<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
May 30, 1997
SPLASH TECHNOLOGY HOLDINGS, INC.
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware
---------------------------------------------
(State or other jurisdiction of incorporation)
000-21171 77-0418472
- --------------------- -----------------------------------
(Commission File No.) (IRS Employer Identification Number)
555 Del Ray Avenue
Sunnyvale, California 94086
----------------------------------------
(Address of Principal Executive Offices)
(408) 328-6300
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(Registrant's Telephone Number, Including Area Code)
<PAGE>
Item 2. Acquisition and Disposition of Assets
-------------------------------------
On May 20, 1997, pursuant to an Agreement and Plan of Reorganization
dated as of May 1, 1997 (the "Reorganization Agreement") among Splash Technology
Holdings, Inc. (the "Registrant" or "Splash"), SP Acquisition Corporation, a
California corporation and wholly-owned subsidiary of the Registrant ("Merger
Sub"), Quintar Holdings Corporation, and the related Agreement of Merger dated
as of May 20, 1996 (the "Merger Agreement"), Merger Sub was merged with and into
Quintar (the "Merger"), and Quintar, as the surviving corporation, became a
wholly-owned subsidiary of the Registrant. As part of the Merger, Quintar
changed its name to SP-Quintar Corporation. The Merger was effected by the
filing of the Merger Agreement with the California Secretary of State on May 30,
1997.
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. Splash'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.
Quintar designs, manufactures and markets embedded controllers for
desktop color printers, as well as proprietary servers for high-speed,
multifunction monochrome and color printers and copiers.
The consideration paid by the Registrant in the Merger consisted of
aggregate cash payments of approximately $11.5 million paid at closing to
Quintar's stock and warrant holders and contingent earn-out payments of up to
$3.2 million. The cash consideration paid at closing was paid out of Splash's
cash on hand.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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(a) Financial Statements of Quintar
-------------------------------
It is impracticable for the Registrant to provide financial
statements for the business acquired at this time. Such financial
statements shall be filed as soon as practicable, but not later than
sixty (60) days after the date hereof.
(b) Pro Forma Financial Information
-------------------------------
It is impracticable for the Registrant to provide Pro Forma
financial information assuming a business combination between the
Registrant and Quintar at
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this time. Such Pro Forma financial information shall be filed as soon
as practicable, but not later than sixty (60) days after the date
hereof.
(c) Exhibits
--------
2.1 Agreement and Plan of Reorganization dated
as of May 1, 1997 among the Registrant,
Merger Sub and Quintar, together with
Exhibits A-E thereto and Schedule 5.9.
99.1 Press Release, dated May 28, 1997, announcing
consummation of the Merger.
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SPLASH TECHNOLOGY HOLDINGS, INC.
Dated: May 30, 1997 By: /s/ Kevin K. Macgillivray
-------------------------
Kevin K. Macgillivray
President and Chief Executive Officer
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<PAGE>
SPLASH TECHNOLOGY HOLDINGS, INC.
CURRENT REPORT ON FORM 8-K
INDEX TO EXHIBITS
Exhibit No. Description
- ---------- -----------
2.1 Agreement and Plan of Reorganization dated as of
May 1, 1997 among the Registrant, Merger Sub and
Quintar, together with Exhibits A-E and Schedule 5.9
thereto.
99.1 Press Release, dated May 28, 1997, announcing
consummation of the Merger.
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
SPLASH TECHNOLOGY HOLDINGS, INC.,
SP ACQUISITION CORPORATION
AND
QUINTAR HOLDINGS CORPORATION
DATED AS OF MAY 1, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I - THE MERGER.......................................................2
1.1 The Merger.................................................2
1.2 Effective Time.............................................2
1.3 Effect of the Merger.......................................2
1.4 Certificate of Incorporation; Bylaws.......................2
1.5 Directors and Officers.....................................3
1.6 Cash Consideration; Effect on Capital Stock................3
1.7 Dissenting Shares..........................................6
1.8 Escrow.....................................................6
1.9 Surrender of Certificates; Payment of Merger
Consideration.............................................7
1.10 No Further Ownership Rights in Company Capital Stock.......8
1.11 Lost, Stolen or Destroyed Certificates.....................8
1.12 Taking of Necessary Action; Further Action.................8
1.13 Purchase Price Adjustment..................................9
1.14 Contingent Earn-Out.......................................10
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................12
2.1 Organization, Standing and Power..........................12
2.2 Capital Structure.........................................12
2.3 Authority, Conflicts, Consents............................13
2.4 Company Financial Statements..............................14
2.5 No Undisclosed Liabilities................................15
2.6 No Changes................................................15
2.7 Tax Matters...............................................17
2.8 Restrictions on Business Activities.......................19
2.9 Title to Properties; Absence of Liens and Encumbrances;
Condition of Equipment ..................................19
2.10 Intellectual Property.....................................19
2.11 Agreements, Contracts and Commitments.....................20
2.12 Interested Party Transactions.............................22
2.13 Governmental Authorization................................22
2.14 Litigation................................................22
2.15 Accounts Receivable.......................................23
2.16 Minute Books..............................................23
2.17 Environmental Matters.....................................23
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TABLE OF CONTENTS
(CONTINUED)
PAGE
----
2.18 Brokers' and Finders' Fees................................23
2.19 Employee Benefit Plans and Compensation...................24
2.20 Insurance.................................................25
2.21 Compliance with Laws......................................25
2.22 Complete Copies of Materials..............................25
2.23 Representations Complete..................................25
2.24 Disclosure Schedule.......................................25
2.25 Development and Supply Agreements.........................26
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SPLASH AND MERGER SUB.......26
3.1 Organization, Standing and Power..........................26
3.2 Authority.................................................26
3.3 SEC Documents; Splash Financial Statements................26
3.4 No Material Adverse Change................................27
ARTICLE IV - CONDUCT PRIOR TO THE EFFECTIVE TIME............................27
4.1 Conduct of Business of the Company........................27
4.2 No Solicitation...........................................29
ARTICLE V - ADDITIONAL AGREEMENTS...........................................30
5.1 Access to Information.....................................30
5.2 Confidentiality...........................................30
5.3 Expenses..................................................30
5.4 Public Disclosure.........................................30
5.5 Consents..................................................31
5.6 FIRPTA Compliance.........................................31
5.7 Legal Requirements........................................31
5.8 Notification of Certain Matters...........................31
5.9 Shareholders Agreements...................................31
5.10 Further Assurances........................................31
5.11 Benefits Plans............................................32
5.12 Third Party Expenses......................................32
5.13 Termination Payment.......................................32
ARTICLE VI - CONDITIONS TO THE MERGER.......................................32
6.1 Conditions to Obligations of Each Party to Effect
the Merger...............................................32
6.2 Additional Conditions to Obligations of Company...........33
6.3 Additional Conditions to the Obligations of Splash
and Merger Sub...........................................34
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<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
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ARTICLE VII - SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW............35
7.1 Survival of Representations and Warranties................35
7.2 Escrow Arrangements.......................................35
ARTICLE VIII - TERMINATION, AMENDMENT AND WAIVER............................41
8.1 Termination...............................................41
8.2 Effect of Termination.....................................42
8.3 Amendment.................................................42
8.4 Extension; Waiver.........................................42
ARTICLE IX - GENERAL PROVISIONS.............................................43
9.1 Notices...................................................43
9.2 Interpretation............................................44
9.3 Counterparts..............................................44
9.4 Entire Agreement; Assignment..............................44
9.5 Severability..............................................44
9.6 Other Remedies............................................44
9.7 Governing Law.............................................45
9.8 Rules of Construction.....................................45
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<PAGE>
INDEX OF EXHIBITS
Exhibit Description
- ------- -----------
Exhibit A Agreement of Merger
Exhibit B Directors and Officers of the Surviving Corporation
Exhibit C Form of Shareholder Agreement
Exhibit D Form of Legal Opinion of Counsel to Splash
Exhibit E Form of Legal Opinion of Counsel to the Company
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<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of May 1, 1997 by and among Splash Technology Holdings, Inc., a
Delaware corporation ("Splash"), SP Acquisition Corporation, a California
------
corporation and a wholly-owned subsidiary of Splash ("Merger Sub"), and Quintar
----------
Holdings Corporation, a California corporation (the "Company").
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RECITALS
A. The Boards of Directors of each of the Company, Splash and Merger
Sub believe it is in the best interests of each company and their respective
shareholders that Splash acquire the Company through the statutory merger of
Merger Sub with and into the Company (the "Merger") and, in furtherance thereof,
------
have approved the Merger.
B. Pursuant to the Merger, among other things, all of the issued and
outstanding shares of common stock of the Company (the "Company Common Stock"),
--------------------
all of the issued and outstanding shares of the Company's Series A Preferred
Stock (the "Series A Preferred") and all of the issued and outstanding shares of
------------------
the Company's Series C Preferred Stock (the "Series C Preferred"; the Series A
------------------
Preferred and Series C Preferred shall be collectively referred to as "Company
-------
Preferred Stock", and the Company Common Stock and Company Preferred Stock shall
- ---------------
be collectively referred to as "Company Capital Stock"), shall be converted into
---------------------
the right to receive cash consideration in accordance with the terms and subject
to the conditions set forth in this Agreement. In addition, pursuant to the
Merger, holders of Company Common Stock and Series C Preferred Stock shall be
entitled, on a pro-rata basis, to participate in, and become entitled to the
cash distributions pursuant to, the contingent earn-out contemplated in Section
1.14 of this Agreement. Finally, pursuant to the Merger but subject to Section
1.6(c)(iv), all outstanding options, warrants and other rights to acquire
Company Capital Stock (collectively, "Company Options") shall be assumed by
---------------
Splash and shall be exercisable following the Merger for shares of Splash Common
Stock in accordance with and subject to the conditions set forth in this
Agreement.
C. A portion of the cash consideration otherwise issuable by Splash in
connection with the Merger shall be placed in escrow by Splash, the release of
which shall be contingent upon certain events and conditions.
D. The Company, Splash and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
<PAGE>
NOW, THEREFORE, in consideration of the covenants, promises,
representations and warranties set forth herein, and for other good and valuable
consideration, the parties to this Agreement hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
----------
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the California General Corporation Law (the "CGCL"),
----
Merger Sub shall be merged with and into the Company, the separate corporate
existence of Merger Sub shall cease, and the Company shall continue as the
surviving corporation and as a wholly-owned subsidiary of Splash. The Company as
the surviving corporation after the Merger is hereinafter sometimes referred to
as the "Surviving Corporation."
---------------------
1.2 Effective Time. Unless this Agreement is earlier terminated
--------------
pursuant to Section 8.1, the closing of the Merger (the "Closing") will take
-------
place as promptly as practicable, but no later than two (2) business days,
following satisfaction or waiver of the conditions set forth in Article VI, at
the offices of Wilson Sonsini Goodrich & Rosati, Professional Corporation, 650
Page Mill Road, Palo Alto, California, unless another place or time is agreed to
in writing by Splash and the Company. The date upon which the Closing actually
occurs is herein referred to as the "Closing Date." On the Closing Date, the
------------
parties hereto shall cause the Merger to be consummated by filing an Agreement
of Merger with the Secretary of State of the State of California in the form
attached hereto as Exhibit A (the "Certificate of Merger"), in accordance with
--------- ---------------------
the relevant provisions of the CGCL (the time of acceptance by the Secretary of
State of the State of California of such filing being referred to herein as the
"Effective Time").
--------------
1.3 Effect of the Merger. At the Effective Time, the effect of the
--------------------
Merger shall be as provided in the applicable provisions of the CGCL. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the property, rights, privileges, powers and franchises of the Company
and Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities, obligations and duties of the Company and Merger Sub shall become
the debts, liabilities, obligations and duties of the Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
------------------------------------
(a) Unless otherwise determined by Splash prior to the Effective
Time, at the Effective Time, the Articles of Incorporation of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Articles of Incorporation, provided, however, that Article I of
-----------------
the Certificate of Incorporation of the Surviving Corporation shall be amended
to read as follows: "The name of the corporation is "Splash-Quintar Company"."
<PAGE>
(b) The Bylaws of Merger Sub, as in effect immediately prior
to the Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
1.5 Directors and Officers. The directors and officers of the Surviving
----------------------
Corporation immediately after the Effective Time shall be the individuals
identified on Exhibit B hereto.
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1.6 Cash Consideration; Effect on Capital Stock. The cash consideration
-------------------------------------------
(hereinafter referred to as the "Merger Consideration") to be provided by Splash
--------------------
and Merger Sub in exchange for all outstanding Company Capital Stock and the
cancellation of the Technology Funding and Oxford Warrants (as defined in
Section 1.6(c)(iv)) shall consist of (i) the amount of eleven million seven
hundred thousand dollars ($11,700,000), subject to adjustment as set forth in
Section 1.13 below and subject to the provisions of Section 1.8 below and
Article VII hereof (the "Cash Consideration"), plus (ii) any amounts to which
------------------
the Company's shareholders shall become entitled pursuant to the contingent
earnout described in Section 1.14 hereof. Subject to the terms and conditions of
this Agreement, as of the Effective Time, by virtue of the Merger and without
any action on the part of Merger Sub, the Company or the holder of any shares of
the Company Capital Stock, the following shall occur:
(a) Definitions.
-----------
(i) Aggregate Common Number. The "Aggregate Common Number"
----------------------- -----------------------
shall mean the aggregate number of shares of Company Common Stock outstanding
immediately prior to the Effective Time.
(ii) Aggregate Preferred Number. The "Aggregate Preferred
-------------------------- -------------------
Number" shall mean the aggregate number of shares of Company Common Stock
- ------
issuable upon conversion of the aggregate shares of Company Preferred Stock
outstanding immediately prior to the Effective Time.
(iii) Aggregate Option Number. The "Aggregate Option Number"
----------------------- -----------------------
shall mean the aggregate number of shares of Company Common Stock issuable on
exercise of all Company Options outstanding immediately prior to the Effective
Time, whether or not such Company Options shall then be vested and exercisable.
(iv) Aggregate Vested Option Number. The "Aggregate Vested
------------------------------ ----------------
Option Number" shall mean the aggregate number of shares of Company Common Stock
- -------------
issuable on exercise of all Company Options outstanding immediately prior to the
Effective Time (including 128,629 shares of Common Stock that would be otherwise
issuable in connection with the cashless exercise of the Technology Funding and
Oxford Warrants), but only to the extent that such Company Options shall be
vested and exercisable as of immediately prior to the Effective Time.
(v) Fully Diluted Common Number. The "Fully Diluted Common
--------------------------- --------------------
Number" shall mean, without duplication, the sum of the Aggregate Common Number,
- ------
the Aggregate Preferred Number and the Aggregate Vested Option Number.
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(vi) Escrow Amount. The "Escrow Amount" shall be cash in
------------- -------------
the amount of one million seven hundred fifty-five thousand dollars
($1,755,000), representing 15% of the targeted Cash Consideration; such amount
is to be deducted from the Merger Consideration otherwise payable at the Closing
and placed in escrow in accordance with the provisions of Section 1.8 and
Article VII of this Agreement.
(vii) Per Share Closing Payment. The "Per Share Closing
------------------------- -----------------
Payment" shall be an amount equal to the quotient obtained by dividing (x) an
- -------
amount equal to the Cash Consideration (as adjusted to the Closing pursuant to
Section 1.13) less (1) $199,375 payable in connection with the cancellation of
the Technology Funding and Oxford Warrants and (2) the Escrow Amount, by (y) an
amount equal to the Fully Diluted Common Number less 128,629 (representing the
shares of Common Stock that would be otherwise issuable in connection with the
cashless exercise of the Technology Funding and Oxford Warrants). By way of
example only, at the time of execution of this Agreement the Fully Diluted
Common Number is represented by the Company to be 7,539,866 shares; accordingly,
assuming Cash Consideration of $11,700,000 and an Escrow Amount of $1,755,000,
the Per Share Closing Payment would be ($11,700,000 - $199,375 - $1,755,000) /
(7,539,866 -128,629) shares, or $1.3150 per share.
(viii) Proportionate Escrow Interest. A Company shareholder's
-----------------------------
"Proportionate Escrow Interest," applicable to each holder of record of Company
-----------------------------
Capital Stock as of immediately prior to the Effective Time, shall mean the
quotient obtained by dividing (x) the total number of shares of Company Common
Stock held of record by such holder as of immediately prior to the Effective
Time plus the total number of shares of Company Common Stock issuable upon
conversion of all Company Preferred Stock held of record by such holder as of
immediately prior to the Effective Time, by (y) the total number of shares of
Company Common Stock outstanding as of immediately prior to the Effective Time
plus the total number of shares of Company Common Stock issuable upon conversion
of all Company Preferred Stock outstanding as of immediately prior to the
Effective Time.
(ix) Proportionate Earnout Interest. A Company
------------------------------
shareholder's "Proportionate Earnout Interest," applicable to each holder of
------------------------------
record of Company Common Stock or Company Series C Preferred Stock as of
immediately prior to the Effective Time, shall mean the quotient obtained by
dividing (x) the total number of shares of Company Common Stock held of record
by such holder as of immediately prior to the Effective Time plus the total
number of shares of Company Common Stock issuable upon conversion of all Company
Series C Preferred Stock held of record by such holder as of immediately prior
to the Effective Time, by (y) the total number of shares of Company Common Stock
outstanding as of immediately prior to the Effective Time plus the total number
of shares of Company Common Stock issuable upon conversion of all Company Series
C Preferred Stock outstanding as of immediately prior to the Effective Time.
(x) "Option Exchange Ratio" shall mean the ratio obtained
---------------------
by dividing (x) the quotient obtained by dividing (1) an amount equal to the
Cash Consideration (as adjusted to the Closing pursuant to Section 1.13), by (2)
the Fully Diluted Common Number, by (y) the average per share
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<PAGE>
closing price of Splash Common Stock over the thirty (30) trading days
immediately preceding the Closing Date as reported by the Nasdaq National
Market.
(b) Conversion of Company Capital Stock. Each share of Company
-----------------------------------
Capital Stock issued and outstanding immediately prior to the Effective Time
(other than any Dissenting Shares, as defined and to the extent provided in
Section 1.7(a)) will at the Effective Time be canceled and extinguished and
converted automatically into the right to receive the following consideration:
(i) Each share of the Company Capital Stock issued
and outstanding immediately prior to the Effective Time shall be entitled to
receive promptly following the Closing an amount equal to the Per Share Closing
Payment;
(ii) Each share of Company Capital Stock issued and
outstanding as of immediately prior to the Effective Time shall be entitled to
receive a Proportionate Escrow Interest of any amounts distributable to such
holders pursuant to Article VII hereof; and
(iii) Each share of Company Common Stock and Company
Series C Preferred Stock shall be entitled to receive a Proportionate Earnout
Interest of any amounts distributable to such holders pursuant to Section 1.14
hereof.
(c) Company Options. At the Effective Time, subject to Section
---------------
1.6(c)(iv) below each Company Option shall be assumed by Splash in accordance
with provisions described below.
(i) At the Effective Time, each Company Option,
whether or not vested and exercisable, shall be, in connection with the Merger,
canceled and in substitution therefor Splash shall issue a new option (a "Splash
Option"). Each Splash Option shall continue to be subject to the same terms and
conditions as the respective Company Option, including vesting, except that (A)
each Splash Option shall be exercisable for that number of whole shares of
Splash Common Stock equal to the product of (1) the number of shares of Company
Capital Stock (on an as converted into Common Stock basis) that were issuable
upon exercise of such Company Option immediately prior to the Effective Time
multiplied by (2) the Option Exchange Ratio (rounded up to the nearest whole
number of shares of Splash Common Stock), (B) the exercise price per share of
Splash Common Stock under such Splash Option shall be equal to the quotient
determined by dividing (1) the exercise price per share of Company Capital Stock
at which such Company Option was exercisable immediately prior to the Effective
Time (on an as converted into Common Stock basis), by (2) the Option Exchange
Ratio (rounded down to the nearest whole cent), and (C) in the case of Company
Options originally granted under the Company's 1993 Stock Option Plan, the
substituted Splash Options shall be governed by the terms of the Splash 1996
Stock Option Plan and standard form of agreement thereunder.
(ii) It is the intention of the parties that the
Company Options assumed by Splash qualify following the Effective Time as
incentive stock options as defined in Section 422 of the
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<PAGE>
Code to the extent the Company Options qualified as incentive stock options
immediately prior to the Effective Time.
(iii) As promptly as practicable following the
Effective Time, Splash will issue, to each holder of an outstanding Company
Option immediately prior to the Effective Time, a new Splash Option in respect
of the canceled Company Option.
(iv) Notwithstanding any other provision of this
Agreement, in connection with the Merger and in return for an aggregate payment
of $199,375 ($79,750 to Technology Funding and $119,625 to Oxford Partners), the
Company warrants to purchase an aggregate of 362,500 shares of Common Stock, at
an exercise price of $1.00 per share, issued to Technology Funding (145,000
shares) and Oxford Partners (217,500 shares) (collectively, the "Technology
----------
Funding and Oxford Warrants") shall be canceled at the Effective Time of the
- ---------------------------
Merger.
(d) Capital Stock of Merger Sub. Each share of Common Stock of
---------------------------
Merger Sub issued and outstanding immediately prior to the Effective Time shall
represent one validly issued, fully paid and nonassessable share of Common Stock
of the Surviving Corporation. Each stock certificate of Merger Sub evidencing
ownership of any such shares shall continue to evidence ownership of such shares
of capital stock of the Surviving Corporation.
1.7 Dissenting Shares.
-----------------
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Company Capital Stock held by a holder who has exercised
and perfected appraisal rights for such shares in accordance with the CGCL and
who, as of the Effective Time, has not effectively withdrawn or lost such
appraisal rights ("Dissenting Shares"), shall not be converted into or represent
-----------------
a right to receive the Merger Consideration pursuant to Section 1.6, but the
holder thereof shall only be entitled to such rights as are granted by the CGCL.
(b) Notwithstanding the provisions of subsection (a), if any
holder of Dissenting Shares shall effectively withdraw or lose (through failure
to perfect or otherwise) his or her appraisal rights, then, as of the later of
Effective Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive the
Merger Consideration as provided in Section 1.6, without interest thereon, upon
surrender of the certificate representing such shares, subject to the conditions
set forth below and throughout this Agreement, including without limitation the
escrow provisions set forth in Section 1.8 and Article VII hereof.
(c) The Company shall give Splash (i) prompt notice of any
written demand for appraisal received by the Company pursuant to the applicable
provisions of the CGCL and (ii) the opportunity to participate in all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Splash, voluntarily make any
payment with respect to any such demands or offer to settle or settle any such
demands. To the extent that Splash or
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<PAGE>
the Company makes any payment or payments in respect of any Dissenting Shares,
Splash shall be entitled to recover under the terms of Article VII hereof (x)
the aggregate amount by which such payment or payments exceed the aggregate
Merger Consideration that otherwise would have been payable in respect of such
Dissenting Shares plus (y) the aggregate fees and expenses (including reasonable
attorneys' fees and expenses) incurred by Splash or the Company in connection
with calculating, settling or litigating the amount of, or making, any such
payment.
1.8 Escrow. Promptly after the Effective Time, Splash shall
------
deposit cash constituting the Escrow Amount into an escrow account pursuant to
Article VII below, of the aggregate Cash Consideration otherwise payable
pursuant to Section 1.6. The portion of the Escrow Amount contributed on behalf
of each holder of Company Capital Stock shall be nearly as may be practical in
proportion to such holder's Proportionate Escrow Interest.
1.9 Surrender of Certificates; Payment of Merger Consideration.
----------------------------------------------------------
(a) Exchange Agent. Comerica Bank - California (the "Exchange
-------------- --------
Agent") shall act as exchange agent in the Merger.
- -----
(b) Splash to Provide Cash. Promptly after the Effective Time,
----------------------
Splash shall make available to the Exchange Agent for exchange in accordance
with this Article I, the aggregate Cash Consideration payable pursuant to
Section 1.6 provided, that, (i) on behalf of the holders of Company Capital
--------------
Stock, Splash shall deposit cash constituting the Escrow Amount into an escrow
account pursuant to Section 1.8 and Article VII below, out of the aggregate Cash
Consideration otherwise payable pursuant to Section 1.6 (the portion of the
Escrow Amount contributed on behalf of each holder of Company Capital Stock
shall be as nearly as may be practical in proportion to such holder's
Proportionate Escrow Interest) and (ii) cash in an aggregate amount of $199,375
and constituting a portion of the Merger Consideration shall be payable in
connection with the cancellation of the Technology Funding and Oxford Warrants,
as contemplated in Section 1.6(c)(iv) and 1.9(c)(ii).
(c) Exchange Procedures.
-------------------
(i) Subject to Section 1.9(i)(ii), as soon as
reasonably practicable after the Effective Time, the Surviving Corporation shall
cause to be delivered to each holder of record of a certificate or certificates
(the "Certificates") which immediately prior to the Effective Time represented
------------
outstanding shares of Company Capital Stock whose shares were converted into the
right to receive the Merger Consideration pursuant to Section 1.6, (i) a letter
of transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Splash may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancellation to Splash or to
such agent or agents as may be appointed by Splash, together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holder of such Certificate
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<PAGE>
shall be entitled to receive in exchange therefor the applicable Merger
Consideration pursuant to Section 1.6 (subject to Section 1.13 and subject to
the escrow provisions of Section 1.8 and Article VII) and the Certificate so
surrendered shall forthwith be canceled. Until so surrendered, each outstanding
Certificate that, prior to the Effective Time, represented shares of Company
Capital Stock, will be deemed from and after the Effective Time, to evidence
only the right to receive the Merger Consideration in respect of each such share
(subject to Sections 1.7 and 1.13 and subject to the escrow provisions of
Section 1.8 and Article VII).
(ii) At such time as Technology Funding and Oxford
Partners, as applicable, surrender their Certificates for payment pursuant to
Section 1.9(c)(i), the Exchange Agent shall pay to Technology Funding and Oxford
Partners $79,750 and $119,625, respectively, as payment for the cancellation of
their respective Technology Funding and Oxford Warrants.
(d) Transfers of Ownership. If any payment is to be made to a
----------------------
person other than the holder in whose name the Certificate surrendered in
exchange therefor is registered, it will be a condition of the payment thereof
that the Certificate so surrendered will be properly endorsed and accompanied by
all documents required to evidence and effect such transfer and to evidence that
any applicable stock transfer taxes have been paid.
(e) No Liability. Notwithstanding anything to the contrary in
------------
this Section 1.9, none of the Exchange Agent, the Surviving Corporation or any
party hereto shall be liable to a holder of shares of Company Capital Stock for
any amount properly paid to a public official pursuant to any applicable
abandoned property, escheat or similar law.
1.10 No Further Ownership Rights in Company Capital Stock. The Merger
----------------------------------------------------
Consideration delivered upon the surrender for exchange of shares of Company
Capital Stock in accordance with the terms hereof shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of Company
Common Stock, and there shall be no further registration of transfers on the
records of the Surviving Corporation of shares of Company Common Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Article I
(subject to the escrow provisions of Article VII).
1.11 Lost, Stolen or Destroyed Certificates. In the event any
--------------------------------------
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
pay in exchange for such lost, stolen or destroyed Certificates, upon the making
of an affidavit in a form satisfactory to Splash and the Exchange Agent of that
fact by the holder thereof, such amount as may be required pursuant to this
Article I; provided, however, that Splash may, in its discretion and as a
-----------------
condition precedent to the issuance thereof, require the owner of any such lost,
stolen or destroyed Certificates to deliver a bond in such sum as Splash may
reasonably direct as indemnity against any claim that may be made against
Splash, the Surviving Corporation or the Exchange Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
-8-
<PAGE>
1.12 Taking of Necessary Action; Further Action. If, at any time after
------------------------------------------
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub or to vest Splash with a 100%
ownership interest in the Surviving Corporation, the officers and directors of
the Surviving Corporation are fully authorized in the name of the Company and
the Surviving Corporation or otherwise to take, and will take, all such lawful
and necessary and/or desirable action so long as such action is consistent with
this Agreement.
1.13 Purchase Price Adjustment. The Purchase Price will be subject to
-------------------------
adjustment as follows:
(a) Working Capital Adjustment.
--------------------------
(i) Closing Balance Sheet. As soon as practicable (but in no
---------------------
event later than 45 days) following the Closing, the Company will, at the
expense of the Surviving Corporation, prepare and cause to be audited by Coopers
& Lybrand, independent auditors, and the Company will deliver to Splash and the
Shareholders' Agent (as defined in Article VII), a balance sheet of the Company
as of the Closing Date (the "Closing Balance Sheet"). The Closing Balance Sheet
---------------------
will be prepared in accordance with generally accepted accounting principles
("GAAP") consistent with the basis of accounting and procedures and methods
----
employed by the Company in its December Balance Sheet (as defined in Section
2.4(a) hereunder). During the conduct of the audit, the Company will cooperate
in all respects with the independent auditors for the purposes of completing the
Closing Balance Sheet. In addition, the Company and the independent auditors
shall be available for periodic inquiry by Splash, the Shareholders' Agent and
the Company, and the independent auditors will answer such questions as Splash
or the Shareholders' Agent may have and provide such additional schedules and
materials as Splash or the Shareholders Agent may reasonably request in order to
permit a meaningful review of the Closing Balance Sheet.
(ii) Definition. "Working Capital" will mean the aggregate of
---------- ---------------
all current assets including cash, net accounts receivable (less allowances for
doubtful accounts), net value of inventory (adjusted for all applicable write-
downs and write-offs) and prepaid expenses, less all current liabilities of any
kind, which liabilities will include, but not be limited to, accounts payable,
royalties payable, warranty reserves, accrued bonuses, accrued vacation,
employee expense obligations, deferred revenue and other current liabilities.
(iii) Disputes. At any time within 30 days following the
--------
delivery of the Closing Balance Sheet to Splash and the Shareholders' Agent (the
"Review Period"), Splash or the Shareholders' Agent may dispute any amounts
-------------
reflected or not reflected on the Closing Balance Sheet to the extent the net
effect of all such disputed amounts in the aggregate would affect the Working
Capital amount, but only on the basis that such amounts were not arrived at in
accordance with Section 1.13(a)(i); each of Splash and the Shareholders' Agent
will notify the other in writing of each such disputed item, and will specify
the amount thereof in dispute, not later than the expiration of the
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<PAGE>
Review Period. If Splash and the Shareholders' Agent are able to resolve all the
disputed items, then the Closing Balance Sheet agreed upon by Splash and the
Shareholders' Agent will be final, binding and conclusive on the parties hereto.
If Splash and the Shareholders' Agent are unable to resolve any disputed item
and are therefore unable to agree as to the Closing Balance Sheet and the
resultant Working Capital amount within 20 days following the expiration of the
Review Period, then within 10 days thereafter either Splash or the Shareholders'
Agent may elect that the items remaining in dispute be submitted for resolution
to a nationally recognized accounting firm (the member of which who will be
primarily responsible for resolving such disputes will have had substantial
auditing experience and substantial experience in arbitration or other dispute
resolution proceedings concerning accounting issues) selected by mutual
agreement of Splash and the Shareholders' Agent (or failing such agreement
between Splash and the Shareholders' Agent, as selected by mutual agreement
between Splash's independent accountants and the Company's independent
accountants (prior to the Merger), or failing such appointed by the American
Arbitration Association) (the "Accountants"). The Accountants will, within 30
-----------
days after submission, determine, based solely on presentations by Splash and
the Shareholders' Agent (and their representatives) and not by independent
review, and render a written report to the parties upon, such remaining disputed
items and the resultant calculation of the Closing Balance Sheet and the Working
Capital amount in accordance with the provisions hereof, and such report and the
resultant Closing Balance Sheet will be final, binding and conclusive on the
parties hereto. In resolving any disputed item, the Accountants may not assign a
value to such item greater than the greatest value for such item claimed by
either party or less than the smallest value for such item claimed by either
party. The fees and disbursements of the Accountants (and of the American
Arbitration Association, if any) (a) will be paid out of the Escrow Fund
established under Article VII if the Working Capital amount finally determined
pursuant to this Section 1.13(a)(iii) shall be more than $50,000 below the
Working Capital amount reflected on the Closing Balance Sheet originally
submitted pursuant to Section 1.13(a)(i) hereof, or (b) will be borne by Splash
if the Working Capital amount finally determined pursuant to this Section
1.13(a)(iii) is less than $50,000 below the Working Capital amount reflected on
the Closing Balance Sheet originally submitted pursuant to Section 1.13(a)(i)
hereof. Splash and the Company hereby agree to cooperate and work in good faith
and as expeditiously as reasonably possible to resolve any and all Closing
Balance Sheet disputes.
(iv) Adjustment. In the event that the Working Capital of
----------
the Company as of the Closing Date as reported in the Closing Balance Sheet is
more negative than $(250,000) (excluding any liabilities for Third Party
Expenses for which an adjustment is made on the Closing Date pursuant to Section
1.13(b)), then the Purchase Price shall be reduced to the extent of such
deficiency. Splash shall provide written notice of such deficiency to the Escrow
Agent pursuant to the provisions of Article VII, and the deficiency shall be
payable to the Company as an escrow claim thereunder (pursuant to the procedure
set forth in such Article VII).
(b) Expense Adjustment. In accordance with Section 5.3 of this
------------------
Agreement, in the event that the Third Party Expenses (as defined in Section 5.3
hereof) incurred by the Company exceeds the sum of $250,000, then (i) to the
extent any such excess is known as of the Closing Date the Cash Consideration
payable pursuant to Section 1.6 shall be reduced by the amount of such excess,
and (ii) to
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the extent any such excess is not known as of the Closing Date the excess shall
when known be paid to Splash out of the Escrow Fund described in Article VII.
1.14 Contingent Earn-Out. In addition to the Cash Consideration payable
-------------------
following the Closing pursuant to Section 1.6, the certain shareholders of the
Company shall be entitled to receive additional Merger Consideration in an
aggregate amount up to $3,200,000 in the event that the Company shall achieve
certain financial metrics following the Closing. Splash shall cause the Company
to use commercially reasonable efforts to achieve such metrics fully, to the
extent reasonably practical consistent with the business of the Company as it
may evolve. There shall be four independent financial metrics, as follows:
(a) Power Q Revenues (as defined below) of $2,222,222 to
$3,333,333 for the period from the Effective Time through December 31, 1997;
(b) Operating Income (as defined below) of $444,445 to $667,000
for the period from the Effective Time through December 31, 1997;
(c) Power Q Revenues of $4,444,445 to $6,666,667 for the six
months ending June 30, 1998; and
(d) Operating Income of $888,888 to $1,333,333 for the six months
ending June 30, 1998.
"Power Q Revenues" shall mean revenues recognized by the
----------------
Company in its divisional financial statements, net of sales returns, allowances
and reserves, in accordance with GAAP and the accounting rules of the Securities
and Exchange Commission, deriving from sales of all Power PC-based products,
including royalties received by the Company from Adobe relating to Power
PC-based products and properly recognized in the respective period. "Operating
---------
Income" shall be determined in accordance with GAAP as applied consistently with
- ------
the Company's historic accounting practices, including nonrecurring engineering
revenues (in an amount not to exceed $1,000,000 for the period in paragraph (b)
above and not to exceed $800,000 for the period in paragraph (d) above, for the
purposes of this computation) but excluding the reversal of any one-time
reserves or restructuring reserves included in the Closing Balance Sheet,
subject however to proper recognition under the accounting rules of the
Securities and Exchange Commission.
Each individual milestone must be achieved at least to the extent
of the low end of the range specified for such milestone in order to result in
an earnout accrual based on such target. It shall not be necessary, however,
that all of the milestones be achieved in order that eligible shareholders to
be entitled to the earnout accrual based on any one milestone. Upon achievement
of a given milestone (to at least the minimum required threshold), the
participating shareholders of the Company shall be entitled to receive an
aggregate payment equal to the product of (i) $800,000 and (ii) the proportion
of the milestone achieved, based on the top of the milestone range (but not to
exceed a proportion of 100%,
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<PAGE>
which gives rise to the maximum accrual of $800,000). The milestone payments
shall be cumulative, such that if only one milestone is achieved the eligible
shareholders shall be entitled to receive an aggregate payment of $800,000 (or a
portion thereof based on the extent of milestone achievement) and if all four
milestones are achieved the eligible shareholders shall be entitled to receive
an aggregate payment of up to $3,200,000 (based on the extent of achievement of
each individual milestone).
The achievement of any of the foregoing milestones shall be
reviewed and certified by Coopers & Lybrand, independent auditors. In the event
of any dispute as to the achievement of a milestone, such dispute shall be
resolved in a manner consistent with the dispute resolution process set forth in
Section 1.13(a)(iii).
To the extent that a milestone is achieved, the funds
distributable to the participating shareholders of the Company as provided above
shall be payable as follows. Each holder of record of Company Common Stock or
Company Series C Preferred Stock as of immediately prior to the Effective Time
shall be entitled to receive an amount equal to the product of (x) the aggregate
amount of funds to be so distributed, times (y) such holder's Proportionate
Earnout Interest. Such amount shall be payable to any holder at such holder's
most recent address of record on the books of the Company, and shall be payable
promptly after determination of achievement (and in any event within 45 days of
completion of the audit determining such achievement).
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in a document of even date herewith and delivered
by the Company to Splash prior to the execution and delivery of this Agreement
and referring to the representations and warranties in this Agreement (the
"Company Disclosure Schedule"), the Company represents and warrants to Splash as
---------------------------
set forth in this Article II. Except as the context otherwise indicates, all
references to "the Company" herein include the Company and its subsidiaries,
taken as a whole.
2.1 Organization, Standing and Power. Each of the Company and its
--------------------------------
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Each of the Company
and its subsidiaries has the corporate power to own its properties and to carry
on its business as now being conducted and as proposed to be conducted and is
duly qualified to do business and is in good standing in each jurisdiction in
which it is required to be so qualified. The Company has delivered a true and
correct copy of the Articles of Incorporation and Bylaws or other charter
documents, as applicable, of the Company and each of its subsidiaries, each as
amended to date, to Splash. Neither the Company nor any of its subsidiaries is
in violation of any of the provisions of its Articles of Incorporation or Bylaws
or equivalent organizational documents. The Company is the owner of all
outstanding shares of capital stock of each of its subsidiaries and all such
shares are duly authorized, validly issued, fully paid and nonassessable. All of
the outstanding shares of capital stock of each such subsidiary are owned by the
Company free and clear of all liens, charges,
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<PAGE>
claims, security interests or other encumbrances of any sort ("Liens") or rights
of others. There are no outstanding subscriptions, options, warrants, puts,
calls, rights, exchangeable or convertible securities or other commitments or
agreements of any character relating to the issued or unissued capital stock or
other securities of any such subsidiary, or otherwise obligating the Company or
any such subsidiary to issue, transfer, sell, purchase, redeem or otherwise
acquire any such securities. The Company does not directly or indirectly own any
equity or similar interest in, or any interest convertible or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity.
2. Capital Structure.
-----------------
(a) The authorized capital stock of the Company consists of
10,000,000 shares of Common Stock, of which 997,541 shares are issued and
outstanding, and 7,000,000 shares of Preferred Stock, of which (i) 4,200,000
shares are designated Series A Preferred, of which 4,160,445 shares are issued
and outstanding, (ii) 1,200,000 shares are designated Series B Preferred Stock
("Series B Preferred"), none of which is outstanding, and (iii) 2,166,668 shares
are designated Series C Preferred, of which 1,500,001 shares are issued and
outstanding. A list of all the holders of the Company Capital Stock, together
with number of shares held by each of them and the kind of stock held, is set
forth in Section 2.2(a) of the Company Disclosure Schedule. There are no other
outstanding shares of capital stock or voting securities. Of the outstanding
Common Stock, an aggregate of 972,541 shares were originally issued under
restricted stock purchase agreements providing for repurchase by the Company at
cost of shares that are unvested as of the date of termination of employment; of
such shares, all are vested and none are unvested as of the date of this
Agreement. No such shares are subject to acceleration of vesting in connection
with the transactions contemplated by this Agreement. Each outstanding share
of Company Preferred Stock is convertible into one share of Company Common
Stock. All outstanding shares of Company Common Stock and Company Preferred
Stock are duly authorized, validly issued, fully paid and non-assessable and are
free of any liens or encumbrances other than any liens or encumbrances created
by or imposed upon the holders thereof, and are not subject to preemptive rights
or rights of first refusal created by statute, the Articles of Incorporation or
Bylaws of the Company or any agreement to which the Company is a party or by
which it is bound.
(b) The Company has reserved 1,485,500 shares of Company
Common Stock for issuance to employees and consultants pursuant to the Quintar
Holdings Corporation 1993 Stock Option Plan (the "Plan"), of which 25,000 shares
have been issued to date pursuant to option exercises and 1,460,500 shares are
subject to outstanding, unexercised options. A list of all holders of Company
Options, together with the number of Company Options held by each of them and
the number of shares subject to such Company Options which are vested and
exercisable (to the extent applicable), is set forth in Section 2.2(b) of the
Company Disclosure Schedule. Such Company Options have been duly and properly
authorized and validly issued, consistent with proper corporate action, all
applicable employee benefits plans and all applicable federal and state
securities laws. There are no other options, warrants, calls, rights,
commitments or agreements of any character to which the Company is a party or by
which it is bound obligating the Company to issue, deliver, sell, repurchase or
redeem, or cause to be issued,
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<PAGE>
delivered, sold, repurchased or redeemed, any shares of capital stock of the
Company or obligating the Company to grant, extend, accelerate the vesting of,
change the price of, or otherwise amend or enter into any such option, warrant,
call, right, commitment or agreement. The terms of the Plan permit the
assumption or substitution of options or warrants, as applicable, to purchase
Splash Common Stock as provided in this Agreement, without the consent or
approval of the holders of such securities, the Company shareholders, or
otherwise, and without acceleration of the exercisability of any option,
warrant, call, right, commitment or agreement and without acceleration of the
rate of lapsing of any Company repurchase right or right of cancellation. True
and complete copies of all agreements and instruments relating to or issued
under the Plan have been made available to Splash and such agreements and
instruments have not been amended, modified or supplemented, and there are no
agreements to amend, modify or supplement such agreements or instruments in any
case from the form made available to Splash.
2.3 Authority, Conflicts, Consents.
------------------------------
(a) The Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company including, without
limitation, the approval of this Agreement and the Merger by the Company's
shareholders. This Agreement has been duly executed and delivered by the Company
and constitutes the valid and binding obligation of the Company, enforceable in
accordance with its terms.
(b) The execution and delivery of this Agreement by the
Company does not, and the consummation of the transactions contemplated hereby
will not, conflict with, or result in any violation of, or default under (with
or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
benefit under (any such event, a "Conflict") (i) any provision of the Articles
--------
of Incorporation or Bylaws of the Company or any of its subsidiaries, as
amended, or (ii) any mortgage, indenture, lease, contract or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or any of
its subsidiaries or any of their properties or assets.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality ("Governmental
------------
Entity") is required by or with respect to the Company or any of its
- ------
subsidiaries in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby, except for (i) the
filing of the Certificate of Merger as provided in Section 1.2, and (ii) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable state securities laws and the
securities laws of any foreign country. Section 2.3(c) of the Company Disclosure
Schedule sets forth a full and complete list of all necessary consents, waivers
and approvals of third parties applicable to the operations of the Company or
its subsidiaries that are required to be obtained by the Company or its
subsidiaries in connection with
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<PAGE>
the execution and delivery of this Agreement by the Company or the consummation
by the Company of the transactions contemplated hereby.
2.4 Company Financial Statements.
----------------------------
(a) Section 2.4(a) of the Company Disclosure Schedule includes
the Company's audited consolidated financial statements (balance sheets,
statements of operations, statements of shareholder's equity and statements of
cash flows) as of December 31, 1995 and 1994 and for the periods ended December
31, 1995 and 1994, and the Company's unaudited balance sheet and statement of
operations as of and for the year and three (3) months ended December 31, 1996
and March 31, 1997, respectively (collectively, the "Financial Statements"). The
--------------------
Financial Statements are complete and correct in all respects and have been
prepared in accordance with GAAP applied on a basis consistent throughout the
periods indicated (except that the unaudited financial statements for the year
and the three (3) months ended December 31, 1996 and March 31, 1997,
respectively, are subject to normal recurring adjustments and do not contain the
footnotes necessary to be in accordance with GAAP). The Financial Statements
present fairly the financial position and operating results of the Company as of
the dates and during the periods indicated therein. The balance sheet of the
Company as of December 31, 1996 is hereinafter referred to as the "December
--------
Balance Sheet." The unaudited balance sheet of the Company as of March 31, 1997
- -------------
is hereinafter referred to as the "March Balance Sheet." Since December 31, 1996
-------------------
there has been no material change in the Company's accounting policies.
(b) The financial projections of the Company set forth in
Section 2.4(b) of the Company Disclosure Schedule (the "Projections"), were
-----------
prepared by the Company in good faith. The Company makes no representations and
warranties, and expressly disclaims all express or implied representations and
warranties, relating to the Projections except that such Projections were
prepared by the Company in good faith.
2.5 No Undisclosed Liabilities. Except for obligations incurred in
--------------------------
the ordinary course of business which individually do not exceed $10,000 and
which in the aggregate do not exceed $50,000, the Company does not have any
liability, indebtedness, obligation, expense, claim, deficiency, guaranty or
endorsement of any type, whether accrued, absolute, contingent, matured,
unmatured or other (whether or not required to be reflected in financial
statements in accordance with generally accepted accounting principles), which
individually or in the aggregate, (i) has not been reflected in the March
Balance Sheet, and (ii) has not been specifically described in this Agreement or
in the Company Disclosure Schedule and specifically identified herein or therein
as not being included in the March Balance Sheet, and (iii) has not arisen in
the ordinary course of the Company's business since the date of the March
Balance Sheet.
2.6 No Changes. Since December 31, 1996 there has not been,
----------
occurred or arisen any:
(a) transaction by the Company or its subsidiaries except
in the ordinary course of business as conducted on that date;
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<PAGE>
(b) capital expenditure or commitment by the Company or its
subsidiaries that has exceeded $25,000 individually or $50,000 in the aggregate;
(c) destruction of, damage to or loss of any material assets,
business or customer of the Company or its subsidiaries (whether or not covered
by insurance);
(d) labor trouble or claim of wrongful discharge of which the
Company or its subsidiaries has received written notice or of which the Company
is aware or other unlawful labor practice or action; Section 2.6(d) of the
Company Disclosure Schedule includes a list of all employees who have been
terminated by the Company since January 1, 1995;
(e) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company;
(f) revaluation by the Company of any of its assets other than
depreciation as required by GAAP and reflected on the March Balance Sheet;
(g) declaration, setting aside or payment of any dividends on
or any other distribution (whether in cash, stock or property) in respect of any
of the Company Capital Stock, or any split, combination or reclassification of
any of the Company Capital Stock or the issuance or authorization of the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of the Company Capital Stock, or the repurchase, redemption or other
acquisition, directly or indirectly, of any shares of the Company Capital Stock
(or options, warrants, or other rights exercisable therefor).
(h) increase of over 10% in the salary or other compensation
payable or to become payable by the Company to any of its officers, directors,
employees or advisors, or the declaration, payment or commitment or obligation
of any kind for the payment, by the Company, of a bonus or other additional
salary or compensation to any such person, or grants of options or other
employee stock awards representing more than 20,000 shares in the aggregate or
otherwise not in the ordinary course of business except as otherwise
contemplated by this Agreement.
(i) sale, lease, license or other disposition of any of the
assets or properties of the Company or any of its subsidiaries, except in the
ordinary course of business;
(j) amendment or termination or violation of any material
contract, agreement or license to which the Company or any of its subsidiaries
is a party or by which it or they are bound other than termination by the
Company or such subsidiary pursuant to the terms thereof in the ordinary course
of business;
(k) loan by the Company or any of its subsidiaries to any
person or entity, other than advances to employees for travel and business
expenses in the ordinary course of business and consistent
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<PAGE>
with past practices, or incurring by the Company or any of its subsidiaries of
any indebtedness other than trade debt in the ordinary course of business
consistent with past practices, guaranty of the Company or any of its
subsidiaries of any indebtedness, issuance or sale of any debt securities of the
Company or any of its subsidiaries or guaranteeing of any debt securities of
others;
(l) waiver or release of any material right or claim of the
Company or any of its subsidiaries, including any material write-off or other
compromise of any account receivable of the Company;
(m) the commencement or notice or, to the knowledge of the
Company or its subsidiaries, threat of commencement of any lawsuit or proceeding
against or investigation of the Company or any of its subsidiaries or their
affairs;
(n) claim of ownership by a third party of the Company's
Intellectual Property (as defined in Section 2.10 below), or to the knowledge of
the Company, of infringement by the Company or any of its subsidiaries of any
third party's Intellectual Property rights;
(o) issuance, sale or exemption by the Company of any of its
shares of capital stock, or securities exchangeable, convertible or exercisable
therefor, or of any other securities except for issuances or sales as a result
of exercises of outstanding stock options granted under the Plan or other rights
previously granted to purchase shares of the Company Capital Stock, provided
that such options and other rights are included among the options and rights
specified in paragraph 2.2(b) above;
(p) change in pricing or royalties set or charged by the
Company;
(q) any event or condition of any character that has had or is
reasonably likely to have an effect that is materially adverse to the condition
(financial or otherwise), properties, assets, liabilities, business, operating,
results of operations or, to the Company's knowledge, prospects of the Company
and its subsidiaries taken as a whole (a "Material Adverse Effect"); or
-----------------------
(r) agreement by the Company, any of its subsidiaries or any
officer or employees thereof to do any of the things described in the preceding
clauses (a) through (q) (other than by negotiations with Splash and its
representatives regarding the transactions contemplated by this Agreement).
2.7 Tax Matters.
-----------
(a) Definition of Taxes. For the purposes of this Agreement,
-------------------
"Tax" or, collectively, "Taxes", means (i) any and all federal, state, local and
--- -----
foreign taxes, and similar assessments and other governmental charges, duties,
impositions and liabilities, including taxes based upon or measured by gross
receipts, income, profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all
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interest, penalties and additions imposed with respect to such amounts; (ii) any
liability for the payment of any amounts of the type described in clause (i) as
a result of being a member of an affiliated, consolidated, combined or unitary
group for any period; and (iii) any liability for the payment of any amounts of
the type described in clause (i) or (ii) as a result of any express or implied
obligation to indemnify any other person or as a result of any obligations under
any agreements or arrangements with any other person with respect to such
amounts and including any liability for taxes of a predecessor entity.
(b) Tax Returns and Audits.
----------------------
(i) The Company as of the Effective Time will have
prepared and timely filed or made a timely request for extension for all
required federal, state, local and foreign returns, estimates, information
statements and reports ("Returns") relating to any and all Taxes attributable to
the Company and such Returns are true and correct in all respects and have been
completed in accordance with applicable law, except in any instance where
failure to do so will not give rise to any future liability.
(ii) The Company as of the Effective Time: (A) will
have paid or accrued all material Taxes it is required to pay or accrue whether
or not shown on the Returns and (B) will have withheld and remitted in a timely
manner with respect to its employees all material federal and state income
taxes, FICA, FUTA and any other Taxes required to be withheld and remitted.
(iii) Since December 31, 1993, the Company has not
been delinquent in the payment of any Tax. There has been no Tax deficiency
assessed or proposed against the Company which has not been resolved with the
appropriate tax authorities and paid or properly accrued, nor has the Company
executed any waiver of any statute of limitations on or extending the period for
the assessment or collection of any Tax that is still in effect.
(iv) There are no audits or examinations in progress
or claims against the Company for Taxes for any period or periods and no notice
of any claim for Taxes, whether pending or threatened, has been received.
(v) The Company is an accrual basis taxpayer and
does not have any liabilities for unpaid Taxes not yet due which have not been
accrued or reserved against in accordance with GAAP on the March Balance Sheet,
whether asserted or unasserted, contingent or otherwise.
(vi) There are no Liens on the assets of the Company
relating to or attributable to Taxes other than Liens for taxes not yet due and
payable.
(vii) The Company has no knowledge of any basis for
the assertion of any claim relating or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of the Company or otherwise
have an adverse effect on the Company.
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<PAGE>
(viii) As of the Effective Time, there will not be
any contract, agreement, plan or arrangement, including but not limited to the
provisions of this Agreement, covering any employee or former employee of the
Company that, individually or collectively, could give rise to the payment of
any amount that would not be deductible pursuant to Sections 280G, 404 or 162 of
the Code.
(ix) The Company is not a party to a tax sharing,
indemnification or allocation agreement (other than this Agreement) nor does the
Company owe any amount under any such agreement.
(x) The Company is not, and has not been within the
time period set forth in Section 897(c)(i)(A)(ii), a "United States real
property holding corporation" within the meaning of Section 897(c)(2) of the
Code.
(xi) Copies of (A) any Tax examinations, (B)
extensions of statutory limitations for the collection or assessment of Taxes
and (C) the Returns of the Company for the last fiscal year have been delivered
to Splash.
(xii) The Company has not filed any consent agreement
under Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as defined in Section
341(f)(4) of the Code) owned by the Company.
(xiii) The Company's tax basis in its assets for
purposes of determining its future amortization, depreciation and other federal
income tax deductions is accurately reflected on the Company's tax books and
records.
(xiv) The Company has not been a member of an
affiliated group filing a consolidated federal income Tax Return and does not
have any liability for the Taxes of another person under Treas. Reg. ss. 1.1502-
6 (or any similar provision of state, local or foreign law) as a transferee or
successor, by contract or otherwise.
2.8 Restrictions on Business Activities. There is no agreement
-----------------------------------
(noncompete or otherwise), commitment, judgment, injunction, order or decree to
which the Company or any of its subsidiaries is a party or, to the knowledge of
the Company, otherwise binding upon the Company or any of its subsidiaries which
has or reasonably could be expected to have the effect of prohibiting or
impairing any business practice of the Company or any of its subsidiaries, any
acquisition of property (tangible or intangible) by the Company or any of its
subsidiaries or the conduct of business as currently conducted or as proposed to
be conducted by the Company or any of its subsidiaries.
2.9 Title to Properties; Absence of Liens and Encumbrances;
-------------------------------------------------------
Condition of Equipment.
- ----------------------
-19-
<PAGE>
(a) Section 2.9(a) of the Company Disclosure Schedule sets
forth a list of all real property currently owned or leased by the Company and
its subsidiaries and, in the case of leased property, the name of the lessor,
the date of the lease and each amendment thereto and the aggregate annual rental
and/or other fees payable under any such lease. All such leases are in full
force and effect, are valid and effective in accordance with their respective
terms, and there is not, under any of such leases, any existing default or event
of default (or event which with notice or lapse of time, or both, is reasonably
likely to give rise to a default) of the Company.
(b) The Company and its subsidiaries have good and valid title
to, or, in the case of leased properties and assets, valid leasehold interests
in, all of their tangible properties and assets free and clear of any Liens,
except as reflected in the Company Financial Statements and except for Liens for
taxes not yet due and payable.
(c) The equipment owned or leased by the Company, taken as a
whole, is (i) adequate for the conduct of the business of the Company as
currently conducted (ii) generally in good operating condition, subject to
normal wear and tear, and (iii) reasonably maintained.
2.10 Intellectual Property.
---------------------
(a) The Company and its subsidiaries own, or are licensed or
otherwise possess legally enforceable and irrevocable rights to use, all
patents, trademarks, trade names, service marks, copyrights, and any
applications therefor, maskworks, net lists, schematics, technology, know-how,
computer software programs or applications (in both source code and object code
form), and tangible or intangible proprietary information or material
(collectively, "Intellectual Property") that are used or proposed to be used in
---------------------
the business of the Company and its subsidiaries as currently conducted or as
proposed to be conducted by the Company and its subsidiaries.
(b) Section 2.10 of the Company Disclosure Schedule sets forth
a complete list of all patents, trademarks, registered copyrights, trade names
and service marks, and any applications therefor in respect of any of the
foregoing included in the Company Intellectual Property, and specifies, where
applicable, the jurisdictions in which the rights to such Company Intellectual
Property have been issued or registered or in which an application for such
issuance and registration has been filed, including the respective registration
or application numbers and the names of all registered owners. All registered
patents, trademarks, service marks and copyrights held by the Company are valid
and subsisting.
(c) Section 2.10 of the Company Disclosure Schedule also sets
forth a complete list of all licenses, sublicenses and other agreements as to
which the Company or any subsidiary is a party and pursuant to which the
Company, a subsidiary of the Company or any other person is authorized to use
Company Intellectual Property that is material to the Company and its
subsidiaries, taken as a whole, and includes the identity of all parties
thereto, a description of the nature and subject matter thereof, the applicable
royalty and the term thereof. Neither the Company nor any subsidiary is in
violation of any license, sublicense or agreement described on such list. The
execution and delivery of this Agreement
-20-
<PAGE>
by the Company, and the consummation of the transactions contemplated hereby,
(i) will not cause the Company or any subsidiary to be in violation or default
under any such license, sublicense or agreement, (ii) entitle any other party to
any such license, sublicense or agreement to terminate or modify such license,
sublicense or agreement or (iii) require the Company or any subsidiary to repay
any funds already received by it from a third party. Except for rights granted
in agreements, licenses or sublicenses described in Schedule 2.10 of the Company
Disclosure Schedule, the Company or one of its subsidiaries is the sole and
exclusive owner or licensee of, with all right, title and interest in and to
(free and clear of any Liens), the Company Intellectual Property, and has sole
and exclusive rights (and is not contractually obligated to pay any compensation
to any third party in respect thereof) to the use thereof or the material
covered thereby in connection with the services or products in respect of which
the Company Intellectual Property is being used.
(d) No claims contesting the Company's (or any subsidiary's)
ownership of or right to use Company Intellectual Property, or asserting any
right of a third party to use any Company Intellectual Property, have been
asserted or threatened to the Company or its agents, nor are there any valid
grounds for any bona fide claims (i) against the use by the Company or any
subsidiary of any Company Intellectual Property used in the Company's business
as currently conducted or as proposed to be conducted by the Company, or (ii)
challenging the validity, effectiveness, or ownership by the Company of any of
the Company Intellectual Property.
(e) To the knowledge of the Company, (i) there is no
unauthorized use, infringement or misappropriation of any of the Company
Intellectual Property by any third party, including any employee or former
employee of the Company, and (ii) no Company Intellectual Property or product of
the Company or any of its subsidiaries is subject to any outstanding decree,
order, judgment, or stipulation restricting in any manner the licensing thereof
by the Company. The Company has a policy requiring each employee and contractor
materially involved in proprietary aspects of the Company's business to execute
nondisclosure of proprietary information and confidentiality agreements in the
Company's standard forms, and all current and former employees, consultants and
contractors of the Company involved in proprietary aspects of the Company's
business have executed such an agreement.
2.11 Agreements, Contracts and Commitments.
-------------------------------------
(a) Except as set forth in Section 2.11(a) of the Company
Disclosure Schedule, each of the Company and its subsidiaries does not have
continuing obligations under, is not a party to nor is it bound by:
(i) any collective bargaining agreements,
(ii) any agreements or arrangements that contain
any severance pay, post-employment liabilities or obligations or "golden
parachute" provisions (or similar provisions which provide for payment of
consideration upon the completion of the transactions contemplated herein),
-21-
<PAGE>
(iii) any bonus, deferred compensation, pension,
profit sharing or retirement plans, or any other employee benefit plans or
arrangements,
(iv) any employment or consulting agreement,
contract or commitment with an employee or individual consultant or salesperson
or consulting or sales agreement, contract or commitment with a firm or other
organization,
(v) any agreement or plan, including, without
limitation, any stock option plan, stock appreciation rights plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting of
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement, except as provided herein,
(vi) any fidelity or surety bond or completion
bond,
(vii) any lease of personal property having annual
lease payments individually in excess of $25,000,
(viii) any agreement of indemnification, warranty
or guaranty other than in the ordinary course of business,
(ix) any agreement, contract or commitment
containing any covenant limiting the freedom of the Company to engage in any
line of business or to compete with any person,
(x) any agreement, contract or commitment
relating to capital expenditures and involving future payments in excess of
$50,000,
(xi) any agreement, contract or commitment
relating to the disposition or acquisition of material assets or any interest in
any business enterprise outside the ordinary course of the Company's business or
any subsidiary's business,
(xii) any mortgages, indentures, loans or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit,
(xiii) any distribution, joint marketing or
development agreement, or
(xiv) any agreement, contract or commitment with
any customer or vendor which, during the last two fiscal years of the Company,
accounted, or is expected to account during the Company's current fiscal year,
for more than 5% of the Company's revenue or 10% of the Company's trade
payables, as applicable.
-22-
<PAGE>
(xv) any other agreement, contract or commitment
that involves $25,000 or more or is not cancelable without penalty within thirty
(30) days.
(b) Except for any alleged breaches, violations and defaults,
and events that would constitute a breach, violation or default with the lapse
of time, giving of notice, or both, all as noted in Section 2.11(b) of the
Company Disclosure Schedule, neither the Company nor any of its subsidiaries has
breached, violated or defaulted under, or received notice that it has breached,
violated or defaulted under, any of the terms or conditions of any agreement,
contract or commitment set forth in Section 2.10 or Section 2.11(a) of the
Company Disclosure Schedule (a "Company Contract"). Each Company Contract is in
----------------
full force and effect and, except as otherwise disclosed in Section 2.11(b) of
the Company Disclosure Schedule, is not subject to any default thereunder of
which the Company or any subsidiary is aware by any party obligated to the
Company or any subsidiary pursuant thereto.
2.12 Interested Party Transactions. No officer, director or, to the
-----------------------------
Company's knowledge, employee or shareholder of more than 5% of the Company
Capital Stock (nor, to the Company's knowledge, any ancestor, sibling,
descendant or spouse of any of such persons, or any trust, partnership or
corporation in which any of such persons has or has had an interest), has or has
had, directly or indirectly, (i) an interest in any entity which furnished or
sold, or furnishes or sells, services or products that the Company furnishes or
sells, or proposes to furnish or sell, or (ii) any interest in any entity that
purchases from or sells or furnishes to, the Company, any goods or services or
(iii) a beneficial interest in any contract or agreement set forth in Section
2.11 of the Company Disclosure Schedule; provided, however, that passive
-----------------
ownership of no more than five percent (5%) of the outstanding voting stock of a
corporation shall not be deemed an "interest in any entity" for purposes of this
Section 2.12.
2.13 Governmental Authorization. Section 2.13 of the Company Disclosure
--------------------------
Schedule accurately lists each consent, license, permit, grant or other
authorization issued to the Company by a Governmental Entity (i) pursuant to
which the Company or its subsidiaries currently operate or hold any interest in
any of its or their properties or (ii) which is required for the operation of
its or their business or the holding of any such interest (herein collectively
called "Company Authorizations"), which Company Authorizations are in full force
----------------------
and effect and constitute all Company Authorizations required to permit the
Company and its subsidiaries to operate or conduct their business or hold any
interest in their properties or assets.
2.14 Litigation. There is no private or governmental action, suit,
----------
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of the Company or any of
its subsidiaries, threatened against the Company or any of its subsidiaries or
any of their respective properties or any of their respective officers or
directors (in their capacities as such). There is no judgment, decree or order
against the Company or any of its subsidiaries, or, to the knowledge of the
Company and its subsidiaries, any of their respective directors or officers (in
their capacities as such), that could prevent, enjoin, alter or delay any of the
transactions contemplated by this Agreement or that has a reasonable risk of
having a Material Adverse Effect on the Company and its subsidiaries, taken as a
whole.
-23-
<PAGE>
2.15 Accounts Receivable. All accounts receivable of the Company
-------------------
reflected on the March Balance Sheet ("Accounts Receivable") of the Company
-------------------
arose in the ordinary course of business, are carried at values determined in
accordance with generally accepted accounting principles consistently applied
and, to the Company's knowledge, are collectible except to the extent of
reserves therefor set forth in the March Balance Sheet. No person has any Lien
on any such Accounts Receivable and no request or agreement for deduction or
discount has been made with respect to any of such Accounts Receivable.
2.16 Minute Books. The minute books of the Company made available to
------------
counsel for Splash are the only minute books of the Company and contain an
accurate summary of all material transactions approved by the directors (or
committees thereof) and shareholders since the time of incorporation of the
Company.
2.17 Environmental Matters.
---------------------
(a) No substance that is regulated by any foreign, federal,
state or local governmental authority or that has been designated by any such
authority to be radioactive, toxic, hazardous or otherwise a danger to health or
the environment (herein, a "Hazardous Material") is present in, on or under any
------------------
property that the Company or any of its subsidiaries has at any time owned,
operated, occupied or leased (herein, a "Company Facility"), except as permitted
----------------
by and managed in accordance with applicable law.
(b) Neither the Company nor any of its subsidiaries has
transported, stored, used, disposed of, manufactured, released or exposed its
employees or any other person to Hazardous Materials ("Hazardous Materials
-------------------
Activity") in violation of any applicable foreign, federal, state or local
- --------
statute, rule, regulation, order or law.
(c) Each of the Company and its subsidiaries is and at all times
has been in compliance with all foreign, federal, state and local laws relating
to emissions, discharges, releases or threatened releases of Hazardous
Materials.
(d) No action, proceeding, permit revocation, writ, injunction
or claim is pending or, to the knowledge of the Company and its subsidiaries,
threatened, concerning the Hazardous Materials Activities of the Company or any
of its subsidiaries and/or any Company Facilities, and neither the Company nor
any of its subsidiaries is aware of any fact or circumstance which could involve
the Company or any of its subsidiaries in any environmental litigation or impose
any environmental liability upon the Company or any of its subsidiaries.
2.18 Brokers' and Finders' Fees. The Company has not incurred, nor will
--------------------------
it incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or any similar charges in connection with this Agreement
or any transaction contemplated hereby, except only a $250,000
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<PAGE>
advisory fee payable by the Company to Prudential Securities Incorporated. A
complete and accurate copy of the engagement letter relating to such advisory
fee has been provided to Splash. Section 2.18 of the Company Disclosure Schedule
identifies all Third Party Expenses (as defined in Section 5.3) expected to be
incurred by the Company in connection with the negotiation and effectuation of
the terms and conditions of this Agreement and the transactions contemplated
hereby.
2.19 Employee Benefit Plans and Compensation.
---------------------------------------
(a) The Company Disclosure Schedule lists, with respect to the
Company, any trade or business (whether or not incorporated) which is treated as
a single employer with the Company (an "ERISA Affiliate") within the meaning of
---------------
Section 414(b), (c), (m) or (o) of the Code or any subsidiary of the Company (i)
all employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), (ii) all loans to
employees (except loans to a given individual from the individual's
tax-qualified retirement plan) in excess of $25,000, loans to officers (except
loans to a given individual from the individual's tax-qualified retirement
plan), and any stock option, stock purchase, phantom stock, stock appreciation
right, supplemental retirement, severance, sabbatical, disability, employee
relocation, cafeteria (pursuant to section 125 of the Code), life insurance or
accident insurance plans, programs or arrangements, (iii) all bonus, deferred
compensation or incentive plans, programs or arrangements, (iv) other fringe or
employee benefit plans, programs or arrangements that apply to senior management
of the Company and that do not generally apply to all employees, providing an
aggregate amount of annual benefits in excess of $25,000, and (v) any current or
former employment or executive compensation or severance agreements, written or
otherwise, as to which current or contingent obligations of the Company of
greater than $25,000 exist for the benefit of, or relating to, any current or
former employee, consultant or director of the Company (together, the "Company
-------
Employee Plans"), and a copy of each such Company Employee Plan and each summary
- --------------
plan description and annual report on the Form 5500 Series required to be filed
with any government agency for each Company Employee Plan for the three most
recent Plan years has been delivered to Splash.
(b) (i) None of the Company Employee Plans promises or
provides retiree medical or other retiree welfare benefits to any person, except
as required by Code Section 4980B or applicable state law conversion rights;
(ii) there has been no "prohibited transaction," as such term is defined in
Section 406 of ERISA and Section 4975 of the Code, with respect to any Company
Employee Plan; (iii) all Company Employee Plans have been administered in
compliance with the requirements prescribed by any and all statutes, rules and
regulations (including ERISA and the Code, orders, or governmental rules and
regulations currently in effect with respect thereto and including all
applicable requirements for notification to participants or to the Department of
Labor, Internal Revenue Service or Secretary of the Treasury), and the Company
and each of its subsidiaries have performed all obligations required to be
performed by them under, are not in any respect in default under or violation
of, and have no knowledge of any material default or violation by any other
party to, any of the Company Employee Plans; (iv) each Company Employee Plan
intended to qualify under Section 401(a) of the Code and each trust intended to
qualify under Section 501(a) of the Code has received a favorable determination
letter from the Internal Revenue Service (the "IRS") as to such qualification,
---
and, to the best knowledge of the
-25-
<PAGE>
Company, nothing has occurred which could reasonably be expected to cause the
loss of such qualification or exemption; (v) all contributions required to be
made by the Company or any of its subsidiaries to any Company Employee Plan have
been made on or before their due dates and a reasonable amount has been accrued
for contributions to each Company Employee Plan for the current plan years; and
(vi) no Company Employee Plan is covered by, and neither the Company nor any
subsidiary has incurred or expects to incur any liability under Title IV of
ERISA or Section 412 of the Code.
(c) With respect to each Company Employee Plan, the Company
has complied with the applicable health care continuation and notice provisions
of the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") and the
-----
proposed regulations thereunder.
2.20 Insurance. Section 2.20 of the Company Disclosure Schedule lists
---------
all insurance policies and fidelity bonds covering the assets, business,
equipment, properties, operations, employees, officers and directors of the
Company and its subsidiaries. There is no claim by the Company or its
subsidiaries pending under any of such policies or bonds as to which the Company
or its subsidiaries has received notice that coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds. All premiums
due and payable under all such policies and bonds have been paid and the Company
is otherwise in material compliance with the terms of such policies and bonds
(or other policies and bonds providing substantially similar insurance
coverage). The Company and its subsidiaries have no knowledge of any threatened
termination of, or material premium increase with respect to, any of such
policies.
2.21 Compliance with Laws. The Company has complied with, is not in
--------------------
violation of, and has not received any notices of violation with respect to, any
foreign, federal, state or local statute, law or regulation with respect to the
conduct of its business, or the ownership or operation of its business, assets
or properties.
2.22 Complete Copies of Materials. The Company has delivered or made
----------------------------
available to Splash true and complete copies of each agreement, contract,
commitment or other document (or summaries of same) that is referred to in the
Company Disclosure Schedule or that has been requested in writing by Splash or
its counsel.
2.23 Representations Complete. None of the representations or
------------------------
warranties made herein by the Company (as modified by the Company Disclosure
Schedule), nor any statement made in any Schedule or certificate furnished by
the Company pursuant to this Agreement, or furnished in or in connection with
documents mailed or delivered to the shareholders of the Company in connection
with soliciting their consent to this Agreement and the Merger, contains or will
contain at the Effective Time, any untrue statement of a material fact, or omits
or will omit at the Effective Time to state any material fact necessary in order
to make the statements contained herein or therein, in the light of the
circumstances under which they were made, not misleading.
-26-
<PAGE>
2.24 Disclosure Schedule. The Company Disclosure Schedule has been
-------------------
prepared and executed by the Company and dated and delivered on the date of this
Agreement. The Company shall endeavor to disclose in the Company Disclosure
Schedule each item of information in each separate section in which such item
may reasonably be required to be disclosed.
2.25 Development and Supply Agreements. The consummation of the
---------------------------------
transactions contemplated by any one Development and Supply Agreement entered
into by the Company will not give rise to a Conflict under any other Development
and Supply Agreement to which the Company is party.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SPLASH AND MERGER SUB
Splash and Merger Sub represent and warrant to the Company as follows:
3.1 Organization, Standing and Power. Splash is a corporation duly
--------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware. Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Each of Splash and Merger
Sub has the corporate power to own its properties and to carry on its business
as now being conducted and is duly qualified to do business and is in good
standing in each jurisdiction in which the failure to be so qualified would have
a Material Adverse Effect on the business, assets, financial condition, or
results of operations of Splash or the ability of Splash and Merger Sub to
consummate the transactions contemplated hereby.
3.2 Authority. Each of Splash and Merger Sub have all requisite
---------
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of each of Splash and
Merger Sub. This Agreement has been duly executed and delivered by Splash and
Merger Sub and constitutes the valid and binding obligations of Splash and
Merger Sub, enforceable in accordance with its terms. The execution and delivery
of this Agreement do not, and the consummation of the transactions contemplated
hereby will not, conflict with, or result in any violation of any provision of
the charter documents of, Splash and Merger Sub. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity, is required by or with respect to Splash and Merger Sub in connection
with the execution and delivery of this Agreement by Splash and Merger Sub or
the consummation by Splash and Merger Sub of the transactions contemplated
hereby, except for (i) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware, and (ii) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable state and federal securities laws and the laws of any
foreign country.
27-
<PAGE>
3.3 SEC Documents; Splash Financial Statements. Splash has furnished or
------------------------------------------
made available to the Company true and complete copies of (i) all reports and
registration statements filed with the SEC under the Securities Exchange Act of
1934, as amended (the "Exchange Act") since its initial public offering in
------------
October 1996, all in the form (including exhibits) so filed (collectively, the
"SEC Documents"). As of their respective filing dates, the SEC Documents
-------------
complied in all material respects with the requirements of the Exchange Act, and
none of the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which they
were made, not misleading, except to the extent corrected by a subsequently
filed SEC Document.
3.4 No Material Adverse Change. Since the date on which the most
--------------------------
recent SEC Document was filed by the Company and prior to the date of this
Agreement, there has not been, occurred or arisen any event or condition of any
character that has had or creates a reasonable risk of having a material adverse
effect on the business, assets, financial condition or results of operations of
Splash.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of the Company. During the period from the date
----------------------------------
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, the Company agrees (except to the extent that
Splash shall otherwise consent in writing), to carry on its business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay its debts and Taxes when due unless validly
withheld, to pay or perform other obligations when due, and, to the extent
consistent with such business and except as agreed to by Splash and the Company,
use all reasonable efforts consistent with past practice and policies to
preserve intact the Company's present business organization, keep available the
services of its present officers and key employees and preserve their
relationships with customers and others having business dealings with it, all
with the goal of preserving unimpaired the Company's goodwill and ongoing
businesses at the Effective Time. The Company shall promptly notify Splash of
any event or occurrence or emergency not in the ordinary course of business of
the Company, and any material event involving the Company. Except as expressly
contemplated by this Agreement, the Company (and each of its subsidiaries) shall
not, without the prior written consent of Splash:
(a) Enter into any commitment or transaction not in the
ordinary course of business or any commitment or transaction of the type
described in Section 2.6 hereof;
(b) Transfer to any person or entity any material rights to
the Company's Intellectual Property (other than such transfers effectuated in
the ordinary course of business);
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<PAGE>
(c) Enter into or amend any agreements not cancelable by the
Company without penalty on ninety (90) days notice or less pursuant to which any
other party is granted marketing, distribution or similar rights of any type or
scope with respect to any products of the Company;
(d) Materially amend, terminate or violate any distribution
agreement or material contract, agreement or license which the Company is a
party or by which it is bound other than termination by the Company pursuant to
the terms thereof in the ordinary course of business and without financial
penalty to the Company;
(e) Commence any material litigation;
(f) Declare, set aside or pay any dividends on or make any
other distributions (whether in cash, stock or property) in respect of any
Company Capital Stock, or split, combine or reclassify any Company Capital Stock
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of Company Capital Stock, or, repurchase,
redeem or otherwise acquire, directly or indirectly, any shares of Company
Capital Stock (or options, warrants or other rights exercisable therefor);
(g) Except for the issuance of shares of Company Common Stock
upon exercise or conversion of presently outstanding Company Options or
conversion of Company Preferred Stock, issue, deliver or sell or authorize or
propose the issuance, delivery or sale of, or purchase or propose the purchase
of, any shares of capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities;
(h) Cause or permit any amendments to its Articles of
Incorporation or Bylaws (or comparable organizational documents);
(i) Acquire or agree to acquire by merging or consolidating
with, or by purchasing any of the assets or equity securities of, or by any
other manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets which are material, individually or in the aggregate, to the
business of the Company;
(j) Sell, lease, license or otherwise dispose of any of its
properties or assets except in the ordinary course of business;
(k) Incur any indebtedness for borrowed money (except with
respect to indebtedness incurred by the Company in the ordinary course of
business and under existing term loans or revolving credit lines in an amount
not more than $50,000) or guarantee any such indebtedness or issue or sell any
debt securities of the Company or guarantee any debt securities of others;
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<PAGE>
(l) Grant any severance or termination pay (i) to any director
or officer or (ii) to any other employee except payments made pursuant to
written agreements outstanding on the date hereof and disclosed in Section
2.11(a) of the Company Disclosure Schedule;
(m) Adopt or amend any employee benefit plan, or enter into
any employment contract, pay or agree to pay any special bonus or special
remuneration to any director or employee, or increase the salaries or wage rates
of its employees other than hirings and terminations in the ordinary course of
business and other than customary increases associated with annual reviews
scheduled during such period;
(n) Revalue any of its assets including, without limitation,
writing down the value of inventory or writing off notes or accounts receivable
other than in the ordinary course of business;
(o) Pay, discharge or satisfy, in an amount in excess of
$10,000 (in any one case) or $50,000 (in the aggregate), any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction of liabilities in the ordinary
course of business or liabilities reflected or reserved against in the Company
Financial Statements (or the notes thereto);
(p) Make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, enter into any
closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes;
(q) Enter into any development, joint marketing or other
strategic arrangement or agreement; or
(r) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(a) through (q) above, or any other action that
would prevent the Company from performing or cause the Company not to perform
the transactions contemplated herein or its covenants hereunder.
4.2 No Solicitation.
---------------
(a) Until the Effective Time or the date of termination of
this Agreement pursuant to the provisions of Section 8.1 hereof, as the case may
be, the Company will not (nor will the Company permit any of the Company's
officers, directors, agents, representatives or affiliates to) directly or
indirectly, take any of the following actions with any party other than Splash
or its designees: (i) solicit, conduct discussions with or engage in
negotiations with any person, relating to the possible acquisition by any person
other than Splash of the Company or any of its subsidiaries or any material
portion of the business of the Company and its subsidiaries (whether by way of
merger, purchase of capital stock, purchase of assets or otherwise) (an
"Alternative Acquisition") or of any material portion of its or their capital
-----------------------
stock or assets (an "Equity Transaction"), (ii) provide information with respect
------------------
to it or any of its
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subsidiaries to any person, other than Splash, relating to or in connection with
an Alternative Acquisition or Equity Transaction, (iii) enter into an agreement
with any person, other than Splash, providing for an Alternative Acquisition or
Equity Transaction or (iv) make or authorize any statement, recommendation or
solicitation in support of an Alternative Acquisition or Equity Transaction.
(b) If, prior to the Effective Time or the Termination of this
Agreement, the Company or any of its subsidiaries receives any bona fide offer
or proposal relating to any of the above, the Company shall immediately notify
Splash thereof, including information as to the identity of the offeror or the
party making any such offer or proposal and the specific terms of such offer or
proposal, as the case may be.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Access to Information. The Company shall afford Splash and its
---------------------
accountants, counsel and other representatives, reasonable access during normal
business hours upon reasonable notice during the period prior to the Effective
Time or Termination to (a) all of the Company's properties, books, contracts,
commitments and records, and (b) with the consent of the Company, which consent
shall not be unreasonably withheld, all other information concerning the
business, properties and personnel (subject to restrictions imposed by
applicable law) of the Company as Splash may reasonably request including,
without limitation, access upon reasonable request to the Company's employees,
customers and vendors for due diligence inquiry. The Company agrees to provide
to Splash and its accountants, counsel and other representatives copies of
internal financial statements, business plans and projections promptly upon
request. No information or knowledge obtained in any investigation pursuant to
this Section 5.1 or otherwise shall affect or be deemed to modify any
representation or warranty contained herein or the conditions to the obligations
of the parties to consummate the Merger.
5.2 Confidentiality. Each of the parties hereto hereby agrees to keep
---------------
such information or knowledge obtained in any investigation pursuant to Section
5.1, or pursuant to the negotiation and execution of this Agreement or the
effectuation of the transactions contemplated hereby, confidential in accordance
with the terms of the confidentiality agreement executed by Splash and the
Company as of November 5, 1996, (the "Confidentiality Agreement").
-------------------------
5.3 Expenses. If the Merger is consummated, all fees and expenses
--------
incurred by the Company in connection with this Agreement and the transactions
contemplated hereby, including, without limitation, all legal, accounting
(including fees and expenses in connection with the Company's 1996 year end
audit), financial advisory, consulting and all other fees and expenses of third
parties ("Third Party Expenses"), shall be the obligation of the Surviving
--------------------
Corporation, provided, that, to the extent the aggregate Third Party Expenses of
--------------
the Company exceed $250,000, an adjustment shall be made to the Merger
Consideration pursuant to Section 1.13(b). If the Merger is not consummated, the
Company
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<PAGE>
shall bear all Third Party Expenses incurred by it in connection with this
Agreement and the transactions contemplated hereby. Each other party (including
without limitation shareholders of the Company) shall bear all its own Third
Party Expenses incurred in connection with this Agreement and the transactions
contemplated hereby.
5.4 Public Disclosure. Unless otherwise required by law, the parties
-----------------
hereto agree that they shall not make any disclosure, by means of the issuance
of any reports, statements, releases or other public disclosure, or any other
third party disclosure, relating to the terms and conditions of this Agreement
and the transactions contemplated hereby, except for (a) disclosure by Splash of
----------
the intention of the parties to effect the transactions contemplated herein
(disclosing only the nature but not the terms of the transaction), in such
manner as Splash shall determine, subject to the Company's reasonable approval,
(b) such disclosures as may be required by applicable law (provided that the
disclosing party shall use reasonable efforts to notify the other party in
advance), and (c) such other disclosures as the parties shall mutually agree.
Notwithstanding the foregoing, however, and except as may be otherwise required
by law, the amount of the Merger Consideration shall not be disclosed, by means
of the issuance of any reports, statements, releases or other public disclosure,
or any other third party disclosure, by any party without the consent of the
other parties.
5.5 Consents. Each of Splash and the Company shall promptly apply for
--------
or otherwise seek, and use all commercially reasonable efforts to obtain, all
consents and approvals required to be obtained by it for the consummation of the
Merger, and the Company shall use all commercially reasonable efforts to obtain
all consents, waivers and approvals under any of the Company's agreements,
contracts, licenses or leases in order to preserve the benefits thereunder for
the Surviving Corporation and otherwise in connection with the Merger.
5.6 FIRPTA Compliance. On the Closing Date, the Company shall deliver
-----------------
to Splash a properly executed statement in a form reasonably acceptable to
Splash conforming to the requirements of Treasury Regulation Sections
1.897-2(h)(1)(i) and 1.1445-2(c)(3).
5.7 Legal Requirements. Subject to the terms and conditions provided in
------------------
this Agreement, each of the parties hereto shall use its reasonable best efforts
to take promptly, or cause to be taken, all reasonable actions, and to do
promptly, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated hereby, to obtain all necessary waivers, consents and
approvals and to effect all necessary registrations and filings and to remove
any injunctions or other impediments or delays, legal or otherwise, in order to
consummate and make effective the transactions contemplated by this Agreement
for the purpose of securing to the parties hereto the benefits contemplated by
this Agreement.
5.8 Notification of Certain Matters. The Company shall give prompt
-------------------------------
notice to Splash, and Splash shall give prompt notice to the Company, of (i) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which may cause any representation or warranty of the Company and Splash,
respectively, contained in this Agreement to be untrue or inaccurate at the
Effective Time
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and (ii) any failure of the Company or Splash, as the case may be, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 5.8 shall not limit or otherwise affect any remedies
available to the party receiving such notice.
5.9 Shareholders Agreements. The Company shall deliver or cause to be
-----------------------
delivered to Splash, concurrently with the execution of this Agreement (from the
shareholders of the Company listed in Section 5.9 of the Company Disclosure
Schedule (the "Company Shareholders") as being required to sign a Shareholder's
--------------------
Agreement), executed Shareholder Agreements substantially in the form attached
hereto as Exhibit C (the "Shareholders Agreement").
----------------------
5.10 Further Assurances. Each of the parties to this Agreement shall
------------------
use all commercially reasonable efforts to effectuate the transactions
contemplated hereby and to fulfill or cause to be fulfilled the conditions to
closing under this Agreement. Each party hereto, at the reasonable request of
another party hereto, shall execute and deliver such other instruments and do
and perform such other acts and things as may be necessary or desirable for
effecting completely the consummation of this Agreement and the transactions
contemplated hereby.
5.11 Benefits Plans. Splash covenants and agrees that the Company's
--------------
employees who remain employees of the Surviving Corporation shall be entitled,
commencing as of the Effective Time, to participate in all benefit plans and
arrangements which are available and subsequently become available to Splash's
employees on the same basis as Splash's employees. The period of service with
the Company of each such employee of the Surviving Corporation, for the purposes
of benefits plan eligibility, shall commence as of the date of commencement of
uninterrupted employment with the Company.
5.12 Third Party Expenses. The Company shall use all commercially
--------------------
reasonable efforts to cause all Third Party Expenses to be determined and
invoiced to the Company prior to the Closing.
5.13 Termination Payment. (a) In the event that the Company shall fail
-------------------
to consummate the Merger on the terms set forth herein for any reason other than
(i) failure of the conditions set forth in Section 6.1(b) or (c) or termination
of the Agreement pursuant to Section 8.1(a), (b), (c), (d) or (f), or (ii)
failure by Splash and Merger Sub to comply in all material respects with the
conditions set forth in Sections 6.2(a) or (b) hereof, then the Company shall
pay to Splash the sum of $500,000, to compensate Splash for transaction
expenses, opportunity costs, management disruption and the potential negative
impact on Splash's public image. The parties agree that while such damages to
Splash are impossible to quantify, the sum of $500,000 is a reasonable payment
in respect of such damages. Such payment shall be in addition to any other
remedies that Splash may have at law or in equity, including specific
performance of the transactions contemplated by this Agreement.
(b) In the event that Splash shall fail to consummate the
Merger on the terms set forth herein for any reason other than (i) failure of
the conditions set forth in Section 6.1(a), (b) or (c) or termination of the
Agreement pursuant to Section 8.1(a), (b), (c), (d) or (e), or (ii) failure by
the Company to comply in all material respects with the conditions set forth in
Sections 6.3 hereof, then
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<PAGE>
Splash shall pay to the Company the sum of $250,000, to compensate the Company
for transaction expenses, opportunity costs, management disruption and the
potential negative impact on the Company's public image. The parties agree that
while such damages to the Company are impossible to quantify, the sum of
$250,000 is a reasonable payment in respect of such damages. Such payment shall
be in addition to any other remedies that the Company may have at law or in
equity, including specific performance of the transactions contemplated by this
Agreement.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger.
------------------------------------------------------------
The respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) Corporate Approvals. This Agreement and the Merger shall
-------------------
have been approved and adopted by the requisite vote of the shareholders of the
Company, including without limitation any vote required by such shareholders to
amend the Company's Articles of Incorporation in order to provide that the
rights of the holders of Company Capital Stock shall be in accordance with such
rights as set forth in this Agreement.
(b) No Injunctions or Restraints; Illegality. No temporary
----------------------------------------
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger or restricting the conduct or
operations of the business of the Surviving Corporation shall be in effect, nor
shall any proceeding brought by a Governmental Entity, seeking any of the
foregoing be pending; nor shall there be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which makes the consummation of the Merger unlawful.
(c) Governmental Approval. Each of Splash, Merger Sub and the
---------------------
Company (and the Company's subsidiaries) shall have timely obtained from each
Governmental Entity all approvals, waivers and consents, if any, necessary for
consummation of or in connection with the Merger and the transactions
contemplated hereby.
6.2 Additional Conditions to Obligations of Company. The
-----------------------------------------------
obligations of the Company to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, exclusively by the Company:
(a) Representations, Warranties and Covenants. The
-----------------------------------------
representations and warranties of Splash and Merger Sub in this Agreement shall
be true and correct on and as of the Effective Time
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<PAGE>
as though such representations and warranties were made on and as of such time
and each of Splash and Merger Sub shall have performed and complied with all
covenants, obligations and conditions of this Agreement required to be performed
and complied with by it as of the Effective Time.
(b) Certificate of Splash. The Company shall have been
---------------------
provided with a certificate executed on behalf of Splash by its President and
its Chief Financial Officer to the effect that, as of the Effective Time:
(i) all representations and warranties made by
Splash and Merger Sub under this Agreement are true and correct; and
(ii) all covenants, obligations and conditions of
this Agreement to be performed by Splash and Merger Sub on or before such date
have been so performed.
(c) Claims. There shall not have occurred any claims (whether
------
asserted or unasserted in litigation) which may materially and adversely affect
the consummation of the transactions contemplated hereby or the business, assets
(including intangible assets), financial condition or results of operations of
Splash.
(d) Legal Opinion. The Company shall have received a legal
-------------
opinion from Wilson Sonsini Goodrich & Rosati, P.C., legal counsel to Splash and
Merger Sub, substantially in the form of Exhibit D hereto.
(e) Litigation. There shall be no action, suit, claim or
----------
proceeding of any nature pending, or overtly threatened, against Splash, Merger
Sub or the Company, their respective properties or any of their officers or
directors, arising out of, or in any way connected with, the Merger or the other
transactions contemplated by the terms of this Agreement.
6.3 Additional Conditions to the Obligations of Splash and Merger
-------------------------------------------------------------
Sub. The obligations of Splash and Merger Sub to consummate and effect this
- ---
Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, exclusively by Splash:
(a) Representations, Warranties and Covenants. The
-----------------------------------------
representations and warranties of the Company in this Agreement shall be true
and correct on and as of the Effective Time as though such representations and
warranties were made on and as of such time and the Company shall have performed
and complied with all covenants, obligations and conditions of this Agreement
required to be performed and complied with by it as of the Effective Time.
Notwithstanding the foregoing, from time to time prior to the Closing Date, the
Company will promptly supplement or amend the Company Disclosure Schedule with
respect to any matter hereafter arising that, if existing at or prior to the
date of this Agreement, would have been required to be set forth or described in
the Company Disclosure Schedule.
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<PAGE>
(b) Certificate of the Company. Splash shall have been
--------------------------
provided with a certificate executed on behalf of the Company by its Chief
Executive Officer and its Chief Financial Officer or Treasurer to the effect
that, as of the Effective Time:
(i) all representations and warranties made by the
Company in this Agreement are true and correct; and
(ii) all covenants, obligations and conditions of this
Agreement to be performed by the Company on or before such date have been so
performed.
(c) Claims. There shall not have occurred any claims (whether
------
asserted or unasserted in litigation) which may materially and adversely affect
the consummation of the transactions contemplated hereby or could reasonably be
anticipated to have a Material Adverse Effect on the Company, its subsidiaries
or the Surviving Corporation.
(d) Third Party Consents. All consents, waivers, and approvals
--------------------
listed pursuant to Section 2.3 of the Company Disclosure Schedule shall have
been obtained, including (without limitation) all necessary consents from Adobe
regarding assignment of the Company's agreements with Adobe.
(e) Legal Opinion. Splash shall have received a legal opinion
-------------
from Riordan & McKinzie, legal counsel to the Company, substantially in the form
of Exhibit E hereto.
(f) Litigation. There shall be no action, suit, claim or
----------
proceeding of any nature pending, or overtly threatened, against Splash, Merger
Sub or the Company (including its subsidiaries), their respective properties or
any of their officers or directors, arising out of, or in any way connected
with, the Merger or the other transactions contemplated by the terms of this
Agreement.
(g) No Material Adverse Effect. There shall not have occurred
--------------------------
any Material Adverse Effect on the Company and its subsidiaries, taken as a
whole.
(h) Shareholder's Agreement. Splash shall have received from
-----------------------
each of the Company Shareholders an executed Shareholder's Agreement which shall
be in full force and effect.
(i) No Dissenters. Holders of more than 5% of the outstanding
-------------
Company Capital Stock shall not have exercised, nor shall they continue to have
the right to exercise, appraisal rights with respect to the transactions
contemplated by this Agreement.
(j) Cancellation of Warrants. The warrants issued to each of
------------------------
Technology Funding and Oxford Partners shall have been cancelled at the
Effective Time, and Splash shall have received evidence in form and substance
satisfactory to it of such cancellation.
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<PAGE>
(k) Audited Balance Sheets. Splash shall have received the
----------------------
Company's audited consolidated financial statements (balance sheet, income
statements, statement of shareholder's equity and statement of cash flows) as of
December 31, 1996 and for the periods ended December 31, 1996 and 1995 and such
financial statements shall indicate no material differences from the December
Financial Statements.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW
7.1 Survival of Representations and Warranties. All covenants to
------------------------------------------
be performed prior to the Effective Time, and all representations and warranties
in this Agreement or in any instrument delivered pursuant to this Agreement
shall survive the Merger until June 30, 1998 (provided that the representations
and warranties set forth in Sections 2.7 and 2.17 shall survive until the
expiration of all applicable statutory limitations on third party and
governmental claims).
7.2 Escrow Arrangements.
-------------------
(a) Escrow Fund. As provided in Section 1.8, promptly
-----------
following the Effective Time, Splash shall deposit $1,755,000 with Comerica Bank
(or another institution acceptable to Splash and the Shareholders' Agent (as
defined in Section 7.2(g) below)), as Escrow Agent (the "Escrow Agent"), cash in
------------
the Escrow Amount, which shall constitute an escrow fund (the "Escrow Fund") to
-----------
be governed by the terms set forth herein. The portion of the Escrow Amount
contributed on behalf of each holder of Company Capital Stock shall correspond
to such shareholder's Proportionate Escrow Interest. The Escrow Fund shall be
available to compensate Splash and its affiliates (i) for the payment to Splash
of any adjustments to the Merger Consideration pursuant to Section 1.13 of this
Agreement, and (ii) for any claim, loss, expense, liability or other damage,
including reasonable attorneys' fees and disbursements in connection with any
action, suit or proceeding, to the extent of the amount of such claim, loss,
expense, liability or other damage (collectively "Losses") that Splash or any of
------
its affiliates has actually incurred (or, in the case of an extension of the
Escrow Period pursuant to Section 7.2(b)(ii), reasonably anticipates incurring),
by reason of (x) the breach by the Company of any representation, warranty,
covenant or agreement of the Company contained herein (including the Disclosure
Schedule), or (y) the breach by any of the Company Shareholders of any
representation, warranty, covenant or agreement contained in such Company
Shareholders' Shareholders Agreements; provided, however, that claims for Losses
-----------------
incurred as a result of a breach by a Company Shareholder shall be satisfied out
of such shareholder's Proportionate Escrow Interest of the Escrow Fund until
such Proportionate Escrow Interest is exhausted, and then shall be satisfied out
of the Escrow Fund in accordance with this Agreement. Splash and the Company
each acknowledge that such Losses, if any, would relate to unresolved
contingencies existing at the Effective Time, which if resolved at the Effective
Time would have led to a reduction in the aggregate Merger Consideration. Splash
shall not be entitled to receive any disbursement with respect to any Loss under
Section 7.2(a)(ii) arising in respect of any individual occurrence or
circumstance unless the amount of the Loss arising in respect of such occurrence
or circumstance individually, exceeds a $10,000 deductible level; provided,
--------
however, that (i) in the event
- -------
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<PAGE>
the aggregate Losses of Splash under Section 7.2(a)(ii) shall exceed $100,000,
then Splash shall be entitled to recover from the Escrow Fund the total of its
Losses including any amounts below the $10,000 deductible for each such
occurrence or circumstance and (ii) the foregoing limitation shall not apply to
any Third Party Expense required to be paid pursuant to Section 1.13(b) hereof.
(b) Escrow Period; Distribution upon Termination of Escrow
------------------------------------------------------
Period. Subject to the following requirements, the Escrow Fund shall remain in
- ------
existence until 60 days following the first fiscal quarter ending at least one
year following the Closing Date (the "Escrow Period"), subject to extension as
-------------
set forth below. At the expiration of the Escrow Period, the Escrow Fund shall
be released from escrow to the shareholders of the Company entitled to receive
the Merger Consideration hereunder, in an amount equal to the entire initial
Escrow Fund less an amount equal to the sum of (i) all amounts theretofore paid
out of the Escrow Fund to Splash and its affiliates pursuant to this Article VII
and (ii) an amount equal to such portion of the Escrow Fund which, in the
reasonable judgment of Splash, subject to the objection of the Shareholders'
Agent (as defined in Section 7.2(g)) and the subsequent arbitration of the
matter in the manner provided in Section 7.2(f) hereof, is necessary to satisfy
any unsatisfied claims specified in any Officer's Certificate theretofore
delivered to the Escrow Agent prior to the end of the Escrow Period (which
amount shall remain in the Escrow Fund (and which shall cause the Escrow Fund
shall remain in existence) until such claims have been resolved). As soon as all
such claims have been resolved, the Escrow Agent shall deliver to the eligible
shareholders of the Company the remaining portion of the Escrow Fund not
required to satisfy such claims. Deliveries of Escrow Amounts to the
shareholders of the Company pursuant to this Section 7.2(b) shall be made
according to each shareholder's Proportionate Escrow Interest.
(c) Protection of Escrow Fund. The Escrow Agent shall hold and
-------------------------
safeguard the Escrow Fund during the Escrow Period, shall treat such fund as a
trust fund in accordance with the terms of this Agreement and not as the
property of Splash and shall hold and dispose of the Escrow Fund only in
accordance with the terms hereof.
(d) Claims Upon Escrow Fund. Upon receipt by the Escrow Agent
-----------------------
at any time on or before the last day of the Escrow Period of a certificate
signed by any officer of Splash (an "Officer's Certificate"): (A) stating that
---------------------
Splash has incurred and paid or properly accrued Losses, or reasonably
anticipates that it may have to pay or accrue Losses, and (B) specifying in
reasonable detail the individual items of Losses included in the amount so
stated, the date each such item was incurred and paid or properly accrued, or
the basis for such anticipated liability, and the nature of the
misrepresentation, breach of warranty or claim to which such item is related,
the Escrow Agent shall, subject to the provisions of Section 7.2(a) and 7.2(e)
hereof, deliver to Splash out of the Escrow Fund, as promptly as practicable,
such amounts held in the Escrow Fund equal to such Losses.
(e) Objections to Claims. At the time of delivery of any
--------------------
Officer's Certificate to the Escrow Agent, a duplicate copy of such certificate
shall be delivered to the Shareholders' Agent, and for a period of thirty (30)
days after such delivery the Escrow Agent shall make no delivery to Splash of
any Escrow Amount specified in such Officer's Certificate unless the Escrow
Agent shall have received
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<PAGE>
written authorization from the Shareholders' Agent to make such delivery. After
the expiration of such thirty (30) day period, the Escrow Agent shall make
delivery of an amount from the Escrow Fund in accordance with such Officer's
Certificate and Section 7.2(d) hereof, provided, that, no such payment or
delivery may be made if the Shareholders' Agent shall object in a written
statement to the claim made in the Officer's Certificate, and such statement
shall have been delivered to the Escrow Agent prior to the expiration of such
thirty (30) day period.
(f) Resolution of Conflicts; Arbitration.
------------------------------------
(i) In case the Shareholders' Agent shall so
object in writing to any claim or claims made in any Officer's Certificate, the
Shareholders' Agent and Splash shall attempt in good faith to agree upon the
rights of the respective parties with respect to each of such claims. If the
Shareholders' Agent and Splash should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both parties and shall be furnished to
the Escrow Agent. The Escrow Agent shall be entitled to rely on any such
memorandum signed by Splash and the Shareholders' Agent and distribute amounts
from the Escrow Fund in accordance with the terms thereof.
(ii) If no such agreement can be reached after
good faith negotiation, either Splash or the Shareholders' Agent may demand
arbitration of the matter unless the amount of the damage or loss is at issue in
pending litigation with a third party, in which event arbitration shall not be
commenced until such amount is ascertained or both parties agree to arbitration;
and in either such event the matter shall be settled by arbitration conducted by
three arbitrators. Splash and the Shareholders' Agent shall each select one
arbitrator, and the two arbitrators so selected shall select a third arbitrator.
The arbitrators shall, within ten (10) business days after the last day of any
hearings on any motion, issue a definitive ruling on such motion. The
arbitrators shall also, within twenty (20) business days from the last day of
any hearings regarding the imposition of sanctions or the issuance of any
awards, issue a definitive ruling on the imposition of any such sanctions or the
issuance of any such award in such arbitration. The arbitrators shall also
establish procedures designed to reduce the cost and time for discovery while
allowing the parties an opportunity, adequate in the sole judgement of the
arbitrators, to discover relevant information from the opposing parties about
the subject matter of the dispute. The arbitrators shall rule upon motions to
compel or limit discovery and shall have the authority to impose sanctions,
including attorneys fees and costs, to the extent as a court of competent law or
equity, should the arbitrators determine that discovery was sought without
substantial justification or that discovery was refused or objected to without
substantial justification. The decision of a majority of the three arbitrators
as to the validity and amount of any claim in such Officer's Certificate shall
be binding and conclusive upon the parties to this Agreement, and
notwithstanding anything in Section 7.2(e) hereof, the Escrow Agent shall be
entitled to act in accordance with such decision and make or withhold payments
out of the Escrow Fund in accordance therewith. Such decision shall be written
and shall be supported by written findings of fact and conclusions which shall
set forth the award, judgment, decree or order awarded by the arbitrators.
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<PAGE>
(iii) Judgment upon any award rendered by the
arbitrators may be entered in any court having jurisdiction. Any such
arbitration shall be held in Santa Clara County, California under the rules then
in effect of the American Arbitration Association. Each party to any arbitration
pursuant to this Section 7.2(f) shall pay its own expenses; the fees of each
arbitrator and the administrative fee of the American Arbitration Association
shall be borne equally by Splash, on the one hand, and the Shareholders' Agent,
on the other.
(g) Shareholders' Agent; Power of Attorney.
--------------------------------------
(i) In the event that the Merger is approved,
effective upon such vote, and without further act of any shareholder, John
Farina shall be appointed as agent and attorney-in-fact (the "Shareholders'
------------
Agent") for each shareholder of the Company on whose behalf a portion of the
- -----
Merger Consideration was deposited into escrow, for and on behalf of the
shareholders of the Company, to give and receive notices and communications, to
authorize delivery to Splash of cash from the Escrow Fund in satisfaction of
claims by Splash, to object to such deliveries, to agree to, negotiate, enter
into settlements and compromises of, and demand arbitration and comply with
orders of courts and awards of arbitrators with respect to such claims, and to
take all actions necessary or appropriate in the judgment of the Shareholders'
Agent for the accomplishment of the foregoing. Such agency may be changed by the
shareholders of the Company from time to time upon not less than thirty (30)
days prior written notice to Splash or in the event of the death or permanent
disability of the Shareholders' Agent; provided, that, the Shareholders' Agent
may not be removed or replaced unless holders of a majority interest of the
Escrow Fund agree to such removal and to the identity of the substituted agent.
No bond shall be required of the Shareholders' Agent, and the Shareholders'
Agent shall not receive compensation for his or her services. Notices or
communications to or from the Shareholders' Agent shall constitute notice to or
from each of the shareholders of the Company.
(ii) The Shareholders' Agent shall not be liable
for any act done or omitted hereunder as Shareholders' Agent while acting in
good faith and in the exercise of reasonable judgment. The shareholders of the
Company on whose behalf the Escrow Amount was contributed to the Escrow Fund
shall severally indemnify the Shareholders' Agent and hold the Shareholders'
Agent harmless against any loss, liability or expense incurred without
negligence or bad faith on the part of the Shareholders' Agent and arising out
of or in connection with the acceptance or administration of the Shareholders'
Agent's duties hereunder, including the reasonable fees and expenses of any
legal counsel retained by the Shareholders' Agent.
(iii) The Shareholders' Agent shall be entitled to
submit a claim to and receive reimbursement from the Escrow Agent out of the
Escrow Fund for all reasonable, documented and out-of-pocket expenses incurred
by the Shareholders' Agent as a result of his or her acting as the Shareholders'
Agent, in an aggregate amount not to exceed $50,000. Any expenses or costs
incurred by the Shareholders' Agent from which he or she does not receive
reimbursement from the Shareholders' Agent Expense Fund shall be borne by the
Shareholders' Agent, unless it is an expense or cost for which such
Shareholders' Agent may be reimbursed pursuant to Section 7.2(g)(ii).
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<PAGE>
(h) Actions of the Shareholders' Agent. A decision, act,
----------------------------------
consent or instruction of the Shareholders' Agent shall constitute a decision of
all the shareholders for whom a portion of the Escrow Amount otherwise issuable
to them are deposited in the Escrow Fund and shall be final, binding and
conclusive upon each of such shareholders, and the Escrow Agent and Splash may
rely upon any such decision, act, consent or instruction of the Shareholders'
Agent as being the decision, act, consent or instruction of each and every such
shareholder of the Company. The Escrow Agent and Splash are hereby relieved from
any liability to any person for any acts done by them in accordance with such
decision, act, consent or instruction of the Shareholders' Agent.
(i) Third-Party Claims. In the event Splash becomes aware of a
------------------
third-party claim which Splash believes may result in a demand against the
Escrow Fund, Splash shall promptly notify the Shareholders' Agent of such claim,
and the Shareholders' Agent and the shareholders of the Company who have monies
in the escrow shall be entitled, at their expense, to participate in any defense
of such claim. Splash shall consult with the Shareholders' Agent prior to the
settlement any such claim and discuss with the Shareholders' Agent in good faith
any input regarding the claim and potential settlement the Shareholders' Agent
may have prior to any settlement. After such consultation, Splash shall have the
right to settle any such claim; provided, however, that except with the consent
-------- -------
of the Shareholders' Agent, no settlement of any such claim with third-party
claimants shall alone be determinative of the amount of any claim against the
Escrow Fund. In the event that the Shareholders' Agent has consented to any such
settlement, the Shareholders' Agent shall have no power or authority to object
under any provision of this Article VII to the amount of any claim by Splash
against the Escrow Fund with respect to such settlement to the extent that such
amount is consistent with the terms of such settlement.
(j) Escrow Agent's Duties.
---------------------
(i) The Escrow Agent shall be obligated only for the
performance of such duties as are specifically set forth herein, and as set
forth in any additional written escrow instructions which the Escrow Agent may
receive after the date of this Agreement which are signed by an officer of
Splash and the Shareholders' Agent, and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed to be
genuine and to have been signed or presented by the proper party or parties. The
Escrow Agent shall not be liable for any act done or omitted hereunder as Escrow
Agent while acting in good faith and in the exercise of reasonable judgment, and
any act done or omitted pursuant to the advice of counsel shall be conclusive
evidence of such good faith.
(ii) The Escrow Agent is hereby expressly authorized
to disregard any and all warnings given by any of the parties hereto or by any
other person, excepting only orders or process of courts of law, and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any such order, judgment
or decree of any court, the Escrow Agent shall not be liable to any of the
parties hereto or to any other person by reason of such compliance,
notwithstanding any such order, judgment or decree being subsequently reversed,
modified, annulled, set aside, vacated or found to have been entered without
jurisdiction.
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<PAGE>
(iii) The Escrow Agent shall not be liable in any
respect on account of the identity, authority or rights of the parties executing
or delivering or purporting to execute or deliver this Agreement or any
documents or papers deposited or called for hereunder.
(iv) The Escrow Agent shall not be liable for the
expiration of any rights under any statute of limitations with respect to this
Agreement or any documents deposited with the Escrow Agent.
(v) The Escrow Agent may resign at any time upon
giving at least thirty (30) days written notice to Splash and the Shareholders'
Agent; provided, however, that no such resignation shall become effective until
-----------------
the appointment of a successor escrow agent which shall be accomplished as
follows: Splash and the Shareholders' Agent shall use their best efforts to
mutually agree upon a successor escrow agent within thirty (30) days after
receiving such notice. If the parties fail to agree upon a successor escrow
agent within such time, Splash shall have the right to appoint a successor
escrow agent (subject to the consent of the Shareholders' Agent, which consent
shall not be unreasonably withheld). The successor escrow agent selected in the
preceding manner shall execute and deliver an instrument accepting such
appointment and it shall thereupon be deemed the Escrow Agent hereunder and it
shall without further acts be vested with all the estates, properties, rights,
powers, and duties of the predecessor Escrow Agent as if originally named as
Escrow Agent. Thereafter, the predecessor Escrow Agent shall be discharged for
any further duties and liabilities under this Agreement.
(vi) During the Escrow Period, the Escrow Agent
shall invest the Escrow Fund solely in direct obligations of the United States
government, the principal and interest of which are fully guaranteed by the
United States government, any daily or weekly withdrawal money market fund
investing solely in such obligations or interest-bearing or time deposits fully
insured by the Federal Deposit Insurance Corporation, and short-term bankers'
acceptances in any bank which is rated in one of the two highest ratings
categories by Moody's Investor Service, Inc. or Standard & Poor's Corporation
(collectively, "Permitted Investments"), or any combination of the foregoing.
---------------------
For purposes of this Agreement, any and all interest earned on the Escrow Fund
during the Escrow Period as a result of any Permitted Investments shall be
reported by the Company's shareholders for tax purposes and distributed to the
Company shareholders upon termination of the Escrow Fund according to each such
shareholder's Proportionate Escrow Interest.
(k) Exclusivity. Except to the extent of actual fraud, the
-----------
remedies available to Splash and its affiliates under this Article VII shall be
the exclusive remedies available to Splash and its affiliates for breach of the
representations, warranties and covenants of the Company and its affiliates
under this Agreement, provided only that the remedies under this Article VII
shall be nonexclusive for breach of any of the representations and warranties
set forth in Sections 2.7 and 2.17 (with respect to which the remedies set forth
in this Article VII shall be cumulative with any other remedies available at law
or in equity).
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<PAGE>
(l) Fees. All fees of the Escrow Agent for performance of its
----
duties hereunder shall be paid in equal proportions by (i) Splash and (ii)
payment out of the Escrow Fund. It is understood that the fees and usual charges
agreed upon for services of the Escrow Agent shall be considered compensation
for ordinary services as contemplated by the Agreement.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. Except as provided in Section 8.2 below, this
-----------
Agreement may be terminated and the Merger abandoned at any time prior to the
Effective Time:
(a) by mutual consent of the Company and Splash; or
(b) by Splash or the Company if the Closing has not occurred
by June 30, 1997, other than due to the failure of the party seeking to
terminate this Agreement to perform its obligations under this Agreement which
are required to be performed at or prior to the Effective Time; or
(c) by Splash or the Company if there shall be a final
nonappealable order of a federal or state court in effect preventing
consummation of the Merger; or there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable to
the Merger by any Governmental Entity which would make the consummation of the
Merger illegal; or
(d) by Splash or the Company if there shall be any action
taken, or any statute, rule, regulation or order enacted, promulgated or issued
or deemed applicable to the Merger by any Governmental Entity, which would: (i)
prohibit Splash's or the Company's ownership or operation of all or a material
portion of the business of the Company or (ii) compel Splash or the Company to
dispose of or hold separate all or a material portion of the business or assets
of the Company or Splash as a result of the Merger; or
(e) by Splash if it is not in material breach of its
obligations under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of the Company, provided, that, if such breach is curable by the
-------- ----
Company within twenty (20) days through the exercise of its reasonable best
efforts, then for so long as the Company continues to exercise such reasonable
best efforts Splash may not terminate this Agreement under this Section 8.1(e)
unless such breach is not cured within twenty (20) days following notification
of such breach to the Company from Splash; or
(f) by the Company if it is not in breach of its obligations
under this Agreement and there has been a material breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of
Splash or Merger Sub, provided that, if such breach is curable by Splash
-43-
<PAGE>
within twenty (20) days through the exercise of its reasonable best efforts,
then for so long as Splash continues to exercise such reasonable best efforts
the Company may not terminate this Agreement under this Section 8.1(f) unless
such breach is not cured within twenty (20) days following notice of such breach
to Splash by the Company.
Where action is taken to terminate this Agreement pursuant to this
Section 8.1, it shall be sufficient for such action to be authorized by the
Board of Directors (as applicable) of the party taking such action.
8.2 Effect of Termination. In the event of termination of this
---------------------
Agreement as provided in Section 8.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Splash, Merger Sub
or the Company, or their respective officers, directors or shareholders;
provided, however, that each party shall remain liable for any breaches of this
- -------- -------
Agreement prior to its termination; and provided further that, the provisions of
-------- -------
the Confidentiality Agreement and Sections 5.2, 5.3, 5.4, 5.13, Article VIII and
Article IX of this Agreement shall remain in full force and effect and survive
any termination of this Agreement.
8.3 Amendment. Except as is otherwise required by applicable law after
---------
the shareholders of the Company approve this Agreement, this Agreement may be
amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time, Splash
-----------------
and Merger Sub, on the one hand, and the Company, on the other hand, may, to the
extent legally allowed: (i) extend the time for the performance of any of the
obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices. All notices and other communications required or permitted
-------
hereunder shall be in writing, shall be effective when given, and shall in any
event be deemed to be given upon receipt or, if earlier, (a) five (5) days after
deposit with the U.S. Postal Service or other applicable postal service, if
delivered by first class mail, postage prepaid, (b) upon delivery, if delivered
by hand, (c) one (1) business day after the business day of deposit with Federal
Express or similar overnight courier, freight prepaid or (d) one (1) business
day after the business day of facsimile transmission, if delivered by facsimile
transmission with copy by first class mail, postage prepaid, and shall be
addressed to the address set forth below (or at such other address as a party
may designate by ten (10) days' advance written notice to the other party
pursuant to the provisions above):
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<PAGE>
(a) if to Splash, Merger Sub or the Surviving Corporation, to:
Splash Technology Holdings, Inc.
555 Del Rey Avenue
Sunnyvale, California 94086
Attention: Joan P. Platt, Chief Financial Officer
Facsimile No.: (408) 328-6418
with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Jeffrey D. Saper, Esq.
and Howard S. Zeprun, Esq.
Facsimile No.: (415) 493-6811
(b) if to the Company, to:
Quintar Holdings Corporation
370 Amapola Avenue, Suite 106
Torrance, California 90501
Attn: John J. Farina
Facsimile No.: (310) 618-1282
with a copy to:
Riordan & McKinzie
650 Town Center Drive, Suite 1500
Costa Mesa, CA 92626
Attn: James H. Shnell
(c) if to the Shareholders' Agent, to:
John Farina
10266 Cresta Drive
Los Angeles, CA 90064
9.2 Interpretation. Any reference to the Company's "knowledge" shall
--------------
mean the actual knowledge of the Company's executive officers after due inquiry,
which may be satisfied by consultation with the Company's executive officers and
other key personnel as said executive officers or the Company deem appropriate.
The words "include," "includes" and "including" when used herein shall be deemed
in each case to be followed by the words "without limitation." The table of
contents and
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<PAGE>
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
9.3 Counterparts. This Agreement may be executed in one or more
------------
counterparts (including by means of telecopier), all of which shall be
considered one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other party, it being understood that all parties need not sign the same
counterpart.
9.4 Entire Agreement; Assignment. This Agreement, the schedules and
----------------------------
Exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein: (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof except for the Confidentiality Agreement,
which shall remain in full force and effect in accordance with their respective
terms; (b) are not intended to confer upon any other person any rights or
remedies hereunder except that the Shareholders' Agent and the Escrow Agent
shall have the express rights articulated in Article VII hereof and the Company
Shareholders shall be entitled to enforce Splash's obligation, if any, under
Exhibit C hereto; and (c) shall not be assigned by operation of law or otherwise
- ---------
except as otherwise specifically provided, except that Splash and Merger Sub may
assign their respective rights and delegate their respective obligations
hereunder to their respective affiliates.
9.5 Severability. In the event that any provision of this Agreement or
------------
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
9.6 Other Remedies. Except as otherwise provided herein, any and all
--------------
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
9.7 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
Each of the parties hereto irrevocably consents to the exclusive jurisdiction
and venue of any federal or state court within Santa Clara County, California,
in connection with any matter based upon or arising out of this Agreement or the
matters contemplated herein, agrees that process may be served upon them in any
manner authorized by the laws of the State of California for such persons and
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction, venue and such process.
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<PAGE>
9.8 Rules of Construction. The parties hereto agree that they have been
---------------------
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
IN WITNESS WHEREOF, Splash, Merger Sub and the Company have caused this
Agreement to be signed by their duly authorized respective officers, all as of
the date first written above.
QUINTAR HOLDINGS CORPORATION
By: /s/ John J. Farina
-------------------------------------
John J. Farina, President
SPLASH TECHNOLOGY HOLDINGS, INC.
By: /s/ Kevin K. Macgillivray
-------------------------------------
Kevin K. Macgillivray, President and
Chief Executive Officer
SP ACQUISITION CORPORATION
By: /s/ Kevin K. Macgillivray
-------------------------------------
Name: Kevin K. Macgillivray
------------------------------------
Title: President
-----------------------------------
With respect to the matters set forth in Article VII and Section 1.9
only, the Escrow Agent/Exchange Agent has caused this Agreement to be signed by
its duly authorized representative, as of the date first written above.
COMERICA BANK - CALIFORNIA
By: /s/ Carole A. Swartz
-------------------------------------
Name: Carole A. Swartz
--------------------------
Title: Senior Vice President
--------------------------
***REORGANIZATION AGREEMENT***
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<PAGE>
SCHEDULE 5.9
COMPANY SHAREHOLDERS TO ENTER INTO SHAREHOLDER
AGREEMENTS CONCURRENTLY WITH THE EXECUTION
OF THE AGREEMENT AND PLAN OF REORGANIZATION
John Farina
Craig Douglas
Gary Moskovitz
Technology Funding
The Oxford Entities
Danka Industries
<PAGE>
EXHIBIT A
AGREEMENT OF MERGER OF
SP ACQUISITION CORPORATION, A CALIFORNIA CORPORATION
AND QUINTAR HOLDINGS CORPORATION, A CALIFORNIA CORPORATION
THIS AGREEMENT OF MERGER dated as of May 20, 1997 (the "Agreement") is
---------
between SP Acquisition Corporation ("Merger Sub"), a California corporation and
----------
a wholly owned subsidiary of Splash Technology Holdings, Inc. ("Splash"), a
------
Delaware corporation, and Quintar Holdings Corporation (the "Company"), a
-------
California corporation. The Company and Merger Sub are sometimes referred to
herein as the "Constituent Corporations."
RECITALS
A. The authorized capital stock of the Company consists of 10,000,000
shares of common stock of the Company (the "Common Stock"), of which 972,541
------------
shares are issued and outstanding, and 8,000,000 shares of Preferred Stock, of
which (i) 4,200,000 shares are designated Series A Preferred Stock (the "Series
------
A Preferred"), of which 4,160,445 shares are issued and outstanding, (ii)
- -----------
1,200,000 shares are designated Series B Preferred Stock ("Series B Preferred"),
------------------
none of which is outstanding, and (iii) 2,166,668 shares are designated Series C
Preferred Stock (the "Series C Preferred"; the Series A Preferred and Series C
------------------
Preferred shall be collectively referred to as "Company Preferred Stock"), of
-----------------------
which 1,500,001 shares are issued and outstanding (the Company Common Stock and
Company Preferred Stock shall be referred to collectively as the "Company
-------
Capital Stock"). There are no other outstanding shares of capital stock or
- -------------
voting securities. Of the outstanding Common Stock, an aggregate of 972,541
shares were originally issued under restricted stock purchase agreements
providing for repurchase by the Company at cost of shares that are unvested as
of the date of termination of employment; of such shares, all are vested and
none are unvested as of the date of this Agreement. No such shares are subject
to acceleration of vesting in connection with the transactions contemplated by
this Agreement. Each outstanding share of Company Preferred Stock is convertible
into one share of Company Common Stock. All outstanding shares of Company Common
Stock and Company Preferred Stock are duly authorized, validly issued, fully
paid and non-assessable and are free of any liens or encumbrances other than any
liens or encumbrances created by or imposed upon the holders thereof, and are
not subject to preemptive rights or rights of first refusal created by statute,
the Certificate of Incorporation or Bylaws of the Company or any agreement to
which the Company is a party or by which it is bound.
B. Merger Sub is a corporation duly organized and existing under the
laws of the State of California and on the date hereof has 100 shares of its
Common Stock outstanding, all of which are owned by Splash.
<PAGE>
C. Splash, Merger Sub and the Company have entered into an
Agreement and Plan of Reorganization dated March 21, 1997, (the "Reorganization
--------------
Agreement"), providing, among other things, for the execution and filing of this
- ---------
Merger Agreement and the merger of Merger Sub with and into the Company upon the
terms set forth in the Reorganization Agreement and this Merger Agreement (the
"Merger").
D. The respective Boards of Directors of each of the Constituent
Corporations deem it advisable and in the best interests of each of such
corporations and their respective shareholders that Merger Sub be merged with
and into the Company.
AGREEMENT
NOW, THEREFORE, in consideration of the promises and mutual agreements
contained in this Merger Agreement, the Constituent Corporations hereby agree
that Merger Sub shall be merged with and into the Company in accordance with the
Reorganization Agreement and the provisions of the California General
Corporation Law (the "CGCL"), upon the terms and subject to the conditions set
----
forth as follows:
ARTICLE I
MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
----------
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the CGCL, Merger Sub shall be merged with and into the
Company, the separate corporate existence of Merger Sub shall cease, and the
Company shall continue as the surviving corporation and as a wholly owned
subsidiary of Splash. The Company as the surviving corporation after the Merger
is hereinafter sometimes referred to as the "Surviving Corporation."
---------------------
1.2 Filing and Effectiveness. The Merger shall become effective when
------------------------
the following actions shall have been completed:
(a) This Agreement and the Merger shall have been adopted and
approved by Splash, as the sole shareholder of Merger Sub, and by the
shareholders of the Company, each in accordance with the requirements of the
CGCL;
(b) All of the conditions precedent to the consummation of the
Merger specified in this Agreement and the Reorganization Agreements shall have
been satisfied or duly waived by the party entitled to satisfaction thereof; and
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<PAGE>
(c) An executed Agreement of Merger or an executed counterpart
of this Agreement meeting the requirements of the CGCL shall have been filed
with the Secretary of State of the State of California; and
The date and time when the Merger shall become effective, as aforesaid,
is herein called the "Effective Time" of the Merger.
--------------
1.3 Effect of the Merger. At the Effective Time, the effect of the
--------------------
Merger shall be as provided in the applicable provisions of the CGCL. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the property, rights, privileges, powers and franchises of the Company
and Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities, obligations and duties of the Company and Merger Sub shall become
the debts, liabilities, obligations and duties of the Surviving Corporation.
ARTICLE II
CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 Certificate of Incorporation; Bylaws.
------------------------------------
(a) Unless otherwise determined by Splash prior to the
Effective Time, at the Effective Time, the Articles of Incorporation of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the Articles
of Incorporation of the Surviving Corporation until thereafter amended as
provided by law and such Articles of Incorporation, provided, however, that
-------- -------
Article I of the Certificate of Incorporation of the Surviving Corporation shall
be amended to read as follows: "The name of the corporation is Splash-Quintar
Company".
(b) The Bylaws of Merger Sub, as in effect immediately prior
to the Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
2.2 Directors and Officers. The directors of the Surviving
----------------------
Corporation immediately after the Effective Time shall be Kevin K. Macgillivray,
Joan P. Platt and John J. Farina. The officers of the Surviving Corporation
shall be as follows: Kevin K. Macgillivray shall be President; Gary Moskovitz
shall be Executive Vice President; and Joan P. Platt shall be Chief Financial
Officer and Secretary.
ARTICLE III
CASH CONSIDERATION; EFFECT ON CAPITAL STOCK;
CONVERSION OF COMPANY CAPITAL STOCK;
COMPANY OPTIONS; DISSENTING SHARES; ESCROW
-3-
<PAGE>
3.1 Cash Consideration; Effect on Capital Stock. The cash
-------------------------------------------
consideration (hereinafter referred to as the "Merger Consideration") to be
--------------------
provided by Splash and Merger Sub in exchange for all outstanding Company
Capital Stock and the cancellation of the Technology Funding and Oxford Warrants
(as defined in Section 3.1(c)(4) below) shall consist of (i) the amount of
eleven million seven hundred thousand dollars ($11,700,000), subject to
adjustment as set forth in Section 4.3 below and subject to the provisions of
Section 3.3 below and the Escrow provisions of Article VII of the Reorganization
Agreement (the "Cash Consideration"), plus (ii) any amounts to which the
------------------
Company's shareholders shall become entitled pursuant to the contingent earnout
described in Section 4.4 hereof. Subject to the terms and conditions of this
Agreement, as of the Effective Time, by virtue of the Merger and without any
action on the part of Merger Sub, the Company or the holder of any shares of the
Company Capital Stock, the following shall occur:
(a) Definitions.
-----------
(1) Aggregate Common Number. The "Aggregate Common Number"
----------------------- ----------------------
shall mean the aggregate number of shares of Company Common Stock outstanding
immediately prior to the Effective Time.
(2) Aggregate Preferred Number. The "Aggregate Preferred
-------------------------- -------------------
Number" shall mean the aggregate number of shares of Company Common Stock
- ------
issuable upon conversion of the aggregate shares of Company Preferred Stock
outstanding immediately prior to the Effective Time.
(3) Aggregate Option Number. The "Aggregate Option Number"
----------------------- -----------------------
shall mean the aggregate number of shares of Company Common Stock issuable on
exercise of all outstanding options, warrants and other rights to acquire
Company Capital Stock ("Company Options"), outstanding immediately prior to the
---------------
Effective Time, whether or not such Company Options shall then be vested and
exercisable.
(4) Aggregate Vested Option Number. The "Aggregate Vested
------------------------------ ----------------
Option Number" shall mean the aggregate number of shares of Company Common Stock
- -------------
issuable on exercise of all Company Options outstanding immediately prior to the
Effective Time (including 128,629 shares of Common Stock that would be otherwise
issuable in connection with the cashless exercise of the Technology Funding and
Oxford Warrants), but only to the extent that such Company Options shall be
vested and exercisable as of immediately prior to the Effective Time.
(5) Fully Diluted Common Number. The "Fully Diluted Common
--------------------------- --------------------
Number" shall mean, without duplication, the sum of the Aggregate Common Number,
- ------
the Aggregate Preferred Number and the Aggregate Vested Option Number.
(6) Escrow Amount. The "Escrow Amount" shall be cash in
------------- -------------
the amount of one million seven hundred fifty-five thousand dollars
($1,755,000), representing 15% of the targeted Cash Consideration; such amount
is to be deducted from the Merger Consideration otherwise payable at the Closing
and placed in escrow in accordance with the provisions of Section 3.3 hereof and
Article VII of the Reorganization Agreement.
-4-
<PAGE>
(7) Per Share Closing Payment. The "Per Share Closing
------------------------- -----------------
Payment" shall be an amount equal to the quotient obtained by dividing (x) an
- -------
amount equal to the Cash Consideration (as adjusted to the Closing pursuant to
Section 4.3) less (1) $199,375 payable in connection with the cancellation of
the Technology Funding and Oxford Warrants and (2) the Escrow Amount, by (y) an
amount equal to the Fully Diluted Common Number less 128,629 (representing the
shares of Common Stock that would be otherwise issuable in connection with the
cashless exercise of the Technology Funding and Oxford Warrants). By way of
example only, at the time of execution of this Agreement the Fully Diluted
Common Number is represented by the Company to be 7,539,866 shares; accordingly,
assuming Cash Consideration of $11,700,000 and an Escrow Amount of $1,755,000,
the Per Share Closing Payment would be ($11,700,000 - $199,375 - $1,755,000) /
(7,539,866 -128,629) shares, or $1.3150 per share.
(8) Proportionate Escrow Interest. A Company shareholder's
-----------------------------
"Proportionate Escrow Interest," applicable to each holder of record of Company
-----------------------------
Capital Stock as of immediately prior to the Effective Time, shall mean the
quotient obtained by dividing (x) the total number of shares of Company Common
Stock held of record by such holder as of immediately prior to the Effective
Time plus the total number of shares of Company Common Stock issuable upon
conversion of all Company Preferred Stock held of record by such holder as of
immediately prior to the Effective Time, by (y) the total number of shares of
Company Common Stock outstanding as of immediately prior to the Effective Time
plus the total number of shares of Company Common Stock issuable upon conversion
of all Company Preferred Stock outstanding as of immediately prior to the
Effective Time.
(9) Proportionate Earnout Interest. A Company
------------------------------
shareholder's "Proportionate Earnout Interest," applicable to each holder of
------------------------------
record of Company Common Stock or Company Series C Preferred Stock as of
immediately prior to the Effective Time, shall mean the quotient obtained by
dividing (x) the total number of shares of Company Common Stock held of record
by such holder as of immediately prior to the Effective Time plus the total
number of shares of Company Common Stock issuable upon conversion of all Company
Series C Preferred Stock held of record by such holder as of immediately prior
to the Effective Time, by (y) the total number of shares of Company Common Stock
outstanding as of immediately prior to the Effective Time plus the total number
of shares of Company Common Stock issuable upon conversion of all Company Series
C Preferred Stock outstanding as of immediately prior to the Effective Time.
(10) "Option Exchange Ratio" shall mean the ratio obtained
---------------------
by dividing (x) the quotient obtained by dividing (1) an amount equal to the
Cash Consideration (as adjusted to the Closing pursuant to Section 4.3), by (2)
the Fully Diluted Common Number, by (y) the average per share closing price of
Splash Common Stock over the thirty (30) trading days immediately preceding the
Closing Date as reported by the Nasdaq National Market.
(b) Conversion of Company Capital Stock. Each share of Company
-----------------------------------
Capital Stock issued and outstanding immediately prior to the Effective Time
(other than any Dissenting Shares, as defined and to the extent provided in
Section 3.2(a)) will at the Effective Time be canceled and extinguished and
converted automatically into the right to receive the following consideration:
-5-
<PAGE>
(1) Each share of the Company Capital Stock issued and
outstanding immediately prior to the Effective Time shall be entitled to receive
promptly following the Closing an amount equal to the Per Share Closing Payment;
(2) Each share of Company Capital Stock issued and
outstanding as of immediately prior to the Effective Time shall be entitled to
receive a Proportionate Escrow Share of any amounts distributable to such
holders pursuant to Article VII of the Reorganization Agreement; and
(3) Each share of Company Common Stock and Company Series C
Preferred Stock shall be entitled to receive a Proportionate Earnout share of
any amounts distributable to such holders pursuant to Section 4.4 hereof.
(c) Company Options. At the Effective Time subject to Section
---------------
3.1(c)(4), each Company Option shall be assumed by Splash in accordance with
provisions described below.
(1) At the Effective Time, each Company Option, whether or
not vested and exercisable, shall be, in connection with the Merger, canceled
and in substitution therefor Splash shall issue a new option (a "Splash
------
Option"). Each Splash Option shall continue to be subject to the same terms and
- ------
conditions as the respective Company Option, including vesting, except that (A)
each Splash Option shall be exercisable for that number of whole shares of
Splash Common Stock equal to the product of (1) the number of shares of Company
Capital Stock (on an as converted into Common Stock basis) that were issuable
upon exercise of such Company Option immediately prior to the Effective Time
multiplied by (2) the Option Exchange Ratio (rounded up to the nearest whole
number of shares of Splash Common Stock), (B) the exercise price per share of
Splash Common Stock under such Splash Option shall be equal to the quotient
determined by dividing (1) the exercise price per share of Company Capital Stock
at which such Company Option was exercisable immediately prior to the Effective
Time (on an as converted into Common Stock basis), by (2) the Exchange Ratio
(rounded down to the nearest whole cent), and (C) in the case of Company Options
originally granted under the Company's 1993 Stock Option Plan, the substituted
Splash Options shall be governed by the terms of the Splash 1996 Stock Option
Plan and standard form of agreement thereunder.
(2) It is the intention of the parties that the Company
Options assumed by Splash qualify following the Effective Time as incentive
stock options as defined in Section 422 of the Code to the extent the Company
Options qualified as incentive stock options immediately prior to the Effective
Time.
(3) As promptly as practicable following the Effective
Time, Splash will issue, to each holder of an outstanding Company Option
immediately prior to the Effective Time, a new Splash Option in respect of the
canceled Company Option.
(4) Notwithstanding any other provision hereof, in
connection with the Merger and in return for an aggregate payment of $199,375
($79,750 to Technology Funding and $119,625 to Oxford Partners), the Company
warrants to purchase an aggregate of 362,500 shares of
-6-
<PAGE>
Common Stock at an exercise price of $1.00 per share issued to Technology
Funding (145,000 shares) and Oxford Partners (217,500 shares) (collectively, the
"Technology Funding and Oxford Warrants") shall be canceled at the Effective
Time of the Merger.
(d) Capital Stock of Merger Sub. Each share of Common Stock of
---------------------------
Merger Sub issued and outstanding immediately prior to the Effective Time shall
represent one validly issued, fully paid and nonassessable share of Common Stock
of the Surviving Corporation. Each stock certificate of Merger Sub evidencing
ownership of any such shares shall continue to evidence ownership of such shares
of capital stock of the Surviving Corporation.
3.2 Dissenting Shares.
-----------------
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Company Capital Stock held by a holder who has exercised
and perfected appraisal rights for such shares in accordance with the CGCL and
who, as of the Effective Time, has not effectively withdrawn or lost such
appraisal rights ("Dissenting Shares"), shall not be converted into or represent
-----------------
a right to receive the Merger Consideration pursuant to Section 3.1, but the
holder thereof shall only be entitled to such rights as are granted by the CGCL.
(b) Notwithstanding the provisions of subsection (a), if any
holder of Dissenting Shares shall effectively withdraw or lose (through failure
to perfect or otherwise) his or her appraisal rights, then, as of the later of
Effective Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive the
Merger Consideration as provided in Section 3.1, without interest thereon, upon
surrender of the certificate representing such shares, subject to the conditions
set forth below and throughout this Agreement, including without limitation the
escrow provisions set forth in Section 3.3 and Article VII of the Reorganization
Agreement.
(c) The Company shall give Splash (i) prompt notice of any
written demand for appraisal received by the Company pursuant to the applicable
provisions of the CGCL and (ii) the opportunity to participate in all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Splash, voluntarily make any
payment with respect to any such demands or offer to settle or settle any such
demands. To the extent that Splash or the Company makes any payment or payments
in respect of any Dissenting Shares, Splash shall be entitled to recover under
the terms of Article VII of the Reorganization Agreement (x) the aggregate
amount by which such payment or payments exceed the aggregate Merger
Consideration that otherwise would have been payable in respect of such
Dissenting Shares plus (y) the aggregate fees and expenses (including reasonable
attorneys' fees and expenses) incurred by Splash or the Company in connection
with calculating, settling or litigating the amount of, or making, any such
payment.
3.3 Deposit of Escrow Amount. Promptly after the Effective Time,
------------------------
Splash shall deposit cash constituting the Escrow Amount into an escrow account
pursuant to Article VII of the Reorganization Agreement, of the aggregate Cash
Consideration otherwise payable pursuant to Section 3.1. The portion of the
Escrow Amount contributed on behalf of each holder of Company Capital Stock
shall be nearly as may be practical in proportion to such holder's Proportionate
Escrow Interest.
-7-
<PAGE>
ARTICLE IV
SURRENDER OF CERTIFICATES; PAYMENT
OF MERGER CONSIDERATION; NO FURTHER
OWNERSHIP RIGHTS IN COMPANY CAPITAL STOCK;
PURCHASE PRICE ADJUSTMENT; CONTINGENT EARN-OUT
4.1 Surrender of Certificates; Payment of Merger Consideration.
----------------------------------------------------------
(a) Exchange Agent. Boston Equiserve (the "Exchange Agent")
-------------- --------------
shall act as exchange agent in the Merger.
(b) Splash to Provide Cash. Promptly after the Effective Time,
----------------------
Splash shall make available to the Exchange Agent for exchange in accordance
with Article III, the aggregate Cash Consideration payable pursuant to Section
3.1 provided, that, on behalf of the holders of Company Capital Stock, Splash
-------- ----
shall deposit cash constituting the Escrow Amount into an escrow account
pursuant to Section 3.3 and Article VII of the Reorganization Agreement, out of
the aggregate Cash Consideration otherwise payable pursuant to Section 3.3 (the
portion of the Escrow Amount contributed on behalf of each holder of Company
Capital Stock shall be as nearly as may be practical in proportion to such
holder's Proportionate Escrow Interest).
(c) Exchange Procedures. As soon as reasonably practicable
-------------------
after the Effective Time, the Surviving Corporation shall cause to be delivered
to each holder of record of a certificate or certificates (the "Certificates")
------------
which immediately prior to the Effective Time represented outstanding shares of
Company Capital Stock whose shares were converted into the right to receive the
Merger Consideration pursuant to Section 3.1, (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as Splash may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to Splash or to such agent or agents as may be
appointed by Splash, together with such letter of transmittal, duly completed
and validly executed in accordance with the instructions thereto, the holder of
such Certificate shall be entitled to receive in exchange therefor the
applicable Merger Consideration pursuant to Section 3.1 (subject to Section 4.3
and subject to the escrow provisions of Section 3.3 and Article VII of the
Reorganization Agreement) and the Certificate so surrendered shall forthwith be
canceled. Until so surrendered, each outstanding Certificate that, prior to the
Effective Time, represented shares of Company Capital Stock, will be deemed from
and after the Effective Time, to evidence only the right to receive the Merger
Consideration in respect of each such share (subject to Sections 3.2 and 4.3 and
subject to the escrow provisions of Section 3.1 and Article VII of the
Reorganization Agreement).
(d) Transfers of Ownership. If any payment is to be made to a
----------------------
person other than the holder in whose name the Certificate surrendered in
exchange therefor is registered, it will be a condition of the payment thereof
that the Certificate so surrendered will be properly endorsed and accompanied
-8-
<PAGE>
by all documents required to evidence and effect such transfer and to evidence
that any applicable stock transfer taxes have been paid.
(e) No Liability. Notwithstanding anything to the contrary in
------------
this Section 4.1, none of the Exchange Agent, the Surviving Corporation or any
party hereto shall be liable to a holder of shares of Company Capital Stock for
any amount properly paid to a public official pursuant to any applicable
abandoned property, escheat or similar law.
4.2 No Further Ownership Rights in Company Capital Stock. The Merger
----------------------------------------------------
Consideration delivered upon the surrender for exchange of shares of Company
Capital Stock in accordance with the terms hereof shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of Company
Common Stock, and there shall be no further registration of transfers on the
records of the Surviving Corporation of shares of Company Common Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Article IV
(subject to the escrow provisions of Section 3.3 and Article VII of the
Reorganization Agreement).
4.3 Purchase Price Adjustment. The Purchase Price will be subject to
-------------------------
adjustment as follows:
(a) Working Capital Adjustment.
--------------------------
(1) Closing Balance Sheet. As soon as practicable (but in
---------------------
no event later than 45 days) following the Closing, the Company will, at the
expense of the Surviving Corporation, prepare and cause to be audited by Coopers
& Lybrand, independent auditors, and the Company will deliver to Splash and the
Shareholders' Agent (as defined in Article VII of the Reorganization Agreement),
a balance sheet of the Company as of the Closing Date (the "Closing Balance
---------------
Sheet"). The Closing Balance Sheet will be prepared in accordance with generally
- -----
accepted accounting principles ("GAAP") consistent with the basis of accounting
----
and procedures and methods employed by the Company in its audited balance sheet
of the Company as of December 31, 1996 (the "Audited Balance Sheet"). During the
---------------------
conduct of the audit, the Company will cooperate in all respects with the
independent auditors for the purposes of completing the Closing Balance Sheet.
In addition, the Company and the independent auditors shall be available for
periodic inquiry by Splash, the Shareholders' Agent and the Company, and the
independent auditors will answer such questions as Splash or the Shareholders'
Agent may have and provide such additional schedules and materials as Splash or
the Shareholders' Agent may reasonably request in order to permit a meaningful
review of the Closing Balance Sheet.
(2) Definition. "Working Capital" will mean the aggregate
---------- ---------------
of all current assets including cash, net accounts receivable (less allowances
for doubtful accounts), net value of inventory (adjusted for all applicable
write-downs and write-offs) and prepaid expenses, less all current liabilities
of any kind, which liabilities will include, but not be limited to, accounts
payable, royalties payable, warranty reserves, accrued bonuses, accrued
vacation, employee expense obligations, deferred revenue and other current
liabilities.
-9-
<PAGE>
(3) Disputes. At any time within 30 days following the
--------
delivery of the Closing Balance Sheet to Splash and the Shareholders' Agent (the
"Review Period"), Splash or the Shareholders' Agent may dispute any amounts
-------------
reflected or not reflected on the Closing Balance Sheet to the extent the net
effect of all such disputed amounts in the aggregate would affect the Working
Capital amount, but only on the basis that such amounts were not arrived at in
accordance with Section 4.3(a)(1); Splash and the Shareholders' Agent will
notify the other in writing of each such disputed item, and will specify the
amount thereof in dispute, not later than the expiration of the Review Period.
If Splash and the Shareholders' Agent are able to resolve all the disputed
items, then the Closing Balance Sheet agreed upon by Splash and the Company will
be final, binding and conclusive on the parties hereto. If Splash and the
Shareholders' Agent are unable to resolve any disputed item and are therefore
unable to agree as to the Closing Balance Sheet and the resultant Working
Capital amount within 20 days following the expiration of the Review Period,
then within 10 days thereafter either Splash or the Shareholders' Agent may
elect that the items remaining in dispute be submitted for resolution to a
nationally recognized accounting firm (the member of which who will be primarily
responsible for resolving such disputes will have had substantial auditing
experience and substantial experience in arbitration or other dispute resolution
proceedings concerning accounting issues) selected by mutual agreement of Splash
and the Shareholders' Agent (or failing such agreement between Splash and the
Shareholders' Agent, as selected by mutual agreement between Splash's
independent accountants and the Company's independent accountants (prior to the
Merger), or failing such appointed by the American Arbitration Association) (the
"Accountants"). The Accountants will, within 30 days after submission,
-----------
determine, based solely on presentations by Splash and the Shareholders' Agent
(and their representatives) and not by independent review, and render a written
report to the parties upon, such remaining disputed items and the resultant
calculation of the Closing Balance Sheet and the Working Capital amount in
accordance with the provisions hereof, and such report and the resultant Closing
Balance Sheet will be final, binding and conclusive on the parties hereto. In
resolving any disputed item, the Accountants may not assign a value to such item
greater than the greatest value for such item claimed by either party or less
than the smallest value for such item claimed by either party. The fees and
disbursements of the Accountants (and of the American Arbitration Association,
if any) (a) will be paid out of the Escrow Fund established under Article VII of
the Reorganization Agreement if the Working Capital amount finally determined
pursuant to this Section 4.3(c)(3) shall be more than $50,000 below the Working
Capital amount reflected on the Closing Balance Sheet originally submitted
pursuant to Section 4.3(a)(1) hereof, or (b) will be borne by Splash if the
Working Capital amount finally determined pursuant to this Section 4.3(a)(3) is
less than $50,000 below the Working Capital amount reflected on the Closing
Balance Sheet originally submitted pursuant to Section 4.3(a)(1) hereof. Splash
and the Company hereby agree to cooperate, work in good faith and as
expeditiously as reasonably possible to resolve any and all Closing Balance
Sheet disputes.
(4) Adjustment. In the event that the Working Capital of
----------
the Company as of the Closing Date as reported in the Closing Balance Sheet is
more negative than $(250,000) (excluding any liabilities for Third Party
Expenses for which an adjustment is made on the Closing Date pursuant to Section
4.3(b) below), then the Purchase Price shall be reduced to the extent of such
deficiency. Splash shall provide written notice of such deficiency to the Escrow
Agent pursuant to the provisions
-10-
<PAGE>
of Article VII of the Reorganization Agreement, and the deficiency shall be
payable to the Company as an escrow claim thereunder (pursuant to the procedure
set forth in such Article VII of the Reorganization Agreement).
(b) Expense Adjustment. In accordance with Section 5.3 of this
------------------
Agreement, in the event that all fees and expenses incurred by the Company in
connection with the Reorganization Agreement and the transactions contemplated
thereby, including, without limitation, all legal, accounting (including fees
and expenses in connection with the Company's 1996 year end audit), financial
advisory, consulting and all other fees and expenses of third parties ("Third
-----
Party Expenses") incurred by the Company exceeds the sum of $250,000, then (i)
- --------------
to the extent any such excess is known as of the Closing Date the Cash
Consideration payable pursuant to Section 3.1 shall be reduced by the amount of
such excess, and (ii) to the extent any such excess is not known as of the
Closing Date the excess shall when known be paid to Splash as of the Escrow Fund
described in Article VII of the Reorganization Agreement.
4.4 Contingent Earn-Out. In addition to the Cash Consideration
-------------------
payable following the Closing pursuant to Section 3.1, certain shareholders of
the Company shall be entitled to receive additional Merger Consideration in an
aggregate amount up to $3,200,000 in the event that the Company shall achieve
certain financial metrics following the Closing. Splash shall cause the Company
to use commercially reasonable efforts to achieve such metrics fully, to the
extent reasonably practical consistent with the business of the Company as it
may evolve. There shall be four independent financial metrics, as follows:
(a) Power Q Revenues (as defined below) of $2,222,222 to
$3,333,333 for the period from the Effective Time through December 31, 1997;
(b) Operating Income (as defined below) of $444,445 to $667,000
for the period from the Effective Time through December 31, 1997;
(c) Power Q Revenues of $4,444,445 to $6,666,667 for the six
months ending June 30, 1998; and
(d) Operating Income of $888,888 to $1,333,333 for the six
months ending June 30, 1998.
"Power Q Revenues" shall mean revenues recognized by the
----------------
Company in its divisional financial statements, net of sales returns, allowances
and reserves, in accordance with GAAP and the accounting rules of the Securities
and Exchange Commission, deriving from sales of all Power PC-based products,
including royalties received by the Company from Adobe relating to Power
PC-based products and properly recognized in the respective period. "Operating
---------
Income" shall be determined in accordance with GAAP as applied consistently with
- ------
the Company's historic accounting practices, including nonrecurring engineering
revenues (in an amount not to exceed $1,000,000 for the period in paragraph (b)
above and not to exceed $800,000 for the period in paragraph (d) above, for the
purposes of this computation) but excluding the reversal of any one-time
reserves or restructuring reserves
-11-
<PAGE>
included in the Closing Balance Sheet, subject however to proper recognition
under the accounting rules of the Securities and Exchange Commission.
Each individual milestone must be achieved at least to the
extent at the low end of the range specified for such milestone in order to
result in an earnout accrual based on such target. It shall not be necessary,
however, that all of the milestones be achieved in order that eligible
shareholders to be entitled to the earnout accrual based on any one milestone.
Upon achievement of a given milestone (to at least the minimum required
threshold), the participating shareholders of the Company shall be entitled to
receive an aggregate payment equal to the product of (i) $800,000 and (ii) the
proportion of the milestone achieved based on the top of the milestone range
(but not to exceed a proportion of 100%, which gives rise to the maximum accrual
of $800,000). The milestone payments shall be cumulative, such that if only one
milestone is achieved the eligible shareholders shall be entitled to receive an
aggregate payment of $800,000 (or a portion thereof based on the extent of
milestone achievement) and if all four milestones are achieved the eligible
shareholders shall be entitled to receive an aggregate payment of up to
$3,200,000 (based on the extent of achievement of each individual milestone).
The achievement of any of the foregoing milestones shall be reviewed
and certified by Coopers & Lybrand, independent auditors. In the event of any
dispute as to the achievement of a milestone, such dispute shall be resolved in
a manner consistent with the dispute resolution process set forth in Section
4.3(a)(3).
To the extent that a milestone is achieved, the funds distributable to
the participating shareholders of the Company as provided above shall be payable
as follows. Each holder of record of Company Common Stock or Company Series C
Preferred Stock as of immediately prior to the Effective Time shall be entitled
to receive an amount equal to the product of (x) the aggregate amount of funds
to be so distributed, times (y) such holder's Proportionate Earnout Interest.
Such amount shall be payable to any holder at such holder's most recent address
of record on the books of the Company, and shall be payable promptly after
determination of achievement (and in any event within 45 days of completion of
the audit determining such achievement).
ARTICLE V
GENERAL
5.1 Covenants of the Company. The Company covenants and agrees that
------------------------
it will, on or before the Effective Date of the Merger:
(a) File any and all documents with the California Franchise Tax
Board necessary for the assumption by Quintar of all of the franchise tax
liabilities of Merger Sub; and
(b) Take such other actions as may be required by the CGCL.
-12-
<PAGE>
5.2 Taking of Necessary Action; Further Action. If, at any time after
------------------------------------------
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub or to vest Splash with a 100%
ownership interest in the Surviving Corporation, the officers and directors of
the Surviving Corporation are fully authorized in the name of the Company and
the Surviving Corporation or otherwise to take, and will take, all such lawful
and necessary and/or desirable action so long as such action is consistent with
this Agreement.
5.3 Amendment. The Boards of Directors of the Constituent
---------
Corporations may amend this Agreement at any time prior to the filing of this
Agreement (or certificate in lieu thereof) with the Secretary of State of the
State of California, provided that an amendment made subsequent to the adoption
of this Agreement by the shareholders of either Constituent Corporation shall
not: (1) alter or change the amount or kind of shares, securities, cash,
property and/or rights to be received in exchange for or on conversion of all or
any of the shares of any class or series thereof of such Constituent
Corporation, (2) alter or change any term of the Articles of Incorporation of
the Surviving Corporation to be effected by the Merger, or (3) alter or change
any of the terms and conditions of this Agreement if such alteration or change
would materially adversely affect the holders of any class of shares or series
thereof of such Constituent Corporation.
5.4 Agreement. Executed copies of this Agreement will be on file at
---------
the principal place of business of the Surviving Corporation at 370 Amapola
Avenue, Suite 106, Torrance, California 90501 and copies thereof will be
furnished to any shareholder of either constituent Corporation, upon request and
without cost.
5.5 Governing Law. This Agreement shall in all respects be
-------------
construed, interpreted and enforced in accordance with and governed by the laws
of the State of California.
5.6 Counterparts. In order to facilitate the filing and recording of
------------
this Agreement, the same may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
-13-
<PAGE>
IN WITNESS WHEREOF, this Agreement, having first been approved by
resolutions of the Boards of Directors of Quintar and Merger Sub is hereby
executed on behalf of each of such two corporations and attested by their
respective officers thereunto duly authorized.
QUINTAR HOLDINGS CORPORATION
a California corporation
By:
-----------------------------------
John J. Farina, President
By:
-----------------------------------
Dana Dreidame, Secretary
SP ACQUISITION CORPORATION
a California corporation
By:
-----------------------------------
Title:
--------------------------------
By:
-----------------------------------
Title:
--------------------------------
-14-
<PAGE>
SP Acquisition Corporation
(California Corporation)
OFFICERS' CERTIFICATE
The undersigned, Kevin K. Macgillivray and Joan P. Platt, certify that:
1. They are President and Secretary, respectively, of SP Acquisition
Corporation, Inc. (the "Corporation"), a corporation organized under the laws of
the State of California.
2. The Corporation has authorized capital of 100 shares, $.001 par
value, all of which are designated "Common Stock."
3. There were 100 shares of Common Stock issued and outstanding as of
the date of the shareholders' meeting approving the Agreement of Merger attached
hereto (the "Merger Agreement"). All shares of Common Stock outstanding were
entitled to vote on the merger.
4. The principal terms of the Merger Agreement were approved by the
Board of Directors and by the vote of a number of shares of each class of stock
which equaled or exceeded the vote required.
5. The percentage vote required for such approval was more than 50%
of the outstanding shares of the Common Stock.
6. Kevin K. Macgillivray and Joan P. Platt further declare under
penalty of perjury under the laws of the State of California that each has read
the foregoing certificate and knows the contents thereof and that the same is
true of their own knowledge.
Executed in Sunnyvale, California on May __, 1997.
----------------------------------
Kevin K. Macgillivray, President
----------------------------------
Joan P. Platt, Secretary
<PAGE>
Quintar Holdings Corporation
(Surviving Corporation)
OFFICERS' CERTIFICATE
The undersigned, John J. Farina and Dana Dreidame, certify that:
1. They are the President and the Secretary, respectively, of
Quintar Holdings Corporation (the "Corporation"), a corporation organized under
the laws of the State of California.
2. The Corporation has authorized capital of 17,000,000 shares, of
which 10,000,000 shares are designated "Common Stock" and 7,000,000 shares are
designated "Preferred Stock". 4,200,000 shares of Preferred Stock have been
designated "Series A Preferred Stock", 1,200,000 shares of Preferred Stock have
been designated "Series B Preferred Stock" and 2,166,668 shares of Preferred
Stock have been designated "Series C Preferred Stock."
3. There were _______ shares of Common Stock issued and outstanding
as of May ___, 1997. There were ______ shares of Series A Preferred Stock issued
and outstanding, no shares of Series B Preferred Stock issued and outstanding
and ______ shares of Series C Preferred Stock issued and outstanding as of May
___, 1997.
4. The principal terms of the Merger Agreement were approved by the
Board of Directors.
5. The percentage vote required by the holders of Common and
Preferred Stock necessary for approval of the principal terms of the Merger
Agreement, which is a vote of at least 50% of each of the outstanding Common and
Preferred Stock of the Corporation, was obtained.
6. John J. Farina and Dana Dreidame further declare under penalty of
perjury under the laws of the State of California that each has read the
foregoing certificate and knows the contents thereof and that the same is true
of their own knowledge.
Executed in Torrance, California on May __, 1997.
---------------------------------
John J. Farina, President
---------------------------------
Dana Dreidame, Secretary
<PAGE>
EXHIBIT B
OFFICERS AND DIRECTORS
OF SURVIVING CORPORATION
OFFICERS
- --------
Kevin K. Macgillivray - President
Joan P. Platt - Chief Financial Officer and Secretary
Gary S. Moskovitz - Executive Vice President
DIRECTORS
- ---------
Kevin K. Macgillivray
Joan P. Platt
John J. Farina
<PAGE>
EXHIBIT C
QUINTAR HOLDINGS CORPORATION
SHAREHOLDER AGREEMENT
This Shareholder Agreement (the "Agreement") is made and entered into
as of May 1, 1997, between Splash Technology Holdings, Inc., a Delaware
corporation ("Splash"), and the undersigned shareholder ("Shareholder") of
Quintar Holdings Corporation, a California corporation ("Company"). Capitalized
terms used herein and not otherwise defined shall have the meanings ascribed
thereto in the Merger Agreement (as defined below).
RECITALS
A. Concurrently with delivery of this Agreement, Splash, the Company
and SP Acquisition Corporation, a California corporation and a wholly owned
subsidiary of Splash ("Merger Sub"), are entering into an Agreement and Plan of
Reorganization (the "Merger Agreement") which provides for the merger (the
"Merger") of Merger Sub with and into the Company. Pursuant to the Merger,
shares of capital stock of the Company will be converted into the right to
receive cash and other consideration on the basis described in the Merger
Agreement.
B. The Shareholder is the record holder and beneficial owner (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of such number of shares of the outstanding capital stock of
the Company, as is indicated on the final page of this Agreement (the "Shares").
C. As an inducement to Splash to enter into the Merger Agreement, the
Shareholder is willing to enter into and be bound by this Agreement pursuant to
which the Shareholder agrees not to transfer or otherwise dispose of any of the
Shares, or any other shares of capital stock of the Company acquired hereafter
and prior to the Expiration Date (as defined in Section 1.1 below, except as
otherwise permitted hereby), and to vote the Shares and any other such shares of
capital stock of the Company so as to facilitate consummation of the Merger.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, the parties agree as follows:
1. Agreement to Retain Shares.
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1.1 Transfer and Encumbrance. Shareholder agrees not to
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transfer (except as may be specifically required by court order), sell,
exchange, pledge or otherwise dispose of or encumber any of the Shares or any
New Shares (as defined in Section 1.2 below), or to make any offer or agreement
relating thereto, at any time prior to the Expiration Date. As used herein, the
term "Expiration Date"
<PAGE>
shall mean the earlier to occur of (i) such date and time as the Merger shall
become effective in accordance with the terms and provisions of the Merger
Agreement and (ii) such date and time as the Merger Agreement shall have been
terminated pursuant to Article VIII thereof.
1.2 Additional Purchases. Shareholder agrees that any shares
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of capital stock of the Company that Shareholder purchases or with respect to
which Shareholder otherwise acquires beneficial ownership after the execution of
this Agreement and prior to the Expiration Date ("New Shares") shall be subject
to the terms and conditions of this Agreement to the same extent as if they
constituted Shares.
2. Agreement to Vote Shares. At every meeting of the shareholders of
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the Company called with respect to any of the following, and at every
adjournment thereof, and on every action or approval by written consent of the
shareholders of the Company with respect to any of the following, Shareholder
shall vote the Shares and any New Shares: (i) in favor of approval of the Merger
Agreement and the Merger and any matter that could reasonably be expected to
facilitate the Merger; and (ii) against approval of any proposal made in
opposition to or competition with consummation of the Merger and against any
merger, consolidation, sale of assets, reorganization or recapitalization, with
any party other than with Splash and its affiliates and against any liquidation
or winding up of the Company (each of the foregoing is hereinafter referred to
as an "Opposing Proposal"). Shareholder agrees not to take any actions contrary
to Shareholder's obligations under this Agreement.
3. Irrevocable Proxy. Concurrently with the execution of this
-----------------
Agreement, Shareholder agrees to deliver to Splash a proxy in the form attached
hereto as Exhibit A (the "Proxy"), which shall be irrevocable to the fullest
extent permitted in the California General Corporation Law, with the total
number of shares of capital stock of the Company beneficially owned (as such
term is defined in Rule 13d-3 under the Exchange Act) by Shareholder set forth
therein.
4. Representations, Warranties and Covenants of the Shareholder.
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Shareholder hereby represents, warrants and covenants to Splash as follows:
4.1 Ownership of Shares. Shareholder (i) is the beneficial
-------------------
owner of the Shares, which at the date hereof and at all times up until the
Expiration Date will be free and clear of any liens, claims, options, charges or
other encumbrances; (ii) does not beneficially own any shares of capital stock
of the Company other than the Shares (excluding shares as to which Shareholder
currently disclaims beneficial ownership in accordance with applicable law); and
(iii) has full power and authority to make, enter into and carry out the terms
of this Agreement and the Proxy.
4.2 No Proxy Solicitations. Shareholder will not, and will not
----------------------
permit any entity under Shareholder's control to: (i) solicit proxies or become
a "participant" in a "solicitation" (as such terms are defined in Regulation 14A
under the Exchange Act) with respect to an Opposing Proposal or otherwise
encourage or assist any party in taking or planning any action that would
compete with, restrain or otherwise serve to interfere with or inhibit the
timely consummation of the Merger in accordance with the terms of the Merger
Agreement; (ii) initiate a Shareholders' vote or action by consent of the
Company Shareholders with respect to an Opposing Proposal; or (iii) become a
member
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<PAGE>
of a "group" (as such term is used in Section 13(d) of the Exchange Act) with
respect to any voting securities of the Company with respect to an Opposing
Proposal.
5. Additional Documents. Shareholder hereby covenants and agrees
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to execute and deliver any additional documents necessary or desirable, in the
reasonable opinion of Splash or Shareholder, as the case may be, to carry out
the intent of this Agreement.
6. Consent and Waiver. Shareholder hereby gives any consents or
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waivers that are reasonably required for the consummation of the Merger under
the terms of any agreements to which Shareholder is a party or pursuant to any
rights Shareholder may have.
7. Termination. This Agreement and the Proxy delivered in
-----------
connection herewith shall terminate and shall have no further force or effect as
of the Expiration Date.
8. Miscellaneous.
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8.1 Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, then the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
8.2 Binding Effect and Assignment. This Agreement and all of
-----------------------------
the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but,
except as otherwise specifically provided herein, neither this Agreement nor any
of the rights, interests or obligations of the Shareholder may be assigned by
the Shareholder without prior written consent of Splash.
8.3 Amendments and Modification. This Agreement may not be
---------------------------
modified, amended, altered or supplemented except upon the execution and
delivery of a written agreement executed by the party against whom enforcement
is sought.
8.4 Specific Performance; Injunctive Relief. The parties
---------------------------------------
hereto acknowledge that Splash will be irreparably harmed and that there will be
no adequate remedy at law for a violation of any of the covenants or agreement
of Shareholder set forth herein. Therefore, it is agreed that, in addition to
any other remedies that may be available to Splash upon any such violation,
Splash shall have the right to enforce such covenants and agreements by specific
performance, injunctive relief or by any other means available to Splash at law
or in equity.
8.5 Notices. All notices, requests, claims, demands and other
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communications hereunder shall be in writing and sufficient if delivered in
person, by cable, telegram or telex, or sent by mail (registered or certified
mail, postage prepaid, return receipt requested) or overnight courier (prepaid)
to the respective parties as follows:
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<PAGE>
If to Splash: Splash Technology Holdings, Inc.
555 Del Rey Avenue
Sunnyvale, CA 94086
Attn: Joan P. Platt, Chief Financial Officer
Telephone: (408) 328-6300
Fax: (408) 326-6418
With a copy to: Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
Attn: Jeffrey D. Saper, Esq.
Howard S. Zeprun, Esq.
Telephone: (415) 493-9300
Fax: (415) 493-6811
If to the Shareholder: To the address for notice set forth on the
last page hereof.
With a copy to: Riordan & McKinzie
695 Town Center Drive, Suite 1500
Costa Mesa, CA 92626
Attn: Michael Whalen, Esq.
Telephone: (714) 433-2900
Fax: (714)549-3244
If to the Company: Quintar Company
370 Amapola Avenue, Suite 106
Torrance, CA 90501
Attn: John Farina
Telephone: (310) 320-5700
Fax: (310) 787-4957
With a copy to: Riordan & McKinzie
695 Town Center Drive, Suite 1500
Costa Mesa, CA 92626
Attn: Michael Whalen
Telephone: (714) 433-2900
Fax: (714) 549-3244
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall only be
effective upon receipt.
8.6 Governing Law. This Agreement shall be governed by, and
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construed and enforced in accordance with, the internal laws of the State of
California.
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<PAGE>
8.7 Entire Agreement. This Agreement contains the entire
----------------
understanding of the parties in respect of the subject matter hereof, and
supersedes all prior negotiations and understandings between the parties with
respect to such subject matter.
8.8 Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
8.9 Effect of Headings. The section headings herein are for
------------------
convenience only and shall not affect the construction or interpretation of this
Agreement.
8.10 Effective Time. This Agreement and the Proxy delivered in
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connection herewith shall become effective only upon execution of the Merger
Agreement by each of the Company, Parent and Sub, and the time and date of such
execution shall be the "Effective Time."
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Shareholder Agreement
to be duly executed on the date and year first above written.
QUINTAR HOLDINGS CORPORATION SPLASH TECHNOLOGY HOLDINGS, INC.
By: By:
-------------------------------- --------------------------------
Name: Name:
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Title: Title:
----------------------------- -----------------------------
SHAREHOLDER:
Signature:
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Print Name:
-------------------------
Title:
-------------------------
Shareholder's Address for Notice:
Shares beneficially owned:
_____ shares of Common Stock
_____ shares of Series A Preferred Stock
_____ shares of Series C Preferred Stock
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<PAGE>
EXHIBIT A
IRREVOCABLE PROXY
The undersigned Shareholder of Quintar Holdings Corporation, a
California corporation ("Company"), hereby irrevocably appoints the directors on
the Board of Directors of Splash Holdings, Inc., a Delaware corporation
("Splash"), and each of them, as the sole and exclusive attorneys and proxies of
the undersigned, with full power of substitution and resubstitution, to the full
extent of the undersigned's rights with respect to the shares of capital stock
of the Company beneficially owned by the undersigned, which shares are listed on
the final page of this Proxy (the "Shares"), and any and all other shares or
securities issued or issuable in respect thereof on or after the date hereof,
until such time as that certain Agreement and Plan of Reorganization dated as of
May 1, 1997 (the "Merger Agreement"), among Splash, SP Acquisition Corporation,
a California corporation and a wholly-owned subsidiary of Splash ("Merger Sub"),
and the Company, shall be terminated in accordance with its terms or the Merger
(as defined in the Merger Agreement) is effective. Upon the execution hereof,
all prior proxies given by the undersigned with respect to the Shares and any
and all other shares or securities issued or issuable in respect thereof on or
after the date hereof are hereby revoked and no subsequent proxies will be
given.
This proxy is irrevocable, is granted pursuant to the Shareholder
Agreement dated as of May 1, 1997 (the "Shareholder Agreement"), between Splash
and the undersigned shareholder, and is granted in consideration of Splash
entering into the Merger Agreement. The attorneys and proxies named above will
be empowered at any time prior to termination of the Merger Agreement to
exercise all voting and other rights (including, without limitation, the power
to execute and deliver written consents with respect to the Shares) of the
undersigned at every annual, special or adjourned meeting of Company
shareholders, and in every written consent in lieu of such a meeting, or
otherwise, in favor of approval of the Merger and the Merger Agreement and any
matter that could reasonably be expected to facilitate the Merger, and against
any proposal made in opposition to or competition with the consummation of the
Merger and against any merger, consolidation, sale of assets, reorganization or
recapitalization of the Company with any party other than Splash and its
affiliates and against any liquidation or winding up of the Company.
The attorneys and proxies named above may only exercise this proxy to
vote the Shares subject hereto at any time prior to termination of the Merger
Agreement, at every annual, special or adjourned meeting of the shareholders of
Company and in every written consent in lieu of such meeting, in favor of
approval of the Merger and the Merger Agreement and any matter that could
reasonably be expected to facilitate the Merger, and against any merger,
consolidation, sale of assets, reorganization or recapitalization of Company
with any party other than Splash and its affiliates, and against any liquidation
or winding up of the Company, and may not exercise this proxy on any other
matter. The undersigned shareholder may vote the Shares on all other matters.
<PAGE>
Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned.
This proxy is irrevocable to the maximum extent permitted by law.
Dated: ___________, 1997
Print Name of Shareholder:
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Signature of Shareholder:
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(or authorized representative, agent or partner)
Shares beneficially owned:
shares of Common Stock
shares of Series A Preferred Stock
shares of Series C Preferred Stock
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<PAGE>
EXHIBIT D
May 19, 1997
Quintar Holdings, Inc.
370 Amapola Avenue, Suite 106
Torrance, CA 90501
Ladies and Gentlemen:
Reference is made to (i) the Agreement and Plan of Reorganization by
and among Splash Technology, Holdings, Inc., a Delaware corporation ("Splash"),
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SP Acquisition Corporation, a California corporation and wholly-owned subsidiary
of Splash ("Sub"), and Quintar Holdings Corporation, a California corporation
---
("Quintar"), dated as of May 1, 1997 (the "Reorganization Agreement"), which
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provides for the acquisition of Quintar by Splash pursuant to a statutory merger
of Sub with and into Quintar on the terms and conditions set forth in the
Reorganization Agreement and (ii) the Employment Agreement by and between SP
Acquisition Corporation and John J. Farina, dated as of May 1, 1997 (the
"Employment Agreement", and together with the Reorganization Agreement, "the
-------------------- ---
Agreements"). This opinion is rendered to you pursuant to Section 6.2(d) of the
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Reorganization Agreement, and all capitalized terms used herein have the
meanings ascribed to them in the Reorganization Agreement unless otherwise
defined herein.
We have acted as counsel for Splash and Sub in connection with the
negotiation, execution and delivery of the Agreements. As such counsel, we have
made such legal and factual examinations and inquiries as we have deemed
advisable or necessary for the purposes of rendering this opinion. In addition,
we have examined originals or copies of such corporate records of Splash,
certificates of public officials and such other documents that we consider
necessary or advisable for the purpose of rendering this opinion. In such
examination, we have assumed the genuineness of all signatures on original
documents, the authenticity and completeness of all documents submitted to us as
originals, the conformity to original documents of all copies submitted to us
and the due execution and delivery of all documents (except as to due execution
and delivery by Splash and Sub) where due execution and delivery are a
prerequisite to the effectiveness thereof.
As used in this opinion, the expression "to our knowledge," "known to
us" or similar language with reference to matters of fact means that, after an
examination of documents made available to us by Splash, and after inquiries of
officers of Splash but without any further independent factual investigation, we
find no reason to believe that the opinions expressed herein are factually
incorrect. Further, the expression "to our knowledge," "known to us" or similar
language with reference to matters of fact refers to the current actual
knowledge of the attorneys of this firm who have worked on matters for Splash
solely in connection with the Agreements and the transactions contemplated
thereby. Except to the extent expressly set forth herein, we have not undertaken
any independent investigation to determine the existence or absence of any fact,
and no inference as to our knowledge of the existence or absence of any fact
should be drawn from our representation of Splash and Sub or the rendering of
the opinion set forth below.
<PAGE>
Quintar Holdings, Inc.
May 19, 1997
Page 2
For purposes of this opinion, we are assuming that the representations
and warranties made by Quintar in the Reorganization Agreement are true and
correct as of the date hereof and that all covenants, obligations and conditions
of the Reorganization Agreement to be performed by Quintar on or prior to the
date hereof have been so performed. We are also assuming that Quintar has all
requisite power and authority, and has taken any and all necessary corporate
action, to execute and deliver the Reorganization Agreement and to consummate
the transactions contemplated thereby.
The opinions hereinafter expressed are subject to the following
qualifications:
a. We express no opinion as to the effect of applicable
bankruptcy, insolvency, reorganization, moratorium or other similar federal or
state laws affecting the rights of creditors or secured parties, including
without limitation, federal, state or other laws regarding fraudulent transfers;
b. We express no opinion as to the effect of rules of law
governing specific performance, injunctive relief or other equitable remedies
(regardless of whether any such remedy is considered in a proceeding at law or
in equity) or as to the effects of public policy on the enforceability of any
provision of any agreement;
c. We express no opinion as to compliance with the anti-fraud
provisions of applicable securities laws;
d. We are members of the Bar of the State of California, and
we express no opinion as to any matter relating to the laws of any jurisdiction
other than the federal laws of the United States of America, the laws of the
State of California and the General Corporation Law of the State of Delaware. As
you know, we are not licensed to practice law in the State of Delaware, and our
opinions as to the General Corporation Law of the State of Delaware are based
solely on our review of standard compilations of such laws and without reference
to its conflicts of law rules.
e. This opinion is subject to the effect of statutes,
principles of equity and court decisions providing (i) that certain covenants
and provisions of agreements are unenforceable where enforcement of such
covenants or provisions under the circumstances would violate the enforcing
party's implied covenant of good faith and fair dealing, and (ii) that a court
may refuse to enforce, or may limit the application of, a contract or any clause
thereof that the court finds to be unconscionable or contrary to public policy.
f. In rendering our opinion set forth in paragraph 5 below, we
have not made any investigation of court records to determine whether any
actions have been filed.
Based upon and subject to the foregoing, we are of the opinion that:
1. Splash is a corporation validly existing and in good standing
under the laws of the State of Delaware and has the corporate power and
authority to own, operate and lease its properties and carry on its business as
now conducted.
<PAGE>
Quintar Holdings, Inc.
May 19, 1997
Page 3
2. Sub is a corporation validly existing and in good standing under
the laws of the State of California; all of the outstanding shares of capital
stock of Sub are validly issued, fully paid and nonassessable and registered in
the name of Splash.
3. Each of Splash and Sub, as applicable, has full corporate power
and authority to execute, deliver, and perform its obligations under the
Agreements and has taken all requisite corporate action to approve and adopt the
Agreements. Sub has full corporate power and authority to execute, deliver and
perform its obligations under the Certificate of Merger. Each of the Agreements
has been duly executed and delivered by each of Splash and Sub, and constitutes
the legal, valid and binding obligation of each of Splash and Sub, as
applicable. The Merger shall be legally effective under California law upon the
filing of the Certificate of Merger.
4. The execution, delivery and performance of the Agreements by
Splash and Sub, as applicable, the execution and delivery of the Certificate of
Merger by Sub, and the carrying out by Splash and Sub of the transactions
contemplated by the Agreements and by the Certificate of Merger did not and will
not conflict with or constitute a violation under the charter documents of
Splash or Sub or, to our knowledge, any statute, rule or regulation, judgment,
decree, order, governmental permit or license applicable to Splash or Sub.
5. To our knowledge, no suit, action or legal, administrative,
arbitration or other proceeding or governmental investigation is pending or
threatened to which Splash or Sub or any of their assets or properties is a
party which seeks to prohibit, restrain or enjoin the transactions contemplated
by the Agreements or the Certificate of Merger.
6. There is no consent, approval, authorization, order, registration,
qualification or filing of or with any court or any regulatory authority or
other governmental body (either foreign or domestic) required for the
consummation by Splash or Sub or with respect to their respective assets or
properties of the transactions contemplated by the Agreements and Certificate of
Merger that has not been obtained, except for (i) acceptance for filing, by the
Secretary of State of California, of the Certificate of Merger, and (ii) such
consents, approvals, orders, authorizations, registrations or qualifications as
may be required under state securities or Blue Sky laws.
This letter is furnished to you by us as counsel to you and is solely
for your benefit. It may not be relied upon by any other person or for any other
purpose without our prior written consent.
Very truly yours,
WILSON, SONSINI, GOODRICH & ROSATI
Professional Corporation
<PAGE>
EXHIBIT E
March 20, 1997
Splash Technology Holdings, Inc.
555 Del Rey Avenue
Sunnyvale, California 94086
RE: ACQUISITION OF QUINTAR HOLDINGS CORPORATION BY SPLASH
TECHNOLOGY HOLDINGS, INC.
Ladies and Gentlemen:
We have acted as counsel for Quintar Holdings Corporation, a California
corporation (the "Company"), and Quintar Company, a Delaware corporation
("Subsidiary"), in connection with the merger (the "Merger") of SP Acquisition
Corporation, a California corporation ("SPAC"), with and into the Company,
pursuant to that certain Agreement and Plan of Reorganization (the
"Reorganization Agreement") dated as of May 1, 1997 by and among the Company,
SPAC and Splash Technology Holdings, Inc., a Delaware corporation ("Splash").
This opinion is being rendered to you pursuant to Section 6.3(e) of the
Reorganization Agreement. Capitalized terms not otherwise defined in this
opinion have the meaning given to them in the Reorganization Agreement.
In rendering this opinion, we have examined and relied upon, among
other things, the following documents:
1. An executed copy of the Reorganization Agreement;
2. An executed copy of the Agreement of Merger among the
Company, SPAC and Splash with attached Officers' Certificates (collectively, the
"Certificate of Merger");
3. The Restated Articles of Incorporation (the "Articles") and
all amendments thereto of the Company as certified by the Secretary of State of
California;
4. The Certificate of Incorporation of the Subsidiary and all
amendments thereto of the Subsidiary as certified by the Secretary of State of
Delaware;
<PAGE>
Splash Technology Holdings, Inc.
SP Acquisition Corporation
March 20, 1997
Page 2
5. The Bylaws and all amendments thereto of the Company (the
"Bylaws") as certified by an officer of the Company;
6. The Bylaws and all amendments thereto of the Subsidiary as
certified by an officer of the Subsidiary;
7. Records of proceedings and actions of the Board of Directors
of the Company certified to us by an officer of the Company as constituting all
of the proceedings and actions of the Company relating to the Reorganization
Agreement and the transactions contemplated thereby;
8. A certificate of the California Secretary of State dated
April 27, 1997 as to the corporate existence and good standing of the Company in
the State of California;
9. A certificate of the California Franchise Tax Board dated
April 27, 1997 regarding the payment by the Company of franchise and similar
state taxes of the State of California; and
10. A certificate of the Secretary of State of Delaware dated May 5,
1997 as to the corporate existence and good standing of, and that no franchise
taxes have been assessed on, Subsidiary in the State of Delaware.
We have also examined originals, or copies certified or otherwise
identified to our satisfaction as being true copies, of such corporate records
of the Company, such certificates of public officials and of officers of the
Company, and such other documents as we have deemed necessary for the purpose of
rendering this opinion. In such examination, we have assumed the genuineness of
all signatures, the authenticity of all documents submitted to us as originals
and the conformity to original documents of all documents submitted to us as
copies. As to any facts material to this opinion which were not independently
established or verified, we have relied upon statements and representations of
officers and other representatives of the Company and of others.
We have made such investigations of law as we have deemed necessary in
connection with the opinions expressed herein. We are attorneys duly admitted
and qualified to practice only in the State of California and we are opining
only as to the effect on the subject transactions of United States federal law
(other than with respect to trademarks, copyrights, patents and antitrust), the
General Corporation Law of the State of Delaware and the laws of the State of
California, as those laws are in effect as of the date hereof. We are not
opining on, and we assume no responsibility as to the applicability to, or the
effect on, any of the matters covered herein of: (i) the laws of any other
jurisdiction; (ii) any laws of the State of Delaware other than
the General Corporation Law; (iii) the laws of any municipality or other agency
in any state; or (iv) state or federal antifraud, antitrust or environmental
laws.
In stating our opinions, we have assumed (i) the due organization,
valid existence and good standing under the laws of its jurisdiction of
organization of the parties to the
<PAGE>
Splash Technology Holdings, Inc.
SP Acquisition Corporation
March 20, 1997
Page 3
Reorganization Agreement and the Certificate of Merger, other than the Company
and the Subsidiary; (ii) the authority and legal right and power under all
applicable laws and regulations of the officers, directors and other persons and
entities, other than the Company, signing the Reorganization Agreement, the
Certificate of Merger and the other documents executed and delivered in
connection therewith as or on behalf of the parties thereto; (iii) the
Reorganization Agreement and the Certificate of Merger have been duly
authorized, executed and delivered by the parties thereto, other than the
Company; (iv) the execution and delivery of the Reorganization Agreement and the
Certificate of Merger by the parties thereto, other than the Company, creates
legal, valid and binding obligations of such parties enforceable against them in
accordance with their terms; (v) the authenticity of all documents submitted to
us as originals; (vi) the genuineness of all signatures, other than those of the
Company; and (vii) the conformity to authentic original documents of all
documents submitted to us as certified, conformed or photostatic copies.
As used in this opinion, the phrase "to our knowledge" means only to
our actual knowledge, which knowledge is based solely on (i) a certificate or
certificates from officers of the Company, (ii) a review of the documents listed
in the second paragraph of this opinion, (iii) a review of only those agreements
listed in Section 2.10(c) and 2.11 of the Company Disclosure Schedule, and (iv)
inquiry among the lawyers currently in our firm who have represented the Company
in connection with the transactions contemplated by the Agreement, without other
inquiry or investigation.
Based upon and subject to the foregoing, we are of the opinion that:
1. Each of the Company and the Subsidiary is a corporation duly
organized, validly existing and in corporate and tax good standing under the
laws of the State of California and the laws of the State of Delaware,
respectively, and each has the corporate power and authority to own, operate and
lease its properties and carry on its business as now conducted and now proposed
to be conducted. Each of the Company and Subsidiary is duly qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
in which failure to be so qualified would have a material adverse effect on the
Company or the Subsidiary, respectively. To our knowledge, the Company has no
subsidiaries other than Subsidiary, and does not otherwise own any shares of
capital stock or any interest in, or control, direct or indirectly, any other
corporation, partnership, association, joint venture or other business entity.
2. The capitalization of the Company immediately prior to the
Closing of the Merger is as follows:
<PAGE>
Splash Technology Holdings, Inc.
SP Acquisition Corporation
March 20, 1997
Page 4
a. The authorized capital stock of the Company consists of
18,000,000 shares, (i) 10,000,000 shares of which are designated as Common
Stock, 1,667,593 shares of which are issued and outstanding and (ii) 8,000,000
shares of which are designated as Preferred Stock, of which (A) 4,200,000 shares
are designated as Series A Preferred Stock, of which 4,160,445 shares are issued
and outstanding, (B) 1,200,000 shares are designated as Series B Preferred
Stock, none of which are outstanding, and (C) 2,166,668 shares are designated as
Series C Preferred Stock, of which 1,500,001 shares are issued and outstanding.
Of the outstanding Common Stock, to our knowledge an aggregate of 972,541 shares
were originally issued under restricted stock purchase agreements which grant to
the Company the right to repurchase at cost any shares that are unvested as of
the date of termination of employment; of such shares, to our knowledge all are
vested as of the date hereof. Such shares of capital stock are held of record by
the persons and in the amounts set forth on the Company Disclosure Schedule. All
outstanding shares of the Company's capital stock are duly authorized, validly
issued, fully paid and non-assessable and are not subject to preemptive rights
created by statute, the Articles or Bylaws of the Company or, to our knowledge,
any agreement to which the Company is a party or by which it is bound and were
issued in compliance with the registration and qualification requirements under
all applicable securities laws.
b. The Company has reserved 1,460,500 shares of Common Stock
for issuance to employees and consultants pursuant to the Company's 1993 Stock
Option Plan of which 790,448 shares are subject to outstanding, unexercised
options ("Company Options") (of which outstanding options 84,500 shares are
vested and 705,948 unvested as of the Closing Date) and no shares remain
available for future grant. The Company Options have been duly and properly
authorized and validly issued, consistent with proper corporate action, all
applicable employee benefits plans and all applicable federal and state
securities laws. The Company has also reserved 5,660,446 shares of Common Stock
for issuance upon conversion of outstanding shares of the Company's Preferred
Stock. Except for the Company Options, there are, under the Company's Articles
and Bylaws, or to our knowledge otherwise, no options, warrants, calls, rights,
commitments or agreements of any character, written or oral, to which the
Company is a party or by which it is bound obligating the Company to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of the capital stock of the Company and,
except as expressly contemplated by the Reorganization Agreement, there are to
our knowledge no rights, commitments or agreements of any character, written or
oral, to which the Company is a party or by which it is bound obligating the
Company to grant, extend, accelerate the vesting of, change the price of,
otherwise amend or enter into any such option, warrant, call, right, commitment
or agreement. The holders of Company Options have been given, or have properly
waived, any required notice prior to the Merger and all such rights are
terminated.
<PAGE>
Splash Technology Holdings, Inc.
SP Acquisition Corporation
March 20, 1997
Page 5
c. The authorized capital stock of Subsidiary consists of
2,000 shares, 1,000 shares of which are designated as Common Stock, all of which
are issued and outstanding, and 1,000 shares of which are designated as
Preferred Stock, none of which are issued and outstanding. All such shares of
capital stock are held by the Company. All outstanding shares of Subsidiary's
capital stock are duly authorized, validly issued, fully paid and non-assessable
and are not subject to any preemptive rights created by statute, the Certificate
of Incorporation or Bylaws of Subsidiary or to our knowledge any agreement to
which Subsidiary is a party or by which it is bound and were issued in
compliance with the registration and qualification requirements under applicable
securities laws. There are, under the Subsidiary's Articles and Bylaws, or to
our knowledge otherwise, no options, warrants, calls, rights, commitments or
agreements of any character, written or oral, to which Subsidiary is a party or
by which it is bound obligating Subsidiary to issue, deliver, sell, repurchase
or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of capital stock of Subsidiary and, except as expressly contemplated by
the Reorganization Agreement, there are to our knowledge no rights, commitments
or agreements of any character, written or oral, to which Subsidiary is a party
or by which it is bound obligating Subsidiary to grant, extend, accelerate the
vesting of, change the price of, otherwise amend or enter into any such option,
warrant, call, right, commitment or agreement.
3. The Company has taken all requisite corporate action to
approve and adopt the Reorganization Agreement and the Certificate of Merger and
to approve and to authorize the carrying out of the transactions contemplated by
the Reorganization Agreement and the Certificate of Merger. The holders of each
class and series of capital stock of the Company outstanding have duly approved
under California law and the Articles, to the extent so required, the
Reorganization Agreement and Certificate of Merger and the transactions
contemplated thereby, including in particular but without limitation the kind
and amount of Merger Consideration to be received by each class and series of
capital stock of the Company as specified in Section 1.6 of the Reorganization
Agreement. The Company has full corporate power and authority to execute,
deliver and perform its obligations under the Reorganization Agreement and the
Certificate of Merger. The Reorganization Agreement and the Certificate of
Merger have been duly executed and delivered by the Company and constitute
legal, valid and binding obligations of the Company. The Merger shall be legally
effective under California law upon the filing of the Certificate of Merger.
4. The execution, delivery and performance of the
Reorganization Agreement and the Certificate of Merger by the Company and the
carrying out of the transactions contemplated thereby will not conflict with or
constitute a breach, violation or default (or upon the failure to give notice or
the lapse of time, or both, result in any conflict with or breach, violation or
default) under the Articles and Bylaws of the Company or Subsidiary, or to our
knowledge under any
<PAGE>
Splash Technology Holdings, Inc.
SP Acquisition Corporation
March 20, 1997
Page 6
statute, rule, regulation, judgment, decree or order, or any governmental permit
or license identified to us by the Company, applicable to the Company or
Subsidiary, or under any agreement, lease, indenture or instrument listed in the
Company Disclosure Schedule and to which the Company or Subsidiary is a party or
by which the Company or Subsidiary or their respective assets or properties is
subject. The consent of the holders of the Company's Series A Preferred Stock
and Series C Preferred Stock was received pursuant to a written consent dated as
of May 6, 1997. As a result, under Section 1202(b) of the California
Corporations Code and the Company's Articles, (i) no amendment to the Company's
Articles is required to eliminate the preference provisions contained therein
and (ii) the holders of such shares of Preferred Stock are entitled to receive
only the consideration to be paid to them pursuant to the Reorganization
Agreement.
5. To our knowledge, there is no suit, action or legal,
administrative, arbitration or other proceeding or governmental investigation
pending or threatened to which the Company or Subsidiary or their respective
assets or properties is a party except as described in Section 2.14 of the
Company Disclosure Schedule.
6. There is no consent, approval, authorization, order,
registration, qualification or filing of or with any court or any regulatory
authority or other governmental body (either foreign or domestic) required for
the consummation by the Company or Subsidiary of the transactions contemplated
by the Reorganization Agreement and Certificate of Merger that has not been
obtained, except for (i) acceptance for filing, by the California Secretary of
State,. of the Certificate of Merger and (ii) such consents, approvals, orders,
authorizations, registrations or qualifications as may be required under state
securities or Blue Sky laws.
This opinion has been rendered solely for your use in connection with
the transactions contemplated by the Agreement and may not be relied upon by any
other person or entity for any reason whatsoever.
Respectfully submitted,
/s/ Riordan & McKinzie
<PAGE>
EXHIBIT 99.1
------------
FOR IMMEDIATE RELEASE Contact: Joan P. Platt
408.328.6351
SPLASH COMPLETES ACQUISITION OF QUINTAR,
MAKER OF EMBEDDED PRINTER CONTROLLERS
Sunnyvale, California -- May 28,1997 -- Splash Technology Holdings, Inc.
("Splash" NASDAQ: SPLH) announced it has completed its acquisition of
privately-held Quintar Company, a manufacturer and marketer of embedded
controllers for desktop color printers and servers for high-speed, multifunction
monochrome and color printers and copiers.
Under the terms of the agreement, Splash paid approximately $11.5 million
dollars in cash at closing to Quintar's stockholders and warrant holders. In
addition, the agreement provides for additional consideration of up to $3.2
million, contingent on Quintar's achievement of certain levels of product
revenues and operating profitability.
About Splash:
Splash Technology Holdings, Inc., headquartered in Sunnyvale, California,
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.
Splash'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.
