
mean any software, other than Adobe Software or Demonstration Program(s),
identified in a CPSI Application Appendix hereto and any updates or
modifications thereof delivered to OEM by Adobe during the term of Agreement.
1.15 PostScript Language Addendum. "PostScript Language Addendum" shall
----------------------------
mean a supplement to the Documentation for each Licensed System to be written by
OEM using the PostScript Language Addendum Template as a guide and with
technical content approved by Adobe, that describes the features specific to a
Licensed System and the means of accessing those features via the Adobe
Software.
1.16 PPD File. "PPD File" shall mean a human readable, machine
--------
parseable, PostScript printer description file containing device-specific
information as to how to invoke the features of a particular Licensed System, as
described in the "PostScript Printer Description File Specification" (which
specification is available from Adobe and subject to change by Adobe, in its
sole discretion, from time to time).
1.17 Subsidiary. "Subsidiary" shall mean any corporation, partnership or
----------
other entity as to which OEM (a) owns or controls, directly or indirectly, at
least fifty percent (50%) by nominal value or number of units of the outstanding
stock or of the outstanding stock conferring the right to vote at a general
meeting, or (b) has the right to elect a majority of the Board of Directors or
its equivalent, or (c) has the right, directly or indirectly, to appoint or
remove the management.
1.18 Trademark. "Trademark" shall mean the trademarks, if any, used by
---------
Adobe to identify the Coded Font Programs and Typefaces.
1.19 Typeface. "Typeface" shall mean a human readable set of glyphs,
--------
including letters of the alphabet, upper and/or lower case, the numerals 0-9
and additional special characters and punctuation marks as may be offered by
Adobe in conjunction with such letters and numerals of one typeface design and
identified in Exhibit C ("Coded Font Programs") hereto or in any CPSI
Application Appendix. Each weight or version of a single typeface design (such
as Roman or Italic or in an expanded or condensed form) marketed by Adobe as a
separate typeface will be considered a separate Typeface.
-4-
<PAGE>
2. LICENSE GRANTS.
--------------
2.1 License to Sublicense Certain Software and Documentation.
--------------------------------------------------------
2.1.1 Adobe Software. Adobe hereby grants to OEM a worldwide, non-
--------------
exclusive, non-transferable license, during the term of this Agreement (subject
to OEM's compliance with Paragraph 2.1.7 ("Limited Functional Scope of License")
---------------
through Paragraph 2.1.10 ("Protection Mechanisms"), Paragraph 4.3 ("Unauthorized
---------------- -------------
Distribution or Copying") and the other terms hereof), to use, and to reproduce
only at the locations listed in Exhibit D ("Reproduction Locations") hereto, as
---------
amended from time to time, and to Sublicense and distribute, directly and
indirectly, through OEM's usual distribution channels, copies of the object code
version of the Adobe Software only as part of a CPS Application Object for use
by End Users solely on or in conjunction with a Computer System comprising a
Licensed System, as described in a CPSI Application Appendix. Each copy of the
CPSI Application Object shall be licensed for use only on a single Computer
System. OEM agrees that any such distribution of the CPSI Application Object
shall include at a minimum the Roman Initial Installation Coded Font Programs,
as described in Exhibit C ("Coded Font Programs") hereto, or otherwise as
---------
specified in the applicable CPSI Application Appendix.
2.1.2 Coded Font Programs. Adobe hereby grants to OEM a worldwide,
-------------------
non-exclusive, non-transferable license, during the term of this Agreement
(subject to OEM's compliance with Paragraph 2.1.7 ("Limited Functional Scope of
---------------
License") through Paragraph 2.1.10 ("Protection Mechanisms"), Paragraph 4.3
---------------- -------------
("Unauthorized Distribution or Copying") and the other terms hereof), (a) to
use, and to reproduce only at the locations listed in Exhibit D ("Reproduction
---------
Locations") hereto, as amended from time to time, the Coded Font Programs
provided by Adobe and to sublicense and distribute, directly and indirectly,
through OEM's usual distribution channels, such Coded Font Programs to End
Users bundled with the OEM Application Object solely for use as part of a
Licensed System on the terms set forth herein; (b) to sublicense the Coded
Font Programs to End Users for the reproduction and display of Typefaces on
the applicable Licensed Systems; (c) to sublicense such End Users to reproduce
and display Typefaces on the applicable Licensed System on which the Typefaces
are licensed; (d) to use the Coded Font Programs to reproduce and display the
Typefaces on the applicable Licensed Systems for purposes of test, evaluation,
demonstration or development of applications; (e) to reproduce and display
Typefaces on the applicable Licensed Systems for purposes of test, evaluation,
demonstration or development of applications; and (f) to use and to sublicense
such End Users to use the Trademarks used by Adobe to identify the Coded Font
Programs. OEM's license under this Paragraph 2.1.2 with respect to any
---------------
particular Coded Font Program will terminate, and OEM shall no longer be
entitled to distribute the corresponding Coded Font Program, upon termination
of the agreement between Adobe and the owner of any Trademark, if any,
pertaining to such Coded Font Program.
-5-
<PAGE>
2.1.3 Demonstration Program(s). Adobe hereby grants to OEM a
------------------------
worldwide, non-exclusive, non-transferable license, during the term of this
Agreement (subject to OEM's compliance with Paragraph 2.1.7 ("Limited Functional
---------------
Scope of License") through Paragraph 2.1.10 ("Protection Mechanisms"), Paragraph
---------------- ---------
4.3 ("Unauthorized Distribution or Copying") and the other terms hereof), to use
- ---
the Demonstration Program(s) internally as a demonstration of how the Adobe
Software may be used and to modify and create derivative works with the
Demonstration Program(s), provided that any portion of the Demonstration
Program(s) which is included in any derivative work is distributed in object
code form only for use solely in conjunction with a Licensed System.
Modifications made by OEM to the Demonstration Program(s), but not the original
code supplied by Adobe hereunder, shall be the property of OEM; provided,
however, that any portion of the Demonstration Program(s) which is included in
any derivative work shall remain subject to the provisions of this Agreement.
2.1.4 PostScript Language Addendum Template. Adobe hereby grants
-------------------------------------
to OEM a non-transferable, non-exclusive license, during the term of this
Agreement and subject to the terms hereof, to use (but not reproduce) the single
copy of the PostScript Language Addendum Template ("Template") supplied by Adobe
to OEM hereunder solely as a guide for customizing and creating the PostScript
Language Addendum for a specific Licensed System.
2.1.5 Other Adobe-Supplied Software. Adobe hereby grants to OEM a
-----------------------------
non-exclusive, non-transferable license, during the term of this Agreement and
subject to the terms hereof, to use, and to reproduce only at the locations
listed in Exhibit D ("Reproduction Locations") hereto, the Other Adobe-Supplied
Software for the purpose specified in a CPSI Application Appendix hereto. If
the purpose specified in a CPSI Application Appendix contemplates OEM
distributing a portion or all of the Other Adobe-Supplied Software, then such
grant of a license by Adobe to OEM under this Paragraph shall include a non-
exclusive, non-transferable license to sublicense and distribute, directly and
indirectly, through OEM's usual distribution channels, copies of the object
code version of the Other Adobe-Supplied Software for use by End Users solely on
or in conjunction with a Computer System comprising a Licensed System, as
described in the applicable CPSI Application Appendix.
2.1.6 Nondisclosure. OEM agrees to disclose the Adobe Software,
-------------
Other Adobe-Supplied Software, Coded Font Programs and Demonstration Program(s)
and the Template only to authorized employees and independent contractors having
a need to use them as permitted by this Agreement and to take all measures
reasonably required to prevent disclosure to other parties. OEM agrees that it
will disclose the Adobe Software, Other Adobe-Supplied Software, Coded Font
Programs and Demonstration Program(s) and Template only to employees and
independent contractors with a need to know who have agreed in writing (i) not
to disclose the Adobe Software, Other Adobe-Supplied Software, Coded Font
Programs and Demonstration Program(s) and Template, (ii) to use the
-6-
<PAGE>
Adobe Software, Other Adobe-Supplied Software, Coded Font Programs and
Demonstration Program(s) and Template for the sole benefit of OEM and only as
permitted by this Agreement, and (iii) to take all reasonable precautions to
Prevent disclosure to other parties. OEM shall take prompt and appropriate
action to prevent unauthorized use or disclosure of Adobe Software. Other Adobe-
Supplied Software, Coded Font Programs and Demonstration Program(s) and Template
by such authorized employees and independent contractors.
2.1.7 Limited Functional Scope of License. The licenses granted
-----------------------------------
hereunder are limited to OEM's development and subsequent sublicensing Of CPSI
Application Object and Coded Font Programs and Other Adobe-Supplied Software, if
any, to be used to generate raster images on Computer Systems. These licenses
do not extend to the development or sublicensing of End User Software that is
used, directly or indirectly (a) to modify Coded Font Programs or Typefaces
other than to convert them to the disk-based representation of a Coded Font
Program, (b) to generate Coded Font Programs or Typefaces for use other than
with a CPSI Application Object licensed hereunder, (c) to control the output
from output devices other than those designated in the CPSI Application Appendix
(the "Designated Output Devices") or (d) to generate output for more than one
(1) Designated Output Device at a time unless OEM has issued an additional
license to the End User and paid Adobe an additional per copy royalty in the
amount specified in the applicable CPSI Application Appendix.
2.1.8 Subsidiaries of OEM. This Agreement applies to OEM and to
-------------------
any Subsidiaries of OEM which agree with OEM in writing to be bound by the terms
and conditions imposed on OEM hereunder. Notwithstanding the foregoing, OEM
agrees to make all payments due Adobe under the terms of this Agreement. OEM
agrees that reproduction of the CPSI Application Object and Coded Font Programs
will only be done by OEM or its Subsidiaries at the locations described in
Exhibit D ("Reproduction Locations"). The exercise of any right granted under
- ---------
this Agreement by any such Subsidiary is subject to OEM's guaranty of the
performance by such Subsidiary of all of OEM's obligations hereunder.
2.1.9 End User Licensing. OEM shall take all steps necessary to
------------------
ensure that each End User signs a copy of OEM's standard software license prior
to receipt of a copy of the CPSI Application Object or otherwise accepts the
CPSI Application Object subject to terms of a license agreement as described in
this Paragraph 2.1.9. The terms of such license will be drafted so as to apply
to the CM Application Object, Coded Font Programs and Other Adobe-Supplied
Software, if any. In addition, such license will include terms and conditions
substantially equivalent to those set forth in Exhibit E ("Minimum Terms of End
---------
User Agreement") to this Agreement. In the United States and in the other
jurisdictions where an enforceable copyright covering the CPSI Application
Object and Coded Font Programs exists, the software license specified above may
be a written agreement signed by the End User prior to or simultaneously with
the delivery of each copy of the CPSI Application Object, Other Adobe-Supplied
Software or any
-7-
<PAGE>
Coded Font Programs distributed by OEM, or a written agreement in the package
containing the CPSI Application Object, Other Adobe-Supplied Software and Coded
Font Programs or the user documentation for the CPSI Application Object, Other
Adobe-Supplied Software and Coded Font Programs that is fully visible to the End
User and that the End User accepts by opening the package. In all other
jurisdictions such software license must be a written agreement signed by the
End User. OEM agrees it shall be deemed to have materially breached this
Agreement if it (a) fails to use its best efforts to enforce the corresponding
provisions of End User Agreements set forth in Exhibit E ("Minimum Terms of End
---------
User Agreement"), (b) distributes versions of CPSI Application Object or other
software that facilitates End User violation of these limitations, or (c)
otherwise licenses End Users so as to expand the rights granted herein or reduce
the obligations required hereby.
2.1.10 Protection Mechanisms. OEM shall employ in conjunction with
---------------------
the CPSI Application Object and Coded Font Programs licensed hereunder, copy
protection, serialization, encryption or any other mechanism to restrict or
monitor unauthorized use of application software, as required by Adobe and as
specified in the applicable CPSI Application Appendix. If no standard for
protection is specified, OEM shall ensure that the CPSI Application Object and
Coded Font Programs are encrypted, and, in the case of Other Coded Font Programs
for Japanese Typefaces, copy protected as well.
2.2 [*]
2.3 Conveyance of License Only. This Agreement grants OEM a license to
--------------------------
the Adobe Information only and only such rights as are specifically enumerated
herein. No other right, title, or interest in the Adobe Information is hereby
conveyed to OEM.
2.4 Similar Products. OEM acknowledges that Adobe is currently, and will
----------------
in the future, develop and acquire other software, including software based on
the Adobe Software, that such existing or planned software independently
developed or acquired by Adobe may contain ideas and concepts similar to those
in the CPSI Application; and that, over time, Adobe's employees may gain
familiarity, pursuant to this Agreement, with such general concepts and ideas.
Therefore, OEM agrees that Adobe shall not be precluded from developing
acquiring or distributing software or other products containing such ideas and
concepts for any purpose, without obligation to OEM.
-8-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
2.5 Reverse Engineering. OEM agrees that it will not reverse engineer,
-------------------
reverse compile, disassemble or otherwise attempt to create source code which is
derived from the Adobe Software, Other Adobe-Supplied Software or Coded Font
Programs or Demonstration Program(s) provided in object code form. OEM further
agrees that the object code version of the Adobe Software licensed from Adobe is
intended to be used as an integral part of the CPSI Application to be developed
by OEM and OEM will take all reasonable precautions to prevent Its customers
from extracting the Adobe Software from the CPSI Application with which it is
combined and distributed.
3. DEVELOPMENT, DELIVERY AND ACCEPTANCE.
------------------------------------
3.1 Agreement on Future CPSI Applications. The parties agree that the
-------------------------------------
Adobe Software may be licensed for use with-other application programs or in
other computer environments upon the mutual agreement of OEM and Adobe under the
terms of a fully executed CPSI Application Appendix in a form similar to
Exhibit F ("Sample Form of CPSI Application Appendix") hereto.
- ---------
3.2 Adobe Software Development. Adobe shall use its best efforts to
--------------------------
develop and modify the Adobe Software for use as part of the CPSI Application in
the Computer System environment specified in the applicable CPSI Application
Appendix, subject to the following limitations. If Adobe determines that it b
not technically feasible to develop the Adobe Software for the particular CPSI
Application specified in the applicable CYST Application Appendix, OEM's sole
and exclusive remedy shall be to terminate the development of the Adobe Software
for such CPSI Application and to obtain a refund of that portion of the software
license fee, if any, paid by OEM to Adobe under Paragraph 7.1 ("CPST Application
-------------
Payments") below for such CPSI Application, as specified in the applicable CPSI
Application Appendix I provided that OEM has returned all existing copies of the
Adobe Software for such CPSI Application and certified in writing that it has no
right to use or distribute such Adobe Software.
3.3 Custom Product Development. If OEM requests a custom product
--------------------------
development from Adobe (i.e. a product that requires Adobe to develop a version
of the Adobe Software that is not then a current product offering of Adobe),
Adobe and OEM will negotiate the business terms of this custom development,
including without limitation, the scope of work, technical specification,
pricing and milestone schedule, and if the parties can agree, the terms of such
agreement will be set forth in a non-standard form of a CPSI Application
Appendix to be executed by the parties and made a part of this Agreement.
3.4 OEM-Loaned Equipment and Related Materials.
------------------------------------------
3.4.1 OEM-Loaned Equipment. Concurrent with, or promptly after,
--------------------
the effective date of any CPSI Application Appendix hereto, OEM shall provide
Adobe with the software, equipment and documentation, if any, set forth in the
-9-
<PAGE>
applicable CPSI Application Appendix, to be used by Adobe for testing the CPSI
Application Object in accordance with Paragraph 3.8.2 ("Adobe Testing") below.
---------------
OEM shall also promptly provide Adobe with any other software, equipment, and
documentation necessary for Adobe to perform development or warranty services
for OEM hereunder or to provide maintenance services to OEM under a Continuing
Support Agreement (collectively "OEM-Loaned Equipment"). All OEM-Loaned
Equipment will be returned to OEM at its request after termination of Adobe's
development, testing, warranty and maintenance activities hereunder. All
OEM-Loaned Equipment shall remain the property of OEM. OEM shall pay shipping
costs for delivery of the OEM-Loaned Equipment to Adobe. Any OEM-Loaned
Equipment shall be returned to OEM by Adobe, shipping and insurance costs
prepaid by OEM. While in the possession of Adobe, the OEM-Loaned Equipment
shall be maintained by OEM in good working order and shall be fully insured by
Adobe. Any delays in maintaining the OEM-Loaned Equipment by OEM shall result
in corresponding delays in the milestone schedule for the applicable CPSI
Application Appendix.
3.4.2 OEM Technical Contract. OEM agrees to designate in the
----------------------
particular CPSI Application Appendix a technically qualified person to respond
to information requests by Adobe who, when so requested by Adobe, shall use his
or her best efforts to respond within two (2) working days of receipt of such
request.
3.5 PPD File. OEM shall also create and deliver to Adobe one (1) master
--------
copy of the PPD File for each Licensed System at the time OEM provides a beta
version of the CPSI Application Object to Adobe for testing under Paragraph
---------
3.8.2 ("Adobe Testing") and any updated version thereof in a timely manner
- -----
following the availability of any updated version. OEM shall include with each
licensed System a copy of the corresponding PPD File.
3.6 Adobe Deliverables. Adobe will provide OEM with one (1) master copy
------------------
of the Adobe Software for each CPSI Application, the Other Adobe-Supplied
Software, if any, the Coded Font Programs and the Demonstration Program(s) in
accordance with the milestones set forth in the applicable CPSI Application
Appendix hereto, and one copy of the Documentation to be delivered by Adobe to
OEM under the provisions of a CPSI Application Appendix.
3.7 OEM Modification; Adobe Assistance. OEM shall be responsible for
----------------------------------
producing the CPSI Application Object fully adapted to the applicable Licensed
System and suitable for distribution to End Users. Adobe's sole responsibility
in connection with such modification shall be to provide OEM, at no charge, with
eight (8) person hours of technical assistance (or such other quantity as is
specified in the applicable CPSI Application Appendix) to familiarize OEM
personnel with the operation of the Adobe Software. All such assistance will be
provided at Adobe's headquarters facilities in California, or such other
facility as specified in the applicable CPSI Application Appendix.
-10-
<PAGE>
3.8 Testing. [*]
-------
3.8.1 [*]
3.8.2 [*]
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
-11-
<PAGE>
3.9 PostScript Language Addendum. OEM will provide Adobe with a draft
----------------------------
version of a PostScript Language Addendum for each Licensed System in a mutually
agreeable format [*] in accordance with the milestone set forth in a CPSI
Application Appendix hereto. The contents of the PostScript Language Addendum
shall be reviewed and approved by Adobe for compliance with Adobe's PostScript
language standards before the PostScript Language Addendum is finalized for
distribution with a Licensed System. OEM shall include with each Licensed System
a copy of the corresponding PostScript Language Addendum.
4. PROPRIETARY RIGHTS.
------------------
4.1 Adobe Ownership. OEM acknowledges that Adobe and its suppliers are
---------------
the sole and exclusive owners of all rights, title and interest, including all
trademarks, copyrights, patents, trade names, trade secrets and other
intellectual property rights to the Trademarks and Adobe Trademarks, logos, and
product names, and to all of the documentation and computer-recorded data
comprising or included in the Adobe Information. Except for the rights
expressly enumerated herein, OEM is not granted any rights to patents,
copyrights, trade secrets, trade names, trademarks, or any other rights,
franchises or licenses with respect to the Adobe Information.
4.2 Adobe Trade Secrets. OEM agrees that the Demonstration Program(s) in
-------------------
source code form and those techniques, algorithms, and processes contained in
the Adobe Software, Other Adobe-Supplied Software, Coded Font Programs and
Demonstration program(s) and the information contained in the Template which
have been developed, acquired or licensed by Adobe, or any modification or
extraction thereof, constitute trade secrets of Adobe or its suppliers, and will
be used by OEM only in accordance with the terms of this Agreement. In
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
-12-
<PAGE>
addition to the specific measures required hereunder, OEM shall take all
measures reasonably required to protect the proprietary rights of Adobe and its
suppliers in the Adobe Information. Failure to protect the proprietary rights of
Adobe and its suppliers in the Adobe Information, as required by this Agreement,
will be considered a material breach of this Agreement.
4.3 Unauthorized Distribution or Copying. OEM agrees that (a)
------------------------------------
distribution, copying, duplicating or otherwise reproducing all or any part of
the Adobe Software, Other Adobe-Supplied Software, Demonstration Program(s),
Coded Font Programs or Documentation (except as expressly permitted by this
Agreement), (b) distributing copies of all or any portion of the Adobe Software,
Other Adobe-Supplied Software, Demonstration Program(s) or Coded Font Programs
other than in the form of royalty-bearing End User products, or (c) distributing
the CPSI Application Object for use on other than a Computer System, will be
considered a material breach of this Agreement.
4.4 No Modifications. OEM agrees that it shall not make any
----------------
modifications of definitions in the PostScript language as specified in the
Documentation by altering or extending the function of the Adobe Software;
however, should OEM wish to add custom PostScript operators, OEM must
define them in a separate custom dictionary included with the CPSI Application
and provide documentation that clearly specifies that these operators are not
part of the PostScript language as specified in the Documentation.
5. TERM OF AGREEMENT.
-----------------
The initial term of this Agreement is for five (5) years from the effective
date of this Agreement, unless earlier terminated as provided in this Agreement.
Thereafter, this Agreement may be renewed on its anniversary dates, at the
option of either party, subject to the written agreement of the other party,
provided that (i) OEM has made all payments required by this Agreement, (ii)
there has been no uncured breach of this Agreement or any CPSI Application
Appendix, and (iii) the CPSI Application is still supported by OEM for use with
Computer Systems.
6. EXPORT. OEM shall not knowingly, without prior authorization, if required, of
------
the Office of Export Administration ("OEA"), export or re-export (as defined in
Section 779.1(b)-(c) of the Export Administration Regulations - and any
amendments thereto) to Afghanistan, the People's Republic of China or to any
Group Q, S, W, Y or Z country specified in Supplement No. 1 to Section 779 of
the Regulations as amended from time to time (i) any Adobe Information or (ii)
the immediate product (including processes and services) produced directly by
use of any Adobe Information. The provisions of this Paragraph shall survive
notwithstanding any cancellation, termination or expiration of this Agreement.
-13-
<PAGE>
7. PAYMENTS.
--------
7.1 CPSI Application Payments. OEM shall pay Adobe in U.S. Dollars the
-------------------------
software license fees and per copy royalties set forth in each CPSI Application
Appendix hereto. OEM shall pay Adobe a separate fee for each copy of the CPSI
Application Object which OEM distributes or uses internally.
7.2 Coded Font Program Royalties. OEM shall also pay to Adobe the
----------------------------
royalties for the Roman Initial Installation Coded Font Programs, Roman if an
Additional Coded Font Programs, if any, and Other Coded Font Programs, if any,
distributed with each CPSI Application Object, in the amount specified in the
applicable CPSI Application Appendix hereto.
7.3 Other Payments. Certain other payments to Adobe, including but not
--------------
limited to advances against royalties, will be designated in the specific CPSI
Application Appendix. Advances against royalties for a specified CPSI
Application are recoupable only against royalties for that CPSI Application
during the eighteen (18) month period following Adobe's test and acceptance of
the CPSI Application Object for that Licensed System, as defined in the
applicable CPSI Application Appendix.
7.4 Taxes. In addition to any other payments due under this Agreement,
-----
OEM agrees to pay, and to indemnify and hold Adobe harmless from, any sales,
use, excise, import or export, value added or similar tax or duty not based on
Adobe's net income, including any penalties and interest, as well as any costs
associated with the collection or withholding thereof, and all governmental
permit fees, license fees and customs and similar fees levied upon the delivery
by Adobe of the Adobe Software and Coded Font Programs or other deliverables to
OEM hereunder, which Adobe may incur in respect of this Agreement. If a resale
certificate or other certificate or document of exemption is required in order
to exempt all or any of the Adobe Software, Coded Font Programs or other
deliverables from any such tax liability, OEM will promptly furnish it to Adobe.
7.5 Payment of Royalties. All royalties due in accordance with the terms
--------------------
of this Agreement shall be paid in U.S. Dollars within 30 days after the end of
each calendar quarter. With each royalty payment OEM shall include a written
summary, broken out by month of sale and country categories (U.S., Canada,
Europe, Far East, Rest of World), of (a) the number of copies and types of CPSI
Application Object distributed or used internally by OEM during the quarter; (b)
the number of copies and types of Roman and Other Coded Font Programs, by
Typefaces, bundled with the CPSI Application Object for use as a part of a
Licensed System and licensed to End Users or used internally by OEM during the
quarter; and (c) any other information which may be required to determine
whether OEM is paying the correct royalty amount hereunder. Copies of CPSI
Application Object which are returned for which refunds are made or a credit is
issued by OEM shall be credited by OEM against royalties due to Adobe for such
copies of USI Application
-14-
<PAGE>
Object; provided however, that in the event OEM provided a partial refund (or
credit) of the price of a returned CPSI Application, OEM shall be entitled to
obtain a corresponding partial credit against royalties due for such CPSI
Application Object. At Adobe's request, OEM shall orally advise Adobe each month
of its estimate of the number of copies of the CPSI Application Object and Coded
Font Programs shipped or used internally by OEM during the previous month and
the royalties accrued thereby. Such oral communication shall be subject to
adjustment by OEM at the end of each accounting period.
7.6 When Royalties Are Earned. All royalties due hereunder be earned on
-------------------------
the date OEM ships the CPSI Application Object to its customer, except that in
the event of shipment of CPSI Application Object as between OEM and its
Subsidiary or as between such Subsidiaries for resale, such royalties shall be
earned when the CPSI Application Object is first shipped to a customer other
than OEM and any such Subsidiaries.
7.7 Right of Audit. OEM shall maintain a complete, dear, accurate record
--------------
of: (a) the number of copies and types of CPSI Application Object distributed
or used internally by OEM during the quarter; (b) the number of copies and types
of Roman and Other Coded Font Programs, by Typefaces, bundled with the CPSI
Application Object for use as part of a Licensed System and licensed to End
Users or used internally by OEM during the quarter; and (c) any other
information which may be required to determine whether OEM is paying the correct
royalty amount hereunder. To ensure compliance with the terms of this Agreement,
Adobe shall have the right to conduct an inspection and audit of all the
relevant accounting and sales books and records of OEM during regular business
hours at OEM's offices and in such a manner as not to interfere with OEM's
normal business activities. In no event shall audits be made hereunder more
frequently than every six (6) months. If such inspections should disclose any
underreporting, OEM shall promptly pay Adobe such amount, together with interest
thereon at the rate of 1 1/2% per month or the highest interest rate allowed by
law, whichever is lower, from the date on which such amount became due.
7.8 ITC Typefaces. Distribution of Coded Font Programs for any
-------------
International Typeface Corporation ("IM") Typefaces licensed from Adobe for any
Licensed System that includes a marking engine with maximum resolution exceeding
900 dots per inch or that outputs onto any silver based substrate (eg.
photographic medium) other than a 35 millimeter transparency ("High Resolution
Output Device") requires execution of a written agreement between OEM and ITC
which sets forth the royalties, if any, due directly to ITC from OEM (the "ITC
License Agreement"). These royalties to ITC are in addition to the royalties
due to Adobe for the distribution of Coded Font Programs for ITC Typefaces under
the terms of this or any other Agreement between Adobe and OEM. If OEM wants to
implement the Coded Font Programs for ITC Typefaces licensed from Adobe on any
High Resolution Output Device, OEM agrees to provide Adobe a written
certification that
-15-
<PAGE>
OEM has executed an ITC License Agreement within sixty (60) days of execution of
a CPSI Application Appendix covering such a High Resolution Output Device.
8. OEM SUPPORT. OEM will have the sole responsibility for supporting End Users
-----------
and will provide End Users with reasonable end user documentation, warranty
service, and telephone support or other electronic support for the use of the
Adobe Software and Coded Font Programs included as part of a CPSI Application.
9. COPYRIGHT AND OTHER NOTICES.
---------------------------
9.1 Copyright Notices. In order to protect Adobe's copyright and other
-----------------
ownership interests, OEM agrees that, as a condition of its rights hereunder, it
will cause to be preserved in each copy of all or any portion of the Adobe
Software, Other Adobe-Supplied Software, Demonstration Program(s), Coded Font
Programs and any Documentation reproduced by it hereunder, the same proprietary
notices which appear on or in the Adobe Software, Other Adobe-Supplied Software,
Demonstration Program(s), Coded Font Programs and Documentation delivered by
Adobe to OEM hereunder or such other proprietary notices as Adobe may reasonably
require from time to time. OEM agrees that valid copyright notices for the Adobe
Software and Coded Font Programs will appear on the media. In addition, a valid
Adobe copyright notice in the following format, or such other format as Adobe
specifies by written notice to OEM, shall be displayed on the single user screen
of the Computer System, or in some other manner consented to in writing by
Adobe, when the CPSI Application Object is first invoked during an End User
session:
(a) the name of the program,
(b) the word "Copyright" and the circled-c symbol(C),
(c) the date of first publication of the Adobe Software, and
(d) the name of the copyright owner and the words "All Rights
Reserved".
9.2 Restricted Rights. OEM will (a) identify as developed with private
-----------------
industry funds the CPSI Application Object, Other Adobe-Supplied Software, Coded
Font Programs and related documentation in all proposals and agreements with the
United States Government or any contractor therefor; and (b) legend or mark the
CPSI Application Object, Other Adobe-Supplied Software, Coded Font Programs and
related documentation provided pursuant to any agreement with the United States
Government or any contractor therefor, as follows:
(a) For acquisition by or on behalf of civilian agencies, as
necessary to obtain protection substantially equivalent to that afforded to
-16-
<PAGE>
commercial computer software and related documentation developed at private
expense and which is existing computer software no part of which was developed
with government funds and provided with Restricted Rights in accordance with
subparagraphs (a) through (d) of the "Commercial Computer Software Restricted
Rights" clause at section 52.227-19 of the Federal Acquisition Regulations and
its successors;
(b) For acquisition by or on behalf of units of the Department of
Defense ("DoD") as necessary to obtain protection substantially equivalent to
that afforded to commercial computer software and related documentation
developed at private expense and provided with Restricted Rights as defined in
DoD FAR Supplement 48 C.F.R. 252.227-7013(c)(1)(ii) and its successors in effect
for all solicitations and resulting contracts issued on or after May 18, 1987.
9.3 Foreign Government Agreements. OEM will take all reasonable steps in
-----------------------------
making proposals and agreements with foreign governments other than the United
States which involve the CPSI Application Object, Other Adobe-Supplied Software,
Coded Font Programs and related Documentation to ensure that Adobe's proprietary
rights in the Adobe Software, Other Adobe-Supplied Software, Coded Font Programs
and related Documentation receive the maximum protection available from such
foreign government for commercial computer software and related documentation
developed at private expense.
10. LICENSE TO USE ADOBE TRADEMARKS: NONGENERIC ADVERTISING.
-------------------------------------------- -----------
10.1 Trademark License. Adobe hereby grants to OEM a nonexclusive,
-----------------
limited license to use the Adobe Trademarks on the CPSI Application Object and
in OEM's advertising and printed materials for the CPSI Application Object and
Coded Font Programs, provided that OEM displays the following notices of
trademark status adjacent to and with the first or most prominent use of the
Adobe Trademark in each piece of advertising or printed materials in which such
Adobe Trademark appears and includes the respective legends adjacent to or as a
footnote to the Adobe Trademarks as follows:
(i) "Adobe(TM)": "Adobe is the trademark of Adobe Systems
Incorporated which may be registered in certain jurisdictions";
(ii) "PostScript(TM)": "PostScript is the trademark of Adobe
Systems Incorporated which may be registered in certain jurisdictions; and
(iii) such other symbols and notices as may be prescribed by Adobe
from time to time.
OEM agrees not to use any other trademark or service mark in close
proximity to any of the Adobe Trademarks or combine the marks so as to
effectively
-17-
<PAGE>
create a unitary composite mark without the prior written approval
of Adobe. OEM agrees not to use any other name or trademarks for the Coded Font
Programs except for the name or trademarks used by the Trademark Owner as set
forth in Exhibit C ("Coded Font Programs") hereto, or in a CPSI Application
---------
Appendix OEM will comply with all of the terms in this Paragraph 10.1 in its
--------------
catalogs, advertising, packaging, and promotional materials relating to or
including Coded Font Programs.
10.2 Ownership of Trademarks. OEM acknowledges the ownership of the
-----------------------
Adobe Trademarks and Trademarks in Adobe and Its suppliers, agrees that it will
do nothing inconsistent with such ownership, agrees to use reasonable effort to
preserve Adobe's and its suppliers' rights in the Adobe Trademarks and
Trademarks, and that all uses of the Adobe Trademarks and the Trademarks by OEM
shall inure to the benefit of and be on behalf of Adobe and its suppliers. OEM
acknowledges that the Trademarks and Adobe Trademarks are valid under applicable
law and that OEM's utilization of the Trademarks and Adobe Trademarks will not
create any right, title or interest in or to such Trademarks or Adobe
Trademarks. OEM acknowledges the respective exclusive rights of Adobe and the
Trademark Owners (as defined below) to use of the Adobe Trademarks and
Trademarks and agrees not to do anything contesting or impairing the trademark
rights of Adobe or its suppliers. Any use of the Trademarks must identify the
applicable "Trademark Owner" set forth in Exhibit C ("Coded Font Programs")
---------
hereto, or the applicable CPSI Application Appendix, as the owner of such
Trademarks. OEM agrees to notify or require notification of sublicensees who
receive Coded Font Programs that (i) Trademarks can only be used to identify
printed output produced by the Coded Font Programs, and (ii) the Trademarks are
the property of the Trademark Owners. OEM will maintain a high quality standard
in producing copies of the CPSI Application Object, Coded Font Programs and
Typefaces. At the request of Adobe, OEM must supply samples of any Typeface
identified by a Trademark.
10.3 Quality Standards. OEM agrees that the nature and quality of the
-----------------
Licensed System, CPSI Application Object, Coded Font Programs and any other
products or services it supplies in connection with its use of the Adobe
Trademarks shall conform to the standards set by Adobe. OEM agrees to cooperate
with Adobe in facilitating Adobe's monitoring and control of the nature and
quality of such OEM products and services and to supply Adobe with specimens of
use of the Trademarks and Adobe Trademarks upon request. If, at any time, Adobe
determines that the OEM has not met or is not meeting the Adobe quality
standards, Adobe shall so advise OEM and, upon OEMS receipt of such notice by
any means, OEM shall have sixty (60) days to improve the quality to the standard
previously approved by Adobe. OEM shall comply with all applicable laws,
Regulations and customs and obtain all appropriate government approvals
pertaining to use of trademarks and trade names and to the sublicensing
distribution and advertising of the CPSI Application Object, Coded Font Programs
and Documentation hereunder.
-18-
<PAGE>
10.4 Infringement Proceedings. OEM agrees to notify Adobe of any
------------------------
unauthorized use of the trademarks or Adobe Trademarks by others promptly as it
comes to OEM's attention. Adobe shall have the sole right and discretion to
bring infringement or unfair competition proceedings involving the Trademarks or
Adobe Trademarks.
10.5 OEM's Use of Trademarks. OEM agrees that it will include the Adobe
-----------------------
Trademarks on all copies of the CPSI Application Object and in any advertising
or printed materials concerning the CPSI Application Object and that it will use
the applicable Trademarks and Adobe Trademarks on all copies, advertisements,
brochures, manuals or other appropriate uses made in the promotion, distribution
or use of the CPSI Application Object Coded Font Programs and Licensed Systems.
OEM shall make specific reference to PostScript(TM) software from Adobe in any
advertisement which refers to the CPSI Application.
10.6 Trademark Registrations. OEM, at Adobe's request, shall (i)
-----------------------
promptly provide Adobe with any specimens, (ii) execute all applications for
trademark registrations, assignments, or other applicable documents, and (iii)
perform any other act reasonably necessary for Adobe or any Trademark Owner to
secure or maintain any and all Adobe Trademark or Trademark rights in any
country in which OEM is marketing the CPSI Application Object, Coded Font
Programs and licensed Systems.
11. WARRANTIES.
----------
11.1 Infringement.
------------
(a) By Adobe. Adobe agrees to defend and otherwise hold OEM
--------
harmless from all costs, damages and reasonable attorneys' fees resulting from
claims by third parties that uses permitted hereunder of the Adobe Software
infringe any U.S. patents or U.S. copyrights, or the use of the Adobe Trademarks
"Adobe" and "PostScript" (as applied to the Adobe Software) infringes any US.
trademarks, provided that OEM gives Adobe prompt written notice of any such
claim, tenders to Adobe the defense or settlement of such a claim, at Adobe's
expense, and cooperates with Adobe, at Adobe's expense, in defending or settling
such claim. If Adobe receives notice of an alleged infringement or if OEM's use
of the Adobe Software shall be prevented by permanent injunction, Adobe may, at
its sole option and expense, procure for OEM the right to continued use of the
Adobe Software or the Adobe U.S. trademarks "Adobe" and "PostScript" as provided
hereunder, modify the Adobe Software so that it no longer infringes, replace the
Adobe Software with computer software of equal or superior functional
capability, or in the case of trademark infringement, instruct OEM to use an
alternative trademark. THE RIGHTS GRANTED TO OEM UNDER THIS PARAGRAPH SHALL BE
OEM'S SOLE AND EXCLUSIVE REMEDY AND ADOBE'S SOLE OBLIGATION FOR ANY ALLEGED
INFRINGEMENT OF ANY PATENT, COPYRIGHT, TRADEMARK, TRADE SECRET OR OTHER
PROPRIETARY RIGHT. ADOBE WILL HAVE NO
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<PAGE>
LIABILITY TO OEM IF ANY ALLEGED INFRINGEMENTS OR CLAIM THEREOF IS BASED UPON (A)
THE USE OF THE ADOBE SOFTWARE IN CONNECTION OR IN COMBINATION WITH EQUIPMENT,
DEVICES, OR SOFTWARE NOT DELIVERED BY ADOBE (IF SUCH INFRINGEMENT OR CLAIM COULD
HAVE BEEN AVOIDED BY THE USE OF THE ADOBE SOFTWARE WITH OTHER EQUIPMENT, DEVICES
OR SOFTWARE), (B) THE USE OF ANY ADOBE SOFTWARE OTHER THAN AS PERMITTED UNDER
THIS AGREEMENT OR IN A MANNER FOR WHICH IT WAS NOT INTENDED OR USE OF MOST
CURRENT RELEASE OF THE ADOBE SOFTWARE (AND SUCH CLAIM WOULD HAVE BEEN PREVENTED
BY THE USE OF SUCH RELEASE) OR (C) ANY MODIFICATIONS MADE TO THE ADOBE SOFTWARE
BY OEM OR AMY THIRD PARTY (IF SUCH CLAIM WOULD HAVE BEEN AVOIDED BY THE USE OF
THE UNMODIFIED ADOBE SOFTWARE).
(b) By OEM. OEM agrees to defend and otherwise hold Adobe
------
harmless from all costs, damages and reasonable attorneys, fees resulting from
all claims by third parties arising from the use, manufacture and distribution
of the CPSI Application Object by OEM and its direct and indirect customers in
any country, worldwide, provided that Adobe gives OEM prompt written notice of
any such claim, tenders to OEM the defense or settlement of any such claim, at
OEM's expense, and cooperates with OEM, at OEM's expense, in defending or
settling such claim. OEM WILL HAVE NO LIABILITY TO ADOBE IF ANY ALLEGED PATENT
OR COPYRIGHT INFRINGEMENTS OR CLAIM THEREOF ARISE SOLELY AS A RESULT OF THE
CONTENT OF THE ADOBE SOFTWARE.
11.2 Adobe Software Warranty. If (a) the Adobe Software for a CPSI
-----------------------
Application licensed hereunder fails to perform substantially in accordance with
the Documentation in the Development Environment (as specified in the CPSI
Application Appendix for such CPSI Application) from the date on which Adobe
delivers the Adobe Software to OEM and ending one (1) year thereafter (the
"Warranty Period"); (b) such failure is reproducible; and (c) such failure is
reported to Adobe by OEM during the Warranty Period, then Adobe shall, at its
expense, provide a workaround for such failure or, at Adobe's option, provide
OEM with an updated version of the Adobe Software which does not cause such
failure. This warranty shall not apply to any software modified by OEM or any
third party, or to any failure caused by hardware or software not provided by
Adobe. If OEM reports a failure to Adobe, and Adobe reasonably determines that
such failure was not caused by the Adobe Software, then Adobe shall have no
further obligations with respect to such report, and OEM agrees to pay Adobe's
reasonable costs in making such determination.
11.3 Limitations on Warranties. The foregoing warranties by Adobe are
-------------------------
made only to OEM and OEM shall be solely responsible for any warranty to, or
claims by, its distributors or end user customers concerning the Adobe Software.
THE FOREGOING STATES ADOBE'S SOLE AND EXCLUSIVE OBLIGATION TO OEM FOR BREACH OF
WARRANTY. EXCEPT FOR THE EXPRESS
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<PAGE>
WARRANTIES STATED IN THIS AGREEMENT, ADOBE MAKES NO ADDITIONAL WARRANTIES,
EXPRESS, IMPLIED OR STATUTORY, AS TO ANY MATTER WHATSOEVER. IN PARTICULAR, ANY
AND ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE ARE
EXPRESSLY EXCLUDED. EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, ADOBE
EXPRESSLY EXCLUDES ANY AND ALL WARRANTIES OF NONINFRINGEMENT. THIS IS A LIMITED
WARRANTY AND IS THE ONLY WARRANTY MADE BY ADOBE. OEM SHALL NOT HAVE THE RIGHT TO
MAKE OR PASS ON, AND SHALL TAKE ALL MEASURES NECESSARY TO ENSURE THAT NEITHER IT
NOR ANY OF ITS AGENTS OR EMPLOYEES SHALL MAKE OR PASS ON ANY SUCH WARRANTY OR
REPRESENTATION ON BEHALF OF ADOBE TO ANY CUSTOMER, END USER OR THIRD PARTY.
12. INTERNAL IMPROVEMENTS; CONTINUING SUPPORT.
-----------------------------------------
12.1 Internal Improvements. Adobe will notify OEM when Internal
---------------------
Improvements to the Adobe Software become available, and thereafter, if it
receives a written request from OEM, it will provide OEM with such Internal
Improvements without charge. OEM may distribute such Internal Improvements to
licensed End Users who have paid the applicable per copy royalties for use with
previously distributed copies of the CPSI Application Object without payment of
additional royalties. Such Internal Improvements do not include modifications,
enhancements, or other software products for which Adobe charges separately or
which Adobe provides only to customers receiving Continuing Support services.
12.2 Continuing Support. Following expiration of the Warranty Period,
------------------
Adobe will provide continuing support services to OEM in accordance with its
standard Continuing Support Agreement, once executed by the parties, at its then
current OEM rate for such services. OEM agrees that all contact regarding
warranty and Continuing Support services shall be handled through a designated
person from OEM who shall direct requests for Continuing Support services
through Adobe's designated technical contact. For purposes of the Continuing
Support Agreement, "Licensed System" shall mean the Adobe Software and Coded
Font Programs.
13. CANCELLATION.
------------
13.1 Cancellation by Adobe for Cause. If any material breach of this
-------------------------------
Agreement by OEM continues after thirty (30) days written notice of the breach
by Adobe to OEM, Adobe may terminate this Agreement on written notice to OEM.
13.2 Cancellation by OEM for Cause. If any material breach under this
-----------------------------
Agreement by Adobe continues after thirty (30) days written notice of the breach
by OEM to Adobe, OEM may seek any damages arising under this Agreement, and (a)
continue this Agreement in full force and effect, or (b) terminate this
Agreement on written notice to Adobe.
-21-
<PAGE>
13.3 Bankruptcy. In addition to any material breach of this Agreement,
----------
the application for, or adjudication in, bankruptcy by OEM, or dissolution of
OEM shall terminate this Agreement.
13.4 Obligations on Cancellation, Termination or Expiration. Upon
------------------------------------------------------
cancellation, termination, or expiration of this Agreement.
13.4.1 Safeguarding of Trade Secrets. OEM shall continue to be
-----------------------------
responsible for safeguarding the trade secrets and proprietary rights of Adobe
in accordance with the terms of this Agreement after such cancellation,
termination or expiration.
13.4.2 Return of Proprietary Information. Subject to Paragraph
--------------------------------- ---------
13.4.6 ("Continued Support") below, OEM shall erase, destroy or return to Adobe
- ------
all of Adobe's proprietary information in its possession upon Adobe's request,
OEM shall warrant in writing its return or destruction of Adobe's proprietary
information within thirty (30) days of cancellation, termination, or expiration.
13.4.3 OEM's Return of Adobe Softwares. Subject to Paragraph 13.4.6
------------------------------- ----------------
("Continued Support") below, OEM shall immediately discontinue use and
distribution of, and return or destroy all copies of, the CPSI Application and
Coded Font Programs in its possession (including copies placed in any storage
device under OEM's control). OEM shall not retain any whole or partial copies
of the Demonstration Program(s) in source or object code form.
13.4.4 End Users. End Users shall be permitted the continued and
---------
uninterrupted use of the CPSI Application Object and Coded Font Programs for the
balance of the term of their End User agreements, as specified in such
agreements, provided that and so long as the End Users are not in default of
their End User agreements.
13.4.5 Default by End Users. OEM's rights upon default of an End
--------------------
User relating to the CPSI Application Object and Coded Font Programs, as
specified in the End User agreement, shall automatically be assigned to Adobe to
the extent relevant to the enforcement by Adobe of the proprietary rights of
Adobe and/or its suppliers in the Adobe Software and Coded Font Programs.
13.4.6 Continued Support. OEM shall have the right to retain five
-----------------
(5) copies of the CPSI Application Object and Coded Font Programs and use such
CPSI Application Object and Coded Font Programs to the extent required for
support and maintenance purposes but OEM shall have no right to sublicense or
otherwise distribute the CPSI Application Object or Coded Font Programs or any
other rights with respect to such software except as specifically set forth in
this Paragraph 13.4.6.
----------------
-22-
<PAGE>
13.4.7 Payment. Unless OEM has terminated this Agreement for cause,
-------
the payment date of all monies due Adobe shall automatically be accelerated so
that they shall become due and payable on the effective date of termination,
even if longer terms had been provided previously.
14. LIMITATION OF LIABILITY. NEITHER ADOBE NOR ANY OF ITS OFFICERS, DIRECTORS,
-----------------------
EMPLOYEES, AFFILIATES, OR AGENTS SHALL BE LIABLE TO OEM OR TO ANY THIRD PARTY
FOR ANY LOSS OF USE, LOSS OF GOODWILL, INTERRUPTION OF BUSINESS, OR FOR INDIRECT
INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST REVENUES OR
PROFITS) OR SIMILAR DAMAGES, WHETHER BASED ON TORT(INCLUDING WITHOUT LIMITATION,
NEGLIGENCE OR STRICT LIABILITY), CONTRACT, OR OTHER LEGAL OR EQUITABLE GROUNDS,
EVEN IF ADOBE HAS BEEN ADVISED OR HAD REASON TO KNOW OF THE POSSIBILITY OF SUCH
DAMAGES AND EVEN IN THE EVENT OF FAILURE OF EXCLUSIVE REMEDIES. THE FOREGOING
LIMITATION OF LIABILITY IS INDEPENDENT OF ANY EXCLUSIVE REMEDIES FOR A BREACH OF
WARRANTY SET FORTH IN THIS AGREEMENT.
15. GENERAL.
-------
15.1 Governing Law. This Agreement shall be governed in all respects by
-------------
the laws of the United States of America and the State of California as such
laws are applied to agreements entered into and to be performed entirely within
California between California residents. The parties agree that the United
Nations Convention on Contracts for the International Sale of Goods is
specifically excluded from application to this Agreement.
15.2 Notices. All notices or reports permitted or required under this
-------
Agreement shall be in writing and shall be delivered by personal delivery,
telegram, telex, telecopier or facsimile transmission or by registered mail,
return receipt requested, and shall be deemed given upon personal delivery or
five (5) days after deposit in the mail or upon acknowledgment of receipt of
electronic transmission. Notices shall be sent to: (i) the contract
representative designated in the specific CPSI Application Appendix if the
notice or report relates to one or more specific CPSI Applications and (ii) a
copy to the signatory of this Agreement at the address set forth at the end of
this Agreement or such other address as either party may specify in writing as
well as a copy to the parties General Counsel at the same address. Notices shall
be effective upon receipt, unless otherwise specified in such notice or in this
Agreement.
15.3 Injunctive Relief. It is understood and agreed that,
-----------------
notwithstanding any other provisions of this Agreement, breach of the provisions
of this Agreement by OEM will cause Adobe irreparable damage for which recovery
of money damages would be inadequate, and that Adobe shall therefore be entitled
to obtain timely injunctive relief in a court of competent jurisdiction to
protect
-23-
<PAGE>
Adobe's rights under this Agreement in addition to any and all remedies
available at law. Because of the unique and proprietary nature of the Adobe
Software, OEM acknowledges that in the event OEM or any OEM customer continues
to distribute the CPSI Application Object, or any portion thereof, after its
right to do so has terminated or expired, Adobe shall be entitled to active or
other equitable relief, including without limitation, an order directing that
any copies of the CPSI Application Object, or any portion thereof, which OEM or
any direct or indirect customer of OEM attempts to import into the U.S. or any
other country or territory, be seized, impounded and destroyed by Customs
officials in order to prevent such importation.
15.4 No Agency. Nothing contained herein shall be construed as creating
---------
any agency, partnership, or other form of joint enterprise between the parties.
15.5 Force Majeure. Neither party shall be liable hereunder by reason of
-------------
any failure or delay in the performance of its obligations hereunder (except for
the payment of money) on account of strikes, shortages, riots, insurrection,
fires, flood, storm, explosions, acts of God, war, governmental action, labor
conditions, earthquakes, material shortages or any other cause which is beyond
the reasonable control of such party.
15.6 Waiver. The failure of either party to require performance by the
------
other party of any provision hereof shall not affect the full right to require
such performance at any time thereafter; nor shall the waiver by either party of
a breach of any provision hereof be taken or held to be a waiver of the
provision itself.
15.7 Severability. In the event that any provision of this Agreement
------------
shall be unenforceable or invalid under any applicable law or be so held by
applicable court decision, such unenforceability or invalidity shall not render
Agreement unenforceable or invalid as a whole, and, in such event, such
provision shall be changed and interpreted so as to best accomplish the
objectives of such unenforceable or invalid provision within the limits of
applicable law or applicable court decisions.
15.8 Headings. The paragraph headings appearing in this Agreement are
--------
inserted only as a matter of convenience and in no way define, limit, construe
or describe the scope or extent of such paragraph, or in any way affect this
Agreement.
15.9 Confidentiality of Agreement. Neither party shall make any public
----------------------------
announcement of, or otherwise disclose, the existence of or matters set forth in
this Agreement except as mutually agreed in writing or as required by disclosure
obligations arising under law.
15.10 No Patent License. Nothing contained herein shall be construed as
-----------------
conferring by implication, estoppel or otherwise any license or right under any
-24-
<PAGE>
United States or foreign patent, issued, assigned or licensed to Adobe, whether
existing or later issued, except to the extent specifically required to perform
the obligations and obtain the benefits expressly set forth in this agreement.
Adobe agrees that OEM and OEM's customers shall have the right to exercise all
rights which Adobe expressly grants to OEM or expressly authorizes OEM to grant
to such customers herein, notwithstanding the existence or later issuance to
Adobe of any United States or foreign patent.
15.11 Assignment. Neither this Agreement nor any rights of OEM hereunder
----------
may be assigned by OEM in whole or in part without the prior written approval of
Adobe. For the purposes of this Paragraph, a change in the persons or entities
who control 50% or more of the equity securities or voting interest of OEM shall
be considered an assignment of OEM's rights. Adobe's rights and obligations, in
whole or in part, under this Agreement may be assigned by Adobe. Adobe may
exercise full transfer and assignment rights in any manner at Adobe's discretion
and specifically may sell, pledge or otherwise transfer its right to receive
royalties under this Agreement.
15.12 Attorneys' Fees. In the event any proceeding or lawsuit is brought
---------------
by Adobe, its suppliers or OEM in connection with this Agreement, the prevailing
party in such proceeding shall be entitled to receive its costs, expert witness
fees and reasonable attorneys' fees, including costs and fees on appeal.
15.13 Full Power. Each party warrants to the other that it has fun power
----------
to enter into and perform this Agreement, and the person signing this Agreement
on behalf of the respective party has been duly authorized and empowered to
enter into this Agreement. Each party further acknowledges that it has read
this Agreement, understands it and agrees to be bound by it.
15.14 Forum. All disputes arising under this Agreement may be brought in
-----
Superior Court of the State of California in Santa Clara County or the Federal
District Court of San Jose as permitted by law. The Superior Court of Santa
Cara County and the Federal District Court of San Jose shall each have
nonexclusive jurisdiction over disputes under this Agreement. OEM and Adobe
consent to personal jurisdiction of the above courts; provided, that the
foregoing shall not be construed as divesting any other court of such
jurisdiction as such court may otherwise have over such disputes.
15.15 Entire Agreement. This Agreement, the Exhibits hereto, and any
----------------
executed CPSI Application Appendices constitute the entire agreement between the
parties with respect to the subject matter hereof. This Agreement supersedes,
and the terms of this Agreement govern, any prior or collateral agreements
between the parties with respect to the subject matter hereof, whether oral or
written. This Agreement may only be changed by mutual agreement of authorized
representatives of the parties in writing.
-25-
<PAGE>
IN WITNESS OF, the parties hereto have duly executed this Agreement by
their respective duly authorized officers to be effective as Of the date first
written above.
ADOBE: OEM:
ADOBE SYSTEMS INCORPORATED SUPERMAC TECHNOLOGY
By:/s/ Steve MacDonald By:/s/ Louis J. Doctor
----------------------------------- ----------------------------------
Print Print
Name: Steve MacDonald Name: Louis J. Doctor
--------------------------------- --------------------------------
Title: V.P. SVS Products Div. Title: V.P. Business Development
-------------------------------- -------------------------------
Date: September 18, 1992 Date: 9/17/92
--------------------------------- --------------------------------
Address: 1585 Charleston Road Address: 485 Potrero Avenue
P.O. Box 7900 Sunnyvale, CA 94076
Mountain View,
CA 94039-7900
-26-
<PAGE>
EXHIBIT A
---------
Description of Adobe Software
Configurable PostScript Interpreter:
Interpreter for Adobe Systems Incorporated PostScript(R) page description
language which takes PostScript language programs as input and generates raster
images in memory.
-27-
<PAGE>
EXHIBIT B
---------
Adobe Trademarks
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TRADEMARK TRADEMARK ATTRIBUTION
--------- ---------------------
<S> <C>
Adobe(TM) . . . is a trademark of Adobe Systems
Incorporated which may be registered in
certain jurisdictions.
The Adobe Logo . . . is a trademark of Adobe Systems
[LOGO](TM) Incorporated which may be registered in
certain jurisdictions.
PostScript(TM) . . . is a trademark of Adobe Systems
Incorporated which may be registered in
certain jurisdictions.
The PostScript Logo . . . is a trademark of Adobe Systems
[LOGO](TM) Incorporated which may be registered in
certain jurisdictions.
- --------------------------------------------------------------------------------
</TABLE>
-28-
<PAGE>
EXHIBIT C
---------
Coded Font Programs
A. The following Roman Initial Installation Coded Font programs shall be
made available on all licensed Systems:
<TABLE>
<CAPTION>
IDENTIFYING
TRADEMARK TYPEFACE TRADEMARK OWNER
- --------------- ---------- -----------------
<S> <C> <C>
Helvetica Linotype-Hell AG and/or it subsidiaries
Helvetica Bold Linotype-Hell AG and/or it subsidiaries
Helvetica Oblique Linotype-Hell AG and/or it subsidiaries
Helvetica Bold Oblique Linotype-Hell AG and/or it subsidiaries
Times Roman Linotype-Hell AG and/or it subsidiaries
Times Bold Linotype-Hell AG and/or it subsidiaries
Times Italic Linotype-Hell AG and/or it subsidiaries
Times Bold Italic Linotype-Hell AG and/or it subsidiaries
Symbol (Public Domain)
Courier (Public Domain)
Courier Bold (Public Domain)
Courier Oblique (Public Domain)
Courier Bold Oblique (Public Domain)
</TABLE>
-29-
<PAGE>
EXHIBIT D
---------
REPRODUCTION LOCATIONS
OEM's reproduction of the CPSI Application Object and Coded Font Programs
shall be restricted to the following locations:
<TABLE>
<CAPTION>
Name of Reproduction Site: Address of Reproduction Site:
------------------------- -----------------------------
<S> <C>
SuperMac Technology, Inc. 485 Potrero Avenue
Sunnyvale, CA 94086
</TABLE>
-30-
<PAGE>
EXHIBIT E
---------
CPSI Application Object and Coded Font Programs
Minimum Terms of End User Agreement
Notice to User
1. Licensor grants to Licensee a nonexclusive sublicense, subject to
Paragraph 7 below and the other provisions hereof (a) to use the CPSI
- -----------
Application Object ("Software") solely for Licensee's own internal business
purposes in a single computer, associated display with a resolution of less than
one hundred fifty dots per inch, and an associated printer which is directly
connected to the computer (the "Computer System"); (b) to use the digitally-
encoded machine-readable outline programs ("Font Programs") provided by Licensor
in a special encrypted format ("Coded Font Programs") and identified herewith to
reproduce and display designs, styles, weights, and versions of letters,
numerals, characters and symbols ("Typefaces") solely for Licensee's own
customary business or personal purposes on the Computer System; and (c) to use
the trademarks used by Licensor to identify the Coded Font Programs and
Typefaces reproduced therefrom ("Trademarks"). Licensee may assign its rights
under this Agreement to a licensee of all of Licensee's right, title and
interest to such Software and Coded Font Programs provided the licensee agrees
to be bound by all of the terms and conditions of this Agreement.
2. Licensee acknowledges that the Software, Coded Font Programs,
Typefaces and Trademarks are proprietary to Licensor and its suppliers.
Licensee agrees to hold the Software and Coded Font Programs in confidence,
disclosing the Software and Coded Font Programs only to authorized employees
having a need to use the Software and Coded Font Programs as permitted by this
Agreement and to take all reasonable precautions to prevent disclosure to other
parties.
3. Licensee will not make or have made, or permit to be made, any copies
of the Software or Coded Font Programs or portions thereof, except as necessary
for its use with a single Computer System hereunder. Licensee agrees that any
such copies shall contain the same proprietary notices which appear on or in the
Software or the Coded Font Program.
4. Except as stated above, this Agreement does not grant Licensee any
rights to patents, copyrights, trade secrets, trade names, trademarks (whether
registered or unregistered), or any other rights, franchises, or licenses in
respect of the Software, Coded Font Programs, Typefaces, or Trademarks.
Licensee will not adapt or use any trademark or trade name which is likely to be
similar to or confusing with that of licensor or any of its suppliers or take
any other action which impairs or reduces the trademark rights of licensor or
its suppliers. The Trademarks can only be used to identify printed output
produced by the Coded Font Programs. At the reasonable request of licensor,
Licensee must supply samples of any Typeface identified by a Trademark.
-31-
<PAGE>
5. Licensee agrees that it will not attempt to alter, disassemble,
decrypt or reverse engineer the Software or Coded Font Programs.
6. Licensee acknowledges that the laws and Regulations of the United
States restrict the export and re-export of commodities and technical data of
United States origin, including the Software or Coded Font Programs. Licensee
agrees that it will not export or re-export the Software or Coded Font Programs
in any form without the appropriate United States and foreign government
licenses. Licensee agrees that its obligations pursuant to this section survive
and continue after any termination or expiration of rights under this Agreement.
7. The Software licensed hereunder is intended to be used to generate
screen displays on a single Computer System having a screen resolution of less
than 150 dots per inch and to generate output on the associated printer.
Licensee agrees not to make use of the Software, directly or indirectly, (i) to
generate bitmap images on a screen display with a resolution of 150 dots per
inch or greater, (ii) to generate Typefaces for use other than with the Computer
System, or (iii) to generate printed output on other than an output device that
Licensor has designated to be approved for use with the Software on the Computer
System. Any failure of License to comply with this provision is a material
breach of this End User Agreement.
8. NEITHER LICENSOR NOR ANY OF ITS REPRESENTATIVES MAKES OR PASSES ON TO
LICENSEE OR OTHER THIRD PARTY ANY WARRANTY OR REPRESENTATION ON BEHALF OF
LICENSOR'S THIRD PARTY SUPPLIERS.
9. Licensee is hereby notified that Adobe Systems Incorporated, a
California corporation located at 1585 Charleston Road, Mountain View,
California 94039-7900 ("Adobe") is a third-party beneficiary to this Agreement
to the extent that this Agreement contains provisions which relate to Licensee's
use of the Software, the Coded Font Programs, the Typefaces and the Trademarks
licensed hereby. Such provisions are made expressly for the benefit of Adobe
and are enforceable by Adobe in addition to Licensor.
-32-
<PAGE>
EXHIBIT F
---------
Sample Form of CPSI Application Appendix
APPENDIX NO. ______
EFFECTIVE AS OF _______________, 19___
TO
CONFIGURABLE POSTSCRIPT(R) INTERPRETER
OEM LICENSE AGREEMENT
BETWEEN
ADOBE SYSTEMS INCORPORATION
AND
_____________________________________________
Name of CPSI Application:_____________________________
This Appendix sets forth additional and different terms and conditions
particular to the Licensed System described below and shall be incorporated by
reference into the Configurable PostScript Interpreter OEM License Agreement
("Agreement") between _______________________ ("OEM") and Adobe Systems
Incorporated ("Adobe") effective as of ________________________. Such different
or additional terms are applicable only to the Licensed System described below
and in no way alter the terms and conditions applicable to other Licensed
Systems incorporated into the Agreement by addition of an appendix.
All the terms used in this Appendix shall retain the same meaning as
defined in the Agreement and such definitions are incorporated herein by
reference.
A. Description of CPSI Application:
B. Description of Computer System:
(1) One computer with operating system software described as
follows:
(2) One Designated Output Device from the following set:
OEM may use the CPSI Application to generate output from devices
other than those listed in this paragraph only within the development
group and only for testing purposes within that group. New devices
must be added to this Appendix by an addendum before OEM may install
such devices for use with the CPSI Application outside the
development group. If OEM wishes to
-33-
<PAGE>
add other devices, it must first submit to Adobe a letter describing
the full specification of the additional device and
provide output samples of type in both small and large sizes and
sampled images. Adobe may subject this additional device installed
for use with the CPSI Application to quality testing, as described
Paragraph 3.8.2 ("Adobe Testing") and will notify OEM within thirty
---------------
(30) days or such longer period if Adobe determines, in its sole
discretion, that it needs a longer period, that it accepts or rejects
OEM's proposed additional device. If such additional device is
accepted by Adobe as a Designated Output Device, Adobe will prepare
an addendum to this Appendix and forward to OEM for execution. OEM
shall authorize use of the CPSI Application to generate output only
on devices that have been approved by Adobe in accordance with the
provisions as described in this Paragraph.
C. Licensed System: (List all the hardware and software components
comprising a Licensed System.)
D. Development Environment (if different from the computer and operating
system described in Paragraph B above):
-----------
(a) Hardware platform:
(b) Software platform:
E. Adobe Deliverables:
(1) Adobe Software: As described in Exhibit A ("Description of
-------------- ---------
Adobe Software") to the Agreement and in the lst [2nd]
Edition of the PostScript Language Reference Manual. See
Schedule 1 ("Licensed System Functional Specification").
----------
Adobe Software will be delivered on ____________media.
(2) Demonstration Program(s): The Demonstration Program(s) will
------------------------
be in "C" language source form and will provide OEM with an
example of how to use the Adobe Software described in
Exhibit A ("Description of Adobe Software") to interpret
---------
PostScript language programs and produce raster output. See
Schedule 1 ("Licensed System Functional Specification"). The
----------
Demonstration Program(s) will be delivered with the Adobe
Software.
(3) Other Adobe-Supplied Software:
(4) Documentation: The Documentation as described below will be
-------------
delivered both in hard copy (1 copy) and in PostScript page
description language format on the software distribution
medium (1 file per document).
-34-
<PAGE>
a. CPSI Supplement
b. PostScript Language Addendum Template
c. Other Documentation
(5) Coded Font Programs: The Roman Initial Installation Coded
-------------------
Font Programs, listed in Paragraph I will be delivered on the
-----------
Adobe Software distribution medium.
F. Development Schedule and Testing Expectations:
<TABLE>
<CAPTION>
MILESTONE DESCRIPTION *SCHEDULE:
------------------------- ----------------
<S> <C>
#(1) [*]
#(2)
#(3)
#(4)
#(5)
#(6)
#(7)
</TABLE>
-35-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
<TABLE>
<S> <C>
#(8) [*]
#(9)
#(10)
#(11)
</TABLE>
G. OEM-Loaned Equipment: Terms and conditions related to the
obligations of the parties concerning OEM-Loaned Equipment are set
forth in Paragraph 3.4 ("OEM-Loaned Equipment and Related Materials")
-------------
of the Agreement.
-36-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
H. Software License Fee:
OEM shall pay Adobe a Software License Fee of U.S. $_____ upon
execution of this Appendix.
I. Applicable Royalties:
J. Roman Initial Installation Coded Font Program:
Media: ____________________________ (as distributed by OEM).
Adobe will provide the graphic characters specified in ISO 8859-1:
1987, Latin, alphabet No. 1 and symbol characters, as applicable, for
the following Initial Installation Coded Font Programs as fisted in
Exhibit C ("Coded Font Programs") to the Agreement:
---------
Identifying Trademark Typeface Trademark Owner
--------------------- -------- ---------------
K. Roman Additional Coded Font Programs:
Media:_____________________________ (as distributed by OEM).
Adobe will provide the graphic characters specified in ISO 8859-1:
1987, Latin alphabet No. 1 and symbol characters, as applicable, for
the following Roman Additional Coded Font Programs:
Identifying Trademark Typeface Trademark Owner
--------------------- -------- ---------------
L. Testing Criteria: OEM shall test a beta release version of the CPSI
Application Object, and any modified version thereof, to confirm that
the licensed System performs in accordance with the testing criteria
described below.
M. Designated Representatives:
(1) Technically qualified OEM representative to respond to
information requested by Adobe:
_____________________________________________________________
(2) Technically qualified Adobe representative to respond to
information requested by OEM:
_____________________________________________________________
-37-
<PAGE>
(3) OEM's designated representative for Continuing Support
services:
_____________________________________________________________
(4) Adobe Contract Representative:
_____________________________________________________________
(5) OEM Contract Representative:
_____________________________________________________________
IN WITNESS WHEREOF, OEM and Adobe have caused this Appendix to be executed
by their duly authorized officers.
ADOBE: OEM:
ADOBE SYSTEMS INCORPORATED SUPERMAC TECHNOLOGY
By:_____________________________ By: /s/ Louis J. Doctor
-----------------------------------------
Print Print
Name:___________________________ Name: Louis J. Doctor
---------------------------------------
Date:___________________________ Date: Sept. 17, 1992
---------------------------------------
-38-
<PAGE>
SCHEDULE-1
----------
Licensed System Functional Specification
To be provided at a later date
-39-
<PAGE>
AMENDMENT NO. 1
TO THE
CONFIGURABLE POSTSCRIPT INTERPRETER
OEM LICENSE AGREEMENT
BETWEEN
ADOBE SYSTEMS INCORPORATED
AND SUPERMAC TECHNOLOGY INCORPORATED
Effective Date: July 28, 1993
-------------
This Amendment No. 1 to the Configurable PostScript Interpreter OEM License
Agreement effective September 18,1992 (the "Agreement") is by and between Adobe
Systems Incorporated, having its place of business at 1585 Charleston Road, P.O.
Box 7900, Mountain View, California, 94039-7900 ("Adobe") and SuperMac
Technology, Inc., having its place of business at 215 Moffett Park Drive,
Sunnyvale, CA 94089 ("OEM").
WHEREAS, Adobe has revised its procedures for quality testing a CPSI
Application Object since OEM and Adobe entered into the Agreement;
WHEREAS, such revised testing procedures will be mutually beneficial to
Adobe and OEM by providing OEM increased responsibility in the final stages of
development of a CPSI Application Object;
WHEREAS, Adobe has also revised its procedures for managing the number of
users of the Adobe Software at any one time;
NOW, THEREFORE, the parties agree to modify and amend the Agreement to add
the revised testing and use procedures as follows:
1. All references in the Agreement to [*] shall hereby refer instead to
[*].
2. All references in the Agreement to Paragraph 2.1.10 ("Protection
----------------
Mechanisms") shall hereby refer instead to Paragraph 2.1.11 ("Additional
----------------
Protection Mechanism").
3. Paragraph 1 ("Definitions"). Paragraph 1.1 ("Adobe Information") is
----------- -------------
hereby deleted in its entirety and replaced by the following:
"1.1 Adobe Information. "Adobe Information" shall mean the Adobe
-----------------
Software, Other Adobe-Supplied Software, Coded Font Programs, Demonstration
Program(s), PostScript Product Certification Test Suite, Typefaces, Trademarks,
Documentation and the Adobe Trademarks."
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
-1-
<PAGE>
4. Paragraph 1 ("Definitions"). Paragraph 1.10 ("Documentation") is
----------- --------------
hereby deleted in its entirety and replaced by the following:
"1.10 Documentation. "Documentation" shall mean (i) the PostScript
------------- ----------
Language Reference Manual, Second Edition, as printed in English by Addison-
- -----------------------------------------
Wesley, current as of April, 1991, or such other version of the PostScript
Language Reference Manual as specified in a CPSI Application Appendix, (ii) the
printer supplement and/or addendum, if any, prepared by Adobe for a CPSI
Application Appendix, (iii) the PostScript Language Addendum Template, (iv) the
Configurable PostScript Interpreter Functional Specification, (v) Supplement to
the PostScript Language Reference Manual, (vi) any other Documentation for Adobe
Software identified in a CPSI Application Appendix hereto and (vii) any updates,
enhancements, substitutions, replacements or modifications thereof delivered to
OEM by Adobe during the term of this Agreement."
5. Paragraph 1 ("Definitions"). New Paragraphs 1.20 through 1.29 are
----------- --------------- ----
hereby added to the Agreement to read as follows:
"1.20 [*]
1.21 CPU. "CPU" shall mean a central processing unit.
---
1.22 License Management Mechanism. "License Management Mechanism"
----------------------------
shall mean the software/and or hardware provided by OEM which controls-and
monitors access to the CPSI Application Object and Coded Font Programs to ensure
that use thereof is limited to licensed Uses.
1.23 Licensed Use. "Licensed Use" shall mean the executing of the
------------
CPSI Application Object and Coded Font Programs in a single CPU on a Computer
System under a license purchased by the End User. The total number of licenses
purchased by the End User shall never be less than the total number of CPU's
executing the CPSI Application Object and Coded Font Programs concurrently on a
single Licensed System or in a network on multiple Computer Systems.
1.24 Software Upgrade. A "Software Upgrade" shall mean the
----------------
installation of any software enhancement to standard software features on a
previously installed Licensed System or the installation of any optional
software features on a previously installed Licensed System.
1.25 Hardware Upgrade. A "Hardware Upgrade" shall mean the
----------------
installation of any hardware enhancement, with required software, to standard
hardware features on a previously installed Licensed System or the installation
of any
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
-2-
<PAGE>
optional hardware features, with required software, on a previously
installed Licensed System.
1.26 Bitmap Font. Bitmap Font shall mean the applicable digitally
-----------
encoded machine readable data in bitmap form for screen display and having a
resolution of less than 150 dots per inch in the plurality of sizes then
currently available from Adobe for a single Typeface in Macintosh format only
delivered by Adobe to OEM for use with the associated Coded Font Program.
1.27 Authorized Third Party(ies). "Authorized Third Party(ies)"
---------------------------
shall be the collective term for OEM's distributors and Authorized Service
Companies (service companies that provide third party service and maintenance to
End Users for OEM or OEM's distributors) who have entered into a written
agreement containing the minimum terms and conditions described in Exhibit H
---------
("Authorized Third Party Agreement Minimum Terms and Conditions").
1.28 Replacement Software. "Replacement Software" shall mean a
--------------------
copy of the CPSI Application Object and Coded Font Programs intended for use in
accordance with Paragraph 2.7 ("Replacement Software") as a maintenance spare
-------------
for a specific Licensed System.
1.29 Authorized Printer Engine Manufacturer Distributor.
--------------------------------------------------
"Authorized Printer Engine Manufacturer Distributor" shall mean a third party
with whom OEM has entered into a written agreement for distribution of a
Licensed System which includes a Designated Output Device supplied by such third
party and other hardware and software components provided by OEM, and who are
expressly identified as such in the attached Exhibit I ("Authorized Printer
---------
Engine Manufacturer Distributors") to this Agreement."
6. Paragraph 2 ("License Grants"). A new paragraph at the end of
-----------
Paragraph 2.1.2 ("Coded Font Programs") is hereby added to read as follows:
- ---------------
"OEM agrees that the Bitmap Fonts provided by Adobe will be
distributed only in conjunction with the associated Coded Font Programs. OEM
acknowledges that Bitmap Fonts will be available in a limited number of point
sizes and may not be available at all for some Coded Font Programs. All of the
terms and conditions applicable to the Coded Font Programs herein, including but
not limited to the grant of rights in this Paragraph 2.1.2 and in Paragraph
--------------- ---------
2.1.7 ("Limited Functional Scope of License") through Paragraph 2.1.9 ("End-User
- ----- ---------------
Licensing") and Paragraph 2.5 ("Reverse Engineering") shall apply to the Bitmap
-------------
Fonts. Notwithstanding the foregoing, so long as the Bitmap Fonts are
distributed in conjunction with the Coded Font Programs, no additional royalty
is due Adobe under the terms of Paragraph 7.5 ("Payment of Royalties") for
-------------
distribution of the Bitmap Fonts."
7. Paragraph 2 ("License Grants"). Paragraph 2.1.6 ("Nondisclosure") is
----------- ---------------
hereby deleted in its entirety and replaced by the following:
-3-
<PAGE>
"2.1.6 Nondisclosure. OEM agrees that it will disclose the Adobe
-------------
Information only to employees and independent contractors with a need to know
who have agreed in writing (i) not to disclose the Adobe Information to other
parties, (ii) to use the Adobe Information for the sole benefit of OEM and only
as permitted by this Agreement, and (iii) to take all reasonable precautions to
prevent disclosure to other parties. OEM shall take all measures reasonably
required, including prompt and appropriate action as required, to prevent
unauthorized use or disclosure of Adobe Information by such authorized employees
and independent contractors."
8. Paragraph 2 ("License Grants"). Paragraph 2.1.10 ("Protection
----------- ----------------
Mechanisms") is hereby deleted in its entirety and replaced by the following:
"2.1.10 Protection Mechanisms. OEM shall employ in conjunction with
---------------------
the CPSI Application Object and Coded Font Programs licensed hereunder, copy
protection, serialization, encryption or other License Management Mechanism to
restrict or monitor unauthorized use of application software, as required by
Adobe and as specified in the applicable CPSI Application Appendix. If no
standard of protection is specified, OEM shall ensure that the CPSI Application
Object and Coded Font Programs are encrypted, and, in the case of Other Coded
Font Programs for Japanese Typefaces, copy protected as well."
9. Paragraph 2 ("License Grants"). New Paragraph 2.1.11 ("Additional
----------- ----------------
Protection Mechanism") and 2.1.12 ("PostScript Product Certification Test
------
Suite") are hereby added to the Agreement to read as follows:
"2.1.11 Additional Protection Mechanism. The parties acknowledge
-------------------------------
that the Licensed System may be in a network environment with the CPSI
Application Object and Coded Font Programs located on a server. OEM shall employ
a License Management Mechanism which permits the End User access to the CPSI
Application Object and Coded Font Programs only if such use constitutes a
Licensed Use, as that term is defined herein, and thus is covered by a license
purchased by the End User from OEM. In the event that it comes to Adobe's
attention that the License Management Mechanism has been violated and Adobe
reasonably believes that there is unlicensed use of the CPSI Application Object
and Coded Font Programs, OEM will use best efforts to supply a new License
Management Mechanism within thirty (30) days after OEM receives notification of
such violation. Should Adobe be able to demonstrate failure of the License
Management Mechanism to reasonably prevent unlicensed use of the CPSI
Application Object and Coded Font Programs, OEM will immediately stop shipment
of the CPSI Application Object and Coded Font Programs until corrective measures
can be taken. One license is required for each concurrent Licensed Use of the
CPSI Application Object and Coded Font Programs.
2.1.12 [*]
-4-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
10. [*]
11. Paragraph 2 ("License Grants"). The first sentence of Paragraph 2.5
----------- -------------
("Reverse Engineering") is hereby deleted in its entirety and replaced by the
following:
"OEM agrees that it will not reverse engineer, reverse compile,
disassemble or otherwise attempt to create source code which is derived from the
Adobe Software, Other Adobe-Supplied Software or Coded Font Programs or
Demonstration Program(s) provided in object code form or [*]."
12. Paragraph 2 ("License Grants"). A new Paragraph 2.6 ("Authorized
----------- -------------
Third Parties") and a new Paragraph 2.7 ("Replacement Software") are hereby
added to the Agreement to read as follows:
"2.6 Authorized Third Parties.
------------------------
2.6.1 License Grant. OEM shall have the right to provide
-------------
Replacement Software to Authorized Third Parties in accordance with a written
agreement containing the minimum terms of Exhibit H ("Authorized Third Party
---------
Agreement Minimum Terms and Conditions"), solely for the purpose of performing
maintenance, support, troubleshooting and related diagnostic services for
Licensed Systems. OEM will use its best efforts to ensure that every copy of
Replacement Software which it supplies to an Authorized Third Party hereunder is
used solely for the purposes of servicing defective Licensed Systems.
Replacement Software supplied for the purpose of servicing a defective Licensed
System shall contain the same Coded Font Programs and version of CPSI
Application Object as the Coded
-5-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
Font Programs and CPSI Application Object it replaces in the Licensed System.
2.6.2 Right to Sublicense. OEM may permit its Authorized
-------------------
Third Parties to provide the Replacement Software to their respective Authorized
Service Companies solely for the purpose of performing the activities described
in Paragraph 2.6.1 above so long as each such Authorized Service Company has
---------------
executed a written agreement which contains the minimum terms and conditions
described in Exhibit H ("Authorized Third Party Minimum Terms and Conditions")
---------
prior to receipt of the Replacement Software. Upon Adobe's request, OEM agrees
to supply Adobe with copies of such Authorized Third Party agreements. OEM
acknowledges that it has no right to grant an Authorized Third Party the right
to reproduce the Replacement Software or the Adobe Software or Coded Font
Programs contained in the Replacement Software.
2.7 Replacement Software. Notwithstanding the terms of
--------------------
Paragraph 2.1 ("License to Sublicense Certain Software and Documentation"),
- -------------
Adobe grants OEM the right to distribute such Replacement Software either
directly to End Users or through Authorized Third Parties in accordance with
Paragraph 2.6 ("Authorized Third Parties"), provided that:
- -------------
(i) the versions of the CPSI Application Object and Coded
Font Programs previously residing on the Licensed System are destroyed by OEM,
its Subsidiary, or by the Authorized Third Party, subject to its Subsidiary or
Authorized Third Party providing assurance in writing to OEM that the replaced
copies of CPSI Application Object and Coded Font Programs have been destroyed.
Upon request by Adobe, an officer of OEM shall certify in writing that all such
replaced copies of the CPSI Application Object and Coded Font Programs have been
destroyed or properly disposed of as required by this subparagraph; and
(ii) OEM keeps records of the number of such Replacement
Software reproduced and distributed either directly or indirectly through its
Subsidiary or Authorized Third Parties and supplies Adobe with copies of such
records upon request; and
(iii) OEM agrees that written records on the use and
disposition of the Replacement Software shall be maintained by OEM, its
Subsidiary and/or its Authorized Third Parties ("Service Records"), and OEM
agrees to make or require its Subsidiary or Authorized Third Parties to make
such Service Records available to Adobe upon request within ninety (90) days
thereafter; and further, such Service Records shall be supplied to Adobe in
sufficient detail to allow Adobe to reasonably ascertain for itself the use and
disposition of Replacement Software; and
(iv) OEM shall account for each shipment of Replacement
Software in the reports submitted under Paragraph 7.5 ("Payment of Royalties")
-------------
of the Agreement either as a royalty-bearing event or as a royalty-free
-6-
<PAGE>
distribution. All distribution of Replacement Software by OEM shall be royalty-
free unless OEM fails to comply with the requirements set forth in Subparagraphs
-------------
(i), (ii), and (iii) of this Paragraph 2.7 ("Replacement Software") in which
- --- ---- ----- -------------
case OEM shall pay Adobe the Licensed System royalties and Coded Font Program
royalties described in the applicable CPSI Application Appendix for such
Replacement Software."
13. Paragraph 3. ("Development, Delivery and Acceptance"). The first
-----------
sentence of Paragraph 3.2 ("Adobe Software Development") is hereby deleted in
-------------
its entirety and replaced by the following:
"Adobe shall use its best efforts to develop and modify the Adobe
Software for use as part of the CPSI Application in the Computer System
environment specified in the applicable CPSI Application Appendix and in
conformance with the functional description of the Adobe Software as described
in Exhibit G ("Configurable PostScript Interpreter Functional Specification"),
---------
hereto, subject to the following limitations."
14. [*]
15. [*]
-7-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
16. Paragraph 3 ("Development, Delivery and Acceptance"). Paragraph 3.8
----------- -------------
[*] is hereby deleted in its entirety and replaced by the following:
[*]
-8-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
17. Paragraph 3 ("Development, Delivery and Acceptance"). The first
-----------
sentence of Paragraph 3.9 ("PostScript Language Addendum") is hereby deleted in
-------------
its entirety and replaced by the following:
"OEM will provided Adobe with a draft version of a PostScript Language
Addendum for each Licensed System in a mutually agreeable format in advance of
the time when OEM provides test results for Adobe's review under Paragraph 3.8.2
---------------
("Adobe certification") above or in accordance with the milestone set forth in a
CPSI Application Object.
18. Paragraph 3 ("Development, Delivery and Acceptance"). A new Paragraph
----------- ---------
3.10 ("OEM Training") is hereby added to the Agreement to read as follows:
- ----
"3.10 OEM Training. OEM agrees that if such training has not
------------
already been completed, it will send at least two technically qualified
employees and/or independent contractors to attend one of Adobe's authorized
PostScript language training classes for five (5) days prior to its initiating
its first development effort under this Agreement. OEM will pay the costs of
travel and accommodations for its personnel and shall reimburse Adobe for such
training at Adobe's then current standard rates."
19. Paragraph 4 ("Proprietary Rights"). The first sentence of Paragraph
----------- ---------
4.2 ("Adobe Trade Secrets") is hereby deleted in its entirety and replaced by
- ---
the following:
"OEM agrees that the Demonstration Program(s) in source code form and
those techniques, algorithms, and processes contained in the Adobe Software,
Other Adobe-Supplied Software, Coded Font Programs and Demonstration Program(s)
and the information contained in the Template and the PostScript Product
Certification Test Suite which have been developed, acquired or licensed by
Adobe, or any modification or extraction thereof, constitute trade secrets of
Adobe or its suppliers, and will be used by OEM only in accordance with the
terms of this Agreement."
-9-
<PAGE>
20. Paragraph 4 ("Proprietary Rights"). Paragraph 4.3 ("Unauthorized
----------- -------------
Distribution or Copying") is hereby deleted in its entirety and replaced by the
following:
"4.3 Unauthorized Distribution or Copying. OEM agrees that (a)
------------------------------------
distributing, copying, duplicating or otherwise reproducing all or any part of
the Adobe Software, Other Adobe-Supplied Software, Demonstration Program(s),
PostScript Product Certification Test Suite, Coded Font Programs or
Documentation (except as expressly permitted by this Agreement), (b)
distributing copies of all or any portion of the Adobe Software, Other Adobe-
Supplied Software, Demonstration Program(s) or Coded Font Programs other than in
the form of royalty-bearing End User products; (c) failing to ensure that each
End User of the CPSI Application and Coded Font Programs first obtains a license
and pays the appropriate royalty fee in accordance with the royalty provisions
contained herein; or (d) distributing the CPSI Application Object or Coded Font
Programs for use on other than a Computer System, or for use in conjunction with
an output device that is not a Designated Output Device, will be considered a
material breach of this Agreement."
21. Paragraph 6 ("Export"). Paragraph 6 is hereby deleted in its
----------- -----------
entirety and replaced by the following:
"6. EXPORT, OEM shall not knowingly, without prior authorization,
------
required, of the Office of Export Administration ("OEA"), export or re-export
(as defined in Section 779.1(b)-(c) of the Export Administration Regulations -
"Regulations" - and any amendments thereto) to any Group Q, S, W, Y or Z country
specified in Supplement No. 1 to Section 770 of the Regulations as amended from
time to time (i) any Adobe Information or (ii) the immediate product (including
processes and services) produced directly by use of any Adobe Information. The
provisions of this Paragraph shall survive notwithstanding any cancellation,
termination or expiration of this Agreement."
22. Paragraph 7 ("Payments"). Paragraphs 7.1 ("CPSI Application
----------- --------------
Payments") and 7.2 ("Coded Font Program Royalties") are hereby deleted in their
---
entirety and replaced by the following:
"7.1 CPSI Application Payments. OEM shall pay Adobe in U.S.
-------------------------
Dollars the software license fees and per Licensed Use royalties set forth in
each CPSI Application Appendix hereto. OEM shall pay Adobe a separate royalty
for each concurrent Licensed Use of the CPSI Application Object.
7.2 Coded Font Program Royalties. OEM shall also pay to Adobe
----------------------------
the per Licensed Use royalties for the Roman Initial Installation Coded Font
Programs, Roman Additional Coded Font Programs, if any, and Other Coded Font
Programs, if any, distributed with each CPSI Application Object, in the amount
specified in the applicable CPSI Application Appendix hereto."
-10-
<PAGE>
23. Paragraph 7 ("Payments"). Paragraphs 7.5 ("Payment of Royalties"),
----------- --------------
7.6 ("When Royalties Are Earned") and 7.7 ("Right of Audit") are hereby deleted
- --- ---
in their entirety and replaced by the following:
"7.5 Payment of Royalties. All royalties due in accordance with
--------------------
the terms of this Agreement shall be paid in U.S. Dollars within 30 days after
the end of each calendar quarter. With each royalty payment OEM shall include a
written summary, broken out by month of sale and country categories (U.S.,
Canada, Europe, Far East, Rest of World), of: (a) the number and types of
Licensed Systems distributed or used internally by OEM during the quarter; (b)
the number and types of Roman and Other Coded Font Programs, by Typefaces,
bundled with the CPSI Application Object for use as a part of a Licensed System
and licensed to End Users or used internally by OEM during the quarter; (c) the
number of licenses for licensed Use of the CPSI Application Object and Coded
Font Programs purchased by End Users during the quarter; and (d) any other
information which may be required to determine whether OEM is paying the correct
royalty amount hereunder. Licensed Systems which are returned for which refunds
are made or a credit is issued by OEM shall be credited by OEM against royalties
due to Adobe for such Licensed Systems; provided however, that in the event OEM
provided a partial refund (or credit) of the price of a returned Licensed
System, OEM shall be entitled to obtain a corresponding partial credit against
royalties due for such Licensed System. At Adobe's request, OEM shall orally
advise Adobe each month of its estimate of the number of Licensed Systems
shipped by OEM and the number of licenses for Licensed Use purchased by End
Users during the previous month and the royalties accrued thereby. Such oral
communication shall be subject to final adjustment by OEM at the end of each
accounting period.
7.6 When Royalties Are Earned. All royalties due hereunder shall
-------------------------
be earned on the date OEM ships a Licensed System to its customer or upon the
purchase of a license for a Licensed Use of the CPSI Application Object and
Coded Font Programs by an End User, except that in the event of shipment of the
CPSI Application Object between OEM and its Subsidiary or as between
such Subsidiaries for resale, such royalties shall be earned when the CPSI
Application Object and Coded Font Programs are first shipped to a customer other
than OEM and any such Subsidiaries.
7.7 Right of Audit. OEM shall maintain a complete, clear,
--------------
accurate record of: (a) the number and types of licensed Systems distributed or
used internally by OEM and the number of licenses for Licensed Use purchased by
End Users during the quarter; (b) the number and types of Roman and Other Coded
Font Programs, by Typefaces, bundled with the CPSI Application Object for use as
part of a Licensed System and licensed to End Users or used internally by OEM
during the quarter; and (c) any other information which may be required to
determine whether OEM is paying the correct royalty amount hereunder. To ensure
compliance with the terms of this Agreement, Adobe shall have the right to
conduct an inspection and audit of all the relevant accounting and sales books
and records of OEM during regular business hours at OEM's offices and in such a
manner as not to interfere with OEM's normal business activities. In no event
shall audits be made hereunder more frequently than every six
-11-
<PAGE>
(6) months. If such inspections should disclose any underreporting, OEM shall
promptly pay Adobe such amount, together with interest thereon at the rate of 1-
1/2% per month or the highest interest rate allowed by law, whichever is lower,
from the date on which such amount became due."
24. Paragraph 12 ("Internal Improvements; Continuing Support"). The
------------
second sentence of Paragraph 12.1 ("Internal Improvements") is hereby deleted in
--------------
its entirety and replaced by the following:
"OEM may distribute such Internal improvements to licensed End Users
who have paid the applicable Licensed Use royalties for use with previously
distributed Licensed Systems containing the CPSI Application Object [*]."
25. Paragraph 13 ("Cancellation"). Paragraph 13.4.2 ("Return of
------------ ----------------
Proprietary Information") is hereby deleted in its entirety and replaced by the
following:
"13.4.2 Return of Proprietary Information. Subject to Paragraph
--------------------------------- ---------
13.4.6 ("Continued Support") below, OEM shall erase, destroy or return to Adobe
- ------
all of Adobe's proprietary information in its possession, [*]. Upon Adobe's
request, OEM shall warrant in writing its return or destruction of Adobe's
proprietary information within thirty (30) days of cancellation, termination, or
expiration."
26. A new Paragraph 15 ("Right to Use Authorized Printer Engine
------------
Manufacturer Distributors") is added to the Agreement to read as follows:
"15. Right to Use Authorized Printer Engine Manufacturer
---------------------------------------------------
Distributors. OEM may distribute Licensed Systems which include a Designated
Output Device through a third party identified in Exhibit I ("Authorized Printer
---------
Engine Manufacturer Distributor") attached hereto. Such identified third party
may, in conjunction with marketing and distributing (directly and indirectly)
Licensed Systems to End Users, market and distribute Adobe Software and Coded
Font Programs, provided however, that such third party shall have no right to
alter, reproduce or make copies of any Adobe Software or Coded Font Programs
contained in the Licensed System, manufacture any portion of the Licensed System
other than the Designated Output Device specified in the applicable CPSI
Application Appendix and Exhibit I hereto, alter the functionality of any
portion of the Licensed System manufactured by OEM or market or distribute any
portion of the Licensed System other than the applicable Designated Output
Device (including cables) under such third party's trademarks. Notwithstanding
the above, OEM may include the identified third party's trademarks with any
portion of the Licensed System manufactured by OEM and the identified third
party may market or distribute Licensed Systems with such third party's
trademarks. OEM shall use best efforts to ensure that (i) such third party's
distribution of the Licensed Systems will be accompanied by an OEM End User
License as set forth in Paragraph 2.17 of the Agreement; and (ii) such third
--------------
party uses the applicable
-12-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
Trademarks and Adobe Trademarks in its catalogs, advertising, packaging, and
promotional materials relating to the Licensed System in accordance with
accepted trademark practice, including identification of the Trademark Owner;
provided, however, that OEM shall prohibit such distribution of a Licensed
System in Taiwan in conjunction with such third party's use of the Trademarks
and Adobe Trademarks. OEM shall provide in the written agreement with such third
party an express statement that Adobe shall have no responsibility to provide
direct support or service to such third party. OEM acknowledges that the grant
of such right to use authorized third parties to distribute Licensed Systems
does not in any way affect OEM's obligation to account for and pay all royalties
for Licensed Systems distributed by such authorized third parties with such
royalties deemed to be earned by Adobe at the time OEM ships an accelerator
card, Adobe Software and accompanying Coded Font Programs to such third party."
27. A new Exhibit G ("Configurable PostScript Interpreter Functional
---------
Specification") is hereby added to the Agreement and is attached hereto.
28. A new Exhibit H ("Authorized Third Party Agreement Minimum Terms and
---------
Conditions") is hereby added to the Agreement and is attached hereto.
29. A new Exhibit I ("Authorized Printer Engine Manufacturer
---------
Distributors") is hereby added to the Agreement and is attached hereto.
30. All other terms and conditions of the Agreement shall remain in full
force and effect.
31. Paragraph 15 ("General") and all subparagraphs thereto are renumbered
------------
as Paragraph 16 ("General") and all subparagraphs thereto are renumbered
------------
appropriately.
IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to the
Agreement to be signed by their duly authorized representatives.
Adobe: OEM:
ADOBE SYSTEMS INCORPORATED SUPERMAC TECHNOLOGY
INCORPORATED
By: /s/ John E. Warnock By: /s/ Louis J. Doctor
------------------------------- ----------------------------
John E. Warnock Louis J. Doctor
- ---------------------------------- -------------------------------
Printed Name Printed Name
Title: Chief Executive Officer Title: EVP
---------------------------- -------------------------
Date: 7/28/93 Date: 7/16/93
---------------------------- -------------------------
-13-
<PAGE>
EXHIBIT G
---------
Configurable PostScript Interpreter Functional Specification
[*]
-14-
[*] Confidential Treatment Requested. The confidential portion has been omitted
and filed separately with the Securities and Exchange Commission.
<PAGE>
EXHIBIT H
---------
Authorized Third Party Agreement
Minimum Terms and Conditions
1. License. Licensor may provide to Licensee Software media containing
-------
the CPSI Software and/or Coded Font Programs from Adobe ("Replacement Software")
for maintenance or repair purposes only. Licensee may use the Replacement
Software for the performance of maintenance, support, troubleshooting and
related diagnostic services for the Licensed System.
If Licensee is SuperMac's OEM or distributor, Licensee may provide the
Replacement Software to its Authorized Service Companies performing the
activities described above so long as each such Authorized Service Company has
executed a written agreement containing these minimum terms and conditions, and
provided SuperMac Technology, Inc. and Adobe Systems Incorporated are listed as
third party beneficiaries of such written agreement.
2. Replacement. All defective copies of the Software which contain the
-----------
CPSI Software or Coded Font Programs from Adobe shall be replaced with
Replacement Software on a "like-for-like" basis. Licensee must destroy the
version of the CPSI Software previously residing on the Licensed System or
return them to SuperMac. Licensee shall keep records of the disposition of such
replaced copies of the CPSI Software and shall provide SuperMac with reports
containing such information upon SuperMac's request.
3. Restrictions. Licensee agrees it will not reproduce, modify, reverse
------------
assemble, reverse compile or otherwise reverse engineer the Replacement Software
in whole or in part or allow any other party to do so while Replacement Software
is in its possession or under its control.
4. Third Party Beneficiary. Licensee is hereby notified and
-----------------------
acknowledges that Adobe Systems Incorporated, 1585 Charleston Road, Mountain
View, California 94039-7900 ("Adobe") is a third-party beneficiary of any
agreement between Licensee and Licensor that pertains to the Replacement
Software. The provisions of such agreements are made expressly for the benefit
of Adobe and are enforceable by Adobe in addition to SuperMac. Licensee further
acknowledges that if it fails to comply with the applicable terms and conditions
of such agreement, Adobe shall have the right to terminate this Agreement under
the terms of Paragraph 5 below and further, Adobe shall be entitled to equitable
-----------
relief to protect its interests, including but not limited to injunctive relief,
in addition to any other rights and remedies provided by law.
5. Termination. Licensor may terminate this Agreement at any time for
-----------
breach of the provisions set forth in Paragraph 2 and 3 above by providing
----------- -
Licensee with a notice of termination, and upon receiving such notice Licensee
shall immediately discontinue use of the Replacement Software. Within ten (10)
days of such termination,
-15-
<PAGE>
Licensee shall have (i) returned to Licensor all copies of the Replacement
Software in its possession or under its control; and (ii) presented to Licensor
a certificate signed by a corporate office of Licensee stating that all such
copies of the Replacement Software have been returned or destroyed.
-16-
<PAGE>
EXHIBIT I
---------
Authorized Printer Engine Manufacturer Distributors
Authorized Printer Engine Manufacturer Distributors must be specified in
this Exhibit I. Licensed Systems must be specified in this Exhibit I. All
--------- ---------
requests for changes to this Exhibit must be submitted to Adobe in writing and
such changes shall apply only if subsequently approved by Adobe by the issuance
of an updated Exhibit I.
---------
<TABLE>
<CAPTION>
LICENSED SYSTEMS
THIRD-PARTY ACCELERATOR CARD DESIGNATED OUTPUT DEVICE/MODEL
- ----------- ---------------- ------------------------------
<S> <C> <C>
Fuji Xerox Midrange SM-ICS A Color 630
A Color 635
Fuji Xerox High-end SM-ICS A Color 630
A Color 635
Xerox Midrange SM-ICS Majestic
Xerox High-end SM-ICS Majestic
Rank Xerox Midrange SM-ICS Majestic
Rank Xerox High-end SM-ICS Majestic
</TABLE>
-17-
<PAGE>
AMENDMENT NO. 3
TO THE
CONFIGURABLE POSTSCRIPT(TM) INTERPRETER
OEM LICENSE AGREEMENT
AND AMENDMENT NO. 3 TO APPENDIX NO. 1
AND AMENDMENT NO. 1 TO APPENDICES NOS. 2 AND 3
BETWEEN
ADOBE SYSTEMS INCORPORATED
AND
SUPERMAC TECHNOLOGY INCORPORATED
Effective date: September 19, 1994
------------------
THIS AMENDMENT NO. 3 (the "Amendment") to the Configurable PostScript
Interpreter OEM License Agreement (the "Agreement") between SuperMac Technology
Incorporated ("OEM") and Adobe Systems Incorporated ("Adobe") effective as of
September 18, 1992, amends the Agreement and Appendices Nos. 1, 2, and 3 in
certain respects as follows:
WHEREAS, Adobe has revised its procedures for bundling Coded Font Programs
for use with Licensed Systems incorporating a version of the CPSI Application;
WHEREAS, Adobe has standardized its procedures regarding royalty payments
for such bundled Coded Font Programs;
NOW, THEREFORE, the parties agree to modify and amend the Agreement and
Appendix No. 1 and Appendix No. 2 and Appendix No. 3 as follows:
A. Adobe and OEM hereby agree to modify the Agreement as follows:
1. Paragraph 1.4 ("Coded Font Programs"): Paragraph 1.4 ("Coded Font
------------- -------------
Programs") is hereby amended by adding the phrase: ", in Schedule 1 to
----------
Exhibit K ("Licensed Use Royalties for Coded Font Programs") hereto" before
---------
the phrase: "or in the applicable CPSI Application Appendix hereto" in
lines four and five and before the phrase "or in any CPSI Application
Appendix" in the last line.
2. Paragraph 1.4.1 ("Roman Initial Installation Coded Font Programs")
---------------
and Paragraph 1.4.2 ("Roman Additional Coded Font Programs"): Paragraph
--------------- ---------
1.4.1 ("Roman Initial Installation Coded Font Programs") and Paragraph
----- ---------
1.4.2 ("Roman Additional Coded Font Programs") are hereby amended to add
-----
the
-1-
<PAGE>
phrase: ", in Schedule 1 to Exhibit K ("Licensed Use Royalties for
---------- ---------
Coded Font Programs") hereto" before the phrase: "or in a CPSI Application
Appendix hereto" in line four of each Paragraph.
3. Paragraph 1.4.3 ("Other Coded Font Programs"): Paragraph 1.4.3
--------------- ---------------
("Other Coded Font Programs") is hereby amended to add the phrase: "which
are identified in Schedule 2 to Exhibit K ("Licensed Use Royalties for
---------- ---------
Coded FONT Programs") hereto or" before the phrase: "which are identified
in a CPSI Application Appendix hereto" in lines three and four.
4. Paragraph 1.19 ("Typeface"): Paragraph 1.19 ("Typeface") is hereby
-------------- --------------
amended by adding the phrase: ", in Schedules 1 or 2 to Exhibit K
----------- - ---------
("Licensed Use Royalties for Coded Font Programs") hereto" before the
phrase: "or in any CPSI Application Appendix." in line 5.
5. Paragraph 7.2 ("Coded Font Program Royalties"): Paragraph 7.2 ("Coded
------------- -------------
Font Program Royalties") is hereby amended by adding the phrase: "in
accordance with the terms and conditions set forth in Exhibit K ("Licensed
---------
Use Royalties for Coded Font Programs") hereto or" before the phrase: "in
the amount specified in the applicable CPSI Application Appendix hereto" in
the last sentence.
6. Paragraph 10.1 ("Trademark License"): Paragraph 10.1 ("Trademark
-------------- --------------
License") is hereby amended by adding the phrase: ", in Schedules 1 or 2 to
----------- -
Exhibit K ("Licensed Use Royalties for Coded Font Programs") hereto" before
---------
the phrase: "or in a CPSI Application Appendix." in line 6 of the second
paragraph thereto.
7. Paragraph 10.2 ("Ownership of Trademarks"): Paragraph 10.2
-------------- --------------
("Ownership of Trademarks") is hereby amended by adding the phrase: ", in
Schedules 1 or 2 to Exhibit K ("Licensed Use Royalties for Coded Font
----------- - ---------
Programs") hereto" before the phrase: "or the applicable CPSI Application
Appendix," in line 15.
8. Exhibit K ("Licensed Use Royalties for Coded Font Programs"): Exhibit
--------- -------
K ("Licensed Use Royalties for Coded Font Programs") is hereby added to the
-
Agreement and is attached hereto.
B. Adobe and OEM hereby agree to modify the Appendix No. 1 to the Agreement as
follows:
1. Paragraph E ("Adobe Deliverables:"). Paragraph E(5) ("Coded Font
----------- --------------
Programs:") is hereby deleted in its entirety and replaced by the
following:
-2-
<PAGE>
"(5) Coded Font Programs: OEM shall bundle the Roman Coded Font Programs
-------------------
as per Paragraph 1(a) ("Roman Coded Font Programs") of Exhibit K
-------------- ---------
("Licensed Use Royalties for Coded Font Programs") with each Licensed
System distributed hereunder (a "Roman Version"). OEM agrees that
with each Licensed System distributed for use in Japan (a "Japanese
Version"), it shall bundle the same Roman Coded Font Programs as
specified above for Roman Versions. Additionally, OEM shall bundle
the Coded Font Programs for Japanese Typefaces as per Paragraph l(b)
--------------
("Coded Font Programs for Japanese Typefaces") and Paragraph 1(c)
--------------
("Distribution Media") of Exhibit K ("Licensed Use Royalties for
---------
Coded Font Programs"), with every Licensed System distributed for use
in Japan. OEM may license additional fonts for use with an existing
Licensed System but only as described in Paragraphs 1(d) and 1(e) of
--------------- ----
Exhibit K to the Agreement."
---------
2. Paragraph I ("Applicable Royalties:"). Paragraph I(2) ("Coded Font
----------- --------------
Program Royalties:") is hereby deleted in its entirety and replaced by the
following:
"(2) Coded Font Program Royalties: The Licensed Use Royalties for Coded
----------------------------
Font Programs distributed bundled with or as an upgrade to a Licensed
System under this Appendix shall be in accordance with Exhibit K
---------
("Licensed Use Royalties for Coded Font Programs") herein."
3. Paragraph J ("Roman Initial Installation Coded Font Programs:") is
-----------
hereby deleted in its entirety and replaced by the following:
"J. Roman Initial Installation Coded Font Programs:
The Roman Initial Installation Coded Font Programs distributed with
Licensed Systems under this Appendix shall be as set forth in
Paragraph 1 of Attachment 1 to Schedule 1 of Exhibit K ("Licensed Use
----------- ------------ ---------- ---------
Royalties for Coded Font Programs") and in Paragraph 1 ("Coded Font
-----------
Program Distribution") to Exhibit K herein."
---------
4. Paragraph K ("Roman Additional Coded Font Programs:") is hereby
-----------
deleted in its entirety and replaced by the following:
"K. Roman Additional Coded Font Programs:
The Roman Additional Coded Font Programs distributed with
Licensed Systems under this Appendix shall be as set forth in
Paragraph 2 of Attachment 1 to Schedule 1 of Exhibit K
----------- ------------ ---------- ---------
("Licensed Use Royalties for Coded Font Programs") and in
Paragraph 1 ("Coded Font Program Distribution") to Exhibit K
----------- ---------
herein."
-3-
<PAGE>
5. Paragraph L ("Coded Font Programs for Japanese Typefaces:") is hereby
-----------
deleted in its entirety and replaced by the following:
"L. Coded Font Programs for Japanese Typefaces:
The Coded Font Programs for Japanese Typefaces distributed with
Licensed Systems under this Appendix shall be as set forth in
Paragraph 1 of Schedule 2 to Exhibit K ("Licensed Use Royalties for
----------- ---------- ---------
Coded Font Programs") and in Paragraph 1 ("Coded Font Program
-----------
Distribution") to Exhibit K herein."
---------
C. Adobe and OEM hereby agree to modify the Appendix No. 2 to the Agreement as
follows:
1. Paragraph I ("Applicable Royalties:"). Subparagraph I(1)d.(ii)
----------- -----------------------
("Japanese List Price.") is hereby deleted in its entirety and replaced by
the following:
"(ii) Japanese List Price. The Japanese List Price shall
-------------------
mean OEM's published List Price in Japanese yen to End Users for
quantity one (1) of a fully functioning Japanese Version with the
minimum required Coded Font Programs for Japanese Typefaces (as
described in Paragraph I(2)b, as amended, below) of a Licensed System
---------------
as described in Paragraph C above, for distribution in Japan. The
-----------
Japanese List Price shall apply for the purpose of royalty
calculations hereunder for each Licensed Use of a Japanese Version of
the Licensed System distributed for use throughout the world. The
Japanese List Price shall be converted into U.S. Dollars at a rate
equal to the average of the exchange rates quoted in the Wall Street
Journal at the end of the first and last days of the relevant
quarterly accounting period defined in Paragraph 7.5 ("Payment of
-------------
Royalties") of the Agreement. OEM shall use the converted Japanese
List Price to calculate the royalty for CPSI Application hereunder."
2. Paragraph I ("Applicable Royalties:"). Paragraph I(2) ("Licensed Use
----------- --------------
Royalty for CPSI Application:") is hereby deleted in its entirety and
replaced by the following:
"(2) Licensed Use Royalties for CPSI Application:
-------------------------------------------
a. Roman Versions. OEM shall bundle the Roman Coded Font
--------------
Programs in accordance with Paragraph 1(a) ("Roman Coded Font
Programs") of Exhibit K ("Licensed Use Royalties for Coded Font
---------
-4-
<PAGE>
Programs") with each Licensed System distributed hereunder (a "Roman
Version").
[*]
b. Japanese Versions. OEM agrees that with each Licensed System
-----------------
distributed for use in Japan (a "Japanese Version"), it shall bundle
the same Roman Coded Font Programs as specified in Paragraph I(2)a
---------------
above for Roman Versions. Additionally, OEM shall bundle the Coded
Font Programs for Japanese Typefaces in accordance with Paragraph
---------
l(b) ("Coded Font Programs for Japanese Typefaces") and Paragraph
---- ---------
l(c) ("Distribution Media") of Exhibit K ("Licensed Use Royalties for
---- ---------
Coded Font Programs"), with every Licensed System distributed for use
in Japan. Font upgrades may be distributed in accordance with
Paragraphs l(d) ("Distribution of Japanese Versions and Font
---------------
Upgrades") and 1(f) ("Distribution of CPSI Application with Font
----
Upgrade") of Exhibit K to the Agreement.
---------
[*]
-5-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
3. Paragraph I ("Applicable Royalties:"). Paragraph I(5) ("Licensed Use
----------- --------------
Royalty for Coded Font Programs:") is hereby deleted in its entirety and
replaced by the following:
"(5) Licensed Use Royalties for Coded Font Programs:
----------------------------------------------
The Licensed Use Royalties for Coded Font Programs distributed
bundled with or as an upgrade to a Licensed System under this
Appendix shall be in accordance with Paragraph 2 of Exhibit K
----------- ---------
("Licensed Use Royalties for Coded Font Programs") herein."
4. Paragraph J ("Roman Initial Installation Coded Font Programs:") is
-----------
hereby deleted in its entirety and replaced by the following:
"J. Roman Initial Installation Coded Font Programs:
The Roman Initial Installation Coded Font Programs distributed with
Licensed Systems under this Appendix shall be as set forth in
Paragraph 1 of Attachment 1 to Schedule 1 of Exhibit K ("Licensed Use
----------- ------------ ---------- ---------
Royalties for Coded Font Programs") and in Paragraph 1 ("Coded Font
Program Distribution") to Exhibit K herein."
---------
5. Paragraph K ("Additional Coded Font Programs:") is hereby deleted in
-----------
its entirety and replaced by the following:
"K. Roman Additional and Other Coded Font Programs:
(1) The Roman Additional Coded Font Programs distributed with Licensed
Systems under this Appendix No. 2 shall be as set forth in Paragraph 2 of
-----------
Attachment 1 to Schedule 1 of Exhibit K ("Licensed Use Royalties for Coded
------------ ---------- ---------
Font Programs") and in Paragraph 1 ("Coded Font Program Distribution") of
-----------
Exhibit K herein.
---------
(2) The Coded Font Programs for Japanese Typefaces distributed with
Licensed Systems under this Appendix No. 2 shall be as set forth in
Paragraph 1 to Schedule 2 of Exhibit K ("Licensed Use Royalties for Coded
----------- ---------- ---------
Font Programs") and in Paragraph 1 ("Coded Font Program Distribution") of
-----------
Exhibit K herein."
---------
D. Adobe and OEM hereby agree to modify the Appendix No. 3 to the Agreement as
follows:
1. Paragraph I ("Applicable Royalties:"). Subparagraph I(1)c.(ii)
----------- -----------------------
("Japanese List Price.") is hereby deleted in its entirety and replaced by
the following:
-6-
<PAGE>
"(ii) Japanese List Price. The Japanese List Price shall mean
-------------------
OEM's published List Price in Japanese yen to End Users for
quantity one (1) of a Japanese Version with the minimum required
Coded Font Programs for Japanese Typefaces (as described in
Paragraph I(2)b, as amended, below) of a Licensed System with
---------------
Minimum Configuration as described in Paragraph C above, for
-----------
distribution in Japan. The Japanese List Price shall apply for the
purpose of royalty calculations hereunder for each Licensed Use of
a Japanese Version of the Licensed System distributed for use
throughout the world. The Japanese List Price shall be converted
into U.S. Dollars at a rate equal to the average of the exchange
rates quoted in the Wall Street Journal at the end of the first and
last days of the relevant quarterly accounting period defined in
Paragraph 7.5 ("Payment of Royalties") of the Agreement. OEM shall
-------------
use the converted Japanese List Price to calculate the royalty for
CPSI Application hereunder."
2. Paragraph I ("Applicable Royalties:"). Paragraph I(2) ("Licensed Use
----------- --------------
Royalty for CPSI Application:") is hereby deleted in its entirety and
replaced by the following:
"(2) Licensed Use Royalty for CPSI Application:
-----------------------------------------
a. Roman Versions. OEM shall bundle the Roman Coded Font
--------------
Programs in accordance with Paragraph 1(a) ("Roman Coded Font
Programs") of Exhibit K ("Licensed Use Royalties for Coded Font
---------
Programs") with each Licensed System distributed hereunder (a "Roman
Version").
[*]
-7-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
b. Japanese Versions. OEM agrees that with each Licensed System
-----------------
distributed for use in Japan (a "Japanese Version"), it shall bundle
the same Roman Coded Font Programs as specified in Paragraph I(2)a
---------------
above for Roman Versions. Additionally, OEM shall Bundle the Coded
Font Programs for Japanese Typefaces in accordance with Paragraph
---------
1(b) ("Coded Font Programs for Japanese Typefaces") and Paragraph
---- ---------
1(c) ("Distribution Media") of Exhibit K ("Licensed Use Royalties for
---- ---------
Coded Font Programs"), with every Licensed System distributed for use
in Japan. Font upgrades may be distributed in accordance with
Paragraphs l(d) ("Distribution of Japanese Versions and Font
---------------
Upgrades") and 1(f) ("Distribution of CPSI Application with Font
----
Upgrade") of Exhibit K to the Agreement.
---------
[*]
3. Paragraph I ("Applicable Royalties:"). Paragraph I(5) ("Licensed Use
----------- --------------
Royalty for Coded Font Programs:") is hereby deleted in its entirety
and replaced by the following:
"(5) Licensed Use Royalties for Coded Font Programs:
----------------------------------------------
The Licensed Use Royalties for Coded Font Programs distributed
bundled with or as an upgrade to a Licensed System under this
Appendix shall be in accordance with Paragraph 2 of Exhibit K
----------- ---------
("Licensed Use Royalties for Coded Font Programs") herein."
4. Paragraph J ("Roman Initial Installation Coded Font Programs:") is
-----------
hereby deleted in its entirety and replaced by the following:
"J. Roman Initial Installation Coded Font Programs:
The Roman Initial Installation Coded Font Programs distributed with
Licensed Systems under this Appendix shall be as set forth in
Paragraph 1 of Attachment 1 to Schedule 1 of Exhibit K ("Licensed Use
----------- ------------ ---------- ---------
Royalties for Coded Font Programs") and in Paragraph 1 ("Coded Font
Program Distribution") to Exhibit K herein."
---------
-8-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
5. Paragraph K ("Additional Coded Font Programs:") is hereby deleted in
-----------
its entirety and replaced by the following:
"K. Roman Additional and Other Coded Font Programs:
(1) The Roman Additional Coded Font Programs distributed with Licensed
Systems under this Appendix No. 3 shall be as set forth in Paragraph
---------
2 of Attachment 1 to Schedule 1 of Exhibit K ("Licensed Use Royalties
- ------------ ---------- ---------
for Coded Font Programs") and in Paragraph 1 ("Coded Font Program
-----------
Distribution") of Exhibit K herein.
---------
(2) The Coded Font Programs for Japanese Typefaces distributed with
Licensed Systems under this Appendix No. 3 shall be as set forth in
Paragraph 1 to Schedule 2 of Exhibit K ("Licensed Use Royalties for
----------- ---------- ---------
Coded Font Programs") and in Paragraph 1 ("Coded Font Program
-----------
Distribution") of Exhibit K herein."
---------
E. All other terms and conditions of the Agreement and of Appendix No. 1 to
the Agreement and of Appendix No. 2 to the Agreement and of Appendix No. 3 to
the Agreement, as amended, shall remain in full force and effect.
Adobe: OEM:
ADOBE SYSTEMS INCORPORATED SUPERMAC TECHNOLOGY
INCORPORATED
By:/s/ S.A. MacDonald By:/s/ Mark Housley
------------------------------------ ----------------------------------
Print Print
Name:S.A. MacDonald Name: Mark Housley
---------------------------------- -------------------------------
Title:Sr. V.P., General Manager, SPD Title General Manager
--------------------------------- -------------------------------
Date: 9/22/94 Date: 9/19/94
---------------------------------- --------------------------------
-9-
<PAGE>
EXHIBIT K
---------
Licensed Use Royalties for Coded Font Programs
1. Coded Font Program Distribution.
-------------------------------
OEM may reproduce the Coded Font Programs delivered by Adobe hereunder solely at
the Reproduction Locations and only for distribution with Licensed Systems.
(a) Roman Coded Font Programs. OEM agrees that with each Licensed System
-------------------------
distributed for use outside of Japan (a "Roman Version"), OEM shall bundle the
Roman Initial Installation Coded Font Programs identified in Paragraph 1 of
-----------
Attachment 1 attached hereto. OEM may also distribute a Roman Version bundled
- ------------
with Roman Additional Coded Font Programs or Other Coded Font Programs solely in
one of the Optional Packages specified in Attachment 1 to Schedule 1 to this
------------ ----------
Exhibit K.
- ---------
(b) Coded Font Programs for Japanese Typefaces. OEM agrees that with each
------------------------------------------
Licensed System distributed for use in Japan (a "Japanese Version"), it shall
bundle the same Roman Initial Installation Coded Font Programs as specified in
Paragraph l(a) of this Exhibit K for Roman Versions. Additionally, with each
- -------------- ---------
Japanese Version, OEM shall bundle a minimum of the [*] Coded Font
Programs for Japanese Typefaces identified in Paragraph 1 of Schedule 2 to this
----------- ----------
Exhibit K
- ---------
[*] OEM may also distribute a Japanese Version bundled with
[*] Coded Font Programs for Japanese Typefaces in any of the bundled
configurations specified in Schedule 2.
(c) Distribution Media. Such Coded Font Programs for Japanese Typefaces
------------------
will be distributed on mutually agreeable distribution media and will be
encrypted and copy-protected against unauthorized duplication in a manner to be
specified by Adobe. In particular, to prevent an End User from substituting one
font configuration for the original font configuration licensed with the
Licensed System, OEM shall employ a different set of code ROMs (with a different
identification code) to distinguish the original font configuration from the
other font configuration. Special character set encodings are not provided.
(d) Distribution of Japanese Versions and Font Upgrades. OEM is not
---------------------------------------------------
required to bundle the Coded Font Programs for Japanese Typefaces with Licensed
Systems distributed for use outside of Japan. However, if OEM decides to
distribute
-10-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
Licensed Systems with Coded Font Programs for Japanese Typefaces for
use outside of Japan, it shall bundle the Coded Font Programs for Japanese
Typefaces in accordance with Paragraphs l(b) and (c) above. Where OEM has
--------------- ---
distributed a Roman Version and wishes to upgrade such Roman Version to the
corresponding Japanese Version, OEM may do so, provided that the Coded Font
Programs for Japanese Typefaces are bundled as an upgrade in accordance with
Paragraphs l(b) and (c) above. Except for such initial upgrade for a Roman
- -------------- ---
Version, OEM may not distribute additional Coded Font Programs for Japanese
Typefaces in an unbundled form for the purpose of upgrading an existing Licensed
System from one font configuration to another. If OEM desires to offer to
customers additional Coded Font Programs for Japanese Typefaces, it may license
the additional aftermarket fonts in retail product version directly from Adobe
or Morisawa to provide to OEM's End Users.
(e) Font Upgrades for Roman Versions. OEM may upgrade an existing Roman
--------------------------------
Version of a Licensed System by adding one or more of the Optional Packages
specified in Attachment 1 hereto.
------------
(f) Distribution of CPSI Application with Font Upgrade. OEM will not
--------------------------------------------------
distribute the CPSI Application Object with a font upgrade, as described in
Paragraph (d) or (e) above, unless expressly permitted in the applicable CPSI
- ------------- ---
Application Appendix, and under applicable terms set forth therein.
2. Licensed Use Royalty Payments for Coded Font Programs.
-----------------------------------------------------
(a) Roman Versions. For each Licensed Use of the Roman Initial
--------------
Installation Coded Font Programs, Roman Additional Coded Font Programs and Other
Coded Font Programs distributed bundled with or as an upgrade to a Licensed
System or used internally by OEM or its Subsidiaries (beyond the number of
Licensed Uses provided royalty-free for Internal Use under applicable CPSI
Application Appendices), OEM shall pay a per Typeface or Optional Package
royalty, as applicable, as set forth in Schedule 1 ("Licensed Use Royalties for
----------
Roman Coded Font Programs") hereto.
(b) Japanese Versions. For each Licensed Use of the Coded Font Programs
-----------------
for Japanese Typefaces distributed bundled with or as an upgrade to a Licensed
System or used internally by OEM or its Subsidiaries, OEM shall pay a per
Typeface royalty as set forth in Schedule 2 ("Licensed Use Royalties for Coded
----------
Font Programs for Japanese Typefaces") hereto.
-11-
<PAGE>
Schedule 1
----------
Licensed Use Royalties for Roman Coded Font Programs
1. Licensed Use Royalties for Roman Initial Installation Coded Font Programs.
-------------------------------------------------------------------------
The seventeen (17) Roman Initial Installation Coded Font Programs specified in
Paragraph 1 of Attachment 1 and bundled with a Licensed System shall be royalty-
- ----------- ------------
free.
2. Licensed Use Royalties for Optional Packages. OEM shall pay a per Licensed
--------------------------------------------
Use royalty for each Optional Package which is distributed bundled with or as an
upgrade to a Licensed System or used internally by OEM or its Subsidiaries
(beyond the number of Licensed Uses provided royalty-free for Internal Use under
applicable CPSI Application Appendices) based on the following royalty schedule,
using the published U.S. List Price for the Minimum Configuration of the
Licensed System. To calculate royalties due for Optional Package 4C, add the
applicable royalty due for the relevant line item in column 4C to the applicable
royalty due for the relevant line item in one or more of the other columns. For
example: If the published U.S. List Price of the Licensed System is greater than
[*] and OEM distributes Optional Package 65 with Optional Package 4C, then
the total royalty due to Adobe for the Other Coded Font Programs is equal to
[*] . The Coded Font Programs included in the Optional Packages are
listed in Attachment 1 hereto.
------------
[*]
-12-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
Attachment 1
------------
Optional Packages
1. Roman Initial Installation Coded Font Programs:
-----------------------------------------------
Adobe will provide the graphic characters specified in ISO 8859-1: 1987,
Latin alphabet No. 1 and symbol characters as applicable, for the following
Roman Initial Installation Coded Font Programs:
<TABLE>
<CAPTION>
IDENTIFYING TRADEMARK TYPEFACE TRADEMARK OWNER
--------------------- -------- ---------------
<S> <C> <C>
Helvetica Linotype-Hell AG and/or its subsidiaries
Helvetica Bold Linotype-Hell AG and/or its subsidiaries
Helvetica Oblique Linotype-Hell AG and/or its subsidiaries
Helvetica Bold Oblique Linotype-Hell AG and/or its subsidiaries
Times Roman Linotype-Hell AG and/or its subsidiaries
Times Bold Linotype-Hell AG and/or its subsidiaries
Times Italic Linotype-Hell AG and/or its subsidiaries
Times Bold Italic Linotype-Hell AG and/or its subsidiaries
Symbol (Public Domain)
Courier (Public Domain)
Courier Bold (Public Domain)
Courier Oblique (Public Domain)
Courier Bold Oblique (Public Domain)
Helvetica Narrow Linotype-Hell AG and/or its subsidiaries
Helvetica Narrow Bold Linotype-Hell AG and/or its subsidiaries
Helvetica Narrow Oblique Linotype-Hell AG and/or its subsidiaries
Helvetica Narrow Bold Oblique Linotype-Hell AG and/or its subsidiaries
</TABLE>
2. Roman Additional Coded Font Programs:
------------------------------------
Upon written notification by OEM, Adobe win provide the graphic characters
specified in ISO 8859-1: 1987, Latin alphabet No. 1 and symbol characters
as applicable, for the Roman Additional Coded Font Programs listed in the
Optional Packages as described below. After receipt of written request
from OEM, Adobe will provide the Macintosh compatible Bitmap Fonts in such
point sizes as Adobe has available for the Roman Additional Coded Font
Programs listed below. These Bitmap Fonts can only be used in conjunction
with a Licensed System.
(a) Optional Package 35N. "Optional Package 35N" shall consist of the
--------------------
Roman Initial Installation Coded Font Programs listed in Paragraph 1 above
-----------
plus the Roman Additional Coded Font Programs listed in this Paragraph 2.
-----------
<TABLE>
<CAPTION>
IDENTIFYING TRADEMARK TYPEFACE TRADEMARK OWNER
------------------------- ---------------------- ------------------------------------------
<S> <C> <C>
ITC Avant Garde Gothic Book International Typeface Corporation
ITC Avant Garde Gothic Book Oblique International Typeface Corporation
</TABLE>
-13-
<PAGE>
<TABLE>
<S> <C> <C>
ITC Avant Garde Gothic Demi International Typeface Corporation
ITC Avant Garde Gothic Demi Oblique International Typeface Corporation
ITC Bookman Light International Typeface Corporation
ITC Bookman Light ItalicInternational Typeface Corporation
ITC Bookman Light International Typeface Corporation
ITC Bookman Light Italicinternational Typeface Corporation
New Century Schoolbook Roman Public Domain
New Century Schoolbook Bold Public Domain
New Century Schoolbook Italic Public Domain
New Century Schoolbook Bold ItalicPublic Domain
ITC Zapf Chancery Medium ItalicInternational Typeface Corporation
ITC Zapf Dingbats International Typeface Corporation
Palatino Roman Linotype-Hell AG and/or its subsidiaries
Palatino Bold Linotype-Hell AG and/or its subsidiaries
Palatino Italic Linotype-Hell AG and/or its subsidiaries
Palatino Bold Italic Linotype-Hell AG and/or its subsidiaries
</TABLE>
(b) Optional Package 65. "Optional Package 65" shall consist of Optional
------------------- -------------------
Package 35N listed in Paragraph 2(a) above plus the thirty (30) Other Roman
--------------
Additional Coded Font Programs listed in this Paragraph 2(b).
--------------
<TABLE>
<S> <C> <C>
Adobe Caslon Regular Adobe Systems Incorporated
Adobe Caslon Italic Adobe Systems Incorporated
Adobe Caslon Semibold Adobe Systems Incorporated
Adobe Caslon Semibold Italic Adobe Systems Incorporated
Adobe Garamond Regular Adobe Systems Incorporated
Adobe Garamond Italic Adobe Systems Incorporated
Adobe Garamond Bold Adobe Systems Incorporated
Adobe Garamond Bold Italic Adobe Systems Incorporated
Barmeno Regular H. Berthold AG
Barmeno Medium H. Berthold AG
Barmeno Bold H. Berthold AG
Barmeno Extra Bold H. Berthold AG
Lithos Regular Adobe Systems Incorporated
Lithos Black Adobe Systems Incorporated
Trajan Bold Adobe Systems Incorporated
Adobe Wood Type 2 Ornaments Adobe Systems Incorporated
Blackoak Bold Adobe Systems Incorporated
Carta Map Symbols Adobe Systems Incorporated
Tekton Regular Adobe Systems Incorporated
Tekton Bold Adobe Systems Incorporated
Park Avenue Regular Kingsley/ATF Type Corporation
Poetica Ornaments RegularAdobe Systems Incorporated
Kaufmann Regular Kingsley/ATF Type Corporation
Americana Regular Kingsley/ATF Type Corporation
Americana Extra Bold Kingsley/ATF Type Corporation
Parisian Regular Kingsley/ATF Type Corporation
Formata Regular H. Berthold AG
Formata Medium H. Berthold AG
Formata Italic H. Berthold AG
Formata Medium Italic H. Berthold AG
</TABLE>
-14-
<PAGE>
(c) Optional Package 100. "Optional Package 100" shall consist of
--------------------
Optional Package 65 listed in Paragraph 2(b) above plus the thirty-five
(35) Other Roman Additional Coded Font Programs listed in this Paragraph
---------
2(c).
----
<TABLE>
<S> <C> <C>
ITC Lubalin Graph Book International Typeface Corporation
ITC Lubalin Graph BookOblique International Typeface Corporation
ITC Lubalin Graph BookDemi International Typeface Corporation
ITC Lubalin Graph BookDemi Oblique International Typeface Corporation
ITC Korinna Regular International Typeface Corporation
ITC Korinna Kursiv Regular International Typeface Corporation
ITC Korinna Bold International Typeface Corporation
ITC Korinna Kursiv Bold International Typeface Corporation
ITC Kabel Book International Typeface Corporation
ITC Kabel Medium International Typeface Corporation
ITC Kabel Demi International Typeface Corporation
ITC Kabel Bold International Typeface Corporation
ITC Kabel Ultra International Typeface Corporation
ITC Berkeley Oldstyle(R) Book International Typeface Corporation
ITC Berkeley Oldstyle Book Italic International Typeface Corporation
ITC Berkeley Oldstyle Medium International Typeface Corporation
ITC Berkeley Oldstyle Italic International Typeface Corporation
ITC Berkeley Oldstyle Bold International Typeface Corporation
ITC Berkeley Oldstyle Bold Italic International Typeface Corporation
ITC Berkeley Oldstyle Black International Typeface Corporation
ITC Berkeley Oldstyle Black Italic International Typeface Corporation
ITC Machine(R) Medium International Typeface Corporation
ITC Machine Bold International Typeface Corporation
ITC Flora(R) Medium International Typeface Corporation
ITC Flora Bold International Typeface Corporation
Copperplate Gothic 31AB Public Domain
Copperplate Gothic 31BC Public Domain
Brush Script Public Domain
Hobo Public Domain
Stencil Public Domain
Baker Signet Visual Graphics Corporation
Nuptial Script Linotype-Hell AG and/or its subsidiaries
Mythos(TM) Adobe Systems Incorporated
Birch(TM) Adobe Systems Incorporated
Umbra Ludlow
</TABLE>
(d) Optional Package 300. "Optional Package 300" shall consist of
--------------------
Optional Roman 100 listed in Paragraph 2(c) above plus the two hundred
(200) Other Roman Additional Coded Font Programs listed in this Paragraph
2(d).
<TABLE>
<S> <C> <C>
Goudy Old Style Public Domain
Goudy Bold Public Domain
Goudy Old Style Italic Public Domain
Goudy Bold Italic Public Domain
Goudy ExtraBold Public Domain
Goudy Heavyface Public Domain
</TABLE>
-15-
<PAGE>
<TABLE>
<S> <C> <C>
Goudy Heavyface Italic Public Domain
Sonata Adobe Systems Incorporated
Letter Gothic Public Domain
Letter Gothic Bold Public Domain
Letter Gothic Slanted Public Domain
Letter Gothic Bold Slanted Public Domain
Cooper Black Public Domain
Cooper Black Italic Public Domain
ITC Stone Serif International Typeface Corporation
ITC Stone Serif Semibold International Typeface Corporation
ITC Stone Serif Italic International Typeface Corporation
ITC Stone Serif Semibold Italic International Typeface Corporation
ITC Stone Serif Bold International Typeface Corporation
ITC Stone Serif Bold Italic International Typeface Corporation
ITC Stone Sans Bold International Typeface Corporation
ITC Stone Sans Bold Italic International Typeface Corporation
ITC Stone Sans International Typeface Corporation
ITC Stone Sans Semibold International Typeface Corporation
ITC Stone Sans Italic International Typeface Corporation
ITC Stone Sans Semibold ItalicInternational Typeface Corporation
Kaufmann Bold Kingsley/ATF Type Corporation
Americana Bold Kingsley/ATF Type Corporation
Americana Italic Kingsley/ATF Type Corporation
Century Expanded Linotype-Hell AG and/or its subsidiaries
Century Expanded Italic Linotype-Hell AG and/or its subsidiaries
Caslon Open Face Linotype-Hell AG and/or its subsidiaries
Gothic 13 Linotype-Hell AG and/or its subsidiaries
Tempo Heavy Condensed Ludlow
Tempo Heavy Condensed Italic Ludlow
Adobe Garamond Semibold Adobe Systems Incorporated
Adobe Garamond Semibold Italic Adobe Systems Incorporated
Adobe Garamond Regular, SC Adobe Systems Incorporated
Adobe Garamond Semibold, SC Adobe Systems Incorporated
Franklin Gothic Roman Linotype-Hell AG and/or its subsidiaries
Franklin Gothic Condensed Linotype-Hell AG and/or its subsidiaries
Franklin Gothic Extra Condensed Linotype-Hell AG and/or its subsidiaries
Utopia Regular Adobe Systems Incorporated
Utopia Semibold Adobe Systems Incorporated
Utopia Italic Adobe Systems Incorporated
Utopia Semibold Italic Adobe Systems Incorporated
Utopia Bold Adobe Systems Incorporated
Utopia Bold Italic Adobe Systems Incorporated
Utopia Black Adobe Systems Incorporated
Utopia Regular, SC Adobe Systems Incorporated
Utopia Semibold, SC Adobe Systems Incorporated
Copperplate Gothic 29AB Public Domain
Copperplate Gothic 29BC Public Domain
Copperplate Gothic 30AB Public Domain
Copperplate Gothic 30BC Public Domain
Copperplate Gothic 32AB Public Domain
Copperplate Gothic 32BC Public Domain
Copperplate Gothic 33BC Public Domain
</TABLE>
-16-
<PAGE>
<TABLE>
<S> <C> <C>
Charlemagne Regular Adobe Systems Incorporated
Charlemagne Bold Adobe Systems Incorporated
Mesquite Adobe Systems Incorporated
Woodtype Ornaments 1 Adobe Systems Incorporated
Tekton Oblique Adobe Systems Incorporated
Tekton Bold Oblique Adobe Systems Incorporated
Minion Regular Adobe Systems Incorporated
Minion Semibold Adobe Systems Incorporated
Minion Italic Adobe Systems Incorporated
Minion Semibold Italic Adobe Systems Incorporated
Minion Bold Adobe Systems Incorporated
Minion Bold Italic Adobe Systems Incorporated
Minion Regular, SC Adobe Systems Incorporated
Minion Semibold, SC Adobe Systems Incorporated
Minion Italic SC Adobe Systems Incorporated
Minion Semibold Italic, SC Adobe Systems Incorporated
Rockwell Monotype Corporation
Rockwell Bold Monotype Corporation
Rockwell Italic Monotype Corporation
Rockwell Bold Italic Monotype Corporation
Rockwell Light Monotype Corporation
Rockwell Light Italic Monotype Corporation
Willow Adobe Systems Incorporated
Madrone Adobe Systems Incorporated
Adobe Caslon Bold Adobe Systems Incorporated
Adobe Caslon Bold Italic Adobe Systems Incorporated
Adobe Caslon Regular, SC Adobe Systems Incorporated
Adobe Caslon Semibold, SC Adobe Systems Incorporated
Poppl-Pontifex Regular H. Berthold AG
Poppl-Pontifex Medium H. Berthold AG
Poppi-Pontifex Italic H. Berthold AG
Poppi-Pontifex Bold H. Berthold AG
Poppl-Pontifex Medium Condensed H. Berthold AG
Bell Gothic Light Public Domain
Bell Gothic Bold Public Domain
Bell Gothic Black Public Domain
MinionCyrillic Regular Adobe Systems Incorporated
MinionCyrillic Semibold Adobe Systems Incorporated
MinionCyrillic Italic Adobe Systems Incorporated
MinionCyrillic Semibold Italic Adobe Systems Incorporated
MinionCyrillic Bold Adobe Systems Incorporated
MinionCyrillic Bold Italic Adobe Systems Incorporated
ITC Stone Informal International Typeface Corporation
ITC Stone Informal Semibold International Typeface Corporation
ITC Stone Informal Italic International Typeface Corporation
ITC Stone Informal Semibold Italic International Typeface Corporation
ITC Stone Informal Bold International Typeface Corporation
ITC Stone Informal Bold Italic International Typeface Corporation
Trajan Regular Adobe Systems Incorporated
Lithos Extra Light Adobe Systems Incorporated
Lithos Light Adobe Systems Incorporated
Lithos Bold Adobe Systems Incorporated
</TABLE>
-17-
<PAGE>
<TABLE>
<S> <C> <C>
Gill Sans Monotype Corporation
Gill Sans Bold Monotype Corporation
Gill Sans Italic Monotype Corporation
Gill Sans Bold Italic Monotype Corporation
Gill Sans Light Monotype Corporation
Gill Sans Light Italic Monotype Corporation
Gill Sans Condensed Monotype Corporation
Gill Sans Bold Condensed Monotype Corporation
Gill Sans Ultra Bold Condensed Monotype Corporation
Gill Sans Extra Bold Monotype Corporation
Gill Sans Ultra Bold Monotype Corporation
Bembo Monotype Corporation
Bembo Bold Monotype Corporation
Bembo Italic Monotype Corporation
Bembo Bold Italic Monotype Corporation
Bembo Semibold Monotype Corporation
Bembo Semibold Italic Monotype Corporation
Bembo Extra Bold Monotype Corporation
Bembo Extra Bold Italic Monotype Corporation
Rockwell Condensed Monotype Corporation
Rockwell Bold Condensed Monotype Corporation
Rockwell Extra Bold Monotype Corporation
Plantin Monotype Corporation
Plantin Bold Monotype Corporation
Plantin Italic Monotype Corporation
Plantin Bold Italic Monotype Corporation
Perpetua Monotype Corporation
Perpetua Bold Monotype Corporation
Perpetua Italic Monotype Corporation
Perpetua Bold Italic Monotype Corporation
Nofret Light H. Berthold AG
Nofret Light Italic H. Berthold AG
Nofret Regular H. Berthold AG
Nofret Medium H. Berthold AG
Nofret Italic H. Berthold AG
Nofret Medium Italic H. Berthold AG
Nofret Bold H. Berthold AG
Nofret Bold Italic H. Berthold AG
Plantin Light Monotype Corporation
Plantin Light Italic Monotype Corporation
Plantin Semibold Monotype Corporation
Plantin Semibold Italic Monotype Corporation
Plantin Bold Condensed Monotype Corporation
Centaur Regular Monotype Corporation
Centaur Bold Monotype Corporation
Centaur Italic Monotype Corporation
Centaur Bold Italic Monotype Corporation
Joanna Regular Monotype Corporation
Joanna Bold Monotype Corporation
Joanna Italic Monotype Corporation
Joanna Bold Italic Monotype Corporation
Joanna Semibold Monotype Corporation
</TABLE>
-18-
<PAGE>
<TABLE>
<S> <C> <C>
Joanna Semibold Italic Monotype Corporation
Joanna Extra Bold Monotype Corporation
ITC StoneSans Phonetic IPA International Typeface Corporation
ITC StoneSans Phonetic Alternate International Typeface Corporation
ITC StoneSerif Phonetic IPA International Typeface Corporation
ITC StoneSerif Phonetic Alternate International Typeface Corporation
Poetica Chancery I Adobe Systems Incorporated
Poetica Chancery II Adobe Systems Incorporated
Poetica Chancery III Adobe Systems Incorporated
Poetica Chancery IV Adobe Systems Incorporated
Poetica Roman Small Caps Adobe Systems Incorporated
Delta Jaeger Light H. Berthold AG
Delta Jaeger Light Italic H. Berthold AG
Delta Jaeger Book H. Berthold AG
Delta Jaeger Medium H. Berthold AG
Delta Jaeger Italic H. Berthold AG
Delta Jaeger Medium Italic H. Berthold AG
Delta Jaeger Bold H. Berthold AG
Delta Jaeger Bold Italic H. Berthold AG
Delta Jaeger Outline H. Berthold AG
Formata Condensed H. Berthold AG
Formata Medium Condensed H. Berthold AG
Formata Condensed ltalic H. Berthold AG
Formata Med Condensed Italic H. Berthold AG
</TABLE>
<TABLE>
<S> <C> <C>
ITC Legacy Sans Book InternationalTypeface Corporation
ITC Legacy Sans Book Italic International Typeface Corporation
ITC Legacy Sans Medium International Typeface Corporation
ITC Legacy Sans Medium Italic International Typeface Corporation
ITC Legacy Sans Bold International Typeface Corporation
ITC Legacy Sans Bold Italic International Typeface Corporation
ITC Legacy Sans Ultra International Typeface Corporation
ITC Legacy Serif Book International Typeface Corporation
ITC Legacy Serif Book Italic International Typeface Corporation
ITC Legacy Serif Medium International Typeface Corporation
ITC Legacy Serif Medium Italic International Typeface Corporation
ITC Legacy Serif Bold International Typeface Corporation
ITC Legacy Serif Bold Italic International Typeface Corporation
ITC Legacy Serif Ultra International Typeface Corporation
</TABLE>
(e) Optional Package 4C. "Optional Package 4C" shall consist of the four
-------------------
(4) Roman Additional Coded Font Programs fisted in this Paragraph 2(e).
--------------
Optional Package 4C may be distributed with Optional Package 35N, Optional
Package 65, Optional Package 100, or Optional Package 300, for use with a
Licensed System.
<TABLE>
<S> <C> <C>
Helvetica Condensed Linotype-Hell AG and/or its subsidiaries
Helvetica Condensed Bold Linotype-Hell AG and/or its subsidiaries
Helvetica Condensed Oblique Linotype-Hell AG and/or its subsidiaries
Helvetica Condensed Bold Oblique Linotype-Hell AG and/or its subsidiaries
</TABLE>
-19-
<PAGE>
Schedule 2
Licensed Use Royalties for Coded Font Programs for Japanese Typefaces
1. Coded Font Programs for Japanese Typefaces:
------------------------------------------
Upon written notification by OEM, Adobe will provide the Adobe Standard Japanese
Character set, which includes JIS, Shift JIS, and EUC encodings of the JIS X
0208 1983 Level 1 and Level 2 characters, plus other characters and encodings as
defined in Adobe's Kanji Glyph Collection and Glyph Sets Technical Note #5031,
----------------------------------------------------------
dated November 12, 1990, for the following Coded Font Programs for Japanese
Typefaces. Generic characters listed therein are not typeface specific. OEM
shall distribute the Coded Font Programs for Japanese Typefaces bundled with or
as an upgrade to a Licensed System, only in the following configurations:
(a) The first two (2), as listed below [*]
(b) The first five (5), as listed below [*]
(c) The first seven (7), as listed below,
(d) All, as listed below:
<TABLE>
<CAPTION>
Identifying Trademark Trademark Owner
--------------------- ---------------
<S> <C>
Ryumin Light KL Morisawa & Co., Ltd.
Gothic Medium BBB Morisawa & Co., Ltd.
Futo Min A101 Morisawa & Co., Ltd.
Futo Go B101 Morisawa & Co., Ltd.
Jun 101 Morisawa & Co., Ltd.
Midashi Min MA31 Morisawa & Co., Ltd.
Midashi Go MB31 Morisawa & Co., Ltd.
ShinseiKaisho CBSK1 Morisawa & Co., Ltd.
Ryumin Medium M-KL Morisawa & Co., Ltd.
Ryumin Ultra U-KL Morisawa & Co., Ltd.
Shin Gothic L (Light) Morisawa & Co., Ltd.
Shin Gothic M (Medium) Morisawa & Co., Ltd.
Shin Gothic B (Bold) Morisawa & Co., Ltd.
Shin Gothic U (Ultra) Morisawa & Co., Ltd.
</TABLE>
After receipt of written request from OEM, Adobe will provide the Macintosh
compatible Bitmap Fonts for Futo Min A101, Futo Go B101, Jun 101, Midashi Min,
MA31, Midashi Go MB31, ShinseiKaisho CBSK1, Ryumin Medium M-KL, Ryumin Bold B-
KL, Ryumin Ultra U-KL, Shin Gothic L, Shin Gothic M, Shin Gothic B and Shin
-20-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
Gothic U. OEM may distribute these Bitmap Fonts without additional charge
provided that they are used only in conjunction with a Licensed System. Bitmap
Fonts for Ryumin Light KL and Gothic Medium BBB will not be provided, since they
are available to the End User bundled with Apple's KanjiTalk(TM) system
software.
2. Licensed Use Royalties. For the Coded Font Programs for Japanese Typefaces
----------------------
described in Paragraph 1 above which are distributed or used internally by OEM
-----------
or its Subsidiaries and bundled as part of a Licensed System or as an upgrade to
an existing Licensed System, as permitted hereunder, OEM shall pay Adobe a per
Typeface royalty for each Licensed Use of the Coded Font Programs for Japanese
Typefaces as described below.
(a) Licensed Systems with Color Designated Output Devices [*]:
---------------------------------------------------------
For Licensed Systems with a color Designated Output device capable of [*], the
per Typeface royalty for internal use or distribution of the Coded Font Programs
for Japanese Typefaces shall be calculated using the following procedure and
with the tables below:
Step 1: Determine the number of each of the Japanese Font Bundles
shipped during the quarter.
Step 2: Multiply each number of Japanese Font Bundles shipped during
the quarter (as determined in Step 1 above) by the applicable
Base Royalty per Font Bundle as shown in Table 1 below and
aggregate the result. This is the quarterly base aggregate
Licensed Use royalties for Coded Font Programs for Japanese
Typefaces.
[*]
-21-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
[*]
-22-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
[*]
-23-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
[*]
(B) Licensed Systems With a Black and White Designated Output Device [*].
--------------------------------------------------------------------
For Licensed Systems with a black and white Designated output Device [*] the per
Typeface royalty for internal use or distribution of the Coded Font Programs for
Japanese Typefaces can be calculated using the following procedure and with the
table below:
Step 1: Determine the number of Japanese typefaces shipped during the
quarter.
Step 2: Multiply the number of Japanese Typefaces shipped during the
quarter (as determined in step 1 above) by the applicable Royalty
per Typeface as shown in the Royalty Table below and aggregate
the result. This is the quarterly aggregate Licensed Use
royalties for Coded Font Programs for Japanese Typefaces due for
the quarter.
[*]
-24-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
(c) Licensed Systems With a Black and White or Color Designated Output
------------------------------------------------------------------
Device greater than 600 dpi. For Licensed Systems with a black and white or
------------
color Designated Output Device capable of [*], the per Typeface royalty for
internal use or distribution of the Coded Font Programs for Japanese Typefaces
shall be calculated using the following procedure and with the tables below:
Step 1: Determine the number of each of the Japanese Font Bundles shipped
during the quarter.
Step 2: Multiply each number of Japanese Font Bundles shipped during the
quarter (as determined in Step 1 above) by the applicable Royalty
per Font Bundle as shown in the Royalty Table below and aggregate
the result. This is the quarterly aggregate Licensed Use
royalties for Coded Font Programs for Japanese Typefaces due for
the quarter.
[*]
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
APPENDIX NO. 1
EFFECTIVE AS OF SEPTEMBER 18, 1992
------------
TO
CONFIGURABLE POSTSCRIPT(R) INTERPRETER
OEM LICENSE AGREEMENT
BETWEEN
ADOBE SYSTEMS INCORPORATED AND SUPERMAC TECHNOLOGY
Name of CPSI Application: Macintosh Level 2 Adobe Software RIP
This Appendix sets forth additional and different terms and conditions
particular to the Licensed System described below and shall be incorporated by
reference into the Configurable PostScript Interpreter OEM License Agreement
("Agreement") between SuperMAC Technology ("OEM") and Adobe Systems Incorporated
("Adobe") effective as of September 18, 1992. Such different or additional
------------
terms are applicable only to the Licensed System described below and in no way
alter the terms and conditions applicable to other Licensed Systems incorporated
into the Agreement by addition of an appendix.
All the terms used in this Appendix shall retain the same meaning as
defined in the Agreement and such definitions are incorporated herein by
reference.
A. Description of CPSI Application:
ProofPositive Color Printer Software RIP running on an Apple Macintosh
computer.
B. Description of Computer System:
[*]
OEM may use the CPSI Application to generate output from devices other than
those listed in this paragraph only within OEM's internal development group and
only for testing purposes within that group. New devices must be added to this
Appendix by an addendum before OEM may install such devices for use with the
CPSI Application outside the development group. If [*]. OEM shall authorize use
of the CPSI application to generate output only on devices that have been
approved by Adobe in accordance with the provisions as described in this
Paragraph.
-1-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
C. Licensed Systems:
[*]
D. Development Environment - The Adobe Development Environment is the specific
computer environment in which Adobe has developed the Adobe Software and tested
the Licensed System and which is defined below:
(1) Hardware platform:
[*]
(2) Software platform:
Macintosh OS version 7.0, MPW version 3.2.
OEM may upgrade the Development Environment to the latest version of both
the Hardware platform and the Software platform supplied by Apple or a
supplier that provides a compatible computer system faster completion of
Milestone #(8) in Paragraph F of this Appendix, provided that the upgrade
-----------
Development Environmental described in this Paragraph D. In the event
-----------
that in compatibilities are introduced by hardware or software vendor(s),
OEM may notify Adobe of such incompatibilities. Adobe will assess these
incompatibilities and, if necessary, OEM will upgrade the Loaned Equipment
to the upgraded Development Environment. Adobe will communicate the results
of the assessment to the OEM. If agreed to by Adobe, upgrades, made at the
OEM's request, for incompatibilities introduced outside of the Development
Environment described in Paragraph D(1) and D(2), will be provided under
-----------------------
the terms of a Continuing Support Agreement or at Adobe's current
consulting rates and under applicable terms.
-2-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
E. Adobe Deliverables:
(1) Adobe Software: As described in Exhibit A ("Description of Adobe
-------------- ---------
Software") to the Agreement or as further described herein. Adobe Software will
be delivered on 3.5 inch Macintosh diskettes.
(2) Demonstration Program(s): The Demonstration Program(s) will be in "C"
------------------------
language source form and will provide OEM with an example of how to use the
Adobe Software described in Exhibit A ("Description of Adobe Software") to
---------
interpret PostScript language programs and produce faster output. The
Demonstration Program(s) will be delivered with the Adobe Software.
(3) Other Adobe-Supplied Software:
TBD
(4) Documentation: The documentation as described below will be delivered
-------------
both in hardcopy (1 copy) and in PostScript page description language format on
the software distribution medium (1 file per document).
a. Supplement to the PostScript Language Reference Manual
b. PostScript Language Addendum Template
c. CPSI Demonstration Product Guide
d. CPSI Product Developer's Guide
e. CPSI Read Me First!
All of the above specified Documentation is to be used internally solely
for the purposes of developing a Licensed System and is to be treated as
Confidential Information of Adobe and subject to Paragraph 2.1.6
---------------
("Nondisclosure") of the Agreement. The PostScript Language Addendum Template
supplied by Adobe hereunder is to be used by OEM solely as a guide for
customizing and creating the PostScript Language Addendum for this Licensed
System. The only Documentation which OEM is permitted to distribute to its End
User customers, is the PostScript Language Addendum with the content written by
OEM and approved by Adobe.
(5) Coded Font Programs: OEM shall bundle the Roman Initial Installation
-------------------
Coded Font Programs identified in Paragraph J below and the Roman Additional
-----------
Coded Font Programs identified in Paragraph K below with each Licensed System
-----------
(hereinafter "Roman Version"). OEM agrees that the [*] Coded Font Programs for
Japanese Typefaces identified in Paragraph L of this Appendix shall be bundled
-----------
with every Licensed System distributed for use in Japan (hereinafter "Japanese
Version"). OEM is not required to bundle the Coded Font Programs for Japanese
Typefaces with Licensed Systems distributed for use outside of Japan. However,
if OEM decides to distribute Licensed Systems with Coded Font Programs for
Japanese Typefaces for use outside of Japan, it shall
-3-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
bundle all of the Coded Font Programs for Japanese Typecasts listed in
Paragraph L of this Appendix with each such Licensed System.
- -----------
F. Development Schedule and Testing Expectations:
<TABLE>
<CAPTION>
Milestone Description: *Schedule
<S> <C>
#(1) [*]
#(2) [*]
#(3) [*]
#(4) [*]
#(5) [*]
#(6) [*]
#(7) [*]
#(8) [*]
#(9) [*]
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
</TABLE>
-4-
<PAGE>
[*]
G. Loaned Equipment:
Adobe requires two (2) complete Licensed Systems as described in Paragraph
---------
C of this Appendix. Additional Licensed Systems may be required to accelerate
- -
quality assurance testing. Only one (1) system is required through the warranty
period.
The Loaned Equipment is being supplied to Adobe for the purpose of testing
the CPSI Application Object for use with the Licensed System and for testing and
reference purposes when evaluating draft PPD Files and PostScript Language
Addendum. Following Adobe testing and acceptance of the CPSI Application Object,
and for as long as Adobe is providing testing, warranty or Continuing Support
services, at Adobe's request OEM will replace the hardware and software
comprising the Loaned Equipment with the most recent version thereof.
Terms and conditions related to the obligations of the parties concerning
OEM-Loaned Equipment are set forth in Paragraph 3.4.1 ("OEM-Loaned Equipment")
---------------
of the Agreement.
H. Software License Fee:
[*]
I. Applicable Royalties:
(1) Royalties for Worldwide Distribution of Licensed Systems:
--------------------------------------------------------
(a) Basis for Payments Hereunder. All royalties due to Adobe by OEM shall
----------------------------
be paid in U.S. dollars regardless of the location of the transaction or the
type of currency used to consummate the transaction.
All List Prices, as described below, shall mean OEM's published List Price,
established in good faith, for quantity one (1) of the fully functioning
Licensed System described hereunder as distributed to End Users in both Roman
and Japanese Versions. Such calculations shall be exclusive of amounts received
for taxes, interest, non-warranty maintenance and installation charges, finance
charges, insurance, shipping and handling.
-5-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
(i) U.S. List Price. The U.S. List Price shall mean OEM's published
---------------
list price to End Users in quantity one (1) for a fully
functioning Licensed System as described in Paragraph C, for
-----------
distribution in the United States. OEM shall pay the per copy
royalty based upon the royalty schedule set forth herein in
Paragraph I(1)(b)(i) below using the U.S. List Price for a fully
--------------------
functioning Licensed System to calculate the per copy royalty.
The Licensed System U.S. List Price shall apply for the purpose
of royalty calculations hereunder for distribution of all Roman
Versions of the Licensed System throughout the world.
(ii) Japanese List Price. The Japanese List Price shall mean OEM's
-------------------
published list price in Japanese yen for quantity one (1) for a
fully functioning Licensed System as described in Paragraph C for
-----------
distribution in Japan. OEM shall pay the per copy royalty based
upon the royalty schedule set forth herein in Paragraph
---------
I(1)(b)(ii) below by converting the Japanese List Price in yen to
-----------
U.S. Dollars for a fully functioning Licensed System to calculate
the per copy royalty. The Japanese List Price shall be converted
into U.S. Dollars at a rate equal to the average of the exchange
rates quoted in the Wall Street Journal on the first and last
days of the relevant quarterly accounting period defined in
Paragraph 7.5 ("Payment of Royalties") of the Agreement and then
-------------
used to calculate the royalty due hereunder.
(b) [*]
(i) Roman Versions. For the Roman Versions of the Licensed System,
--------------
OEM shall pay Adobe a royalty equal to [*] of the U.S. List Price for each
Licensed System which is distributed or used internally by OEM or its
Subsidiaries.
(ii) Japanese Versions. For the Japanese Versions of the Licensed
-----------------
System, OEM shall pay Adobe a royalty equal to [*] of the Japanese List Price
for each Licensed System which is distributed or used internally by OEM or its
Subsidiaries.
(2) Coded Font Program Royalties. Both the Roman and Japanese Versions of the
----------------------------
Licensed System contain seventeen (17) royalty free Roman Initial
Installation Coded Font Programs as defined in Paragraph J of this Appendix
-----------
-6-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
No. 1 [*].
(a) Royalties for Roman Additional Coded Font Programs. OEM shall pay the
--------------------------------------------------
following royalty per Typeface for each copy of the Roman Additional coded Font
Programs specified in Paragraph K of this Appendix No. 1 which are distributed
-----------
or used internally by OEM and bundled as part of a Licensed System:
[*]
(b) Royalties for Coded Font Programs for Japanese Typefaces: The
--------------------------------------------------------
royalties for the Coded Font Programs for Japanese Typefaces, described in
Paragraph L of this Appendix No. 1 and bundled as part of the Licensed System,
- -----------
shall be [*].
J. Roman Initial Installation Coded Font Programs:
Adobe will provide the graphic characters specified in ISO 8859-1: 1987,
Latin alphabet No. 1, or symbol characters where appropriate, for the following
Roman Initial Installation Coded Font Programs:
<TABLE>
<CAPTION>
Identifying Trademark Typeface Trademark Owner
- ---------------------- ------- ---------------
<S> <C> <C>
Helvetica Linotype-Hell AG and/or its subsidiaries
Helvetica Bold Linotype-Hell AG and/or its subsidiaries
Helvetica Oblique Linotype-Hell AG and/or its subsidiaries
Helvetica Bold Oblique Linotype-Hell AG and/or its subsidiaries
Times Roman Linotype-Hell AG and/or its subsidiaries
Times Bold Linotype-Hell AG and/or its subsidiaries
Times Italic Linotype-Hell AG and/or its subsidiaries
Times Bold Italic Linotype-Hell AG and/or its subsidiaries
Symbol Public Domain
Courier Public Domain
Courier Bold Public Domain
Courier Oblique Public Domain
Courier Bold Oblique Public Domain
Helvetica Narrow Linotype-Hell AG and/or its subsidiaries
Helvetica Narrow Bold Linotype-Hell AG and/or its subsidiaries
Helvetica Narrow Oblique Linotype-Hell AG and/or its subsidiaries
Helvetica Narrow Bold Oblique Linotype-Hell AG and/or its subsidiaries
</TABLE>
-7-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
K. Roman Additional Coded Font Programs:
Upon written notification by OEM, Adobe will provide the graphic characters
specified in ISO 8859-1: 1987, Latin alphabet No. 1, or symbol characters
where appropriate, for the following Roman Additional Coded Font Programs:
<TABLE>
<CAPTION>
Identifying Trademark Typeface Trademark Owner
- ------------------------- ------------- ----------------------------------------
<S> <C> <C>
Palatino Roman Linotype-Hell AG and/or its subsidiaries
Palatino Italic Linotype-Hell AG and/or its subsidiaries
Palatino Bold Linotype-Hell AG and/or its subsidiaries
Palatino Bold Italic Linotype-Hell AG and/or its subsidiaries
ITC Avant Garde Gothic Book International Typeface Corporation
ITC Avant Garde Gothic Book Oblique International Typeface Corporation
ITC Avant Garde Gothic Demi International Typeface Corporation
ITC Avant Garde Gothic Demi Oblique International Typeface Corporation
ITC Bookman Light International Typeface Corporation
ITC Bookman Light Italic International Typeface Corporation
ITC Bookman Demi International Typeface Corporation
ITC Bookman Demi Italic International Typeface Corporation
ITC Zapf Dingbats International Typeface Corporation
ITC Zapf Chancery Medium Italic International Typeface Corporation
New Century Schoolbook Roman Public Domain
New Century Schoolbook Italic Public Domain
New Century Schoolbook Bold Public Domain
New Century Schoolbook Bold Italic Public Domain
</TABLE>
L. Coded Font Programs for Japanese Typefaces:
Adobe will provide the Adobe Standard Japanese Character set, which includes
all of the characters in Adobe's Kanji Glyph Collections and Glyph Sets
--------------------------------------
Technical Note #5031 dated November 12, 1990, with the exception of generic
--------------------
characters listed therein, for the following Coded Font Programs for
Japanese Typefaces:
<TABLE>
<CAPTION>
Identifying Trademark Trademark Owner
--------------------- ---------------
<S> <C>
Ryumin Light KL Morisawa & Company Ltd.
Gothic Medium BBB Morisawa & Company Ltd.
</TABLE>
Such Coded Font Programs for Japanese Types will be distributed on mutually
agreeable distribution media and will be encrypted and copy-protected against
unauthorized duplication in a manner to be specified by Adobe. Special
character set encodings are not provided.
M. Protection Mechanisms:
(1) Adobe and OEM shall mutually agree on an execution control mechanism
which OEM shall utilize as a copy protection device in each Licensed
System distributed under this Appendix.
(2) Adobe and OEM shall mutually agree upon a secure production method for
the Japanese font copy-protected keys.
-8-
<PAGE>
N. Designated Representatives:
(3) Technically qualified OEM representative to respond to information
requested by Adobe:
Jim Pendergast
SuperMAC Technology Phone # (408) 254-2202
485 Potrero Ave. Fax # (408) 735-7250
Sunnyvale, CA 94086
(4) Technically qualified Adobe representative to respond to information
requested by OEM:
Ivor Durham
Adobe Systems Incorporated Phone # (415) 962-2183
1585 Charleston Road Fax # (415) 961-3769
Mountain View, CA 94039-7900
(5) Adobe Contract Representative:
Ron Richter
Adobe Systems Incorporated Phone # (415) 962-6650
1585 Charlston Road Fax # (415) 965-7430
Mountain View, CA 94039-7900
(6) OEM Contact Representative:
Ron Moore
SuperMAC Technology Phone # (408) 254-2202
485 Potrero Ave. Fax # (408) 735-7250
Sunnyvale, CA 94086
IN WITNESS WHEREOF, each of Adobe and OEM has executed this Appendix No. 1
by its duly authorized officer.
ADOBE SYSTEMS INCORPORATED SUPERMAC TECHNOLOGY
By: /s/ Steve MacDonald By: /s/ Louis J. Doctor
-------------------------------- -----------------------------------
Name: Steve MacDonald Name: Louis J. Doctor
----------------------------- ---------------------------------
Title: V.P. Sys. Products Div. Title: V.P. Business Dev't
----------------------------- ---------------------------------
Date: Sept. 18, 1992 Date: Sept. 17, 1992
------------------------------ ----------------------------------
-9-
<PAGE>
Schedule 1 to Appendix No. 1
Specifications for the Configurable Postscript Interpreter
[*]
-10-
[*] Confidential Treatment Requested. The confidential portion has been omitted
and filed separately with the Securities and Exchange Commission.
<PAGE>
APPENDIX NO. 3
EFFECTIVE AS OF March 21 1994
-------------------------
TO THE
CONFIGURABLE POSTSCRIPT(TM) INTERPRETER
OEM LICENSE AGREEMENT
BETWEEN
ADOBE SYSTEMS INCORPORATED
AND
SUPERMAC TECHNOLOGY INCORPORATED
Name of CPSI Application: Power PC Level 2 Adobe Software RIP
This Appendix sets forth additional and different terms and conditions
particular to the Licensed System described below and shall be incorporated by
reference into the Configurable PostScript Interpreter OEM License Agreement
("Agreement") between SuperMac Technology Incorporated ("OEM") and Adobe Systems
Incorporated ("Adobe") effective as of September 18, 1992 and as amended by
Amendment No. 1 effective July 28, 1993. Such different or additional terms are
applicable only to the Licensed System described below and in no way alter the
terms and conditions applicable to other Licensed Systems incorporated into the
Agreement by addition of an appendix.
All the terms used in this Appendix shall retain the same meaning as
defined in the Agreement and such definitions are incorporated herein by
reference.
A. Description of CPSI Application:
SuperMac Color Printer Software RIP running on an Apple Power Macintosh
computer.
B. Description of Computer System:
[*]
-1-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
(2) One Designated Output Device from the following set:
a. ProofPositive full page color printer, 300 dpi, dye-
sublimation
b. ProofPositive two-page color printer, 300 dpi, dye sublimation
c. Fuji Xerox A Color copier, 400 dpi, laser
d. Xerox MajestiK color copier, 400 dpi, laser
OEM may use the CPSI Application to generate output from devices other than
those listed in this paragraph only within OEM's internal development group and
only for testing purposes within that group. New devices must be added to this
Appendix by an addendum before OEM may install such devices for use with the
CPSI Application outside the development group. If OEM wishes to add any other
device, it must [*] OEM shall authorize use of the CPSI Application to generate
output only on devices that have been approved by Adobe in accordance with the
provisions as described in this Paragraph.
OEM may upgrade the Computer System to the latest version of both the hardware
platform and the software platform supplied by a manufacturer or a supplier that
provides a compatible computer system after completion of Milestone #(13) in
Paragraph F of this Appendix, provided that the upgraded Computer System is
- -----------
object code compatible with the original Computer System described in this
Paragraph B. In the event that incompatibilities are introduced by hardware or
- -----------
software vendor(s), OEM may notify Adobe of such incompatibilities. Adobe will
assess these incompatibilities and, if necessary, OEM will upgrade the Loaned
Equipment to the upgraded Computer System. Adobe will communicate the results
of this assessment to the OEM. If agreed to by Adobe, upgrades to the Adobe
Software made by Adobe at OEM's request for incompatibilities introduced outside
of the Computer System described in Paragraph B, will be provided under the
-----------
terms of a Continuing Support Agreement or at Adobe's current consulting rates
and under applicable terms. OEM may not distribute an upgraded Computer System
that is not object code compatible with the original Computer System without
first submitting such upgrade to testing and acceptance in accordance with
Paragraph 3.8 ("Testing") of the Agreement.
- -------------
C. Licensed System:
[*]
-2-
[*] Confidential Treatment Requested.
<PAGE>
D. The Adobe Development environment is the specific computer environment in
which Adobe has developed and tested the Adobe Software and which is
defined below:
a. Hardware platform:
Same as described in Paragraph B(1).
--------------
b. Software platform:
Same as described in Paragraph B(1).
--------------
E. Adobe Deliverables:
(1) Adobe Software: As described in Exhibit A ("Description of Adobe
-------------- ---------
Software") to the Agreement and in the PostScript Language Reference
Manual (Second Edition). See also Exhibit G ("Configurable PostScript
---------
Interpreter Functional Specification") of the Agreement. Adobe
Software will be on Macintosh diskettes.
(2) Demonstration Program(s): The Demonstration Program(s) will be in "C"
------------------------
language source for-in and will provide OEM with an example of how to
use the Adobe Software described in Exhibit A ("Description of Adobe
---------
Software) of the Agreement to interpret PostScript language programs
and produce raster output. See also Exhibit G ("Configurable
---------
PostScript Interpreter Functional Specification") of the Agreement.
The Demonstration Program(s) will be delivered with the Adobe
Software.
(3) Other Adobe-Supplied Software: Aftermarket font conversion and
-----------------------------
installation utilities software for the Roman Initial Installation
Coded Font Programs listed in Paragraph J, to be bundled with and
-----------
used solely with a Licensed System.
(4) Documentation: The Documentation as described below will be
-------------
delivered in hard copy (1 copy).
a. CPSI Read Me First!
-3-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
b. CPSI Developer's Guide Companion (includes Functional
Specification)
c. CPSI Demonstration Software Guide
d. Supplement to the PostScript Language Reference Manual
e. PostScript Language Addendum Template
All of the above specified Documentation is to be used internally
solely for the purposes of developing a Licensed System and is to be
treated as confidential information of Adobe and subject to Paragraph
---------
2.1.6 ("Nondisclosure") of the Agreement. The PostScript Language
-----
Addendum Template supplied by Adobe hereunder is to be used by OEM
solely as a guide for customizing and creating the PostScript
Language Addendum for this Licensed System. The only Documentation
which OEM is permitted to distribute to its End User customers is the
PostScript Language Addendum with the content written by OEM and
approved by Adobe.
(5) Coded Font Programs: The Roman Initial Installation Coded Font
-------------------
Programs listed in Paragraph J will be delivered on the Adobe
-----------
Software distribution medium. The Coded Font Programs for Japanese
Typefaces listed in Paragraph K will be delivered on mutually
-----------
agreeable distribution media per Paragraph K.
-----------
(6) [*]
F. Development Schedule and Testing Expectations:
<TABLE>
<CAPTION>
MILESTONE DESCRIPTION *SCHEDULE:
<S> <C>
#(1) [*]
#(2) [*]
</TABLE>
-4-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
<TABLE>
<CAPTION>
MILESTONE DESCRIPTION *SCHEDULE
--------------------- ---------
<S> <C>
#(3) [*]
#(4) [*]
#(5) [*]
#(6) [*]
#(7) [*]
#(8) [*]
</TABLE>
-5-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
<TABLE>
<CAPTION>
MILESTONE DESCRIPTION SCHEDULE
--------------------- --------
<S> <C>
#(9)
#(10)
[*]
#(11)
#(12)
#(13)
</TABLE>
[*]
-6-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
G. OEM Loaned Equipment:
[*]
H. [*]
I. Applicable Royalties:
(1) Royalties for Worldwide Distribution of Licensed Systems:
--------------------------------------------------------
a. Basis for Payments Hereunder. All royalties due to Adobe by
----------------------------
OEM shall be paid in U.S. Dollars regardless of the location
of the transaction or the type of currency used to consummate
the transaction .
b. Licensed Use Royalty. The Licensed Use royalty for CPSI
--------------------
Application and for the Coded font Programs described herein
shall apply to all Licensed Systems and Coded Font Programs
used internally by OEM or its Subsidiaries and to all
Licensed Systems and Coded Font Programs sold, leased or
otherwise disposed of by OEM or its Subsidiaries directly or
indirectly to End Users. royalties are calculated on a per
Licensed Use basis and OEM shall ensure that it accounts for
and pays royalties for each Licensed Use of the CPSI
Application Object and Coded Font Programs.
c. List Prices. All List Prices, as described below, shall mean
-----------
OEM's published List Price, established in good faith, for
quantity one (1) of the fully functioning Licensed System
described hereunder as distributed to End Users in both Roman
and Japanese Versions. Such calculations shall be exclusive
of amounts received for taxes, interest, non-warranty
maintenance and installation charges, insurance, shipping and
handling costs.
(i) U.S. List Price. The U.S. List Price shall mean OEM's
---------------
published List Price in U.S. Dollars to End Users for
quantity one (1) of a Licensed System with Minimum
Configuration as described in Paragraph C above,
-----------
for distribution in the United States. The U.S. List
Price of the Licensed System shall apply for the
purpose of royalty calculations hereunder for each
Licensed Use of a Roman Version (as described in
Paragraph I(2)a below) of the
---------------
Licensed
-7-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
System distributed for use throughout the world excluding Japan where
the distribution of Licensed Systems is limited to Japanese Versions.
(ii) Japanese List Price. The Japanese List Price shall
-------------------
mean OEM's published List Price in Japanese yen to End Users for quantity one
(1) of a Japanese Version (with two (2) or five (5) Japanese Typefaces as
described in Paragraph I(2)b below) of a Licensed System with Minimum
---------------
Configuration as described in Paragraph C above, for distribution in Japan. The
-----------
Japanese List Price shall apply for the purpose of royalty calculations
hereunder for each Licensed Use of a Japanese Version of the Licensed System
distributed for use throughout the world. The Japanese List Price shall be
converted into U.S. Dollars at a rate equal to the average of the exchange rates
quoted in the Wall Street Journal at the end of the first and last days of the
relevant quarterly accounting period defined in Paragraph 7.5 ("Payment of
-------------
Royalties") of the Agreement. OEM shall use the converted Japanese List Price to
calculate the royalty for CPSI Application hereunder.
(2) Licensed Use Loyalties for CPSI Application:
-------------------------------------------
a. Roman Versions. OEM shall bundle the Roman Initial Installation
--------------
Coded Font Programs identified in Paragraph J with each Licensed System
-----------
distributed hereunder (a "Roman Version"). OEM may also distribute a Roman
Version bundled with either an additional twenty-two (22) Roman Additional Coded
Font Programs, as identified in Group I of Paragraph K(1) below or with all of
--------------
the Roman Additional Coded Font Programs identified in Group I and the
additional Roman Additional Coded Font Programs identified in Group 2 of
Paragraph K(1) below. If OEM elects to distribute the Roman Additional Coded
- --------------
Font Programs identified in Group 2, OEM must also bundle the Roman Additional
Coded Font Programs identified in Group 1.
For each Roman Version of the Licensed System which is distributed or used
internally (beyond the number of Licensed Uses provided royalty-free for
Internal Use under Paragraph I(6) below) by OEM or its Subsidiaries hereunder,
--------------
OEM shall pay Adobe a per Licensed Use royalty based on the U.S. List Price of a
Licensed System with Minimum Configuration using the following method of royalty
calculation:
[*]
b. Japanese Versions. OEM agrees that with each Licensed System
-----------------
distributed for use in Japan (a "Japanese Version"), it shall bundle the same
Roman Coded Font Programs as specified in Paragraph I(2)a above for Roman
---------------
Versions. Additionally, OEM shall bundle the [*] coded Font Programs
for Japanese Typefaces identified in Paragraph K(2)(i), or [*]
-----------------
-8-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
Coded Font Programs for Japanese Typefaces identified in Paragraph K(2)(ii),
------------------
with every Licensed System distributed for use in Japan.
OEM is not required to bundle the Coded Font Programs for Japanese Typefaces
with Licensed Systems distributed for use outside of Japan. However, if OEM
decides to distribute Licensed Systems with Coded Font Programs for Japanese
Typefaces for use outside of Japan, it shall bundle the Coded Font Programs for
Japanese Typefaces in accordance with the above paragraph.
For each Japanese Version of the Licensed System which is distributed or used
internally
[*]
(3) Software Upgrade Royalties:
---------------------------
"Software Upgrades" means the installation of both the CPSI Application
Object and Coded Font Programs in a Licensed System already distributed under
license in place of CPSI Application Object and Coded Font Programs previously
installed in such Licensed System for the purpose of updating, enhancing or
extending a Licensed System. To qualify for Software Upgrade pricing, OEM must
either (i) promptly destroy the media containing the prior version of the CPSI
Application Object and Coded Font Programs, or (ii) return the media containing
the CPSI Application Object and Coded Font Programs to the factory where they
were manufactured, and immediately accrue a new royalty when such CPSI
Application and Coded Font Programs are shipped as part of a new s obligated to
account for any of the replaced CPSI Application Object and Coded Font Programs
which are not destroyed.
OEM shall keep accurate records of the number of Software Upgrades which it
distributes to its customers and the disposition of the corresponding CPSI
Application Object and Coded Font Programs replaced by the Software Upgrades.
OEM shall submit reports containing such Software Upgrade information in
accordance with its reporting requirements pursuant to Paragraph 7.5 ("Payment
-------------
of Royalties") of the Agreement. In addition, upon request from Adobe, OEM
shall certify to Adobe in writing signed by its authorized representative, that
it has fully complied with the requirement contained in this Paragraph I(3).
--------------
[*]
-9-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
[*]
The per copy royalty for each Coded Font Program not previously included in the
unit being upgraded shall be determined in accordance with Paragraph I(5) below
--------------
for each Roman and Japanese Typeface which is part of the Software Upgrade.
(4) Hardware Upgrades for Distribution Worldwide:
---------------------------------------------
[*]
OEM shall pay a Hardware Upgrade royalty based on the applicable U.S. or
Japanese List Price to End Users for the Hardware Upgrade equal to [*] of the
applicable End User List Price.
(5) Licensed Use Royalty for Coded Font Programs:
---------------------------------------------
a. Licensed Use Royalties for Roman Initial Installation Coded Font
----------------------------------------------------------------
Programs. The seventeen (17) Roman Initial Installation Coded Font Programs
- --------
specified in Paragraph J of this Appendix No. 3 and bundled with a Licensed
-----------
System [*].
b. Licensed Use Royalties for Roman Additional Coded Font Programs. OEM
----------------------------------------------------------------
shall pay the following royalty per Typeface or sets, as applicable, for each
Licensed Use of the Roman Additional Coded Font Programs specified in Paragraph
---------
K of this Appendix No. 3 which are distributed or used internally by OEM or its
- -
subsidiaries and bundled as part of a Licensed System:
[*]
-10-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
[*]
c. Licensed Use Royalties for Coded Font Programs for Japanese
-----------------------------------------------------------
Typefaces. For the Coded Font Programs for Japanese Typefaces described in
- ---------
Paragraph K(2) which are distributed or used internally by OEM or its
- --------------
Subsidiaries and bundled as part of a Licensed System, OEM shall pay
Adobe a per Typeface royalty for each Licensed Use of the Coded Font programs
for Japanese Typefaces as follows:
[*]
-11-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
J. Roman Initial Installation Coded Font Program:
Adobe will provide the graphic characters specified in ISO 8859-1: 1987,
Latin alphabet No. 1 and symbol characters as applicable, for the following
Roman Initial Installation Coded Font Programs:
<TABLE>
<CAPTION>
IDENTIFYING TRADEMARK TYPEFACE TRADEMARK OWNER
----------------------- ------------------------------ ---------------------------------------------
<S> <C> <C>
Helvetica Linotype-Hell AG and/or its subsidiaries
Helvetica Bold Linotype-Hell AG and/or its subsidiaries
Helvetica Oblique Linotype-Hell AG and/or its subsidiaries
Helvetica Bold Oblique Linotype-Hell AG and/or its subsidiaries
Times Roman Linotype-Hell AG and/or its subsidiaries
</TABLE>
<TABLE>
<CAPTION>
IDENTIFYING TRADEMARK TYPEFACE TRADEMARK OWNER
----------------------- ----------------------- ---------------------------------------------
<S> <C> <C>
Times Bold Linotype-Hell AG and/or its subsidiaries
Times Italic Linotype-Hell AG and/or its subsidiaries
Times Bold Italic Linotype-Hell AG and/or its subsidiaries
Symbol (Public Domain)
Courier (Public Domain)
Courier Bold (Public Domain)
Courier Oblique (Public Domain)
Courier Bold Oblique (Public Domain)
Helvetica Narrow Linotype-Hell AG and/or its subsidiaries
Helvetica Narrow Bold Linotype-Hell AG and/or its subsidiaries
Helvetica Narrow Oblique Linotype-Hell AG and/or its subsidiaries
Helvetic Narrow Bold Oblique Linotype-Hell AG and/or its subsidiaries
</TABLE>
K. Additional Coded Font Programs:
(1) Roman Additional Coded Font Programs:
Upon written notification by OEM, Adobe will provide the graphic.
characters specified in ISO 8859-1: 1987, Latin alphabet No. 1 and
symbol characters as applicable, for the Roman Additional Coded Font
Programs listed in Group 1 below. Upon written notification by OEM,
Adobe will provide the graphic characters specified in LSO 8859-1:
1987, Latin alphabet No. 1 and symbol characters, as applicable, for
the Roman Additional Coded Font Programs listed in. Group 2 below.
[*]
Group 1:
- --------
<TABLE>
<CAPTION>
IDENTIFYING TRADEMARK TYPEFACE TRADEMARK OWNER
------------------------ ----------------------- ---------------------------------------------
<S> <C> <C>
ITC Avant Garde Gothic Book International Typeface Corporation
ITC Avant Garde Gothic Book Oblique International Typeface Corporation
ITC Avant Garde Gothic Demi International Typeface Corporation
ITC Avant Garde Gothic Demi Oblique International Typeface Corporation
ITC Bookman Light International Typeface Corporation
ITC Bookman Light Italic International Typeface Corporation
</TABLE>
-12-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
<TABLE>
<S> <C> <C>
ITC Bookman Demi International Typeface Corporation
ITC Bookman Demi Italic International Typeface Corporation
New Century Schoolbook Roman Public Domain
New Century Schoolbook Bold Public Domain
New Century Schoolbook Italic Public Domain
New Century Schoolbook Bold Italic Public Domain
ITC Zapf Chancery Medium Italic International Typeface Corporation
ITC Zapf Dingbats International Typeface Corporation
Palatino Roman Linotype-Hell AG and/or its subsidiaries
Palatino Bold Linotype-Hell AG and/or its subsidiaries
Palatino Italic Linotype-Hell AG and/or its subsidiaries
Palatino Bold Italic Linotype-Hell AG and/or its subsidiaries
Helvetica Condensed Linotype-Hell AG and/or its subsidiaries
Helvetica Condensed Bold Linotype-Hell AG and/or its subsidiaries
Helvetica Condensed Oblique Linotype-Hell AG and/or its subsidiaries
Helvetica Condensed Bold Oblique Linotype-Hell AG and/or its subsidiaries
</TABLE>
Group 2:
- --------
<TABLE>
<CAPTION>
IDENTIFYING TRADEMARK TYPEFACE TRADEMARK OWNER
------------------------ -------------------------- ----------------------------------------------
<S> <C> <C>
Adobe Caslon(TM) Regular Adobe Systems Incorporated
Adobe Caslon Italic Adobe Systems Incorporated
Adobe Caslon Semibold Adobe Systems Incorporated
Adobe Caslon Semibold Italic Adobe Systems Incorporated
Adobe Garamond(TM) Regular Adobe Systems Incorporated
Adobe Garamond Italic Adobe Systems Incorporated
Adobe Garamond Bold Adobe Systems Incorporated
Adobe Garamond Bold Italic Adobe Systems Incorporated
Barmeno(TM) Regular H. Berthold AG
Barmeno Medium H. Berthold AG
Barmeno Bold H. Berthold AG
Barmeno Extra Bold H. Berthold AG
Lithos(TM) Regular Adobe Systems Incorporated
Lithos Black Adobe Systems Incorporated
Trajan Bold Adobe Systems Incorporated
Adobe Wood Type(TM)2 Ornaments Adobe Systems Incorporated
Blackoak(TM) Regular Adobe Systems Incorporated
Carta(TM) Map Symbols Adobe Systems Incorporated
Tekton(TM) Regular Adobe Systems Incorporated
Tekton Bold Adobe Systems Incorporated
Park Avenue(R) Regular Kingsley/ATF Type Corporation
Poetica 2 Supplement Ornaments Adobe Systems Incorporated
Kaufmann(R) Regular Kingsley/ATF Type Corporation
Americana(R) Regular Kingsley/ATF Type Corporation
Americana Extra Bold Kingsley/ATF Type Corporation
Parisian Regular Kingsley/ATF Type Corporation
Formata(R) Regular H. Berthold AG
Formata Medium H. Berthold AG
Formata Italic H. Berthold AG
Formata Medium Italic H. Berthold AG
</TABLE>
After receipt of written request from OEM, Adobe will provide the Macintosh
compatible Bitmap Fonts for the Roman Additional Coded Font Programs listed in
Group 1 and in Group 2 without additional charge. These Bitmap Fonts can only
be used in conjunction with a Licensed System.
-13-
<PAGE>
(2) Coded Font Programs for Japanese Typefaces:
Upon written notification by OEM, Adobe will provide the Adobe Standard
Japanese Character Set, which includes all of the characters, in Adobe's
Kanji Glyph Collection and Glyph Sets Technical Note #5031, dated November
----------------------------------------------------------
12, 1990, with the exception of generic characters listed therein, for the
following Coded Font Programs for Japanese Typefaces.
[*]
<TABLE>
<CAPTION>
IDENTIFYING TRADEMARK TRADEMARK OWNER
------------------------ ---------------------------------
<S> <C>
Ryumin Light KL Morisawa & Co., Ltd.
Gothic Medium BBB Morisawa & Co., Ltd.
Futo Min A101 Morisawa & Co., Ltd.
Futo Go B101 Morisawa & Co., Ltd.
June 101 Morisawa & Co., Ltd.
</TABLE>
Such Coded Font Programs for Japanese Typefaces will be distributed on
mutually agreeable distribution media and will be encrypted and copy
protected against unauthorized duplication in a manner to be specified by
Adobe. [*] Special character set encodings are not provided.
OEM may not distribute additional Coded Font Programs for Japanese
Typefaces in an unbundled form for the purpose of upgrading an existing
Licensed System from [*] for Japanese Typefaces. If OEM desires to offer to
customers additional Coded Font Programs for Japanese Typefaces, it may
license the additional [*] aftermarket fonts in retail product
version directly from Adobe or Morisawa to provide to OEM's End Users.
After receipt of written request from OEM, Adobe will provide the Macintosh
compatible Bitmap Fonts for Futo Min A101, Futo Go B101 and Jun 101 without
additional charge. These Bitmap Fonts can only be used in conjunction with
a Licensed System. Bitmap Fonts for Ryumin light KL and Gothic Medium BBB
will not be provided, since they are available to the End User bundled with
Apple's KanjiTalk(TM) system software.
L. Protection Mechanisms:
(1) Adobe and OEM shall mutually agree on a License Management Mechanism
which OEM shall utilize as a copy protection device in each
-14-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
Licensed System distributed under this appendix and as a way of
ensuring that use of the CPSI Application Object and Coded Font
Programs is limited to Licensed Uses.
(2) OEM shall implement the os_serialnumber ( ) library procedure to
guarantee that it returns a unique 32 bit identifier for each
Licensed System .
(3) Adobe and OEM shall mutually agree upon a secure production method
for the Japanese font copy-protection keys.
(4) All Coded Font Programs for Japanese Typefaces bundled with each
Licensed System shall be keyed to such Licensed System's unique 32
bit identifier.
M. Provisions for Raster File Output:
The SuperMac Power PC Level 2 Adobe Software RIP may be used to generate
raster files from PostScript files for use as a print preview or with a
photo retouch or paint software package of an End User's choice residing on
any workstation connected to the Licensed System.
The SuperMac Power PC Level 2 Adobe Software RIP may be used to generate
raster files in [*]. The raster file format shall be Unedited to the format
characteristics of the Designated Output Device or to 150 dpi or less for
output to a display. [*]
N. Adobe Product Certification and Shipment Standards:
The following Adobe standards shall apply for purposes of this Appendix No.
3:
[*]
-15-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
[*]
O. Designated Representatives
(1) Technically qualified OEM Representative to respond to information
requested by Adobe:
Richard Falk Phone (408) 541-5207
SuperMac Technology Incorporated FAX (408) 541-6150
215 Moffett Park Drive
Sunnyvale, CA 94089-1374
(2) Technically qualified Adobe representative to respond to information
requested by OEM:
Ivor Durham Phone (415) 962-2183
Adobe Systems Incorporated FAX (415) 961-4022
1585 Charleston Road
Mountain View, CA 94039-7900
(3) Adobe Contract Representative:
Jeffrey Eid Phone (415) 962-3962
Adobe Systems Incorporated FAX (415) 965-7430
1585 Charleston Road
Mountain View, CA 94039-7900
-16-
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
(4) OEM Contract Representative:
Mark Housley Phone (408) 541-5215
SuperMac Technology Incorporated FAX (408) 541-6150
215 Moffett Park Drive
Sunnyvale, CA 94089-1374
IN WITNESS WHEREOF, OEM and Adobe have caused this Appendix No. 3 to be
executed by their duly authorized officers.
ADOBE: OEM:
ADOBE SYSTEMS INCORPORATED SUPERMAC TECHNOLOGY
INCORPORATED
By: /s/ M. Bruce Nakao By: /s/ Jay Torborg
--------------------------------- ---------------------------
Print Print
Name: M. Bruce Nakao Name: Jay Torborg
-------------------------------- --------------------------
Title: Sr. VP & CFO Treasurer & Title: VP Engineering
------------------------------- -------------------------
Assistant Secretary
-----------------------
Date: 3/21/1994 Date: 3/18/94
-------------------------------- --------------------------
-17-
<PAGE>
EXHIBIT 10.5a
AMENDMENT NO. 2
TO
CONFIGURABLE POSTSCRIPT INTERPRETER OEM LICENSE AGREEMENT
BETWEEN
SUPERMAC TECHNOLOGY, INC.
AND ADOBE SYSTEMS INCORPORATED
Effective Date: February 28, 1994
This Amendment No. 2 to the Configurable PostScript Interpreter OEM License
Agreement, effective September 18,1992 (the "Agreement") is by and between Adobe
Systems Incorporated, having its place of business at 1585 Charleston Road, P.O.
Box 7900, Mountain View, California, 94039-7900 ("Adobe") and SuperMac
Technology, Inc. having its place of business at 215 Moffett Park Drive,
Sunnyvale, CA 94089. ("OEM").
WHEREAS, it is the mutual goal of OEM and Adobe to work together in
promoting the PostScript language as an industry standard and in defining and
offering services and products to the market which promote and facilitate the
use of Adobe's CPSI Software; and
WHEREAS, Adobe and OEM agree to undertake certain activities in a
cooperative manner, as specified in this Amendment, with the intended purpose of
achieving the above stated mutual goal of the parties; and
WHEREAS, in furtherance of such agreed upon goal, Adobe has offered
specified volume discounts which may be applied to mutually agreed upon products
and types of distribution, as described in this Amendment; and
WHEREAS, OEM agrees to make certain commitments and to assume additional
responsibilities described in this Amendment as a condition to OEM being
entitled to receive such specified volume discounts.
A. Adobe and OEM hereby agree to modify the Agreement as follows:
1. Paragraph 2 ("License Grants"). Paragraph 2.1.12 [*]
----------- ----------------
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
[*]
2. Paragraph 2 ("License Grant"). The term [*] is hereby deleted from
-----------
Paragraph 2.2 ("No Right to Source Software"), as amended.
- -------------
3. Paragraph 2 ("License Grant"). The first sentence of Paragraph 2.5
----------- -------------
("Reverse Engineering"), as amended, is hereby deleted in its entirety and
replaced by the following:
"2.5 Reverse Engineering. OEM agrees that it will not reverse
-------------------
engineer, reverse compile, disassemble or otherwise attempt to create source
code which is derived from the Adobe Software, Other Adobe-Supplied Software,
Coded Font Programs or Demonstration Program(s) provided in object code form."
4. Paragraph 10.5 ("OEM's Use of Trademarks") of the Agreement is amended
--------------
in its entirety to read as follows:
"10.5 OEM's Use of Trademarks. OEM agrees that it will include the
-----------------------
Adobe Trademarks on all copies of the CPSI Application and in any advertising
concerning the CPSI Application and that it will use the applicable Trademarks
and Adobe Trademarks on all copies, advertisements, brochures, manuals and other
appropriate uses made in the promotion, distribution or use of the CPSI
Application, Bitmap Fonts and Coded Font Programs. Any use by OEM of the Adobe
Trademarks shall conform to the standards set forth by Adobe in its then
available Trademark Reference Manual. OEM shall make specific reference to
PostScript software from Adobe in any advertisement which refers to the CPSI
Application. In addition, OEM agrees to include (i) in the system software
visible to the End User and on any Designated Output Devices distributed by OEM
part of the Licensed System, and (ii) a copy of the brochure entitled
"PostScript is...", if provided free of charge by Adobe, with each Licensed
System distributed in the U.S. Further, OEM agrees to promote the Licensed
System at trade shows at which other OEM products are displayed and to allow
Adobe to review all announcements and press releases pertaining to Licensed
Systems prior to their release to the public or the press. Further, with
respect to such announcements and press releases, OEM agrees to incorporate all
changes that Adobe may reasonably request to ensure correct Adobe Trademark
usage and accuracy of content related to the Adobe Software."
[*] Confidential Treatment Requested. The confidential portion has been omitted
and filed separately with the Securities and Exchange Commission.
-2-
<PAGE>
5. A new Paragraph 16 ("Clone Product Development") is added to the
------------
Agreement to read as follows:
"16. Clone Product Development.
-------------------------
If at any time during the term of the Agreement OEM commits resources to
development of or acquires rights to a product or software having page
description capabilities that are substantially compatible with the PostScript
language (hereinafter "Clone Product"), it may do so; provided however, that OEM
is obligated to inform Adobe of such decision immediately thereafter, and upon
such event, the discounts, if any, which OEM may be receiving under the
provisions in Paragraph 17 ("Qualifying for Royalty Discounts") below shall
continue, but only on a conditional basis, until such time as OEM begins
marketing a Clone Product or abandons its effort to market a Clone Product. In
the event that OEM begins marketing a Clone Product, OEM shall resume paying the
full Licensed System and Coded Font Program royalties and, further, shall
reimburse Adobe the full amount of the discounts on Licensed Systems shipped
after OEM has committed resources to such development of, or after having
acquired rights to, a Clone Product, whether or not OEM complies with its
obligations to inform Adobe as required in this Paragraph."
6. A new Paragraph 17 ("Qualifying for Royalty Discounts") is added to
------------
this Agreement to read as follows:
"17. Qualifying for Royalty Discounts.
--------------------------------
17.1 Royalty Discounts. [*]
-----------------
[*] Confidential Treatment Requested. The confidential portion has been omitted
and filed separately with the Securities and Exchange Commission.
-3-
<PAGE>
17.2 General Discount Terms. [*]
----------------------
17.3 Qualifying for Royalty Discounts. [*]
--------------------------------
[*] Confidential Treatment Requested. The confidential portion has been omitted
and filed separately with the Securities and Exchange Commission.
-4-
<PAGE>
[*]
7. Paragraph 16 ("General") and all subparagraphs thereto are renumbered
------------
as Paragraph 18 ("General") and all subparagraphs thereto are renumbered
------------
appropriately.
8. Exhibit I ("Authorized Printer Engine Manufacturer Distributor") has
---------
been deleted in its entirety and replaced with the updated and amended Exhibit I
---------
attached hereto.
9. A new Exhibit J ("Volume Discount Schedule") is hereby added to the
---------
Agreement and is attached hereto.
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
-5-
<PAGE>
B. All other terms and conditions of the Agreement shall remain in full force
and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment No. 2 to the
Agreement to be signed by their duly authorized representatives.
Adobe: OEM:
ADOBE SYSTEMS INCORPORATED SUPERMAC TECHNOLOGY, INC.
By: /s/ S.A. MacDonald By: [illegible]
-------------------------------- --------------------------------
Name: S.A. MacDonald Name:
------------------------------- ------------------------------
Title: Sr. V.P., General Manager, SPD Title:
------------------------------ -----------------------------
Date: 2-28-94 Date:
------------------------------- ------------------------------
-6-
<PAGE>
EXHIBIT I
---------
Authorized Printer Engine Manufacturer Distributors
Authorized Printer Engine Manufacturer Distributors must be specified in
this Exhibit L Licensed Systems must be specified in this Exhibit I. AU request
for changes to this Exhibit must be submitted to Adobe in writing and such
changes shall apply only ff subsequently approved by Adobe by the issuance of an
updated Exhibit I.
Licensed Systems
Third Party CPSI Platform Designated Output Device/Model
- ----------- ------------- ------------------------------
Fuji Xerox Base SM-ICS A Color
Splash.MX Majestik
Splash.MX A Color
Fuji Xerox High-end SM-ICS A Color
Splash.MX Majestik
Splash.TX A Color
Xerox Splash.MX Majestik
Xerox Splash.TX Majestik
Rank Xerox Splash.MX Majestik
Rank Xerox Splash.TX Majestik
Hoechst-Celanese Corp. Macintosh CPSI ProofPositive
Shinko Electric Corp. Macintosh CPSI ProofPositive
<PAGE>
EXHIBIT J
---------
Volume Discount Schedule
[*]
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
APPENDIX NO. 2
EFFECTIVE AS OF JULY 28, 1993
TO THE
CONFIGURABLE POSTSCRIPT/TM/ INTERPRETER
OEM LICENSE AGREEMENT
BETWEEN
ADOBE SYSTEMS INCORPORATED
AND
SUPERMAC TECHNOLOGY INCORPORATED
Name of CPSI Application: SuperMaster Image Creation System (SM-ICS) Server
This Appendix sets forth additional and different terms and conditions
particular to the Licensed System described below and shall be incorporated by
reference into the Configurable PostScript Interpreter OEM License Agreement
("Agreement") between SuperMac Technology Incorporated ("OEM") and Adobe Systems
Incorporated ("Adobe") effective as of September 18, 1992. Such different or
additional terms are applicable only to the Licensed System described below and
in no way alter the terms and conditions applicable to other Licensed Systems
incorporated into the Agreement by addition of an appendix.
All the terms used in this Appendix shall retain the same meaning as
defined in the Agreement and such definitions are incorporated herein by
reference.
A. Description of CPSI Application:
Adobe Software integrated with the SuperMaster Image Creation System (SM-ICS)
software running on a MIPS-based accelerator card to create a PostScript Level 2
rasterization server.
B. Description of Computer System:
[*]
[*] Confidential Treatment Requested. The confidential portion has been omitted
and filed separately with the Securities and Exchange Commission.
<PAGE>
[*]
OEM may upgrade the Computer System to the latest version of both the hardware
platform and the software platform supplied by a manufacturer or a supplier that
provides a compatible computer system after completion of Milestone #(11) in
Paragraph F of this Appendix, provided that the upgraded Computer System is
- -----------
object-code compatible with the original Computer System described in this
Paragraph B. In the event that incompatibilities are introduced by hardware or
- -----------
software vendor(s), OEM may notify Adobe of such incompatibilities. Adobe will
assess these incompatibilities and, if necessary, OEM will upgrade the OEM-
Loaned Equipment to the upgraded Computer System. Adobe will communicate the
results of this assessment to the OEM. If agreed to by Adobe, upgrades to the
Adobe Software made by Adobe at OEM's request, for incompatibilities introduced
outside of the Computer System described in Paragraph B will be provided under
-----------
the terms of a Continuing Support Agreement or at Adobe's current consulting
rates and under applicable terms. [*]
C. Licensed System:
[*]
[*] Confidential Treatment Requested. The confidential portion has been omitted
and filed separately with the Securities and Exchange Commission.
-2-
<PAGE>
[*]
D. Adobe Development Environment:
The Adobe Development Environment is the specific computer environment in
which Adobe has developed and tested the Adobe Software and which is
defined below:
(1) Hardware platform: Silicon Graphics, Inc. Indigo workstation with 16
-----------------
megabytes of memory and 200 megabytes of disk;
(2) Software platform: Silicon Graphics, Inc. IRIX 4.0.5 operating system.
-----------------
E. Adobe Deliverables:
(1) Adobe Software: As described in Exhibit A ("Description of Adobe
-------------- ---------
Software") to the Agreement and in the PostScript Language Reference
Manual, Second Edition. See also Exhibit G ("Configurable PostScript
---------
Interpreter Functional Specification") of the Agreement. Adobe Software
will be delivered on 1/4 inch tape media.
(2) Demonstration Program(s): The Demonstration Program(s) will be in "C"
------------------------
language source form and will provide OEM with an example of how to use the
Adobe Software described in Exhibit A ("Description of Adobe Software") of
---------
the Agreement to interpret PostScript language programs and produce raster
output See also Exhibit G ("Configurable PostScript Interpreter Functional
---------
Specification") of the Agreement. The Demonstration Program(s) will be
delivered with the Adobe Software.
[*] Confidential Treatment Requested. The confidential portion has been omitted
and filed separately with the Securities and Exchange Commission.
-3-
<PAGE>
(3) Other Adobe-Supplied Software: The following Other Adobe-Supplied
-----------------------------
Software will be provided:
Macintosh-based Japanese font installer to be bundled with and solely for
use with a Licensed System. This Japanese font installer is licensed for
use to install aftermarket Japanese fonts that are supplied and
manufactured by Adobe or Morisawa & Co., Ltd., on the Licensed System. The
Japanese font installer shall be compatible with Apple's Mac OS 6.0.7J and
Apple's KanjiTalk/TM/7.
(4) Documentation: The Documentation as described below will be delivered
-------------
in hard copy (1 copy).
a. CPSI Read Me First!
b. Configurable PostScript Interpreter Functional Specification
c. CPSI Demonstration Software Guide
d. CPSI Product Developer's Guide
e. Supplement to the PostScript Language Reference Manual
f. PostScript Language Addendum Template
All of the above specified Documentation is to be used internally solely
for the purposes of developing a Licensed System and is to be treated as
confidential information of Adobe and subject to Paragraph 2.1.6
---------------
("Nondisclosure") of the Agreement. The PostScript Language Addendum
Template supplied by Adobe hereunder is to be used by OEM solely as a guide
for customizing and creating the PostScript Language Addendum for this
Licensed System. The only Documentation which OEM is permitted to
distribute to its End User customers is the PostScript Language Addendum
with the content written by OEM and approved by Adobe.
(5) Coded Font Programs: The Coded Font Programs described in Paragraphs J
------------------- ------------
and K below.
-
(6) [*]
F. Development Schedule and Testing Expectations:
Milestone Description Schedule*
- ---------------------- ---------
[*]
[*] Confidential Treatment Requested. The confidential portion has been omitted
and filed separately with the Securities and Exchange Commission.
-4-
<PAGE>
Milestone Description Schedule*
- ---------------------- ---------
[*]
[*] Confidential Treatment Requested. The confidential portion has been omitted
and filed separately with the Securities and Exchange Commission.
-5-
<PAGE>
Milestone Description Schedule*
- ---------------------- ---------
[*]
G. OEM-Loaned Equipment:
[*]
[*] Confidential Treatment Requested. The confidential portion has been omitted
and filed separately with the Securities and Exchange Commission.
-6-
<PAGE>
[*]
H. Software License Fee:
[*]
I. Applicable Royalties:
(1) Royalties for Worldwide Distribution of Licensed Systems:
--------------------------------------------------------
a. Basis for Payments Hereunder. All royalties due to Adobe by OEM
----------------------------
shall be paid in U.S. Dollars regardless of the location of the transaction
or the type of currency used to consummate the transaction.
b. When Royalties Are Earned. All royalties due hereunder shall be
-------------------------
earned on the date OEM ships a complete Licensed System, or the components
listed in Paragraphs C(2) through (5) to make a complete Licensed System,
-------------- ---
to its customers.
c. Licensed Use Royalty. The Licensed Use royalty for CPSI
--------------------
Application and for the Coded Font Programs described herein shall apply to
all Licensed Systems and Coded Font Programs used internally by OEM or its
Subsidiaries and to all Licensed Systems and Coded Font Programs sold,
leased or otherwise disposed of by OEM or its Subsidiaries directly or
indirectly to End Users. Royalties are calculated on a per Licensed Use
basis and OEM shall ensure that it accounts for and pays royalties for each
Licensed Use of the CPSI Application Object and Coded Font Programs.
d. List Prices. All List Prices, as described below, shall mean OEM's
-----------
published List Price, established in good faith, for quantity one (1) of
the fully functioning Licensed System described hereunder as distributed to
End Users in both Roman and Japanese Versions. Such calculations shall be
exclusive of amounts received for taxes, interest, non-warranty maintenance
and installation charges, insurance, shipping and handling costs. OEM shall
[*] Confidential Treatment Requested. The confidential portion has been omitted
and filed separately with the Securities and Exchange Commission.
-7-
<PAGE>
distribute the components listed in Paragraphs C(2) through (5) herein
--------------- ---
solely for use with a computer supporting platform described in Paragraph
---------
C (1). Where OEM is not able to identify which specific model of computer
supporting platform, as specified in Paragraph C(1) above, is to be
--------------
included as part of the Licensed System, OEM shall determine the List Price
of the Licensed System using the List Price of any computer supporting
platform which has a Minimum Configuration equal to that specified in
Paragraph C(1).
--------------
(i) U.S. List Price. The U.S. List Price shall mean OEM's
---------------
published List Price in U.S. Dollars to End Users for quantity one (1) of a
fully functioning Licensed System as described in Paragraph C above, for
-----------
distribution in the United States. Should the U.S. List Price as described
above not be available because OEM is not shipping Licensed Systems in the
United States, the US. List Price shall mean OEM's published List Price in
Australian Dollars to End Users for quantity one (1) of a fully functioning
Licensed System as described in Paragraph C above, for distribution in
-----------
Australia. Australian Dollars shall be converted into U.S. Dollars at a
rate equal to the average of the exchange rates quoted in the Wall Street
Journal at the end of the first and last days of the relevant quarterly
accounting period defined in Paragraph 7.5 ("Payment of Royalties") of the
-------------
Agreement. The U.S. List Price of the Licensed System shall apply for the
purpose of royalty calculations hereunder for each Licensed Use of a Roman
Version (as described in Paragraph I(2)a below) of the Licensed System
---------------
distributed for use throughout the world excluding Japan where the
distribution of Licensed Systems is limited to Japanese Versions.
(ii) Japanese List Price. The Japanese List Price shall mean
-------------------
OEM's published List Price in Japanese yen to End Users for quantity one
(1) of a fully functioning Japanese Version (with five (5) or seven (7)
Japanese Typefaces as described in Paragraph I(2)b below) of a Licensed
---------------
System as described in Paragraph C above, for distribution in Japan. The
-----------
Japanese List Price shall apply for the purpose of royalty calculations
hereunder for each Licensed Use of a Japanese Version of the Licensed
System distributed for use throughout the world. The Japanese List Price
shall be converted into U.S. Dollars at a rate equal to the average of the
exchange rates quoted in the Wall Street journal at the end of the first
and last days of the relevant quarterly accounting period defined in
Paragraph 7.5 ("Payment of Royalties") of the Agreement. OEM shall use the
-------------
converted Japanese List Price to calculate the royalty for CPSI Application
hereunder.
(2) Licensed Use Royalty for CPSI Application:
-----------------------------------------
a. Roman Versions. OEM shall bundle the Roman Initial Installation
--------------
Coded Font Programs identified in Paragraph J and the Roman Additional
-----------
Coded Font Programs identified in Group I of Paragraph K(l) below with each
--------------
Licensed System distributed hereunder (a "Roman Version"). OEM may also
distribute a Roman Version bundled with an additional thirty (30) Roman
Additional Coded Font Programs, as identified in Group 2 of Paragraph K(l)
--------------
below.
-8-
<PAGE>
For each Roman Version of the Licensed System which is distributed or used
internally (beyond the number of licensed Uses provided royalty-free for
Internal Use under Paragraph I(6) below) by OEM or its Subsidiaries
--------------
hereunder, OEM shall pay Adobe a per Licensed Use royalty based on the U.S.
List Price of a Licensed System using the following method of royalty
calculation:
[*]
The same per Licensed Use royalty shall apply for each Roman Version of the
Licensed System distributed unbundled from a computer system platform in
accordance with Paragraph C above.
-----------
b. Japanese Versions. OEM agrees that with each Licensed System
-----------------
distributed for use in Japan (a "Japanese Version"), it shall bundle the
same Roman Coded Font Programs as specified in Paragraph I(2)a above for
---------------
Roman Versions. Additionally, OEM shall bundle the first five (5) Coded
Font Programs for Japanese Typefaces identified in Paragraph K(2)a. or an
---------------
seven (7) Coded Font Programs for Japanese Typefaces identified in
Paragraph K(2)(ii) with every Licensed System distributed for use in Japan.
------------------
OEM is not required to bundle the Coded Font Programs for Japanese
Typefaces with Licensed System's distributed for use outside of Japan.
However, if OEM decides to distribute Licensed Systems with Coded Font
Programs for Japanese Typefaces for use outside of Japan, it shall bundle
the Coded Font Programs for Japanese Typefaces in accordance with the above
Paragraph.
For each Japanese Version of the Licensed System which is distributed or
used internally (beyond the number of licensed Uses provided royalty-free
for Internal Use under Paragraph im below) by OEM or its Subsidiaries
hereunder, OEM shall pay Adobe a per licensed Use royalty based on the
Japanese List Price of the applicable Licensed System (Japanese Version
with five (5) or with seven (7) Japanese Typefaces) converted to U.S.
Dollars using the table in Paragraph I(2)a above.
---------------
The same per Licensed Use royalty shall apply for each Japanese Version of
the Licensed System distributed unbundled from a computer system platform
in accordance with Paragraph c above.
-----------
(3) Software Upgrade Royalties:
--------------------------
"Software Upgrades" means the installation of both the CPSI
Application Object and Coded Font Programs in a Licensed System already
distributed under license in place of CPSI Application Object and Coded
Font Programs previously installed in such Licensed System for the purpose
of updating, enhancing or extending a Licensed System. To qualify for
Software Upgrade pricing, OEM must either (i) promptly destroy the media
containing
[*] Confidential Treatment Requested. The confidential portion has been omitted
and filed separately with the Securities and Exchange Commission.
-9-
<PAGE>
the prior version of the CPSI Application Object and Coded Font Programs,
or (ii) return the media containing the CPSI Application Object and Coded
Font Programs to the factory where they were manufactured, and immediately
accrue a new royalty when such CPSI Application Object and Coded Font
Programs are shipped as part of a new Licensed System. OEM is obligated to
account for any of the replaced CPSI Application Object and Coded Font
Programs which are not destroyed.
OEM shall keep accurate records of the number of Software Upgrades which it
distributes to its customers and the disposition of the corresponding CPSI
Application Object and Coded Font Programs replaced by the Software
Upgrades. OEM shall submit reports containing such Software Upgrade
information in accordance with its reporting requirements pursuant to
Paragraph 7.5 ("Payment of Royalties") of the Agreement. In addition, upon
-------------
request from Adobe, OEM shall certify to Adobe in writing, signed by its
authorized representative, that it has fully complied with the requirement
contained in this Paragraph I(3).
--------------
Following joint execution of a PostScript Software Continuing Support
Agreement, OEM shall pay Adobe a royalty on its Net Receipts from each
Software Upgrade, if any, equal to [*] of OEMs net receipts, from such
Software Upgrade, but in no event less than U.S. [*] plus the amounts due
for any Coded Font Programs not already included in the unit being
upgraded. Prior to the execution of a PostScript Software Continuing
Support Agreement, OEM shall pay Adobe a royalty on its Net Receipts from
each Software Upgrade, if any, equal to [*] of OEMs net receipts, from such
Software Upgrade, but in no event less than U.S. [*] plus the amounts due
for any Coded Font Programs not already included in the unit being
upgraded. Net Receipts means OEM's gross receipts (exclusive of amounts
received for taxes, interest, finance charges, insurance, shipping and
handling costs) from all distributions of Software Upgrades.
The per copy royalty for each Coded Font Program not previously included in
the unit being upgraded shall be determined in accordance with Paragraph
---------
I(5) below for each Roman and Japanese Typeface which is part of the
----
Software Upgrade.
(4) Hardware Upgrades for Distribution Worldwide:
--------------------------------------------
Unless agreed to in writing by Adobe and designated as a non-royalty
bearing feature, all Hardware Upgrades installed as part of the Licensed
System, which OEM may choose to offer and distribute to End Users of
Licensed Systems, shall be royalty bearing. The parties will determine
whether an optional feature improves the functional performance or improves
the throughput performance of the CPSI Application Object and/or Coded Font
Programs and thus is royalty bearing or is unrelated to the functional
performance or throughput performance in which case the feature is non-
royalty bearing.
[*] Confidential Treatment Requested. The confidential portion has been omitted
and filed separately with the Securities and Exchange Commission.
-10-
<PAGE>
OEM shall pay a Hardware Upgrade royalty based on the applicable U.S. or
Japanese List Price to End Users for the Hardware Upgrade equal to [*]
of the applicable End User List Price.
(5) Licensed Use Royalty for Coded Font Programs:
--------------------------------------------
a. Licensed Use Parties for Roman Initial Installation Coded Font
--------------------------------------------------------------
Programs. The seventeen (17) Roman Initial Installation Coded Font Programs
--------
specified in Paragraph J of this Appendix No. 2 and bundled
-----------
with a Licensed System shall be royalty-free.
b. Licensed Use Royalties for Roman Additional Coded Font Programs.
---------------------------------------------------------------
OEM shall pay a per Licensed Use Royalty of $[*] per Typeface for the Roman
Additional Coded Font Program specified in Group 1 of Paragraph K(1) of
--------------
this Appendix No. 2 which is distributed or used internally by OEM or its
Subsidiaries and bundled as part of a Licensed System.
OEM shall pay a per Licensed Use Royalty of [*] for the set of thirty (30)
Typefaces for the Roman Additional Coded Font Programs specified in Group 2
of Paragraph K(1) of this Appendix No. 2 which is distributed or used
-------------
internally by OEM or its Subsidiaries and bundled as part of a Licensed
System.
c. Licensed Use Royalties for Coded Font Programs for Japanese
-----------------------------------------------------------
Typefaces. For the Coded Font Programs for Japanese Typefaces described in
---------
Paragraph K(2) which are distributed or used internally by OEM or its
--------------
Subsidiaries and bundled as part of a Licensed System, OEM shall pay Adobe
a per Typeface royalty for each Licensed Use of the Coded Font Programs for
Japanese Typefaces as follows:
[*]
* Based on 8.5 inch by 11 inch color page size.
(6) Licensed Use Parties for Internal Use:
-------------------------------------
Except for Roman Additional Coded Font Programs and Coded Font Programs for
Japanese Typefaces, OEM shall have no obligation to pay royalties to Adobe
for Licensed Uses of up to a total (cumulating all uses) of [*]
Licensed Systems if dedicated solely to the following uses:
a. Internal use by OEM (or by OEM's independent contractors) for the
exclusive benefit of OEM) for the purpose of adding proposed new
Designated Output Devices or new features to existing Designated
[*] Confidential Treatment Requested. The confidential portion has been omitted
and filed separately with the Securities and Exchange Commission.
-11-
<PAGE>
Output Devices, testing Licensed Systems or performing training
with respect to Licensed Systems; or
b. Internal use by OEM's Authorized Third Parties or Authorized
Printer Engine Manufacturer Distributors for the purpose of
testing Licensed Systems or performing training with respect to
Licensed Systems.
OEM shall pay Adobe the full Licensed Use royalties for the CPSI
Application, except for such thirty (30) Licensed Systems, used internally
by OEM (or OEM's Authorized Third Parties, Authorized Printer Engine
Manufacturer Distributors or independent contractors). OEM shall pay Adobe
the full Licensed Use royalties for Roman Additional Coded Font Programs
and Coded Font Programs for Japanese Typefaces, for each Licensed Use used
internally by OEM.
J. Roman Initial Installation Coded Font Programs:
Adobe will provide the graphic characters specified in ISO 8859-1: 1987,
Latin alphabet No. 1 and symbol characters as applicable, for the following
Roman Initial Installation Coded Font Programs:
<TABLE>
<CAPTION>
Identifying Trademark Typeface Trademark Owner
--------------------- -------- ---------------
<S> <C> <C>
Helvetica Linotype-Hell AG and/or its subsidiaries
Helvetica Bold Linotype-Hell AG and/or its subsidiaries
Helvetica Oblique Linotype-Hell AG and/or its subsidiaries
Helvetica Bold Oblique Linotype-Hell AG and/or its subsidiaries
Times Roman Linotype-Hell AG and/or its subsidiaries
Times Bold Linotype-Hell AG and/or its subsidiaries
Times Italic Linotype-Hell AG and/or its subsidiaries
Times Bold Italic Linotype-Hell AG and/or its subsidiaries
Symbol (Public Domain)
Courier (Public Domain)
Courier Bold (Public Domain)
Courier Oblique (Public Domain)
Courier Bold Oblique (Public Domain)
Helvetica Narrow Linotype-Hell AG and/or its subsidiaries
Helvetica Narrow Bold Linotype-Hell AG and/or its subsidiaries
Helvetica Narrow Oblique Linotype-Hell AG and/or its subsidiaries
Helvetica Narrow Bold Oblique Linotype-Hell AG and/or its subsidiaries
</TABLE>
K. Additional Coded Font Programs:
(1) Roman Additional Coded Font Programs:
Adobe will provide the graphic characters specified in ISO 8859-1: 1987,
Latin alphabet No. 1 and symbol characters as applicable, for the Roman
Additional Coded Font Programs listed in Group 1 below. Upon written
notification by OEM, Adobe will provide the graphic characters specified
in ISO 8859-1: 1987, Latin alphabet No. 1 and symbol characters, as
applicable, for the Roman Additional Coded Font Programs listed in Group 2
below. OEM shall distribute the Roman Additional Coded Font Programs
bundled with a Roman or
-12-
<PAGE>
Japanese Version of the Licensed System, only in one of either of the
following two (2) configurations:
(i) Group 1, as listed below, or
(ii) Group 1 and Group 2, as listed below:
<TABLE>
<CAPTION>
Group 1:
-------
Identifying Trademark Typeface Trademark Owner
------------------------- --------------- ----------------------------------------
<S> <C> <C>
ITC Avant Garde Gothic Book International Typeface Corporation
ITC Avant Garde Gothic Book Oblique International Typeface Corporation
ITC Avant Garde Gothic Demi International Typeface Corporation
ITC Avant Garde Gothic Demi Oblique International Typeface Corporation
ITC Bookman Light International Typeface Corporation
ITC Bookman Light Italic International Typeface Corporation
ITC Bookman Demi International Typeface Corporation
ITC Bookman Demi Italic International Typeface Corporation
New Century Schoolbook Roman Public Domain
New Century Schoolbook Bold Public Domain
New Century Schoolbook Italic Public Domain
New Century Schoolbook Bold Italic Public Domain
ITC Zapf Chancery Medium Italic International Typeface Corporation
ITC Zapf Dingbats International Typeface Corporation
Palatino Roman Linotype-Hell AG and/or its subsidiaries
Palatino Bold Linotype-Hell AG and/or its subsidiaries
Palatino Italic Linotype-Hell AG and/or its subsidiaries
Palatino Bold Italic Linotype-Hell AG and/or its subsidiaries
<CAPTION>
Group 2:
-------
Identifying Trademark Typeface Trademark Owner
--------------------- --------- ---------------------------------
<S> <C> <C>
Adobe Calson/TM/ Regular Adobe Systems Incorporated
Adobe Caslon Italic Adobe Systems Incorporated
Adobe Caslon Semibold Adobe Systems Incorporated
Adobe Caslon Semibold Italic Adobe Systems Incorporated
Adobe Garamond/TM/ Regular Adobe Systems Incorporated
Adobe Garamond Italic Adobe Systems Incorporated
Adobe Garamond Bold Adobe Systems Incorporated
Adobe Garamond Bold Italic Adobe Systems Incorporated
Barmeno/TM/ Regular H. Berthold AG
Barmeno Medium H. Berthold AG
Barmeno Bold H. Berthold AG
Barmeno Extra Bold H. Berthold AG
Lithos/TM/ Regular Adobe Systems Incorporated
Lithos Black Adobe Systems Incorporated
Trajan/TM/ Bold Adobe Systems Incorporated
Adobe Wood Type/TM/2 Ornaments Adobe Systems Incorporated
Blackoak/TM/ Regular Adobe Systems Incorporated
Carta/TM/ Map Symbols Adobe Systems Incorporated
Tekton/TM/ Regular Adobe Systems Incorporated
</TABLE>
-13-
<PAGE>
<TABLE>
<CAPTION>
Identifying Trademark Typeface Trademark Owner
--------------------- --------- ---------------------------------
<S> <C> <C>
Tekton Bold Adobe Systems Incorporated
Park Avenue(R) Regular Kingsley/ATF Type Corporation
Poetica 2 Supplement Ornaments Adobe Systems Incorporated
Kaufmann(R) Regular Kingsley/ATF Type Corporation
Americana(R) Regular Kingsley/ATF Type Corporation
Americana Extra Bold Kingsley/ATF Type Corporation
Parisian Regular Kingsley/ATF Type Corporation
Formata(R) Regular H. Berthold AG
Formata Medium H. Berthold AG
Formata Italic H. Berthold AG
Formata Medium Italic H. Berthold AG
</TABLE>
After receipt of written request from OEM, Adobe will provide the
Macintosh compatible Bitmap Fonts for the Roman Additional Coded Font
Programs listed in Group I and in Group 2 without additional charge.
These Bitmap Fonts can only be used in conjunction with a Licensed
System.
(2) Coded Font Programs for Japanese Typefaces:
Adobe will provide the Adobe Standard Japanese Character Set, which
includes all of the characters in Adobe's Kanji Glyph Collection and
--------------------------
Glyph Sets Technical Note #5031, dated November 12, 1990, with the
-------------------------------
exception of generic characters listed therein, for the following
Coded Font Programs for Japanese Typefaces. OEM shall distribute the
Coded Font Programs for Japanese Typefaces bundled with a Japanese
Version of the Licensed System, only in one of either of the following
two (2) configurations:
(i) The first five (5), as listed below, or
(ii) all seven (7), as listed below:
<TABLE>
<CAPTION>
Identifying Trademark Trademark Owner
--------------------- ---------------
<S> <C>
Ryumin Light KL Morisawa & Co., Ltd.
Gothic Medium BBB Morisawa & Co., Ltd.
Futo Min A101 Morisawa & Co., Ltd.
Futo Go B101 Morisawa & Co., Ltd.
Jun 101 Morisawa & Co., Ltd.
Midashi Min MA31 Morisawa & Co., Ltd.
Midashi Go MB31 Morisawa & Co., Ltd.
</TABLE>
Such Coded Font Programs for Japanese Typefaces will be distributed on
mutually agreeable distribution media and will be encrypted and copy-
protected against unauthorized duplication in a manner to be specified
by Adobe. In particular, to prevent unauthorized use of the Coded Font
Programs for Japanese Typefaces licensed with a seven font
configuration by a five font configuration, OEM must employ a different
set of code ROMs (with a different identification code) to distinguish
the five font configuration from the seven font configuration. Special
character set encodings are not provided.
OEM may not distribute additional Coded Font Programs for Japanese2
Typefaces in an unbundled form for the purpose of upgrading an existing
-14-
<PAGE>
Licensed System from five (5) to seven (7) Coded Font Programs for
Japanese Typefaces. If OEM desires to offer to customers additional
Coded Font Programs for Japanese Typefaces, it may license the
additional two (2) aftermarket fonts in retail product version directly
from Adobe or Morisawa to provide to OEM's End Users.
After receipt of written request from OEM, Adobe will provide the
Macintosh compatible Bitmap Fonts for Futo Min A101, Futo Go B101, Jun
101, Midashi Min MA31 and Midashi Go MB31 without additional charge.
These Bitmap Fonts can only be used in conjunction with a licensed
System. Bitmap Fonts for Ryumin Light KL and Gothic Medium BBB will not
be provided, since they are available to the End User bundled with
Apple's KanjiTalk/TM/ system software.
L. Protection Mechanisms:
(1) Adobe and OEM shall mutually agree on a License Management
Mechanism which OEM shall utilize as a copy protection device in each
Licensed System distributed under this Appendix and as a way of
ensuring that use of the CPSI Application Object and Coded Font
Programs is limited to Licensed Uses.
(2) OEM shall implement the os_serial number ( ) library procedure to
guarantee that it returns a unique 32 bit identifier for the Licensed
System.
(3) Adobe and OEM shall mutually agree upon a secure production
method for the Japanese font copy-protection keys.
M. OEM Training:
With respect to the requirements set forth under Paragraph 3.10 of the
--------------
Agreement, training with respect to the development of Licensed Systems
described within this Appendix No. 2 has been completed by OEM.
N. Designated Representatives:
(1) Technically qualified OEM representative to respond to
information requested by Adobe:
David Lynch Phone (408) 541-6100
SuperMac Technology Incorporated FAX (408) 541-6150
215 Moffett Park Drive
Sunnyvale, CA 94089-1374
-15-
<PAGE>
(2) Technically qualified Adobe representative to respond to information
requested by OEM:
Ivor Durham Phone (415) 962-2183
Adobe Systems Incorporated FAX (415) 9614022
1585 Charleston Road
Mountain View, CA 94039-7900
(3) Adobe Contract Representative:
Jeffrey Eid Phone (415) 962-3962
Adobe Systems Incorporated FAX (415) 965-7430
1585 Charleston Road
Mountain View, CA 94039-7900
(4) OEM Contract Representative:
Tim Kleffman Phone (408) 541-5109
SuperMac Technology Incorporated FAX (408) 541-5003
215 Moffett Park Drive
Sunnyvale, CA 94099-1374
IN WITNESS WHEREOF, OEM and Adobe have caused this Appendix No. 2 to be
executed by their duly authorized officers.
ADOBE: OEM:
ADOBE SYSTEMS INCORPORATED SUPERMAC TECHNOLOGY
INCORPORATED
By: /s/ John E. Warnock By: /s/ Louis J. Doctor
-------------------------- --------------------------
Print Print
Name: John E. Warnock Name: Louis J. Doctor
----------------------- ----------------------
Title: Chief Executive Officer Title: EVP
----------------------- ----------------------
Date: 7/28/93 Date: 7/16/93
----------------------- ----------------------
-16-
<PAGE>
Schedule 1
Project Deliverables Checklist
OEM provides technical information and specifications on each _____________
output device. -
OEM provides estimated development schedule for each output _____________
device, with key milestones an deliverables. -
OEM provides business forecast for each output device (12, 24 _____________
and 36 months). -
License Management Mechanism proposal provided to Adobe. _____________
-
Color calibration mechanism proposal provided to Adobe. _____________
-
OEM certifies that the following deliverables have been _____________
received from Adobe: -
Adobe Software and Demonstration Programs ____
Aftermarket font installation utilities ____
CPSI Read Me First! ____
Configurable PostScript Interpreter Functional
Specification ____
CPSI Demonstration Software Guide ____
CPSI Product Developer's Guide ____
Supplement to the PostScript Language Reference Manual ____
PostScript Language Addendum Template ____
Coded Font Programs ____
[*] ____
[*] Confidential Treatment Requested. The confidential portion has been omitted
and filed separately with the Securities and Exchange Commission.
-17-
<PAGE>
EXHIBIT 10.6
Xerox & SMT Hardware Purchase and Software Development/License Agreement
TABLE OF CONTENTS
<TABLE>
<S> <C>
I. Definitions
II. Products Development Work
III. Licensed Software Development
Work
IV. Purchase and Sale of Products and
License of Licensed Software
V. Documentation and Support
VI. Quality Assurance
VII. Term and Termination
VIII. Deliveries
IX. Product And Licensed Software
Changes
X. Agency Approval and Safety
XI. Consumables and Emergency
Maintenance Support
XII. Warranties
XIII. Training
XIV. Indemnification
XV. Confidential and Proprietary
Information
XVI. Limitation of Liability
XVII. Export Control
XVIII. Independent Product Development
XIX. Force Majeure
XX. Notices
XXI. Points of Contact
XXII. Headings
XXIII. Amendment
XXIV. Assignment
XXV. Product Recycling
XXVI. Severability
XXVII. Waiver
XXVIII. Survival
XXIX. Ethical Standards
XXX. Arbitration
XXXI. Nonpublicity
XXXII. Controlling Law
XXXIII. Controlling Language
XXXIV. Remedies Cumulative
XXXV. Integration
ATTACHMENT SCHEDULE
I. Specifications
II. EIQP - 1000
III. Pricing
IV. Development Work Schedule
V. Primary Point of Contact
X. Technical Support
</TABLE>
1
<PAGE>
Xerox & SMT Hardware Purchase and Software Development/License Agreement
HARDWARE PROCUREMENT AND SOFTWARE DEVELOPMENT AND LICENSE AGREEMENT
This Agreement is made and entered into between SuperMac Technology, Inc., a
corporation organized under the laws of the State of Delaware, with its
principal offices in Sunnyvale, CA. (hereinafter referred to as "Seller") and
Xerox Corporation, a corporation organized under the laws of the State of New
York, U.S.A., with an office in El Segundo, CA. (hereinafter referred to as
"Xerox" or "Buyer"), upon the terms and conditions set forth below.
1. DEFINITIONS
1.01 Accessories - "Accessories" shall mean an item of optional equipment
marketed by Seller and which can or is specifically designed to be used in
connection with Equipment and which enhances the features or functionality of
such Equipment, whether or not connected to Equipment by electrical, electronic,
or mechanical means.
1.02 Buyers - shall mean Xerox or Xerox Affiliated Companies, as the case may
------
be.
1.03 "Derivative Works" - shall mean any work based on, and derived from, the
----------------
original Licensed Software, which derivation was created or developed, at the
expense of, or on the initiative of, Xerox as-additionally detailed in 3.01. If,
however, title to any Derivative Work resides in Seller, any such Derivative
Work shall be automatically deemed as Licensed Software.
1.04 "Documentation" means all written text including but not limited to
-------------
manuals, brochures, specifications and software descriptions, in electronic,
printed and/or camera ready form, and related materials customarily needed for
use with Licensed Software.
1.05 Effective Date - shall mean the date on which this Agreement is fully
--------------
executed by the parties.
1.06 Equipment - shall mean Xerox Private Label versions of Seller's equipment
---------
and Accessories as set forth in Attachment 1 and modifications, enhancements and
improvements thereto which are made pursuant to Article VII herein.
1.07 "Licensed Software" - shall mean all software and Documentation created or
-------------------
developed, pursuant to this Agreement, from a certain computer program which
Seller has either created, or has the ownership of, Documentation, and related
written materials, ("Underlying Software") and conforming to the Specifications
set forth in Attachment hereof, and shall include all modifications,
improvements, enhancements, additions, Derivative Works, updates, releases and
versions thereof.
1.08 Private Label - shall mean Equipment, specified Accessories, supplies,
-------------
Spares, or Licensed Software with Xerox or Xerox Affiliated Companies'
trademarks and logos as identified in Attachment 1 or Xerox or Xerox Affiliated
Companies' or their respective customers' trademarks, tradedress, and logos
thereon.
1.09 Production Month - shall mean the calendar month in which production of
----------------
Products or Licensed Software is scheduled.
1.10 Products - shall mean Equipment, Accessories, and Supplies.
--------
1.11 Spares - shall mean spare parts for the Equipment or Accessories and
------
modifications, enhancements and improvements thereto which are made pursuant to
Article VII, herein.
1.12 Regulatory Agency - shall mean any regulatory agency or other body,
-----------------
governmental or private, including but not limited to agencies regulating
product safety, and or electromagnetic emissions, the approval of which is
required by the government prior to delivery or marketing of the Products or
Licensed Software in the United States, Puerto Rico, and the territories and
possessions of the United States, and any other country listed on Attachment I
hereto.
1.13 Systemic Defect - shall mean a defect of any type where the Products do
not conform with the Specifications set forth in Attachment I [*] which occurs
in identical or substantially similar form or from
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
2
<PAGE>
Xerox & SMT Hardware Purchase and Software Development/License Agreement
a substantially similar cause where such failures are reported in at least [*]
of the Current Field Population of Products within any single [*] period of time
after receipt of delivery of Products. The Current Field Population shall be
calculated as the number of Products of the same or substantially same design
sold by Seller to Buyer within the preceding [*] period. Any failure of any
Product sold by Seller more than [*] prior to failure [*] shall not be deemed a
Systematic Defect failure, nor counted as a failure for the purposes of
calculating the threshold under this section.
1.14 Xerox Affiliated Companies - shall mean Rank Xerox Limited, Xerox Canada,
--------------------------
Inc., any entity which is owned or controlled jointly by Xerox Corporation and
the Rank Organization, PLC, and any entity which is owned or controlled directly
or indirectly, by any of the foregoing, but shall not include Xerox.
1.15 Xerox Unique Features - shall mean those Features of Products which are
---------------------
unique to Xerox, and which are designated as Xerox Unique Features in Attachment
I. Such Xerox Unique Features shall only be incorporated in Products as
designated by Xerox.
1.16 Specifications - shall mean the engineering, operational and/or functional
--------------
description of the Products as set forth in the SuperMac Functional
Specification, Revision 0.5, dated September 13, 1993 which may change from time
to time and is referenced in this Agreement as Attachment I hereto, which is
expressly incorporated herein by this reference.
II. PRODUCTS DEVELOPMENT WORK
2.01 a) In the event Seller, in order to deliver Products which meet the
Specifications set forth in Attachment I hereto, has agreed to develop new
products or modify existing products other than rendering current Products into
Private Label Products ("Development Work"), then this Article II shall apply.
b) Seller shall perform the Development Work in conformity to the
Development Work Schedule set forth in Attachment VI. Seller shall provide Xerox
with progress reports, in accordance with the schedule set forth in Attachment
IV. Each such report shall reflect/indicate:
i. Status of progress to current Program Schedule milestone;
ii. Short description of problems in meeting such milestone;
iii. Proposed recovery method to meet next milestone if needed;
iv. Probability of meeting next milestone;
v. Any other information related to the Development Work reasonably
requested by Xerox.
c) The parties agree to conduct regular program reviews as shown on the
agreed Program Schedule set forth on Attachment IV to this Agreement, to ensure
their mutual satisfaction with the performance of the Development Work under the
Agreement. Upon reasonable notice, the parties agree to meet at a mutually
agreeable time and location to discuss and inspect the status of the Development
Work.
d) At any time prior to acceptance by Xerox of the Products as set forth
in this Article, each party is entitled to request modifications in the form of
changes or additions to the Specifications as agreed and set forth in Attachment
I hereto. Such requests shall be submitted in writing. Upon receipt of the
other's written approval, both parties will proceed with the implementation of
the prescribed changes, and the Specifications and other Attachments to the
Agreement shall be modified accordingly to reflect such agreed upon changes.
e) Seller shall, in accordance with the Program Schedule set forth in
Attachment VI to this Agreement, develop the Products. In accordance with the
Program Schedule, Seller shall deliver to Xerox both prototype validation test
unit(s) ("PVT unit") and development validation test unit(s) ("DVT unit") for
testing and acceptance by Xerox, hereinafter collectively referred to as
"Deliverables." The PVT unit shall be a unit of the product sufficiently
developed to enable Xerox to ascertain if the Product will be capable of
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
3
<PAGE>
Xerox & SMT Hardware Purchase and Software Development/License Agreement
meeting the specifications set forth in Attachment I hereto, and the
manufacturing cost targets, although such PVT unit may not be fully functional
or manufactured with actual production tooling. The DVT unit shall be a
completed unit of the Product with all required functionality and performance
for final Product test purposes, manufactured with production ready tooling
using the actual production methods and equipment.
(f) (i) Xerox, with the assistance of the Seller if requested by Xerox,
will examine and test each Deliverable upon delivery to determine whether the
Deliverable conforms to the Specifications. Xerox shall, within the acceptance
period for each Deliverable set forth in Attachment IV; (i) accept the
Deliverable and so inform the Seller in writing; or (ii) reject the Deliverable
and provide Seller with a written statement to specify in detail the
Deliverable's non-conformity to applicable specification. Notwithstanding the
Project Schedule, Xerox shall not be obligated to pay for any Deliverable for
which Xerox has submitted to the Seller a statement of non-conformity to
applicable specifications. If Xerox does not provide such a statement of
non-conformity to applicable specifications within the said acceptance period,
the Deliverables will be deemed to have accepted by Xerox.
(f) (ii) Should any Deliverable fail to meet the Specifications after the
second redelivery of that Deliverable, then the parties shall promptly meet to
resolve the problem. In the event that the parties are unable to develop a plan
to resolve such failure of the Deliverable to conform to applicable
specifications or other problems, Xerox shall have the right to terminate this
Agreement as set forth in Article VII hereof, and such impasse shall be deemed
due cause for termination of this Agreement.
III. LICENSED SOFTWARE DEVELOPMENT WORK
3.01 Seller will develop the Licensed Software in accordance with the
Specification defined in Attachment I and will deliver the Licensed Software to
Xerox in accordance with Attachment IV.
3.02 Xerox reserves the right to make changes to the Licensed Software
Specifications at any time prior to delivery of the Licensed Software in
accordance with 3.01 and Seller agrees to make such changes. Xerox and Seller
agree to negotiate in good faith an equitable adjustment in time schedule and
fee, as necessary, for substantial changes to the specification and/or changes
which affect the dates for scheduled delivery.
3.03 After delivery as stated in 3.01 of the Licensed Software, Xerox will have
sixty (60) days to test the same and to notify Seller in writing of either its
Approval or reasons for nonconformance to the Specifications of Attachment I.
The Acceptance Criteria in Attachment VI shall serve as the primary part of the
criteria which Xerox will use in making its determination as to Approval.
3.04 Upon notification by Xerox in accordance with 3.03 that the Licensed
Software does not meet the Specifications of Attachment I and/or contains
significant program errors, or otherwise doesn't function properly, Seller will
correct the Licensed Software within a correction period of thirty (30) days
following receipt of written notice from Xerox, and Xerox will be relieved of
its sixty (60) day Approval obligation set forth in 3.03. If Seller subsequently
delivers corrected Licensed Software to Xerox within said thirty (30) day
correction period, Xerox will have an additional thirty (30) days from receipt
to reevaluate the corrected Licensed Software.
3.05 If Seller is unable to meet the Specifications to Attachment I and/or
eliminate significant program errors, product failure, or other problems in the
Licensed Software in the thirty (30) day correction period of 3.04, or within 60
days of the delivery milestone dates set forth in Attachment IV then as Xerox'
sole remedy and at its option Xerox may:
(a) extend the correction period by an amount of time as may be a
determined by Xerox; or
(b) Approve the Licensed Software; or
(c) reject the Licensed Software by notifying Seller of such in writing
and promptly return Licensed Software to Seller with all copies made;
or
(d) Elect to terminate the Agreement.
4
<PAGE>
Xerox & SMT Hardware Purchase and Software Development/License Agreement
IV. PURCHASE AND SALE OF PRODUCTS AND LICENSE OF LICENSED SOFTWARE
4.01 (a) During the term of this Agreement, Buyer may purchase from Seller,
and Seller shall sell to Buyer, Products for unrestricted resale, lease and
servicing by Buyer or Buyer's customers worldwide, directly or through third
parties.
(b) Seller grants Xerox Companies a non-exclusive licence to use any of
Seller's tradenames, trademarks or logos as supplied by Seller from time to time
on units of the Products in connection with the resale or sub-licensing of units
of the Products.
(c) Seller grants and conveys to Xerox and Xerox Affiliated Companies a
perpetual, nonexclusive, world-wide right and license to market, use, maintain,
display, lease, and sub-license the Licensed Software themselves, or through
authorized VARs, dealers or distributors, where and when, and under terms and
conditions as determined by Xerox and Xerox Affiliated Companies, in connection
with the marketing of the Products. Title to Licensed Software resides with
Seller. The license granted in this Agreement extends to and includes all
Releases of the Licensed Software and backward compatibility to the original
Release. These releases will include all error corrections. Seller will provide
Xerox written notification of pending new updates, releases and versions and
availability thereof, sufficiently in advance of publication on order for Xerox
to react in a timely manner.
(d) Seller may manufacture, use, sell, lease or otherwise market or
dispose of, or license any third party to manufacture, use, sell, lease, or
otherwise dispose of, any Products which do not contain any Xerox Unique
Features, Xerox patents, copyrights, trade secrets or intellectual property
rights (unless licensed by Xerox) or any Xerox or Xerox Affiliated Companies'
trademarks or logos. Provided, however, Seller may not grant to any third party
manufacturing rights for Products or Licensed Software in a manner that will
interfere with Xerox' rights under this Agreement.
4.02 Prices - (a) The prices for Products are set forth in Attachment III and
--------
are expressed in Buyer's currency. [*] If Xerox agrees to pay Seller a license
fee for Licensed Software, the fee will be defined in Attachment III hereto.
Prices for Products shall remain firm and unchanged during the first year of
this Agreement. However, Seller shall reduce applicable prices for Products and
Licensed Software to equitably reflect any reduction of Seller's costs of raw
materials, parts, direct labor or other appropriately allocated direct or
indirect costs related to the production or delivery of the Products or
Licensed Software. Thereafter, [*] the prices for Products not more than [*].
(b) Prices for Products and Licensed Software shall include the cost of
packaging and packing which conform to the requirements of this Agreement but
shall be exclusive of applicable taxes and duties and all similar governmental
levies.
(c) In the event Buyer wishes to purchase Products or Licensed Software
on a Private Label basis it shall so inform Seller and Seller and Buyer shall
negotiate the appropriate price for the purchase of Private Label Products or
the license of such Licensed Software.
(d) [*]
4.03 Payment - Provided Buyer has accepted Products or Licensed software
-------
developed for Buyer hereunder Products purchased or licensed hereunder shall be
paid for by bank transfer or written check within thirty (30) days following
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
5
<PAGE>
Xerox & SMT Hardware Purchase and Software Development/License Agreement
the receipt of Seller's invoice by Buyer and accompanying documented proof of
shipment. Seller agrees not to charge late payment fees for payments made by
Buyer within thirty (30) days of the payment due date.
4.04 [*]
4.05 Purchase Release Orders - All purchases of Products and licenses of
-----------------------
Licensed Software hereunder shall be made only upon the issuance of written
purchase release orders by Buyer. All purchase release orders for a particular
Production Month shall be sent by Buyer [*] before the Production Month for such
Products or Licensed Software. In placing orders for Spares, Buyer shall use
Seller's Spares parts number as well as Buyer's parts number in order to avoid
any possible delay in filling such orders.
4.06 Acknowledgment - Within [*] of receipt, Seller shall accept and
--------------
acknowledge in writing purchase release orders issued by Buyer hereunder. Any
purchase release order not acknowledged within [*] after receipt by Seller is
deemed to have been accepted. All purchases hereunder shall be governed solely
by the terms and conditions of this Agreement, notwithstanding any preprinted
terms and conditions contained on any purchase release orders issued by Buyer or
acknowledgments thereof issued by Seller.
4.07 Xerox Unique Tooling - Buyer Unique Tooling shall not be used by Seller for
--------------------
any purpose other than the manufacture of Products or Licensed Software under
this Agreement without the prior express written consent of the particular Buyer
which owns the Xerox Unique Tooling.
4.08 Unique Design Rights - All rights in and to Product designs that result
--------------------
from the use of Xerox Unique Tooling or Xerox owned patents, copyrights or other
intellectual property rights shall belong exclusively to the particular Buyer
which provided Seller with Xerox Unique Tooling. With respect to such Product
designs, Seller agrees to assist Buyer in applying for and obtaining any design
patents or other intellectual property rights upon request from Buyer.
4.9 New Models - If, during the term of this Agreement or any extension
----------
thereof, Seller decides to develop products similar to the Products or Licensed
Software that may be more efficient, contain additional features or
capabilities, and/or are less expensive, Seller shall promptly notify Xerox and
the parties shall discuss in good faith any unique Buyer requirements for such
planned future product. In the event Seller decides to market such future
product Seller shall make such products available to Buyer on terms comparable
to those contained herein except that the parties shall negotiate the price
therefor in good faith.
4.10 Kit Assembly - In certain instances Buyer may desire to market Products in
------------
countries that request local manufacturing content. In such cases Seller agrees
to meet with Xerox in a timely manner to discuss the local manufacturing content
requirement. Buyer and Seller will each have an obligation to negotiate in good
faith using reasonable efforts to define the contents and assembly instructions
for such Manufacturing Kits. Further, to the extent Seller has the right to do
so, and if desired by Buyer, Seller agrees to sell such Manufacturing Kits to
Buyer or a third party designated by Xerox under the terms and conditions of
this Agreement, excepting the warranty (section XII), indemnification (section
XIV) and systemic defect (section 1.13) provisions of this Agreement. In such
event the price of such kits shall not exceed [*] of the equivalent. Product
price to Buyer or the Product price less the labor savings, whichever is
greater.
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
6
<PAGE>
Xerox & SMT Hardware Purchase and Software Development/License Agreement
4.11 Discontinuance Or Change in Location Of Manufacture - During the term
---------------------------------------------------
hereof, Seller may not discontinue the manufacture of any Products or Licensed
Software without the express written permission of Xerox. Seller shall notify
Xerox prior to changing the location where Products or Licensed Software are
manufactured, and Xerox shall have the right to terminate this Agreement
immediately upon nature if such change in location is not satisfactory to Xerox.
4.12 Title And Risk Of Loss - Notwithstanding Products being delivered [*]
----------------------
title and risk of loss for all Products purchased by Buyer, and risk of loss for
Licensed Software licensed by Buyer, shall pass to Buyer from Seller [*].
4.13 Enhancements To Licensed Software - Seller in good faith shall use
---------------------------------
commercially reasonable efforts to provide enhancements to the Licensed Software
in accordance with the Software Support Plan in Attachment X.
4.14 [*]
V. DOCUMENTATION AND SUPPORT
5.01 Sales Documentation - Seller shall furnish to Buyer, on an ongoing basis
-------------------
during the term hereof, free of charge, such materials as Buyer may reasonably
request in electronic and camera ready form for use by Buyer to prepare
documentation, brochures and other product literature, including, but not
limited to, operators, maintenance and parts manuals, catalogs, specification
sheets, and other data necessary or appropriate for the sale of Products. Seller
grants to Buyer and its customers the royalty-fee right and license to
reproduce all or any part of such documentation. Buyer is further given the
right to modify any or all parts of the documentation to reflect changes made to
the Products or consistency in style with other documentation used by Buyer or
to satisfy legal or customer requirements.
5.02 Service Documentation - Seller shall provide to Buyer, at no cost, and in
---------------------
accordance with the schedules set forth in Attachment IV, all engineering
drawings, service, repair procedures, and documentation (by part number) which,
in Buyer's reasonable opinion, are necessary or appropriate to fulfill Buyer's
service and customer support obligations for the Products. Seller grants to
Buyer and its customers the royalty-free right and license to reproduce all or
any part of such documentation. Buyer is further given the right to modify any
or all parts of the documentation to reflect consistency in style with other
documentation used by Buyer or to satisfy legal or customer requirements.
5.03 Licensed Software Documentation And Other Information - Seller will
-----------------------------------------------------
provide to Xerox one (1) full, complete, and accurate set of Licensed Software
marketing information, technical specifications, and update descriptions so that
Xerox and Xerox Affiliated Companies can, on a periodic basis and as new changes
or additions occur, make copies thereof and distribute the same to its sales
force and customers. During the term of this Agreement, Xerox and Xerox
Affiliated Companies may also include Licensed Software product description and
information in any Xerox or Xerox Affiliated Companies literature. The
distribution of such literature by Xerox and Xerox Affiliated Companies will be
at their sole expense. Xerox and Xerox Affiliated Companies may, at their option
and expense, prepare their own promotional literature relating to Licensed
Software and distribute the same to its sales force and customers. Seller will
provide Xerox one (1) complete set of Documentation and grants to Xerox and
Xerox Companies the right to reproduce such Documentation for the purpose of
distribution to their customers on an as needed basis. Seller will also include
with each unit of Product shipped hereunder one (1) complete set of
Documentation. Under this Section, Seller shall be under no obligation to create
any specific marketing collateral for distribution but shall provide Buyer with
the information necessary to create such materials for Buyer's use.
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
7
<PAGE>
Xerox S SMT Hardware Purchase and Software Development/License Agreement
5.04 Technical Support - Seller shall provide technical support and maintenance
-----------------
for the Licensed Software to Xerox and Xerox Affiliated Companies in conformity
with Attachment X hereto.
5.05 (a) Escrow - Within thirty (30) days of the delivery of the Product and
------
Licensed Software, Seller shall place in escrow with Seller's escrow shall
place in escrow with Seller's escrow agent ("Escrow Agent"): (a) one (1)
complete copy of the source code and documentation for the Licensed
Software contained in the Products, together with copies of all design
specifications and other technical information; and (b) one (1) complete
copy of the hardware design specifications for the Products, together with
copies of selected drawings and other technical information (collectively
"Escrow Deposit"). Seller agrees to update and maintain the Escrow Deposit
held in safekeeping by the Escrow Agent to reflect all changes made to the
Products and/or the Licensed Software in the Products. Seller also agrees
to provide Buyer with the name of Seller's Escrow Agent and a copy of the
Escrow Agreement within one week of deposit of the source code and
documentation.
(b) During the term of this Agreement, the Escrow Agent shall be
instructed to provide Xerox with the Escrow Deposit only in the event
that: [*]. However, in the event that Seller notifies the Escrow Agent
that a dispute exists between Seller and Xerox with respect to the release
of the Escrow Deposit, then the Escrow Agent shall release the Escrow
Deposit to Xerox only if such dispute is submitted to arbitration Article
XXX and such arbitration is conclusively decided in Xerox' favor. If the
Escrow Deposit is released to Xerox, it shall be subject to the terms of
the license and confidentiality provisions of this Agreement, which
provisions shall survive any termination of this Agreement.
VI. QUALITY ASSURANCE
6.01 Quality Requirements - All Products and Licensed Software produced and
--------------------
delivered to Buyer shall fully comply with the specifications set forth in the
Attachments hereto and shall be one hundred percent (100%) free of material
defects. Reliability of Products and Licensed Software shall meet or exceed the
requirements of such specifications.
6.02 IS0 9000 Quality Systems Registration Requirements - Seller or Seller's
--------------------------------------------------
suppliers will have a quality system which is registered to ISO 9001, and or
9002 and 9003 and ISO 9000-3 (TC176 Approved equivalent) or is in the process of
obtaining such registration. Any costs associated with obtaining the initial
registration or maintenance thereof shall be the sole responsibility of Seller.
6.03 Product Quality Plan - Seller will develop, implement and provide to
--------------------
Xerox a Quality Plan for Products in accordance with the ISO-9000 end-term
quality provisions set forth in Attachment II, a copy of which Seller
acknowledges having received. Such Quality Plan shall define the controls and
operating systems required to assure that only defect free Products and Licensed
Software will be delivered to the Buyer. Xerox's Material Quality Assurance or
their authorized representatives shall source verify all deliveries until Seller
achieves Product certification. Existing Seller quality procedures which totally
comprehend any quality plan elements may be used to satisfy the plan and will
become the basic operating document for assuring compliance to Xerox's quality
requirements.
6.04 Acceptance Inspection - Buyer shall have the right to conduct, at its
---------------------
expense, at a location that the Buyer may reasonably select, an acceptance
inspection of the Products and Licensed Software to ensure compliance with the
specifications set forth in the Attachments to this Agreement. Buyer shall
notify Seller of the
8
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Xerox & SMT Hardware Purchase and Software Development/License Agreement
result of such inspection (acceptance or rejection) for each lot delivered
within thirty (30) days after receipt of such Products and Licensed Software.
Should Buyer fail to notify Seller within such thirty (30) day period, the
relevant Products and Licensed Software shall be deemed to have been accepted by
Buyer. Such acceptance shall not however be deemed a waiver of any warranties
applicable to such Products or Licensed Software. Quality and reliability
failure rates observed in excess of those specified in the Seller Quality Plan
may result in the return of the Product or Licensed Software or sorting at
Seller's expense.
6.05 Nonconforming Product or Licensed Software - Seller agrees that it shall
------------------------------------------
correct nonconforming Product or Licensed Software that have been rejected as a
result of acceptance inspection provided for in Section 6.04 by the following
methods (the choice of which shall be at Buyer's option):
(a) Buyer returns the Product or Licensed Software to Seller at Seller
expense, and Seller shall repair or replace the Product or Licensed
Software within thirty (30) days at no cost to the Buyer.
(b) Buyer repairs the Product at a mutually agreed cost which Seller shall
reimburse to Buyer upon receipt of Buyers invoice, or
(c) Seller, at its expense, shall repair the nonconforming Product at a
facility designated by Buyer.
6.06 Preliminary Data - Seller shall supply preliminary data on the Mean Time
----------------
Between Failure ("MTBF") for the Equipment as soon as practical in the planning
stage of the program. Final MTBF data shall be provided as soon as design
maturity testing of the Equipment is completed. Such MTBF data shall include
failure data on all major subassemblies of the Equipment. Further, should any
revisions or modifications to Equipment or component parts thereof affect the
MTBF of the Equipment, Seller shall supply revised MTBF data within thirty (30)
days of such revisions and modifications.
6.07 Mean Time Between Failure - In the event that a variance should occur such
-------------------------
that the actual MTBF is below the MTBF specified in Attachment I, Seller will
implement a corrective action program acceptable to Xerox to correct such
variance. If the average MTBF for Equipment nonetheless remains below that
specified in Attachment I after such corrective action is implemented, Seller
agrees to implement a new corrective action program and repair all failed
Equipment and affected Spares, at no cost to the Buyer. [*]
6.08 Replaced Products - All Products or Licensed Software repaired or replaced
-----------------
by Seller pursuant to this Article shall be subject to all quality assurance and
inspection requirements in accordance with the provisions of Article VI.
6.09 Program Milestone Management - The parties agree that achievement of
----------------------------
certain key milestones must be managed actively to assure that the initiation of
delivery of Products and Licensed Software meets Buyer's market requirements.
The program management team may identify key milestones which shall be included
in Attachment IV. When such program milestones are included in Attachment IV,
both parties agree to apply diligent efforts to assure that the progress of the
program is kept on schedule.
If it is determined by either party that the progress of key program milestones
is insufficient to assure the Product market launch schedule is maintained,
identified managers within each company shall be empowered to schedule a
milestone exception review upon written notification to the other party.
Milestone exception reviews will be held at a mutually agreed location within
ten (10) working days of such written notification and will be attended by Xerox
and Seller program team members that the identified managers may select. The
senior managers of each company will review the problems and causes for delay in
achieving the key program milestones and commit the necessary resources within
their company to recover or minimize the program delay.
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
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Xerox & SMT Hardware Purchase and Software Development/License Agreement
6.10 Source Verification - Buyer shall have the right to conduct, at its
-------------------
expense, source verification activities, in accordance with the Xerox Supplier
Quality Assurance Procedures set forth in Attachment II at Seller's
manufacturing site. All such source verification activities shall be scheduled
within one (1) week of receipt of notice from Seller indicating that Products or
Licensed Software are ready for verification. Any request for a repeat
verification of Products or Licensed Software that did not pass initial
verifications or emergency situations shall require a forty eight (48) hour
notice period.
VII. TERM AND TERMINATION
7.01 Term - This Agreement shall commence on the Effective Date and shall
----
continue for a period of two (2) years ("Initial Term") and thereafter for
successive twelve (12) month periods, unless one party gives written notice of
its intent to terminate this Agreement one hundred twenty (120) days prior to
the expiration of the Initial Term or any such subsequent twelve (12) month
period. The provisions of this Article VII shall not apply to the sale of Spares
which shall be governed solely by the provisions of Article XI.
7.02 Termination For Cause - Either party may terminate this Agreement or any
---------------------
purchase order issued hereunder effective immediately upon written notice of
termination to the other party in any of the following events:
a) if the other party materially breaches this Agreement and such breach,
if curable, is not cured within thirty (30) days after written notice of breach
by terminating party:
b) if the other party materially breaches this Agreement and such breach
is by its nature not curable.
c) if the other party's performance is delayed for more than sixty (60)
days for any reason, including force majeure delays; or
d) upon the rejection of the Licensed Software in accordance with 3.05(c)
except that the Confidential Obligations (the obligations as to Confidential
Information) herein and any other remedies available, such as return of fees,
shall not be waived and shall survive termination.
e) if a petition for relief under applicable bankruptcy regulations is
filed by or against the other party, or the other party makes an assignment for
the benefit of creditors, or a receiver is appointed, or a purchase agreement is
executed for all or substantially all of the other party's assets or of the
shares of stock in such other party and such petition, assignment or agreement
is not dismissed, vacated or terminated within thirty (30) days. To the extent
applicable law prevents the non-terminating party from terminating this
Agreement as described above, then the parties shall have only those rights and
remedies permitted by applicable law, including the United States Bankruptcy
Act, including but not limited to 11 U.S.C. Section 365n. Any such Termination
shall be automatically effective at the end of any applicable notice period if
any. However, Xerox, as the non-defaulting party, has the unrestricted right, at
its option, not to terminate this Agreement insofar as it pertains to Licensed
Software and to continue as a licensee of Licensed Software and to market such
Licensed Software in accordance with the terms hereof.
7.03 Termination for Convenience - Xerox reserves the right, in whole or in
---------------------------
part, and in the exercise of its discretion, prior to its Approval of exercise
of its discretion, prior to its Approval of the Licensed Software and Hardware
to terminate this Agreement upon not less than thirty (30) days written notice
to Seller. In the event of such termination of this Agreement, in addition to
Xerox's obligations under Article II of this Agreement respecting Products
development work, Xerox' shall be obligated with respect to Licensed Software
Development Work solely to pay Seller for the development work respecting
Licensed Software and Hardware work completed as of the date of termination.
7.04 Termination And Expiration Effect
---------------------------------
a) Except as otherwise set forth in this Agreement or with respect to
obligations which survive the termination or expiration of this Agreement,
Buyer's sole liability to Seller shall be for the payment of any balance due and
owing for conforming Products and Licensed Software delivered prior to the
effective date of termination or expiration.
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Xerox & SMT Hardware Purchase and Software Development/License Agreement
b) If Buyer is committed to supply Products or Licensed Software to its
customers beyond such termination or expiration date, Seller and Buyer agree to
negotiate in good faith, and in a timely manner, terms and conditions to allow
Buyer to fulfill such commitments. In the absence of agreement as to such terms
and conditions, the parties agree to submit such dispute to arbitration as set
forth in 30.01 hereof. Seller shall continue to deliver Products and Licensed
Software to Buyer during the pendency of such arbitration at price levels which
were in effect immediately prior to such termination or expiration. The
arbitrator has the authority to change the price levels retroactively.
c) Each party shall immediately return to the other all proprietary,
confidential or private data and all copies thereof. Buyer will not have such
obligation to the extent the data is reasonably necessary to support a
reasonable continuing obligation to customers as set forth in 7.03(b). In
addition, notwithstanding the above, Buyer shall retain all rights and
documentation necessary to continue servicing Products sold hereunder and the
right to dispose of its inventory of Products and Licensed Software.
d) Upon the request of Xerox, Seller shall, at Xerox' expense, return all
Xerox Unique Tooling to Xerox or make disposition thereof in accordance with
Xerox' written instructions. Such disposition shall be subject to verification
by Xerox.
e) Seller shall upon request provide a list of vendors for Products and
Spares or components of Products, and Licensed Software, so that Buyer(s) may
source Products, Spares, and components therefor and Licensed Software directly
from such vendors. Further, Seller agrees to provide timely assistance to
Buyer(s) in negotiating supply agreements with such vendors upon Buyer's request
and hereby grants to Buyer(s) the non-exclusive world-wide royalty free right
and license to manufacture, have manufactured, use and sell or otherwise market
any Products or Licensed Software, spares, or components thereof, which are
proprietary to Seller or which, for any reason, a license from Seller is
necessary for Buyer to manufacture, use and sell or otherwise market any
Products or Licensed Software and to the extent necessary, shall obtain from a
third party the necessary licenses for Buyer to have the rights specified in
this Paragraph.
VIII. DELIVERIES
8.01 Transportation And Packaging - All Products and Licensed Software will be
---------------------------
shipped with commercial packaging suitable for shipment via air or sea, as
applicable, in standardized containers in accordance with the packaging
specifications set forth or referenced in Attachment I for Products and for
Licensed Software. If requested, Seller agrees to assist Buyer or the forwarder
selected by Buyer in arranging the most economical transportation from the
seaport or airport from which the Products or Licensed Software will be shipped.
8.02 Forecasts - Buyer shall submit to Seller a forecast covering the quantity
---------
of Products it then intends to order during the [*] period covered by the
forecast. No forecast is to be construed as a purchase commitment; it is offered
only as an indication of Buyer's then anticipated future requirements to assist
Seller in its planning.
8.03 Early Delivery - Buyer reserves the right, at its option and without
--------------
liability, to:
a) refuse to accept delivery of Products or Licensed Software more than
[*] in advance of the delivery dates set forth in purchase orders and, if
delivered to return such Products or Licensed Software to Seller at Seller's
expense, for subsequent delivery in conformance with such purchase orders; or
b) retain any early delivered Product or Licensed Software and hold
Seller's invoice until the date it would otherwise be due if delivery had been
made on the delivery date set forth in the purchase order.
8.04 Late Delivery - In consideration of increased but not easily calculable
-------------
costs incurred
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
11
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Xerox & SMT Hardware Purchase and Software Development/License Agreement
by Buyer when Seller is late in delivery of Products or Licensed Software, the
parties agree that (a) if delivery is delayed more than [*] and upon request by
Buyer, Seller will airship the Products or Licensed Software and pay any
increase in packaging and shipping costs between air freight and land or ocean
freight, and (b) if delivery is delayed more than [*], Buyer shall have the
right to cancel the delayed Products or Licensed Software with no charge or
penalty to Buyer and such delay, at Buyer's option, shall be deemed a material
breach of this Agreement. This Section 8.04 shall only apply to Purchase Release
Orders that are for quantities that are equal to or less than those that have
appeared on the [*] rolling forecast for at least the [*] immediately preceding
the scheduled month of shipment. Seller shall use best commercial efforts to
accomodate any orders above such amount.
8.05 Manufacturing License - If Seller is unable or unwilling for any reason
---------------------
other than Buyer's material breach of this Agreement, to deliver any Product or
Licensed Software to Buyer hereunder for a period of [*] from the delivery date
for such Product or Licensed Software, Seller hereby grants to Xerox any and all
rights that Seller has that can be transferred to manufacture or have
manufactured the Products or Licensed Software, as applicable. Seller shall also
provide, at the request of Xerox, engineering assistance, documentation and
know-how sufficient to enable Xerox to manufactured or have manufactured the
Products or Licensed Software. In addition, Seller hereby grants to Xerox the
right to contract with Seller's vendors for such purpose. Should such license
grant be implemented, both parties agree to meet in a timely manner to negotiate
in good faith the process of such implementation.
8.06 Rescheduling - Buyer may, upon written notice to Seller, reschedule
------------
Products and Licensed Software for delivery [*], and such rescheduled date must
be no later than [*] after the originally scheduled date.
Notwithstanding the above, Seller will use reasonable efforts to accommodate
Buyer's requested schedule changes.
8.07 Cancellation Without Cause - Buyer may, upon written notice to Seller
--------------------------
cancel any Product or Licensed Software then scheduled for delivery for any
reason whatsoever up to, but no later than, [*] prior to the first day of the
Production Month for such Products. The payment by Buyer of a cancellation
charge as set forth below shall represent Seller's exclusive remedy for a
cancellation by Buyer pursuant to this Section.
a) if notice of cancellation is sent by Buyer at least [*] prior to the
first day of the Production Month for such Products, Buyer may cancel without
any cost or penalty;
b) if notice of cancellation is sent by Buyer less than [*] prior to the
first day of the Production Month for such Products, Buyer shall pay Seller
actual costs incurred in manufacture of the Product prior to issuance of such
notice of cancellation, subject to Seller (i) making its best effort in the case
of Products to cancel parts sourced form external vendors, and to reschedule
over the next two (2) Production Months all possible parts, at no charge to
Xerox, and (ii) advising Buyer of the amount of any actual cancellation cost
incurred and paid, if Seller is unable to effect such complete cancellation
and/or rescheduling. Xerox shall have the right to audit such cancellation
charges. The maximum charges hereunder shall be the actual costs incurred by
Seller in effecting such cancellation or the cost of the canceled Products,
whichever is less.
8.08 Cancellation For Cause - In the event Seller is, for any reason
----------------------
whatsoever, including reasons beyond its control, [*] or more working days
delinquent in meeting the agreed upon delivery schedule of any Product or
Licensed Software, Buyer may, by written notice to Seller, cancel without
liability such delinquent Product or Licensed Software and such delay shall be
deemed, at Buyer's option. a material breach of this Agreement.
8.09 Disposition Of Canceled Product - In the event Buyer cancels any purchase
-------------------------------
order or portion thereof pursuant to 8.07 or 8.08 hereof, Seller may dispose of
the canceled Products or Licensed Software, after removing all identifying marks
which identify the Products or Licensed
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
12
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Xerox & SMT Hardware Purchase and Software Development/License Agreement
Software as Private Label Products or Licensed Software provided that, unless
Buyer's prior consent is obtained, all Xerox Unique Parts are to be removed from
such Products. Should Seller elect to dispose of such canceled Products of
Licensed Software, Buyer shall have the right of first refusal to purchase/
license such canceled Products/Licensed Software at the best price offered to
any third party.
IX PRODUCT AND LICENSED SOFTWARE CHANGES
9.01 Products And Licensed software Changes - The Products and Licensed
--------------------------------------
Software delivered hereunder shall incorporate the latest improvements
implemented by Seller, subject to Xerox' prior written agreement. Seller shall
inform Xerox, in writing, of the following in requesting such approval:
The date of the proposed incorporation of such changes into the Products
or Licensed Software and description of changes affecting the:
a) form (external appearance of finished products or piece parts; or
external dimensions, dimension tolerances or shape);
b) fit (provisions for mounting; changes to mounting holes, holes for
mounting shipping restraints, or holes or fittings for mounting accessory or
optional features; changes in the dimension or shape of internal spaces
available for customer use; changes affecting the interchangeability of parts,
electrical or other power and environmental requirements).
c) function (changes in the Product or Licensed Software specification,
Product or Licensed Software performance, or any changes affecting the Product's
or Licensed Software's reliability); or
d) compatibility of the Products or Licensed Software (changes to or
which affect Product or Licensed Software operation or Product's Spares,
internal logic or timing which might affect application of the Products or
Licensed Software, part number or configuration dash number of parts which can
be replaced in the field, the interchangeability of Spares, service
documentation which might affect a customer's application of the Product).
Xerox shall respond within thirty (30) days to each request for Product or
Licensed Software changes received from Seller indicating its acceptance or
rejection of such change.
9.02 Implementation - Any changes made by Seller and accepted by Xerox pursuant
--------------
to 9.01 hereof shall be implemented in accordance with the schedule indicated by
Seller in the written notification of change. Such changes shall be
incorporated into Products or Licensed Software shipped pursuant to purchase
orders received by Seller after Xerox approved such changes. The serial number
of the first such changed Product shall be identified to Xerox and Seller agrees
that all Products with serial numbers greater than such serial number shall
incorporate such changes.
9.03 Obsolete Inventory - In the event of changes to Products or Licensed
------------------
Software, Seller shall repurchase or exchange from Buyer all Consumables or
Spares and refund any royalties paid on account of Licensed Software which are
in Buyer's inventory and which have become obsolete as a result of any change
to Products or Licensed Software, other than a Products or Licensed Software
change requested by Buyer.
9.04 Effect of Rejection - In the event Buyer rejects a proposed change to
-------------------
Products or Licensed Software, Seller shall remain obligated to deliver Products
and Licensed Software conforming to the applicable specifications, set forth in
this Agreement in the Attachments hereto.
X. AGENCY APPROVAL AND SAFETY
10.01 Compliance - Product and Licensed Software shall comply with all
----------
applicable governmental laws, regulations and other public or private
requirements in effect at the time of shipment hereunder and, in particular, the
safety requirements and governmental or other agency certifications described in
the specifications appearing in Attachment 1.
10.02 Regulatory Agency Approval - Seller shall obtain, at no cost to Buyer,
--------------------------
full Regulatory Agency approvals as required for Products and
13
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Xerox & SMT Hardware Purchase and Software Development/License Agreement
Licensed Software in accordance with the schedules in Attachment IV and
Specifications shown in Attachment I. Seller shall obtain, at no cost to Buyer,
any required Regulatory Agency reapprovals for any Products or Licensed Software
which are modified in any authorized manner hereunder.
10.03 Cost Effects of Changes - In the event that any change in the form, fit
-----------------------
or function (as collectively defined in 9.01) or specification of any Products
or Licensed Software which are necessitated in order to comply with Regulatory
Agency requirements or standards or mutually agreed upon hereunder results in a
significant increase or decrease in the cost of such Products or Licensed
Software, or in the length of time required for the manufacture or delivery
thereof, equitable adjustment to the price of such Products or Licensed
Software or agreed upon shipping date or both shall be made by the parties
pursuant to good faith negotiations.
XI. CONSUMABLES AND EMERGENCY MAINTENANCE SUPPORT
11.01 Spares Listing - Seller shall supply to Xerox, in accordance with the
--------------
schedule set forth in Attachment IV, a recommended Spares listing based on
representative field populations.
11.02 Initial Order - Seller shall deliver to Buyer the initial Spares order
------------
in accordance with the quantities specified in such order and in accordance with
the schedule set forth in Attachment IV.
11.03 Spares And Supplies - Seller shall supply Buyer Spares and Supplies for
-------------------
Equipment for a period of [*] from the last delivery of Equipment under this
Agreement and notwithstanding any Termination hereof pursuant to Article VII. In
this regard, Buyer shall place its final purchase orders for such Spares and
Supplies at least [*] prior to the expiration of such [*] period. Prices of
Spares after the last delivery of Equipment under this Agreement and during this
[*] will be adjusted to reflect actual total costs (manufacturing
plus material) on a [*].
11.04 Equivalent Spares - Buyer agrees to accept equivalent and/or
-------------------
interchangeable (form, fit and function compatible as defined in 9.01 hereof)
Spares and consumables during the [*] period defined 11.03 hereof, if
Seller's source of supply should change and such change is beyond Seller's
reasonable control. The determination as to whether Spares are equivalent and/or
interchangeable shall be made solely by Xerox.
11.05 Emergency Spares Inventory - Seller shall at all times maintain an
--------------------------
inventory of at least [*] of the total cumulative units purchased by Buyer in
the preceding [*] units of each Spare, at no cost to Buyer, and use this supply
solely for shipment to Buyer as emergency Spares, when requested Deliveries of
emergency Spares shall be made within [*] of buyer's request thereor to Seller.
11.06 Priority - Seller shall use its best efforts to have in inventory or
--------
supply Spares to Buyer on a priority basis, inside of Seller's usual lead time,
to replenish any Buyer low stock condition and shall immediately upon receipt of
relevant Purchase Orders, notify Buyer or customers of the anticipated shipment
date of all Spares orders.
11.07 Full Set of Spares - The price of a full set of Spares shall not exceed
------------------
[*] of the then current price of one unit of Equipment.
XII. WARRANTIES
12.01 Express warranties -
------------------
(a) Seller warrants that it has good and marketable title to all Products
delivered to Buyer hereunder that all units of Products shall be free and clear
of all liens, encumbrances, security interests or other claims.
(b) Seller also warrants that it has either good and marketable title to all
units of Licensed Software shipped hereunder or has the right to convey to Xerox
and Xerox Affiliated Companies the right respecting Licensed Software granted
in this Agreement.
(c) Seller further warrants that, unless otherwise agreed in writing, all
Products delivered to
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
14
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Xerox & SMT Hardware Purchase and Software Development/License Agreement
hereunder shall be manufactured solely from new or like new parts and shall
fully conform to the specifications of Attachment I.
(d) Seller further warrants that all Products delivered to Buyer hereunder shall
be free from defects in material and workmanship and shall fully conform to the
specifications of Attachment I for a period of [*] from the date of delivery to
Buyer.
(e) Seller further warrants that Licensed Software shall be substantially free
from program error and fully conform with specifications of Attachment I for a
period of [*] after shipment of the first unit of License Software by
Seller to Buyer.
12.02 Warranty Obligations - With respect to any Products or Licensed Software
--------------------
found to be defective, Seller shall, without charge including freight, deliver
at Buyer's option, repaired or replaced Products or licensed Software within [*]
from the time of Buyer's notification that such defective Products or Licensed
Software exist. Buyer's sole obligation shall be to maintain adequate records
regarding the causes (if know) and dates of such failures and provide such
information to Seller at Seller's request. At Buyer's option, Buyer may repair
the Products or Licensed Software, and in such event Seller shall reimburse
Buyer for actual expenses Buyer incurs in repairing or attempting to repair the
Products or licensed Software.
12.03 Out Of Warranty Service - During the term hereof and for a period of [*]
-----------------------
thereafter, Seller agrees to repair or replace, within [*] of receipt from
Buyer, each product found to be defective following the warranty period of 12.01
at Seller's then flat rate exchange, if required, reasonable travel expenses
when approved in advance by Xerox.
12.04 Repaired And Replaced Products - All Products or Licensed Software
------------------------------
repaired or replaced by Seller under this Article shall be subject to Buyer's
inspection and acceptance in accordance with the provisions of Article VI, and
if accepted, shall be extended new warranties in accordance with 12.01 hereof.
12.05 Systemic Defects - Notwithstanding the warranty requirements and
----------------
conditions of Section 12.01 hereof, Seller will undertake without charge and
without delay to promptly remedy any Systemic Defect in all affected Products or
Licensed Software in inventory or in the field, by delivering to Buyer a
replacement Product or Licensed Software. Seller shall not be required to cure
any Systemic Defect for any Products or License Software which have been
subjected to accident, negligence, misuse, alteration, modification, tempering
or causes other than ordinary use.
12.06 WARRANTY DISCLAIMER - THE EXPRESS WARRANTIES SET FORTH IN THIS ARTICLE,
-------------------
AND THE OBLIGATIONS AND LIABILITIES OF SELLER HEREUNDER, ARE IN LIEU OF ALL
OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
XIII. TRAINING
13.01 Seller shall provide to Xerox and Xerox Affiliated Companies, at no
charge for labor or materials supplied, two (2) training courses (1 sales and 1
service) for Xerox and Xerox Affiliated Companies sales and service engineers
with respect to the marketing and servicing/support of Products and Licensed
Software at locations designated by Xerox. The course will be held at venues and
on dates to be agreed. Xerox shall be given one copy of such training materials
which it may copy and distribute for purposes of training other employees or
agents of Xerox and Xerox Affiliated Companies.
13.02 Should Buyer purchase customized or new Products or Licensed Software
from Seller pursuant to 4.10 or 9.01, Seller agrees to offer the same training
as described in 13.01 hereof for each such Product and Licensed Software, at no
cost to Buyer.
XIV. INDEMNIFICATION
14.01(a) Seller Indemnification. Seller agrees, at its expense, to defend
----------------------
Buyer from, and pay any judgment for, any suit, claim or proceeding (hereinafter
"Claim") against Buyer alleging that any Products sold or Licensed Software
licensed hereunder either (i) violates any applicable safety or regulatory
standard, or (ii)
[*] Confidential Treatment Requested. The confidential portion has been omitted
and filed separately with the Securities and Exchange Commission.
15
<PAGE>
has caused injury or damage to the person or property of another arising from
defects in materials, design or construction of any Products or Licensed
Software, unless based upon the negligent conduct of Buyer, any of its agents,
representatives or employees, or any other third party, or (iii) infringes any
patents, utility models, copyrights, trade secrets, or any other intellectual
property rights of a third party issued in U.S., Canada, members of the European
Economic Community and Japan; provided that Seller is promptly notified in
writing of any Claim, given all reasonable assistance required, and permitted to
direct the defense. Seller shall have no liability for settlements or costs
incurred without its consent.
14.01(b) Buyer agrees, at its expense, to defend Seller from, and pay any
judgment for, any suit, claim or proceeding (hereafter "Claim") against Seller
alleging that any Product sold or Licensed Software licensed hereunder has
caused injury or damage to the person or property of another arising from the
negligence of Buyer or any of its agents, representatives or employees provided
that Buyer is promptly notified of any claim, given all reasonable assistance
required, and permitted to direct the defense. Seller shall have the right at
all times to participate in the defense of such claim or proceeding at Seller's
expense. Buyer shall have no liability for settlement or costs incurred without
its consent.
14.02 Injunction - In the event that Buyer's use of any of the Products or
----------
Licensed Software is enjoined, Seller shall, at its option and expense, either
substitute fully equivalent Products or Licensed Software not subject to such
injunction, modify the Product or Licensed Software so that it no longer is
subject to such injunction, or obtain for Buyer and its customers the right to
continue using the enjoined Products or Licensed Software. If none of the
foregoing is feasible, and said injunction is in effect for more than three (3)
months, Seller will take back the enjoined Products and Licensed Software from
Buyer and its customers and refund to Buyer the purchase price/royalties/fees
paid therefor, plus return transportation costs.
14.03 Limitations - Seller shall not be liable for any Claim arising solely out
-----------
of or resulting solely from (i) Seller's compliance with or adoption of any
specification, design, feature, mark or symbol, component parts or printed
materials or other information or materials required by Buyer for incorporation
or use with any Products or licensed Software, or (ii) any modification or
reworking made by Buyer, or upon instruction of Buyer performed by Seller, to
any Products or Licensed Software.
14.04 DISCLAIMER OF LIABILITY - NEITHER XEROX, XEROX AFFILIATED COMPANIES, OR
-----------------------
THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AND AGENTS, SHALL BE LIABLE FOR
ANY LOSS OR PROFIT WHICH SELLER INTENDED TO OBTAIN BY SALE OF THE "PRODUCTS" OR
LICENSE OF LICENSED SOFTWARE TO BUYER OR OTHER INDIRECT OR CONSEQUENTIAL DAMAGES
OF ANY KIND SUFFERED BY SELLER DUE TO OR IN CONNECTION WITH ANY SUCH CLAIM.
XV. CONFIDENTIAL AND PROPRIETARY INFORMATION
15.01 Except as set forth in Article IV, all information furnished or disclosed
by either party in writing and marked "Confidential," "Proprietary," or
"Private," shall remain the property of the disclosing party. The recipient
shall not disclose such information or any part thereof to any third party and
shall restrict circulation of such information within its own organization on a
need-to-know basis. However, if Buyer is the recipient it may disclose such
information to Xerox and Xerox Affiliated Companies and such Companies shall
restrict circulation of such information within their own organizations on a
need-to-know basis. If either party reproduces any part of such information for
use within its own organization, the recipient shall mark all reproductions by
indicating the disclosing party's proprietary interest. If any such information
is transferred to Buyer's or Seller's vendors, suppliers or customers, such
vendors, suppliers or customers shall be required to maintain the
confidentiality of such information and such transfer must be authorized in
writing by the disclosing party. Such obligation to keep information
confidential shall survive termination or expiration of this Agreement.
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
16
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Xerox & SMT Hardware Purchase and Software Development/License Agreement
15.02 Neither party hereto shall be bound by the confidentiality obligations of
Section 15.01 hereof if:
15.02.1 the information was not specifically designated in writing as
confidential or proprietary at the time of the disclosure or, if the disclosure
was orally made, it had not been initially identified as being confidential and
it had not been reduced to writing and designated as being confidential within
[*] from the date of oral disclosure (and during such not more than [*] period
prior confirmation that such orally disclosed information is confidential such
orally disclosed information shall be treated as confidential information in
accordance with this Article XV;
15.02.2 the information was in the public domain at the time of the
disclosure;
15.02.3 the information becomes publicly available through no fault of
the recipient;
15.02.4 the information was in the recipient's possession, free of any
obligation of confidence, at the time of receipt of the information;
15.02.5 the information becomes available on an unrestricted basis to a
third party from the disclosing party or from someone acting under its control;
15.02.6 the information was developed by employees or agents of the
recipient independently of and without reference to the information disclosed in
confidence;
15.02.7 and to the extent the recipient is obligated to produce the
information under court or government action;
15.02.8 five (5) years have elapsed since the information was disclosed
to the recipient; or
15.02.9 the information is determinable by the public upon reverse
engineering or scrutiny upon inspection when the Products are marketed.
XVI. LIMITATION OF LIABILITY
16.01 A. LIMITATION ON DIRECT DAMAGES - NOTWITHSTANDING ANY OTHER PROVISION
----------------------------
CONTAINED HEREIN TO THE CONTRARY EXCEPT ARTICLE XIV, WHICH SHALL BE
GOVERNED BY ITS TERMS, UNDER NO CIRCUMSTANCES SHALL THE LIABILITY OF
XEROX, XEROX AFFILIATED COMPANIES AND SELLER, SELLER AFFILIATED
COMPANIES, OR THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AND
AGENTS, FOR DIRECT DAMAGES EXCEED THE PURCHASE PRICE RECEIVED BY
SELLER FOR THE PRODUCT OR LICENSED SOFTWARE FROM WHICH THE CLAIM AROSE
OR ONE HUNDRED THOUSAND ($100,000) DOLLARS, WHICHEVER IS GREATER
WHETHER ARISING IN CONTRACT IN TORT (INCLUDING WITHOUT LIMITATION
NEGLIGENCE) OR ANY OTHER THEORY.
B. DISCLOSURE OF OTHER DAMAGES - NOTWITHSTANDING ANY OTHER PROVISION
---------------------------
CONTAINED HEREIN TO THE CONTRARY EXCEPT ARTICLE XIV, WHICH SHALL BE
GOVERNED BY ITS TERMS, XEROX, XEROX AFFILIATED COMPANIES, AND SELLER
SPECIFICALLY DISCLAIM AND WAIVE AS TO EACH OTHER AND THEIR RESPECTIVE
OFFICERS, DIRECTORS, EMPLOYEES, OR AGENTS ANY AND ALL LIABILITY FOR
DAMAGES OTHER THAN DIRECT DAMAGES, INCLUDING BUT NOT LIMITED TO
PUNITVE OR EXEMPLARY DAMAGES, HOWEVER DENOMINATED AND INDIRECT,
CONSEQUENTIAL, OR INCIDENTAL DAMAGES, WHETHER ARISING IN CONTRACT, IN
TORT (INCLUDING WITHOUT LIMITATION NEGLIGENCE), OR ANY OTHER THEORY
EVEN IF INFORMED OF THE POSSIBILITY OF SUCH DAMAGES AND
NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY
PROVIDED HEREIN.
XVII. EXPORT CONTROL
17.01 Seller and Buyer shall comply with all applicable laws and regulations
respecting the export, directly or indirectly, of any technical data acquired
from the other under this
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
17
<PAGE>
Xerox & SMT Hardware Purchase and Software Development/License Agreement
Agreement or any Products or Licensed Software utilizing any data to any country
the laws or regulations of which at the time of export, require an export
license or other government approval including but not limited to first
obtaining such license or approval.
XVII. INDEPENDENT PRODUCT DEVELOPMENT
18.01 This Agreement does not and shall not be construed to limit the rights of
Xerox or Xerox Affiliated Companies or Seller and Seller Affiliated Companies
(aside from restrictions contained in Article XIV) to develop competing products
or software.
XIX. FORCE MAJEURE
19.01 Neither Seller nor Buyer shall be liable to the other for its failure to
perform any of its obligations hereunder or under any purchase order or
acknowledgment thereof during any period in which such performance id delayed by
unforeseeable circumstances beyond its reasonable control.
XX. NOTICES
20.01 Any notice which may be or is required to be given under this Agreement
shall be in writing. All written notices shall be sent by common carrier,
registered or certified airmail, postage prepaid, return receipt requested. To
the extent this Agreement requires notice to be given to Seller or Xerox, such
notices shall be deemed to have been given when received, addressed in the
manner indicated below or at such other addresses as the parties may from time
to time notify each other of:
BUYER
XEROX CORPORATION
THE XEROX CONNECTION
2200 EAST GRAND AVE ESCG 285
EL SEGUNDO, CA. 90245
Attn:Contract Administrator
SELLER
SUPERMAC TECHNOLOGY, INC.
215 MOFFETT PARK DRIVE
SUNNYVALE, CA. 94089-1374
Atten:Contract Administrator
To the extent this Agreement requires Seller to give notice to a Xerox
Affiliated Company in its capacity as a Buyer then such notice will be deemed to
have been given when received and addressed in the manner agreed to by Seller
and the appropriate Xerox Affiliated Company.
XXI. POINTS OF CONTACT
21.01 Attachment V is included in this Agreement only to provide both parties
with names, addresses and telephone numbers for primary points of contract in
the day to day administration of the activities defined in this Agreement.
XXII. HEADINGS
22.01 The headings and titles of the Articles and Sections of this Agreement are
inserted for convenience only and shall not affect the construction or
interpretation of any provision.
XXIII. AMENDMENT
23.01 This Agreement and the Attachments hereto may be amended only by a
document in writing duly signed by authorized representatives of both parties.
XXIV. ASSIGNMENT
24.01 Seller or Buyer may not assign this Agreement except as provided for in
this section to any other party without the prior written consent of Buyer or
Seller, which consent shall not be unreasonably withheld. Buyer or Seller may
assign this Agreement only to a parent, subsidiary or affiliated firm, to a
third party in connection with a merger, consolidation or joint venture, or to a
third party upon a sale or transfer or substantially all of Buyer's or Seller's
business assets.
18
<PAGE>
Xerox & SMT Hardware Purchase and Software Development/License Agreement
XXV. PRODUCT RECYCLING
25.01 Product Recycling - In the event Products or Licensed Software are
-----------------
returned to Buyer after Buyer's sale, lease, or license thereof, Buyer has the
right, without payment or renumeration of any kind or type to Seller, to use,
remanufacture, refurbish, or recondition and thereafter remarket such Products.
Such processes may include by way of illustration and not of limitation
disassembly of Products to a standard determined by Buyer, the addition of new,
used, or reprocessed components cleaning, refinishing, and retrofitting Products
with all applicable retrofits. However, Buyer's right to remarket Products and
Licensed Software is not contingent upon Buyer's remanufacturing, refurbishing
or reconditioning of the Products and such remanufacturing, refurbishing or
reconditioning by Buyer shall be deemed a repair of the Products. Such
remanufacturing, refurbishing or reconditioning and thereafter remarketing of
Products and Licensed Software by Buyer shall not be deemed nor constitute a
violation by Buyer of any of Seller's rights,including but not limited to
Seller's patents rights respecting the Products and Licensed Software.
XXVI. SEVERABILITY
26.01 If any provision of this Agreement is held invalid by any law, rule, order
or regulation of any government, or by the final determination of a court of
last resort, such invalidity shall not affect (a) the other provisions of this
Agreement, (b) the application of such provision to any other circumstance
other than that with respect to which this Agreement was found to be
unenforceable, or (c) the validity or enforceability of this Agreement as a
whole.
XXVII. WAIVER
27.01 Failure or delay of either party to exercise any right or remedy under
this Agreement or to require strict performance by the other party of any
provision of this Agreement shall not be construed to be a waiver of any such
right or remedy or any other right or remedy hereunder. All of the rights of
either party under this Agreement shall be cumulative and may be exercised
separately or concurrently.
XXVIII. SURVIVAL
28.01 Unless this Agreement expressly provides otherwise or by its nature a
provision cannot survive this Agreement, the provisions of this Agreement shall
survive the expiration or any termination of this Agreement.
XXIX. ETHICAL STANDARDS
29.01 Seller agrees that, with respect to its role as supplier to Buyer
including any interaction with any employee of Buyer, Seller shall not: (1) give
or offer to give any gift or benefit to any such employee of Buyer, (2) solicit
or accept any information, data, services, equipment, or commitment from such
employee unless same is (i) required under a contract between Buyer and Seller,
or (ii) made pursuant to a written disclosure Agreement between Buyer and
Seller, or (iii) specifically authorized in writing by Buyer's management, (3)
solicit or accept favoritism from said employee, and (4) enter into any outside
business relationship with said employee without full disclosure to, and prior
approval of, the appropriate management of Buyer. As used herein: "employee"
includes members of the employee's immediate family and household, plus any
other person who is attempting to benefit from his or her relationship to the
employee. "Seller" includes all employees and agents of Seller. "Gift or
benefit" includes money, goods, services, discounts, favors and the like in any
form but excluding low value advertising items such as pens, pencils, and
calendars.
XXX. ARBITRATION
30.01 The parties shall attempt in good faith to resolve any dispute arising out
of or relating to this agreement promptly by negotiations between executives who
have authority to settle the controversy. Any party may give the other
party(ies) written notice of any dispute not resolved in the normal course of
business. Within 20 days after delivery of said notice, executives of both
parties who have not been personally and substantially involved in the events
leading up to the dispute, and who have authority to settle the dispute, shall
meet at a mutually acceptable time and place, and thereafter as often as they
reasonably deem
19
<PAGE>
Xerox & SMT Hardware Purchase and Software Development/License Agreement
necessary, to exchange relevant information and to attempt to resolve the
dispute. If the matter has not been resolved within 60 days of the disputing
party's notice, or if the parties fail to meet within 20 days, either party may
initiate arbitration of the controversy or claim as provided hereinafter.
If a negotiator intends to be accompanied at a meeting by an attorney, the other
negotiator shall be given at least three working days' notice of such intention
and may also be accompanied by an attorney. All negotiations pursuant to this
clause are confidential and shall be treated as compromise and settlement
negotiations for purposes of the Federal Rules of Evidence, state rules of
evidence, and other applicable law.
If the parties are unable to resolve the dispute by negotiations as set forth
above, such dispute shall be settled by arbitration, conducted on a confidential
basis, under the then current commercial Arbitration Rules of the American
Arbitration Association ("the Association") strictly in accordance with the
terms of this Agreement and the substantive law of the State of California. The
arbitration shall be held at a mutually agreeable location in Los Angeles,
California and conducted by one arbitrator chosen from a list of attorneys who
are knowledgeable about the data processing and business equipment industries.
The costs of the arbitration, including the fees to be paid to the arbitrator,
shall be shared equally by the parties to the dispute. The parties to the
dispute shall be limited to taking no more than three (3) depositions. The scope
of document production shall be governed by the commercial Arbitration Rules of
the Association and the decision of the arbitrator with respect thereto. The
Judgment upon the award rendered by the arbitrator may be entered and enforced
in any court of competent jurisdiction. Neither party shall be precluded hereby
from seeking provisional remedies in the courts of any jurisdiction including,
but not limited to, temporary restraining orders and preliminary injunctions, to
protect its rights and interests, but such shall not be sought as a means to
avoid or stay arbitration. To the extent this Agreement contains a limitation
and/or disclaimer of liability clause, the terms of such clause will be applied
by the arbitrator. If this Agreement does not contain a limitation and/or
disclaimer of liability clause the maximum monetary award that can be rendered
by the arbitrator will be ten (10) million dollars and such award shall not
include any consequential, incidental, punitive, or exemplary damages. The
parties agree that they have voluntarily agreed to arbitrate their disputes in
accordance with the foregoing.
XXXI. NONPUBLICITY
31.01 Without the prior written consent of either party to this Agreement,
Seller nor Buyer shall not (a) make any news release, public announcement,
denial or confirmation of this Agreement or its subject matter, or (b) advertise
or publish any facts relating to this Agreement.
XXXII. CONTROLLING LAW
32.01 This Agreement shall be governed by and construed in all respects in
accordance with the laws and regulation of the State of California, U.S.A. The
definitions set forth in the Incoterms of the International Chamber of Commerce,
1990 edition, shall be controlling. To the extent there may be any conflict
between the law of the State of California and the Incoterms, the Incoterms
shall be controlling. The parties specifically agree that the 1980 United
Nations Convention on Contracts for the International Sale of Goods, as such may
be amended from time to time, shall not apply to this Agreement.
XXXIII. CONTROLLING LANGUAGE
33.01 This Agreement is in English only, which language shall be controlling in
all respects. All documents exchanged under this Agreement shall be in English
only.
XXXIV. REMEDIES CUMULATIVE
34.01 Except as otherwise set forth herein, any rights of cancellation or
termination, or remedies prescribed in this Agreement are cumulative and are not
intended to be exclusive of any other remedy of which the injured party may be
entitled to herein or at law or in equity, including but not limited to the
remedy of specific performance.
20
<PAGE>
Xerox & SMT Hardware Purchase and Software Development/License Agreement
XXXV. INTEGRATION
35.01 With the exception of the Tooling Agreement, this Agreement constitutes
the entire agreement of the parties as to the subject matter hereof and
supersedes any and all prior oral or written understandings and agreements as to
such subject matter, including any preprinted terms and conditions contained in
any purchase orders and acknowledgements issued hereunder.
XEROX CORPORATION SELLER
By:/s/ John A Lopiano By:/s/ Louis J. Doctor
------------------------------------ -----------------------
JOHN A LOPIANO LOUIS J. DOCTOR
- --------------------------------------- -------------------------
(Typed/Printed Name)
PRESIDENT, PRINTING SYSTEMS DIVISION EXECUTIVE VICE PRESIDENT
- -------------------------------------- --------------------------
(Title) (Title)
11/11/93 NOVEMBER 01, 1993
- -------------------------------------- --------------------------
(Date) (Date)
(Typed/Printed Name) (Typed/Printed Name)
21
<PAGE>
ATTACHMENT III
PRICING (FOR NEW ORDERS)
There are five "Basic" board level products:
1) a 128MB v3 Splash Power Kit Pro
2) a 128MB Splash.TX v2.5
3) a 72MB PostScript print only medium range version: Splash.MX v2.5
4) a 72MB v3 version with scanning and direct Export printing: Splash Power Kit
5) a 72MB v2.5 version with scanning and direct Export printing: Splash.MXplus
All the above board level products, with the exception of the Splash.MX, include
the Color Central for Splash OPI server (Lite version). In addition, there are
three "System Configurations", as defined in the next paragraph. Finally,
spares, upgrades, and repair pricing is included. Each of these products will
have a volume discount based on the total prediscount transfer revenue of
purchases of all products aggregated. Xerox may choose the volume discount level
at which purchases shall begin. There is also a bill back arrangement for
failure to purchase a minimum aggregate revenue of products on an annual basis.
SYSTEM CONFIGURATIONS: The three system configurations will be Apple Power
Macintosh or Power Macintosh compatible based, with the following minimum system
configuration specifications. The systems will have the Splash Hardware, Splash
Software, and all other bundled software loaded and preconfigured. The warranty,
service, and support for the items included other than the Splash board and
Splash software will only be the standard terms provided to Customers by Adobe,
Apple, Radius, and/or SuperMac. None of the clauses in the contract with respect
to warranty, repair, or support will apply to these other system components.
Splash Power Series P70 97K25090
-------------------
Minimum functional specification:
(could also be better/later versions)
1. Splash.MX controller board set
2. Splash v3.0 release software
3. 14" color display
4. All configuration and installation
5. 66MHz Power PC Macintosh compatible with NuBus
6. System software 7.5
7. 12 MB RAM
8. 350 MB disk
9. built-in EtherTalk and LocalTalk
10. external CD ROM drive
11. keyboard and mouse
12. additional documentation
<PAGE>
Splash Power Series P85 97K22820
- ------------------
Minimum functional specification:
(could also be better/later versions)
1. Splash.MXplus controller board set
2. Splash v3.0 release software
3. Color Central for Splash OPI software (Lite version)
4. Adobe Photoshop LE imaging software
5. 17" color display
6. 24-bit graphics display capability
7. All configuration and installation
8. 80MHz PowerPC Macintosh compatible with Nubus
9. System software 7.5
10. 16 MB RAM
11. 500 MB disk
12. built-in EtherTalk and LocalTalk
13. built-in CD ROM drive
14. keyboard and mouse
15. additional documentation
Splash Power Series P105 97K22830
- ------------------
Minimum functional specification:
(could also be better/later versions
1. Splash.TX controller board set
2. Splash v3.0 release software
3. Color Central for Splash OPI software (Lite version)
4. Adobe Photoshop LE imaging software
5. 17" color display
6. 24-bit graphics display capability
7. All configuration and installation
8. 100MHz PowerPC Macintosh compatible with Nubus
9. System software 7.5
10. 16 MB RAM
11. 500 MB disk
12. built-in EtherTalk and LocalTalk
13. built-in CD ROM drive
14. keyboard and mouse
15. additional documentation
<PAGE>
[*]
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
STANDARD CONTRACT PRICE FOR THE PRODUCTS:
The Standard Prices for the Products are as follows:
Full products:
Splash.MX v2.5 board 98K23700 [*]
Splash Power Series P70 v3 System (MX) 97K25090 [*]
Splash.MXplus v2.5 board 98K32420 [*]
Splash Power Kit v3 board (MX+) 98K39640 [*]
Splash Power Series P85 v3 System 97K22820 [*]
Splash.TX v2.5 board 98K32430 [*]
Splash Power Kit Pro v3 board (TX) 98K39650 [*]
Splash Power Series P105 v3 System 97K22830 [*]
Upgrades:
Splash v3 Software/Key Upgrade Kit 300K49920 [*]
Other Products:
Splash.MX daughter board spare 160K01960 [*]
Splash.MXplus daughterboard spare 160K08280 [*]
Splash.TX daughterboard spare 160K08300 [*]
Splash baseboard spare 160K01950 [*]
PowerPC 601/66 Controller spare TBD [*]
PowerPC 601/80 Controller spare TBD [*]
PowerPC 601/100 Controller spare TBD [*]
17" Color Monitor 128K00560 [*]
Color Central Deluxe 300K49950 [*]
14" Color Monitor 128K00550 [*]
External Mac compatible CD ROM drive TBD [*]
ESD Wrist Strap 115E3970 [*]
Splash Cable 152K633320 [*]
Splash v2.5 User's Manual Set 709P00094 [*]
Color Central Lite spare 300K49940 [*]
Adobe Photoshop LE spare TBD [*]
Splash v2.5 Software Spare 300K42730 [*]
Splash v3.0 Manual Set 709P00108 [*]
Splash v3.0 Software Spare 300K49930 [*]
Keyboard 110K07450 [*]
Mouse 18K00770 [*]
Orders for the above items marked with * must be place with a minimum quantity
of 25 per delivery date.
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
[*]
Out of Warranty Repair costs:
The following out of warranty standard board repair costs apply during the time
that the boards are in production. This repair charge will not, however,
apply to any boards rendered unrepairable due ot physical abuse or damage.
Splash.MX Daughter board [*]
Splash.MXplus Daughter board [*]
Splash.TX Daughter board [*]
Splash Baseboard [*]
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
Accepted and Agreed as a contract attachment ammendment:
By: Harvey L. Huddleston By: Kevin Macgillivray
------------------------- -----------------------------
Title: Com, The Xerox Connection Title: General Manager
----------------------- --------------------------
Date: March 31, 1995 Date: 4/10/95
----------------------- --------------------------
Xerox Corporation Radius (SuperMac Technology)
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
ATTACHMENT IV
DEVELOPMENT WORK SCHEDULE
Macro Level
Milestone Date Milestone Deliverable
10/25/93 Alpha Version Mid Range Product To be determined
SW and HW with preliminary User number of prototype
Interface, no sorter, no Windows Mid Range boards
Driver. and Software
11/22/93 Beta Version Mid Range Product To be determined
with Beta Version of User number of Beta Version
interface, no sorter, no Windows Mid Range boards and
Driver Software
1/31/94 Final shipping version Mid Range Begin Production
Product with Final User Interface, version deliveries
no Windows Driver
4/18/94 Alpha Versions of High End and Lite To be determined
Products HW and SW for all three number of Alpha version
version including Windows Driver High End and Lite
and sorter support boards and Software
5/30/94 Beta Versions of High End and Lite To be determined
Products HW and SW Adobe qualified number of Beta version
for Beta Release High End and Lite
boards and Software
6/27/94 Final Shipping Versions of High End Begin Production
and Lite Products and SW with final version deliveries
Adobe qualification
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
ATTACHMENT "V" XEROX AND SUPERMAC TECHNOLOGY CONTACTS
<TABLE>
<CAPTION>
XEROX CONTACTS SUPERMAC CONTACTS
<S> <C>
BUYER AND CONTACT ADMINISTRATION CONTRACT ADMINISTRATION
- -------------------------------- -----------------------
Harvey L. Huddleston Ron Moore
The Xerox Connection SuperMac Technologies
2200 East Grand Ave. 215 Moffett Park Dr.
El Segundo, CA 90293 Sunnyvale, CA 94089-1374
Tel: 310-333-4217 Tel: 408-541-5277
Fax: 310-333-4222 Fax: 408-541-6150
SUPPLY & DEMAND ORDER ADMINISTRATION
- --------------- --------------------
Joy Lipari Norma Catt
The Xerox Connection SuperMac Technologies
2200 East Grand Ave. 215 Moffett Park Dr.
El Segundo, CA 90293 Sunnyvale, CA 94089-1374
Tel: 310-333-4217 Tel: 408-541-5082
Fax: 310-333-4222 Fax: 408-541-5005
MAJESTIC PRODUCT MANAGEMENT GENERAL MANAGER-COLOR HARD COPY GROUP
- --------------------------- -------------------------------------
Mark Audino Mark Housley
Xerox Corp. SuperMac Technologies
800 Phillips Rd., Bldg. 311 215 Moffett Park Dr.
Rochester, NY 14580-9701 Sunnyvale, CA 94089-1374
Tel: 716-427-4316 Tel: 408-541-5215
Fax: 716-427-4904 Fax: 408-541-6150
MAJESTIC TECHNICAL PROGRAM MANAGER TECHNICAL PROGRAM MANAGER
- ---------------------------------- -------------------------
Vittal Shenoy Tim Kleffman
800 Phillips Rd., Bldg. 311 215 Moffett Park Drive
Rochester, NY 14580-9701 Sunnyvale, CA 94089-1374
Tel: 716-422-4199 Tel: 408-541-5109
Fax: 716 Fax: 408-541-6150
MAJESTIC MULTINATIONAL PRODUCT LAUNCH MANAGER
- ---------------------------------------------
Fred Peeks
800 Phillips Rd., Bldg. 311
Rochester, NY 14580-9701
Tel: 716-427-4448
</TABLE>
<PAGE>
ATTACHMENT "X" - TECHNICAL SUPPORT
ATTACHMENT X
SOFTWARE SUPPORT
SuperMac will provide support described below between the hours of [*]
Monday through Friday.
FIRST LEVEL SUPPORT RESPONSIBILITIES
Xerox will act as the initial point of contact and provide customer assistance
during the pre-sale and pre-install phases of the Products.
Xerox will provide limited post-sale first level telephone hotline support as
needed, and engage SuperMac for the more involved support. As a function of the
initial contact, Level 1 Support shall direct customer diagnostics operation to
attempt to isolate between copier and Splash failures, then to isolate hardware
failures to determine if there is a Splash product hardware failure.
Xerox will provide support to the customer during the installation and post
installation of the Products to enhance customer satisfaction. Level 1 Support
shall either (i) satisfy the customer, (ii) dispatch a hardware replacement to
the customer to replace defective hardware, or (iii) For North America Customer
Operations: pass the call to Level 2 Support for further diagnosis, and for
Europe and Latin America: use email, fax or telephone in English to pass
information to Level 2 support. The Level 1 Support provider shall always remain
primarily responsible for the trouble call and shall always confirm with the
customer that subsequent levels of support have satisfied their support
responsibilities.
SuperMac will provide reasonable additional support and training, when requested
by Xerox, during the pre-sale and pre-install phases of the Products.
SECOND LEVEL SUPPORT RESPONSIBILITIES
SuperMac will verify Product problems reported by customers, including
duplicating problems whenever possible in a controlled environment. Level 2
Support shall maintain a reasonable amount of products and other equipment to
allow, if necessary, duplication of the customers operating environment to
assist in diagnosis of the problem. [*] SMT will supply all other equipment. If
the proposed resolution is replacement of hardware. Level 1 Support shall
dispatch the required hardware and handle any further exchanges with the
customer.
SuperMac will report verified Product failures or unresolved problems to third
level support.
SuperMac will provide third level support with all available information and
materials related to any Product failure or unresolved problem for resolution.
SuperMac will coordinate the definition and resolution of all Product problems
reported by a customer, including maintaining contact with the customer
throughout the resolution process and gathering additional diagnostic
information required by third level support.
SuperMac will maintain an integrated file record of Product problems reported,
the nature of each problem, whether or not it has been resolved and the nature
of the solution. Upon the occurence of a problem for which a solution has
previously been developed, SuperMac shall communicate the solution to the end
user without involving third level support.
THIRD LEVEL SUPPORT RESPONSIBILITIES
Level 3 Support shall consist of software and hardware engineers sufficiently
familiar with the design and operation of the product to allow for diagnosis of
complex design and software functional issues. Level 3 Support shall examine
reported failures of the product operation that fail to meet specifications and
shall propose a solution to the problem and a date by which such solution will
be
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
ATTACHMENT "X" - TECHNICAL SUPPORT
available. The time frame in which such proposal shall be made shall be
dependent on the SPAR Severity Level, in accordance with Xerox standard SPAR
resolution times as shown in Attachment X-1.
SuperMac will perform the analysis of reported product failures and unresolved
problems and undertake any efforts to develop solutions of bypasses.
SuperMac will provide first level support or second level support in machine
format for updated programs and associated documentation developed in response
to the resolution of product failures and non-conformances.
SuperMac will provide information, where such information is not clearly
described in the associated documentation, and consulting assistance regarding
the operation of the Products in order to enable second level personnel to
perform their second level support responsibilities.
SuperMac will maintain current updated master libraries for the Product
including all programs and documentation and inform Xerox of any changes or
updates.
HARDWARE REPAIR SUPPORT
Xerox Corp. Customer Operations groups shall inventory spare parts in sufficient
quantity to provide all required dispatched of hardware to resolve customer
problems, both during and after the warranty period.
SuperMac shall, during the warranty period, repair or replace any defective
hardware returned to SuperMac by Xerox Corp. (TXC).
HARDWARE REPAIR SUPPORT
Xerox Corp. Customer Operations groups shall inventory spare parts in sufficient
quantity to provide all required dispatched of hardware to resolve customer
problems, both during and after the warranty period.
SuperMac shall, during the warranty period, repair or replace any defective
hardware returned to SuperMac by Xerox Corp (TXC) at no charge. SuperMac shall
not be obligated to accept returns from any other source.
Subsequent to the warranty period, or for failures not covered by the
warranty, SuperMac shall repair or replace any defective hardware for a flat
exchange fee, except that if the returned hardware is for any reason not
repairable, Supermac shall have the right to charge Xerox the full new purchase
price of any replacement hardware.
SuperMac shall provide hardware repair support for [*] following the date of
last shipment of new units of any particular version of hardware, and shall
allow Xerox (TXC) to do one last spares purchase, necessary to conduct exchanges
for any remaining useful life of the product, concurrent with the final build of
new units. The flat rate exchange fee may be adjusted to reflect increased parts
and/or repair costs during this period.
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
ATTACHMENT "X" - TECHNICAL SUPPORT
SOFTWARE SUPPORT
SuperMac shall provide Level 2 and 3 technical support to customers for the
current shipping and last previous shipping versions of the product software, or
in the case of a discontinued hardware product, the last version of the software
that supports such product. Users in possession of any prior version must update
to the most current version in order to receive any assistance from Level 2 or
Level 3 Support.
Software Upgrades are defined as releases of software that are not intended to
provide increase functionality or performance, but to correct errors in
operation in accordance with specifications. Upgrade versions shall be
identified by 1.XX.01 numbers where the XX portion refers to the Upgrade version
number.
Software Upgrades are defined as releases of software that are intended to
provide increase functionality or performance, or to provide compatibility with
application or system software that was not released for general use at the time
of the previous Upgrade version. Upgrade versions shall be identified by
XX.1.01 numbers where the XX portion refers to the Update version number.
During the warranty period of the customer's hardware, superMac shall provide
the most current Update version of the Product software at no cost to the
customer. After the hardware warranty period, SuperMac shall have the right to
charge the customer for software Updates.
SuperMac shall use commercially reasonable efforts to include in each Update
releases solutions for all level 1-3 SPAR's open as of a specified cutoff date
for each Update release, and as many of the level 4 SPAR's as SuperMac in the
reasonable exercise of its discretion considers desirable to incorporate into
any particular Update release.
SuperMac may always, at SuperMac's option substitute an Upgrade version of the
software in place of an Update version to customers within the warranty period
at no charge, but shall be under no obligation to do so.
SuperMac shall not be required to release during the term of the Agreement any
more than one Update version of the software.
Acceptance testing of the software by Xerox, or Xerox and SuperMac in
cooperation shall be definitive on the compliance of the Software with the
specifications. SuperMac at its option may choose to make further Updates or
refinements, and Xerox may request SuperMac, at Xerox' expense, to incorporate
specified changes to the software and its operation, subject to the availability
of engineering resources at SuperMac.
<PAGE>
ATTACHMENT X-1
--------------
MAINTENANCE & SUPPORT
---------------------
SOFTWARE PROBLEM ACTION REQUEST (SPAR)
1. SuperMac will provide MAINTENANCE MODIFICATION services, which will consist
of SuperMac using its reasonable best efforts to design, code, and
implement programming changes to the Products and modifications to the
documentation to correct reproducible errors therein such that the Products
is brought into conformance with the Specifications listed in Attachment I.
2. SuperMac will respond to SPARs (Software Problem Action Requests) and will
use reasonable best efforts to perform the required MAINTENANCE
MODIFICATIONS, for four severity levels, in time frames as shown in TABLE A
below. All times are in working days, i.e., normal business days, measured
from the day the SPAR is received
TABLE A
-------
<TABLE>
<CAPTION>
SPAR Resolution*
Severity Level Time
<S> <C>
--- ---
1 [*]
2 [*]
3 [*]
4 [*]
</TABLE>
All customer PROBLEMS, of which Xerox receives notice, that become SPARs, are
assigned one of the four SEVERITY LEVELS agreed to between the Op Unit/CO, SMT,
and the customer. In case of dispute the voice of the customer takes priority.
The PROBLEM/SPAR SEVERITY LEVEL determines the process timing and priority for
resource allocations to address the PROBLEM. If a customer's current operational
conditions change during the process, the SEVERITY LEVEL may be adjusted, with
agreement between the Op Unit/Co and the customer, based upon any of these
conditions:
. A satisfactory workaround (interim Solution) is found.
. A software update is available that may significantly reduce the impact of
the problem to the customer's business.
. Additional information surfaces concerning the impact of the problem.
SEVERITY LEVEL is not changed based upon business priorities or aging.
The definitions used to determine the correct SEVERITY LEVEL are listed below.
SEVERITY 1 Catastrophic problem; the system is down and/or user has no
production capability.
SEVERITY 2 Severe problem; system is up, but production capability is
seriously degraded.
SEVERITY 3 Moderate problem; the system is up, but production capability is
reduced.
SEVERITY 4 Minor problem; system is up, with no significant impact to
production.
3. All services provided under this Maintenance and Support Agreement shall be
provided from SuperMac's facility.
*Resolution shall mean: a recommended "deliverable" proposed to meet the
customer requirements for a specific problem. The deliverable medium includes,
but is not limited to, any of the following:
[*] Confidential Treatment Requested. The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
. Answer to an inquiry or request
. A verbal instruction
. Dispatch of an electronic patch, tape, disk, or medium available
for communicating code changes
. Remote code download
. Dispatch of corrected documentation, or
. Any other solution acceptable to the customer sufficient for
problem closure.
An acceptable resolution is a recommended "deliverable" that totally satisfies
the customer requirements for a specific problem solution, and the problem can
be closed. Further assistance is no longer required. An interim solution is a
recommended "deliverable" that does not totally satisfy the customer
requirements. SuperMac is still responsible for providing an acceptable
solution to the customer. The problem remains open.
.
<PAGE>
EXHIBIT 21.1
Subsidiaries of Registrant
Subsidiary Jurisdiction of Formation
- ---------- -------------------------
Splash Technology, Inc. Delaware
Splash Technology S.a.r.l. France
Splash Foreign Sales Corporation Barbados
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the conclusion in this registration statement on Form S-1 (File
No. 333-09591) of our report dated July 23, 1996, except for Note 12 for which
the dates are July 31, 996 and September 6, 1996, on our audits of the
consolidated financial statements and consolidated financial statement schedule
of Splash Technology Holdings, Inc. We also consent to the reference to out
firm under the caption "Experts."
Coopers & Lybrand, L.L.P.
San Jose, California
September 27, 1996
