<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 21, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------------
RASTER GRAPHICS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
CALIFORNIA 3577 94-3046090
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification Number)
incorporation or
organization)
</TABLE>
3025 ORCHARD PARKWAY, SAN JOSE, CALIFORNIA 95134 (408) 232-4000
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
RAKESH KUMAR
PRESIDENT AND CHIEF EXECUTIVE OFFICER
RASTER GRAPHICS, INC.
3025 ORCHARD PARKWAY
SAN JOSE, CALIFORNIA 95134
(408) 232-4000
(Name and address, including zip code, and telephone number, including area
code, of agent for service)
------------------------------------
COPIES TO:
<TABLE>
<S> <C>
MICHAEL W. HALL BROOKS STOUGH
EDMUND S. RUFFIN, JR. ROBERT G. SPECKER
KEITH A. MILLER Gunderson Dettmer Stough
Venture Law Group, A Professional Corporation Villeneuve Franklin & Hachigian, LLP
2800 Sand Hill Road 600 Hansen Way
Menlo Park, California 94025 Palo Alto, California 94303
(415) 854-4488 (415) 843-0500
</TABLE>
------------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
------------------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE (1) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------
Common Stock.............................. 41,400,000 14,276
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(a).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
RASTER GRAPHICS, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS IN PART I OF FORM S-1
<TABLE>
<CAPTION>
FORM S-1 ITEM NUMBER AND HEADING LOCATION IN PROSPECTUS
- ------------------------------------------------- --------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page.................. Facing Page; Cross Reference Sheet; Outside
Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus................................ Inside Front and Outside Back Cover Pages
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges.............. Prospectus Summary; Risk Factors
4. Use of Proceeds............................. Prospectus Summary; Use of Proceeds;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations
5. Determination of Offering Price............. Outside Front Cover Page; Underwriting
6. Dilution.................................... Dilution
7. Selling Security Holders.................... Principal and Selling Stockholders
8. Plan of Distribution........................ Outside Front Cover Page; Underwriting
9. Description of Securities to be
Registered................................ Prospectus Summary; Capitalization;
Description of Capital Stock
10. Interests of Named Experts and Counsel...... Not Applicable
11. Information with Respect to the
Registrant................................ Outside and Inside Front Cover Pages;
Prospectus Summary; Risk Factors; The
Company; Use of Proceeds; Dividend Policy;
Capitalization; Dilution; Selected
Consolidated Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Management; Certain
Transactions; Principal and Selling
Stockholders; Description of Capital
Stock; Shares Eligible for Future Sale;
Legal Matters; Experts; Additional
Information; Consolidated Financial
Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................... Not Applicable
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 21, 1996
PROSPECTUS
SHARES
LOGO
COMMON STOCK
Of the shares of Common Stock offered hereby, are being sold by
the Company and shares are being sold by Selling Stockholders. The
Company will not receive any proceeds from the sale of shares by Selling
Stockholders. See "Principal and Selling Stockholders."
Prior to this offering, there has been no public market for the Common
Stock of the Company. It is currently estimated that the initial public offering
price will be between $ and $ per share. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price. The Common Stock has been approved for quotation on the Nasdaq
National Market under the symbol RGFX.
------------------------
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 5.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
- -------------------------------------------------------------------------------------------------
Per Share........................ $ $ $
- -------------------------------------------------------------------------------------------------
Total (3)........................ $ $ $
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) See "Underwriting" for indemnification arrangements with the several
Underwriters.
(2) Before deducting expenses payable by the Company estimated at $850,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to additional shares of Common Stock solely to cover over-allotments,
if any. If all such shares are purchased, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."
------------------------
The shares of Common Stock are offered by the Underwriters subject to prior
sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that certificates for such shares will be available
for delivery on or about , 1996 at the office of the agent of
Hambrecht & Quist LLC in New York, New York.
HAMBRECHT & QUIST PRUDENTIAL SECURITIES INCORPORATED
, 1996
<PAGE> 4
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
The Raster Graphics logo, ColorStation(R) and PrimaScript(R) are registered
trademarks of the Company. PosterShop(TM) and DuraPrint(TM) are trademarks of
the Company. This Prospectus also contains the trademarks of other companies.
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus.
THE COMPANY
Raster Graphics, Inc. ("Raster Graphics" or the "Company") develops,
manufactures and markets high-performance, large format color printing systems
and sells related consumables for the on-demand, large format digital printing
("LFDP") market. The LFDP market consists of color print jobs with run lengths
ranging from one to 200 copies and output sizes of 20-inches by 30-inches or
larger. Applications include point of purchase ("POP") signs, trade show exhibit
graphics, banners, billboards, courtroom graphics and backlit signage. The
primary users of the Company's products are color photo labs, reprographic
houses, graphic arts service bureaus, exhibit builders, digital color printers,
screen printers and in-house print shops. The Company's Digital Color Station
("DCS") printing system, consisting of the DCS Printer and PosterShop system
software, allows users to print short runs of high quality color graphics
on-demand at substantial time and cost savings relative to traditional printing
methods.
According to IT Strategies, the LFDP printers and consumables market is
projected to grow from annual sales of approximately $319 million in 1995 to
approximately $1.9 billion in 1998. The rapid growth in this market is being
driven primarily by the increasing desire and need for customized, large format
color graphics, as well as significant advances in short-run printing and
desktop publishing technologies. Traditional graphics printing methods,
consisting of photographic, screen and offset printing, do not meet the
requirements for production short-run print jobs due to the time consuming,
multi-step processes and set up costs involved. As a result, digital printing
was developed to fulfill the unmet demand of short-run users by allowing
graphics to be printed directly from desktop publishing systems to paper.
Raster Graphics offers a complete printing solution, consisting of its DCS
printers, integrated image processing software and related consumables, to meet
the performance, cost, versatility and quality demands of the production LFDP
market. With a production printing speed of 600 to 1,000 square feet per hour,
the DCS printing system can produce 50 to 60, full-color, 36- by 48-inch posters
in one hour, which the Company believes is significantly faster than comparable
digital printers. DCS printing systems are more cost-effective for short-run
print jobs in comparison to traditional methods which have high set-up and labor
costs. Using digital printing technology, DCS systems allow content to be
customized on a print-by-print basis. DCS printing systems also offer two
printing resolution modes, which allow the user to adjust the quality level
depending on the application. The Company also markets a line of consumables,
including specialized inks and print media, from which the Company expects to
derive increasing recurring revenues as its installed base increases.
Raster Graphics' objective is to build on its position as a market leader
in providing digital printing systems and related consumables and services, for
the rapidly growing, on-demand production LFDP printing market. In August 1995,
as part of the Company's strategy to provide a complete system solution, the
Company acquired Onyx Graphics Corporation ("Onyx"), a leading developer of
image processing software.
The Company was established in 1987 initially to develop low-cost
electrostatic printers for computer aided design ("CAD") applications. In 1993,
the Company shifted its product focus to leverage its proprietary print head
technology to address the new opportunities in the high performance production
LFDP market. The Company currently sells DCS products to a wide range of
customers both domestically through direct and independent sales forces,
original equipment manufacturers ("OEMs") and value-added resellers ("VARs") and
internationally through distributors, OEMs and VARs.
Raster Graphics' products have received five highly acclaimed industry
awards for their contribution to digital printing technology, including Digital
Printing and Imaging Association's Product of the Year; Top 10 New Repro
Products for 1994 by Modern Reprographics; Hot Product for 1994 by Electronic
Publishing; 1994 Editor's Choice from Computer Graphics World; and 1994 Industry
Excellence Award by IEEE Computer Graphics and Applications.
3
<PAGE> 6
THE OFFERING
<TABLE>
<S> <C>
COMMON STOCK OFFERED BY THE COMPANY.............. shares(1)
COMMON STOCK OFFERED BY THE SELLING
STOCKHOLDERS................................... shares
COMMON STOCK TO BE OUTSTANDING AFTER THE
OFFERING....................................... shares(2)
USE OF PROCEEDS.................................. General corporate purposes including
working capital, capital expenditures,
research and development and potential
acquisitions of businesses and
technologies. See "Use of Proceeds."
NASDAQ NATIONAL MARKET SYMBOL.................... RGFX
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED QUARTERS ENDED
---------------------------------------------------- ---------------------
DEC. 27, DEC. 25, DEC. 31, DEC. 30, DEC. 31, MAR. 31, MAR. 31,
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net revenues................. $ 7,770 $ 8,525 $ 14,719 $ 13,235 $ 26,045 $ 5,720 $ 8,591
Gross profit................. 1,659 2,410 4,777 3,531 9,447 1,928 3,286
Operating income (loss)...... (1,919) (1,725) 106 (2,229) 111 370 567
Net income (loss)............ $ (1,963) $ (2,061) $ 41 $ (2,128) $ 77 $ 179 $ 489
Net income (loss) per
share(3).................. $ 0.01 $ 0.03 $ 0.07
Shares used in per share
calculation............... 7,172 6,892 7,304
</TABLE>
<TABLE>
<CAPTION>
MAR. 31, 1996
------------------------
ACTUAL AS ADJUSTED(4)
------- --------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents........................................... $ 1,506 $ --
Total assets........................................................ 13,050 --
Long-term debt...................................................... 402 --
Total stockholders' equity.......................................... 7,215 --
</TABLE>
- ---------------
(1) Excludes up to shares of Common Stock that may be sold by the
Company pursuant to the Underwriters' over-allotment option. See
"Underwriting."
(2) Excludes 170,155 shares of Common Stock issuable upon exercise of
outstanding warrants at a weighted average exercise price of $2.17 per
share and 1,027,100 shares of Common Stock issuable upon exercise of
outstanding options at a weighted average exercise price of $0.69 per share
at March 31, 1996. See "Management--Stock Options and Incentive Plans and
note 7 of Notes to Consolidated Financial Statements."
(3) See note 1 of Notes to Consolidated Financial Statements for an explanation
of the determination of shares used in computing net income (loss) per
share.
(4) Adjusted to reflect the sale of shares of Common Stock offered hereby at an
assumed initial public offering price of $ per share and the receipt of
the estimated proceeds therefrom. See "Use of Proceeds" and
"Capitalization."
------------------------------------
Except as otherwise noted, all information in this Prospectus (i) assumes a
1-for-5 reverse stock split of the Common Stock and Preferred Stock to be
effective prior to this offering, (ii) assumes the conversion of all outstanding
shares of Preferred Stock into Common Stock upon the closing of this offering,
(iii) reflects the anticipated reincorporation of the Company from California to
Delaware prior to the closing of the offering and (iv) assumes no exercise of
the Underwriters' over-allotment option. See "Description of Capital Stock" and
"Underwriting."
4
<PAGE> 7
RISK FACTORS
The Common Stock offered hereby involves a high degree of risk. In addition
to the other information in this Prospectus, the following factors should be
considered carefully in evaluating an investment in the shares of Common Stock
offered by this Prospectus. The Prospectus contains forward-looking statements
that involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth below and elsewhere in this
Prospectus.
Limited History of Profitability and Uncertainty of Future Financial
Results. The Company has incurred a net operating loss in each year subsequent
to its inception in 1987, except for the years ended December 31, 1993 and
December 31, 1995. As a result, the Company had an accumulated deficit as of
March 31, 1996 of approximately $17.9 million. The Company has a limited history
of profitability. There can be no assurance that sales of the Company's products
will generate significant revenues or that the Company can sustain profitability
on a quarterly or annual basis in the future.
The Company expects to expand its manufacturing and administrative
capabilities, technical and other customer support, research and product
development activities. The anticipated increase in the Company's operating
expenses caused by this expansion could have a material adverse effect on the
Company's operating results if revenues do not increase at an equal or greater
rate. Also, the Company's expenses for these and other activities are based in
significant part on its expectations regarding future revenues and are fixed to
a large extent in the short term. The Company may be unable to adjust spending
in a timely manner to compensate for any unexpected revenue shortfall, which
would have a material adverse effect on the Company's business, financial
condition and results of operations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Overview" and the Consolidated
Financial Statements.
Significant Fluctuations in Quarterly Results. The Company's quarterly
operating results have varied significantly in the past and are likely to vary
significantly in the future based upon a number of factors including general
economic conditions, the introduction or market acceptance of new products
offered by the Company and its competitors, changes in the pricing polices of
the Company or its competitors, the volume and timing of customer orders, the
level of product and price competition, the relative proportion of printer and
consumables sales, the continued availability of sole source components, the
continued availability of consumables from independent vendors, fluctuations in
research and development expenditures, the impact of future Company
acquisitions, the continued availability of financing arrangements for certain
of the Company's customers, the Company's success in expanding its direct sales
force and indirect distribution channels and the risks related to international
operations, as well as other factors. Additionally, because the purchase of a
DCS printer or printing system involves a significant capital commitment, the
Company's DCS printer and printing system sales cycle is susceptible to delays
and lengthy acceptance procedures associated with large capital expenditures.
Moreover, due to the Company's high average sales price and low unit volume per
month, a delay in the sale of a few units could have a material adverse effect
on the results of operations for a financial quarter.
Quarterly revenues and operating results depend primarily on the volume,
timing, shipping and acceptance of orders during the quarter, which are
difficult to forecast due to the length of the sales cycle. A significant
portion of the Company's operating expenses are relatively fixed in the short
term, and planned expenditures are based on sales forecasts. If revenue levels
are below expectations, net income, if any, may be disproportionately affected
because only a small portion of the Company's expenses vary with revenue in the
short term, which could have a material adverse effect on the Company's
business, financial condition and results of operations. Although the Company
has experienced growth in revenue in recent years, there can be no assurance
that the Company will sustain such revenue growth or be profitable on an
operating basis in any future period. For the foregoing reasons, the Company
believes that period-to-period comparisons of its results are not necessarily
meaningful and should not be relied upon as indications of future performance.
Further, it
5
<PAGE> 8
is likely that in some future quarter the Company's revenues or operating
results will be below the expectations of public market analysts and investors.
In such event, the price of the Common Stock could be materially adversely
affected.
Dependence on a Single Product Line. Substantially all of the Company's
sales are derived from one principal product line, the DCS printing systems,
printers and related software and consumables, such as specialized inks,
varnish, vinyls and papers. The Company anticipates that it will continue to
derive substantially all of its revenues in the next several years from sales of
this product line. Dependence on a single product line makes the Company
particularly vulnerable to the successful introduction of competing products.
The Company's inability to generate sufficient sales of the DCS product line and
to achieve profitability due to competitive factors, manufacturing difficulties,
or other reasons, would have a material adverse effect on its business,
financial condition and results of operations. Moreover, some of the Company's
DCS printing system and printer customers have purchased and will continue to
purchase consumables such as ink and paper from suppliers other than the
Company. If a significant number of current or future purchasers of the DCS
printing systems and printers were to purchase consumables from suppliers other
than the Company, the Company's business would be materially adversely affected.
See "Business--Products" and "--Competition."
Competition. The market for printing equipment and related software and
consumables is extremely competitive. Suppliers of equipment for the LFDP market
compete on the basis of speed, print quality, price and the ability to provide
complete solutions, including service. Certain of the Company's competitors are
developing or have introduced products to address the LFDP market. Among these
companies are Xerox ColorgrafX Systems, a subsidiary of Xerox Corporation,
("ColorgrafX"), Encad, Inc. ("Encad"), Hewlett-Packard Corporation
("Hewlett-Packard") and Lasermaster Corporation ("Lasermaster"), which
manufacture LFDP printers, and Cactus, Infographix Technologies, Inc.
("Infographix") and Visual Edge Technology Digital Printing Systems ("Visual
Edge"), which develop LFDP image processing software. A variety of potential
actions by any of the Company's competitors, especially those with substantial
market presence such as ColorgrafX, could have a material adverse effect on the
Company's business, financial condition and results of operations. Such actions
may include reduction of product prices, increased promotion, announcement or
accelerated introduction of new or enhanced products, product giveaways, product
bundling or other competitive actions. In addition, companies that are currently
targeting the photographic enlargement, screen and offset printing markets may
enter the LFDP market in the future or may increase the performance or lower the
costs of such alternate printing processes in a manner that would allow them to
compete more directly with the Company for LFDP customers. Furthermore,
companies that supply consumables, such as ink and paper, to the Company could
compete with the Company by not selling such consumables to the Company or by
widely selling such consumables directly or through other channels to the
Company's customers. Such competition would have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Business -- Competition" and "-- Suppliers."
Many of the companies that currently compete with the Company or that may
compete with the Company in the future have longer operating histories and
significantly greater financial, technical, sales, marketing and other
resources, as well as greater name recognition and a larger customer base, than
the Company. As a result, these competitors may be able to respond more quickly
and/or effectively to new or emerging technologies and changes in customer
requirements or to devote greater resources to the development, promotion, sale
and support of their products than the Company. Consequently, the Company
expects to continue to experience increased competition, which could result in
significant price reductions, loss of market share and lack of acceptance of new
products, any of which could have a material adverse effect on the Company's
business, financial condition and results of operations. There can be no
assurance that the Company will be able to compete against current or future
competitors successfully or that competitive pressures faced by the Company will
not have a material adverse effect upon its business, financial condition and
results of operations. See "Business--Competition" and "--Intellectual
Property."
6
<PAGE> 9
Reliance on Third-Party Distribution. The Company relies heavily on
original equipment manufacturing ("OEMs"), value added resellers ("VARs") and a
network of distributors for both domestic and international sales. In
particular, OEM sales to Oce Graphics France S.A. ("Oce") accounted for 10.9% of
the Company's revenue in 1995. While the total percentage of Company revenue
represented by sales to Oce has been reduced significantly in recent years as
the Company has expanded its distribution channels, Oce remains one of the
Company's largest single customers. The Company's agreement with Oce expires in
October 1997. There can be no assurance that the Company will continue to sell
substantial quantities of its products to Oce or that, upon any termination of
the Company's relationship with Oce, the Company will be able to obtain suitable
distribution of its products in Europe through alternate distributions channels.
Such failure would have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company also currently maintains OEM, VAR and distribution agreements
for its printing systems and printers with 3M Commercial Graphics, a division of
Minnesota Mining and Manufacturing Company ("3M"), Cactus, C-4 Network, Inc.,
Management Graphics Inc. and Ahearn & Soper Inc. for distribution of its
products in North America; Sumisho Electronics Ltd. ("Sumisho"), Sumitomo-
3M Ltd. ("Sumitomo-3M"), Marubeni Electronics Co Ltd ("Marubeni") and Kimoto
Co., Ltd ("Kimoto") for distribution of its products in Japan; and Oce and
Sign-Tronic ("Sign-Tronic") for distribution of its products in Europe. In
addition, the Company distributes its image processing software products through
a number of domestic and international OEMs, VARs and distributors such as CIS
Graphik and Bildverarbeitung GmbH, The David Group, Access Graphics and Encad.
There can be no assurance that the Company's independent OEMs, VARs and
distributors will maintain their relationships with the Company or that the
Company will be able to recruit additional or, if necessary, replacement OEMs,
VARs or distributors. The loss of one or more of the Company's OEMs, VARs or
distributors could have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company's agreements with its OEMs, VARs and distributors are not
exclusive, and each of the Company's OEMs, VARs and distributors can cease
marketing the Company's products with limited notice and with little or no
penalty. Some of the Company's OEMs, VARs and distributors offer competitive
products manufactured by third parties. In addition, some of these customers may
consider Onyx's products to be competitive offerings and, as a result, there can
be no assurance that such customers will continue marketing the Company's
products. Further, there can be no assurance that the Company's OEMs, VARs and
distributors will give a high priority to the marketing of the Company's
products as compared to competitors' products or alternative solutions or that
such OEMs, VARs and distributors will continue to offer the Company's products.
Any reduction or delay in sales of the Company's products by its OEMs, VARs or
distributors could have a material adverse effect on the Company's business,
financial condition and results of operations. For further description of the
Company's OEM, VAR and distribution agreements, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Overview" and
"Business--Customers, Sales and Marketing."
Although the Company seeks information from foreign customers that purchase
products from the Company's OEMs, VARs and distributors, it generally does not
deal directly with them and cannot directly observe their experience with the
Company's products. The Company also does not have direct control over the
marketing and support efforts of its OEMs, VARs and distributors in foreign
countries. This may result in the inability of the Company to identify potential
opportunities with these customers and a potential delay by the Company in the
recognition and correction of any problems with such OEM, VAR or distributor
sales or support organizations. Failure of the Company to respond to customer
preferences or experience with its products or the failure of OEM, VAR or
distributor supported customers to market and support the Company's products
successfully, could have a material adverse effect on the Company's business,
financial condition and results of operations. Further, third-party distribution
provides the Company with less information regarding the amount of inventory
that is in the process of distribution. This lack of information can reduce the
Company's ability to predict fluctuations in revenues resulting from a surplus
or a shortage in its distribution
7
<PAGE> 10
channels and contribute to volatility in the Company's financial results, cash
flow, and inventory balances. See "Business--Customers, Sales and Marketing."
Limited History of Product Manufacturing and Use; Product Defects. The
Company's DCS printers are based on relatively new technology, are complex and
must be reliable and durable. Companies engaged in the development and
production of new, complex technologies and products often encounter
difficulties and delays. The Company began commercial production of the DCS 5400
in June 1994 and the DCS 5442 in January 1996. The DCS 5442 was developed as a
second generation to the DCS 5400 and, consequently, the Company has been slowly
phasing out production of the DCS 5400. The Company is continuing to make
upgrades and improvements in the features of the DCS 5442. Despite extensive
research and testing, the Company's experience with volume production of the DCS
5442 and with the reliability and durability of the DCS 5442 during customer use
is limited. Consequently, customers may experience reliability and durability
problems that arise only as the product is subjected to extended use over a
prolonged period of time. The Company and certain DCS 5442 users have
encountered some operational problems which the Company believes it has
successfully addressed. However, given the recent introduction of the DCS 5442,
there can be no assurance that the Company has successfully resolved these
operational issues or that the Company will successfully resolve any future
problem in the manufacture or operation of the DCS printers or any new product.
Failure by the Company to resolve manufacturing or operational problems with the
DCS printers or any new product in a timely manner would have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Business--Manufacturing" and "-- Competition."
The Company's image processing software products are extremely complex as a
result of such factors as advanced functionality, the diverse operating
environments in which they may be deployed, the need for interoperability, the
multiple versions of such products that must be supported for diverse operating
platforms and languages and the underlying technological standards. These
products may contain undetected errors or failures when first introduced or as
new versions are released. There can be no assurance that, despite testing by
the Company and by current and potential customers, errors will not be found in
new software products after commencement of commercial shipments, resulting in
loss of or delay in market acceptance. Such loss or delay would likely have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Products."
Susceptibility of Certain Customers to Economic and Financing
Conditions. Many of the Company's end user customers are small businesses that
are more susceptible than large businesses to general downturns in the economy.
In some cases, these customers finance the purchase of the Company's products
through third-party financing arrangements. To the extent that such customers
are unable to obtain acceptable financing terms or to the extent that a rise in
interest rates makes financing arrangements generally unattractive, such
customers could forgo the purchase of a LFDP product. Consequently, the
Company's access to a significant portion of its present customer base would be
limited. Moreover, competitors, such as ColorgrafX, that have significantly
greater financial resources than the Company may be able to provide more
attractive financing terms to potential customers than those available through
the Company or through third parties. There can be no assurance that the
Company's small business customers will, if necessary, be able to obtain
acceptable financing terms or that the Company will be able to offer financing
terms that are competitive with those offered by the Company's competitors. The
Company's inability to continue to generate sufficient levels of product revenue
from sales to such customers due to the unavailability of financing arrangements
or due to a general economic downturn would have a material adverse effect on
the Company's business, financial condition and results of operations.
Uncertainty Regarding Development of LFDP Market; Uncertainty Regarding
Market Acceptance of New Products. The LFDP market is relatively new and
evolving. The Company's future financial performance will depend in large part
on the continued growth of this market and the continuation of present large
format printing trends such as use and customization of large format
advertisements, use
8
<PAGE> 11
of color, transferring of color images onto a variety of substrates,
point-of-purchase printing, in-house graphics design and production and the
demand for limited printing runs of less than 200 copies. The failure of the
LFDP market to achieve anticipated growth levels or a substantial change in
large format printing customer preferences would have a material adverse effect
on the Company's business, financial condition and results of operations.
Additionally, in a new market, customer preferences can change rapidly and new
technology can quickly render existing technology obsolete. Failure by the
Company to respond effectively to changes in the LFDP market, to develop or
acquire new technology or to successfully conform to industry standards would
have a material adverse effect on the business, financial condition and results
of operations of the Company. See "Business--Industry Background."
The Company's products currently target the high-performance production
segment of the LFDP market. The future success of the Company will likely depend
on its ability to develop and market new products that provide superior
performance at acceptable prices within this segment. In addition, the Company's
future success may depend on the Company's ability to successfully introduce
lower-cost products aimed at a broader segment of the LFDP market. Any quality,
durability or reliability problems with such new products, regardless of
materiality, or any other actual or perceived problems with new Company
products, could have a material adverse effect on market acceptance of such
products. There can be no assurance that such problems or perceived problems
will not arise or that, even in the absence of such problems, new Company
products will receive market acceptance. A failure of future Company products to
receive market acceptance for any reason would have a material adverse effect on
the Company's business, financial condition and results of operations. In
addition, the announcement by the Company of new products and technologies could
cause customers to defer purchases of the Company's existing products, which
would have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business--Products," "--Product
Technology, Research and Development."
International Revenues. The Company's international revenues accounted for
approximately 48.1%, 55.9%, 49.3% and 51.1% of the Company's revenues in 1993,
1994, 1995, and the first quarter of 1996, respectively. The Company expects
that international sales will continue to account for a significant portion of
its total revenues in future periods. International sales are subject to certain
inherent risks, including unexpected changes in regulatory requirements and
tariffs, government controls, political instability, longer payment cycles,
increased difficulties in collecting accounts receivable and potentially adverse
tax consequences. The Company's inability to obtain foreign regulatory approvals
on a timely basis could have a material adverse effect on the Company's
business, financial condition and results of operations. Fluctuations in
currency exchange rates could cause the Company's products to become relatively
more expensive to end users in a particular country, leading to a reduction in
sales in that country. The impact of future exchange rate fluctuations cannot be
predicted adequately. To date, the Company has not found it appropriate to hedge
the risks associated with fluctuations in exchange rates, as substantially all
of the Company's foreign sales have been transacted in U.S. dollars. However, it
is possible that the Company may undertake such transactions in the future.
There can be no assurance that any hedging techniques implemented by the Company
would be successful or that the Company's results of operations will not be
materially adversely affected by exchange rate fluctuations. In general, certain
seasonal factors and patterns impact the level of business activities at
different times in different regions of the world. For example, sales in Europe
are adversely affected in the third quarter of each year as many customers and
end users reduce their business activities during the summer months. These
seasonal factors and currency fluctuation risks could have a material adverse
effect on the Company's quarterly results of operations. Further, because the
Company has operations in different countries, the Company's management must
address differences in regulatory environments and cultures. Failure to address
these differences successfully could be disruptive to the Company's operations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Results of Operations" and "Business--Customers, Sales and
Marketing."
9
<PAGE> 12
Dependence on Sole Source Subcontractors and Suppliers. The Company relies
on subcontractors and suppliers to manufacture, subassemble, and perform
first-stage testing of DCS printer components and may, in the future, rely on
third parties to develop or provide printer components, some of which are, or
may be, critical to the operation of the Company's products. The Company relies
on single suppliers for certain critical components, such as rubber drive
rollers, electrostatic writing head circuit boards, and application-specific
integrated circuits. In addition, the Company relies on limited source suppliers
for consumables, such as specialized inks, varnish, vinyls and papers, that the
Company sells under the Raster Graphics brand name. The Company's agreements
with its subcontractors and suppliers are not exclusive, and each of the
Company's subcontractors and suppliers can cease supplying DCS printing system
components or consumables with limited notice and with little or no penalty. In
the event it becomes necessary for the Company to replace a key subcontractor or
supplier, the Company could incur significant manufacturing set-up costs and
delays while new sources are located and alternate components and consumables
are integrated into the Company's manufacturing process. There can be no
assurance that the Company will be able to maintain its present subcontractor
and supplier relationships or that the Company will be able to find suitable
replacement subcontractors and suppliers, if necessary. Further, there can be no
assurance that the Company's present subcontractors and suppliers will continue
to provide sufficient quantities of suitable quality DCS product components and
consumables at acceptable prices. The loss of subcontractors or suppliers or the
failure of subcontractors or suppliers to meet the Company's price, quality,
quantity and delivery requirements would have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Products," "--Suppliers" and "--Manufacturing."
Risks Associated with Intellectual Property. The Company relies primarily
on a combination of patent, copyright, trademark and trade secret laws,
confidentiality procedures and contractual provisions to protect its proprietary
technology. The Company has been issued nine United States patents related to
its printer technology and one United States patent related to its image
processing software. Despite the Company's precautions, it may be possible for a
third party to copy or otherwise obtain and use the Company's technologies
without authorization or to develop competing technologies independently.
Furthermore, the laws of certain countries in which the Company does business
may not protect the Company's software and intellectual property rights to the
same extent as do the laws of the United States. There can be no assurance that
the Company's means of protecting its proprietary rights will be adequate or
that the Company's competitors will not independently develop similar
technology. If unauthorized copying or misuse of the Company's products were to
occur to any substantial degree, or if a competitor of the Company were to
effectively duplicate the Company's proprietary technology, the Company's
business, financial condition and results of operations would be materially
adversely affected. See "Business -- Intellectual Property."
Although the Company has not received notices from third parties alleging
infringement claims that the Company believes would have a material adverse
effect on the Company's business, there can be no assurance that third parties
will not claim that the Company's current or future products or manufacturing
processes infringe the proprietary rights of others. Any such claim, with or
without merit, could result in costly litigation or might require the Company to
enter into royalty or licensing agreements. Such royalty or licensing
agreements, if required, may not be available on terms acceptable to the
Company, or at all, which could have a material adverse effect upon the
Company's business, financial condition and results of operations. See
"Business--Intellectual Property."
Recent Acquisition of Onyx. In August 1995, the Company acquired Onyx,
which, like Raster Graphics, is at an early stage of development. There can be
no assurance that Onyx will be able to successfully develop, manufacture and
commercialize its products in the future. In addition, there can be no assurance
that the managements and operations of the two companies can be successfully
combined. Furthermore, some of Onyx's current customers may perceive the Company
as a potential competitor. As a result, there can be no assurance that such
customers would continue to purchase Onyx's products which would cause a
material adverse effect on the Company's business, financial
10
<PAGE> 13
condition and results of operations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Certain Transactions."
Difficulties in Managing Growth. The Company has experienced significant
growth in its business over the past two years, which has placed demands on the
Company's administrative, operational and financial personnel and systems,
manufacturing operations, research and development, technical support and
financial and other resources. Certain of the Company's officers have recently
joined the Company, including the Company's Chief Financial Officer, and the
Company anticipates further increases in the number of its senior managers.
Failure to manage these changes and to expand effectively any of these areas
would have a material adverse effect on the Company's business, financial
condition and results of operations. See "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
"Business--Manufacturing."
Key Personnel. The success of the Company depends to a large extent upon
its ability to retain and continue to attract highly skilled personnel.
Competition for employees in the high technology sector in general, and in the
LFDP industry in particular, is intense, and there can be no assurance that the
Company will be able to attract and retain enough qualified employees. If the
business of the Company increases, it may become increasingly difficult to hire,
train and assimilate the new employees needed. The Company's inability to retain
and attract key employees would have a material adverse effect on the Company's
business, financial condition and results of operations. See
"Business--Employees."
Environmental. The Company is subject to local laws and regulations
governing the use, storage, handling and disposal of the inks sold for use with
the Company's printers. Although the Company believes that its safety procedures
for handling and disposing of such materials comply with the standards
prescribed by such laws and regulations, and while the Company is not aware of
any notice or complaint alleging any violation of such laws or regulations, risk
of accidental contamination, improper disposal or injury from these materials
cannot be completely eliminated. In the event of such an accident, the Company
could be held liable for any damages that result and any such liability could
have a material adverse effect on the Company's business, financial condition
and results of operations. In addition, there can be no assurance that the
Company will not be required to incur significant costs to comply with
environmental laws and regulations in the future.
Concentration of Stock Ownership. Upon completion of this offering, the
present directors and officers and their affiliates will beneficially own
approximately % of the outstanding Common Stock. As a result, these
stockholders will be able to exercise significant influence over all matters
requiring stockholder approval, including the election of directors and approval
of significant corporate transactions. Such concentration of ownership may have
the effect of delaying or preventing a change in control of the Company. See
"Principal and Selling Stockholders."
No Prior Public Market; Possible Volatility of Stock Price. There has been
no public market for the Common Stock prior to this offering, and there can be
no assurance that an active trading market will develop or be sustained after
this offering. The initial public offering price will be determined through
negotiations among the Company, the representatives of the Underwriters and the
selling stockholders. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price. The negotiated
public offering price may not be indicative of the market price for the Common
Stock following this offering. In recent years, the stock market in general, and
the stock prices of technology companies in particular, have experienced extreme
price fluctuations, sometimes without regard to the operating performance of
particular companies. Factors such as quarterly variation in actual or
anticipated operating results, changes in earnings estimates by analysts, market
conditions in the industry, announcements by competitors, regulatory actions and
general economic conditions may have a significant effect on the market price of
the Common Stock. Following fluctuations in the market price of a corporation's
securities, securities class action litigation has often resulted. There can be
no assurance that such litigation will not occur in the future with respect to
the Company. Such litigation could result in substantial costs and a diversion
of management's attention
11
<PAGE> 14
and resources, which could have a material adverse effect on the Company's
business, financial condition and results of operations.
Dilution. The initial public offering price is substantially higher than
the book value per share of Common Stock. Investors purchasing shares of Common
Stock in this offering will therefore incur immediate, substantial dilution. See
"Dilution."
Shares Eligible for Future Sale. Upon completion of this offering at an
assumed offering price of $ per share, the Company will have outstanding
shares of Common Stock, assuming no exercise of any outstanding stock
options or warrants after March 31, 1996. On the date of this Prospectus,
shares of Common Stock (including the shares offered hereby)
will be immediately eligible for sale in the public market. Subject to volume
limitations on sales pursuant to Rule 144 under the Securities Act of 1933, as
amended (the "Securities Act"), and taking into account the effect of lock-up
agreements binding the Company's stockholders, 120,000 and 4,999,877 additional
shares of Common Stock, assuming no exercise of outstanding stock options or
warrants after March 31, 1996, will be eligible for sale beginning 91 days after
the effective date of the Registration Statement and 181 days after the date of
this Prospectus, unless earlier released by Hambrecht & Quist LLC. In addition,
at various times after expiration of the 180-day lock-up period, an additional
1,189,362 shares will become eligible for sale in the public market upon
expiration of their respective two-year holding periods, subject to certain
volume and resale restrictions as set forth in Rule 144. Certain stockholders
holding 5,444,872 shares of Common Stock (assuming exercise of outstanding
warrants for 170,155 shares of Common Stock) are entitled to registration rights
with respect to their shares of Common Stock. The Securities and Exchange
Commission has recently proposed to reduce the Rule 144 holding periods. If
enacted, such modification will have a material effect on the timing of when
shares of Common Stock become eligible for resale. Sales of substantial amounts
of such shares in the public market or the prospect of such sales could
adversely affect the market price of the Common Stock. See "Description of
Capital Stock," "Shares Eligible for Future Sale" and "Underwriting."
Blank Check Preferred Stock; Anti-Takeover Provisions. The Company's Board
of Directors has the authority to issue up to 2,000,000 shares of Preferred
Stock and to determine the price, rights, preferences and privileges of those
shares without any further vote or action by the stockholders. The rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of the holders of any Preferred Stock that may be issued in the
future. The issuance of Preferred Stock may have the effect of delaying,
deterring or preventing a change of control of the Company without further
action by the stockholders and may adversely affect the voting and other rights
of the holders of Common Stock. The Company has no present plans to issue shares
of Preferred Stock. The Company's Certificate of Incorporation and Bylaws
provide for, among other things, the prospective elimination of cumulative
voting with respect to the election of directors, the elimination of actions to
be taken by written consent of the Company's stockholders and certain procedures
such as advance notice procedures with regard to the nomination, other than by
or at the direction of the Board of Directors, of candidates for election as
directors. In addition, the Company's charter documents provide that the
Company's Board of Directors be divided into three classes, each of which serves
for a staggered three-year term. The foregoing provisions could have the effect
of making it more difficult for a third party to effect a change in the control
of the Board of Directors. In addition, these provisions could have the effect
of making it more difficult for a third party to acquire, or of discouraging a
third party from attempting to acquire, a majority of the outstanding voting
stock of the Company, and may complicate or discourage a takeover of the
Company. See "Description of Capital Stock."
12
<PAGE> 15
THE COMPANY
The Company was incorporated in July 1987 in the State of California and
was reincorporated in Delaware in July 1996. The Company's principal executive
offices are located at 3025 Orchard Parkway, San Jose, California 95134. Its
telephone number at that location is (408) 232-4000.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of
Common Stock offered hereby are estimated to be $ ($ if the
Underwriters' over-allotment option is exercised in full) after deducting
underwriting discounts and commissions and estimated offering expenses and
assuming an initial public offering price of $ per share. The Company intends
to use the net proceeds from this offering for general corporate purposes,
including working capital, capital expenditures and research and development. A
portion of the proceeds may also be used to acquire or invest in complementary
businesses or products, to obtain the right to use complementary technologies
and to acquire or expand distribution channels. From time to time, the Company
evaluates potential acquisitions of such businesses, products or technologies.
However, the Company has no present understandings, commitments or agreements
with respect to any material acquisition of other businesses, products or
technologies. Pending use of the net proceeds for the above purposes, the
Company intends to invest such funds in short-term, interest-bearing,
investment-grade obligations.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital
stock and does not anticipate paying cash dividends in the foreseeable future.
13
<PAGE> 16
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1996 (i) on an actual basis and as adjusted to give effect to the
conversion of all outstanding Preferred Stock of the Company into Common Stock
upon the closing of this offering and the changes in the number of authorized
shares of Common and Preferred Stock (all of which will occur in connection with
the sale of Common Stock offered hereby) and (ii) as adjusted to give effect to
the sale by the Company of the shares of Common Stock offered hereby at an
assumed initial public offering price offered hereby of $ per share and the
application of the estimated proceeds therefrom. This table should be read in
conjunction with the Consolidated Financial Statements of the Company and the
Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1996
-----------------------
ACTUAL AS ADJUSTED
------- -----------
<S> <C> <C>
(IN THOUSANDS)
Current portion of long-term debt.................................... $ 355 $
======= =======
Long-term debt....................................................... $ 402 $
Stockholders' equity:
Preferred Stock,
2,000,000 shares authorized;
no shares issued or outstanding................................. -- --
Convertible Preferred Stock, $0.001 par value,
6,030,000 shares authorized, actual
5,892,716 shares issued and outstanding, actual;
no shares authorized, none issued or outstanding, as adjusted... 6 --
Common Stock, $0.001 par value, 50,000,000 shares authorized,
424,023 shares issued and outstanding, actual; shares
issued and outstanding, as adjusted(1).......................... --
Additional paid-in capital......................................... 25,163
Retained earnings (accumulated deficit)............................ (17,934)
Notes receivable from stockholders................................. (20)
------- -------
Total stockholders' equity...................................... 7,215
------- -------
Total capitalization....................................... $ 7,617 $
======= =======
</TABLE>
- ---------------
(1) Excludes, as of March 31, 1996, 170,155 shares of Common Stock issuable upon
exercise of outstanding warrants at an exercise price of $2.17 per share,
1,027,100 shares of Common Stock issuable upon exercise of outstanding
options at a weighted average exercise price of $0.69 per share and 289,997
shares available for future issuance under the 1988 Stock Option Plan. See
"Management--Stock Option and Incentive Plans," "Description of Capital
Stock" and note 7 of Notes to Consolidated Financial Statements.
14
<PAGE> 17
DILUTION
The net tangible book value (total tangible assets less total liabilities)
of the Company at March 31, 1996 was approximately $7,075,000, or $1.12 per
share of Common Stock. After giving effect to the sale by the Company of the
shares of Common Stock offered hereby, the Company's pro forma net
tangible book value at March 31, 1996 would have been $ , or $ per
share. This represents an immediate increase in net tangible book value of $
per share to existing stockholders and an immediate dilution in net tangible
book value of $ per share to new investors
purchasing shares in the offering. The following table illustrates this per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share........................... $ --
Net tangible book value per share before the offering................... $1.12
Increase per share attributable to new investors........................ --
------
Pro forma net tangible book value per share after the offering............ --
Dilution per share to new investors....................................... $ --
</TABLE>
The following table summarizes, on a pro forma basis, as of March 31, 1996,
the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per share paid by (i) existing
stockholders and (ii) new investors (before deducting underwriting discounts and
commissions and estimated offering expenses payable by the Company):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)........ 6,316,739 --% $24,071,000 --% $ 3.81
New investors(1)................ -- -- -- -- --
----- ------ ----- ------
Total......................... -- 100.0% $ -- 100.0%
===== ====== ===== ======
</TABLE>
The foregoing computations assume no exercise of the Underwriters'
over-allotment option, outstanding warrants or outstanding options after March
31, 1996. As of March 31, 1996, there were outstanding warrants to purchase
170,155 shares of Common Stock at an exercise price of $2.17 per share, and
outstanding options to purchase 1,027,100 shares of Common Stock, at a weighted
average exercise price of $0.69 per share. To the extent these warrants and
options are exercised, there will be further dilution to new investors. See
"Capitalization," "Management--Stock Option and Incentive Plans," "Description
of Capital Stock" and note 7 of Notes to Consolidated Financial Statements.
- ---------------
(1) Sales by Selling Stockholders in this offering will reduce the number of
shares held by existing stockholders to shares or approximately
% of the total shares of Common Stock outstanding after this offering and
will increase the number of shares held by new investors to shares
or approximately % of the total shares of Common Stock outstanding after
the offering.
15
<PAGE> 18
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and Notes
thereto included elsewhere in this Prospectus. The following selected
consolidated financial data for the years ended December 31, 1993, December 30,
1994 and December 31, 1995 and as of December 30, 1994 and December 31, 1995
have been derived from the Company's Consolidated Financial Statements included
elsewhere in this Prospectus which have been audited by Ernst & Young LLP,
independent public auditors, whose report thereon is also included elsewhere in
this Prospectus. The following selected consolidated financial data for the
years ended December 27, 1991 and December 25, 1992 and as of December 27, 1991,
December 25, 1992 and December 31, 1993 have been derived from the audited
financial statements of the Company not included in this Prospectus. The
selected financial data for the quarters ended March 31, 1995, 1996, and as of
March 31, 1996, have been derived from unaudited interim consolidated financial
statements of the Company contained elsewhere herein and reflect, in
management's opinion, all adjustments, consisting only of normal recurring
accruals, necessary for a fair presentation of the results of operations for
these periods. Results of operations for interim periods are not necessarily
indicative of results to be expected for the entire year.
<TABLE>
<CAPTION>
YEARS ENDED QUARTERS ENDED
---------------------------------------------------- ---------------------
DEC. 27, DEC. 25, DEC. 31, DEC. 30, DEC. 31, MAR. 31, MAR. 31,
1991 1992 1993 1994 1995(1) 1995 1996
-------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENTS OF OPERATIONS DATA:
Net revenues................................ $ 7,770 $ 8,525 $14,719 $13,235 $26,045 $ 5,720 $ 8,591
Cost of revenues............................ 6,111 6,115 9,942 9,704 16,598 3,792 5,305
------- ------- ------- ------- ------- ------- -------
Gross profit................................ 1,659 2,410 4,777 3,531 9,447 1,928 3,286
Operating expenses:
Research and development.................. 1,497 1,638 2,179 2,748 3,373 642 934
Sales, general and administrative......... 2,081 2,497 2,492 3,012 5,074 916 1,785
Acquired in-process research and
development(1).......................... -- -- -- -- 889 -- --
------- ------- ------- ------- ------- ------- -------
Total operating expenses.................... 3,578 4,135 4,671 5,760 9,336 1,558 2,719
------- ------- ------- ------- ------- ------- -------
Operating income (loss)..................... (1,919 ) (1,725 ) 106 (2,229 ) 111 370 567
Interest income (expense), net.............. (44 ) (336 ) (60 ) 101 49 3 (3)
------- ------- ------- ------- ------- ------- -------
Income (loss) before provision for income
taxes..................................... (1,963 ) (2,061 ) 46 (2,128 ) 160 373 564
Provision for income taxes.................. -- -- 5 -- 83 194 75
------- ------- ------- ------- ------- ------- -------
Net income (loss)........................... $(1,963 ) $(2,061 ) $ 41 $(2,128 ) $ 77 $ 179 $ 489
======= ======= ======= ======= ======= ======= =======
Net income (loss) per share(2).............. $ 0.01 $ 0.03 $ 0.07
======= ======= =======
Shares used in per share calculation........ 7,172 6,892 7,304
------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
DEC. 27, DEC. 25, DEC. 31, DEC. 30, DEC. 31, MAR. 31,
1991 1992 1993 1994 1995 1996
-------- -------- -------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEETS DATA:
Cash and cash equivalents.............................. $ 1,440 $ 1,695 $ 4,148 $ 1,607 $ 1,550 $ 1,506
Total assets........................................... 4,397 5,899 9,010 7,912 12,343 13,050
Long-term debt......................................... 108 10 -- 338 504 402
Total stockholders' equity............................. (798 ) (2,861 ) 5,900 3,801 6,713 7,215
</TABLE>
- ---------------
(1) In August 1995, the Company acquired Onyx Graphics Corporation and incurred
a charge of $889,000 for acquired in-process research and development. See
note 3 of Notes to Consolidated Financial Statements.
(2) See note 1 of Notes to Consolidated Financial Statements for an explanation
of the computation of net income (loss) per share.
16
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Raster Graphics was established in 1987 initially to develop low-cost
electrostatic raster printers for the computer-aided design ("CAD") market.
Raster Graphics commenced shipments of its first printer, a 22-inch printer, in
1989, followed by a 24-inch printer in 1990 and a 36-inch printer in 1992.
In 1993, the Company identified the on-demand production LFDP market as a
new opportunity to leverage its proprietary print head technology. As a result,
in 1993 the Company shifted its product focus and began to develop the DCS 5400
specifically for the LFDP market. Shipments of the DCS 5400 began in July 1994.
Beginning in July 1994, the Company commenced shipping the image processing
software package from Onyx, along with the Company's DCS printers, to provide a
complete system solution to its customers. In August 1995, Raster Graphics
acquired Onyx, a Company that develops image processing software for LFDP
printers manufactured by Raster Graphics, as well as a number of other
manufacturers including CalComp, Encad, Hewlett-Packard and ColorgrafX. In
addition to supplying software to Raster Graphics, Onyx also sells its software
products to OEMs, VARs, systems integrators and other printer manufacturers.
Raster Graphics also sells related consumables, including specialized inks
and papers. The sale of consumables generates recurring revenues which the
Company believes will continue to increase to the extent that the installed base
of DCS printing systems expands. See "Risk Factors -- Competition" and
"-- Dependence on Sole Source Subcontractors and Suppliers."
In the United States, Raster Graphics also derives revenues from
maintenance contracts of installed DCS systems and printers, as well as the
Company's older 22-inch, 24-inch and 36-inch printers. Revenue is also generated
from the sale of spare parts.
Raster Graphics' end user customers, OEMs, VARs, and international
distributors submit purchase orders that generally require product shipment
within two to eight weeks from receipt of order. Accordingly, the Company does
not use order backlog as a primary basis for management planning for longer
periods. Revenues are recognized upon shipment if there are no contingencies. If
contingencies exist, revenues are recognized only when such contingencies are
removed by the customer.
Cost of revenues includes materials, labor, overhead and software
royalties. Cost of revenues as a percentage varies depending upon the revenue
mix generated through end user, OEM, VAR and distributor revenues, and the
revenue mix generated from Onyx software license fees, DCS printing systems
sales, consumables sales and service fees.
Raster Graphics expenses research and development costs as incurred.
Research and development expenses have increased from year to year, and Raster
Graphics expects further increases in research and development expenses in the
future due to the development of new products.
Raster Graphics' sales and marketing expenses and general and
administrative expenses have also increased to support the revenue growth of the
Company. The Company's strategy is to distribute its products through a direct
sales force and independent representatives in selected markets (currently the
United States and Germany), as well as through OEMs, VARs and distributors.
Raster Graphics also incurs sales and marketing expenses in connection with
product promotional activities.
The Company has a limited operating history upon which an evaluation of the
Company and its prospects can be based. The Company's prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in the early stages of development, particularly
companies in new and rapidly evolving markets. To address these risks, the
Company must, among other things, respond to competitive developments, attract,
retain and motivate qualified persons, and
17
<PAGE> 20
continue to upgrade its technologies and commercialize products and services
incorporating such technologies. There can be no assurance that the Company will
be successful in addressing these risks. As of March 31, 1996, the Company had
an accumulated deficit of $17.9 million. Although the Company was profitable in
1995 and the first quarter of 1996, there can be no assurance that the Company
will be profitable in the future. See "Risk Factors -- Significant Fluctuations
in Quarterly Results," "-- Limited History of Profitability and Uncertainty of
Future Financial Results," "-- Uncertainty Regarding LFDP Market; Uncertainty
Regarding Market Acceptance of New Products," "-- Competition," "-- Dependence
on a Single Product Line," "-- Reliance on Third-Party Distribution,"
"-- Dependence on Sole Source Subcontractors and Suppliers," "-- Difficulties in
Managing Growth" and "-- Key Personnel."
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated selected items of
the Company's consolidated statements of operations expressed as a percentage of
its net revenues:
<TABLE>
<CAPTION>
YEARS ENDED QUARTERS ENDED
------------------------------------------ ---------------------
DECEMBER 31, DECEMBER 30, DECEMBER 31, MARCH 31, MARCH 31,
1993 1994 1995 1995 1996
------------ ------------ ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
Net revenues......................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues..................... 67.6 73.3 63.7 66.3 61.8
----- ----- ----- ----- -----
Gross profit......................... 32.4 26.7 36.3 33.7 38.2
Operating expenses:
Research and development........... 14.8 20.8 13.0 11.2 10.9
Sales and marketing................ 10.8 15.5 14.0 11.0 15.8
General and administrative......... 6.1 7.2 5.5 5.0 4.9
Acquired in-process research and
development(1).................. -- -- 3.4 -- --
Total operating expenses........... 31.7 43.5 35.9 27.2 31.6
----- ----- ----- ----- -----
Operating income (loss))............. 0.7 (16.8) 0.4 6.5 6.6
Interest income (expense), net....... (0.4) 0.7 0.2 -- --
Income (loss) before provision for
income taxes....................... 0.3 (16.1) 0.6 6.5 6.6
Provision for income taxes........... -- -- 0.3 3.4 0.9
----- ----- ----- ----- -----
Net income (loss).................... 0.3% (16.1)% 0.3% 3.1% 5.7%
===== ===== ===== ===== =====
</TABLE>
- ---------------
(1) In August 1995 the Company acquired Onyx Graphics Corporation and incurred a
charge of $889,000 for acquired in-process research and development. See
note 3 of Notes to Consolidated Financial Statements.
QUARTERS ENDED MARCH 31, 1995 AND 1996
Net Revenues. Net revenues increased from $5.7 million in the quarter ended
March 31, 1995 to $8.6 million for the comparable period in 1996 for an increase
of 50.2%. The increase was primarily due to increased sales of printer systems
following introduction of the DCS 5442 printing system in January 1996,
increased sales of consumables, sales by the Company's new German subsidiary and
consolidation of sales following the acquisition of Onyx.
For the quarter ended March 31, 1995, one customer accounted for 19.3% of
net revenues. A second customer accounted for 11.7% of net revenues in the
quarter ended March 29, 1996.
18
<PAGE> 21
Gross Profit. Gross profit was $1.9 million, or 33.7% of net revenues, for
the quarter ended March 31, 1995, compared to gross profit of $3.3 million, or
38.2% of net revenues, for the comparable period in 1996. The absolute dollar
increase in gross profit was primarily the result of increased net revenues,
while the improvement in gross profit as a percentage of net revenues was due to
improvements in manufacturing efficiency, the allocation of fixed costs over a
larger number of units sold and increased sales of higher margin products.
Research and Development. Research and development expenses were $642,000,
or 11.2% of net revenues for the quarter ended March 31, 1995, compared to
expenses of $934,000, or 10.9% of net revenues, for the comparable period in
1996. The absolute dollar increase in research and development expenses was
primarily the result of new product development activities.
Sales and Marketing. Sales and marketing expenses were $632,000, or 11.0%
of net revenues, for the quarter ended March 31 1995, compared to expenses of
$1.4 million, or 15.8% of net revenues, for the comparable period in 1996. This
increase was due primarily to the personnel and related costs associated with
the Company's acquisition of Onyx, the establishment of the Company's German
subsidiary and increased sales activities.
General and Administrative. General and administrative expenses were
$284,000, or 5.0% of net revenues, for the quarter ended March 31, 1995,
compared to expenses of $421,000, or 4.9% of net revenues, for the comparable
period in 1996.
Provision for Income Taxes. For the quarters ended March 31, 1995 and March
29, 1996, income taxes have been provided for based upon estimated annualized
effective tax rates of 51.9% and 13.3%, respectively, applied to the earnings
for the period. The provision for income taxes for the quarter ended March 31,
1995 reflects unbenefited foreign losses and the tax benefits of utilizing net
operating loss carryforwards. The provision for the comparable period in 1996
reflects the tax benefits of utilizing net operating loss carryforwards.
FISCAL YEARS ENDED DECEMBER 1993, 1994 AND 1995
Net Revenues. Net revenues were $14.7 million, $13.2 million and $26.0
million in 1993, 1994 and 1995, respectively. The decrease in net revenues in
1994 primarily resulted from a decrease in sales of 24-inch and 36-inch raster
printers (which the Company no longer markets) in the first six months of 1994,
which the Company believes was due to competitive pressures attributed to
introduction of ink jet printers by Hewlett-Packard. In the second half of 1994,
the Company's DCS 5400 began gaining market acceptance, which partially offset
the decrease in net revenues in the first six months of 1994. In addition, sales
of consumables increased in 1994 as a result of increased orders for DCS
printing systems, further offsetting the reduction in sales of 24-inch and
36-inch printers. The primary reason for the $12.8 million increase from 1994 to
1995 was continued growth in sales of DCS printing systems and increased sales
of consumables, spare parts and the consolidation of net revenues from Onyx
after August 10, 1995.
Future revenue growth will depend on a number of factors, including the
Company's ability to develop, manufacture, market and sell innovative and
reliable new products, customer satisfaction, market growth, competitive
developments, product mix, vendor performance and the Company's ability to
handle growth. There can be no assurance that the Company's revenues will
continue to grow at current rates, or at all. See "Risk Factors -- International
Revenues."
International sales, which include export sales and sales shipped by the
Company's European operations, were $7.1 million, $7.4 million and $12.8 million
for 1993, 1994 and 1995, respectively. These sales represented 48.1%, 55.9% and
49.3% of net revenues. The increases in international sales were a result of the
increased international customer acceptance of the DCS printing systems and
establishment of new distribution arrangements. Future international revenues
will depend on the factors set forth above, and will be subject to unexpected
changes in regulatory requirements and tariffs, longer customer payment cycles,
fluctuation in currency exchange rates, seasonal factors and
19
<PAGE> 22
risks associated with managing business operations in geographically distant
locations. No assurance can be given that international revenues will continue
to grow at current rates, or at all. See "Risk Factors -- International
Revenues."
One customer, a related party in 1993, accounted for 33.4%, 20.6% and 10.9%
of net revenues for 1993, 1994 and 1995, respectively. Another customer
accounted for 18.4% of net revenues in 1993. There were no other customers which
accounted for more than 10% of net revenues during these years. Any material
reduction in purchases by the first customer could have a material adverse
effect on the Company and its operations and financial condition.
Gross Profit. Gross profit was $4.8 million, $3.5 million and $9.4 million,
or 32.4%, 26.7% and 36.3% of revenues, for 1993, 1994 and 1995, respectively.
The decrease in gross margin from 1993 to 1994 was primarily due to competitive
pricing pressures from Hewlett-Packard with respect to the Company's 24-inch and
36-inch printers (which the Company no longer markets) and higher fixed overhead
costs being allocated over fewer units in the first six months of 1994. In 1994,
this decrease was partially offset by sales of the new DCS systems, which
contributed a higher margin. The improved gross margin in 1995 was primarily due
to a change in product mix to a greater percentage of relatively higher-margin
DCS printing systems. The Company's future level of gross profit will depend on
a number of factors, including product mix and its abilities to control variable
expenses relative to revenue levels, maintain a revenue base over which to
allocate fixed costs and continue to develop, manufacture, market and sell
innovative and reliable new products.
Research and Development. Research and development expenses were $2.2
million, $2.7 million and $3.4 million, or 14.8%, 20.8% and 13.0% of net
revenues, for 1993, 1994 and 1995, respectively. The absolute dollar increase
from 1993 to 1994 was primarily due to engineering material expenditures related
to the development of new products. The absolute dollar increase from 1994 to
1995 was primarily due to increased payroll and related expenses, including the
Onyx engineering staff, and to a lesser degree increased engineering material
expenditures and increased facility costs related to the Company's new facility.
The Company intends to continue to dedicate substantial resources to research
and development activities. Accordingly, the Company believes that research and
development expenses generally will continue to increase in dollar amounts, and
may increase as a percentage of revenues, in the future.
Sales and Marketing. Sales and marketing expenses were $1.6 million, $2.1
million and $3.6 million, or 10.8%, 15.5% and 14.0% of net revenues, for 1993,
1994 and 1995, respectively. The primary cause of the absolute dollar increase
have been increases in payroll and payroll-related expenses due to increases in
personnel, and to a lesser degree, travel-related expenses. Spending also
increased in 1995 due to the opening of sales offices in Germany and the United
Kingdom to support increased sales activities in Europe. The Company believes
that sales and marketing expenses will continue to increase in dollar amounts,
and may increase as a percentage of revenues, in the future.
General and Administrative. General and administrative expenses were
$901,000, $958,000 and $1.4 million, or 6.1%, 7.2% and 5.5% of net revenues, for
1993, 1994 and 1995, respectively. The absolute dollar amounts of general and
administrative expenses were comparable in 1993 and 1994. The increase in 1995
was primarily related to increased payroll and payroll-related expenses and
increased costs related to the Company's new facility. The Company believes that
general and administrative expenses will continue to increase in dollar amounts,
and may increase as a percentage of revenues, in the future.
Acquired In-Process Research and Development. In August 1995, the Company
acquired Onyx Graphics Corporation for stock and other consideration valued at
$1.5 million. The assets acquired included tangible assets valued at $866,000,
intangible assets of $454,000, less liabilities assumed of $570,000, and
software in the development stage valued at approximately $750,000 which was
expensed in the September 1995 quarter as it had not yet reached technological
feasibility and did not have alternative future uses. In addition, the Company
wrote off $139,000 in the September 1995 quarter for
20
<PAGE> 23
redundant PostScript licenses that the Company had purchased for the Company's
development of a similar image processing software product.
Interest Income (Expense), net. The Company's net interest expense was
$60,000 in 1993, due to interest expense of $173,000 primarily related to
interest on related-party notes, which was offset in part by interest income.
Net interest income was $101,000 and $49,000 in 1994 and 1995, respectively.
Provisions for Income Taxes. The provision for income taxes was $5,000 and
$83,000 for 1993 and 1995, respectively. There was no provision for income taxes
for 1994 as the Company incurred operating losses. The provision for income
taxes for 1993 differs from the statutory federal income tax rate, primarily due
to the utilization of net operating loss carryforwards. The provision for income
taxes for 1995 differs from the statutory income tax rate, primarily due to
unbenefited foreign losses and the tax benefits of utilizing net operating loss
carryforwards.
As of December 31, 1995, the Company had federal and state net operating
loss carryforwards of approximately $13.2 million and $4.4 million,
respectively. The Company also has federal and California research and
development tax credit carryforwards of approximately $753,000 and $325,000,
respectively. The net operating loss and credit carryforwards will expire, if
not utilized, at various dates beginning in 1996 through 2010.
Utilization of the net operating losses and credits will be subject to an
annual limitation due to the ownership change limitations provided by the
Internal Revenue Code of 1986, as amended (the "Code") and similar state
provisions. The annual limitation may result in the expiration of net operating
losses and credits before utilization.
Under Statement of Financial Accounting Standards No. 109, deferred tax
assets and liabilities are determined based on the difference between financial
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse. Based on the weight of available evidence, which includes
the Company's historical operating performance, the reported loss in 1994, only
marginal profitability in 1993 and 1995, and the uncertainties regarding future
results of operations, the Company has provided a full valuation allowance
against its net deferred tax assets of $7.3 million at December 31, 1995, as it
is more likely than not that the deferred tax assets will not be realized.
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain unaudited quarterly financial
information for the five quarters ended March 31, 1996, as well as such data
expressed as a percentage of the Company's net revenues for the periods
indicated. In the opinion of management, the data has been prepared on a basis
consistent with the Company's audited consolidated financial statements included
elsewhere in the Prospectus and includes all necessary adjustments, consisting
only of normal recurring accruals, that management considers necessary for a
fair presentation. The results of operations for the interim periods are not
necessarily indicative of the results to be expected for any future period.
21
<PAGE> 24
<TABLE>
<CAPTION>
QUARTERS ENDED
---------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1995 1995 1995 1995 1996
--------- -------- ------------- ------------ ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues............................. $ 5,720 $5,932 $ 6,835 $7,558 $ 8,591
Cost of revenues......................... 3,792 3,909 4,315 4,582 5,305
------ ------ ------ ------ ------
Gross profit............................. 1,928 2,023 2,520 2,976 3,286
Operating expenses:
Research and development............... 642 784 948 999 934
Sales and marketing.................... 632 743 975 1,290 1,364
General and administrative............. 284 316 408 426 421
Acquired in-process research and
development(1)...................... -- -- 889 -- --
------ ------ ------ ------ ------
Total operating expenses............ 1,558 1,843 3,220 2,715 2,719
------ ------ ------ ------ ------
Operating income (loss).................. 370 180 (700) 261 567
Interest income (expense), net........... 3 19 16 11 (3)
------ ------ ------ ------ ------
Income (loss) before provision for income
taxes.................................. 373 199 (684) 272 564
Provision for (benefit from) income
taxes.................................. 194 103 (355) 141 75
------ ------ ------ ------ ------
Net Income (loss)........................ $ 179 $ 96 $ (329) $ 131 $ 489
====== ====== ====== ====== ======
</TABLE>
- ---------------
(1) In August 1995 the Company acquired Onyx Graphics Corporation and incurred a
charge of $889,000 for acquired in-process research and development. See
note 3 of Notes to Consolidated Financial Statements.
<TABLE>
<CAPTION>
QUARTERS ENDED
---------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1995 1995 1995 1995 1996
--------- -------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues............................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues......................... 66.3 65.9 63.1 60.6 61.8
----- ----- ----- ----- -----
Gross profit............................. 33.7 34.1 36.9 39.4 38.2
Operating expenses:
Research and development............... 11.2 13.2 13.9 13.2 10.9
Sales and marketing.................... 11.0 12.5 14.2 17.1 15.8
General and administrative............. 5.0 5.4 6.0 5.6 4.9
Acquired in-process research and
development(1)...................... -- -- 13.0 -- --
----- ----- ----- ----- -----
Total operating expenses............ 27.2 31.1 47.1 35.9 31.6
----- ----- ----- ----- -----
Operating income (loss).................. 6.5 3.0 (10.2) 3.5 6.6
Interest income (expense), net........... -- 0.3 0.2 0.1 --
----- ----- ----- ----- -----
Income (loss) before provision for income
taxes.................................. 6.5 3.3 (10.0) 3.6 6.6
Provision for (benefit from) income
taxes.................................. 3.4 1.7 5.2 1.9 0.9
----- ----- ----- ----- -----
Net Income (loss)........................ 3.1% 1.6% (4.8)% 1.7% 5.7%
===== ===== ===== ===== =====
</TABLE>
- ---------------
(1) In August 1995 the Company acquired Onyx Graphics Corporation and incurred a
charge of $889,000 for acquired in-process research and development. See
note 3 of Notes to Consolidated Financial Statements.
22
<PAGE> 25
QUARTERLY TRENDS
Net Revenues. Net revenues increased and gross margins improved in the
third and fourth quarters of 1995 as compared with the first half of 1995
primarily due to the higher gross margin sales associated with Onyx Graphics
Corporation, which was acquired in August 1995.
Fluctuations in Quarterly Results. The Company's operating results have
historically been, and will continue to be, subject to significant quarterly and
annual fluctuations due to a number of factors, including fluctuations in
capital spending domestically or internationally in one or more industries to
which the Company sells its products, new product introductions by the Company
or its competitors, changes in product mix and pricing by the Company, its
suppliers or its competitors, availability of components and raw materials,
failure to manufacture a sufficient volume of products in a timely and
cost-effective manner, any failure to introduce new products on a timely basis,
or to anticipate changing customer product requirements, lack of market
acceptance or shifts in the demand for the Company's products, changes in the
mix of sales by the distribution channel, changes in the spending patterns of
the Company's customers, and extraordinary events such as litigation or
acquisitions. The Company's gross margins may vary greatly depending on the mix
of sales of lower margin hardware products, and higher margin software products.
The Company's operating results will also be affected by general economic
and other conditions affecting the timing of customer orders and capital
spending. The Company generally recognizes product revenue upon shipment. The
Company's net revenues and results of operations for a fiscal period will
therefore be affected by the timing of orders received and orders shipped during
such period. A delay in shipments near the end of a fiscal period, due for
example to product development delays or to delays in obtaining materials, could
materially adversely affect the Company's business, financial condition and
results of operations for such period. Moreover, continued investments in
research and development, capital equipment and ongoing customer service and
support capabilities will result in significant fixed costs which the Company
will not be able to reduce rapidly. Accordingly, therefore, if the Company's
sales for a particular fiscal period are below expected levels, the Company's
business, financial condition and results of operations for such fiscal period
could be materially adversely affected. There can be no assurance that the
Company will be able to increase or sustain profitability on a quarterly or
annual basis in the future.
The Company has experienced and is expected to continue to experience
seasonality in product bookings. The Company could experience lower bookings
during the third quarter of each fiscal year, due primarily to the slowdown in
sales to European markets. Consequently, revenues could be adversely impacted in
the summer months due to the generally reduced economic activity in Europe at
such time. Moreover, because orders constituting the Company's backlog are
subject to changes in delivery schedules and in certain instances are subject to
cancellation without significant penalty, the Company's backlog may not be
indicative of demand for the Company's products or actual net revenues for any
future period.
In addition, a significant percentage of the Company's bookings frequently
occur in the last month of each fiscal quarter. This fact, coupled with the
relatively short lead-time associated with many of the Company's customer
orders, limits the Company's ability to determine quarterly results until
relatively late in the period.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has financed its operations primarily through
private sales of Preferred Stock and Common Stock of $24.1 million, issuance of
convertible debt, bank loans, equipment lease financing and private loans and
cash provided by operations for the quarter ended March 31, 1996. Cash used in
operations was $342,000, $2.2 million and $638,000 in 1993, 1994 and 1995,
respectively, and for the quarter ended March 31, 1996, $385,000 of cash was
generated by operations. For 1995, net cash used in operations was due primarily
to increases in inventories and accounts receivables associated with higher net
revenues, which were partially offset by an increase in accounts
23
<PAGE> 26
payable. Net cash provided by operations for the quarter ended March 31, 1996
was primarily from net income, adjusted for depreciation and deferred revenue
and a decrease in accounts receivable, partially offset by an increase in
inventories associated with higher net revenues.
Net cash used in investing activities was $813,000, $805,000, $1.0 million
and $340,000 for 1993, 1994, 1995 and the quarter ended March 31, 1996,
respectively, due primarily to the purchase of capital equipment. The Company
currently has budgeted $2.4 million in 1996 for capital expenditures.
Financing activities provided net cash of $3.6 million, $487,000 and $1.6
million, respectively, for 1993, 1994 and 1995, due primarily to sales of equity
securities offset by payments on notes and capital lease obligations. The
Company used net cash of $89,000 for financing activities for the quarter ended
March 31, 1996 related to payments on notes and capital lease obligations,
partially offset by proceeds from exercise of stock options.
The Company has not invested in derivative securities or any other
financial instrument that involves a high level of complexity or risk.
Management expects that, in the future, cash in excess of current requirements
will be invested in investment grade, interest-bearing securities.
At March 31, 1996, the Company had $1.5 million of cash and cash
equivalents. The Company also has available a $2.0 million bank line of credit
agreement that expires on October 15, 1996, which is secured by the tangible
assets of the Company. At March 31, 1996, there were no borrowings outstanding
under the bank line of credit.
The Company believes that existing cash and cash equivalents, together with
anticipated net proceeds of approximately $ million from this offering, will
be sufficient to finance its capital requirements through at least the next two
years. Thereafter, the Company may require additional funds to support its
working capital requirements or for other purposes and may seek to raise such
additional funds through bank borrowings and public or private sales of its
securities, including equity and debt securities. The Company's future capital
requirements, however, depend on numerous factors, including, without
limitation, the success of marketing, sales and distribution efforts; the
progress of its research and development programs; the costs involved in
preparing, filing, prosecuting, defending and enforcing intellectual property
rights; competition; competing technological and market developments; and the
effectiveness of product commercialization activities and arrangements. There
can be no assurance that additional funds, if required, will be available to the
Company on favorable terms or at all.
24
<PAGE> 27
BUSINESS
Raster Graphics develops, manufactures and markets high-performance, large
format, digital color printing systems, and sells related consumables for the
on-demand LFDP market. The Company's products are designed to meet the
short-run, on-demand production market requirements of quality, speed,
flexibility, reliability and low per copy cost. The LFDP market consists of
color print jobs with run lengths ranging from one to 200 copies, and output
sizes of 20-inches by 30-inches or larger. Applications include POP signs, trade
show exhibit graphics, displays, transit advertising, fleet graphics, banners,
billboards, courtroom graphics, backlit signage, posters and sports and
corporate events. The primary users of Raster Graphics' DCS printing systems are
color photo labs, reprographic houses, graphic arts service bureaus, exhibit
builders, digital color printers, screen printers and in-house print shops. DCS
printing systems allow users to print short runs of high quality color graphics
on-demand at substantial time and cost savings relative to traditional printing
methods.
INDUSTRY BACKGROUND
Graphics Market Size and Trends
The overall graphics market, consisting of offset, screen, photographic and
digital printing, is a large and mature market. According to U.S. Commerce
Daily, in 1995, the graphics market in the United States had sales of $160
billion with an estimated growth rate of 8% per year. However, according to the
1996 Electronic Hard Copy Research report by IT Strategies, a printing industry
market research firm ("IT Strategies"), the LFDP segment of this market is
projected to grow more rapidly from an estimated annual sales of $2.7 billion in
1995 to $10 billion in 1998, for a compound annual growth rate of over 50%.
Another study, Wide Format Color Inkjet Graphics Printing -- January 1996, by
CAP Ventures, a market research company, projects that the LFDP segment of the
market will grow to $18 billion in 1999.
This rapid growth of the LFDP market is being driven by the following
factors:
- Customization. The ability to vary content electronically on a
print-by-print basis enables companies to create highly-focused marketing
campaigns customized to market segment characteristics, such as nuances
in language, culture and geographic location.
- Demand for Color. The use of color in graphics design has become
pervasive as digital technology has made full color printing as
accessible as black and white printing. End users strongly prefer to use
full color in all forms of communications and advertising because of its
positive impact on awareness and retention.
- Available Technology. Advances in high speed, large format digital
printing technology enable cost effective, high quality, on-demand color
print jobs in run-lengths from one to 200 copies. The Company is a leader
in the development of these higher speed production digital technologies.
- Desktop Publishing. Recent innovations in desktop publishing have
provided graphics design capabilities to thousands of users through the
use of widely available software packages such as Adobe Illustrator,
Aldus PageMaker and QuarkXPress which have revolutionized desktop
graphics design. This digital desktop publishing technology enables users
to create new designs easily and quickly and print them directly using
LFDP systems.
- Market Expansion. The installed base of thousands of low-cost, color
inkjet printers is helping to fuel the growth of many new applications
such as corporate presentations, POP displays and exhibit graphics. As
end users become accustomed to color graphics and demand higher
performance capabilities including speed, graphics size and outdoor
applications, the demand for LFDP should expand.
- Efficiency of Large Format Print Advertising. The Traffic Audit Bureau
for Media Measurement, Inc., estimates in its Planning for Out of Home
Media Report that large format print advertising is six-to-nine times
more cost effective than newspaper and television advertising. As a
result, Outdoor Services, Inc., a marketing research company, estimates
that large format print advertising is one of the fastest growing
advertising media, rising from sales of $260 million in 1970 to $3.5
billion in 1995. LFDP technology enables adoption of this cost-effective
medium by a new class of regional users desiring a smaller number of
prints.
25
<PAGE> 28
Traditional Printing Methods
Prior to the availability of LFDP technology, graphic printing methods were
limited to the following three categories: photographic enlargement, screen
printing and offset printing.
- Photographic Enlargement. The photographic enlargement process involves
imaging a digital file on a film recorder and using an enlarger to expose
large photographic paper or backlit film. While this method provides a
cost-effective solution for a small number of prints, it requires
extensive chemical-based processing, which requires special handling.
Furthermore, the image quality for line art, such as text, can lose its
sharpness as the image is enlarged. Also, the photographic process is
primarily suited for indoor applications.
- Screen Printing. In the screen print process, the image is first created
on four sets of film -- one for each of the four process colors,
representing Cyan, Magenta, Yellow and Key (black) ("CMYK"). These films
are then exposed onto four screens to produce masks for each color. Ink
pigments are applied through these masks by a squeegee to produce the
final graphics. While screen print quality is acceptable for most
distance-viewed applications, this multi-step process is expensive and
time-consuming, making it uneconomical for runs shorter than 50 to 100
copies.
- Offset Printing. Offset printing requires the creation of four films
which are then used to make printing plates. The plates are physically
mounted on a press, ink is applied to the plates, and the image is then
transferred by an intermediary blanket onto the final paper. In addition
to film and plate-making, offset printing also requires extensive press
setup. Offset printing is an expensive, time-consuming process and is
uneconomical for runs shorter than 1,000 copies. However, offset printing
offers the highest quality graphics and lowest cost per copy for runs
over 1,000 copies.
Because of the multi-step process and high set-up costs, each of these
traditional printing technologies is only cost-effective within certain ranges
of run lengths. The Company believes the following graph shows the range over
which each traditional printing method and LFDP are cost-effective, while the
succeeding table provides a comparison of the four methods' capabilities.
LOGO
* Determination of image quality is subjective, involving individual taste and
perception. The above chart indicates the Company's estimates of
generally-accepted industry perceptions of image quality.
26
<PAGE> 29
PRINTING METHODS' CAPABILITIES
<TABLE>
<S> <C> <C> <C> <C>
HIGH IMAGE ON- SHORT OUTDOOR
METHOD QUALITY* DEMAND RUNS APPLICATIONS
--------------------------------------------------------------------------------
LFDP 'X' 'X' 'X' 'X'
Photograph 'X' 'X' 'X'
Screen 'X' 'X'
Offset 'X' 'X'
--------------------------------------------------------------------------------
</TABLE>
* Determination of image quality is subjective, involving individual taste and
perception. The above chart indicates the Company's estimates of
generally-accepted industry perceptions of image quality.
Digital Printing
Digital printing fulfills the unmet demand of short-run users, as it does
not require expensive chemicals, films, screens, masks or set-up processes.
Furthermore, this technology allows graphics to be printed directly from a
variety of desktop publishing programs onto paper.
Currently, there are two primary methods of digital printing, electrostatic
and inkjet. Electrostatic print heads form images by depositing small dots of
electrical charge across the full width of the paper. The image is developed by
the ink being attracted to the charged dots. Inkjet printers form images by
spraying very small dots of water-based inks as the print head moves
horizontally in a scanning-type process. Electrostatic printers achieve the
speeds required for runs of up to 200 copies (referred to as the production
market), whereas inkjet printers are considerably slower and are generally used
for very short runs of fewer than five copies. Furthermore, electrostatic
technology utilizes weather-durable pigment-based inks that can be used for both
indoor and outdoor applications. Inkjet technology is primarily used for indoor
applications. The following chart compares the electrostatic and inkjet methods:
LFDP TECHNOLOGIES
<TABLE>
<CAPTION>
TECHNOLOGY LIST PRICE TYPICAL PRINT TIME DURABILITY
- -------------- ------------------- ------------------ ------------------
<S> <C> <C> <C>
Inkjet $3,000 - $10,000 20 - 30 min. Currently indoor
applications only
Electrostatic $35,000 - $120,000 1 - 5 min. Indoor and outdoor
applications
</TABLE>
- ---------------
Source -- Raster Graphics, Inc.
RASTER GRAPHICS' SYSTEM SOLUTION
Raster Graphics offers a complete printing system solution to meet the
demands of the high performance production LFDP market. Raster Graphics'
solution consists of its electrostatic DCS printers, integrated image processing
software and related consumables and services. Key benefits of the DCS printing
systems include:
High Performance. With a production printing speed of 600 to 1,000 square
feet per hour, the DCS printing system can produce 50 to 60, full-color, 36- by
48-inch posters in one hour, which the Company believes is significantly faster
than comparable printers. Runs of up to 200 prints can be easily produced in a
single shift.
Low Cost for Short Runs. Primary job costs of DCS printing systems are
variable and are principally composed of consumables costing approximately 30c
to 50c per square foot for paper-based
27
<PAGE> 30
graphics. In contrast, conventional printing methods involve relatively high
fixed overhead, set-up and labor costs for each printing job. Furthermore, the
on-demand capability of digital printing reduces the waste of surplus or
outdated copies. As a result, the Company believes that the DCS printing systems
provide the most cost-effective solution for runs up to 200 copies as
illustrated below.
PRINTING METHODS COMPARISONS
<TABLE>
<CAPTION>
FEATURE OFFSET PRINTING SCREEN PRINTING DCS SYSTEM
- ------------------------------------------- --------------- --------------- ----------
<S> <C> <C> <C>
Job Turnaround Time 3 - 5 days 5 - 9 days 1 day
Estimated Total Cost for 50 copies $4,500 $900 $300
Estimated Total Cost for 200 copies $5,500 $1,100 $1,100
Quality of Output* Excellent Good Very Good
</TABLE>
- ---------------
Source -- Raster Graphics, Inc.
* Determination of image quality is subjective, involving individual taste and
perception. The above chart indicates the Company's estimates of
generally-accepted industry perceptions of image quality.
Targeting and Customizing or "Narrowcasting." The DCS printing systems
allow content to be varied on a print-by-print basis. Fixed and variable data
are printed in one process at the same quality level. This permits narrowcasting
marketing campaigns that are customized to a specific market segment.
High Print Quality and Flexibility. The DCS printing systems offer two
printing resolution modes, a 200 x 200 dots per inch ("dpi") mode and a 200 x
400 dpi mode, allowing utilization of the same system for two levels of image
quality to meet the needs of both close-up graphics and distance-viewed
graphics.
Raster Graphics' products have received five highly acclaimed industry
awards for their contribution to digital printing technology. The Company's DCS
5400 product received the Digital Printing and Imaging Association's Product of
the Year award; was named among the Top 10 New Repro Products for 1994 by Modern
Reprographics; was designated a Hot Product for 1994 by Electronic Publishing;
received a 1994 Editor's Choice Award from Computer Graphics World; and was
honored with the 1994 Industry Excellence Award by IEEE Computer Graphics and
Applications. See "Risk Factors -- Limited History of Product Manufacturing and
Use; Product Defects" and "-- Dependence on Single Product Line."
STRATEGY
Raster Graphics' objective is to build on its position as a market leader
in providing digital printing systems and related consumables and services for
the rapidly growing, on-demand LFDP production printing market. The Company's
strategy for growth includes the following:
Provide System Solutions. In August 1995, the Company acquired Onyx
Graphics Corporation, a leader in image processing software, enabling the
Company to develop highly integrated systems solutions for its customers. Raster
Graphics plans to continue developing additional products and services to
provide complete integrated solutions to its customers. The Company believes
that customers prefer an integrated solution since most customers lack the
expertise or time to source and integrate individual and potentially
incompatible components from multiple suppliers.
Focus on Large Format Digital Segment. Raster Graphics plans to continue
to focus its efforts on producing LFDP systems with capabilities that target and
address specific needs of the production customer, such as paper graphics,
backlit graphics, vinyl graphics and textile graphics. The Company believes that
the rapid growth in small format on-demand color printing will also stimulate
demand for comparable large format solutions by raising the level of awareness
of the benefits of short-run printing.
28
<PAGE> 31
Increase Recurring Revenues Base. Raster Graphics plans to continue
expanding its services and specialized consumables businesses which provide
recurring revenues to the Company. The Company currently sells various inks,
varnish, specially-coated papers, vinyls and maintenance and training services.
Leverage Core Technologies. Raster Graphics plans to leverage its
technological expertise to expand its product offerings. The Company has
expertise in a number of core technologies, including knowledge of complex print
head design and manufacturing; high speed paper transport; high speed data
transfer; and image processing software.
Pursue Acquisitions, Joint Ventures and Alliances. Raster Graphics will
seek to acquire strategic businesses and technologies and establish joint
ventures with companies offering complementary products or synergistic
distribution. For example, by utilizing Onyx's leadership position in image
processing software, Raster Graphics plans to build alliances with manufacturers
and distributors of entry level low-speed graphics printers. The Company
believes that this large base of low-speed graphics printing systems will become
upgrade prospects for the Company's high performance production systems.
Expand International Markets. Approximately half of the Company's revenues
are derived from sales in international markets. The Company believes that these
markets offer attractive growth opportunities fueled by a variety of languages
and cultural and business customs which result in the need for customization.
Raster Graphics plans to continue expanding its direct presence in international
markets by establishing additional foreign subsidiaries and forming joint
ventures.
PRODUCTS
DCS Printing System Architecture
The DCS printing system consists of two primary components: the DCS
printers and PosterShop, a client/server-based image processing system.
Raster Graphics DCS Printer. DCS printers are currently available in two
models: DCS 5400 and DCS 5442. Both models are capable of producing 54-inch wide
graphics, in lengths of up to 30 feet for the 5400 model and up to 100 feet for
the 5442 model. Raster Graphics began designing its first DCS printer, the DCS
5400 in early 1993 and began product shipments in June 1994. The Company
introduced and began shipping the DCS 5442 in January 1996. See "Risk
Factors -- Dependence on Single Product Line" and "-- Limited History of Product
Manufacturing and Use; Product Defects."
DCS PRINTER SPECIFICATIONS
<TABLE>
<CAPTION>
MODEL RESOLUTION(S) PRINTING THROUGHPUT MAX. PRINT LENGTH LIST PRICE
- -------- ------------------ ----------------------- ----------------- ----------
<C> <S> <C> <C> <C>
DCS 5400 200 x 200 dpi Up to 600 sq feet/hr. Up to 30 feet $ 99,950
DCS 5442 200 x 200 dpi and Up to 1,000 sq feet/hr. Up to 100 feet $ 109,950
200 x 400 dpi
</TABLE>
Raster Graphics in its DCS printers is the only manufacturer offering the
following four innovative features to satisfy the requirements of the LFDP
market.
- High Performance Using Non-Multiplexed Writing. Raster Graphics'
patented, non-multiplexed print head, the Silicon Imaging Bar,
simultaneously images across the full 54-inch width of paper allowing DCS
printers to operate at much higher speeds than traditional multiplexed
printers. In multiplexed electrostatic printing, a segmented print head
images across the width of the paper one segment at a time.
29
<PAGE> 32
LOGO
LOGO
- Five Color Capability. DCS printers utilize a unique five color process
that allows printing spot colors or applying varnish. Spot colors enable
the printing of precise corporate identity colors (e.g. Coca-Cola red or
Kodak yellow), accent metallic colors or neon colors. Varnish enables the
application of a protective finish coat. Traditional four-color printing
processes using only CMYK cannot offer these capabilities.
- Dual Resolution Printing Mode. The DCS Model 5442 printer is capable of
printing images in 200 x 200 dpi mode or 200 x 400 dpi mode without any
special printer setup. Images are processed faster in 200 x 200 dpi mode,
while 200 x 400 dpi mode provides better image definition. A user can
select the appropriate mode to match the application needs. Currently,
comparable electrostatic printers do not offer this dual resolution
printing mode.
- Seamless Integration of DCS Printers with System Software. DCS printers
permit real time interaction between the printers and the image
processing server to manage job attributes (e.g. type of media on which
to print, type of ink, rush vs. normal priority, number of inking passes
per color, etc.), and keep the operator informed of the job and print
engine status. Traditionally, printers and image processing software have
been developed independently with limited communication capabilities. As
a result, operators have been forced to manually track job attributes,
requiring additional time and causing workflow inefficiencies.
DCS System Software. The Company's PosterShop DCS system software, based
on client/server architecture, is designed to facilitate the workflow in a
graphics production shop. A typical environment consists of multiple PosterShop
clients connected to a single Digital Equipment Corporation's Alpha workstation
("Alpha workstation") or PC server. The PosterShop software allows clients to
prepare printing jobs and send them to the server. Job preparation tools include
previewing, sizing and tiling the images; color calibrating the printer;
selecting the screening dot pattern and specifying the media type and ink. The
server manages the job queues, performs the raster image processing ("RIP")
function and communicates with the printer(s) and clients. Clients can also
remotely access job and printer status from the server. In addition, the DCS
system software can concurrently process and print, thereby maximizing
throughput. See "Risk Factors -- Limited History of Product Manufacturing and
Use; Product Defects."
The list price for the PosterShop DCS system software, including an Alpha
workstation, is $39,995 and the list price for PosterShop DCS system software
without the workstation is $24,995.
30
<PAGE> 33
LOGO
Inkjet Image Processing Software. In addition to the PosterShop software
sold with the DCS printing systems, the Company offers specialized versions of
PosterShop to inkjet printer manufacturers and distributors under the Onyx brand
name. The Company also markets a hardware image processing solution for inkjet
customers called Qube, which is an integrated hardware/software product that
plugs directly into an existing Macintosh network. PosterShop software products
for inkjet printers have list prices ranging from $495 for the Lite package to
$6,995 for the Encad 50-inch server product. Qube sells for a list price of
$5,995. See "Risk Factors -- Limited History of Product Manufacturing and Use;
Product Defects."
Consumables
Color printing requires the consumption of significant quantities of inks
and papers. Raster Graphics' product offerings include a range of consumables,
such as specialized process color inks, spot color inks and varnish, vinyls and
various indoor and outdoor papers. The Company performs qualification testing on
these consumables before releasing them for customer shipment. See "Risk
Factors -- Dependence on Sole Source Subcontractors and Suppliers."
The specialized inks, concentrates and varnish, are created specifically
for the DCS products to optimize image quality and printer performance. The
Company currently offers over 50 different ink, concentrate and varnish
products. Ink and concentrate consumption varies depending upon both the content
and number of rolls printed. A graphic with a primarily white background will
require much less ink than a graphic with high image content. A full four color
set of inks and concentrates lists for approximately $2,000 and can print
eight-to-ten rolls of paper. See "Risk Factors -- Dependence on Sole Source
Subcontractors and Suppliers."
Raster Graphics markets seven different types of specially coated papers
for use in the DCS products. The list prices for papers range from $190 to $645
per roll. The Company also offers various types of vinyl products to complete
its product offering of consumables. The list prices for vinyls range from $435
to $800 per roll.
31
<PAGE> 34
Services
The Company devotes significant resources in striving for excellence in
customer service. Service response and repair data is recorded and tracked via
an on-line customer dispatch system. Product performance and customer call
history is reviewed and updated and reports are provided to Raster Graphics
management. Complete customer history files are maintained at Raster Graphics
corporate offices in San Jose, California. Raster Graphics has also developed a
state-of-the-art maintenance manual for its DCS printers that resides on a
laptop computer and is interactive with the printer. Using the laptop computer,
the operator can diagnose and test the various components of the printer. See
"Risk Factors -- Limited History of Product Manufacturing and Use; Product
Defects."
In the United States, Raster Graphics provides installation and 90-day
on-site warranty support. After the initial warranty period, the Company offers
service maintenance contracts to its installed base of customers. The Company's
service organization consists of technical support personnel, technical
trainers, field service technicians, a customer call dispatch center and
inventory and logistics support. The field service technicians are located in 12
key locations across the United States. Internationally, Raster Graphics
provides 90-day (12 months for print head) return-to-factory parts warranty.
Maintenance service is provided by authorized dealers and distributors. See
"Risk Factors -- Reliance on Third-Party Distribution."
Raster Graphics provides classroom and on-site training for all products
sold domestically. All of the Company's training programs are listed in the
Company product/price book. The Company also trains its international dealers
and distributors at the Raster Graphics training center in San Jose, California.
MARKETS
The Company's current DCS printing systems are targeted for the high
performance electrostatic segment of the LFDP market. According to IT
Strategies, the installed base for the entire LFDP market in the United States,
consisting of both inkjet and electrostatic systems for all performance segments
of this market, is projected to be as follows in 1998:
<TABLE>
<CAPTION>
ESTIMATED NUMBER
MARKET SEGMENT OF SITES
- ---------------------------- ----------------
<S> <C>
Quick Printers 3,000 - 7,000
Sign Printers 840 - 1,680
Color Photo Labs 324 - 1,260
Exhibit Builders 2,000 - 2,000
Screen Printers 720 - 2,500
Reprographic Houses 1,105 - 1,445
In-House Print Shop 2,000 - 3,750
Graphic Arts Service Bureau 583 - 1,590
Digital Color Printers 1,200 - 1,200
----------------
Total 11,772 - 22,425
</TABLE>
- ---------------
Source -- IT Strategies
IT Strategies also estimates that the annual sales of professional large
format color printers to these worldwide customers were 3,960 units or $126
million in 1995 and are projected to grow to 8,900 or $286 million in 1998. In
addition, sales of consumables (inks, varnish, papers, vinyls and other
substrates) to these customers were $193 million in 1995 and are projected to
grow to $1.6 billion in 1998. This growth trend is depicted by the following
chart. See "Risk Factors -- Uncertainty Regarding Development of LFDP Market;
Uncertainty Regarding Market Acceptance of New Products."
32
<PAGE> 35
LFDP MARKET
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) PRINTERS CONSUMABLES
<S> <C> <C>
1995 126 196
1998 200 1547
</TABLE>
The major markets and applications for LFDP are as follows:
<TABLE>
<S> <C>
- - POP Displays - Museums/Galleries
- - Vinyl and Cloth Banners - Presentations/Seminars
- - Corporate Identity Graphics - Backlit and Reflective Posters
- - Mall Graphics - Courtroom Graphics
- - Exhibit/Trade Show Graphics - Seasonal/Travel Promotions
- - Billboards - Advertising/Merchandising Tie-ins
- - Sports/Concert/Event Graphics - Customer Commercial Wallpaper
</TABLE>
CUSTOMERS, SALES AND MARKETING
Raster Graphics sells complete DCS printing systems, DCS printers and
Poster Shop image processing software to customers both internationally and
domestically. To address these customers, the Company has adopted a dual
distribution strategy that encompasses both a direct sales organization and
third-party distributors, including OEMs and VARs. See "Risk Factors -- Reliance
on Third-Party Distribution."
In the United States, Raster Graphics employs a direct sales force and a
network of independent sales representatives as its primary sales method, each
accounting for approximately one-half of the Company's sales. These individuals
sell DCS printing systems to end user customers such as commercial photo labs,
reprographics service bureaus, exhibit builders, screen printers, digital
printing centers, pre-press trade shops and in-plant printers. Current customers
include a variety of leading companies, such as May Department Stores, Skyline
Displays, Irvine Photo and Eller Media. This sales force also assists OEMs and
VARs, such as 3M and Cactus, in reselling printers when the image processing
software system is supplied by such OEMs or VARs. 3M markets the Company's
printers under the 3M ScotchPrint system brand name and differentiates its
offerings by providing specialized, premium-priced long-durability consumables.
Internationally, the Company sells and supports its products through
non-exclusive agreements with a number of distributors. In 1995, the Company
formed a wholly-owned subsidiary in Germany to support the existing distributors
in Germany and Switzerland. As of July 1996, this subsidiary will also directly
sell systems and consumables to the Company's German customers. The Company
intends to form additional subsidiaries in major European markets to expand its
direct sales efforts. See "Risk Factors -- International Revenues" and
"-- Reliance on Third-Party Distribution."
Raster Graphics also sells stand-alone DCS printer products to
international OEMs and systems integrators/VARs. These customers integrate these
printers with an image processing system. Some key customers in this category
are Oce and Sign-Tronic. Oce private labels the DCS printers as Oce model 5500
and Oce model 5510. In 1995, Oce contributed 10.9% of the Company's revenues.
The OEM
33
<PAGE> 36
agreement with Oce was signed in October 1990 and runs through October 1997. See
"Risk Factors -- Reliance on Third-Party Distribution."
Following the United States and Europe, Japan is the third largest market
for the Company's products. In Japan, the Company sells its products through
four key distributors: Sumisho, Sumitomo-3M, Marubeni and Kimoto. Raster
Graphics' Japanese sales efforts are managed by a United States-based Japanese
national who is a consultant to the Company.
In addition, the Company also distributes specialized versions of the
PosterShop image processing software to inkjet printer manufacturers and
distributors under the Onyx brand name. Some of the key distributors of these
versions of PosterShop include CIS Graphik & Bildverarbeitung GmbH, The David
Group and Access Graphics, the primary distributor of Hewlett-Packard inkjet
printers. In March 1996, Onyx signed an agreement with Encad to supply the Qube
image processing system for printing graphics from Macintosh computers onto
Encad's new 50-inch printer. The Company employs a dedicated sales force located
in Salt Lake City, Utah to work with these inkjet customers.
The Company promotes its DCS printing systems, DCS printers and PosterShop
products through public relations, direct mail, advertising, trade shows and
on-going customer communication programs. The Company utilizes telemarketing
programs to market consumables to its installed customer base. Additionally, the
PosterShop product is also promoted through the inkjet printer dealer channel by
offering free, time-limited copies of PosterShop image processing software with
the printer sales.
PRODUCT TECHNOLOGY, RESEARCH AND DEVELOPMENT
DCS Printer Technology
Raster Graphics' DCS printers utilize electrostatic technology to print on
roll stock. A paper transport system advances the paper through the printer and
the Silicon Imaging Bar printhead deposits small dots of electrical charge on
the paper. The inking system then applies the inks to develop the image. This
process is repeated for each color. Throughout the entire process, the printer
control system is responsible for all operations of the printer. See "Risk
Factors -- Risks Associated
34
<PAGE> 37
with Intellectual Property," "-- Limited History of Product Manufacturing and
Use; Product Defects" and "-- Dependence on Sole Source Subcontractors and
Suppliers."
LOGO
Paper Transport System. DCS digital printers use a roll-to-roll paper
transport system. A roll up to 400 feet in length is loaded on the supply hub. A
paper transport system moves the paper across the Silicon Imaging Bar print
head, and then across a specific color inking station. A take-up reel winds the
paper up as it moves through the printer. An advanced control system, which
utilizes registration marks, cameras and an encoder provides precise
registration from one color pass to the other. Print speed can range from 10
feet per minute to 40 feet per minute (20 feet per minute maximum for 200 x 400
dpi).
Silicon Imaging Bar Print Head. Raster Graphics' patented Silicon Imaging
Bar print head consists of a full 54-inch wide circuit board assembly with
10,656 copper trace styluses spaced every 1/200th inch. Each stylus is
controlled by an individual (non-multiplexed) high-voltage driver circuit, or
"switch." In the writing stage of electrostatic printing, the styluses maintain
contact with the paper as the paper moves across the Silicon Imaging Bar. The
styluses are switched on in every location where an image is desired, resulting
in the deposition of small dots of negative electrical charge, thus creating a
latent image on the paper.
Inking System. The inking system consists of the following components:
four inking stations, one for each process color (CMYK) and one optional spot
color mounted on a sliding drawer, a 2.5 gallon container for each color of
digital ink; four 32-ounce color concentrate bottles and a color control unit.
- Digital Inks. The ink consists of solid color pigment particles
suspended in a clear petroleum base. Because the ink is made of solid
pigments, as opposed to dyes, there is greater ultraviolet and moisture
resistance over water-based inks, making these inks suitable for outdoor
applications.
35
<PAGE> 38
- Concentrates. Concentrate bottles are used to provide color pigment to
the inking system to replenish the depleted color particles and maintain
color intensity.
- Color Control Unit. The color control unit is responsible for
automatically maintaining precise color density for each of the four
process colors. The ink supply from each of the color bottles is pumped
to the color control unit which optically senses the color value and, if
required, adds color concentrate to the ink, to maintain the required
color density. Spot color density is controlled manually.
LOGO
During the inking process, the paper moves across a specific inking station
and the image is developed as follows. At the start of each color printing pass,
the inking station for the desired color is positioned in place. The ink flows
through a slot called the fountain, contacts the negatively charged latent image
on the paper, and the positively charged pigment particles in the ink instantly
develop the image. As the paper continues to move across the inking station, a
spinning roller removes the excess ink from the paper and a fan assembly dries
the image. The roller is kept dry by a blade which scrapes off the excess ink
from the roller. A drain at the bottom of the inking station returns the excess
ink to the ink container. At the end of the process, the paper is rewound, the
next inking station is positioned in place, and the process is repeated three
more times, once for each of the remaining CMYK process colors with an
additional pass if a spot color or varnish is desired.
Printer Control System. Based on Intel's i960 processor with 16MB of
memory and 1GB disk (2GB optional), this system is responsible for all printer
control and diagnostic functions, as well as providing bi-directional
communications to the image processing system. The DCS printer's on-board disk
acts as temporary storage for print files. It buffers the next job while one job
is being printed. It is also used to store prints for subsequently making
additional copies. The bi-directional link to the image processing system is
used to send print files and control commands to the printer from the image
processing system. Control commands can include such attributes as number of
copies desired, resolution, print speed, number of color passes per color and
sequence of color passes. Over this link, the printer also provides status
information such as the name of the job being printed, type of media loaded,
amount of media used, amount of media left, type of ink and amount of ink. This
closed-loop operation allows the image processing system to intelligently manage
the workflow.
PosterShop Image Processing Software
PosterShop software, developed by the Company's wholly-owned subsidiary
Onyx, provides a complete set of tools for producing large-format color graphics
in a wide variety of printers. PosterShop, which is Onyx's second generation
image processing software, includes the following tools:
36
<PAGE> 39
- Preview and Size. Preview and sizing module displays the image on the
screen, rendered with the same software that is used to create the final
print. This WYSIWYG display also provides an easy drag-and-drop cropping
box to select the size and area to be printed. The image can be enlarged
to any size up to 50 feet by 50 feet.
- Tiling. Tiling enables PosterShop to automatically create panels or
tiles when an image will not fit on a single page. These tiles are
displayed on the screen with easy drag-and-drop lines so the user can
easily edit them. The user can also specify an overlap so that the image
is duplicated along the adjoining edges.
- Color Correction. Using several sliders, the color correction tool is
used to control the image appearance. These sliders are highlights,
midtones, shadows, contrast, brightness and saturation. These adjustments
are displayed both on screen and on the printout. This color tool also
has more advanced features for sophisticated users, such as set white,
set black, histograms, GCR, UCR, CMYK curves, sample point and others. Up
to four views of the image can be displayed at the same time.
- Color Calibration. Color calibration is used to provide
device-independent color when changing media, ink or dot pattern.
Calibration reads a color swatch using a densitometer to create color
tables associated with each media resolution and dot pattern.
- PostScript RIP and Font Manager. PosterShop features a full PostScript
level 2 RIP. This RIP converts the PostScript graphics files to binary
data formats specific to each printer. The RIP function utilizes a number
of specialized dot patterns including FDRP, a patented Onyx dot pattern.
A font manager is included to add special fonts to the RIP.
Research and Development
Raster Graphics plans to continue to devote substantial resources to
research and development for the continuous advancement of its proprietary
technologies to address LFDP market requirements. The Company believes the
continued enhancement of the DCS printing systems, including PosterShop image
processing software, to be vital to its future success. The Company intends to
expand its product lines, including printers, to achieve lower price points and
higher image quality. Raster Graphics will continue to design its products to be
compatible with computer systems and data standards commonly used in the
graphics industry. See "Risk Factors -- Uncertainty Regarding Development of
LFDP Market; Uncertainty Regarding Market Acceptance of New Products" and
"-- Risks Associated with Intellectual Property."
The Company's engineering team consists of over 20 engineering
professionals. The Company's research and development efforts include
significant activities in precision mechanics, paper conveyance techniques, real
time computer software development, circuit design, high speed data transfer and
software for color management, image processing and rasterization. Recent
software activities have focused on revamping the image processing software into
a family of products, including client-server versions, which run efficiently on
computers using Windows 95 and Windows NT operating systems.
Research and development expenses consist primarily of payroll and related
costs, occupancy, outside consultants, and material and consumable costs
associated with fabricating and testing of engineering prototypes. Raster
Graphics spent $2.2 million, $2.7 million and $3.4 million on research and
development for the fiscal years 1993, 1994 and 1995, respectively. Raster
Graphics expects future increases in research and development expenses as it
accelerates spending on future products.
INTELLECTUAL PROPERTY
As of May 31, 1996, the Company holds 10 issued United States patents
covering design features and fabrication methods used in Raster Graphics'
printers and color rendering techniques used by image processing software. The
expiration dates of these patents range from 2006 to 2010. Topics
37
<PAGE> 40
covered in these patents include methods for fabricating electrostatic writing
heads, paper positioning and stabilizing systems, and devices for applying
digital ink on paper. The Company expects to continue to seek patents on
innovations related to its products under development. There can be no assurance
that the Company will be successful in obtaining necessary patents, that the
Company's patent applications will result in the issuance of patents, that the
Company will develop additional proprietary technology that is patentable, that
any issued patents will provide the Company with any competitive advantages or
will withstand challenges by third parties or that patents of others will not
have an adverse effect on the Company. In addition to patents, the Company
believes its competitive position is dependent on its unpatented industrial
know-how, its copyrighted software, and the timing of the introduction of
product innovations in advance of potential future competitors.
There can be no assurance that others will not independently develop
similar products, duplicate the Company's products or design products that
circumvent any patents used by the Company. No assurance can be given that the
Company's processes or products will not infringe patents or proprietary rights
of others or that any licenses required under any such patents or proprietary
rights would be made available on terms acceptable to the Company, if at all. If
the Company does not obtain such licenses, it could encounter delays in product
introductions while it attempts to design around such patents, or it could find
that the development, manufacture or sale of products requiring such licenses
could be enjoined. In addition, the Company could incur substantial costs in
defending itself in suits brought against the Company on such patents or in
bringing suits to protect the Company's patents against infringement. If the
outcome of any such litigation is adverse to the Company, the Company's business
could be adversely affected. See "Risk Factors -- Risks Associated with
Intellectual Property."
MANUFACTURING
Raster Graphics' in-house manufacturing is performed in San Jose,
California. This operation consists primarily of writing head manufacturing,
electro-mechanical assembly and printer and system testing. The Company's
patented writing head manufacturing process is extremely complex and is subject
to stringent in-house controls. All other electronic components and assemblies
are subcontracted to qualified suppliers. All products are subjected to rigorous
testing prior to shipment to customers. The PosterShop image processing software
manufacturing is performed by Onyx in Salt Lake City, Utah. Raster Graphics also
contracts with a warehouse and distribution center in Rotterdam, Netherlands to
store and distribute consumables for the European markets. Consumables for the
United States and the rest of the world are supplied from the Company's San Jose
headquarters. See "Risk Factors -- Limited History of Product Manufacturing and
Use; Product Defects."
Raster Graphics' inventory delivery and control systems include MRP,
Just-In-Time and KANBAN systems. These and other systems enable the Company to
meet its manufacturing requirements while minimizing assets tied up in
inventories. The Company has embarked upon a corporate wide Total Quality
Management program which allows the Company to focus on continuous critical
process improvement. These programs include early supplier involvement on new
products, product qualification testing on new products, a qualified supplier
base, in-line statistical defect tracking systems and an outgoing and incoming
inspection capability.
Raster Graphics obtains safety certification for its products with the
assistance of Underwriters Laboratories ("UL") and TUV Product Services. This
allows Raster Graphics to affix UL and CE mark labels to its equipment. A self
certification process is employed to confirm that Raster Graphics printers
conform to the required standards for electromagnetic emissions. Testing is
typically carried out under the supervision of CKC Laboratories, who document
the results. Raster Graphics then affixes the appropriate FCC, CSA and CE mark
labels to the products. The Company also maintains a complete CE mark technical
file for each product as required by the European Economic Community.
38
<PAGE> 41
SUPPLIERS
The Company maintains strong business relationships with its key suppliers,
many of whom have been with the Company since its inception. With the exception
of three key components of the DCS printers (two rubber drive rollers and
electrostatic writing head circuit boards) as well as paper transport belts for
its discontinued CAD products. All components have multiple sources. To date,
the Company has experienced no material problems or delays in dealing with its
sole source suppliers. However, in case of loss of any of the suppliers of these
parts, the Company's ability to deliver its products on a timely basis would be
adversely affected and the Company's competitive position could be otherwise
impaired. See "Risk Factors -- Dependence on Sole Source Subcontractors and
Suppliers."
The inks, concentrates and varnish currently used in DCS products are
specially developed by two suppliers, neither of which has generally marketed
these products directly to the end user. However, each of these suppliers has
agreements with one OEM each to supply the DCS inks and concentrates. There is
no assurance that these two suppliers will continue to sell to the Company or
will not distribute these consumables through additional channels. Also, there
is no assurance that a new supplier will not enter the market and compete with
the Company's offerings. Papers used in DCS products are developed by two
additional suppliers. A number of other companies also acquire papers from these
two suppliers and compete with the Company in the sale of paper to end users.
See "Risk Factors -- Dependence on Sole Source Subcontractors and Suppliers."
COMPETITION
The market for LFDP equipment in general is extremely competitive. The
Company believes that the key competitive factors in the LFDP market are speed,
print quality, price and the ability to provide complete system solutions,
including service. Many of the Company's competitors, including ColorgrafX and
Lasermaster, are well established and have substantially greater resources than
Raster Graphics. See "Risk Factors -- Competition" and "-- Susceptibility of
Certain Customers to Economic and Financing Conditions."
In the printer market, ColorgrafX offers a series of four color
electrostatic printers that are priced slightly below the Company's printers.
The Company's DCS printers offer greater production speed, have the ability to
print with an additional fifth color and can produce both 200 x 200 dpi or 200 x
400 dpi images. Furthermore, Raster Graphics believes that it compares favorably
against ColorgrafX by offering complete solutions and services. A second
competitor, Lasermaster, markets a solid inkjet printing system that is less
expensive than the Company's DCS printing system and allows the user to print
graphics directly onto both paper and vinyl. However, Lasermaster's products are
significantly slower than the Company's DCS printer and have higher per square
foot cost of solid ink. In addition, Encad recently introduced a 50-inch version
of the NovaJet Pro inkjet printer for the LFDP market at a significantly lower
price which offers high image quality but is substantially slower than the
Company's DCS printers.
In the image processing software market, there are a large number of
companies that compete with the Company's PosterShop product, such as Cactus,
InfoGrafix and VisualEdge. However, with the exception of Lasermaster, Raster
Graphics is the only other manufacturer of both the printer and the software.
This allows the Company to offer a highly integrated printer and software
solution resulting in increased productivity.
In the consumables market, Oce and Cactus supply consumables, including
inks and papers, to their customers using the Company's printers. In addition,
3M markets a set of special premium-priced, long-durability inks. A number of
other companies compete with the Company for the paper business. See "Risk
Factors -- Competition," "Dependence on Sole Source Subcontractors and
Suppliers" and "Business -- Suppliers."
39
<PAGE> 42
EMPLOYEES
As of May 31, 1996, Raster Graphics had 146 full-time employees in the
following areas: 49 in manufacturing; 28 in customer support; 26 in research and
development; 26 in sales and marketing; and 17 in general and administrative
functions. The Company's employees are not represented by any collective
bargaining organization, and the Company has never experienced a work stoppage.
The Company believes that its relations with employees are good. See "Risk
Factors -- Key Personnel" and "-- Difficulties in Managing Growth."
FACILITIES
Raster Graphics has facilities in three locations. Its main headquarters of
62,000 square is located in San Jose, California; 11,000 square feet in Salt
Lake City, Utah; 3,000 square feet in Union City, California; and 4,000 square
feet in Germany. The lease on the Company's main facility expires in December
31, 2001. The Company anticipates that it will need additional space as business
expands and believes that it will be able to obtain suitable space as needed.
See "Risk Factors -- Difficulties in Managing Growth."
LITIGATION
Raster Graphics is not currently involved in any material litigation.
40
<PAGE> 43
MANAGEMENT
OFFICERS AND DIRECTORS
The officers and directors of the Company and their ages as of May 31, 1996
are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
------------------------------ --- -----------------------------------------------------
<S> <C> <C>
Rakesh Kumar.................. 51 President, Chief Executive Officer
and Chairman of the Board
Dennis R. Mahoney............. 42 Vice President and Chief Financial Officer
James Louis Harre............. 38 Vice President, Sales and Marketing
Robert Wallace Johnson........ 57 Vice President, Engineering
Sebastian Joseph Nardecchia... 54 Vice President, Operations
Michael Willingham............ 48 Vice President, Customer Service
Chuck Edwards................. 37 Director and President of Onyx
Frank J. Caufield............. 56 Director
Promod Haque(1)............... 48 Director
Lucio L. Lanza(2)............. 51 Director
W. Jeffers Pickard(1)(2)...... 53 Director
Delbert W. Yocam(2)........... 52 Director
</TABLE>
- ---------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
Mr. Kumar joined the Company in 1991 as President and Chief Executive
Officer. From 1988 to 1991, he was Group Marketing Manager, Engineering Systems,
for Digital Equipment Corporation, where he was responsible for worldwide
marketing to technical customers. From 1985 to 1987, he was Vice President of
Sales and Marketing for Precision Image Corporation, a manufacturer of
electrostatic printers. Prior to 1985, Mr. Kumar held a number of management
positions with Phoenix Data Systems, an electronic design automation software
company, Applicon, Inc., a CAD systems company, and Digital Equipment
Corporation.
Mr. Mahoney joined the Company in 1996 as Vice President and Chief
Financial Officer. From 1995 to 1996, he was Vice President and Chief Financial
Officer for Electronics For Imaging, Inc., a manufacturer of hardware and
software products for on-demand, small format color printing. From 1993 to 1995,
he was Vice President, Chief Financial Officer and Corporate Secretary for ADAC
Laboratories, a nuclear medical diagnostic imaging and healthcare information
systems company. From 1991 to 1993, he was Vice President, Finance and
Administration and Chief Financial Officer for Pharmetix Corporation, a drug
delivery technology company. Prior to 1991, Mr. Mahoney was Vice President,
Internal Operations and Control for Triton Container International Ltd. and held
several senior financial management positions at Syntex Corporation. Mr. Mahoney
is a certified public accountant.
Mr. Harre joined the Company in 1994 as Vice President of Sales and
Marketing. From 1990 to 1994, he was Executive Vice President of Onyx,
responsible for the sales and marketing of Onyx software products worldwide.
Prior to 1990, Mr. Harre held various sales and marketing positions in the
computer industry.
Dr. Johnson joined the Company in November 1994 as Vice President of
Engineering. From 1984 to 1994, he was Vice President of Engineering at
Versatec, Inc., a subsidiary of Xerox Corporation, where he was responsible for
printer and systems development. Prior to 1984, Dr. Johnson held various
research and management positions at Control Data Corporation.
Mr. Willingham joined the Company in 1993 as Vice President of Customer
Service. From 1991 to 1993, he was a Vice President for Phoenix Service, a
provider of supplies and service for electrostatic printers. From 1986 to 1991,
he held positions as Vice President, Sales and Service and Director of Field
Engineering for Precision Image, a manufacturer of electrostatic printers. Prior
to 1986, Mr. Willingham held various field service positions for semiconductor
and computer manufacturers.
41
<PAGE> 44
Mr. Nardecchia joined the Company in 1993 as Vice President of Operations.
From 1990 to 1993, he was Vice President of Product Operations for Barneyscan
Corporation, a manufacturer of color scanners. Prior to 1990, he held various
management positions in manufacturing, operations and product development at
Xerox.
Mr. Caufield has served as a director of the Company since November 1988.
Since 1978, Mr. Caufield has been a general partner of Kleiner, Perkins,
Caufield & Byers. Prior to the formation of Kleiner, Perkins, Caufield & Byers,
he was a General Partner and Manager of Oak Grove Ventures, a venture capital
firm. Mr. Caufield also serves as director of Quickturn Design Systems and
America Online.
Mr. Edwards has served as a director of the Company since August 1995. In
1989, he founded Onyx where he continues to serve as President. From 1987 to
1989, he served as Product Marketing Manager for Logic Automation, an electronic
design automation software company. From 1985 to 1987, he was a partner of ALS,
Inc., where he developed software design tools for GE Semiconductor. Prior to
1985, Mr. Edwards was an engineer at Intel Corporation.
Mr. Haque has served as a director of the Company since May 1993. Since
1990, he has served as Vice President of Norwest Venture Capital Management
Inc., a venture capital firm. He also is a general partner of Itasca Partners,
which is a general partner of Norwest Equity Partners IV, a Minnesota limited
partnership. He also serves as director of Forte Software, Inc.; Optical
Sensors, Inc.; Prism Solutions, Inc.; and Transaction Systems Architect, Inc.
Mr. Lanza has served as a director of the Company since May 1993. Since
1990, Mr. Lanza has been a partner of U.S. Venture Partners, a venture capital
firm, and an independent consultant to semiconductor and software companies. In
1986, Mr. Lanza founded EDA Systems, and served as Chief Executive Officer until
1989 when EDA was acquired by Digital Equipment Corporation. Prior to 1986, he
served in a number of marketing, engineering and general management positions in
the electronics industry. Mr. Lanza also serves as director of Landmark Graphics
Corporation.
Mr. Pickard has served as a director of the Company since November 1988.
Since 1980, Mr. Pickard has been general partner of Merrill, Pickard, Anderson &
Eyre Management Co., a venture capital firm.
Mr. Yocam has served as a director of the Company since April 1995. Since
1994, he has been an independent consultant. From 1992 to 1994, he served as
President, Chief Operating Officer and director of Tektronix, Inc. Prior to
1992, he was an independent consultant and from 1979 to 1989 served in a variety
of executive management positions at Apple Computer, Inc. Mr. Yocam is also a
director of Adobe Systems, Inc.; Castelle, Inc.; Integrated Measurement Systems,
Inc.; Oracle Corporation; Sapiens International Corporation; and several
privately held technology companies.
DIRECTOR COMPENSATION AND OTHER INFORMATION
Directors are reimbursed for certain reasonable expenses incurred in
attending Board meetings. In addition, Mr. Yocam receives $1,000 for each Board
of Directors meeting attended and receives an annual consulting fee of $30,000.
In October 1993, Mr. Lanza received an option to purchase 2,500 shares of Common
Stock at an exercise price of $0.50 per share. In April 1995, Mr. Yocam was
granted an option to purchase 40,000 shares of Common Stock at an exercise price
$0.50 of per share. In May 1996, Mr. Edwards, President of Onyx, was granted an
option to purchase 20,000 shares of Common Stock at an exercise price of $7.00
per share. Nonemployee directors of the Company are eligible to participate in
the Company's 1996 Directors' Stock Option Plan. See "-- Stock Option and
Incentive Plans -- 1996 Directors' Stock Option Plan."
There are no family relationships among the directors or officers of the
Company.
TERM OF OFFICE OF DIRECTORS AND OFFICERS
The Company's Bylaws currently provide for a Board of Directors consisting
of seven members. The Board of Directors is divided into three classes with the
directors of each class serving staggered terms. The Class I directors are
Messrs. Caufield and Pickard, whose current terms will end in
42
<PAGE> 45
fiscal 1997, the Class II directors are Messrs. Haque and Lanza, whose current
terms will end in fiscal 1998 and the Class III directors are Messrs. Kumar,
Edwards and Yocam, whose current terms end in fiscal 1999. Directors hold office
until their terms expire and their successors have been elected and qualified.
The Board of Directors elects the Company's officers, and such officers serve at
the discretion of the Board of Directors of the Company.
COMMITTEES OF THE BOARD OF DIRECTORS
There are currently two standing committees of the Board of Directors, the
Audit Committee and the Compensation Committee. The Audit Committee reviews the
Company's annual audit and meets with the Company's independent auditors to
review the Company's internal controls and financial management practices. The
Board's Audit Committee currently consists of Promod Haque and W. Jeffers
Pickard. The Compensation Committee recommends compensation for certain of the
Company's personnel to the Board and, together with the Board of Directors,
administers the Company's stock and option plans. The Compensation Committee
currently consists of Lucio L. Lanza, W. Jeffers Pickard and Del Yocam.
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning
compensation paid to the Company's Chief Executive Officer and each of the other
four most highly compensated officers who were serving as officers on December
31, 1995 (the "Named Officers") whose aggregate annual compensation exceeded
$100,000 for the fiscal year ended December 31, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------------
-------------------------------- SECURITIES
NAME AND PRINCIPAL POSITION SALARY BONUS AND COMMISSION UNDERLYING OPTIONS
- -------------------------------------------- -------- --------------------- ------------------
<S> <C> <C> <C>
Rakesh Kumar................................ $161,539 -- 60,000
President and Chief Executive Officer
James Buckley............................... 107,923 -- 20,000
Vice President and Chief Financial
Officer(1)
James L. Harre.............................. 100,000 $45,293 20,000
Vice President, Sales and Marketing
Robert W. Johnson........................... 130,000 -- 20,000
Vice President, Engineering
Sebastian J. Nardecchia..................... 111,539 -- 30,000
Vice President, Operations
</TABLE>
- ---------------
(1) Mr. Buckley resigned from the Company in January 1996. Dennis R. Mahoney,
the Company's current Vice President and Chief Financial Officer, began
employment with the Company in May 1996.
43
<PAGE> 46
The following table provides certain summary information concerning options
granted during the fiscal year ended December 31, 1995 to the Named Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS (1) POTENTIAL
-------------------------------------------------------- REALIZABLE VALUE
PERCENT OF AT ASSUMED ANNUAL
NUMBER OF TOTAL OPTIONS RATES OF STOCK
SECURITIES GRANTED IN PRICE APPRECIATION
UNDERLYING FISCAL YEAR EXERCISE OR FOR OPTION TERM(3)
OPTIONS ENDED DECEMBER BASE PRICE EXPIRATION ------------------
NAME GRANTED(2) 29, 1995 ($ PER SHARE) DATE 5% 10%
- -------------------------- ---------- -------------- ------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Rakesh Kumar.............. 60,000 11.9% $ 0.50 3/14/2005 $18,867 $47,811
James R. Buckley.......... 20,000 4.0% 0.50 3/14/2005 6,289 15,937
James Harre............... 20,000 4.0% 0.50 3/14/2005 6,289 15.937
Robert W. Johnson......... 20,000 4.0% 0.50 3/14/2005 6,289 15,937
Sebastian Nardecchia...... 30,000 6.0% 0.50 3/14/2005 9,434 23,906
</TABLE>
- ---------------
(1) Consists of stock options granted pursuant to the Company's 1988 Stock
Option Plan. The Company's options generally become exercisable at a rate of
12.5% after six months following the date of grant and approximately 2% per
month thereafter, as long as the optionee remains an employee with,
consultant to or director of the Company. The maximum term of each option
granted is ten years from the date of grant. The exercise price is equal to
the fair market value of the stock on the grant date as determined by the
Board of Directors. See "-- Stock Option and Incentive Plans."
(2) On May 16, 1996, Messrs. Harre, Johnson, Kumar and Nardecchia were granted
options to purchase 20,000, 10,000, 100,000 and 10,000 shares of Common
Stock at an exercise price of $7.00 per share under the Company's 1988 Stock
Option Plan.
(3) The 5% and 10% assumed compounded annual rates of stock price appreciation
are mandated by rules of the Securities and Exchange Commission. There can
be no assurance that the actual stock price appreciation over the ten-year
option term will be at the assumed 5% and 10% levels or at any other defined
level. Unless the market price of the Common Stock appreciates over the
option term, no value will be realized from the option grants made to the
persons named in the Summary Compensation Table.
The following table provides certain summary information concerning the
shares of Common Stock represented by outstanding stock options held by each of
the Named Officers as of December 31, 1995.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Rakesh Kumar.................................. 172,750 77,250 $ 172,750 $77,250
James R. Buckley.............................. 9,450 66,550 9,450 66,550
James Harre................................... 28,750 51,250 28,750 51,250
Robert W. Johnson............................. 20,000 60,000 20,000 60,000
Sebastian Nardecchia.......................... 23,750 36,250 23,750 36,250
</TABLE>
STOCK OPTION AND INCENTIVE PLANS
1996 Stock Plan
The Company's 1996 Stock Plan (the "1996 Stock Plan") was adopted by the
Board of Directors in June 1996 and will be submitted for approval by the
Company's stockholders in July 1996. An aggregate of 800,000 shares of the
Company's Common Stock are reserved for issuance under the 1996 Stock
44
<PAGE> 47
Plan. Upon adoption of the 1996 Stock Plan, the Company's Board of Directors
determined to make no further grants under the 1988 Option Plan.
The 1996 Stock Plan provides for the granting to employees (including
officers and employee directors) of "incentive stock options" within the meaning
of Section 422 of the Code, for the granting to employees and consultants of
nonstatutory stock options and for the granting to employees of stock purchase
rights. The 1996 Stock Plan may be administered by the Board of Directors or a
committee of the Board (the "1996 Administrator"). The 1996 Administrator
determines the terms of options and stock purchase rights granted under the 1996
Stock Plan, including the number of shares subject to the option or right,
exercise price, term and exercisability provided that the maximum number of
shares which may be subject to options or stock purchase rights granted to any
one employee under the 1996 Stock Plan for any fiscal year of the Company shall
be 500,000. The exercise price of all incentive stock options granted under the
1996 Stock Plan must be at least equal to the fair market value of the Common
Stock of the Company on the date of grant. The exercise price of any incentive
stock option granted to an optionee who owns stock representing more than 10% of
the voting power of the Company's outstanding capital stock must equal at least
110% of the fair market value of the Common Stock on the date of grant. Payment
of the exercise price may be made in cash, promissory notes or other
consideration determined by the 1996 Administrator. With respect to any
participant who owns stock possessing more than 10% of the voting power of all
classes of stock of the Company, the maximum term of an incentive stock option
must not exceed five years. The term of all other options may not exceed ten
years.
If the Company consolidates or merges with or into another corporation,
then each option will be either assumed or an equivalent option substituted by
the successor corporation,or if not assumed or substituted the unvested portion
of each option will be accelerated. If not terminated earlier, the 1996 Stock
Plan will terminate in 2006. The 1996 Administrator has the authority to amend
or terminate the 1996 Stock Plan as long as such action does not adversely
affect any outstanding option.
1996 Employee Stock Purchase Plan
The Company's 1996 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors in June 1996 and will be submitted for
approval by the Company's stockholders in July 1996. An aggregate of 400,000
shares of the Company's Common Stock are reserved for issuance under the
Purchase Plan.
The Purchase Plan, which is intended to qualify under Section 423 of the
Code, will be implemented by a series of offering periods of 12 months duration
with new offering periods other than the first offering period commencing on or
about January 1 and July 1 of each year. Each offering period will consist of
two consecutive purchase periods of six months duration with the last day of
such period being designated a purchase date. The initial offering period is
expected to commence on the date of this offering and continue through June 30,
1997, with the first purchase date occurring on December 31, and subsequent
purchase dates to occur every 6 months thereafter. The Purchase Plan will be
administered by the Board of Directors or by a committee appointed by the Board.
Employees (including officers and employee directors) of the Company, or of any
majority owned subsidiary designated by the Board, are eligible to participate
in the Purchase Plan if they are employed by the Company or any such subsidiary.
The Purchase Plan permits eligible employees to purchase Common Stock through
payroll deductions, which may not exceed 10% of an employee's compensation, at a
price equal to the lower of 85% of the fair market value of the Company's Common
Stock at the beginning of the offering period or on the purchase date or end of
the offering period. If the fair market value of the Common Stock on a purchase
date is less than the fair market value at the beginning of the offering period,
a new 12 month offering period will automatically begin on the first business
day following the purchase date with a new fair market value. Employees may end
their participation in the offering at any time during the offering period, and
participation ends automatically on termination of employment with the Company.
45
<PAGE> 48
The Purchase Plan provides that in the event of a merger of the Company
with or into another corporation or a sale of substantially all of the Company's
assets, each right to purchase stock under the Purchase Plan will be assumed or
an equivalent right substituted by the successor corporation, unless the Board
of Directors shortens the offering period so that employees' rights to purchase
stock under the Purchase Plan will be exercised prior to the merger or sale of
assets. The Board of Directors has the power to amend or terminate the Purchase
Plan as long as such action does not adversely affect any outstanding rights to
purchase stock thereunder. If not terminated earlier, the Purchase Plan will
have a term of ten years.
1996 Directors' Stock Option Plan
The 1996 Directors' Stock Option Plan (the "Directors' Plan") was adopted
by the Board of Directors on June 1996 and will be submitted for approval by the
Company's stockholders in July 1996. An aggregate of 150,000 shares of the
Company's Common Stock are reserved for issuance under the Directors' Plan. The
Directors' Plan provides for the grant of nonstatutory stock options to
nonemployee directors of the Company. The Directors' Plan is designed to work
automatically without administration; however, to the extent administration is
necessary, it will be performed by the Board of Directors. To the extent they
arise, it is expected that conflicts of interest will be addressed by abstention
of the interested director from both deliberations and voting regarding matters
in which he or she has a personal interest.
The Directors' Plan provides that each person who is or becomes a
nonemployee director of the Company shall be granted a nonstatutory stock option
to purchase 10,000 shares of Common Stock (the "First Option") on the date on
which the optionee first becomes a nonemployee director of the Company or for
current directors on the date of this offering. Thereafter, on the first
calendar day of the Company's fiscal year commencing in 1997, each nonemployee
director shall be granted an additional option to purchase 5,000 shares of
Common Stock (a "Subsequent Option") if, on such date, he or she shall have
served on the Company's Board of Directors for at least six months.
The Directors' Plan sets neither a maximum nor a minimum number of shares
for which options may be granted to any one nonemployee director, but does
specify the number of shares that may be included in any grant and the method of
making a grant. No option granted under the Directors' Plan is transferable by
the optionee other than by will or the laws of descent or distribution, and each
option is exercisable, during the lifetime of the optionee, only by such
optionee. The Directors' Plan provides that the First Option shall become
exercisable in installments as to 33% of the total number of shares subject to
the First Option on each of the first, second and third anniversaries of the
date of grant of the First Option, and each Subsequent Option shall become
exercisable in full on the first anniversary of the date of grant of such
Subsequent Option. If a nonemployee director ceases to serve as a director for
any reason, he or she may, but only within 30 days after the date he or she
ceases to be a director of the Company, exercise options granted under the
Directors' Plan to the extent that he or she was entitled to exercise such
options at the date of such termination. To the extent he or she was not
entitled to exercise any such option at the date of such termination, or if he
or she does not exercise such option (which he or she was entitled to exercise)
within such 30-day period, such option shall terminate. The exercise price of
all stock options granted under the Directors' Plan shall be equal to the fair
market value of a share of the Common Stock on the date of grant of the option.
Options granted under the Directors' Plan have a term of ten years.
In the event of a merger of the Company with or into another corporation or
a sale of substantially all of the Company's assets, each option will be assumed
or an equivalent option substituted by the successor corporation. The Board of
Directors may amend or terminate the Directors' Plan; provided, however, that no
such action may adversely affect any outstanding option, and the provisions
regarding the grant of options under the Directors' Plan may be amended only
once in any six-month period, other than to comport with changes in the Code. If
not terminated earlier, the Directors' Plan will have a term of ten years.
46
<PAGE> 49
1988 Stock Option Plan
A total of 1,560,000 shares of Common Stock has been reserved for issuance
under the Company's 1988 Stock Option Plan (the "1988 Option Plan"). The 1988
Option Plan was adopted by the Board of Directors in November 1988 and approved
by the stockholders in April 1989. As of March 31, 1996, options to purchase
142,902 shares of Common Stock had been exercised and options to purchase a
total of 1,027,100 shares at a weighted average exercise price of $0.69 per
share were outstanding.
The Board of Directors has determined that no further options will be
granted under the 1988 Option Plan after the offerings. Outstanding options
granted under the 1988 Option Plan generally become exercisable at a rate of
12.5% of the shares subject to the option six months after the date of the grant
and approximately 2% per share thereafter, as long as an optionee remains an
employee with, consultant to or director of the Company. The term of each
outstanding stock option is ten years. The exercise price of all options granted
under the 1988 Option Plan is equal to the fair market value of the Common Stock
of the Company on the date of the grant as authorized by the Board of Directors.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Certificate of Incorporation and Bylaws provide that the
Company shall indemnify its directors and officers against any damages arising
from their actions as an agent of the Company to the fullest extent permitted by
Delaware law. The Bylaws further provide that the Company may similarly
indemnify its other employees and agents. In addition, each director has entered
into an indemnification agreement with the Company, pursuant to which the
Company has agreed to indemnify such director to the fullest extent permitted by
Delaware law.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company where indemnification would
be required or permitted. The Company is not aware of any threatened litigation
or proceeding which might result in a claim for such indemnification.
CERTAIN TRANSACTIONS
In February 1995, shares of the Company's Series C Preferred Stock,
convertible into an aggregate of 595,363 shares of Common Stock, were sold at an
as converted price of $2.50 per share to investors that included, among others,
Norwest Equity Partners IV, a Minnesota limited partnership, 117,584 shares;
U.S. Venture Partners III, 114,056 shares (which includes 1,175 shares sold to
U.S.V. Entrepreneur Partners); Kleiner Perkins Caufield & Byers IV, 76,271
shares; Associated Venture Investors II, 58,766 shares (which includes 970
shares sold to Associated Venture Investors - PGF); Merrill, Pickard, Anderson &
Eyre IV, 54,660 shares; and Bay Partners IV, 47,669 shares (which includes 3,813
shares sold to California BPIV, L.P.).
In August 1995, the Company acquired Onyx in exchange for shares of the
Company's Series C Preferred Stock, convertible into an aggregate of 443,360
shares of Common Stock. In December 1995, the Company amended the Agreement and
Plan of Reorganization with Onyx to provide for the release from escrow to the
former Onyx stockholders on January 1996 of the Company's Series C Preferred
Stock convertible into 133,008 shares of Common Stock.
The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions, including loans, between
the Company and its officers, directors, principal stockholders and affiliates
will be approved by a majority of the Board of Directors, including a majority
of the independent and disinterested directors on the Board of Directors, and
will be on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.
47
<PAGE> 50
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of May 31, 1996, and as adjusted to reflect the
sale by the Company of the shares of Common Stock offered by this Prospectus,
(i) by each person who is known by the Company to beneficially own 5% or more of
the Common Stock, (ii) by each of the Company's directors and Named Officers,
(iii) by all current executive officers and directors as a group and (iv) by the
Selling Stockholders. Unless otherwise indicated below, to the knowledge of the
Company, all persons listed below have sole voting and investment power with
respect to their shares of Common Stock, except to the extent authority is
shared by spouses under applicable law.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO THE OFFERING SHARES TO AFTER THE OFFERING**
--------------------- BE SOLD ---------------------
NAME AND ADDRESS NUMBER PERCENT IN OFFERING NUMBER PERCENT
- ---------------------------------------------- --------- ------- ----------- --------- -------
<S> <C> <C> <C> <C> <C>
5% SHAREHOLDERS
Norwest Equity Partners IV, 857,584 13.5 -- 857,584
a Minnesota Limited Partnership
2800 Piper Jaffray Tower
222 South Ninth Street
Minneapolis, MN 55402
U.S. Venture Partners III(1) 857,583 13.5 -- 857,583
2180 Sand Hill Road, Suite 300
Menlo Park, CA 94025
Kleiner Perkins Caufield & Byers IV(2) 653,519 10.3 -- 653,519
Four Embarcadero Center
San Francisco, CA 94111
Hancock Venture Partners(3) 581,583 9.1 -- 581,583
One Financial Center, 39th Floor
Boston, MA 02111
Associated Venture Investors II(4) 490,131 7.7 -- 490,131
One First Street, No. 12
Los Altos, CA 94022
Merrill, Pickard, Anderson & Eyre IV(5) 463,724 7.3 -- 463,724
2480 Sand Hill Road, Suite 200
Menlo Park, CA 94025
Electronic Marketing Ltd.(6) 431,834 6.8 -- 431,834
5/F., General Electronics Building
FSSTL 96, Sheung Shui
New Territories, Hong Kong
Walden Ventures(7) 387,669 6.1 -- 387,669
750 Battery Street, 7th Floor
San Francisco, CA 94111
Bay Partners IV(8) 347,669 5.5 -- 347,669
10600 North DeAnza Blvd., Suite 100
Cupertino, CA 95014
OFFICERS AND DIRECTORS
Lucio L. Lanza(9) 860,083 13.6 -- 860,083
Promod Haque(10) 857,584 13.5 -- 857,584
Frank Caufield(11) 653,519 10.3 -- 653,519
W. Jeffers Pickard(12) 463,724 7.3 -- 463,724
Rak Kumar(13) 210,000 3.2 -- 210,000
Chuck Edwards(14) 162,560 2.5 -- 162,560
James Harre(15) 40,417 * -- 40,417 *
Sebastian Nardecchia(16) 32,500 * -- 32,500 *
Robert Johnson(17) 31,667 * -- 31,667 *
Delbert Yocam(18) 13,333 * -- 13,333 *
1264 North Shore Road
Lake Oswego, OR 97034
All executive officers and directors 2,693,535 39.4 -- 2,693,535
as a group (11 persons)(9), (10), (11),
(12), (13), (14), (15), (16), (17), (18),
(19)
</TABLE>
48
<PAGE> 51
- ---------------
* Less than 1%.
** Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of shares, the
Common Stock options or warrants held by that person that are currently
exercisable, or become exercisable within 60 days following May 31, 1996,
are deemed outstanding. However, such shares are not deemed outstanding for
purposes of computing the percentage ownership of any other person.
(1) Includes 25,727 shares held by Second Ventures Limited Partnership and
8,575 shares held be U.S.V. Entrepreneur Partners.
(2) Includes 23,679 shares held by KPCB Zaibatsu Fund I. Also includes 23,668
shares issuable pursuant to presently exercisable warrants.
(3) Includes 52,577 shares held by Falcon Ventures, L.P. and 242,314 shares
held by Mayflower Fund Limited. Also includes an aggregate of 44,378 shares
issuable pursuant to presently exercisable warrants (includes 4,142 shares
held by Falcon Ventures, L.P. and 20,118 shares held by Mayflower Fund
Limited.
(4) Includes 7,079 shares held by Associated Venture Investors-PGF and 37,270
shares held by AVI Partners II, N.V. Also includes an aggregate of 24,257
shares issuable pursuant to presently exercisable warrants (includes 367
shares held by Associated Venture Investors-PGF and 1,940 shares held by
AVI Partners II, N.V.).
(5) Includes 2,937 shares held by MPAE Technology Partners. Includes 14,201
shares issuable pursuant to presently exercisable warrants.
(6) Includes 120,000 shares held by Luzon Investments Ltd. Also includes 11,834
shares issuable pursuant to presently exercisable warrants.
(7) Includes 80,000 shares held by O, W & W Pacrim Investments Limited, 24,332
shares held by Walden Capital Partners, 97,334 shares held by Walden
International III, C.V. and 117,334 shares held by Walden Investors.
(8) Includes 27,813 shares held by California BPIV, L.P.
(9) Includes 823,281 shares held by U.S. Venture Partners III, 25,727 shares
held be Second Ventures Limited Partnership and 8,575 shares held by U.S.V.
Entrepreneur Partners. Because Mr. Lanza is a general partner of U.S.
Venture Partners, the general partner of these entities, he may be deemed
to be a beneficial owner of such shares except to the extent of his
interest in such shares arising from his interest in U.S. Venture Partners.
Also includes 2,500 shares issuable upon exercise of options exercisable
within 60 days of May 31, 1996
(10) Includes 857,584 shares held by Norwest Equity Partners IV. Because Mr.
Haque is a general partner of Norwest Equity Partners, the general partner
of Norwest Equity Partners IV, he may be deemed to be a beneficial owner of
such shares. Mr. Hague disclaims beneficial ownership of such shares except
to the extent of his interest in such shares arising from his interest in
Norwest Equity Partners.
(11) Includes 606,172 shares held by Kleiner Perkins Caufield & Byers IV and
23,679 shares held by KPCB Zaibatsu Fund I. Also includes 23,668 shares
issuable to Kleiner Perkins Caufield & Byers IV pursuant to presently
exercisable warrants. Because Mr. Caufield is a general partner of Kleiner
Perkins Caufield & Byers, which is the general partner of Kleiner Perkins
Caufield & Byers IV and KPCB Zaibatsu Fund I, he may be deemed to be a
beneficial owner of such shares. Mr. Caufield disclaims beneficial
ownership of such shares except to the extent of his interest in such
shares arising from his interest in Kleiner Perkins Caufield & Byers.
(12) Includes 446,586 shares held by Merrill, Pickard, Anderson & Eyre IV and
2,937 shares held by MPAE Technology Partners. Also includes 14,201 shares
issuable pursuant to presently exercisable warrants. Because Mr. Pickard is
a general partner of Merrill, Pickard, Anderson & Eyre, the
49
<PAGE> 52
general partner of these entities, he may be deemed to be a beneficial
owner of such shares. Mr. Pickard disclaims beneficial ownership in such
shares arising from his interest in Merrill, Pickard, Anderson & Eyre.
(13) Includes 200,000 shares issuable upon exercise of options exercisable
within 60 days of May 31, 1996.
(14) Includes 148,560 shares issuable upon exercise of options exercisable
within 60 days of May 31, 1996.
(15) Includes 40,417 shares issuable upon exercise of options exercisable within
60 days of May 31, 1996.
(16) Includes 32,500 shares issuable upon exercise of options exercisable within
60 days of May 31, 1996.
(17) Includes 31,667 shares issuable upon exercise of options exercisable within
60 days of May 31, 1996.
(18) Includes 13,333 shares issuable upon exercise of options exercisable within
60 days of May 31, 1996.
(19) Includes 21,667 shares issuable upon exercise of options exercisable within
60 days of May 31, 1996.
50
<PAGE> 53
DESCRIPTION OF CAPITAL STOCK
Upon the completion of this offering, the authorized capital stock of the
Company will consist of 50,000,000 shares of Common Stock, par value $0.001 per
share, and 2,000,000 shares of undesignated Preferred Stock, par value $0.001
per share, after giving effect to the amendment and restatement of the Company's
Certificate of Incorporation to delete references to the Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock and increase the
authorized number of shares of Common Stock, which will occur upon conversion of
such Preferred Stock into Common Stock upon the closing of this offering.
COMMON STOCK
As of March 31, 1996, there were 6,316,739 shares of Common Stock
outstanding that were held of record by approximately 99 stockholders (as
adjusted to reflect the conversion of all outstanding shares of the Company's
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
into Common Stock at a one-to-one ratio upon the completion of this offering).
Stock options to purchase an aggregate of 1,027,100 shares of Common Stock were
outstanding as of March 31, 1996. Warrants to purchase an aggregate of 170,155
shares of Common Stock were also outstanding (as adjusted to reflect the
conversion of all outstanding shares of Preferred Stock). There will be
shares of Common Stock outstanding (assuming no exercise of the
Underwriters' overallotment option or exercise of outstanding options under the
Company's stock and option plans after March 31, 1996) after giving effect to
the sale of the shares of Common Stock to the public offered hereby at an
assumed offering price of $ per share.
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Subject to
preferential rights with respect to any outstanding Preferred Stock, holders of
Common Stock are entitled to receive ratably such dividends as may be declared
by the Board of Directors out of funds legally available therefor. See "Dividend
Policy." In the event of a liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities and satisfaction of preferential rights
of any outstanding Preferred Stock. The Common Stock has no preemptive or
conversion rights or other subscription rights and there are no redemption or
sinking fund provisions available to the Common Stock. The outstanding shares of
Common Stock are, and the shares of Common Stock to be issued upon completion of
this offering will be, fully paid and nonassessable.
PREFERRED STOCK
Upon completion of this offering, the Board of Directors will be authorized
to issue 2,000,000 shares of undesignated Preferred Stock in one or more series
and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, dividend rates, conversion rights, voting rights,
terms of redemption, redemption prices, liquidation preferences and the number
of shares constituting any series or the designation of such series, without
further vote or action by the stockholders. The issuance of Preferred Stock may
have the effect of delaying, deterring or preventing a change in control of the
Company without further action by the stockholders. The issuance of Preferred
Stock with voting and conversion rights may adversely affect the voting power of
the holders of Common Stock, including the loss of voting control to others. At
present, the Company has no plans to issue any shares of Preferred Stock. See
"Risk Factors -- Blank Check Preferred Stock; Anti-Takeover Provisions."
REGISTRATION RIGHTS OF CERTAIN HOLDERS
The holders of 6,444,872 shares of Common Stock or warrants exercisable for
Common Stock (the "Registrable Securities") or their transferees are entitled to
certain rights with respect to the registration of such shares under the
Securities Act. These rights are provided under the terms of an
51
<PAGE> 54
investors' rights agreement (the "Rights Agreement") between the Company and the
holders of Registrable Securities. The holders of at least 20% of the
Registrable Securities may require, on two occasions at any time after six
months following the effective date of this offering, that the Company use its
best efforts to register the Registrable Securities for public resale; provided,
among other limitations, that the proposed aggregate selling price, prior to
deductions for underwriting discounts and commissions, is at least $10 million.
The Company may delay such registration by up to 90 days for business reasons
(but not more than once in any 12-month period). If the Company registers any of
its Common Stock either for its own account or for the account of other security
holders, the holders of Registrable Securities are entitled to include their
shares of Common Stock in the registration. A holder's right to include shares
is subject to certain conditions and limitations, including lock-up agreements
restricting the sale of such shares for 180 days after the effective date of the
registration statement filed in connection with this offering and the right of
the underwriters to limit the number of shares included in such registration.
Holders of Registrable Securities may also require the Company, on no more than
two occasions over any 12-month period, to register all or a portion of their
Registrable Securities on Form S-3 when use of such form becomes available to
the Company, provided, among other limitations, that the proposed aggregate
selling price is at least $500,000. The right of holders of Registrable
Securities to have such shares registered on Form S-3 is subject to the right of
the underwriters participating therein to limit the number of shares included in
such registration. The Company may delay such registration on Form S-3 by up to
90 days for business reasons. Subject to certain limitations contained in the
Rights Agreement and subject to the following sentence, all fees, costs and
expenses of registrations effected pursuant to the Rights Agreement must be
borne by the Company and all selling expenses (including underwriting discounts
and selling commissions) relating to Registrable Securities must be borne by the
holders of the securities being registered.
ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW
The Company's Certificate of Incorporation provides that any action
required or permitted to be taken by the stockholders of the Company may be
taken only at a duly called annual or special meeting of the stockholders and
eliminates cumulative voting in the election of directors if the Company has 800
or more stockholders as of the record date for the most recent annual meeting of
stockholders. The Certificate of Incorporation and Bylaws also restrict the
right of stockholders to change the size of the Board of Directors and to fill
vacancies on the Board of Directors. The Bylaws also establish procedures,
including advance notice procedures, with regard to the nomination, other than
by or at the direction of the Board of Directors, of candidates for election as
directors or for stockholder proposals to be submitted at stockholder meetings.
In addition, the Company's Certificate of Incorporation provides for a Board of
Directors divided into three classes of directors with each class serving a
staggered three-year term. A classified board may maintain the incumbency of the
Board of Directors, as it generally makes it more difficult for stockholders to
replace a majority of the directors. The amendment of any of these provisions
would require approval by holders of 66.67% or more of the outstanding Common
Stock. The Certificate of Incorporation also authorizes the issuance of up to
2,000,000 shares of Preferred Stock. The rights of the holders of the Common
Stock will be subject to, and may be subordinated to, the rights of the holders
of any Preferred Stock that may be issued in the future and, as a result, the
issuance of such Preferred Stock could have a material adverse effect on the
market value of the Common Stock. The Company has no present plan to issue
shares of Preferred Stock.
These and other provisions could have the effect of making it more
difficult for a third party to effect a change in the control of the Board of
Directors and therefore may discourage another person or entity from making a
tender offer for the Company's Common Stock, including offers at a premium over
the market price of the Common Stock, and might result in a delay in changes in
control of management. In addition, these provisions could have the effect of
making it more difficult for proposals favored by the stockholders to be
presented for stockholder consideration.
52
<PAGE> 55
The Company has also included in its Certificate of Incorporation
provisions to eliminate the personal liability of its directors for monetary
damages resulting from breaches of their fiduciary duty to the extent permitted
by the Delaware Law and to indemnify its directors and officers to the fullest
extent permitted by Section 145 of the Delaware Law.
The Company is subject to the provisions of Section 203 of the Delaware
General Corporate Law. In general, the statute prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date that the
person became an interested stockholder unless (with certain exceptions) the
business combination or the transaction in which the person became an interested
stockholder is approved in a prescribed manner. Generally, a "business
combination" includes a merger, asset or stock sale or other transaction
resulting in a financial benefit to the stockholder, and an "interested
stockholder" is a person who, together with affiliates and associates, owns (or
within three years prior, did own) 15% or more of the corporation's outstanding
voting stock. This provision may have the effect of delaying, deferring or
preventing a change in control of the Company without further action by the
stockholders. In addition, upon completion of this offering, certain provisions
of the Company's charter documents, including a provision eliminating the
ability of stockholders to take actions by written consent, may have the effect
of delaying or preventing changes in control or management of the Company, which
could have an adverse effect on the market price of the Company's Common Stock.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is U.S. Stock
Transfer Corporation. Its address is 1745 Gardena Avenue, Glendale, CA 91204,
and its telephone number is (818) 502-1404.
53
<PAGE> 56
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have outstanding
shares of Common Stock, assuming no exercise of options or warrants
after March 31, 1996. Of these shares, shares (including the
shares sold in this offering) will be freely tradable without
restriction or further registration under the Securities Act unless purchased by
"affiliates" of the Company as that term is defined in Rule 144 of the
Securities Act. The remaining 6,309,239 shares will be "restricted securities"
as that term is defined under Rule 144 (the "Restricted Shares"). Sales of
Restricted Shares in the public market, or the availability of such shares for
sale, could adversely affect the market price of the Common Stock.
In addition to the shares sold in this offering, 7,500 shares of
Common Stock held by current stockholders will be immediately eligible for sale
in the public market without restriction pursuant to Rule 144(k) of the
Securities Act. An additional 120,000 shares of Common Stock will be eligible
for sale beginning 91 days after the effective date of the Registration
Statement. An additional 4,999,877 shares of Common Stock and 1,197,255 shares
of Common Stock issuable upon exercise of currently outstanding options and
warrants will be eligible for sale beginning 181 days after the date of this
Prospectus. In addition, at various times after 181 days from the date of this
Prospectus, 1,189,362 shares will become eligible for sale in the public market
upon expiration of their respective two-year holding periods, subject to certain
volume and resale restrictions set forth in Rule 144.
Certain stockholders of the Company holding 120,000 shares of Common Stock
are subject to a contractual lock-up pursuant to which they may not sell or
otherwise dispose of any of these shares for 90 days after the effective date of
the Registration Statement. All directors and officers and certain other
stockholders of the Company, holding in the aggregate 6,189,238 shares of Common
Stock, have agreed with the Underwriters not to sell or otherwise dispose of any
of their shares for 180 days after the date of this Prospectus (the "Lockup
Period") without the prior written consent of Hambrecht & Quist LLC. See
"Underwriting."
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for at
least two years would be entitled to sell within any three-month period a number
of shares that does not exceed the greater of one percent of the number of
shares of Common Stock then outstanding or the average weekly trading volume of
the Common Stock as reported through the Nasdaq National Market during the four
calendar weeks preceding the filing of a Form 144 with respect to such sale.
Sales under Rule 144 are also subject to certain manner of sale provisions and
notice requirements and to the availability of current public information about
the Company. In addition, a person who is not deemed to have been an "affiliate"
of the Company at any time during the 90 days preceding a sale, and who has
beneficially owned for at least three years the shares proposed to be sold,
would be entitled to sell such shares under Rule 144(k) without regard to the
requirements described above. The Securities and Exchange Commission has
recently proposed to reduce the Rule 144 holding periods. If enacted, such
modification will have a material effect on the timing of when shares of the
Common Stock become eligible for resale.
In general, Rule 701 permits resales of shares issued pursuant to certain
compensatory benefit plans and contracts commencing 90 days after the issuer
becomes subject to the reporting requirements of the Securities Exchange Act of
1934, as amended, in reliance upon Rule 144 but without compliance with certain
restrictions, including the holding period requirements, contained in Rule 144.
The Company intends to register on a registration statement on Form S-8, during
the Lockup Period, (i) assuming no exercise of options after March 31, 1996, a
total of 1,027,100 shares of Common Stock issuable upon exercise of outstanding
options under the 1988 Option Plan, (ii) a total of 800,000 shares of Common
Stock reserved for issuance under the 1996 Stock Plan, (iii) a total of 150,000
shares of Common Stock reserved for issuance under the Directors' Plan and (iv)
a total of 400,000 shares of Common Stock reserved for issuance under the
Purchase Plan. Such registration will permit the resale of shares so registered
by non-affiliates in the public market without restriction under the Securities
Act.
54
<PAGE> 57
Prior to this offering, there has been no public market for the Common
Stock of the Company, and any sale of substantial amounts of Common Stock in the
open market may adversely affect the market price of the Common Stock offered
hereby. In addition, after this offering, the holders of 5,444,872 shares of
Common Stock (assuming exercise of outstanding warrants for 170,155 shares of
Common Stock) are entitled to certain demand and piggyback rights with respect
to registration of such shares under the Securities Act. Registration of such
shares under the Securities Act would result in such shares becoming freely
tradable without restriction under the Securities Act (except for shares
purchased by affiliates of the Company) immediately upon the effectiveness of
such registration. See "Description of Capital Stock -- Registration Rights of
Certain Holders." If such holders, by exercising their demand registration
rights, cause a large number of securities to be registered and sold in the
public market, such sales could have an adverse effect on the market price for
the Company's Common Stock. If the Company were to include in a Company
initiated registration any Registrable Securities pursuant to the exercise of
piggyback registration rights, such sales may have an adverse effect on the
Company's ability to raise needed capital.
55
<PAGE> 58
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, through their Representatives, Hambrecht & Quist LLC
and Prudential Securities Incorporated, have severally agreed to purchase from
the Company the following respective numbers of shares of Common Stock:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---------------------------------------------------------------- ---------
<S> <C>
Hambrecht & Quist LLC...........................................
Prudential Securities Incorporated..............................
----
Total.................................................
====
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, including the absence
of any material adverse change in the Company's business and the receipt of
certain certificates, opinions and letters from the Company, its counsel and
independent auditors. The nature of the Underwriters' obligation is such that
they are committed to purchase all shares of Common Stock offered hereby if any
of such shares are purchased.
The Underwriters propose to offer the shares of Common Stock directly to
the public at the initial public offering price set forth on the cover page of
this Prospectus and to certain dealers at such price less a concession not in
excess of $ per share. The Underwriters may allow and such dealers may
reallow a concession not in excess of $ per share to certain other
dealers. After the initial public offering of the shares, the offering price and
other selling terms may be changed by the Representatives of the Underwriters.
The Company has granted to the Underwriters an option, exercisable no later
than 30 days after the date of this Prospectus, to purchase up to
additional shares of Common Stock at the initial public offering price, less the
underwriting discount set forth on the cover page of this Prospectus. To the
extent that the Underwriters exercise this option, each of the Underwriters will
have a firm commitment to purchase approximately the same percentage thereof
which the number of shares of Common Stock to be purchased by it shown in the
above table bears to the total number of shares of Common Stock offered hereby.
The Company will be obligated, pursuant to the option, to sell shares to the
Underwriters to the extent the option is exercised. The Underwriters may
exercise such option only to cover over-allotments made in connection with the
sale of the shares of Common Stock offered hereby.
The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, and to contribute to payments the Underwriters may be required
to make in respect thereof.
Stockholders of the Company, including the officers and directors, who will
own in the aggregate 6,189,239 shares of Common Stock after the offering have
agreed that they will not, without the prior written consent of Hambrecht &
Quist LLC, offer, sell or otherwise dispose of any shares of Common Stock,
options or warrants to acquire shares of Common Stock or securities exchangeable
for or convertible into shares of Common Stock owned by them during the 180-day
period following the date
56
<PAGE> 59
of this Prospectus. Stockholders of the Company who will own in the aggregate
120,000 shares of Common Stock after the offering have agreed they will not,
without prior consent of Hambrecht and Quist LLC, offer, sell or otherwise
dispose of any shares of Common Stock owned by them during the 90-day period
following the date of this Prospectus. The Company has agreed that it will not,
without the prior written consent of the Company or Hambrecht & Quist LLC,
offer, sell or otherwise dispose of any shares of Common Stock, options or
warrants to acquire shares of Common Stock or securities exchangeable for or
convertible into shares of Common Stock during the 180-day period following the
date of this Prospectus, except that the Company (i) may issue shares upon the
exercise of stock options granted prior to the date hereof under the Company's
stock option plans and may grant additional options under the Company's stock
option plans, and (ii) may issue shares under the Company's 1996 Employee Stock
Purchase Plan. The Underwriting Agreement prohibits the Company from releasing
shares from such lock-up without the prior written consent of Hambrecht & Quist
LLC.
The Representatives of the Underwriters have informed the Company that the
Underwriters do not intend to confirm sales to accounts over which they exercise
discretionary authority.
Prior to the offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock will be determined
by negotiation among the Company, the selling stockholders and the
Representatives. Among the factors to be considered in determining the initial
public offering price are prevailing market conditions, revenues and earnings of
the Company, market valuations of other companies engaged in activities similar
to the Company, estimates of the business potential and prospects of the
Company, the present state of the Company's business operations, the Company's
management and other factors deemed relevant. The estimated initial public
offering price range set forth on the cover page of the preliminary prospectus
is subject to change as a result of market conditions and other factors.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Venture Law Group, A Professional Corporation, Menlo Park,
California. Certain members of Venture Law Group own shares of the Company's
Common Stock. Certain legal matters in connection with this offering will be
passed upon for the Underwriters by Gunderson Dettmer Stough Villeneuve Franklin
& Hachigian LLP, Palo Alto, California.
EXPERTS
The Consolidated Financial Statements and schedule of the Company as of
December 30, 1994 and December 31, 1995, and for each of the three years in the
period ended December 31, 1995 appearing in this Prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their reports thereon appearing elsewhere herein and in the
Registration Statement and are included in reliance upon such reports given upon
the authority of such firm as experts in accounting and auditing.
The statements of operations and cash flows of Onyx for the year ended
September 30, 1994 included herein and elsewhere in the Registration Statement
have been included herein and in the Registration Statement in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
57
<PAGE> 60
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1
under the Securities Act of 1933, as amended, with respect to the Common Stock
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules thereto.
Certain items are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement and the
exhibits and schedules filed as a part thereof. Statements contained in this
Prospectus as to the contents of any contract or any other document referred to
are not necessarily complete, and, in each instance, if such contract or
document is filed as an exhibit, reference is made to the copy of such contract
or document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference to such exhibit. The
Registration Statement, including exhibits and schedules thereto, may be
inspected without charge at the public reference facilities maintained by the
Commission in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's regional offices located at the North Western Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World
Trade Center, 13th Floor, New York, NY 10048, and copies of all or any part
thereof may be obtained from such office after payment of fees prescribed by the
Commission.
58
<PAGE> 61
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
RASTER GRAPHICS, INC.
Report of Ernst & Young LLP, Independent Auditors..................................... F-1
Consolidated Balance Sheets........................................................... F-2
Consolidated Statements of Operations................................................. F-3
Consolidated Statements of Shareholders' Equity....................................... F-4
Consolidated Statements of Cash Flows................................................. F-5
Notes to Consolidated Financial Statements............................................ F-6
RASTER GRAPHICS, INC. AND ONYX GRAPHICS CORPORATION
Unaudited Pro Forma Condensed Combined Financial Statements
Unaudited Pro Forma Condensed Combined Financial Information.......................... F-20
Unaudited Pro forma Condensed Combined Statement of Operations........................ F-21
Notes to Unaudited Pro Forma Condensed Combined Statement of Operations............... F-22
ONYX GRAPHICS CORPORATION
Report of KPMG Peat Marwick LLP Independent Auditors.................................. F-24
Statement of Operations............................................................... F-25
Statement of Cash Flows............................................................... F-26
Notes to Financial Statements......................................................... F-27
</TABLE>
<PAGE> 62
EXHIBIT 23.1
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Raster Graphics, Inc.
We have audited the accompanying consolidated balance sheets of Raster
Graphics, Inc. as of December 30, 1994 and December 31, 1995, and the related
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Raster Graphics, Inc. at December 30, 1994 and December 31, 1995, and the
consolidated results of its operations and its cash flows for the three years in
the period ended December 31, 1995 in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
San Jose, California
February 23, 1996,
except as to Note 13,
as to which the date is
July , 1996
- --------------------------------------------------------------------------------
The foregoing report is in the form that will be signed upon the completion
of reincorporation of the Company from California to Delaware and the reverse
stock split.
/s/ ERNST & YOUNG LLP
San Jose, California
June 19, 1996
F-1
<PAGE> 63
RASTER GRAPHICS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 31,
1994 1995
------------ ------------ MARCH 31, PRO FORMA
1996 STOCKHOLDERS'
------------ EQUITY
MARCH 31,
(UNAUDITED) 1996
------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................... $ 1,607 $ 1,550 $ 1,506
Accounts receivable, net of allowance for
doubtful accounts of $246 in 1994, $467 in
1995 and $508 in 1996......................... 2,201 5,567 5,345
Amounts receivable from related parties......... 666 -- --
Inventories..................................... 1,893 3,248 4,060
Prepaid expenses................................ 223 132 286
-------- -------- --------
Total current assets.............................. 6,590 10,497 11,197
Property and equipment, net....................... 1,049 1,452 1,557
Deposits and other assets......................... 273 136 156
Intangible assets related to the acquisition of
Onyx Graphics Corporation....................... -- 258 140
-------- -------- --------
Total assets...................................... $ 7,912 $ 12,343 $ 13,050
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................ $ 414 $ 1,817 $ 1,773
Accrued payroll and related expenses............ 416 583 479
Accrued warranty................................ 347 287 275
Other accrued liabilities....................... 453 970 1,154
Deferred revenues from related parties.......... 152 -- --
Other deferred revenues......................... 1,845 1,114 1,397
Current portion of long-term debt............... 146 355 355
-------- -------- --------
Total current liabilities......................... 3,773 5,126 5,433
Long-term debt.................................... 338 504 402
Commitments
Stockholders' equity:
Preferred stock:
Authorized shares -- 2,000,000 pro forma
Issued and outstanding shares -- none pro
forma....................................... -- -- -- $ --
Convertible preferred stock, $0.001 par value:
Series A, authorized, issued and outstanding
shares -- 320,000 in 1994, 1995 and 1996,
none pro forma.............................. -- -- -- --
Series B, authorized shares -- 1,050,000 in
1996, none pro forma issued and outstanding
shares -- 1,023,998 in 1994, 1995 and 1996,
none pro forma.............................. 1 1 1 --
Series C, authorized shares -- 4,660,000 in
1996, none pro forma issued and outstanding
shares -- 3,509,990 in 1994, 4,548,718 in
1995 and 1996, none pro forma............... 4 5 5 --
Common stock, $0.001 par value:
Authorized shares -- 8,000,000 in 1996,
50,000,000 pro forma
Issued and outstanding shares -- 200,426 in
1994, 344,657 in 1995, 424,023 in 1996 and
6,316,739 pro forma......................... -- -- -- 6
Additional paid-in capital.................... 22,296 25,130 25,163 25,163
Accumulated deficit........................... (18,500) (18,423) (17,934) (17,934)
Notes receivable from stockholders............ -- -- (20) (20)
-------- -------- -------- --------
Total stockholders' equity........................ 3,801 6,713 7,215 $ 7,215
========
-------- -------- --------
Total liabilities and stockholders' equity........ $ 7,912 $ 12,343 $ 13,050
======== ======== ========
</TABLE>
See accompanying notes.
F-2
<PAGE> 64
RASTER GRAPHICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------
YEAR ENDED
------------------------------------------ MARCH 31,
DECEMBER 31, DECEMBER 30, DECEMBER 31, -----------------------
1993 1994 1995 1995 1996
------------ ------------ ------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues (includes related
party revenues of $6,206 in
1993 and
$123 in 1994).................. $ 14,719 $ 13,235 $ 26,045 $ 5,720 $ 8,591
Cost of revenues................. 9,942 9,704 16,598 3,792 5,305
------- ------- ---------- ---------- ----------
Gross profit..................... 4,777 3,531 9,447 1,928 3,286
Operating expenses:
Research and development....... 2,179 2,748 3,373 642 934
Sales and marketing............ 1,591 2,054 3,640 632 1,364
General and administrative..... 901 958 1,434 284 421
Acquired in-process research
and development............. -- -- 889 -- --
------- ------- ---------- ---------- ----------
Total operating expenses......... 4,671 5,760 9,336 1,558 2,719
------- ------- ---------- ---------- ----------
Operating income (loss).......... 106 (2,229) 111 370 567
Interest income.................. 113 106 106 30 16
Interest expense................. (173) (5) (57) (27) (19)
------- ------- ---------- ---------- ----------
Income (loss) before provision
for income taxes............... 46 (2,128) 160 373 564
Provision for income taxes....... 5 -- 83 194 75
------- ------- ---------- ---------- ----------
Net income (loss)................ $ 41 $ (2,128) $ 77 $ 179 $ 489
======= ======= ========== ========== ==========
Pro forma net income per share... $ 0.01 $ 0.03 $ 0.07
========== ========== ==========
Shares used in computing pro
forma net income per share..... 7,172,117 6,891,966 7,304,108
========== ========== ==========
</TABLE>
See accompanying notes.
F-3
<PAGE> 65
RASTER GRAPHICS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED STOCK
-------------------------------------------------------------
COMMON
SERIES A SERIES B SERIES C STOCK
------------------ ------------------ ------------------- ----------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
---------- ------ ---------- ------ ----------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 25, 1992....................... 320,000 $ -- 1,023,998 $1 -- $ -- 368,808
Issuance of Series C preferred stock, net of
issuance costs.................................. -- -- -- -- 3,509,990 4 --
Repurchase of common stock........................ -- -- -- -- -- -- (28,000)
Issuance of common stock under stock option
plan............................................ -- -- -- -- -- -- 10,533
Forgiveness of interest on notes receivable from
stockholders.................................... -- -- -- -- -- -- --
Accrued interest on notes receivable.............. -- -- -- -- -- -- --
Net income........................................ -- -- -- -- -- -- --
-- --
--------- --------- ---------- --- ---------
Balance at December 31, 1993....................... 320,000 -- 1,023,998 1 3,509,990 4 351,341
Repurchase of common stock........................ -- -- -- -- -- -- (154,000)
Issuance of common stock under stock option plan
and upon exercise
of warrants..................................... -- -- -- -- -- -- 3,085
Forgiveness of interest on notes receivable from
stockholders.................................... -- -- -- -- -- -- --
Net loss.......................................... -- -- -- -- -- -- --
-- --
--------- --------- ---------- --- ---------
Balance at December 30, 1994....................... 320,000 -- 1,023,998 1 3,509,990 4 200,426
Issuance of Series C preferred stock, net of
issuance costs.................................. -- -- -- -- 595,368 1 --
Issuance of Series C preferred stock for Onyx
Acquisition..................................... -- -- -- -- 443,360 -- --
Issuance of common stock under stock option plan
and upon exercise
of warrants..................................... -- -- -- -- -- -- 144,231
Net income........................................ -- -- -- -- -- -- --
-- --
--------- --------- ---------- --- ---------
Balance at December 31, 1995....................... 320,000 -- 1,023,998 1 4,548,718 5 344,657
Issuance of common stock under stock option plan
(unaudited)..................................... -- -- -- -- -- -- 79,366
Note receivable from stockholder (unaudited)...... -- -- -- -- -- -- --
Net income (unaudited)............................ -- -- -- -- -- -- --
-- --
--------- --------- ---------- --- ---------
Balance at March 31, 1996 (unaudited)............. 320,000 $ -- 1,023,998 $1 4,548,718 $ 5 424,023
========= == ========= == ========== === =========
<CAPTION>
NOTES
ADDITIONAL RECEIVABLE TOTAL
PAID-IN ACCUMULATED FROM STOCKHOLDERS'
AMOUNT CAPITAL DEFICIT STOCKHOLDERS EQUITY
------ ---------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance at December 25, 1992....................... $ -- $ 13,689 $ (16,413) $ (138) $(2,861)
Issuance of Series C preferred stock, net of
issuance costs.................................. -- 8,706 -- -- 8,710
Repurchase of common stock........................ -- (42) -- 42 --
Issuance of common stock under stock option
plan............................................ -- 6 -- -- 6
Forgiveness of interest on notes receivable from
stockholders.................................... -- -- -- 12 12
Accrued interest on notes receivable.............. -- -- -- (8) (8)
Net income........................................ -- -- 41 -- 41
--- ------- -------- ----- -------
Balance at December 31, 1993....................... -- 22,359 (16,372) (92) 5,900
Repurchase of common stock........................ -- (66) -- 66 --
Issuance of common stock under stock option plan
and upon exercise
of warrants..................................... -- 3 -- -- 3
Forgiveness of interest on notes receivable from
stockholders.................................... -- -- -- 26 26
Net loss.......................................... -- -- (2,128) -- (2,128)
--- ------- -------- ----- -------
Balance at December 30, 1994....................... -- 22,296 (18,500) -- 3,801
Issuance of Series C preferred stock, net of
issuance costs.................................. -- 1,476 -- -- 1,477
Issuance of Series C preferred stock for Onyx
Acquisition..................................... -- 1,098 -- -- 1,098
Issuance of common stock under stock option plan
and upon exercise
of warrants..................................... -- 260 -- -- 260
Net income........................................ -- -- 77 -- 77
--- ------- -------- ----- -------
Balance at December 31, 1995....................... -- 25,130 (18,423) -- 6,713
Issuance of common stock under stock option plan
(unaudited)..................................... -- 33 -- -- 33
Note receivable from stockholder (unaudited)...... -- -- -- (20) (20)
Net income (unaudited)............................ -- -- 489 -- 489
--- ------- -------- ----- -------
Balance at March 31, 1996 (unaudited)............. $ -- $ 25,163 $ (17,934) $ (20) $ 7,215
=== ======= ======== ===== =======
</TABLE>
See accompanying notes.
F-4
<PAGE> 66
RASTER GRAPHICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED
------------------------------------------ MARCH 31,
DECEMBER 31, DECEMBER 30, DECEMBER 31, ---------------------
1993 1994 1995 1995 1996
------------ ------------ ------------ --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)......................... $ 41 $ (2,128) $ 77 $ 179 $ 489
Adjustments to reconcile net income (loss)
to net cash used in operating
activities:
Deferred revenue from related
parties............................. (810) (267) (152) -- --
Other deferred revenue................ 436 951 (760) (762) 283
Depreciation and amortization......... 672 731 1,782 55 353
Forgiveness of interest on
shareholders' notes receivable...... 12 26 -- -- --
Changes in operating assets and
liabilities:
Accounts receivable................. 575 (1,558) (2,169) (683) 222
Inventories......................... (803) 318 (1,283) (275) (812)
Prepaid expenses and other assets... (289) (129) 280 50 (174)
Accounts payable.................... (95) (19) 1,035 824 (44)
Accrued payroll and related
expenses......................... 70 88 123 -- (104)
Other accrued liabilities........... (151) (236) 429 113 172
------- ------- ------- ------ ------
Net cash provided by (used in) operating
activities.............................. (342) (2,223) (638) (499) 385
INVESTING ACTIVITIES
Capital expenditures...................... (813) (805) (1,082) (196) (340)
Cash acquired in acquisition.............. -- -- 55 -- --
------- ------- ------- ------ ------
Net cash used in investing activities..... (813) (805) (1,027) (196) (340)
FINANCING ACTIVITIES
Proceeds from notes payable............... -- 484 418 -- --
Repayment of note......................... -- -- (450) (26) (75)
Repayment of note to related party........ (5,000) -- -- -- --
Payments on capital leases................ (108) -- (23) -- (27)
Proceeds from issuance of common stock.... 6 3 196 -- 13
Proceeds from issuance of Series C
preferred stock......................... 8,710 -- 1,467 1,467 --
------- ------- ------- ------ ------
Net cash provided by (used in) financing
activities.............................. 3,608 487 1,608 1,441 (89)
------- ------- ------- ------ ------
Net increase (decrease) in cash and cash
equivalents............................. 2,453 (2,541) (57) 746 (44)
Cash and cash equivalents at beginning of
year.................................... 1,695 4,148 1,607 1,607 1,550
------- ------- ------- ------ ------
Cash and cash equivalents at end of
year.................................... $ 4,148 $ 1,607 $ 1,550 $ 2,353 $ 1,506
======= ======= ======= ====== ======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid for interest.................... $ 650 $ 5 $ 57 $ 27 $ 19
Cash paid for taxes....................... $ 19 $ 15 $ 28 $ 1 $ 33
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES
Forgiveness of note receivable on return
of common stock......................... $ 42 $ 66 $ -- $ -- $ --
</TABLE>
See accompanying notes.
F-5
<PAGE> 67
RASTER GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE THREE MONTH PERIODS ENDED
MARCH 31, 1995 AND 1996 IS UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Raster Graphics, Inc. (the Company) was incorporated on July 27, 1987 in
the State of California. The Company designs, manufactures, and markets large
format digital printing systems.
Basis of Presentation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries, Onyx Graphics Corporation, Raster Graphics
GmbH, a German Corporation, and Raster Graphics Limited, a company incorporated
in England and Wales.
Fiscal Year
In 1993 and 1994, the Company reported on a fiscal year ending on the last
Friday in December. Effective in 1995, the Company changed its fiscal year-end
to the calendar year-end. In addition, the quarter ends were changed to the
calendar quarters.
Interim Financial Information
The interim financial information at March 31, 1996 and for the three
months ended March 31, 1995 and 1996 is unaudited but, in the opinion of
management, includes all adjustments, consisting only of normal recurring
accruals, which the Company considers necessary for a fair presentation of the
financial position and results of operations for the interim period. The results
of operations for the three months ended March 31, 1996 are not necessarily
indicative of results for the full year.
Cash Equivalents
For financial statement purposes, the Company considers all highly liquid
debt instruments with original maturities of ninety days or less and with
insignificant interest rate risk to be cash equivalents.
At December 31, 1995 and March 31, 1996, cash equivalents consisted of
commercial paper and money market funds.
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" (FAS 115). The adoption of FAS 115 had no material effect on
the Company's results of operations or financial position. The Company considers
its applicable cash equivalents as held-to-maturity investments in accordance
with FAS 115. Any unrealized gains or losses were immaterial.
F-6
<PAGE> 68
RASTER GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE THREE MONTH PERIODS ENDED
MARCH 31, 1995 AND 1996 IS UNAUDITED)
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or fair
market value and consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 31, MARCH 31,
1994 1995 1996
------------ ------------ ---------
<S> <C> <C> <C>
Raw materials................................. $ 578 $ 784 $ 417
Work-in-process............................... 205 588 838
Finished goods................................ 1,110 1,876 2,805
------ ------ ------
$1,893 $3,248 $ 4,060
====== ====== ======
</TABLE>
Property and Equipment
Property and equipment is stated at cost and depreciated, using the
straight-line method, over the shorter of the estimated useful life (one to five
years) or, if applicable, the term of the related lease.
Long-Lived Assets
In 1995 the Financial Accounting Standards Board released the Statement of
Financial Accounting Standard No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed of " (FAS 121). FAS 121
requires recognition of impairment of long-lived assets in the event that the
net book value of such assets exceeds the future undiscounted cash flows
attributable to such assets. FAS 121 is effective for fiscal years beginning
after December 15, 1995. The adoption of FAS 121 is not expected to have a
material impact on the Company's financial position or results of operations.
Revenue Recognition
The Company generally recognizes revenue at the time of shipment and
provides for the estimated cost to repair or replace products under warranty
provisions in effect at the time of sale. Revenue under maintenance contracts is
recognized ratably over the term of the related contract, generally twelve
months. The Company does not warrant its software products.
Income Taxes
The Company accounts for income taxes using the liability method as
required by the provisions of Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" (FAS 109).
Net Income (Loss) Per Share
Net income (loss) per share is computed using the weighted average number
of shares of common stock and dilutive common equivalent shares from convertible
preferred stock (using the if-converted method) and from stock options and
warrants (using the modified treasury stock method). Pursuant to the Securities
and Exchange Commission Staff Accounting Bulletins, common stock and common
equivalent shares issued by the Company at prices below the assumed public
offering price during the twelve-month period prior to the proposed offering
have been included in the calculation as if they were outstanding for all
periods presented regardless of whether they are dilutive (using the modified
treasury stock method at an assumed public offering price).
F-7
<PAGE> 69
RASTER GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE THREE MONTH PERIODS ENDED
MARCH 31, 1995 AND 1996 IS UNAUDITED)
Per share information calculated on the above noted basis is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED
------------------------------------------ MARCH 31,
DECEMBER 31, DECEMBER 30, DECEMBER 31, -------------------------
1993 1994 1995 1995 1996
------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Net income (loss) per share.... $ 0.01 $ (1.91) $ 0.01 $ 0.03 $ 0.07
=========== ========== =========== =========== ===========
Shares used in computing net
income (loss) per share...... 5,047,308 1,112,851 7,172,117 6,891,966 7,304,108
=========== ========== =========== =========== ===========
</TABLE>
Pro Forma Net Income Per Share
Pro forma net income per share has been computed as described above and
also gives effect, even if antidilutive, to common equivalent shares from
convertible preferred stock that will convert upon the closing of the Company's
initial public offering (using the if-converted method).
Pro Forma Shareholders' Equity (Unaudited)
If the offering contemplated by this Prospectus is consummated, all of the
convertible preferred stock outstanding as of the closing date will
automatically be converted into an aggregate of approximately 5,893,000 shares
of common stock. The number of shares of common stock that the convertible
preferred stock converts into is based on an assumed public offering price of
$ per share. Unaudited pro forma stockholders' equity at March 31, 1996, as
adjusted for the conversion of preferred stock, is disclosed on the consolidated
balance sheet.
Employee Stock Plans
The Company accounts for its stock option and employee stock purchase plan
in accordance with the provisions of the Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB Opinion No. 25). In 1995,
the Financial Accounting Standards Board released Statement of Financial
Accounting Standards No. 123, "Accounting for Stock Based Compensation" (FAS
123). FAS 123 provides an alternative to APB Opinion No. 25 and is effective for
fiscal years beginning after December 15, 1995. The Company expects to continue
to account for its employee stock plans in accordance with the provisions of APB
Opinion No. 25. Accordingly, FAS 123 is not expected to have any material impact
on the Company's financial position or results of operations.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions. These assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
2. CONCENTRATIONS
Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of investments in cash
equivalents and receivables from customers. The Company invests in
F-8
<PAGE> 70
RASTER GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE THREE MONTH PERIODS ENDED
MARCH 31, 1995 AND 1996 IS UNAUDITED)
cash equivalents, primarily commercial paper of A1 or P1 grade, placed in
high-credit quality financial institutions. The Company is exposed to credit
risks in the event of default by the financial institutions to the extent of the
amount recorded on the balance sheet. The Company performs ongoing credit
evaluations of its customers and generally does not require collateral. The
Company maintains reserves for potential credit losses, and such losses have
been within management's expectations.
Dependence on Major Subcontractors and Suppliers
The Company relies on subcontractors and suppliers to manufacture,
subassemble, and perform first-stage testing of DCS printer components. The
Company relies on single suppliers for certain critical components. The loss of
certain subcontractors or suppliers or the failure of subcontractors or
suppliers to meet the Company's price, quality, quantity, and delivery
requirements could have a material adverse effect on the Company's business,
financial condition, and results of operations.
Dependence on a Single Product
The majority of the Company's sales are derived from one principal product
line, the DCS printing systems, printers and related consumables, and the
Company anticipates that it will derive the bulk of its revenues in the next
several years from sales of these products. If the Company is unable to generate
sufficient sales of the DSC product line due to competitive factors,
manufacturing difficulties, or other reasons, it may be unable to continue its
business.
Major Customers
One customer, a related party in 1993, accounted for 33.4%, 20.6%, 10.9%
and 19.3% of net revenues for 1993, 1994, 1995 and the three months ended March
31, 1995, respectively. Another customer acounted for 18.4% and 11.7% of net
revenues in 1993 and for the three months ended March 31, 1996, respectively.
3. ACQUISITION
On August 10, 1995, the Company acquired Onyx Graphics Corporation (Onyx)
for the following amounts (dollars in thousands):
<TABLE>
<S> <C>
443,359 shares of Series C preferred stock of the Company for all the
issued common stock of Onyx............................................... $1,108
Assumption by the Company of options to purchase Onyx common stock.......... 63
Note due from Onyx.......................................................... 259
Acquisition costs........................................................... 70
------
$1,500
======
</TABLE>
F-9
<PAGE> 71
RASTER GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE THREE MONTH PERIODS ENDED
MARCH 31, 1995 AND 1996 IS UNAUDITED)
The purchase price was allocated, based on an independent appraisal
obtained by the Company, to the tangible and intangible assets acquired and
liabilities assumed based on their respective fair values on the date of
acquisition as follows (in thousands):
<TABLE>
<S> <C>
Current assets.............................................................. $ 709
Equipment................................................................... 157
Intangibles................................................................. 454
Liabilities assumed......................................................... (570)
In-process research and development......................................... 750
------
$1,500
======
</TABLE>
To determine the value of completed software, the expected future cash
flows of each existing software product were discounted, taking into account
risks related to the characteristics and applications of each product, existing
and future markets, and assessments of the life cycle stage of each product.
This analysis resulted in a valuation of $280,000 for completed software, which
had reached technological feasibility and therefore was capitalizable. This
software is being amortized on a straight-line basis over an eight-month period.
To determine the value of the software in the development stage, the
Company considered, among other factors, the stage of development of each
project, the time and resources needed to complete each project, expected
income, and associated risks. Associated risks include the inherent difficulties
and uncertainties in completing each project, thereby achieving technological
feasibility, and risks related to the viability of potential changes in future
target markets. This analysis resulted in a valuation of $750,000 for software
in the development stage that had not yet reached technological feasibility and
did not have alternative future uses. In accordance with generally accepted
accounting principles, the software in the development stage was expensed in
August 1995 as acquired in-process research and development. In addition, the
Company wrote off $139,000 in the September 1995 quarter for redundant
PostScript licenses that the Company had purchased for the Company's development
of a similar image processing software product.
Other intangible assets will be amortized on a straight-line basis over
estimated useful lives ranging from three to five years.
As part of the Agreement and Plan of Reorganization, 30% of the Series C
preferred stock included in the consideration was deposited into an escrow
account. The escrow shares were to be distributed to Onyx stockholders on August
1, 1996 and were for the full satisfaction of losses to the Company resulting
from misrepresentations or omissions in the Agreement that totaled greater than
$50,000. Management of the Company believed that on the date of acquisition that
it was certain that all escrow shares were going to be distributed to Onyx
shareholders, and in fact, the Company did distribute the escrow shares to Onyx
stockholders.
The following unaudited pro forma combined results of operations of the
Company and Onyx for the years ended December 30, 1994 and December 31, 1995
have been prepared assuming that the acquisition of Onyx had occurred at the
beginning of the period presented. The following pro forma information results
(in thousands, except per share data) are not necessarily indicative of the
results
F-10
<PAGE> 72
RASTER GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE THREE MONTH PERIODS ENDED
MARCH 31, 1995 AND 1996 IS UNAUDITED)
that would have occurred had the transaction been completed at the beginning of
the period indicated nor is it indicative of future operating results:
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 31,
1994 1995
------------ ------------
<S> <C> <C>
Net revenues.............................................. $ 15,829 $ 27,709
Income (loss) from operations............................. $ (2,057) $ 1,364
Net income (loss)......................................... $ (2,027) $ 1,170
Net income (loss) per share............................... $ (4.51) $ 0.16
</TABLE>
The results of the operations of the acquired business have been included
in the consolidated results of operations for the period subsequent to the
acquisition date.
4. BALANCE SHEET COMPONENTS
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 31, MARCH 31,
1994 1995 1996
------------ ------------ ---------
<S> <C> <C> <C>
Machinery and equipment....................... $4,501 $3,869 $ 4,180
Furniture and fixtures........................ 187 303 332
Leasehold improvements........................ 147 162 162
------ ------ ------
4,835 4,334 4,674
Accumulated depreciation...................... 3,786 2,882 3,117
------ ------ ------
$1,049 $1,452 $ 1,557
====== ====== ======
</TABLE>
Fully depreciated fixed assets with an original cost of approximately
$2,000,000 were written off in 1995.
Intangible assets consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ ---------
<S> <C> <C>
Assembled work force........................................ $ 80 $ 80
Trademarks and tradenames................................... 54 54
Developed technology........................................ 280 280
Distributor relationships................................... 40 40
---- ----
454 454
Accumulated amortization.................................... 196 314
---- ----
Net intangible assets....................................... $258 $ 140
==== ====
</TABLE>
5. BORROWINGS
Effective August 14, 1995, the Company's credit agreement with its lender
was amended. The facility was extended to $1,000,000, the term to August 14,
1996 and the interest rate was reduced to the lenders prime rate plus 0.5
percentage points. This facility has not been used during either the year ended
December 31, 1995 or the three months ended March 31, 1996.
F-11
<PAGE> 73
RASTER GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE THREE MONTH PERIODS ENDED
MARCH 31, 1995 AND 1996 IS UNAUDITED)
The Company's long-term debt includes two notes payable. The first note
issued on August 29, 1994 had a principal balance of $336,056 at December 31,
1995 with interest being charged at 0.75% above the lenders prime rate. An
additional note issued on June 5, 1995 had a principal balance of $418,835 at
December 31, 1995 with interest being charged at a rate of 0.5% above the
lenders prime rate. Such prime rate was 8.5% at December 31, 1995.
The notes are secured by the tangible assets of the Company. The notes
include various financial covenants which make reference to the Company's
profitability and liquidity. If the Company fails to satisfy these covenants,
all outstanding amounts of the principal and unpaid interest immediately become
due and payable.
In addition, the Company's subsidiary, Onyx, has two notes payable (the
"Onyx Notes"). The first note issued in August 1992 had a principal balance of
$33,342 at December 31, 1995 with interest being paid at the lenders prime rate
plus six percentage points. A second note issued in August 1993 had a principal
balance of $58,023 at December 31, 1995 and incurs interest at a rate equal to
the lenders prime rate plus eight percentage points. Both notes expire in August
1997. The lenders prime rate at December 31, 1995 was 8.5%.
The Onyx Notes are secured by all equipment of the borrower and all
finished goods, materials, and other personal tangible property purchased with
the proceeds of the notes.
Future principal maturities on the notes payable for the years ended
December 31 are as follows (in thousands):
<TABLE>
<S> <C>
1996.......................................................................... $355
1997.......................................................................... 347
1998.......................................................................... 157
----
$859
====
</TABLE>
6. COMMITMENTS
The Company leases its principal facilities under an operating lease
arrangement. The future minimum annual rental payments are as follows for the
years ended December 31 (in thousands):
<TABLE>
<S> <C>
1996........................................................................ $ 585
1997........................................................................ 589
1998........................................................................ 589
1999........................................................................ 541
2000........................................................................ 548
Thereafter.................................................................. 548
------
$3,400
======
</TABLE>
Rent expense for the fiscal years ended 1993, 1994, and 1995 was
approximately $317,000, $358,000, and $507,000, respectively, and approximately
$118,000 and $161,000, respectively, for the three months ended March 31, 1995
and 1996, respectively.
The Company has a purchase commitment of approximately $1,000,000 to a
supplier over the next year in connection with research and development
activities.
F-12
<PAGE> 74
RASTER GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE THREE MONTH PERIODS ENDED
MARCH 31, 1995 AND 1996 IS UNAUDITED)
7. STOCKHOLDERS' EQUITY
Convertible Preferred Stock
Each share of Series A, B, and C preferred stock may be converted at the
option of the holder into shares of common stock on a one-for-one basis, subject
to adjustment for certain antidilution provisions. The preferred stock
automatically converts into common stock upon the consummation of an
underwritten public offering for the Company's common stock at not less than
$7.50 per share and the gross aggregate offering price is not less than
$10,000,000. The holders of preferred shares are entitled to one vote for each
share of common stock into which the preferred stock is convertible.
The holders of Series C preferred stock are entitled to receive dividends,
when and as declared by the Board of Directors, at a rate of $0.15 per share,
per annum. After the payment of dividends to the Series C preferred
stockholders, the holders of Series A and B preferred stock are entitled to
receive dividends, when and as declared by the Board of Directors, at a rate of
$0.20 and $0.20 per share, per annum, respectively. Dividends are noncumulative,
and to date, no dividends have been declared or paid by the Company.
The Series C preferred stock has a liquidation preference of $2.50 per
share, plus all declared and unpaid dividends, and is payable prior and in
preference to any distribution to the holders of Series A and B preferred stock
and common stock. After the Series C stockholders receive their liquidation
preference, the holders of Series A and B preferred stock will be entitled to
receive an amount per share equal to $560,000 and $2,800,000 divided by the
number of outstanding Series A and B shares, respectively, plus all declared and
unpaid dividends. After full preferential payments have been made to Series A,
B, and C stockholders, the holders of Series A, B, and C preferred stock are
entitled to receive up to an additional $6,750,000. After the Series A, B, and C
preferred stockholders receive their full liquidation preferences, the holders
of common and preferred stock will be entitled to share in the remaining
proceeds based on the number of shares held.
Stock Option Plan
The Company has a stock option plan (the Plan) under which consultants and
key employees may be granted incentive or nonstatutory stock options for the
purchase of common stock.
There are 1,460,000 shares authorized under the Plan. Under the Plan,
incentive and nonstatutory options may be granted at an exercise price of not
less than 100% and 85%, respectively, of the fair value as determined by the
Board of Directors. The options are exercisable at the discretion of the Board
of Directors and generally vest at the rate of 12.5% of the original grant,
commencing six months after the date of grant or employment, and in monthly
increments of approximately 2% of the total grant thereafter. Expiration dates
are determined by the Board of Directors, but in no event will they
F-13
<PAGE> 75
RASTER GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE THREE MONTH PERIODS ENDED
MARCH 31, 1995 AND 1996 IS UNAUDITED)
exceed ten years from the date of grant. Unexercised options are cancelable
thirty days after the date of termination of employment. A summary of activity
in this plan is as follows:
<TABLE>
<CAPTION>
NUMBER PRICE
OF SHARES PER SHARE
--------- --------------
<S> <C> <C>
Options outstanding at December 25, 1992......................... 207,720 $0.25 - $1.50
Granted........................................................ 688,170 $0.50
Exercised...................................................... (10,533) $0.50 - $1.50
Canceled....................................................... (204,587) $0.25 - $1.50
----------
Options outstanding at December 31, 1993......................... 680,770 $0.25 - $1.50
Granted........................................................ 160,100 $0.50
Exercised...................................................... (1,902) $0.50
Canceled....................................................... (215,198) $1.50
----------
Options outstanding at December 30, 1994......................... 623,770 $0.25 - $0.50
Granted........................................................ 513,280 $0.025 - $1.50
Exercised...................................................... (19,787) $0.50
Canceled....................................................... (4,913) $0.50
----------
Options outstanding at December 31, 1995......................... 1,112,350 $0.025 - $1.50
Granted........................................................ 40,900 $1.50 - $5.00
Exercised...................................................... (79,366) $0.25 - $0.50
Canceled....................................................... (46,784) $0.50 - $1.50
----------
Options outstanding at March 31, 1996............................ 1,027,100 $0.025 - $5.00
==========
</TABLE>
At December 31, 1995, there were 709,411 options exercisable under the Plan
at $0.025 -- $1.50 per share, and options for 284,113 shares of common stock
were available for grant.
In July 1993, 175,670 options were repriced. Options originally granted at
$1.50 per share were canceled and new options were issued at $0.50 per share.
Stock Purchase Plan
In 1988, the Company adopted a stock purchase plan for consultants and key
employees of the Company. There are 90,000 shares authorized for issuance under
the plan. Under the plan, consultants and key employees may be granted the right
to purchase shares of the Company's common stock at not less than 100% of the
fair value on the date of grant as determined by the Board of Directors. As of
December 30, 1994, December 31, 1995 and March 31, 1996, 24,000 shares have been
issued under the Plan and 66,000 shares are reserved for issuance.
Warrants
The Company has issued the following warrants:
(a) Warrants were issued in November 1988 to certain Series B investors to
purchase 124,444 shares of common stock at $1.50 per share, subject to
adjustment for dilution. These warrants were exercised in 1995.
(b) During 1989, the Company entered into an equipment lease line with a
financing institution. In conjunction with the lease line, the Company
issued warrants to purchase 10,400 shares of
F-14
<PAGE> 76
RASTER GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE THREE MONTH PERIODS ENDED
MARCH 31, 1995 AND 1996 IS UNAUDITED)
Series B preferred stock at $12.50 per share. The warrants expire in
1998 and are currently exercisable.
(c) Warrants were issued in December 1989 in connection with the issuance
of Series B preferred stock. Investors received warrants to purchase
124,257 shares of common stock at $1.50 per share, subject to adjustment
for dilution. These warrants expire in December 1996, or upon the
occurrence of an initial public offering of common stock of not less
than $10,000,000 and at least $25.00 per share, or upon the sale of
substantially all of the Company's assets. The warrants are currently
exercisable.
(d) In conjunction with the issuance of Series B preferred stock and
additions to the Company's lease line, warrants were issued in March
1990 to various stockholders to purchase 38,227 shares of common stock
at $1.50 per share, subject to adjustment for dilution. During 1994,
warrants were exercised to purchase 1,183 shares of common stock leaving
warrants to purchase 37,044 shares of common stock outstanding at
December 30, 1994. In March 1995, 1,546 warrants expired leaving
warrants to purchase 35,498 shares of common stock outstanding at
December 31, 1995 and March 31, 1996.
Common Stock Reserved
The Company has reserved shares of common stock for future issuance as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ ----------
<S> <C> <C>
Series A convertible preferred stock....................... 320,000 320,000
Series B convertible preferred stock (including
warrants)................................................ 1,034,398 1,034,398
Conversion of warrants..................................... 159,755 159,755
Series C convertible preferred stock....................... 4,548,718 4,548,718
Stock Option Plan.......................................... 284,113 289,997
Stock Purchase Plan........................................ 66,000 66,000
---------- ----------
6,412,984 6,418,868
========== ==========
</TABLE>
Notes Receivable From Stockholders
The Company had accepted long-term promissory notes for the issuance of
common stock to employees and certain consultants. These notes incurred interest
between 6% and 9.4% per annum with principal and interest payable on demand. In
1994, the notes and related interest were forgiven in exchange for the return of
the common stock.
On February 28, 1996, the Company issued a note receivable for $20,000 to a
consultant. The note incurs interest at a rate of 5.25% per annum and is payable
in full on January 31, 1998. The borrower pledged 200,000 shares of common stock
in the Company as security against nonpayment of the loan.
F-15
<PAGE> 77
RASTER GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE THREE MONTH PERIODS ENDED
MARCH 31, 1995 AND 1996 IS UNAUDITED)
8. TAXES ON INCOME
The tax provision consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1993 1995
------------ ------------
<S> <C> <C>
Current:
Federal..................................................... $ 5 $ 40
State....................................................... -- 28
Foreign..................................................... -- 15
--- ---
$ 5 $ 83
=== ===
</TABLE>
There was no provision for income taxes for 1994 due to the net loss.
The difference between the tax provision and the amount computed by
applying the federal statutory income tax rate to income before the provision
for income taxes is explained below (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30, DECEMBER 31,
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
Expected provision (benefit) at statutory
rate......................................... $ 16 $ (745) $ 56
State taxes.................................... -- -- 28
Federal alternative minimum tax................ 5 -- 40
Net operating losses (utilized) not utilized... (16) 745 (103)
Foreign income taxes at a rate greater than
the federal statutory rate................... -- -- 2
Unbenefited foreign loss....................... -- -- 60
---- ----- -----
Provision for income taxes..................... $ 5 $ -- $ 83
==== ===== =====
</TABLE>
Pretax loss from foreign operations was $135,000 in 1995. There were no
foreign operations in 1993 or 1994.
For the three-month periods ended March 31, 1995 and 1996, income taxes
have been provided based upon estimated annualized effective tax rates of 51.9%
and 13.3%, respectively, applied to the earnings for the period. The provision
for income taxes for the three months ended March 31, 1995 reflects unbenefited
foreign losses and the tax benefits of utilizing net operating loss
carryforwards. The provision for the three months ended March 31, 1996 reflects
the tax benefits of utilizing net operating loss carryforwards.
F-16
<PAGE> 78
RASTER GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE THREE MONTH PERIODS ENDED
MARCH 31, 1995 AND 1996 IS UNAUDITED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amount used for income tax purposes. Significant components of
deferred tax assets for federal and state income taxes are as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 31,
1994 1995
------------ ------------
<S> <C> <C>
Net operating loss carryforwards............................ $ 5,647 $ 4,757
Tax credits................................................. 731 1,015
Inventory reserve........................................... 466 552
Other accruals and reserves not deductible for tax
purposes.................................................. 415 688
Other, net.................................................. 335 282
------- -------
Total deferred tax assets................................... 7,594 7,294
Valuation allowance for deferred tax assets................. (7,594) (7,294)
------- -------
Net deferred tax assets..................................... $ -- $ --
======= =======
</TABLE>
Under FAS 109, deferred tax assets and liabilities are determined based on
the difference between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse. Based on the weight of
available evidence, which includes the Company's historical operating
performance, the reported loss in 1994, only marginal profitability in 1993 and
1995, and the uncertainties regarding future results of operations, the Company
has provided a full valuation allowance against its net deferred tax assets as
it is more likely than not that the deferred tax assets will not be realized.
The valuation allowance established upon adoption of FAS 109 in 1993 was
$6,406,000 and was increased by $1,188,000 in 1994 and decreased by $300,000
during 1995.
As of December 31, 1995, the Company had federal and state net operating
loss carryforwards of approximately $13,200,000 and $4,400,000, respectively.
The Company also has federal and California research and development tax credit
carryforwards of approximately $753,000 and $325,000, respectively. The net
operating loss and credit carryforwards will expire at various dates beginning
in 1996 through 2010, if not utilized.
Utilization of the net operating losses and credits will be subject to an
annual limitation due to the ownership change limitations provided by the
Internal Revenue Code of 1986 (the Code) and similar state provisions. The
annual limitation may result in the expiration of net operating losses and
credits before utilization.
F-17
<PAGE> 79
RASTER GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE THREE MONTH PERIODS ENDED
MARCH 31, 1995 AND 1996 IS UNAUDITED)
9. EXPORT AND INTERNATIONAL SALES
Total export sales by geographic region are as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS ENDED
------------------------------------------ MARCH 31,
DECEMBER 31, DECEMBER 30, DECEMBER 31, ---------------------
1993 1994 1995 1995 1996
------------ ------------ ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
Europe............................... $4,615 $5,221 $ 6,880 $ 2,101 $ 1,753
Far East............................. 1,884 1,041 3,051 560 1,136
Other................................ 586 1,141 2,331 553 770
------ ------ ------- ------ ------
$7,085 $7,403 $ 12,262 $ 3,214 $ 3,659
====== ====== ======= ====== ======
</TABLE>
International sales, including sales of the Company's UK and German
subsidiaries, were $12,840,000 and $4,389,000 for 1995 and the three months
ended March 31, 1996, respectively. These subsidiaries had no sales prior to
1995.
10. RELATED PARTY TRANSACTIONS
In December 1989, the Company entered into a distribution agreement with a
stockholder of the Company. As partial consideration for the distribution
rights, the distributor/stockholder paid a distribution fee of $1,050,000. The
distribution fee was nonrefundable except upon termination in accordance with
the distribution agreement. In September 1990, the Company began recognizing the
distribution fee on a monthly basis over a five-year period. The Company
recognized $139,000 and $210,000 of distribution revenue during fiscal 1995 and
1994, respectively, and $52,500 in the three months ended March 31, 1995.
At December 30, 1994, the Company has $140,000 in deferred revenue from the
related party (none at December 31, 1995 and March 31, 1996).
In 1993, sales of $6,206,000 were made to two companies that had made loans
to the Company. Gross margins on these sales were not materially different from
the gross margins realized on similar sales to unaffiliated customers. Both
loans were repaid in full in 1993.
11. EMPLOYEE BENEFIT PLAN
The Company has adopted a salary deferral plan (the Plan) covering
substantially all employees. The Company has made no contributions to the Plan
as of December 31, 1995 or March 31, 1996.
12. SUBSEQUENT EVENTS
In May 1996, the Board of Directors increased the number of shares reserved
for issuance under the Company's 1988 Stock Option Plan by 100,000 to 1,560,000
shares.
In June 1996, the Board of Directors authorized management of the Company
to file a registration statement with the Securities and Exchange Commission
permitting the Company to sell shares of its common stock to the public.
Upon completion of the offering, the Board of Directors will be authorized
to issue 2,000,000 shares of undesignated preferred stock in one or more series
and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, dividend rates, conversion rights, voting rights,
terms of redemption, redemption prices, liquidation preferences, and number of
shares constituting any series or the designation of such series, without
further vote or action by the stockholders.
F-18
<PAGE> 80
RASTER GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE THREE MONTH PERIODS ENDED
MARCH 31, 1995 AND 1996 IS UNAUDITED)
The Company's 1996 Employee Stock Purchase Plan (the Purchase Plan) was
adopted by the Board of Directors in June 1996, subject to stockholder approval.
A total of 400,000 shares of common stock has been reserved for issuance under
the Purchase Plan.
The Purchase Plan, which is intended to qualify under Section 423 of the
Code, will be implemented by a series of twelve month offering periods other
than the first offering period commencing on or about January 1 and July 1 of
each year. The first such offering period is expected to commence on the date of
this offering. The Purchase Plan will be administered by the Board of Directors
or by a committee appointed by the Board of Directors. Employees (including
officers and employee directors) of the Company, or of any majority owned
subsidiary designated by the Board of Directors, are eligible to participate in
the Purchase Plan if they are employed by the Company or any such subsidiary for
at least 20 hours per week and more than five months per year. The Purchase Plan
permits eligible employees to purchase common stock through payroll deductions,
which may not exceed 10% of an employee's compensation at a price equal to the
lower of 85% of the fair market value of the Company's common stock at the
beginning or end of the offering period.
The Company's 1996 Stock Plan (the 1996 Stock Plan) was adopted by the
Board of Directors in June 1996, subject to stockholder approval. An aggregate
of 800,000 shares of the Company's common stock are reserved for issuance under
the 1996 Stock Plan. Upon adoption of the 1996 Stock Plan, the Company's Board
of Directors determined to make no further grants under the 1988 Option Plan.
The 1996 Stock Plan provides for the granting to employees (including officers
and employee directors) of "incentive stock options" within the meaning of
Section 422 of the Code, for the granting to employees and consultants of
nonstatutory stock options and for the granting to employees of stock purchase
rights. The 1996 Stock Plan may be administered by the Board of Directors or a
committee of the Board (the 1996 Administrator). The 1996 Administrator
determines the terms of options and stock purchase rights granted under the 1996
Stock Plan, including the number of shares subject to the option or right,
exercise price, term and exercisability.
The 1996 Directors' Stock Option Plan (the Directors' Plan) was adopted by
the Board of Directors on June 1996, subject to stockholder approval. A total of
150,000 shares of common stock has been reserved for issuance under the
Directors' Plan. The Directors' Plan provides for the grant of nonstatutory
stock options to nonemployee directors of the Company. The Directors' Plan is
designed to work automatically without administration; however, to the extent
administration is necessary, it will be performed by the Board of Directors. To
the extent they arise, it is expected that conflicts of interest will be
addressed by abstention of the interested director from both deliberations and
voting regarding matters in which he or she has a personal interest.
The Directors' Plan provides that each person who is or becomes a
nonemployee director of the Company shall be granted a nonstatutory stock option
to purchase 10,000 shares of common stock (the First Option) on the date on
which the optionee first becomes a nonemployee director of the Company.
Thereafter, on the first calendar day of the Company's fiscal year commencing in
1997, each nonemployee director shall be granted an additional option to
purchase 5,000 shares of common stock (a Subsequent Option) if, on such date, he
or she shall have served on the Company's Board of Directors for at least six
months.
In June 1996, the Board of Directors approved, subject to stockholder
approval, a one-for-five reverse split of the Company's common and preferred
stock and reincorporation of the Company into the State of Delaware. All share
and per share amounts in the accompanying consolidated financial statements have
been adjusted retroactively.
F-19
<PAGE> 81
RASTER GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE THREE MONTH PERIODS ENDED
MARCH 31, 1995 AND 1996 IS UNAUDITED)
In June 1996, the Board of Directors approved, subject to stockholder
approval, an increase in the number of authorized Common Shares from 8,000,000
to 50,000,000.
In June 1996 the Company's credit agreement with its lender was amended.
The facility was extended to $2,000,000. In addition, the term was extended to
October 15, 1996.
F-20
<PAGE> 82
RASTER GRAPHICS
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On August 10, 1995, Raster Graphics, Inc. (the Company) acquired Onyx
Graphics Corporation (Onyx) in a transaction being accounted for as a purchase.
The total purchase price of approximately $1.5 million included the issuance of
443,360 shares of Series C preferred stock of the Company, options to purchase
220,120 shares of Company stock, cancelation of a $259,000 note receivable and
related acquisition costs of $70,000. The net assets acquired included tangible
assets valued at $866,000, developed technology and other intangible assets
totaling $454,000 and $750,000 for acquired in-process research and development
less assumed liabilities of $570,000.
The accompanying unaudited pro forma condensed combined statement of
operations gives effect to the transaction as if it occurred on January 1, 1995,
the beginning of the Company's most recently completed fiscal year. The
Company's year ended December 31, 1995 consolidated statement of operations
include Onyx's results of operations for the period from August 10, 1995 to
December 31, 1995. The pro forma condensed combined statement of operations for
the year ended December 31, 1995 combines the Company's consolidated statement
of operations for the year ended December 31, 1995 with Onyx's results of
operations for the period from January 1, 1995 to August 9, 1995.
The pro forma information is presented for illustrative purposes only and
is not necessarily indicative of the operating results that would have occurred
had the transaction been completed at the beginning of the period indicated nor
is it necessarily indicative of future operating results.
F-21
<PAGE> 83
RASTER GRAPHICS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
------------------------------
ONYX
RASTER GRAPHICS
GRAPHICS CORPORATION
INC. ---------------
------------ PERIOD FROM PRO FORMA
YEAR ENDED JANUARY 1, 1995 YEAR ENDED
DECEMBER 31, TO AUGUST 9, PRO FORMA DECEMBER 31,
1995 1995 ADJUSTMENTS 1995
------------ --------------- ----------- ------------
<S> <C> <C> <C> <C>
Net revenues........................ $ 26,045 $ 2,004 $(340)(A) $ 27,709
Cost of revenues.................... 16,598 401 (229)(A)(B) 16,770
--------- ----- ----------
Gross margin........................ 9,447 1,603 (111) 10,939
Operating expenses:
Research and development.......... 3,373 282 4(B)(C) 3,659
Sales and marketing............... 3,640 695 8(B) 4,343
General and administration........ 1,434 139 -- 1,573
Charge for acquired in-process
research and development....... 889 -- (889)(C)(D) --
--------- ----- ----------
Total operating
expenses................ 9,336 1,116 (877) 9,575
--------- ----- ----------
Income from operations.............. 111 487 766 1,364
Other income (expense).............. 49 (140) 20(E) (71)
--------- ----- ----------
Income from operations.............. 160 347 786 1,293
Provision for income taxes.......... 83 40 -- 123
--------- ----- ----------
Net income.......................... $ 77 $ 307 $ 786 $ 1,170
========= ===== ==========
Net income per share...... $ 0.01 $ 0.22 $ 0.16
========= ==========
Shares used in computing net income
per share......................... 7,172,117 1,364,983 7,171,105(F)
========= ==========
</TABLE>
F-22
<PAGE> 84
RASTER GRAPHICS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS
1. BASIS OF PRESENTATION
The pro forma information presented is theoretical in nature and not
necessarily indicative of the future consolidated results of operations of the
Company or the consolidated results of operations which would have resulted had
the Company purchased Onyx Graphics Corporation (Onyx) during the period
presented. The pro forma condensed combined statement of operations reflects the
effects of the acquisition, assuming the acquisition and related events occurred
as of January 1, 1995.
2. PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENT ADJUSTMENTS
(A) To eliminate sales from Onyx to the Company prior to the acquisition.
(B) Amortization of acquired workforce, trademarks, developed technology,
and distribution networks being amortized over their estimated useful
lives ranging from eight months to five years.
(C) The pro forma statement of operations excludes charges of $151,000
related to software licenses and product support, including $139,000 of
redundant Post Script licenses that the Company had purchased for the
Company's development of a similar image processing software product.
(D) The pro forma statement of operations excludes the charge of $750,000
for purchased in-process research and development which arose from the
acquisition as it represents a nonrecurring item directly related to
the transaction.
The purchase price was allocated to the tangible and intangible assets
of Onyx based on the fair market value of those assets using a risk
adjusted discounted cash flows approach. The evaluation of the
underlying technology acquired considered the inherent difficulties
and the uncertainties in completing the development, thereby achieving
technological feasibility, and the risks related to the viability of
and potential changes in future target markets. The underlying
technology and patent rights had no alternative use (in other research
and development projects or otherwise).
(E) To reverse Onyx's interest expense to third parties satisfied in the
acquisition.
(F) Shares used in net income per share computation have been adjusted to
reflect the weighted average shares of the Company as if the
transaction had occurred on January 1, 1995.
F-23
<PAGE> 85
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Onyx Graphics Corporation:
We have audited the accompanying statements of operations and cash flows of
Onyx Graphics Corporation for the year ended September 30, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of Onyx
Graphics Corporation for the year ended September 30, 1994, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Salt Lake City, Utah
November 11, 1994
F-24
<PAGE> 86
ONYX GRAPHICS CORPORATION
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1994
<TABLE>
<S> <C>
Revenues:
Software sales................................................................. $1,621,170
Hardware sales................................................................. 677,713
Other revenues................................................................. 294,992
----------
Total revenues......................................................... 2,593,875
Cost of sales.................................................................... 856,301
----------
Gross profit........................................................... 1,737,574
Operating expenses:
Research and development....................................................... 347,368
General and administrative..................................................... 424,183
Sales and marketing............................................................ 793,937
----------
Total operating expenses............................................... 1,565,488
Income from operations................................................. 172,086
Other income (expense):
Interest expense............................................................... (95,528)
Other income................................................................... 26,141
----------
Total other expense.................................................... (69,387)
----------
Income before income taxes....................................................... 102,699
Income tax expense (note 7)...................................................... 1,939
----------
Net income............................................................. $ 100,760
==========
Earnings per share............................................................... $ .06
==========
</TABLE>
See accompanying notes to financial statements.
F-25
<PAGE> 87
ONYX GRAPHICS CORPORATION
STATEMENT OF CASH FLOWS
YEAR ENDED SEPTEMBER 30, 1994
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income...................................................................... $100,760
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation................................................................. 52,312
Amortization................................................................. 25,354
Provision for loss on accounts receivable.................................... 2,000
Decrease (increase) in operating assets:
Trade accounts receivable.................................................. (44,227)
Inventories................................................................ 19,614
Prepaid expenses........................................................... (13,080)
Other assets............................................................... 4,116
Increase (decrease) in operating liabilities:
Accounts payable........................................................... (30,426)
Accrued expenses........................................................... 9,663
Deferred revenue........................................................... (24,047)
------
Net cash provided by operating activities............................... 102,039
------
Cash flows from investing activities:
Purchase of equipment........................................................... (17,627)
Purchase of software............................................................ (87,295)
------
Net cash used in investing activities........................................ (104,922)
------
Cash flows from financing activities:
Proceeds from notes payable and long-term debt.................................. 71,121
Repayment of notes payable and long-term debt................................... (83,545)
Principal repayments of capital lease obligations............................... (7,990)
------
Net cash used in financing activities........................................ (20,414)
------
Net decrease in cash.............................................................. (23,297)
Cash at beginning of year......................................................... 33,879
------
Cash at end of year............................................................... $ 10,582
======
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for:
Interest........................................................................ $ 89,551
Income taxes.................................................................... 1,939
</TABLE>
See accompanying notes to financial statements.
F-26
<PAGE> 88
ONYX GRAPHICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
ONYX Graphics Corporation (the Company) is primarily involved in the
business of developing and marketing software products that produce
large format high-quality color images. The Company also operates a
service bureau that utilizes software produced by the Company and sells
hardware products related to its software. The Company's headquarters
are in Salt Lake City, Utah.
(b) Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid financial instruments with original maturities to the
Company of three months or less to be cash equivalents.
(c) Inventories
Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method.
(d) Equipment
Equipment is stated at cost. Equipment under capital leases is stated
at the present value of minimum lease payments at the inception of the
lease.
Depreciation on equipment is calculated on the straight-line method
over their estimated useful lives of three to five years. Equipment
held under capital leases and leasehold improvements are amortized
using the straight-line method over the shorter of the lease term or
estimated useful life of the asset.
(e) Revenue Recognition
The Company recognizes revenue from software licenses at the time the
software is delivered. Revenue from software license agreements with
original equipment manufacturers (OEM) for redistribution to end-user
customers is recognized when the equipment incorporating the Company's
software is delivered to the end-user. Revenue received from software
maintenance contracts is deferred and recognized ratably over the term
of the maintenance contract, which is typically 90 days.
(f) Research and Development Costs
Research and development costs are expensed as incurred.
(g) Capitalization of Software
Under the criteria set forth in Statement of Financial Accounting
Standards (SFAS) No. 86, "Accounting for the Costs of Computer Software
to be Sold, Leased, or Otherwise Marketed," the Company capitalizes
software development costs upon the establishment of technological
feasibility for the product and the cost of software purchased for
subsequent resale, leasing, or otherwise marketed. The gross amount of
software capitalized totaled $104,831 as of September 30, 1994. The
Company is amortizing these costs on the straight-line method over a
period of three years. Related amortization was $25,354 for the year
ended September 30, 1994.
(h) Income Taxes
Income taxes are recorded using the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between
F-27
<PAGE> 89
ONYX GRAPHICS CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1994
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered
or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes
the enactment date.
(i) Earnings Per Share
Earnings per share of common shares are computed on the basis of the
weighted average shares outstanding plus any common stock equivalents
which would arise from the exercise of stock options. The weighted
average number of shares used in computing earnings per share for 1994
was 1,829,000.
(j) Use of Estimates
Management of the Company has made a number of estimates and
assumptions relating to the preparation of these financial statements
in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
(2) LIQUIDITY
As indicated in the accompanying financial statements, the Company
recognized net income of $100,760 in 1994, and generated cash from operating
activities. However, due to prior operating losses, the Company's net
stockholders' deficit is $296,465 and current liabilities exceed current assets
by $223,910. This has resulted in the Company having cash shortages and delayed
payment of certain obligations when they became due. The Company is in the
process of renegotiating the timing of certain debt payments. Management
believes that cash generated from product sales will provide adequate cash to
meet the Company's debt and operating requirements. The Company is subject to
uncertainties and competitive pressures, any of which could adversely affect the
Company's operating cash flow and create liquidity problems for the Company.
(3) LEASES
The Company is obligated under capital leases for equipment that expire
over the next three years. Amortization of assets held under capital leases is
included with depreciation expense.
The Company has a five year, noncancelable operating lease for its office
building. Rent expense for operating leases was $83,931 for the year ended
September 30, 1994.
F-28
<PAGE> 90
ONYX GRAPHICS CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1994
Future noncancelable, minimum lease payments as of September 30, 1994 are:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
Year ending September 30:
1995................................................................ $12,026 $ 69,024
1996................................................................ 12,026 72,160
1997................................................................ 8,638 73,416
1998................................................................ -- 24,612
----- ------
Total minimum lease payments..................................... 32,690 $239,212
======
Less amount representing interest (15.1%)............................. 7,363
-----
Present value of minimum lease payments.......................... 25,327
Less current installments of obligations under capital leases......... 8,041
-----
Obligations under capital leases, excluding current
installments.................................................... $17,286
=====
</TABLE>
(4) INCOME TAXES
Income tax expense for the year ended September 30, 1994 amounted to
$1,939, all of which is current and represents state minimum taxes. There is no
federal income tax expense or federal income tax payable in 1994 principally due
to utilization of net operating loss carryforwards.
The actual tax expense related to income from continuing operations differs
from the "expected" tax expense (computed by applying the U.S. corporate tax
rate of 34 percent) as follows:
<TABLE>
<S> <C>
Computed "expected" tax expense............................................ $34,918
Change in the beginning of the year balance of the valuation allowance for
deferred tax assets...................................................... (36,728)
Meals and entertainment.................................................... 1,810
State taxes, net of federal income tax benefit............................. 1,939
--------
$ 1,939
========
</TABLE>
At September 30, 1994, the Company has net operating loss carryforwards for
federal income tax purposes of approximately $600,000, which are available to
offset future federal taxable income through 2009.
Under the rules of the Tax Reform Act of 1986, the Company has undergone a
greater than 50 percent change of ownership. Consequently, use of substantially
all of the Company's net operating loss carryforwards against future taxable
income in any one year will be limited. The maximum amount of net operating loss
carryforwards available in a given year is limited to the product of the
Company's value on the date of ownership change and the federal long-term
tax-exempt bond rate, plus any limited carryforwards not utilized in prior
years.
Subsequently, recognized tax benefits relating to the valuation allowance
for deferred tax assets as of September 30, 1994, will be allocated as an income
tax benefit to be reported in the statement of operations.
F-29
<PAGE> 91
- ------------------------------------------------------------
- ------------------------------------------------------------
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES
OR AN OFFER TO, OR A SOLICITATION OF, ANY PERSON IN ANY JURISDICATION WHERE SUCH
AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Summary.................................... 3
Risk Factors............................... 5
The Company................................ 13
Use of Proceeds............................ 13
Dividend Policy............................ 13
Capitalization............................. 14
Dilution................................... 15
Selected Consolidated Financial Data....... 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 17
Business................................... 25
Certain Transactions....................... 47
Management................................. 41
Principal and Selling Stockholders......... 48
Description of Capital Stock............... 51
Shares Eligible for Future Sale............ 54
Underwriting............................... 56
Legal Matters.............................. 57
Experts.................................... 57
Additional Information..................... 58
Index to Consolidated Financial
Statements............................... F-1
- ------------------
</TABLE>
UNTIL , 1996 (25 DAYS AFTER THE EFFECTIVE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
SHARES
LOGO
COMMON STOCK
---------------------------
PROSPECTUS
---------------------------
HAMBRECHT & QUIST
PRUDENTIAL SECURITIES INCORPORATED
, 1996
- ------------------------------------------------------------
- ------------------------------------------------------------
<PAGE> 92
APPENDIX -- DESCRIPTION OF GRAPHICS
OUTSIDE FLAP OF CENTERFOLD
Heading: Raster Graphics is dedicated to providing large-format, on-demand,
short-run printing systems.
Top left of page has the Rastergraphics logo.
Top right of page has a photo of a DCS printer.
Caption: DCS Digital Press
Center of page has photo of a computer.
Caption: PosterShop Image Processing Software
Middle left of page has a photo of ink bottles.
Bottom of page has five symbols depicting awards earned by the Company.
Captions: Editors' Choice Award, Modern Reprographics Top 10 of 1994, DPI
Product of the Year 1994, Hot Product 1994 in Electronic Publishing, and IEEE
Computer Society's 1994 CG&A Excellence Award
INSIDE FLAP OF GATEFOLD FRONT COVER
Heading: The Raster Graphics Solution
Subheadings: Fast Turnaround, Low Cost for Short Runs, Customized Graphics,
High Print Quality and Flexibility
Page contains two (2) photos: Center photo is of a stage display. Bottom
left photo is of a banner above a conference facility.
Captions: Innovative uses for large-format digital printing are emerging as
desk-top publishing users become aware of its cost-effectiveness and high
impact; Key Applications: Point-of-Purchase Displays, Vinyl and Cloth Banners,
Corporate Indentity Graphics, Mall Graphics, Exhibit/Trade Show Graphics,
Billboards, Sports/Concert/Event Graphics; and Key Customer Segments: Color
Photo Labs, Reprographic Houses, Graphic Arts Service Bureaus, Exhibit Builders,
Digital Color Printers, Screen Printers, In-House Print Shops
INSIDE FRONT COVER
Heading: Key Applications
Page contains three (3) photos. Upper right photo is of a point of purchase
display. Bottom left is of a bus stand poster. Bottom right is of a banner and
exhibit in the lobby of a building.
Caption: Point of purchase; posters; exhibits.
PROSPECTUS COVER
Page contains logo of Rastergraphics on center top of page.
PAGE 26
Bottom center of page contains graph with Print Quantity on the x-axis and
Image Quality on the y-axis. The graph includes four rectangular boxes which
depict the range of print quantities over which Photographic, LFDP, Screen and
offset printing is cost effective and the corresponding level of image quality.
<PAGE> 93
Caption: Printing Technologies' Cost Effective Range
PAGE 27
Center top of page contains chart with four columns.
Column Titles: Image Quality, On-Demand, Short Run, Outdoor Applications
Row Titles: LFDP, Photograph, Screen, Offset. Check marks depict each
printing technology's capabilities.
Caption: Printing Technologies' Capabilities
PAGE 30
Center top of page contains two drawings of print heads pointing to the
media, writing nibs, data source and print head segments.
Captions: Raster Graphics Non-Multiplexed Writing Print Head; Multiplexed
Writing Print Head.
PAGE 31
Center of page contains drawing of six computers, two inkjet printers and a
DCS5442 printer. Lines between the computers and printers depict the
architecture of the client/server system.
Caption: Postershop Client/Server Architecture; Client; Server; DCS5442
PAGE 33
Center top of page contains a graph which has two vertical bars which show
the total size of the LFDP market in 1995 and 1998 and the split between
consumables and printers.
Caption: LFDP Market; Consumables; Printers
PAGE 35
Center top of page contains a depiction of the Printer paper transport
system showing the ink bottle, inking station, silicon imaging bar print head,
paper roll, transport, supply motor, takeup motor and paper roll.
Caption: Raster Graphics' Paper Transport System
PAGE 36
Center top of page contains a depiction of the printer inking system
showing the ink containers, color concentrate, color control unit, inking
stations and ink tray.
Caption: Raster Graphics' Inking System
BACK INSIDE COVER
Heading: Raster Graphics Products
Page contains three graphics: Top right of page has a photo of a printer.
Middle left of page has a drawing of (copy from page 31 description). Bottom
left has a photo of ink bottles.
Captions: INNOVATIVE FEATURES OF DCS PRINTERS
- HIGH PERFORMANCE USING NON-MULTIPLEXED WRITING
Print at high speeds -- up to 1,000 square feet per hour -- using
the patented print head, the Silicon Imaging Bar.
- FIVE-COLOR CAPABILITY
<PAGE> 94
Print special spot colors or apply varnish finish using the
fifth color station.
- DUAL RESOLUTION PRINTING MODE
Select appropriate 200 x 200 dpi or 200 x 400 dpi mode to match
application and performance needs.
- INTEGRATED PRINTER AND SERVER
Improve work flow with real-time interaction between the printer
and server.
ADVANCED IMAGE-PROCESSING SOFTWARE
DCS SYSTEM SOFTWARE
PosterShop(TM) image-processing software, a true client/server
architecture, allows clients anywhere on the network to prepare
and preview jobs. High-performance server manages printer(s)
queues and RIPs files. PosterShop tools include:
- IMAGE SIZE AND PREVIEW
Size and preview the large-format digital image before printing.
- COLOR ADJUSTMENT
Review and adjust colors on the screen and printer.
- COLOR CALIBRATION
Provide device-independent color when changing media, ink or dot
pattern.
- FULL SUPPORT FOR POSTSCRIPT LEVEL-2 RIP
Screen multiple dot patterns with high speed RIP.
CONSUMABLES
Raster Graphics' product offering also includes a range of
consumables, including specialized process color inks, spot-color
inks, varnish, specialized indoor and outdoor papers and vinyls.
Most of these consumable products are manufactured specifically
for DCS systems, resulting in high-quality printed images.
<PAGE> 95
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of Common Stock being registered. All amounts are estimates except
the SEC registration fee, the NASD filing fee and the Nasdaq National Market
listing fee.
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
---------
<S> <C>
SEC registration fee.............................................. $ 14,276
NASD filing fee................................................... 4,640
Nasdaq National Market listing fee................................ 45,444
Printing and engraving expenses................................... 150,000
Legal fees and expenses........................................... 300,000
Accounting fees and expenses...................................... 250,000
Blue Sky qualification fees and expenses.......................... 10,000
Transfer Agent and Registrar fees................................. 5,000
Miscellaneous fees and expenses................................... 70,640
-------
Total................................................... $850,000
=======
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware Law authorizes a court to award, or a
corporation's Board of Directors to grant, indemnity to directors and officers
in terms sufficiently broad to permit such indemnification under certain
circumstances for liabilities (including reimbursement for expenses incurred)
arising under the Securities Act of 1933, as amended (the "Act"). The Company's
Bylaws provide that the Company shall indemnify its directors and officers to
the fullest extent permitted by Delaware law, including circumstances in which
indemnification is otherwise discretionary under Delaware law. The Company has
entered into indemnification agreements with its directors containing provisions
which are in some respects broader than the specific indemnification provisions
contained in the Delaware Law. The indemnification agreements may require the
Company, among other things, to indemnify its directors against certain
liabilities that may arise by reason of their status or service as directors
(other than liabilities arising from willful misconduct of a culpable nature),
to advance their expenses incurred as a result of any proceeding against them as
to which they could be indemnified, and to obtain directors' and officers'
insurance, if available on reasonable terms. The Registrant's Amended and
Restated Certificate of Incorporation provides for indemnification of its
directors and officers to the maximum extent permitted by the Delaware Law, and
the Registrant's Bylaws provide for indemnification of its directors, officers,
employees and other agents to the maximum extent permitted by Delaware Law. In
addition, the Registrant has entered into Indemnification Agreements with its
directors and officers. Reference is also made to the Underwriting Agreement
indemnifying officers and directors of the Registrant against certain
liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since May 31, 1993, the Company has issued and sold the following
securities:
1. In February 1995, the Company issued and sold, pursuant to a Series C
Preferred Stock Purchase Agreement, an aggregate of 595,363 shares of Series C
Preferred Stock at a purchase price of $2.50 per share for an aggregate offering
price of $1,488,408.
2. From May 31, 1993 through May 31, 1996, the Company granted options
under the 1988 Stock Option Plan to purchase an aggregate of 1,704,190 shares of
Common Stock at exercise prices ranging from $0.50 to $7.00 per share to 89
employees, directors and consultants.
II-1
<PAGE> 96
3. From May 31, 1993 through May 31, 1996, the Company issued and sold,
pursuant to the exercise of options granted under the 1988 Stock Plan, 133,302
shares of Common Stock to 18 employees and consultants for an aggregate purchase
price of $60,251.00 in cash.
4. In August 1995, the Company issued and sold, pursuant to an Agreement
and Plan of Reorganization, an aggregate of 443,360 shares of Series C Preferred
Stock in exchange for an aggregate of 1,108,400 shares of capital stock of Onyx
Graphics, Inc., a Delaware Corporation.
5. In January 1996 the Company amended the Agreement and Plan of
Reorganization dated August 1995 to allow for early release from escrow of
133,008 shares.
The issuances of the securities in Item 1 above was deemed to be exempt
from registration under the Act in reliance on Section 4(2) of such Act as a
transaction by an issuer not involving any public offering. The issuances
described in Items 2 and 3 above were deemed exempt from Registration under the
Act in reliance upon Rule 701 promulgated under the Act. In addition, the
issuances described in Item 4 above were deemed exempt from registration under
the Act in reliance on Section 3(a)(10) of the Act. The recipients of securities
in each such transaction represented their intentions to acquire the securities
for investment only and not with a view to or for sale in connection with any
distribution thereof, and appropriate legends were affixed to the share
certificates, options and warrants issued in such transactions. All recipients
had adequate access, through their relationships with the Company, to
information about the Company.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ ----------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement
2.1 Agreement and Plan of Reorganization dated as of June 12, 1995 among
Registrant, Onyx Graphics Corporation and Bank of America N.T.S.A., and
Amendment dated as of December 31, 1995.
3.1 Amended and Restated Articles of Incorporation of Registrant (California)
3.2* Certificate of Incorporation of Registrant (Delaware)
3.3* Certificate of Merger
3.4* Amended and Restated Certificate of Incorporation of Registrant (Delaware)
3.5 Bylaws of Registrant (California)
3.6* Bylaws of Registrant (Delaware)
4.1* Specimen Common Stock Certificate
4.2* Form of Warrant of Registrant for Common Stock
4.3* Form of Warrant for Series B Preferred Stock
5.1* Opinion of Venture Law Group, A Professional Corporation
10.1 1988 Stock Option Plan
10.2 1996 Stock Plan
10.3 1996 Directors' Stock Option Plan
10.4 1996 Employee Stock Purchase Plan
10.5 Form of Indemnification Agreement (California)
10.6* Form of Indemnification Agreement (Delaware)
10.7 Amended and Restated Registration Rights Agreement dated as of August 4,
1995 between Registrant and holders of its Preferred Stock and warrant
holders
10.8 Amended and Restated Product Agreement by and between Registrant, Inc. and
Oce Graphics France S.A. dated October 1, 1990 and Amendments July 17, 1991,
April 29, 1992, January 13, and September 1, 1994
10.9 Purchase Agreement by and between ENCAD, Inc. and Onyx Graphics Corporation
dated March 9, 1996
10.10 Lease Agreement by and between Raster Graphics, Inc. and Principal Mutual
Life Insurance Company for facility on 3025 Orchard Parkway, San Jose, CA
10.11 Development and Purchase Agreement dated March 16, 1996
11.1 Statement of Computation of Income (Loss) Per Share
</TABLE>
II-2
<PAGE> 97
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ ----------------------------------------------------------------------------
<C> <S>
21.1 Subsidiaries of Registrant
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of KPMG, Independent Auditors
23.3* Consent of Counsel (included in Exhibit 5.1)
24.1 Power of Attorney (see page II- )
27 Financial Data Schedule
</TABLE>
- ---------------
* To be supplied by amendment.
(b) Financial Statement Schedules
II Valuation and qualifying accounts
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the provisions referenced in Item 14 of this Registration Statement
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act, and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered hereunder, the Registrant
will, unless in the opinion of its counsel, the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or Rule
497(h) under the Act shall be deemed to be part of this Registration Statement
as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of Prospectus shall be deemed to
be a new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-3
<PAGE> 98
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Registration Statement on Form S-1 to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of San Jose, State of
California on this 20th day of June, 1996.
RASTER GRAPHICS, INC.
By: /s/ RAKESH KUMAR
Rakesh Kumar,
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Rakesh Kumar and Dennis R. Mahoney
and each of them acting individually, as his or her attorney in fact, each with
full power of substitution, for him or her in any and all capacities, to sign
any and all amendments to this Registration Statement (including post-effective
amendments), and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming our signatures as they may be signed by our said
attorneys to any and all amendments to said Registration Statement, or any
related registration statement that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, as amended. Pursuant to the
requirements of the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- ---------------------------------------- ---------------
<C> <S> <C>
/s/ RAKESH KUMAR President, Chief Executive Officer and June 20, 1996
(Rakesh Kumar) Chairman of the Board of Directors
(Principal Executive Officer)
/s/ DENNIS R. MAHONEY Vice President and Chief Financial June 20, 1996
(Dennis R. Mahoney) Officer (Principal Financial and
Accounting Officer)
(Frank J. Caufield) Director , 1996
/s/ CHUCK EDWARDS President, Onyx Graphics and Director June 20, 1996
(Chuck Edwards)
/s/ PROMOD HAQUE Director June 20, 1996
(Promod Haque)
/s/ LUCIO L. Director June 20, 1996
LANZA
(Lucio L. Lanza)
/s/ W. JEFFERS PICKARD Director June 20, 1996
(W. Jeffers Pickard)
________________ Director 1996
(Delbert W. Yocam)
</TABLE>
II-4
<PAGE> 99
RASTER GRAPHICS, INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED BALANCE AT
BEGINNING TO COSTS DEDUCTIONS END OF
OF PERIOD AND EXPENSE WRITE-OFFS PERIOD
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1993............... $154 $ 57 $ (37) $174
Year ended December 30, 1994............... $174 $ 243 $ (171) $246
Year ended December 29, 1995............... $246 $ 509 $ (288) $467
Warranty reserve:
Year ended December 1993................... $ 76 $ 443 $ (187) $332
Year ended December 1994................... $332 $ 340 $ (325) $347
Year ended December 1995................... $347 $ 710 $ (770) $287
</TABLE>
<PAGE> 100
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ --------------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement
2.1 Agreement and Plan of Reorganization dated as of June 12, 1995 among Registrant,
Onyx Graphics Corporation and Bank of America N.T.S.A., and Amendment dated as
of December 31, 1995.
3.1 Amended and Restated Articles of Incorporation of Registrant (California)
3.2* Certificate of Incorporation of Registrant (Delaware)
3.3* Certificate of Merger
3.4* Amended and Restated Certificate of Incorporation of Registrant (Delaware)
3.5 Bylaws of Registrant (California)
3.6* Bylaws of Registrant (Delaware)
4.1* Specimen Common Stock Certificate
4.2* Form of Warrant of Registrant for Common Stock
4.3* Form of Warrant for Series B Preferred Stock
5.1* Opinion of Venture Law Group, A Professional Corporation
10.1 1988 Stock Option Plan
10.2 1996 Stock Plan
10.3 1996 Directors' Stock Option Plan
10.4 1996 Employee Stock Purchase Plan
10.5 Form of Indemnification Agreement (California)
10.6* Form of Indemnification Agreement (Delaware)
10.7 Amended and Restated Registration Rights Agreement dated as of August 4, 1995
between Registrant and holders of its Preferred Stock and warrant holders
10.8 Amended and Restated Product Agreement by and between Registrant, Inc. and Oce
Graphics France S.A. dated October 1, 1990 and Amendments July 17, 1991, April
29, 1992, January 13, and September 1, 1994
10.9 Purchase Agreement by and between ENCAD, Inc. and Onyx Graphics Corporation
dated March 9, 1996
10.10 Lease Agreement by and between Raster Graphics, Inc. and Principal Mutual Life
Insurance Company for facility on 3025 Orchard Parkway, San Jose, CA
10.11 Development and Purchase Agreement dated March 16, 1996
11.1 Statement of Computation of Income (Loss) Per Share
21.1 Subsidiaries of Registrant
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of KPMG, Independent Auditors
23.3* Consent of Counsel (included in Exhibit 5.1)
24.1 Power of Attorney (see page II- )
27 Financial Data Schedule
</TABLE>
- ---------------
* To be supplied by amendment.
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION AMONG
RASTER GRAPHICS, INC., RASTER ACQUISITION CORPORATION
AND
ONYX GRAPHICS CORPORATION
June 12, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Merger of Constituent Corporations....................................................................... 1
1.1 The Merger.................................................................................. 1
1.2 Effective Date of the Merger................................................................ 1
1.3 Articles of Incorporation................................................................... 2
1.4 Bylaws...................................................................................... 2
1.5 Directors and Officers...................................................................... 2
1.6 Conversion of Shares and Options............................................................ 2
1.7 Onyx Dissenting Shares...................................................................... 3
1.8 Distribution Agent.......................................................................... 3
1.9 Lost, Stolen or Destroyed Certificates...................................................... 4
1.10 Taking of Necessary Action; Further Action.................................................. 4
1.11 Closing of Onyx's Transfer Books............................................................ 4
1.12 Tax-Free Treatment.......................................................................... 4
1.13 Shareholders Agreement...................................................................... 4
2. Representations and Warranties of Onyx................................................................... 4
2.1 Existence; Good Standing.................................................................... 4
2.2 Power, Authorization and Validity........................................................... 5
2.3 No Conflicts or Violations.................................................................. 5
2.4 Subsidiaries................................................................................ 6
2.5 Capitalization.............................................................................. 6
2.6 No Breach or Default........................................................................ 6
2.7 Financial Statements; Indebtedness.......................................................... 6
2.8 Absence of Certain Changes.................................................................. 7
2.9 Agreements and Commitments.................................................................. 7
2.10 Intellectual Property....................................................................... 9
2.11 Transactions with Affiliates................................................................ 9
2.12 Compliance with Laws........................................................................ 9
2.13 Litigation, etc............................................................................. 10
2.14 Brokers, Finders and Consultants............................................................ 10
2.15 Assignability of Contracts; No Default...................................................... 10
2.16 Taxes....................................................................................... 10
2.17 Customer List............................................................................... 12
2.18 Tangible Assets............................................................................. 13
2.19 Accounts and Notes Receivable............................................................... 13
2.20 Inventories................................................................................. 13
2.21 Employee Benefit Plans...................................................................... 13
2.22 Employees................................................................................... 14
2.23 Health, Safety and Environmental Matters.................................................... 14
2.24 Insurance................................................................................... 15
2.25 Books and Records........................................................................... 15
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
2.26 Material Misstatements and Omissions........................................................ 15
2.27 Notice of Fairness Hearing.................................................................. 15
3. Representations and Warranties of Raster and Sub......................................................... 16
3.1 Existence; Good Standing.................................................................... 16
3.2 Power, Authorization and Validity........................................................... 16
3.3 No Conflicts or Violations.................................................................. 16
3.4 Subsidiaries................................................................................ 17
3.5 Capitalization.............................................................................. 17
3.6 No Breach or Default........................................................................ 17
3.7 Financial Statements; Indebtedness.......................................................... 18
3.8 Absence of Certain Changes.................................................................. 18
3.9 Agreements and Commitments.................................................................. 19
3.10 Intellectual Property....................................................................... 20
3.11 Transactions with Affiliates................................................................ 21
3.12 Compliance with Laws........................................................................ 21
3.13 Litigation, etc............................................................................. 21
3.14 Brokers, Finders and Consultants............................................................ 21
3.15 Taxes....................................................................................... 22
3.16 Employee Benefit Plans...................................................................... 22
3.17 Health, Safety and Environmental Matters.................................................... 23
3.18 Insurance................................................................................... 23
3.19 Full Disclosure............................................................................. 23
3.20 Notice of Fairness Hearing.................................................................. 23
4. Additional Covenants and Agreements...................................................................... 24
4.1 Conduct of Onyx Prior to Closing............................................................ 24
4.2 No Other Bids............................................................................... 25
4.3 Shareholder Approval........................................................................ 26
4.4 Legal Conditions to the Merger.............................................................. 26
4.5 Cooperation................................................................................. 26
4.6 Investigation by Raster..................................................................... 26
4.7 Satisfactory Shareholder Agreements......................................................... 27
4.8 Expenses.................................................................................... 27
4.9 Public Announcements........................................................................ 27
4.10 Issuance of Raster Preferred Stock.......................................................... 27
4.11 Consents.................................................................................... 27
4.12 Secured Loan................................................................................ 28
5. Conditions of Closing.................................................................................... 28
5.1 Raster's and Sub's Conditions of Closing.................................................... 28
5.2 Onyx's Conditions of Closing................................................................ 29
5.3 Conditions of Raster, Sub and Onyx to Closing............................................... 30
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
6. Onyx Options............................................................................................. 31
6.1 Onyx's Plans................................................................................ 31
7. Escrow and Indemnification............................................................................... 31
7.1 Creation of Escrow.......................................................................... 31
7.2 Onyx Shareholders' Representatives.......................................................... 32
7.3 Indemnity................................................................................... 32
7.4 Distribution Events......................................................................... 32
7.5 Termination................................................................................. 34
7.6 Rights of Shareholders...................................................................... 34
7.7 Fees........................................................................................ 34
7.8 Escrow Agent's Protection................................................................... 34
7.9 Indemnification of Escrow Agent............................................................. 34
7.10 Exclusive Remedy............................................................................ 35
7.11 Notice...................................................................................... 35
8. Termination.............................................................................................. 36
8.1 Mutual Consent.............................................................................. 36
8.2 By Raster or Onyx........................................................................... 36
8.3 By Raster................................................................................... 37
8.4 By Onyx..................................................................................... 37
8.5 Effect of Termination....................................................................... 37
9. Miscellaneous............................................................................................ 37
9.1 Notice...................................................................................... 37
9.2 Binding Effect, Benefits.................................................................... 38
9.3 Entire Agreement............................................................................ 38
9.4 Governing Law............................................................................... 38
9.5 Non-Survival of Representation, Warranties and Agreements................................... 39
9.6 Counterparts................................................................................ 39
9.7 Headings.................................................................................... 39
9.8 Waivers..................................................................................... 39
9.9 Merger of Documents......................................................................... 39
9.10 Incorporation of Schedules.................................................................. 39
9.11 Assignability............................................................................... 39
9.12 Severability................................................................................ 40
9.13 Finder's Fees............................................................................... 40
9.14 Effective Date.............................................................................. 40
</TABLE>
-iii-
<PAGE> 5
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") dated as of
the 12th day of June 1995, is entered into by and among Raster Graphics, Inc.
("Raster"), a California corporation, Raster Acquisition Corporation ("Sub"), a
Delaware corporation and a wholly owned subsidiary of Raster, Onyx Graphics
Corporation ("Onyx"), a Delaware corporation (Sub and Onyx being referred to
collectively in this Agreement as the "Constituent Corporations"), and as to
Section 7, Sections 9.2 through 9.14 inclusive, and related provisions only,
Bank of America N.T. & S.A. (the "Escrow Agent").
RECITALS
Raster and Onyx believe it is in the best interests of each company and
their respective shareholders that Sub merge with and into Onyx (the "Merger")
and that the outstanding shares of Common Stock of Onyx (herein "Onyx Common
Stock") be converted upon such Merger into shares of Series C Preferred Stock
("Raster Preferred Stock"), of Raster and each outstanding option to purchase
shares of Onyx Common Stock shall be assumed by Raster as provided in this
Agreement;
In consideration of the covenants, promises and representations set
forth in this Agreement and for other good and valuable consideration, the
parties hereby agree as follows:
1. Merger of Constituent Corporations.
1.1 The Merger. At the Effective Time (as defined in Section
1.2), Sub shall be merged with and into Onyx in accordance with the applicable
provisions of the laws of the State of Delaware and the separate existence of
Sub shall thereupon cease, and Onyx, as the surviving corporation in the Merger
(the "Surviving Corporation"), shall continue its corporate existence under the
laws of the State of Delaware. Upon the effectiveness of the Merger, the
Surviving Corporation shall possess all of the rights, privileges, powers and
franchises, of a public as well as of a private nature, of each of the
Constituent Corporations; and shall be subject to all the restrictions,
disabilities and duties of each of the Constituent Corporations and all
property, real, personal and mixed, and all debts due to either of the
Constituent Corporations on whatever account, for stock subscriptions as well as
all other things in action or belonging to each of such Constituent Corporations
shall be vested in the Surviving Corporation; and all property, rights,
privileges, powers and franchises, and all and every other interest shall be
thereafter the property of the Surviving Corporation, the title to any real
estate vested by deed or otherwise in either Constituent Corporation shall not
revert or be in any way impaired by reason of the Merger; but all rights of
creditors and all liens upon any property of either of the Constituent
Corporations shall thenceforth attach to the Surviving Corporation, and may be
enforced against it to the same extent as if said debts, liabilities and duties
had been incurred or contracted by it.
1.2 Effective Time of the Merger. Subject to the terms and
conditions of this Agreement, as soon as practicable after all of the conditions
set forth in Section 5 are fulfilled or waived, the parties to this Agreement
will cause the Merger to be consummated by the filing with
<PAGE> 6
the Secretary of State of the State of Delaware, in accordance with the Delaware
General Corporation Law, of an agreement of merger in such form as required by
and executed in accordance with the relevant provisions of applicable law (the
"Merger Agreement") in substantially the form of Exhibit 1.2 to this Agreement.
The Merger shall become effective on the date and time when the Merger Agreement
is so filed (the time of such filing being the "Effective Time"). The closing of
the Merger (the "Closing") shall take place at 10:00 a.m. at the offices of
Venture Law Group on July 31, 1995, or at such other time, date and location as
the parties to this Agreement agree (the "Closing Date").
1.3 Articles of Incorporation. The Articles of Incorporation
of Onyx as in effect at the Effective Time, as amended by the Merger Agreement,
shall be the Articles of Incorporation of the Surviving Corporation, until
thereafter further amended as provided by law and such Articles of
Incorporation.
1.4 Bylaws. The Bylaws of Onyx as in effect at the Effective
Time shall be the Bylaws of the Surviving Corporation, until thereafter amended
as provided by law, the Articles of Incorporation of the Surviving Corporation
and such Bylaws.
1.5 Directors and Officers. The directors and officers of Sub
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation, each to serve in accordance with the Bylaws of the
Surviving Corporation, and, in the case of the officers, each to serve at the
discretion of the Board of Directors of the Surviving Corporation in accordance
with the Bylaws of the Surviving Corporation.
1.6 Conversion of Shares and Options.
(a) Conversion of Onyx Stock and Options.
(i) As of the Effective Time, by virtue of
the Merger and without any action on the part of the holders thereof, the shares
of Onyx Common Stock which are issued and outstanding immediately prior to the
Effective Time, except Dissenters' Shares (as hereinafter defined) shall, by
virtue of the Merger, be converted into an aggregate of that number of shares of
Raster Preferred Stock as provided in this Section 1.6(a), subject, however, to
the deposit of shares into escrow as provided in Section 7 of this Agreement.
(ii) The aggregate number of shares of
Raster Preferred Stock which will be issued to Onyx shareholders in exchange for
Onyx Common Stock and Raster Common Stock issuable upon exercise of Onyx options
to purchase Onyx Common Stock being assumed by Raster (together, the Raster
Preferred Stock and Raster Common Stock shall be referred to as the "Aggregate
Raster Shares") shall in no event exceed 3,487,434 and shall be exchanged at a 2
to 1 exchange ratio.
(b) Onyx Options. At the Effective Time, all options
to purchase Onyx Common Stock then outstanding under Onyx's 1991 Stock Option
Plan (the "1991 Plan") and 1992 Stock Option Plan (the "1992 Plan," and
collectively with the 1991 Plan, the "Plans") shall be assumed by Raster as
provided in Section 6.
-2-
<PAGE> 7
(c) Capital Stock of Sub. Each share of Common Stock,
of Sub issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
nonassessable share of Common Stock, no par value, of the Surviving Corporation.
Each stock certificate of Sub evidencing ownership of any such shares shall
continue to evidence ownership of such shares of capital stock of the Surviving
Corporation.
1.7 Onyx Dissenting Shares. Shares of Onyx Common Stock that
have not been voted for adoption of the Merger and with respect to which
appraisal rights shall have been properly demanded in accordance with the
Delaware General Corporation Law ("Dissenters' Shares") shall not be converted
into Raster Preferred Stock as set forth in Section 1.6 on the Effective Time,
but shall be converted into the right to receive from Raster such consideration
as is determined to be due with respect to such Dissenters' Shares pursuant to
the provisions of the Delaware General Corporation Law. Onyx shall give Raster
(i) prompt notice of any written demands for appraisals, withdrawals of demands
for appraisal and any other instruments in respect thereof received by Onyx and
(ii) the opportunity to participate in all negotiations and proceedings with
respect to demands for appraisal. Onyx will not, except with the prior written
consent of Raster, voluntarily make any payment with respect to any demands for
appraisal or settle or offer to settle any such demands. Raster will pay all
sums due to holders of Dissenters' Shares.
1.8 Distribution Agent. After the Effective Time, an agent
designated by Raster shall act as agent (the "Distribution Agent") in effecting
the exchange of certificates which, immediately prior to the Effective Time,
represented Onyx Common Stock for certificates of Raster Preferred Stock.
Promptly after the Effective Time (but in no event later than one business day
thereafter), Raster shall make available to the Distribution Agent the shares of
Raster Preferred Stock issuable pursuant to Section 1.6 hereof, subject,
however, to the deposit of shares into escrow as provided in Section 7 of this
Agreement. As soon as practicable after the Effective Time, the Distribution
Agent shall mail a transmittal form (the "Letter of Transmittal") to each holder
of certificates theretofore representing any such shares of Onyx Common Stock
advising such holder of the procedure for surrendering to the Distribution Agent
any such share certificates for exchange. If any certificates for Raster
Preferred Stock are to be issued in a name other than that in which a
certificate so surrendered is then registered, it shall be a condition of such
exchange that the certificate surrendered be accompanied by payment of any
applicable transfer taxes and documents required for a valid transfer. From and
after the Effective Time, until so surrendered, each certificate shall be deemed
for all corporate purposes, except as set forth below, to evidence the number of
shares of Raster Preferred Stock into which the shares of Onyx Common Stock
represented by such certificate shall have been converted. Unless and until any
certificate shall be so surrendered, the holder of such certificate shall have
no right to vote or to receive any dividends paid or other distributions made to
holders of record of Raster Preferred Stock after the Effective Time.
Upon surrender of a certificate, the holder of record thereof
shall receive, together with certificates representing the Raster Preferred
Stock to which he or she shall be entitled in accordance with Section 1.6, all
dividends and other distributions with respect to such shares which shall have
been paid or made to holders of record of Raster Preferred Stock after the
Effective Time without interest thereon. Raster shall be authorized to deliver
Raster Preferred Stock attributable to any certificate representing shares of
Onyx Common Stock theretofore issued
-3-
<PAGE> 8
which has been lost or destroyed upon receipt of satisfactory evidence of
ownership of the shares formerly represented thereby and of appropriate
indemnification.
1.9 Lost, Stolen or Destroyed Certificates. In the event any
certificates evidencing shares of Onyx Common Stock shall have been lost, stolen
or destroyed, the Distribution Agent shall issue in exchange for such lost,
stolen or destroyed certificates, upon the making of an affidavit of that fact
by the holder thereof, such shares of Raster Preferred Stock and cash for
fractional shares, if any, as may be required pursuant to Section 1.6; provided,
however, that Raster may in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificates to deliver a bond in such sum as Raster may reasonably direct as
indemnity against any claim that may be made against Raster or the Distribution
Agent with respect to the certificates alleged to have been lost, stolen or
destroyed.
1.10 Taking of Necessary Action; Further Action. Raster, Sub
and Onyx, respectively, shall take all such action as may be necessary or
appropriate in order to effectuate the Merger as promptly as possible. If, at
any time after the Effective Time, any further action is necessary or desirable
to carry out the purposes of the Agreement and to vest the Surviving Corporation
with full right, title and possession to all assets, property, rights,
privileges, powers and franchises of either of the Constituent Corporations, the
officers and directors of the Surviving Corporation are fully authorized in the
name of the corporation or otherwise to take, and shall take, all such action.
1.11 Closing of Onyx's Transfer Books. At the Effective Time,
the stock transfer books of Onyx shall be closed and no transfer of Onyx Common
Stock shall thereafter be made.
1.12 Tax-Free Treatment. The Merger is intended to constitute
a tax-free reorganization under Section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code") and the parties shall not report the transaction
on any Return (as defined in Section 2.10 below) in a manner inconsistent
therewith.
1.13 Shareholder Agreement. The shareholders of Onyx as shall
be necessary to constitute more than 95% (by value) of the outstanding capital
stock of Onyx as of the Effective Time, shall duly execute and deliver to Raster
on or before the Closing Date, an agreement substantially in the form of Exhibit
5.1(j) attached to this Agreement (the "Shareholder Agreement"), setting forth,
among other things, certain representations relating to compliance with the
continuity of interest requirement for qualifying as a reorganization under
Section 368(a) of the Code.
2. Representations and Warranties of Onyx. Except as disclosed in a
document referring specifically to the representations and warranties in this
Agreement that identifies by section number the section and subsection to which
such disclosure relates, Onyx represents and warrants to Raster and Sub as
follows:
2.1 Existence; Good Standing. Onyx is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware. Onyx is duly
-4-
<PAGE> 9
licensed or qualified to do business as a foreign corporation and is in good
standing under the laws of any jurisdiction in which the character of the
properties owned or leased by Onyx therein or in which the transaction of its
business makes such qualification necessary, except for jurisdictions in which
the failure to be so qualified or to be in good standing would not have a
Material Adverse Effect on Onyx. When used in this Section 2, the term "MATERIAL
ADVERSE EFFECT" means any change or effect that is or is likely to be materially
adverse to the business, Purchased Assets, financial condition, results of
operations or prospects of Onyx. Onyx has all requisite corporate power and
authority to own its properties and carry on its business as now conducted.
2.2 Power, Authorization and Validity. Onyx has all requisite
legal and corporate power and authority to enter into and perform its
obligations under this Agreement and the Agreement of Merger and to consummate
the transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and the Agreement of Merger and the consummation
of the transactions contemplated hereby and thereby have been duly and validly
approved and authorized by all necessary corporate action on behalf of Onyx.
This Agreement has been, and the Agreement of Merger will be, duly executed and
delivered by Onyx and this Agreement constitutes, and the Agreement of Merger
will constitute, a valid and binding obligation of Onyx, enforceable in
accordance with their respective terms against Onyx, subject to applicable
bankruptcy, reorganization, insolvency, moratorium and other laws affecting
creditor's rights generally from time to time in effect and to general equitable
principles. 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, is required by or with respect
to Onyx in connection with the execution and delivery of this Agreement and the
Agreement of Merger by Onyx or the consummation by Onyx of the transactions
contemplated hereby or thereby.
2.3 No Conflicts or Violations. The execution, delivery and
performance of this Agreement and the Agreement of Merger will not (i) conflict
with or result in any violation of or constitute a default under any provision
of Onyx's Certificate of Incorporation or Bylaws or any material agreement,
mortgage, bond, indenture, franchise or other instrument or obligation to which
Onyx is a party or by which Onyx is bound, (ii) result in the creation of any
Encumbrance pursuant to the terms of any material agreement, mortgage, bond,
indenture, franchise or other instrument or obligation, (iii) violate any
judgment, order, injunction, decree or award of any court, administrative agency
or governmental body against, or binding upon, Onyx, (iv) constitute a violation
by Onyx of any law or regulation of any jurisdiction in which Onyx conducts its
business, (v) result in the breach of any of the terms of, or constitute a
default under, or otherwise cause any impairment of, any permit or license or
other governmental authorization held by Onyx or required by Onyx for the
conduct of its business, or (vi) result in any liability or expense to Raster
under any collective bargaining agreements to which Onyx is a party, where such
conflict, violation, default or lien or other encumbrance would have a Material
Adverse Effect on Onyx. The execution, delivery and performance of this
Agreement and the Agreement of Merger will not require the consent of any third
person with respect to the rights, licenses, franchises, leases or agreements of
Onyx, and will not have a Material Adverse Effect upon any such rights,
licenses, franchises, leases or agreements.
-5-
<PAGE> 10
2.4 Subsidiaries. Onyx has no subsidiaries or affiliated
companies and does not otherwise own or control, directly or indirectly, any
equity interest in any corporation, association or business entity.
2.5 Capitalization. The authorized capital stock of Onyx
consists of 9,990,000 shares of Common Stock, par value $0.001 per share, of
which 1,108,400 shares are issued and outstanding, and 10,000 shares of
Preferred Stock, no par value, of which no shares are issued and outstanding.
All issued and outstanding shares have been duly authorized and validly issued,
and are fully paid and nonassessable. Onyx has reserved 280,800 shares of Common
Stock for issuance under its 1991 Stock Option Plan, under which options to
purchase 152,400 shares of Common Stock are outstanding, 545,500 shares of
Common Stock for issuance under its 1992 Stock Option Plan, under which options
to purchase 397,900 shares of Common Stock are outstanding. All outstanding
securities of Onyx were issued in compliance with applicable federal and state
securities laws. There are no other preemptive rights, options or warrants or
other conversion privileges or rights presently outstanding to purchase any of
the authorized but unissued stock of Onyx.
2.6 No Breach or Default. Onyx is not in default under any
material agreement, contract or commitment to which it is a party or by which it
is bound, nor has any event occurred which, after the giving of notice or the
passage of time or both, would constitute a default by Onyx under any such
agreement, contract or commitment. To Onyx's best knowledge, the parties to such
agreements, contracts or commitments will fulfill their obligations under such
agreements, contracts or commitments and are not threatened with insolvency.
2.7 Financial Statements; Indebtedness. Attached as Schedule
2.7 of the Onyx Schedule of Exceptions are copies of Onyx's audited balance
sheet dated as of September 30, 1994 and Onyx's audited income statement and
statement of cash flows for the year then ended (the "AUDITED FINANCIAL
STATEMENTS") and Onyx's unaudited balance sheet dated as of May 31, 1995 and
Onyx's unaudited income statement and statement of cash flows for the
eight-month period then ended (the "UNAUDITED FINANCIAL STATEMENTS" and together
with the Audited Financial Statements, the "FINANCIAL STATEMENTS" and the date
of the Unaudited Financial Statements is hereinafter referred to as the "DATE OF
THE UNAUDITED FINANCIAL STATEMENTS"). The Financial Statements (a) are in
accordance with the books and records of Onyx, (b) are complete and correct in
all material respects, (c) fairly present the financial condition of Onyx at the
respective dates therein indicated and the results of operations for the
respective periods therein specified and (d) have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
("GAAP"), subject, for the Unaudited Financial Statements, to normal year-end
adjustments. Onyx has no material debt, liability or obligation of any nature in
excess of $25,000, whether absolute or contingent, that is not reflected,
reserved against or disclosed in the Financial Statements, except for (i) those
that are disclosed in the Onyx Schedule of Exceptions, (ii) those that may have
been incurred after the Date of the Unaudited Financial Statements in the
ordinary course of its business, consistent with past practice, and (iii) open
purchase or sales orders or agreements for delivery of goods and services in the
ordinary course of such orders or agreements, provided Onyx is not in default
thereunder.
-6-
<PAGE> 11
2.8 Absence of Certain Changes. Since the Date of the
Unaudited Financial Statements, there has not been any, with respect to Onyx:
(a) amendments or changes in the Certificate of
Incorporation or Bylaws of Onyx;
(b) change in the cash, accounts receivable, accounts
payable as disclosed on the balance sheet of the Unaudited Financial Statements
by more than $25,000;
(c) destruction, material damage to, or loss of any
of the material assets (whether or not covered by insurance) of Onyx;
(d) event or condition of any character that Onyx
believes has or might reasonably be expected to have a Material Adverse Effect
on Onyx;
(e) transaction, contract or commitment which
provides for a period of performance by Onyx which extends beyond twelve (12)
months from the date hereof or involves payment or receipt after the date hereof
of amounts in excess of $25,000, except this Agreement and the transactions
contemplated hereby; or
(f) agreement by Onyx to do any of the things
described in the preceding clauses (a) through (e), other than this Agreement,
the Agreement of Merger and negotiations with Raster regarding the transactions
contemplated hereby and thereby.
2.9 Agreements and Commitments. Schedule 2.9 of the Onyx
Schedule of Exception, sets forth any oral or written agreement, obligation or
commitment to which Onyx is a party and which is described below:
(a) any contract, commitment, letter contract,
quotation, purchase order, bid or proposal providing for payments by or to Onyx
in an amount in excess of $25,000 per year;
(b) any license agreement as licensor or licensee
(other than forms of standard non-exclusive software licenses granted to
end-user customers in the ordinary course of business, consistent with past
practice);
(c) any agreement by Onyx to encumber, transfer or
sell rights in or with respect to any Intellectual Property (as defined in
Section 2.10 hereof) (except for non-exclusive software licenses granted to
end-user customers in the ordinary course of business, consistent with past
practice;
(d) any agreement for the sale or lease of real or
personal property involving more than $25,000 per year;
(e) any dealer, distributor, sales representative,
original equipment manufacturer, value added remarketer or other agreement for
the distribution of more than $25,000 of Onyx's products;
-7-
<PAGE> 12
(f) any joint venture contract or arrangement or any
other agreement that involves a sharing of profits with other persons;
(g) any contract for goods or services involving more
than $25,000 per year;
(h) any agreement or other document relating to
noncompetition covenants by Onyx;
(i) any instrument evidencing indebtedness for
borrowed money by way of direct loan, sale of debt securities, purchase money
obligation, conditional sale, guarantee or otherwise, except for trade
indebtedness and advances to employees incurred in the ordinary course of
business, consistent with past practice;
(j) any collective bargaining agreement;
(k) any agreement that contains any unpaid severance
liabilities or obligations;
(l) any bonus, deferred compensation, incentive
compensation, pension, profit-sharing or retirement plan, or any other employee
benefit plan or arrangement;
(m) any employment or consulting agreement, contract
or commitment with an employee or individual consultant or salesperson or
consulting or sales or distribution agreement, contract or commitment with a
firm or other organization not terminable by Onyx on thirty (30) days' notice
without liability;
(n) any agreement or plan, including, without
limitation, any stock option plan, stock appreciation right 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;
(o) any fidelity, surety or completion bond;
(p) any agreement of indemnification or guaranty,
including, without limitation, agreements with officers, directors, consultants,
advisors and suppliers;
(q) any agreement, contract or commitment relating to
the disposition or acquisition of assets not in the ordinary course of business
or any ownership interest in any corporation, partnership, joint venture or
other business enterprise;
(r) any mortgage, indenture, loan or credit
agreement, security agreement or other agreement or instrument relating to the
borrowing of money or extension of credit; or
-8-
<PAGE> 13
(s) any other agreement, contract or commitment that
involves amounts in excess of $25,000 or is not cancelable without penalty
within thirty (30) days.
2.10 Intellectual Property.
(a) Onyx owns, is licensed or otherwise possesses
legally enforceable rights to use all patents, trademarks, trade names, service
marks, copyrights and any applications therefor, technology, know-how, trade
secrets and tangible and intangible proprietary information or material that are
used in the business of Onyx as currently conducted where the failure to have
such right would result or would be expected to result in a Material Adverse
Effect on Onyx (the "INTELLECTUAL PROPERTY"). Schedule 2.10 of the Onyx Schedule
of Exceptions sets forth all patents, registered and unregistered trademarks and
service marks, registered and unregistered copyrights, trade names and service
marks and any applications therefor, included in the Intellectual Property, and
specifies the jurisdictions in which each such Intellectual Property has 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.
(b) No claims with respect to the Intellectual
Property, or any patents, trademarks, trade names, service marks, copyrights and
any applications therefor, technology, know-how, trade secrets and tangible and
intangible proprietary information or material of any third party (to the extent
arising out of any use, reproduction or distribution of such Third Party
Intellectual Property Rights by or through Onyx) ("THIRD PARTY INTELLECTUAL
PROPERTY RIGHTS"), have been asserted or are threatened by any person or entity,
nor does Onyx know of any valid grounds for any claims (i) to the effect that
the manufacture, sale, licensing or use of any product as now used, sold or
licensed by Onyx infringes on any patent, trademark, trade name, service mark,
copyright or trade secret; (ii) against the use by Onyx of any patents,
trademarks, trade names, service marks, copyrights, technology or trade secret
used in Onyx's business as currently conducted; (iii) challenging the ownership,
validity, enforceability or effectiveness of any Intellectual Property or (iv)
challenging Onyx's license or legally enforceable right to use any Third Party
Intellectual Property Rights. To the best of Onyx's knowledge, all patents,
registered trademarks, service marks and copyrights held by Onyx are valid and
subsisting.
(c) No Intellectual Property or, to Onyx's knowledge,
Third Party Intellectual Property Right is subject to any outstanding order,
judgment, decree, stipulation or agreement restricting in any manner the
licensing thereof by Onyx. Onyx has not entered into any agreement to indemnify
any other person against any charge of infringement of any Intellectual
Property, or any Third Party Intellectual Property Right.
2.11 Transactions with Affiliates. There have been no material
transactions to which Onyx is a party in which any current director or officer
or a member of his or her immediate family had or will have any direct or
indirect interest.
2.12 Compliance with Laws. Onyx has complied, and will be on
the Closing Date in full compliance, in all material respects with all
applicable, laws, ordinances, regulations and rules, and all orders, writs,
injunctions, awards, judgments and decrees, applicable to Onyx.
-9-
<PAGE> 14
Onyx has received all material permits and approvals from, and has made all
material filings with, third parties, including government agencies and
authorities, that are necessary in connection with its present business. No
governmental authority which licenses or audits Onyx has conducted any audit of
Onyx during the last five years.
2.13 Litigation, etc. There are no suits, actions,
administrative proceedings, arbitration, unfair labor practice, worker's
compensation or other proceedings or governmental investigations (collectively
"LITIGATION"), pending or threatened against or relating, directly or
indirectly, to Onyx, and there are no judgments, orders, injunctions, decrees,
stipulations or awards (whether rendered by a court, administrative agency or by
arbitration, pursuant to a grievance or other procedure) against or relating to
Onyx, which could result in a Material Adverse Effect, or any Encumbrance, on
Onyx. To the best knowledge of Onyx, there is no basis for any Litigation.
2.14 Brokers, Finders and Consultants. Onyx is not obligated
for the payment of fees or expenses of any investment banker, broker or finder
in connection with the origin, negotiation or execution of this Agreement or in
connection with the acquisition of Onyx or any other transaction contemplated by
this Agreement.
2.15 Assignability of Contracts; No Default. Onyx has no
reason to believe that assignments, novations or other transfers of the rights,
licenses, franchises, leases or agreements of Onyx will not be obtained for
transfer to Raster in accordance with Section 5.3(e) hereof at or prior to the
Closing, without default, penalty or other similar restriction. To the knowledge
of Onyx, no default or condition permitting declaration of default exists with
respect to any of the rights, licenses, franchises, leases or agreements of
Onyx. Onyx is not aware of any payments (other than payment for rent under
rights, licenses, franchises, leases or agreements of Onyx relating to leased
property) that will be required in the future to be made under the rights,
licenses, franchises, leases or agreements of Onyx .
2.16 Taxes.
(a) Definitions. For purposes of this Agreement, the
following definitions shall apply:
(i) The term "Taxes" shall mean all taxes,
however denominated, including any interest, penalties or other additions to tax
that may become payable in respect thereof, imposed by any federal, territorial,
state, local or foreign government or any agency or political subdivision of any
such government, which taxes shall include, without limiting the generality of
the foregoing, all income or profits taxes (including but not limited to,
federal income taxes and state income taxes), payroll and employee withholding
taxes, unemployment insurance, social security taxes, sales and use taxes, ad
valorem taxes, excise taxes, franchise taxes, gross receipts taxes, business
license taxes, occupation taxes, real and personal property taxes, stamp taxes,
environmental taxes, transfer taxes, workers' compensation, Pension Benefit
Guaranty Corporation premiums and other governmental charges, and other
obligations of the same or of a similar nature to any of the foregoing, which
are required to be paid, withheld or collected.
-10-
<PAGE> 15
(ii) The term "Returns" shall mean all
reports, estimates, declarations of estimated tax, information statements and
returns relating to, or required to be filed in connection with, any Taxes,
including information returns or reports with respect to backup withholding and
other payments to third parties.
(b) Returns Filed and Taxes Paid. All Returns
required to be filed by or on behalf of Onyx have been duly filed on a timely
basis and such Returns are true, complete and correct in all material respects.
All Taxes shown to be payable on the Returns or on subsequent assessments with
respect thereto, and all payments of estimated Taxes required to be made by or
on behalf of Onyx under Section 6655 of the Code or comparable provisions of
state, local or foreign law, have been paid in full on a timely basis, and no
other Taxes are payable by Onyx with respect to items or periods covered by such
Returns (whether or not shown on or reportable on such Returns) or with respect
to any period prior to the date of this Agreement. Onyx has withheld and paid
over all Taxes required to have been withheld and paid over, and complied with
all information reporting and backup withholding requirements, including
maintenance of required records with respect thereto, in connection with amounts
paid or owing to any employee, creditor, independent contractor, or other third
party. There are no liens on any of the assets of Onyx with respect to Taxes,
other than liens for Taxes not yet due and payable or for Taxes that Onyx is
contesting in good faith through appropriate proceedings and for which
appropriate reserves have been established. Onyx is not, and at no time has been
(nor has any predecessor of Onyx been), a member of any consolidated, combined
or other tax reporting group pursuant to which Onyx could be liable for Taxes
with respect to the income, property or activities of another entity. Onyx has
not been at any time a member of any partnership or joint venture for a period
for which the statue of limitations for any Tax potentially applicable as a
result of such membership has not expired.
(c) Tax Reserves. The amount of Onyx's liability for
unpaid Taxes for all periods ending on or before the date of this Agreement do
not, and the amount of Onyx's liability for unpaid Taxes for all periods ending
on or before the Closing Date shall not, in the aggregate, materially exceed the
amount of the current liability accruals for Taxes (excluding reserves for
deferred Taxes) reflected on the Onyx Financial Statements.
(d) Returns Furnished. Raster has been furnished by
Onyx with true and complete copies of (i) relevant portions of income tax audit
reports, statements of deficiencies, closing or other agreements received by or
on behalf of Onyx relating to Taxes, and (ii) all federal and state income or
franchise tax returns and state sales, use and property tax returns for Onyx for
all periods ending on and after June 30, 1990.
(e) Tax Deficiencies; Audits; Statutes of
Limitations. The Returns of Onyx have never been audited by a government or
taxing authority, nor is any such audit in process, pending or threatened
(either in writing or verbally, formally or informally). No deficiencies exist
or have been asserted (either in writing or verbally, formally or informally) or
are expected to be asserted with respect to Taxes of Onyx, and Onyx has not
received notice (either in writing or verbally formally or informally) nor
reasonably expects to receive notice that it has not filed a Return or paid
Taxes required to be filed or paid by it. Onyx is neither a party to any action
or proceeding for assessment or collection of Taxes, nor has such event been
asserted or
-11-
<PAGE> 16
threatened (either in writing or verbally, formally or informally) against Onyx
or any of its assets. No waiver or extension of any statute of limitations is in
effect with respect to Taxes or Returns of Onyx. Onyx has disclosed on its
federal and state income tax returns all positions taken therein that could give
rise to a substantial understatement penalty within the meaning of Code Section
6662 (or related state provisions).
(f) Tax Sharing Agreements. Onyx is not (nor has it
ever been) a party to any tax sharing agreement.
(g) Tax Elections and Special Tax Status. Onyx is not
a party to any safe harbor lease within the meaning of Section 168(f)(8) of the
Code, as in effect prior to amendment by the Tax Equity and Fiscal
Responsibility Act of 1982. Onyx is not nor has it been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
Onyx is not a "consenting corporation" under Section 341(f) of the Code. Onyx
has not entered into any compensatory agreements with respect to the performance
of services which payment thereunder would result in a nondeductible expense to
the group pursuant to Section 280G of the Code or an excise tax to the recipient
of such payment pursuant to Section 4999 of the Code. Onyx has not participated
in an international boycott as defined in Code Section 999. Onyx has not agreed
to, nor is it required to make any adjustment under Code Section 481(a) by
reason of a change in accounting method, and Onyx does not otherwise have any
income reportable for a period ending after the Closing Date attributable to a
transaction or other event (e.g., an installment sale) occurring prior to the
Closing Date. Onyx is not and has not been a "reporting corporation" subject to
the information reporting and record maintenance requirements of Code Section
6038A and the regulations thereunder.
(h) Tax Basis and Tax Attributes. The Onyx Schedule
of Exceptions contains a substantially accurate and complete description of
Onyx's basis in its assets, current and accumulated earnings and profits, and
tax carryovers. Onyx has no net operating losses or other tax attributes
currently subject to limitation under Code Sections 382, 383, or 384.
2.17 Customer List. Attached as Schedule 2.17 to the Onyx
Schedule of Exceptions is a true, correct and complete list of the names,
addresses and gross billings of all customers of Onyx for the year ended
September 30, 1994 and the eight-month period ended May 31, 1995. To the
knowledge of Onyx, since the Date of the Unaudited Financial Statements, there
has been no occurrence or circumstance in which (a) any customer listed on
Schedule 2.17 has canceled or significantly curtailed its purchase of products
or services from Onyx or (b) any customer having a contractual relationship with
Onyx which by its terms is subject to renewal within twelve (12) months after
the date of this Agreement has informed Onyx that he, she or it does not intend
to renew such contractual relationship. Onyx is not aware that any customer
listed on Schedule 2.18 (a) intends to cease or reduce the purchase of Onyx's
products or services following the Closing, or (b) is subject to any agreement
or understanding which would prohibit such customer from purchasing additional
products or services from Raster following the Closing Date.
-12-
<PAGE> 17
2.18 Tangible Assets. Attached as Schedule 2.18 of the Onyx
Schedule of Exceptions is a true, correct and complete list of all tangible
assets of Onyx as of the Date of the Unaudited Financial Statements, and there
are no other such tangible assets not reflected in such list. All such property,
machinery, equipment and fixtures are in good condition and repair for the
purposes now used in Onyx's business and are free from any known defects.
2.19 Accounts and Notes Receivable. Attached as Schedule 2.19
of the Onyx Schedule of Exceptions is a complete list of the accounts and notes
receivable of Onyx as of the Date of the Unaudited Financial Statements, aged by
customer or debtor, as the case may be. The accounts and notes receivable of
Onyx as of the date shown or acquired after such date and prior to the Closing
Date arose from valid transactions and, to the knowledge of Onyx, are
collectible (net of the allowance for doubtful accounts) in the ordinary and
usual course of business and not subject to any set-off.
2.20 Inventories. Attached as Schedule 2.20 of the Onyx
Schedule of Exceptions hereto is breakdown of the inventory of Onyx as of the
Date of the Unaudited Financial Statements. The inventories of Onyx, whether
finished goods, work in process or raw materials, as of such date or acquired
after such date and prior to the Closing Date, are all items that are in good
condition, conform in all material respects with Onyx's specifications and
warranties and are not obsolete, unless otherwise reserved for in the Financial
Statements.
2.21 Employee Benefit Plans. Except as attached as Schedule
2.21 of the Onyx Schedule of Exceptions, Onyx does not have any employee pension
benefit plans, multi-employer plans, employee welfare plans or arrangements
covering active, former or retired employees of Onyx which it currently
maintains or to which it is a contributing employer or has in the past
maintained or contributed (the "PLANS"). To the extent applicable:
(a) Each Plan complies, in all material respects,
with the applicable provisions and requirements of the Employee Retirement
Income Security Act of 1974 ("ERISA"), the Code, and all other applicable laws
and regulations, and has been maintained and administered in all material
respects in compliance with its terms;
(b) Each such Plan intended to qualify under Section
401(a) of the Code is the subject of a favorable unrevoked determination letter
issued by the Internal Revenue Service as to its qualified status, which
determination letter may still be relied on as to such tax qualified status;
(c) No Plan is covered by or subject to Title IV of
ERISA or Section 412 of the Code;
(d) To the best knowledge of Onyx, there are no
pending or anticipated material claims against or otherwise involving any of the
Plans or any fiduciaries thereunder or violation of any applicable law with
respect to any such Plan;
(e) Neither Onyx nor any "party in interest" (as
defined in ERISA Section 3(14)) or "disqualified person" (as defined in Code
Section 4975) with respect to any
-13-
<PAGE> 18
such Plan has engaged in a non-exempt "prohibited transaction" within the
meaning of Code Section 4975 or ERISA Section 406;
(f) None of the Plans that are welfare benefit plans
provides for benefits or coverage for any former or retired employees or their
beneficiary, except to the extent required by law, and there has been no
violation of Code Section 4980B or ERISA Sections 601-608 with respect to any
such Plan that could result in any material liability;
(g) Neither Onyx nor any trade or business (whether
or not incorporated) under common control with Onyx within the meaning of ERISA
Section 4001(c)(1) has, or at any time has had, any obligation to contribute to
any "multi-employer plan" as defined in ERISA Section 3(37); and
(h) All material contributions, reserves or premium
payments, required to be made as of the date hereof to the Plans have been made
or provided for.
2.22 Employees.
(a) Set forth on Schedule 2.22(a) of the Onyx
Schedule of Exceptions is a true and complete list of all employees of Onyx,
including current date of hire, position, accrued vacation, wage or salary,
bonus and security status. In addition, attached to Schedule 2.22(a) of the Onyx
Schedule of Exceptions are true and complete copies of all written, and to the
best knowledge of Onyx a description of the terms of all oral, employment,
development and consulting contracts of Onyx. Such Schedule 2.22(a) shall
clearly differentiate employees and consultants. All such contracts are valid
and are in full force and effect in all respects, and neither Onyx, nor to the
knowledge of Onyx, any other party is in breach or default of any such contract.
Onyx has no written or oral agreement or commitment to pay any person anything
of value upon or in connection with the termination of such person's employment
or engagement by Onyx.
(b) All past and present directors, officers,
employees and consultants of Onyx who have had and who have access to the
Intellectual Property and other proprietary information of Onyx had and have
executed and delivered to Onyx agreements regarding the confidentiality and
non-disclosure of such Intellectual Property and proprietary information and the
assignment of intellectual property rights to Onyx. Attached as Schedule 2.22(b)
of the Disclosure Schedule are true and complete copies of all such agreements.
With respect to Onyx, and to the knowledge of Onyx with respect to the other
party, all such agreements are valid and remain in full force and effect, and
neither Onyx, nor to the best of Onyx's knowledge, any other party is in breach
or default of any such agreement.
(c) Onyx has no knowledge of any Onyx employee that
intends to leave Onyx's employ.
2.23 Health, Safety and Environmental Matters.
(a) There are no conditions at, on, under or related
to, any real property of Onyx or at which it conducts or has conducted any of
its operations or business which
-14-
<PAGE> 19
presently or potentially pose a significant hazard to human health or the
environment, whether or not in compliance with law, and there has been no
production, use, treatment, storage, transportation or disposal by Onyx of any
Hazardous Substance, as hereinafter defined, at or on such real property nor any
release or threatened release by Onyx of any Hazardous Substance, pollutant or
contaminant into or upon or over the real property or into or upon ground or
surface water at or within 2,000 feet of the boundaries of such real property
except in compliance with applicable law. No Hazardous Substance is now or ever
have been stored by Onyx on such real property in underground tanks, pits or
surface impoundments except in compliance with applicable law.
(b) No action, investigation, proceeding, permit
revocation, permit amendment, writ, injunction or claim is pending, nor has Onyx
received any notice of any of the foregoing, concerning or relating to (i) the
use, storage, sale or disposal of any Hazardous Substance related to or
affecting the Purchased Assets, (ii) the exposure of any person to any Hazardous
Substance as a consequence of any activity related to or affecting the Purchased
Assets or (iii) the presence of any Hazardous Substance in, on or under any of
Onyx's facilities or any property owned, leased or occupied by Onyx which is
related to or affecting the Purchased Assets.
(c) For purposes of this Section 2.23, "HAZARDOUS
SUBSTANCE" shall mean any environmentally hazardous or toxic substance, material
or waste which is currently regulated as such by any local governmental
authority, any state or the United States Government.
2.24 Insurance. Attached as Schedule 2.24 to the Onyx Schedule
of Exceptions is a copy of all fire, casualty and general liability insurance
policies which Onyx carries and Onyx believes such insurance coverage is
reasonably prudent for similarly sized and similarly situated businesses.
2.25 Books and Records. Set forth on Schedule 2.25 of the Onyx
Schedule of Exceptions is a true and complete list and description of all banks
or other financial institutions (including brokerage firms and money market
mutual funds) in which Onyx keeps accounts, deposits, or cash balances or safety
deposit boxes, including addresses, account and identification numbers, and the
names of all persons who have the authority to draw on such deposits, accounts
or balances or who have access to such boxes. The books, records and accounts of
Onyx are (i) complete and correct in all material respects, and (ii) prepared in
accordance with GAAP.
2.26 Material Misstatements and Omissions. Neither this
Agreement, its schedules and exhibits, the Agreement of Merger, nor any of the
certificates or documents to be delivered by Onyx to Raster under this
Agreement, contains any untrue statement of a material fact or omits to state
any material fact necessary in order to make the statements contained herein and
therein, in light of the circumstances under which such statements were made,
not misleading.
2.27 Notice of Fairness Hearing. The information supplied by
Onyx for inclusion in the notice of fairness hearing (the "NOTICE") filed with
the California Department of Corporations will not at the time the Notice is
mailed to stockholders of Onyx contain any untrue
-15-
<PAGE> 20
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, in light of the circumstances under which they are made. If at any
time prior to the Closing Date any event relating to Onyx or any of its
affiliates, officers or directors is discovered by Onyx which should be set
forth in an amendment or supplement to the Notice, Onyx shall promptly inform
Raster of such fact. Notwithstanding the foregoing, Onyx makes no representation
or warranty with respect to any information supplied by Raster that is contained
in the Notice, or any amendments or supplements thereto.
3. Representations and Warranties of Raster and Sub. Except as
disclosed in a document referring specifically to the representations and
warranties in this Agreement that identifies by section number the section and
subsection to which such disclosure relates and is supplied by Raster to Onyx
(the "Raster Disclosure Schedule") and dated as of the date hereof, or, subject
to the subsequent approval in writing by Onyx of an updated Raster Disclosure
Schedule, as of the Effective Time, Raster and Sub represent and warrant to Onyx
as follows:
3.1 Existence; Good Standing. Raster is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of California. Raster is duly licensed or qualified to do business as a foreign
corporation and is in good standing under the laws of any jurisdiction in which
the character of the properties owned or leased by Raster therein or in which
the transaction of its business makes such qualification necessary, except for
jurisdictions in which the failure to be so qualified or to be in good standing
would not have a Material Adverse Effect on Raster. Raster has all requisite
corporate power and authority to own its properties and carry on its business as
now conducted.
3.2 Power, Authorization and Validity. Raster has all
requisite legal and corporate power and authority to enter into and perform its
obligations under this Agreement and the Agreement of Merger and to consummate
the transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and the Agreement of Merger and the consummation
of the transactions contemplated hereby and thereby have been duly and validly
approved and authorized by all necessary corporate action on behalf of Raster.
This Agreement has been, and the Agreement of Merger will be, duly executed and
delivered by Raster and this Agreement constitutes, and the Agreement of Merger
will constitute, a valid and binding obligation of Raster, enforceable in
accordance with their respective terms against Raster, subject to applicable
bankruptcy, reorganization, insolvency, moratorium and other laws affecting
creditor's rights generally from time to time in effect and to general equitable
principles. 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, is required by or with respect
to Raster in connection with the execution and delivery of this Agreement and
the Agreement of Merger by Raster or the consummation by Raster of the
transactions contemplated hereby or thereby or hereby.
3.3 No Conflicts or Violations. The execution, delivery and
performance of this Agreement and the Agreement of Merger will not (i) conflict
with or result in any violation of or constitute a default under any provision
of Raster's Articles of Incorporation or Bylaws or any material agreement,
mortgage, bond, indenture, franchise or other instrument or obligation to
-16-
<PAGE> 21
which Raster is a party or by which it is bound, (ii) violate any judgment,
order, injunction, decree or award of any court, administrative agency or
governmental body against, or binding upon, Raster or upon the property or
business regulation of any jurisdiction as such law or regulation relates to
Raster or the property or business or Raster, (iii) constitute a violation by
Raster of any law or regulation of any jurisdiction in which Raster conducts its
business, (iv) result in the breach of any of the terms of, or constitute a
default under, or otherwise cause any impairment of, any permit, license or
other governmental authorization held by Raster or required of Raster to conduct
its business, or (v) require the consent of any third person with respect to the
rights, licenses, franchises, leases or agreements of Raster, and will not have
a Material Adverse Effect upon any such rights, licenses, franchises, leases or
agreements.
3.4 Subsidiaries. Raster has no subsidiaries or affiliated
companies and does not otherwise own or control, directly or indirectly, any
equity interest in any corporation, association or business entity.
3.5 Capitalization. The authorized capital stock of Raster
consists of 40,000,000 shares of Common Stock, of which 1,007,601 shares are
issued and outstanding, and 27,850,000 shares of Preferred Stock, 1,600,000
shares of which have been designated Series A Preferred Stock, all of which are
issued and outstanding, 5,250,000 shares of which have been designated Series B
Preferred Stock, 5,120,000 shares of which are issued and outstanding and
21,000,000 shares of which have been designated Series C Preferred Stock,
20,526,856 of which are issued and outstanding. All issued and outstanding
shares have been duly authorized and validly issued, and are fully paid and
non-assessable. The Company has reserved 1,600,000 shares of Common Stock for
issuance upon conversion of Series A Preferred Stock, 5,250,000 shares of Common
Stock for issuance upon conversion of the Series B Preferred Stock, 21,000,000
shares of Common Stock for issuance upon conversion of Series C Preferred Stock,
1,421,037 shares of Common Stock for issuance upon exercise of warrants to
purchase Raster's Common Stock, 52,000 shares of Series B Preferred Stock for
issuance upon exercise of warrants to purchase Raster's Series B Preferred
Stock, 4,450,000 shares of Common Stock for issuance to employees under Raster's
1988 Stock Option Plan under which options to purchase 4,216,525 shares of
Common Stock are outstanding and 450,000 shares of Common Stock for issuance to
employees under Raster's 1988 Stock Purchase Plan under which 330,000 shares
remain available for grant. The Series A, Series B and Series C Preferred Stock
have the rights, preferences, privileges and restrictions set forth in the
Amended and Restated Articles of Incorporation as previously furnished to Onyx,
and all such rights, preferences, privileges and restrictions are valid, binding
and enforceable in accordance with applicable laws. All outstanding securities
of Raster were issued in compliance with applicable federal and state securities
laws. There are no other preemptive rights, options or warrants or other
conversion privileges or rights presently outstanding to purchase any of the
authorized but unissued stock of Raster.
3.6 No Breach or Default. Raster is not in default under any
material agreement, contract or commitment to which it is a party or by which it
is bound, nor has any event occurred which, after the giving of notice or the
passage of time or both, would constitute a default by Raster under any such
agreement, contract or commitment. To Raster's best knowledge, the parties to
such agreements, contracts or commitments will fulfill their obligations under
such agreements, contracts or commitments and are not threatened with
insolvency.
-17-
<PAGE> 22
3.7 Financial Statements; Indebtedness. Attached as Schedule
3.7 of the Raster Schedule of Exceptions are copies of Raster's audited balance
sheet dated as of December 31, 1994, Raster's audited income statement and
statement of cash flows for the year then ended (the " RASTER AUDITED FINANCIAL
STATEMENTS") and Raster's unaudited balance sheet dated as of May 26, 1995 and
Raster's unaudited income statement for the five-month period then ended (the
"RASTER UNAUDITED FINANCIAL STATEMENTS" and together with the Audited Financial
Statements, the "RASTER FINANCIAL STATEMENTS" and the date of the Raster
Unaudited Financial Statements is hereinafter referred to as the "DATE OF THE
RASTER UNAUDITED FINANCIAL STATEMENTS"). The Raster Financial Statements (a) are
in accordance with the books and records of Raster, (b) are complete and correct
in all material respects, (c) fairly present the financial condition of Raster
at the respective dates therein indicated and the results of operations for the
respective periods therein specified and (d) have been prepared in accordance
with GAAP, subject for the Unaudited Financial Statements, to normal year-end
adjustments. Raster has no material debt, liability or obligation of any nature,
whether absolute or contingent that is not reflected, reserved against or
disclosed in the Raster Financial Statements, except for (i) those that are
disclosed in the Raster Schedule of Exceptions, (ii) those that may have been
incurred after the Raster Date of the Unaudited Financial Statements in the
ordinary course of its business, consistent with past practice, and (iii) open
purchase or sales orders or agreements for delivery of goods and services in the
ordinary course of such orders or agreements, provided Raster is not in default
thereunder.
3.8 Absence of Certain Changes. Since the Date of the Raster
Unaudited Financial Statements, there has not been any, with respect to Raster:
(a) amendments or changes in the Articles of
Incorporation or Bylaws of Raster;
(b) capital expenditures or additions of equipment to
existing leases exceeding $50,000 in the aggregate;
(c) destruction, material damage to, or loss of any
material assets (whether or not covered by insurance);
(d) change in accounting methods or practices
(including any change in depreciation or amortization policies or rates);
(e) write-up or write-down of any of its assets;
(f) declaration, setting aside or payment of a
dividend or other distribution with respect to the shares of capital stock of
Raster, or any direct or indirect redemption, purchase or other acquisition by
Raster of any of its shares of capital stock;
(g) event or condition of any character that Raster
believes has or might reasonably be expected to have a Material Adverse Effect
on Raster;
(h) transaction, contract or commitment, which
provides for a period of performance by Raster which extends beyond twelve (12)
months from the date hereof or
-18-
<PAGE> 23
involves payment or receipt after the date hereof of amounts in excess of
$200,000, except (i) contracts listed on the Raster Disclosure Schedule and (ii)
this Agreement and the transactions contemplated hereby; or
(i) agreement by Raster to do any of the things
described in the preceding clauses (a) through (h), other than this Agreement,
the Related Agreements, and negotiations with Onyx regarding the transactions
contemplated hereby and thereby.
3.9 Agreements and Commitments. Except as set forth on the
Raster Disclosure Schedule, Raster is not a party to any currently existing
contract, obligation, agreement, plan, arrangement or commitment or the like
(written or oral) or any material nature, relating to the following:
(a) any contract, commitment, letter contract,
quotation, purchase order, bid or proposal providing for payments by or to
Raster in an amount in excess of $200,000 per year;
(b) any license agreement as licensor or licensee
(other than forms of standard non-exclusive software licenses granted to
end-user customers in the ordinary course of business and consistent with past
practice);
(c) any agreement by Raster to encumber, transfer or
sell rights in or with respect to any Intellectual Property (as defined in
Section 4.9 hereof) (except for non-exclusive software licenses granted to
end-user customers in the ordinary course of business, consistent with past
practice;
(d) any agreement for the sale or lease of real or
personal property involving more than $50,000 per year;
(e) any dealer, distributor, sales representative,
original equipment manufacturer, value added remarketer or other agreement for
the distribution of more than $200,000 of Raster's products;
(f) any joint venture contract or arrangement or any
other agreement that involves a sharing of profits with other persons;
(g) any contract for goods or services involving more
than $200,000 per year;
(h) any agreement or other document relating to
noncompetition covenants by Raster;
(i) any instrument evidencing indebtedness for
borrowed money by way of direct loan, sale of debt securities, purchase money
obligation, conditional sale, guarantee or otherwise, except for trade
indebtedness and advances to employees incurred in the ordinary course of
business, consistent with past practice;
-19-
<PAGE> 24
(j) any collective bargaining agreement;
(k) any agreement that contains any unpaid severance
liabilities or obligations;
(l) any bonus, deferred compensation, incentive
compensation, pension, profit-sharing or retirement plan, or any other employee
benefit plan or arrangement;
(m) any employment or consulting agreement, contract
or commitment with an employee or individual consultant or salesperson or
consulting or sales or distribution agreement, contract or commitment with a
firm or other organization not terminable by Raster on thirty (30) days' notice
without liability;
(n) any agreement or plan, including, without
limitation, any stock option plan, stock appreciation right 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;
(o) any fidelity or surety bond or completion bond;
(p) any agreement of indemnification or guaranty,
including, without limitation, agreements with officers, directors, consultants,
advisors and suppliers;
(q) any agreement, contract or commitment relating to
the disposition or acquisition of assets not in the ordinary course of business
or any ownership interest in any corporation, partnership, joint venture or
other business enterprise;
(r) any mortgages, indentures, loans or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit; or
(s) any other agreement, contract or commitment that
involves amounts in excess of $200,000 or is not cancelable without penalty
within thirty (30) days.
3.10 Intellectual Property.
(a) Raster owns, or is licensed or otherwise
possesses legally enforceable rights to use all patents, trademarks, trade
names, service marks, copyrights and any applications therefor, technology,
know-how, trade secrets and tangible and intangible proprietary information or
material that are used in the business of Raster as currently conducted where
the failure to have such right would result or would be expected to result in a
Material Adverse Effect on Raster (the "INTELLECTUAL PROPERTY"). Schedule 3.10
of the Disclosure Schedule sets forth all patents, registered and unregistered
trademarks and service marks, registered and unregistered copyrights, trade
names and service marks and any applications therefor included in the
Intellectual Property, and specifies the jurisdictions in which each such
Intellectual Property has been issued or registered or in which an application
for such issuance and registration has been
-20-
<PAGE> 25
filed, including the respective registration or application numbers and the
names of all registered owners.
(b) No claims with respect to the Intellectual
Property or any patents, trademarks, trade names, service marks, copyrights and
any applications therefor, technology, know-how, trade secrets and tangible and
intangible proprietary information or material of any third party (to the extent
arising out of any use, reproduction or distribution of such Third Party
Intellectual Property Rights by or through Raster) ("THIRD PARTY INTELLECTUAL
PROPERTY RIGHTS"), have been asserted or are threatened by any person or entity,
nor does Raster know of any valid grounds for any claims (i) to the effect that
the manufacture, sale, licensing or use of any product as now used, sold or
licensed by Raster infringes on any patent, trademark, trade name, service mark,
copyright or trade secret; (ii) against the use by Raster of any patents,
trademarks, trade names, service marks, copyrights, technology or trade secret
used in Raster's business as currently conducted; (iii) challenging the
ownership, validity, enforceability or effectiveness of any Intellectual
Property or (iv) challenging Raster's license or legally enforceable right to
use any Third Party Intellectual Property Rights. To Raster's knowledge, all
patents, registered trademarks, service marks and copyrights held by Raster are
valid and subsisting.
(c) No Intellectual Property or, to Raster's
knowledge, Third Party Intellectual Property Right is subject to any outstanding
order, judgment, decree, stipulation or agreement restricting in any manner the
licensing thereof by Raster. Raster has not entered into any agreement to
indemnify any other person against any charge of infringement of any
Intellectual Property or any Third Party Intellectual Property Right.
3.11 Transactions with Affiliates. There have been no material
transactions to which Raster is a party in which any current director or officer
or a member of his or her immediate family had or will have any direct or
indirect interest.
3.12 Compliance with Laws. Raster has complied, and will be on
the Closing Date in full compliance, in all material respect with all
applicable, laws, ordinances, regulations and rules, and all orders, writs,
injunctions, awards, judgments and decrees, applicable to Raster or to the
assets, properties and business of Raster. Raster has received all material
permits and approvals from, and has made all material filings with, third
parties, including government agencies and authorities, that are necessary in
connection with its present business. No governmental authority which licenses
or audits Raster has conducted any audit of Raster during the last five years.
3.13 Litigation, etc. There is no Litigation, pending or
threatened against or relating, directly or indirectly, to Raster, and there are
no judgments, orders, injunctions, decrees, stipulations or awards (whether
rendered by a court, administrative agency or by arbitration, pursuant to a
grievance or other procedure) against Raster which could have a Material Adverse
Effect on Raster. To the best knowledge of Raster, there is no basis for any
Litigation.
3.14 Brokers, Finders and Consultants. Raster is not obligated
for the payment of fees or expenses of any investment banker, broker or finder
in connection with the origin,
-21-
<PAGE> 26
negotiation or execution of this Agreement or in connection with the acquisition
of Onyx or any other transaction contemplated by this Agreement.
3.15 Taxes. Raster has duly and timely filed (or will file
prior to the Closing Date) all returns and reports of taxes required to be filed
prior to such date and has no material liability for unpaid taxes for periods
ending on or prior to that date except for taxes for which adequate reserves
have been established. Raster has complied with all record keeping and tax
reporting obligations relating to income and employment taxes due with respect
to compensation paid to employees. Raster is not a "foreign person" within the
meaning of Section 1445(f)(3) of the Code. There are no pending proceedings with
respect to taxes. There are no threatened proceedings with respect to taxes,
which if decided adversely to Raster, would have a Material Adverse Effect on
Raster.
3.16 Employee Benefit Plans. Raster does not have any employee
pension benefit plans, multi-employer plans, employee welfare plans or
arrangements covering active, former or retired employees of Raster which it
currently maintains or to which it is a contributing employer or has in the past
maintained or contributed (the "PLANS"). To the extent applicable:
(a) Each Plan complies, in all material respects,
with the applicable provisions and requirements of the Employee Retirement
Income Security Act of 1974 ("ERISA"), the Code, and all other applicable laws
and regulations, and has been maintained and administered in all material
respects in compliance with its terms;
(b) Each such Plan intended to qualify under Section
401(a) of the Code is the subject of a favorable unrevoked determination letter
issued by the Internal Revenue Service as to its qualified status, which
determination letter may still be relied on as to such tax qualified status;
(c) No Plan is covered by or subject to Title IV of
ERISA or Section 412 of the Code;
(d) To the best knowledge of Raster, there are no
pending or anticipated material claims against or otherwise involving any of the
Plans or any fiduciaries thereunder or violation of any applicable law with
respect to any such Plan;
(e) Neither Raster nor any "party in interest" (as
defined in ERISA Section 3(14)) or "disqualified person" (as defined in Code
Section 4975) with respect to any such Plan has engaged in a non-exempt
"prohibited transaction" within the meaning of Code Section 4975 or ERISA
Section 406;
(f) None of the Plans that are welfare benefit plans
provides for benefits or coverage for any former or retired employees or their
beneficiary, except to the extent required by law, and there has been no
violation of Code Section 4980B or ERISA Sections 601-608 with respect to any
such Plan that could result in any material liability;
(g) Neither Raster nor any trade or business (whether
or not incorporated) under common control with Raster within the meaning of
ERISA
-22-
<PAGE> 27
Section 4001(c)(1) has, or at any time has had, any obligation to contribute to
any "multi-employer plan" as defined in ERISA Section 3(37); and
(h) All material contributions, reserves or premium
payments, required to be made as of the date hereof to the Plans have been made
or provided for.
3.17 Health, Safety and Environmental Matters.
(a) There are no conditions at, on, under or related
to, any real property of Raster or at which it conducts or has conducted any of
its operations or business which presently or potentially pose a significant
hazard to human health or the environment, whether or not in compliance with
law, and there has been no production, use, treatment, storage, transportation
or disposal by Raster of any Hazardous Substance, as hereinafter defined, at or
on such real property nor any release or threatened release by Raster of any
Hazardous Substance, pollutant or contaminant into or upon or over the real
property or into or upon ground or surface water at or within 2,000 feet of the
boundaries of such real property except in compliance with applicable law. No
Hazardous Substance is now or ever have been stored by Raster on such real
property in underground tanks, pits or surface impoundments except in compliance
with applicable law.
(b) No action, investigation, proceeding, permit
revocation, permit amendment, writ, injunction or claim is pending, nor has
Raster received any notice of any of the foregoing, concerning or relating to
(i) the use, storage, sale or disposal of any Hazardous Substance related to or
affecting the Purchased Assets, (ii) the exposure of any person to any Hazardous
Substance as a consequence of any activity related to or affecting the Purchased
Assets or (iii) the presence of any Hazardous Substance in, on or under any of
Raster's facilities or any property owned, leased or occupied by Raster which is
related to or affecting the Purchased Assets.
(c) For purposes of this Section 3.17, "HAZARDOUS
SUBSTANCE" shall mean any environmentally hazardous or toxic substance, material
or waste which is currently regulated as such by any local governmental
authority, any state or the United States Government.
3.18 Insurance. Raster maintains fire, casualty and general
liability insurance which Raster believes to be reasonably prudent for similarly
sized and similarly situated businesses.
3.19 Full Disclosure. Neither this Agreement, its schedules
and exhibits, nor any of the certificates or documents to be delivered by Raster
to Onyx under this Agreement, contains any untrue statement of a material fact
or omits to state any material fact necessary in order to make the statements
contained herein and therein, in light of the circumstances under which such
statements were made, not misleading.
3.20 Notice of Fairness Hearing. The information supplied by
Raster for inclusion in the Notice will not at the time the Notice is mailed to
the stockholders of Onyx,
-23-
<PAGE> 28
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading, in light of the circumstances under which they are made.
If at any time prior to the Closing Date any event relating to Raster or any of
its affiliates, officers or directors is discovered by Raster which should be
set forth in an amendment or supplement to the Notice, Raster shall promptly
inform Onyx of such fact. Notwithstanding the foregoing, Raster makes no
representation or warranty with respect to any information supplied by Onyx that
is contained in the Notice, or any amendments or supplements thereto.
4. Additional Covenants and Agreements. The parties further covenant
and agree as follows:
4.1 Conduct of Onyx Prior to Closing. Except as contemplated
by this Agreement, during the period from the date of this Agreement to the
Effective Time:
(a) Operations in the Ordinary Course of Business.
Onyx will conduct its operations according to its ordinary course of business
and will use its best efforts, subject to the following, to maintain and
preserve its business organization and relationships with agents and all others.
(b) Forbearance. Except as disclosed by Onyx to
Raster in writing prior to the date of this Agreement or on the Onyx Schedule of
Exceptions, Onyx shall not, without the prior written consent of Raster:
(i) incur any indebtedness for borrowed
money, assume, guarantee, endorse (other than endorsement of accounts receivable
for collection) or otherwise become responsible for the obligations of any other
individual, firm or corporation, or make any loans or advances to any
individual, firm or corporation, except any indebtedness borrowed under a line
of credit agreement with a bank which is in effect as of the date hereof;
(ii) make, declare or pay any dividend, or
declare or make any distribution on, or directly or indirectly redeem, purchase
or otherwise acquire, any shares of its outstanding capital stock except for
shares of its Common Stock purchasable from employees or consultants at the
original purchase price upon termination of employment or consulting in
accordance with its usual and customary practice, or, except as permitted under
Section 2.2, authorize the creation or issuance of any additional shares of its
capital stock or any options, calls or com mitments relating to its capital
stock or any securities or obligations convertible into or exchangeable for, or
giving any person any right to subscribe for or acquire from it, any shares of
its capital stock, or agree to take any such action;
(iii) except as specifically necessary to
consummate the transactions contemplated in this Agreement, take any action to
amend its Articles of Incorporation or Bylaws;
(iv) mortgage, pledge or otherwise encumber
any of its properties or assets;
-24-
<PAGE> 29
(v) sell or transfer any of its properties
or assets or cancel, release or assign any indebtedness owed to it or any claims
held by it, except in the ordinary course of business;
(vi) make any investment of a capital
nature in excess of $25,000 for any single project either by purchase of stock
or securities, contributions to capital, property transfer or otherwise, or by
the purchase of any property or assets of any other individual, firm or
corporation;
(vii) enter into, except in the ordinary
course of business, any agreement, contract or commitment;
(viii) terminate or make any material
change in any of its agreements, contracts or commitments;
(ix) increase in any manner the
compensation or fringe benefits of any of its officers or any employee or pay or
agree to pay any pension or retirement allowance not required by any existing
plan or agreement to any officers or employees, or commit itself to any pension,
retirement or profit-sharing plan or agreement or employment agreement with or
for the benefit of any officer, employee or other person;
(x) permit any insurance policy (excluding,
however, those policies for which no replacement is available at a cost
comparable to that currently in effect) naming it as a beneficiary or a loss
payable payee to be cancelled or terminated or any of the coverage thereunder to
lapse; or
(xi) accelerate, amend or change the period
of exercisability of options or restricted stock issued by Onyx or authorize
cash payments in exchange for any options issued by Onyx.
(c) Taxes. Onyx shall prepare and timely file all
Returns and amendments thereto required to be filed by it on or before the
Effective Time. Raster shall have a reasonable opportunity to review all Returns
and amendments thereto. Onyx shall pay and discharge all Taxes upon or against
it or any of its properties or assets, before the same shall become delinquent
and before penalties accrue thereon, except to the extent and as long as: (a)
the same are being contested in good faith and by appropriate proceedings
pursued diligently and in such a manner as not to cause any Material Adverse
Effect upon Onyx and (b) Onyx shall have set aside on its books reserves
(segregated to the extent required by sound accounting practice) in the amount
of the demanded principal imposition (together with interest and penalties
relating thereto, if any).
4.2 No Other Bids. Prior to the Effective Time, Onyx shall
not, nor shall it authorize any officer, director or employee of or any
investment banker, attorney, accountant or other representative retained by it
to, initiate, solicit or encourage (including by way of furnishing information),
any inquiries or the making of any proposal which may reasonably be expected to
lead to any takeover proposal. Onyx shall promptly advise Raster orally and in
writing of any
-25-
<PAGE> 30
such inquiries or proposals, whether or not such proposal was in writing. Onyx
shall not furnish any information concerning the Merger or the business or
financial condition of Onyx in response to requests from a third party
contemplating or making a takeover proposal unless (i) such information is
publicly available or (ii) disclosure of such information is required under any
law or statute. As used in this paragraph, "takeover proposal" shall mean any
proposal for a merger or other business combination involving Onyx or for the
acquisition of a substantial equity interest in Onyx or a substantial portion of
the assets of Onyx other than the transactions contemplated by this Agreement.
Nothing in this Section 4.2 shall preclude Onyx's Board of Directors from
carrying out its legal and fiduciary duties with respect to considering or
responding to any written takeover proposal.
4.3 Shareholder Approval. Onyx shall submit this Agreement and
the Merger Agreement to its shareholders for approval and adoption as provided
by law and its Bylaws, at a meeting or by written consent before the Effective
Time. Sub shall obtain requisite approval of its Board of Directors and its
shareholder of this Agreement, the Merger Agreement and the Merger.
4.4 Legal Conditions to the Merger. Raster, Sub and Onyx will
take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on such party with respect to the Merger and
will promptly cooperate with and furnish information to the other parties in
connection with any such requirements imposed upon any other party or any
subsidiary of such other parties in connection with the Merger. Raster, Sub and
Onyx will take, and will cause their subsidiaries to take, all reasonable
actions to obtain (and to cooperate with the other parties and their
subsidiaries in obtaining) any consent, authorization, order or approval of, or
any exemption by, any Governmental Entity, or other third party, required to be
obtained or made by such party or its subsidiaries (or by the other parties or
their subsidiaries) in connection with the Merger or the taking of any action
contemplated thereby or by this Agreement.
4.5 Cooperation. Raster and Onyx shall together, or pursuant
to an allocation of responsibility to be agreed upon between them, (a) prepare
and shall use their best efforts to have the fairness hearing held as promptly
as possible, (b) take all such action as may be required under state blue sky or
securities laws in connection with the transactions contemplated by this
Agreement, and (c) cooperate with one another in determining whether any filings
are required to be made or consents required to be obtained in any jurisdiction
prior to the Effective Time in connection with the consummation of the
transactions contemplated by this Agreement and in making any such filings
promptly and in seeking to obtain timely any such consents. Raster, Sub and Onyx
shall each furnish to one another's counsel all such information as may be
required in order for the effectuation of the foregoing actions and each
represents and warrants to the other that no information furnished by it in
connection with such actions or otherwise in connection with the consummation of
the transactions contemplated by this Agreement will contain any untrue
statement of a material fact or omit to state a material fact required to be
stated in order to make the information so furnished, in light of the
circumstances under which it is so furnished, not misleading.
4.6 Investigation by Raster. Raster may, prior to the
Effective Time, make or cause to be made such reasonable investigation of the
business and properties of Onyx and its
-26-
<PAGE> 31
financial, legal and tax condition as Raster deems necessary or advisable to
familiarize itself with such properties and other matters, provided that such
investigation shall not interfere with normal operations. Onyx agrees to permit
Raster and its authorized representatives to have, after the date of this
Agreement and until the Effective Time, full access to the premises, books and
records of Onyx at reasonable hours, and the officers of Onyx will furnish
Raster with such financial and operating data and other information with respect
to the business and properties of Onyx as Raster shall from time to time
reasonably request. Onyx agrees to give, and to use its best efforts to cause
its independent accountants and other advisors to give, such assistance to the
independent accountants and other advisors for Raster as Raster may reasonably
request in connection with its review of financial statements and returns of
Onyx for the fiscal year ended September 30, 1994 and for the eight (8) month
period ended May 31, 1995 or prior annual or other periods, including its notes
and work papers. No investigation by Raster heretofore or hereafter made shall
affect the representations and warranties of Onyx, and each such representation
and warranty shall survive any such investigation.
4.7 Satisfactory Shareholder Agreements. Onyx will cause each
shareholder of Onyx, which when added together constitutes more than 95% (by
value) of the outstanding capital stock of Onyx as of the Effective Time, to
execute and deliver the Shareholder Agreement prior to the Effective Time.
4.8 Expenses. If for any reason the Merger as contemplated
herein is not consummated, Raster and Onyx shall each pay their own
out-of-pocket expenses, including legal fees and expenses, incurred incident to
the preparation and carrying out of the transactions herein contemplated.
4.9 Public Announcements. Raster and Onyx will consult with
each other at least twenty-four (24) hours before issuing, or permitting any
agent or affiliate to issue, any press releases or otherwise making, or
permitting any agent or affiliate to make, any public statements with respect to
this Agreement and the transactions contemplated hereby, and shall provide to
the other party at such time the proposed text of any such press release or
public statement. Notwithstanding the foregoing, after such consultation, if
Raster and Onyx cannot agree on the content of such press release or public
statement, either party may issue, or permit any agent or affiliate to issue,
any such press release or make any such public statement which such party's
legal counsel deems to be required by law.
4.10 Issuance of Raster Preferred and Common Stock. Raster
will, promptly following the Effective Time and from time to time thereafter as
provided in this Agreement or the Merger Agreement, issue or cause to be issued
or deliver or cause to be delivered from Raster's authorized but unissued
shares, certificates for the shares of Raster Preferred Stock into which the
shares of Onyx Common Stock outstanding on the Effective Time shall then be
converted and the shares of Raster Common Stock to be issued upon the exercise
thereafter of stock options assumed by Raster in accordance with Section 6 of
this Agreement.
4.11 Consents. Raster and Onyx will use their best efforts to
obtain the written consents, if required, of all third parties, including, but
not limited to, governmental or regulatory agencies, foreign or domestic, and
those consents, if required to the contracts listed on the
-27-
<PAGE> 32
Disclosure Schedule of such party and will furnish to the other party executed
copies of those consents on or before the Effective Time.
4.12 Secured Loan. Simultaneous with the execution this of
this Agreement, Raster shall advance to Onyx $254,961.00 pursuant to the Loan
and Security Agreement attached hereto as Exhibit 4.12. Said loan will be
secured by all the assets of Onyx. As partial consideration for the advance,
Onyx agrees that the Software Distribution Agreement dated July 15, 1994 between
Onyx and Raster shall be extended through December 31, 1995 and Onyx agrees that
the minimum purchase commitments (including Exhibit D) shall not be applicable
through the extension period. In addition, Raster shall have the right to offset
against the secured promissory note any payments due to Onyx from Raster for
purchases of Onyx products by Raster pursuant to said Software Distribution
Agreement.
5.2 Conditions of Closing.
5.1 Raster's and Sub's Conditions of Closing. The obligation
of Raster and Sub to effect the Merger shall be, unless waived, subject to and
conditioned upon the satisfaction at or prior to the Effective Time of each of
the following conditions:
(a) Representations and Warranties True and Correct.
All representations and warranties of Onyx contained in this Agreement and the
Schedules hereto shall be true and correct in all material respects at and as of
the Effective Time and Onyx shall have performed, in all material respects, all
agreements and covenants and satisfied all conditions on its part to be
performed or satisfied by the Effective Time pursuant to the terms of this
Agreement, and Raster shall have received a certificate of an authorized officer
of Onyx dated the Effective Time to such effect.
(b) No Material Adverse Change. There shall have been
no material adverse change since the date of this Agreement in the financial
condition, operating results, business or affairs of Onyx, and Onyx shall not
have suffered any loss (whether or not insured) by reason of physical damage
caused by fire, earthquake, accident or other calamity which substantially
affects the value of its assets, properties or business, and Raster shall have
received a certificate of an authorized officer of Onyx dated the Effective Time
to such effect.
(c) Good Standing. Onyx shall have delivered to
Raster certificates of the Secretary of State of the State of Delaware and Utah
and the Franchise Tax Board of the State of Utah certifying as of a date
reasonably close to the Effective Time that Onyx has filed all required reports,
paid all required fees and Taxes, and is, as of such date, in good standing and
authorized to transact business as a domestic corporation.
(d) Legal Opinion. Raster shall have received from
Kimball, Parr, counsel for Onyx, an opinion dated the Effective Time
substantially in the form of Exhibit 5.1(d) attached hereto.
(e) Certificate of Secretary. Onyx shall have
delivered to Raster a certificate of its corporate secretary certifying as to:
-28-
<PAGE> 33
(i) resolutions of its shareholders and
Board of Directors authorizing execution of this Agreement and the execution,
performance and delivery of all agreements, documents and transactions
contemplated hereby and
(ii) the incumbency of its officers
executing this Agreement and all agreements and documents contemplated hereby.
(f) Resignations of Directors and Officers. All
directors and officers of Onyx shall have submitted their written resignations
with respect to such positions.
(g) Employment Agreements. Charles Edwards, Neil
Baker, Todd Hess, Maxim Derhak and Dean Wittman shall have entered into an
Employment Agreement substantially in the form of Exhibit 5.1(i) attached hereto
with Raster.
(h) Shareholder Agreement. All Onyx shareholders as
shall be necessary to constitute more than 95% (by value) of the outstanding
capital stock of Onyx as of the Effective Time, will have executed and delivered
the Shareholder Agreement.
(i) Due Diligence. Raster shall have completed its
due diligence review of Onyx, the results of which shall be satisfactory to
Raster.
5.2 Onyx's Conditions of Closing. The obligation of Onyx to
effect the Merger shall be, unless waived, subject to and conditioned upon the
satisfaction at or prior to the Effective Time of each of the following
conditions:
(a) Representations and Warranties True and Correct.
All representations and warranties of Raster and Sub contained in this Agreement
shall be true and correct at and as of the Effective Time in all material
respects and each of Raster and Sub shall have performed all agreements and
covenants and satisfied all conditions on its part to be performed or satisfied
by the Effective Time pursuant to the terms of this Agreement, and Onyx shall
have received certificates of an authorized officer of Raster dated the
Effective Time to such effect.
(b) Good Standing. Raster shall have delivered to
Onyx a certificate of the Secretary of State of the State of California
certifying as of a date reasonably close to the Effective Time that Raster has
filed all required reports, paid all required fees and Taxes, and is, as of such
date, in good standing and authorized to transact business as a domestic
corporation.
(c) Legal Opinion. Onyx shall have received from
Venture Law Group, counsel for Raster and Sub, an opinion dated the Effective
Time in substantially the form attached hereto as Exhibit 5.2(c).
(d) Certificate of Secretary. Each of Sub and Raster
shall have delivered to Onyx a certificate of its corporate secretary certifying
as to:
(i) resolutions of its shareholders (in the
case of Sub only) and its Board of Directors authorizing execution of this
Agreement and the execution, performance
-29-
<PAGE> 34
and delivery by such party of all agreements, documents and transactions
contemplated hereby and
(ii) the incumbency of its officers
executing this Agreement and all agreements and documents contemplated hereby.
(e) Shareholder Agreement. Raster shall have executed
counterpart copies of the Shareholder Agreement substantially in the form of
Exhibit 5.1(j) attached hereto and shall have delivered such agreement to Onyx
on behalf of Onyx shareholders entering into such agreement.
(f) Employment Agreements. Raster shall have executed
and delivered to Onyx Employment Agreements in substantially the form attached
hereto as Exhibit 5.1(i) with Charles Edwards, Neil Baker, Todd Hess, Maxim
Derhak and Dean Wittman.
5.3 Conditions of Raster, Sub and Onyx to Closing. The
obligations of Raster, Sub and Onyx to effect the Merger shall be, unless
waived, subject to and conditioned upon satisfaction at or prior to the
Effective Time of each of the following conditions:
(a) Board Approval. The Boards of Directors of
Raster, Sub and Onyx shall have duly approved this Agreement and the Merger.
(b) Shareholder Approval. The shareholders of Onyx,
Raster, and Sub shall have duly approved this Agreement and the Merger in
accordance with Delaware and California law and their respective Articles of
Incorporation and Bylaws.
(c) Fairness Hearing. The Merger and the issuance of
the Raster Preferred Stock shall have been approved by the Commissioner of
Corporations of the State of California in a fairness hearing to be held in
California.
(d) Filing of Articles of Merger. The Agreement of
Merger shall have been filed with the Secretary of State of the State of
Delaware.
(e) Third Party Consents. Any and all consents
required from third parties relating to contracts, licenses, leases and other
instruments material to the respective businesses of Raster and Onyx shall have
been obtained.
(f) No Injunction, etc. No temporary restraining
order, preliminary injunction or permanent injunction or other order preventing
the consummation of the Merger shall have been issued by any federal or state
court and remain in effect, and no litigation seeking the issuance of such an
order or injunction, or seeking the imposition against Raster, Sub or Onyx of
substantial damages if the Merger is consummated, shall be pending which, in the
good faith judgment of the Board of Directors of Raster or Onyx (acting upon
advice of their respective outside counsel) has a reasonable probability of
resulting in such order, injunction or damages. In the event any such order or
injunction shall have been issued, each party agrees to use its reasonable
efforts to have any such order or injunction lifted.
-30-
<PAGE> 35
(g) No Conflict. No statute, rule or regulation shall
have been enacted by the government of the United States or any state or agency
thereof which would make the consummation of the Merger illegal.
(h) Dissenting Shareholders. Shareholders of Onyx
holding not more than 4% of the outstanding shares of Onyx on an as-converted to
Common Stock basis shall have exercised dissenters' rights.
(i) No Litigation. Except as disclosed on the
Disclosure Schedules, there shall be no pending or threatened litigation against
any of Raster, Sub or Onyx or against their officers or directors which may have
a material adverse effect on Raster or the Surviving Corporation after the
Merger.
6. Onyx Options.
6.1 Onyx's Plans. Raster shall assume each option to purchase
shares of Onyx Common Stock (collectively, the "Onyx Options") outstanding at
the Effective Time under the Onyx Plans and each Onyx Option shall thereafter be
exercisable for a number of shares of Raster Common Stock equal to the number of
shares of Onyx Common Stock subject to such Onyx Option immediately prior to the
Effective Time multiplied by two (2) (collectively, the "Raster Options"). The
exercise price per share of Raster Common Stock for such Onyx Option so assumed
shall be the exercise price per share specified in such Onyx Option divided by
two (2), rounded to the nearest $0.01, all in accordance with Section 424(a) of
the Code, and the regulations promulgated thereunder, without regard to whether
the Onyx Option qualifies as an incentive stock option within the meaning of
Section 422 of the Code ("ISO"), although an assumed Onyx Option is intended to
be an ISO if the Onyx Option so qualified. For example, a Onyx Option covering
10,000 shares of Onyx Common Stock with an exercise price of $0.32 per share
would be converted into a Raster Option covering 20,000 shares of Raster Common
Stock with an exercise price of $0.16 per Raster share. Prior to rounding, all
calculations shall be carried to four decimal places. Each Raster Option shall
be upon the same substantive terms and conditions as were applicable under the
Onyx Option to purchase Onyx Common Stock, except for the adjustments
contemplated in this Section 6.1. Onyx represents and warrants to Raster that
such assumption can be effected under the Onyx Plans and Onyx Options without
consent of any holder of Onyx Options and without liability to any holder of
Onyx Options. Raster will take all corporate and other action necessary to
reserve and make available sufficient shares of Raster Common Stock for issuance
upon exercise of such Raster Options.
7. Escrow and Indemnification.
7.1 Creation of Escrow. At the Effective Time, an escrow
("Escrow") shall be established with the Escrow Agent on the terms set forth in
this Section 7, for an aggregate of thirty percent (30%) of the number of full
shares of Raster Preferred Stock (the "Escrow Shares") issued or issuable by
Raster in the Merger. At the Effective Time, the shareholders of Onyx shall be
deemed to have directed Raster to deliver to the Escrow Agent a certificate or
certificates registered in the name of the Escrow Agent for that number of
shares of Raster Preferred Stock otherwise distributable to the shareholders of
Onyx which represents each Onyx shareholder's
-31-
<PAGE> 36
proportionate interest in the Escrow Shares. For such purpose, each Onyx
shareholder's "proportionate interest" shall be that number of shares of Raster
Preferred Stock to be issued to such Onyx shareholder divided by the total
number of shares of Raster Preferred Stock to be issued on the Effective Date to
all Onyx shareholders. The shares so delivered to the Escrow Agent and any other
securities or other property or cash, from time to time held by the Escrow Agent
pursuant to the terms hereof is herein referred to as the "Escrow Fund." Any
shares or other securities from time to time held in the Escrow Fund shall be
registered in the name of the Escrow Agent or its nominee. The Escrow Fund shall
be held by the Escrow Agent in escrow subject to the terms and conditions
hereinafter set forth. Any shares or other securities from time to time held in
the Escrow Fund shall be registered in the name of the Escrow Agent or its
nominee. Raster shall show shares held in the Escrow Fund as issued and
outstanding on its balance sheet after the Effective Time and such shares shall
be duly authorized and validly issued under applicable state law.
7.2 Onyx Shareholders' Representatives. From and after the
establishment of the Escrow Fund as provided in Section 7.1 hereof, the Onyx
shareholders shall be represented hereunder by Chris Cannon or his designee (the
"Onyx Shareholders' Representative").
7.3 Indemnity. The Onyx shareholders shall jointly and
severally indemnify Raster and Sub and hold each of them harmless against and in
respect of any loss, cost, expense, liability, judgment or damage (including
reasonable legal fees and expenses) (collectively, the "Losses") incurred by
Raster or any of its subsidiaries (including Sub) or by any successor of any of
them, directly or indirectly, caused by or arising from any misrepresentation or
omission of Onyx contained in this Agreement, in the manner herein provided;
provided, however, that the Onyx shareholders will not be liable under this
Section 7 to the extent claims for Losses hereunder do not exceed $50,000;
provided, however, that if such Losses exceed $50,000, then the indemnification
provided for hereunder shall apply to all Losses without regard to the $50,000
threshold provided above.
7.4 Distribution Events.
(a) If Raster or Sub shall have any claim of
indemnification pursuant to Section 7.3, it shall, after consulting with the
Onyx Shareholders' Representative regarding such claim, promptly give formal
written notice thereof to the Onyx Shareholders' Representative and Escrow
Agent, including a brief description of the facts or other matters upon which
such claim is based and the amount thereof as reasonably determined by Raster.
The Escrow Agent shall within thirty (30) business days following receipt of
such notice deliver from the Escrow Fund to Raster the lesser of (i) the number
of Escrow Shares, in whole shares, or other property in the Escrow Fund, most
nearly equal to the sum of the amount of the claim or claims to be satisfied
divided by the fair market value of the Raster Preferred Stock at the time of
the Loss as determined by an independent appraiser selected by Raster, or (ii)
all of the remaining Escrow Shares. In lieu of the Escrow Shares, the
Shareholder Representative, on behalf of all Onyx shareholders, may elect to pay
for the Loss in cash.
-32-
<PAGE> 37
(b) Disputes with respect to any claims of
indemnification by Raster or Sub hereunder or determination of the fair market
value of the Raster Preferred Stock shall be resolved as follows:
(i) If the Onyx Shareholders'
Representative shall, in good faith, notify the Escrow Agent in writing of his
objection to a claim of indemnification or determination of the fair market
value of the Raster Preferred Stock prior to a distribution under Section 7.4(a)
hereof, including a brief description of the facts or other matters upon which
such objection is based, the Onyx Shareholders' Representative and Raster shall
attempt in good faith to agree upon the rights of the respective parties with
respect to each of such claims and the determination of the fair market value of
the Raster Preferred Stock. If the Onyx Shareholders' Representative and Raster
should so agree, a memorandum setting forth such agreement shall be prepared and
signed by both parties and shall be furnished to the Escrow Agent. The Escrow
Agent shall be entitled to rely on any such memorandum and distribute shares of
Raster Preferred Stock or other property from the Escrow Fund in accordance with
the terms thereof.
(ii) If no such agreement can be reached
after good faith negotiation, either Raster or the Onyx Shareholders'
Representative 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. Any arbitration hereunder shall be conducted
by three arbitrators. Raster and the Onyx Shareholders' Representative shall
each select one arbitrator, and the two arbitrators so selected shall select a
third arbitrator. The decision of a majority of the three arbitrators as to the
validity and amount of any claim or determination of the fair market value of
the Raster Preferred Stock shall be binding and conclusive upon the parties to
this Agreement, and 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.
(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, California, under the rules then in
effect of the American Arbitration Association.
(iv) If the arbitrators shall determine
that some or all of the Escrow Shares are to be delivered to Raster or Sub, the
Escrow Agent shall within fifteen (15) business days following receipt of a copy
of such determination deliver to Raster the lesser of (i) the number of Escrow
Shares in whole shares, or other property in the Escrow Fund, most nearly equal
to the sum of the amount of the claim or claims to be satisfied, or (ii) all of
the remaining Escrow Shares. If such determination is made after July 31, 1996,
any Escrow Shares not delivered to Raster hereunder or not otherwise subject to
a still outstanding claim shall be immediately delivered to the Onyx
shareholders in accordance with their proportionate interest therein.
(c) In the event that the Escrow Shares are
deliverable to Raster hereunder, each Onyx shareholder shall bear his or her
proportionate interest therein.
-33-
<PAGE> 38
(d) Third Party Claims. In the event Raster becomes
aware of a third-party claim which Raster believes may result in a demand
against the Escrow Fund, Raster shall notify the Onyx Shareholders'
Representative, who shall be entitled, at his expense, to participate in any
defense of such claim, subject to Raster's overall control of such defense.
Raster shall have the right in its sole discretion to settle any such claim;
provided, however, that except with the consent of the Onyx Shareholders'
Representative, no settlement of any such claim with third-party claimants shall
alone be determinative of the validity of any claim against the Escrow Fund. In
the event that the Onyx Shareholders' Representative have consented to any such
settlement, the Onyx Shareholders' Representative shall have no power or
authority to object under any provision of this Section 7.4(d) to the amount of
any claim by Raster against the Escrow Fund with respect to such settlement.
7.5 Termination. The obligations of the Onyx shareholders
under this Section 7 with respect to any misrepresentations and omissions shall
apply only with respect to any claims made by July 31, 1996. On August 1, 1996,
the Escrow Agent shall distribute to the Onyx shareholders the Escrow Shares
which remain after full satisfaction of Losses as set forth in Section 7.3
hereof, except that number of Escrow Shares, in whole shares, in the Escrow Fund
most nearly equal to 100% of the amount of all pending claims made by Raster
hereunder relating to misrepresentations and omissions and expenses reasonably
established by Raster to be necessary for the disposition of all such claims,
or, if less, all of the remaining Escrow Shares.
7.6 Rights of Shareholders. The Onyx shareholders shall retain
the rights to vote the Escrow Shares and receive distributions thereon and the
obligations to pay all Taxes, assessments, and charges with respect thereto;
provided, however, that any distribution on or with respect to such Escrow
Shares and any other shares or securities into which such Escrow Shares may be
changed or for which they may be exchanged pursuant to corporate action of
Raster affecting holders of Raster Common Stock generally, shall be delivered to
and held by the Escrow Agent in Escrow and shall be subject to the indemnity and
escrow provisions of this Section 7. As the record holder of the Escrow Shares,
the Escrow Agent shall vote such shares in accordance with the instructions of
the Onyx shareholders having the beneficial interest therein, and the Escrow
Agent shall promptly deliver copies of all proxy solicitation material to such
Onyx shareholders.
7.7 Fees. The fees of the Escrow Agent shall be paid by
Raster.
7.8 Escrow Agent's Protection. In taking any action whatsoever
hereunder, the Escrow Agent shall be protected in relying upon any notice, paper
or other document reasonably believed by it to be genuine, or upon any evidence
reasonably deemed by it to be sufficient. The Escrow Agent shall not be liable
to Raster, Sub, Onyx or the Onyx shareholders for any act performed or omitted
to be performed by it in good faith and shall be liable only in case of its own
bad faith or willful misconduct or gross negligence. The Escrow Agent may
consult with counsel in connection with its duties hereunder and shall be fully
protected in any act taken, suffered or permitted by it in good faith in
accordance with the advice of counsel.
7.9 Indemnification of Escrow Agent. Raster shall reimburse,
indemnify and hold harmless the Escrow Agent, its employees and agents (referred
to herein severally and col-
-34-
<PAGE> 39
lectively as the "Escrow Agent"), from and against any loss, damage, liability
or claim suffered, incurred by, or asserted against the Escrow Agent (including
any amounts paid in settlement of any action, suit, proceeding, or claim brought
or threatened to be brought and including expenses of legal counsel) arising out
of, in connection with or based upon any act or omission by the Escrow Agent
relating in any way to this Agreement or its services hereunder, so long as the
Escrow Agent has acted in good faith and without gross negligence.
Raster may participate at its own expense in the defense of
any claim or action which may be asserted against the Escrow Agent, and if
Raster so elects, Raster may assume the defense of such claim or action;
provided, however, that if there exists a conflict of interest which would make
it inappropriate for the same counsel to represent both Raster and the Escrow
Agent, retention of separate counsel by the Escrow Agent shall be reimbursable
as hereinabove provided. The right of the Escrow Agent to indemnification
hereunder shall survive its resignation or removal as Escrow Agent and shall
survive the termination of this Agreement by lapse of time or otherwise.
7.10 Exclusive Remedy. In the absence of fraud, the Escrow
provided in this Section 7 shall be the sole and exclusive remedy of Raster
against Onyx shareholders and all other holders of Onyx Common Stock or Onyx
Options with respect to all Losses incurred by Raster pursuant to the
transactions contemplated by this Agreement.
7.11 Notice. Any notice or other communication required or
permitted to be given to the parties under this Section 7 shall be deemed to
have been given if delivered personally, or two business days after mailing by
certified or registered mail, return receipt requested, first class postage
prepaid, addressed as follows:
(a) If to Raster as provided in Section 9.1 of this
Agreement
-35-
<PAGE> 40
(b) If to Onyx shareholders:
To: Charles O. Edwards
6915 South High Tech Drive
Midvale, Utah 84047-3757
(c) If to the Escrow Agent:
To: Bank of America N.T. & S.A.
315 Montgomery Street, Suite 920
San Francisco, CA 94104
Attention: _______________
8. Termination. This Agreement may be terminated and the Merger
abandoned at any time before the Effective Time, whether before or after
adoption by the shareholders of Onyx and Raster as follows:
8.1 Mutual Consent. By mutual consent of the Boards of
Directors of Raster, Sub and Onyx.
8.2 By Raster or Onyx. By either Raster or Onyx if
(a) there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of the other party and such breach of a covenant or agreement has not
been promptly cured;
(b) the Merger shall not have been consummated by
August 18, 1995;
(c) (i) there shall be a final nonappealable order of
a federal or state court in effect preventing consummation of the Merger or (ii)
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 consummation of the Merger illegal;
(d) 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 Raster's or
Onyx's ownership or operation of all or a material portion of the business or
assets of Onyx or Raster and its subsidiaries taken as a whole, or compel Raster
or Onyx to dispose of or hold separate all or a material portion of the business
or assets of Onyx or Raster and its subsidiaries taken as a whole, as a result
of the Merger or (ii) render Raster or Onyx unable to consummate the Merger,
except for any waiting period provisions; or
(e) any required approval of the shareholders of Onyx
or RGI shall not have been obtained.
-36-
<PAGE> 41
8.3 By Raster. By Raster giving written notice to Onyx if the
conditions set forth in Sections 5.1 and 5.3 shall not have been complied with
or performed in all material respects not later than August 18, 1995.
8.4 By Onyx. By Onyx giving written notice to Raster if the
conditions set forth in Sections 5.2 and 5.3 shall not have been complied with
or performed in all material respects not later than August 18, 1995.
8.5 Effect of Termination. In the event of termination of this
Agreement by either Raster or Onyx as provided in Section 8.1, 8.2, 8.3 and 8.4,
this Agreement and the Merger Agreement shall forthwith become void and there
shall be no liability or obligation on the part of Raster or Onyx or their
respective officers or directors except as set forth in Sections 4.6 and 4.8 and
except to the extent that such termination results from the willful breach by a
party hereto of any of its representations, warranties, covenants or agreements
set forth in this Agreement.
9. Miscellaneous.
9.1 Notice. Any notice required or permitted hereunder shall
be in writing and shall be sufficiently given if personally delivered or mailed
by certified or registered mail, return receipt requested, addressed as follows:
If to Raster or Sub:
(1) If to Raster:
Raster Graphics, Inc.
285 N. Wolfe Road
Sunnyvale, California 94086
(408) 738-7800
(408) 749-0544 (fax)
Attention: Rak Kumar
President and
Chief Executive Officer
With a copy to:
Mark B. Weeks
Venture Law Group
2800 Sand Hill Road
Menlo Park, California 94025
(415) 854-4488
(415) 854-1121 (fax)
-37-
<PAGE> 42
(2) If to Onyx:
Onyx Graphics Corporation
6915 South High Tech Drive
Midvale, Utah 84047-3757
(801) 568-9900
(801) 568-9911 (fax)
Attention: Charles O. Edwards
President and Chief Executive
Officer
With a copy to:
Richard G. Brown
Kimball, Parr
185 South State Street
Suite 1300
Salt Lake City, Utah 84111
(801) 532-7840
or to such other address as any party shall specify by written notice so given,
and shall be deemed to have been delivered as of the date so personally
delivered or mailed.
9.2 Binding Effect, Benefits. Subject to Section 9.11, this
Agreement shall be binding upon and shall inure to the benefit of the parties to
this Agreement and their respective successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties
to this Agreement or their respective heirs, successors, executors,
administrators and assigns any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
9.3 Entire Agreement. This Agreement, together with the
Exhibits and Schedules to this Agreement, the Secured Promissory Note dated June
12, 1995 issued by Onyx to Raster and other documents contemplated hereby,
constitute the final written expression of all of the agreements among the
parties, and is a complete and exclusive statement of those terms. It supersedes
all prior understandings and negotiations concerning the matters specified
herein and therein. Any representations, promises, warranties or statements made
by any party that differ in any way from the terms of this written Agreement and
the Exhibits and Schedules to this Agreement and other documents contemplated
hereby, shall be given no force or effect. The parties specifically represent,
each to the others, that there are no additional or supplemental agreements
between them related in any way to the matters contained in this Agreement
unless specifically included or referred to in this Agreement. No addition to or
modification of any provision of this Agreement shall be binding upon any party
unless made in writing and signed by all parties.
9.4 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
-38-
<PAGE> 43
CALIFORNIA. THE PARTIES AGREE THAT, EXCEPT WITH RESPECT TO ARBITRATION OF CLAIMS
AGAINST THE ESCROW FUND AS PROVIDED IN SECTION 7, JURISDICTION AND VENUE WITH
RESPECT TO ANY LAWSUIT BETWEEN OR AMONG THE PARTIES INVOLVING THE
INTERPRETATION, COMPLIANCE OR ENFORCEMENT OF ANY PROVISION UNDER THIS AGREEMENT
SHALL BE EXCLUSIVELY IN THE FEDERAL COURTS LOCATED IN THE SOUTHERN DISTRICT OF
CALIFORNIA OR IN THE CALIFORNIA STATE COURTS LOCATED IN THE COUNTY OF LOS
ANGELES.
9.5 Non-Survival of Representation, Warranties and Agreements.
The representations, warranties and agreements in this Agreement shall survive
the Effective Time indefinitely and any termination of this Agreement pursuant
to Section 8.2(a) hereof.
9.6 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same instrument.
9.7 Headings. Headings of the Sections of this Agreement are
for the convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
9.8 Waivers. Any party hereto may by written notice to the
other parties, (i) extend the time for the performance of any of the obligations
or other actions of the other parties under this Agreement; (ii) waive any
inaccuracies in the representations or warranties of the other parties contained
in this Agreement or in any document delivered pursuant to this Agreement; (iii)
waive compliance with any of the conditions or covenants of the other parties
contained in this Agreement; or (iv) waive performance of any of the obligations
of the other parties under this Agreement. Except as provided in the preceding
sentence, no action taken pursuant to this Agreement, including, without
limitation, any investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action of compliance with any
representations, warranties, covenants or agreements contained in this
Agreement. The waiver by any party hereto of a breach of any provision hereunder
shall not operate or be construed as a waiver of any prior or subsequent breach
of the same or any other provision hereunder.
9.9 Merger of Documents. This Agreement and all agreements and
documents contemplated hereby constitute one agreement.
9.10 Incorporation of Schedules. All Exhibits and Schedules
attached to this Agreement are by this reference incorporated herein and made a
part of this Agreement for all purposes as if fully set forth herein.
9.11 Assignability. Neither this Agreement nor any of the
parties' rights hereunder shall be assignable without the prior written consent
of the other parties.
-39-
<PAGE> 44
9.12 Severability. If for any reason whatsoever, any one
or more of the provisions of this Agreement shall be held or deemed to be
inoperative, unenforceable or invalid as applied to any particular case or in
all cases, such circumstances shall not have the effect of rendering such
provision invalid in any other case or of rendering any of the other provisions
of this Agreement inoperative, unenforceable or invalid.
9.13 Finder's Fees.
(a) Onyx (i) represents and warrants that it has
retained no finder or broker in connection with the transactions contemplated by
this Agreement and (ii) hereby agrees to indemnify and to hold Raster harmless
of and from any liability for any commission or compen sation in the nature of a
finder's fee to any broker or other person or firm (and the costs and expenses
of defending against such liability or asserted liability) for which Onyx or any
of its employees or representatives, are responsible.
(b) Raster and Sub (i) represent and warrant that
neither of them has retained any finder or broker in connection with the
transactions contemplated by this Agreement and (ii) hereby agree to indemnify
and to hold Onyx harmless of and from any liability for any commission or
compensation in the nature of a finder's fee to any broker or other person or
firm (and the costs and expenses of defending against such liability or asserted
liability) for which Raster or Sub, or any of their employees or
representatives, are responsible.
9.14 Effective Date. This Agreement shall be effective as
of the date first set forth above by and among Raster, Sub and Onyx when
executed and delivered by them. The Escrow Agent shall become a party to Section
7 of this Agreement at such time as it executes and delivers a signature page to
this Agreement.
-40-
<PAGE> 45
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the same
to be duly delivered on their behalf on the day and year hereinabove first set
forth.
ONYX SYSTEMS, INC. RASTER GRAPHICS, INC.
By: /s/ Charles O. Edwards By: /s/ Rak Kumar
--------------------------- -----------------------------
Title: President and CEO Title: CEO and President
----------------------- -------------------------
RASTER ACQUISITION CORPORATION
By: /s/ Rak Kumar
-----------------------------
Title: CEO and President
-------------------------
ESCROW AGENT:
BANK OF AMERICA N.T. & S.A.
By:
-----------------------------
Title:
-------------------------
-41-
<PAGE> 46
AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION
This Amendment to the Agreement and Plan of Reorganization (the
"Agreement") is made and entered into this 31st day of December 1995, by and
among Raster Graphics, Inc. ("Raster"), a California Corporation and Onyx
Graphics Corporation ("Onyx"), a subsidiary of Raster.
WHEREAS, on June 12, 1995 Raster, Onyx, and Bank of America N.T. and
S.A. (the "Escrow Agent") entered into a merger agreement wherein certain
shares of Raster were held in escrow with the Escrow Agent.
WHEREAS, Onyx and Raster wish to amend the Agreement in certain
respects.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereby
agree as follows:
1. Section 7.5 of the Agreement shall be deleted in its entirety and
replaced with the following:
"7.5 Termination. The obligations of the Onyx shareholders under this
Section 7 with respect to any misrepresentations and omissions shall apply only
with respect to any claims made by December 31, 1995. On January 1, 1996, the
Escrow Agent shall distribute to the Onyx shareholders all of the Escrow
Shares."
2. Except for the foregoing, the Agreement shall remain unchanged and
in full force and effect.
3. This Amendment may be executed in counterparts, each of which when
filed shall be deemed an original and all of which, taken together, shall
constitute one instrument.
IN WITNESS WHEREOF, this Amendment has been duly executed as of the
date first set forth above.
ONYX GRAPHICS CORPORATION RASTER GRAPHICS
By: /s/ Chuck Edwards By: /s/ Rak Kumar
--------------------------- -------------------------
Chuck Edwards Rak Kumar
Title: President Title: President
------------------------ ---------------------
<PAGE> 1
EXHIBIT 3.1
[STATE OF CALIFORNIA LETTERHEAD]
CORPORATION DIVISION
I, Bill Jones, Secretary of the State of California, hereby certify:
That the annexed transcript has been compared with the corporate record
on file in this office, of which it purports to be a copy, and that same is
full, true and correct.
IN WITNESS WHEREOF, I execute this
certificate and affix the Great
Seal of the State of California this
August 8, 1995
/s/ Bill Jones
Secretary of State
[THE SEAL OF THE STATE OF CALIFORNIA]
<PAGE> 2
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
RASTER GRAPHICS, INC.
RAK KUMAR and JAMES R. BUCKLEY certify that:
1. They are the President and Secretary, respectively, of RASTER
GRAPHICS, INC., a California corporation.
2. The Articles of Incorporation of this corporation are amended and
restated to read in their entirety as follows:
"I.
The name of this corporation is Raster Graphics, Inc.
II.
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
III.
(a) This corporation is authorized to issue two classes of shares,
designated "Preferred Stock" and "Common Stock," respectively. The total number
of shares which this corporation shall have authority to issue is Seventy
Million One Hundred-Fifty Thousand (70,150,000), none of which has any par
value. The number of shares of Preferred Stock authorized to be issued is Thirty
Million One Hundred-Fifty Thousand (30,150,000), and the number of shares of
Common Stock authorized to be issued is Forty Million (40,000,000). The
Preferred Stock shall be issued in three series. The first series of Preferred
Stock shall be designated Series A Preferred Stock (the "Series A Preferred")
and shall consist of One Million Six Hundred Thousand (1,600,000) shares with
the rights, preferences, privileges and restrictions set forth in paragraph (b)
below. The second series of Preferred Stock shall be designated Series B
Preferred Stock (the "Series B Preferred") and shall consist of Five Million Two
Hundred-Fifty Thousand (5,250,000) shares with the rights, preferences,
privileges and restrictions set forth in paragraph (b) below. The third series
of Preferred Stock shall be designated Series C Preferred Stock (the "Series C
Preferred") and shall consist of Twenty-Three Million Three Hundred Thousand
(23,300,000) shares with the rights, preferences, privileges and restrictions
set forth in paragraph (b) below.
<PAGE> 3
(b) A statement of the rights, preferences, privileges and restrictions
granted to or imposed on the Series A Preferred, Series B Preferred and Series C
Preferred and the holders thereof is as follows:
(1) Dividends.
(aa)(i) The holders of outstanding Series C Preferred shall be
entitled to receive in any fiscal year, when and as declared by the Board of
Directors, out of any assets at the time legally available therefor, dividends
in cash at the rate of $0.03 per share of Series C Preferred, per annum, before
any cash dividend is paid on Series A Preferred, Series B Preferred or Common
Stock. After payment to the holders of Series C Preferred of the amounts as
aforesaid, the holders of outstanding Series A and Series B Preferred shall be
entitled to receive in any fiscal year, when and as declared by the Board of
Directors, out of any assets at the time legally available therefor, dividends
in cash at the rate of $0.04 and $0.04 per share of Series A and Series B
Preferred, respectively, per annum, before any cash dividend is paid on Common
Stock. Such dividend or distribution may be payable annually or otherwise as the
Board of Directors may from time to time determine. Dividends or distributions
may be declared and paid upon shares of Series A Preferred or Series B Preferred
in any fiscal year of the corporation only if dividends shall have been paid on
or declared and set apart upon all shares of Series C Preferred at the annual
rate as aforesaid. Dividends or distributions may be declared and paid upon
shares of Series A Preferred or Series B Preferred in any fiscal year of the
corporation only if dividends shall have been paid on or declared and set apart
upon all shares of Preferred Stock at such annual rates. The right to such
dividends on shares of Preferred Stock shall not be cumulative and no right
shall accrue to holders of shares of Preferred Stock by reason of the fact that
dividends on such shares are not declared in any prior year, nor shall any
undeclared or unpaid dividend bear or accrue interest.
(ii) In the event this corporation shall determine, after
payment of dividends to holders of Preferred Stock at the annual rates set forth
above, to pay cash dividends to the holders of Common Stock, such dividends may
be paid to holders of Common Stock only if equal dividends are also paid to
holders of Preferred Stock (based upon the number of shares of Common Stock into
which such shares of Preferred Stock are then convertible) at the same time. The
right to such dividends on shares of Common Stock and Preferred Stock shall not
be cumulative and no rights shall accrue to holders of shares of Common Stock
and Preferred Stock by reason of the fact that dividends on such shares are not
declared in any prior year, nor shall any undeclared or unpaid dividends bear or
accrue interest.
(bb) In the event this corporation shall declare a distribution
payable in securities of other persons, evidences of indebtedness issued by this
corporation or other persons, assets (excluding cash dividends) or options or
rights to purchase any such securities or evidences of indebtedness, then, in
each such case the holders of the Preferred Stock shall be entitled to a
proportionate share of any such distribution as though the holders of the
Preferred Stock were the holders of the number of shares of Common Stock of the
corporation into which their respective shares of Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the corporation entitled to receive such distribution.
2
<PAGE> 4
(2) Voting Rights.
(aa) Each holder of shares of Preferred Stock shall be entitled
to the number of votes equal to the number of shares of Common Stock into which
such shares of Preferred Stock could be converted on the record date for the
vote or consent of shareholders and shall have voting rights and powers equal to
the voting rights and powers of the Common Stock. The holder of each share of
Preferred Stock shall be entitled to notice of any shareholders' meeting in
accordance with the Bylaws of the corporation and, except as provided in
paragraph (bb) below, shall vote with holders of the Common Stock upon any
matter submitted to a vote of shareholders, except those matters required by law
to be submitted to a class vote. Fractional votes by the holders of Preferred
Stock shall not, however, be permitted and any fractional voting rights
resulting from the above formula (after aggregating all shares into which shares
of Preferred Stock held by each holder could be converted) shall be rounded to
the nearest whole number.
(bb) The holders of shares of Series C Preferred shall be
entitled, voting as a separate class, to elect two members of the Board of
Directors of this corporation. The holders of shares of Series A Preferred and
Series B Preferred shall be entitled, voting as a single class, to elect two
members of the Board of Directors of this corporation. The holders of shares of
Common Stock shall be entitled, voting as a separate class, to elect two members
of the Board of Directors of this corporation. The holders of shares of
Preferred Stock and Common Stock shall be entitled, voting as a single class, to
elect the remaining directors of this corporation. In the case of any vacancy in
the office of a director elected by the holders of a particular class or series
of stock, the vacancy may be filled only by the vote of the holders of such
class or series of stock. Any director who shall have been elected by the
holders of a particular class or series of stock may be removed without cause
by, and only by, the applicable vote of the holders of shares of such class or
series of stock. The provisions of this paragraph (2)(bb) shall expire and be of
no further force or effect immediately upon conversion of the outstanding shares
of Preferred Stock pursuant to the provisions of paragraph (3)(aa)(ii) below.
(3) Conversion. The holders of the Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(aa) Right to Convert.
(i) Each share of Preferred Stock shall be convertible, at
the option of the holder thereof, at any time after the date of issuance of such
share at the office of the corporation or any transfer agent for the Preferred
Stock, into that number of fully-paid and non-assessable shares of Common Stock
that is equal, in the case of Series A Preferred, to $0.50 divided by the
Conversion Price for such series (as hereinafter defined) , in the case of
Series B Preferred, to $0.50 divided by the Conversion Price for such series (as
hereinafter defined) and, in the case of Series C Preferred, to $0.50 divided by
the Conversion Price for such series (as hereinafter defined). The Conversion
Prices for the Series A, Series B and Series C
3
<PAGE> 5
Preferred shall initially be $0.50, $0.50 and $0.50, respectively, subject to
adjustment as provided herein. (The number of shares of Common Stock into which
each share of Series A, Series B or Series C Preferred may be converted is
hereinafter referred to as the "Conversion Rate" for each such series.) Upon any
decrease or increase in the Conversion Price or the Conversion Rate for a
series, as described in this Section (b)(3), the Conversion Rate or Conversion
Price for such series, as the case may be, shall be appropriately increased or
decreased.
(ii) Each share of Preferred Stock shall automatically be
converted into shares of Common Stock at the then effective Conversion Rate for
such share immediately upon the consummation of the corporation's sale of Common
Stock pursuant to a registration statement under the Securities Act of 1933, as
amended, pursuant to an underwritten firm commitment public offering, provided
that the price per share is not less than $1.50 (net of underwriter commissions
and expenses and subject to appropriate adjustment for all stock splits,
dividends, subdivisions, combinations, recapitalizations and the like) and the
gross aggregate offering price is not less than $10,000,000.
(bb) Mechanics of Conversion. No fractional shares of Common
Stock shall be issued upon conversion of Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
corporation shall pay cash equal to such fraction multiplied by the then fair
market value of such fractional shares as determined by the Board of Directors
of the corporation. Before any holder of Preferred Stock shall be entitled to
convert the same into full shares of Common Stock, he shall surrender the
certificate or certificates therefor, duly endorsed, at the office of the
corporation or of any transfer agent for the Preferred Stock, and shall give
written notice to the corporation at such office that he elects to convert the
same; provided, however, that in the event of an automatic conversion pursuant
to paragraph (b)(3)(aa)(ii) above, the outstanding shares of Preferred Stock
shall be converted automatically without any further action by the holders of
such shares and whether or not the certificates representing such shares are
surrendered to the corporation or its transfer agent; provided further, however,
that the corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such automatic conversion unless either the
certificates evidencing such shares of Preferred Stock are delivered to the
corporation or its transfer agent as provided above, or the holder notifies the
corporation or its transfer agent that such certificates have been lost, stolen
or destroyed and executes an agreement satisfactory to the corporation to
indemnify the corporation from any loss incurred by it in connection with such
certificates.
The corporation shall, as soon as practicable after such delivery, or
after such agreement and indemnification, issue and deliver at such office to
such holder of Preferred Stock, a certificate or certificates for the number of
shares of Common Stock to which he shall be entitled as aforesaid and a check
payable to the holder in the amount of any cash amounts payable as the result of
a conversion into fractional shares of Common Stock, plus any declared and
unpaid dividends on the converted Preferred Stock. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Preferred Stock to be converted, and the
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date; provided, however, that if
the conversion is in connection with an underwritten offer of securities
registered pursuant to the Securities Act of 1933, as amended, the conversion
may, at the option of any holder tendering Preferred Stock for
4
<PAGE> 6
conversion, be conditioned upon the closing of the sale of securities pursuant
to such offering, in which event the person(s) entitled to receive the Common
Stock issuable upon such conversion of the Preferred Stock shall not be deemed
to have converted such Preferred Stock until immediately prior to the closing of
the sale of such securities.
(cc) Adjustments to Conversion Price for Diluting Issues.
(i) Special Definitions. For purposes of this paragraph
(3)(cc), the following definitions shall apply:
(1) "Options" shall mean rights, options or warrants
to subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities.
(2) "Original Issue Date" shall mean, with respect to
a particular series of Preferred Stock, the first date on which the first share
of such series of Preferred Stock was first issued.
(3) "Convertible Securities" shall mean any evidences
of indebtedness, shares or other securities (other than the shares of Preferred
Stock) convertible into or exchangeable for Common Stock.
(4) "Additional Shares of Common" shall mean all
shares of Common Stock issued (or, pursuant to paragraph (3)(cc)(iii), deemed to
be issued) by the corporation after the Original Issue Date of a particular
series of Preferred Stock, other than shares of Common Stock issued or issuable:
(A) upon conversion of shares of Preferred Stock;
(B) to officers, directors and employees of, or
consultants to, the corporation pursuant to stock grants, option plans, purchase
plans or other employee stock incentive programs or arrangements approved by the
Board of Directors or upon exercise of options or warrants granted to such
parties pursuant to any such plan or arrangement;
(C) as a dividend or distribution on Preferred
Stock or pursuant to any event for which adjustment is made pursuant to
paragraph (3)(cc)(vi), (vii) or (viii) hereof;
(D) to lenders in connection with any loan or
lease financing transaction pursuant to arrangements approved by the Board of
Directors or upon exercise of options or warrants granted to such parties
pursuant to any such arrangement;
5
<PAGE> 7
(E) upon exercise of warrants for the purchase of
an aggregate of 622,220 shares of Common Stock at an exercise price of $0.30 per
share issued by the corporation on November 28, 1988 and March 30, 1989 in
connection with consulting services provided to the corporation by the holders
of such warrants;
(F) upon exercise of warrants for the purchase of
up to an aggregate of 806,547 shares of Common Stock at an exercise price of
$0.30 per share issued by the corporation on December 19, 1989 and March 6, 1990
in connection with the sale and issuance of the corporation's Series B Preferred
to certain investors; and
(G) to persons or entities in connection with any
corporate partnership or reorganizations approved by the Board of Directors, or
upon exercise of options or warrants granted to such parties pursuant to any
such transaction.
(ii) No Adjustment of Conversion Price. No adjustment in
the Conversion Price of a particular share of Preferred Stock shall be made in
respect of the issuance of Additional Shares of Common unless the consideration
per share for an Additional Share of Common issued or deemed to be issued by the
corporation is less than the Conversion Price in effect on the date of, and
immediately prior to such issue, for such share of Preferred Stock.
(iii) Deemed Issue of Additional Shares of Common.
(1) Options and Convertible Securities. In the event
the corporation at any time or from time to time after the Original Issue Date
of a particular series of Preferred Stock shall issue any Options or Convertible
Securities or shall fix a record date for the determination of holders of any
class of securities entitled to receive any such Options or Convertible
Securities, then the maximum number of shares (as set forth in the instrument
relating thereto without regard to any provisions contained therein for a
subsequent adjustment of such number) of Common Stock issuable upon the exercise
of such Options or, in the case of Convertible Securities and Options therefor,
the conversion or exchange of such Convertible Securities or exercise of such
Options, shall be deemed to be Additional Shares of Common issued as of the time
of such issue or, in case such a record date shall have been fixed, as of the
close of business on such record date, provided that Additional Shares of Common
shall not be deemed to have been issued unless the consideration per share
(determined pursuant to paragraph (3)(cc)(v) hereof) of such Additional Shares
of Common would be less than the Conversion Price of such series of Preferred
Stock in effect on the date of and immediately prior to such issue, or such
record date, as the case may be, and provided further that in any such case in
which Additional Shares of Common are deemed to be issued:
6
<PAGE> 8
(A) no further adjustment in the Conversion Price
of such series of Preferred Stock shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock upon the exercise of such
Options or conversion or exchange of such Convertible Securities;
(B) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise, for any increase in
the consideration payable to the corporation, or decrease in the number of
shares of Common Stock issuable, upon the exercise, conversion or exchange
thereof, the Conversion Price of such series of Preferred Stock computed upon
the original issue thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall, upon any such
increase or decrease becoming effective, be recomputed to reflect such increase
or decrease insofar as it affects such Options or the rights of conversion or
exchange under such Convertible Securities;
(C) no readjustment pursuant to clause (B) above
shall have the effect of increasing the Conversion Price of such series of
Preferred Stock to an amount which exceeds the lower of (i) the Conversion Price
of such series of Preferred Stock on the original adjustment date, or (ii) the
Conversion Price of such series of Preferred Stock that would have resulted from
any issuance of Additional Shares of Common between the original adjustment date
and such readjustment date;
(D) upon the expiration of any such Options or
any rights of conversion or exchange under such Convertible Securities which
shall not have been exercised, the Conversion Prices computed upon the original
issue thereof (or upon the occurrence of a record date with respect thereto) and
any subsequent adjustments based thereon shall, upon such expiration, be
recomputed as if:
(a) in the case of Convertible Securities or
Options for Common Stock, the only Additional Shares of Common issued were the
shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities and the
consideration received therefor was the consideration actually received by the
corporation for the issue of such exercised Options plus the consideration
actually received by the corporation upon such exercise or for the issue of all
such Convertible Securities which were actually converted or exchanged, plus the
additional consideration, if any, actually received by the corporation upon such
conversion or exchange, and
(b) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually issued upon the
exercise thereof were issued at the time of issue of such Options, and the
consideration received by the corporation for the Additional Shares of Common
deemed to have been then issued was the consideration actually received by the
corporation for the issue of such exercised Options, plus the consideration
deemed to have been received by the corporation (determined pursuant to
paragraph (3)(cc)(v)) upon the issue of the Convertible Securities with respect
to which such Options were actually exercised;
7
<PAGE> 9
(E) in the case of any Options which expire by
their terms not more than 30 days after the date of issue thereof, no adjustment
of the Conversion Prices shall be made until the expiration or exercise of all
such Options issued on the same date, whereupon such adjustment shall be made in
the same manner provided in clause (C) above; and
(F) if such record date shall have been fixed and
such Options or Convertible Securities are not issued on the date fixed
therefor, the adjustment previously made in the Conversion Prices which became
effective on such record date shall be canceled as of the close of business on
such record date, and thereafter the Conversion Prices shall be adjusted
pursuant to this paragraph (3)(cc)(iii) as of the actual date of their issuance.
(iv) Adjustment of Conversion Price Upon Issuance of
Additional Shares of Common. In the event this corporation shall issue
Additional Shares of Common (including Additional Shares of Common deemed to be
issued pursuant to paragraph (3)(cc)(iii)) without consideration or for a
consideration per share less than the Conversion Price for a particular series
of Preferred Stock in effect on the date of and immediately prior to such issue,
then and in such event, such Conversion Price shall be reduced, concurrently
with such issue, to a price determined by multiplying such Conversion Price by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issue plus the number of shares of Common
Stock which the aggregate consideration received by the corporation for the
total number of Additional Shares of Common so issued would purchase at such
Conversion Price; and the denominator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issue plus the number of such
Additional Shares of Common so issued; and provided further that, for the
purposes of this paragraph (3)(cc)(iv), all shares of Common Stock issuable upon
exercise, conversion or exchange of outstanding Options or Convertible
Securities, as the case may be, shall be deemed to be outstanding, and
immediately after any Additional Shares of Common are deemed issued pursuant to
paragraph (3)(cc)(iii), such Additional Shares of Common shall be deemed to be
outstanding.
(v) Determination of Consideration. For purposes of this
subsection (b)(3)(cc), the consideration received by the corporation for the
issue of any Additional Shares of Common shall be computed as follows:
(1) Cash and Property. Such consideration shall:
(A) insofar as it consists of cash, be computed
at the aggregate amount of cash received by the corporation excluding amounts
paid or payable for accrued interest or accrued dividends;
(B) insofar as it consists of property other than
cash, be computed at the fair value thereof at the time of such issue, as
determined in good faith by the Board; and
(C) in the event Additional Shares of Common are
issued together with other shares or securities or other assets of the
corporation for
8
<PAGE> 10
consideration which covers both, be the proportion of such consideration so
received, computed as provided in clauses (A) and (B) above, as determined in
good faith by the Board.
(2) Options and Convertible Securities. The
consideration per share received by the corporation for Additional Shares of
Common deemed to have been issued pursuant to paragraph (3)(cc)(iii)(1),
relating to Options and Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or
receivable by the corporation as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such
consideration) payable to the corporation upon the exercise of such Options or
the conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities by
(y) the maximum number of shares of Common Stock
(as set forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.
(vi) Adjustments for Stock Dividends and for Subdivisions
or Combinations of Common. In the event that this corporation at any time or
from time to time after the Original Issue Date of a particular series of
Preferred Stock shall declare or pay, without consideration, any dividend on the
Common Stock payable in Common Stock or in any right to acquire Common Stock for
no consideration, or if the outstanding shares of Common Stock shall be
subdivided (by stock split, reclassification or otherwise than by payment of a
dividend in Common Stock or in any right to acquire Common Stock) into a greater
number of shares of Common Stock, the Conversion Prices in effect immediately
prior to such event shall, concurrently with the effectiveness of such event, be
proportionately decreased. In the event the outstanding shares of Common Stock
shall be combined or consolidated (by reclassification or otherwise) into a
lesser number of shares of Common Stock, the Conversion Prices in effect
immediately prior to such event shall, concurrently with the effectiveness of
such event, be proportionately increased.
(vii) Adjustments for Other Distributions. In the event
the corporation at any time or from time to time makes or fixes a record date
for the determination of holders of Common Stock entitled to receive any
distribution payable in securities of other persons, evidences of indebtedness
issued by this corporation or other persons, assets (excluding cash dividends)
or options or rights not otherwise referred to in subsection (b)(3)(cc)(vi),
then and in each such event provision shall be made so that the holders of
Preferred Stock shall be entitled to receive a proportionate share of any such
distribution as though they were holders of the number of shares of Common Stock
of this corporation into which their shares of Preferred
9
<PAGE> 11
Stock are convertible as of the record date fixed for the determination of the
holders of Common Stock of this corporation entitled to receive such
distribution.
(viii) Adjustments for Reclassification, Exchange and
Substitution. If the Common Stock issuable upon conversion of the Preferred
Stock shall be changed into the same or a different number of shares of any
other class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination of shares
provided for above), the Conversion Prices then in effect shall, concurrently
with the effectiveness of such reorganization or reclassification, be
proportionately adjusted such that the Preferred Stock shall be convertible
into, in lieu of the number of shares of Common Stock which the holders would
otherwise have been entitled to receive, a number of shares of such other class
or classes of stock equivalent to the number of shares of Common Stock that
would have been subject to receipt by the holders upon conversion of the
Preferred Stock immediately before that change.
(dd) No Impairment. The corporation will not, by amendment of
its Articles of Incorporation or through any reorganization, transfer of assets,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the corporation but will at all times in good
faith assist in the carrying out of all the provisions of this Section (b)(3)
and in the taking of all such action as may be necessary or appropriate in order
to protect the Conversion Rights of the holders of the Preferred Stock against
impairment.
(ee) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of any Conversion Price pursuant to this Section
(b)(3), the corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Preferred Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The corporation shall, upon the written request at any time of any holder of
Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustments and readjustments, (ii) the
Conversion Prices at the time in effect, and (iii) the number of shares of
Common Stock and the amount, if any, of other property which at the time would
be received upon the conversion of Preferred Stock.
(ff) Notices of Record Date. In the event that this corporation
shall propose at any time:
(i) to declare any dividend or distribution upon its
Common Stock, whether in cash, property, stock or other securities, whether or
not a regular cash dividend and whether or not out of earnings or earned
surplus;
(ii) to offer for subscription pro rata to the holders of
any class or series of its stock any additional shares of stock of any class or
series or other rights;
(iii) to effect any reclassification or recapitalization
of its Common Stock outstanding involving a change in the Common Stock; or
10
<PAGE> 12
(iv) to merge with or into any other corporation, or
sell, lease or convey all or substantially all its property or business, or to
liquidate, dissolve or wind up;
then, in connection with each such event, this corporation shall send to the
holders of the Preferred Stock:
(1) at least 20 days' prior written notice of the
date on which a record shall be taken for such dividend, distribution or
subscription rights (and specifying the date on which the holders of Common
Stock shall be entitled thereto) or for determining rights to vote in respect of
the matters referred to in (iii) and (iv) above; and
(2) in the case of the matters referred to in (iii)
and (iv) above, at least 20 days' prior written notice of the date when the same
shall take place (and specifying the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon the occurrence of such event).
Each such written notice shall be given by first class mail, postage
prepaid, addressed to the holders of Preferred Stock at the address for each
such holder as shown on the books of this corporation.
(gg) Reservation of Stock Issuable Upon Conversion. The
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Preferred Stock, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all then outstanding shares of the Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Preferred Stock,
the corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
(4) Liquidation Preference. In the event of any liquidation,
dissolution or winding up of the corporation, either voluntary or involuntary,
distributions to the shareholders of the corporation shall be made in the
following manner:
(aa) The holders of the Series C Preferred shall be
entitled to receive, prior and in preference to any distribution of any of the
assets or surplus funds of the corporation to the holders of the Series A
Preferred, Series B Preferred or Common Stock by reason of their ownership of
such stock, the amount of Fifty Cents ($0.50) per share for each share of Series
C Preferred then held by them (appropriately adjusted in each case for any
combinations, or stock distributions or dividends with respect to such shares)
plus, in addition, an amount equal to all declared but unpaid dividends, if any,
on the shares of Series C Preferred then held by them. If, upon the occurrence
of such event, the assets and property legally available to be distributed among
the holders of the Series C Preferred shall be insufficient to permit the
payment to such holders of the full preferential amount aforesaid, then the
entire assets and property of the
11
<PAGE> 13
corporation legally available for distribution shall be distributed ratably
among the holders of the Series C Preferred Stock pro rata based on the number
of shares of Series C Preferred then held.
(bb) After payment has been made to the holders of the
Series C Preferred of the full preferential amounts to which they shall be
entitled, if any, as aforesaid, the holders of the Series A Preferred and Series
B Preferred shall be entitled to receive, out of the remaining assets (up to a
maximum of $3,360,000), prior and in preference to any distribution of any of
the assets or surplus funds of the corporation to the holders of the Common
Stock by reason of their ownership of such stock:
(i) for each share of Series A Preferred then held by
them the amount per share equal to $560,000 divided by the number of shares of
Series A Preferred then outstanding; and
(ii) for each share of Series B Preferred then held by
them the amount per share equal to $2,800,000 divided by the number of shares of
Series B Preferred then outstanding,
plus, in addition, an amount equal to all declared but unpaid dividends, if any,
on the respective shares of Series A Preferred and Series B Preferred then held
by them. If, upon the occurrence of such event, the assets and property legally
available to be distributed among the holders of the Series A Preferred and
Series B Preferred shall be insufficient to permit the payment to such holders
of the full preferential amount aforesaid, then the entire remaining assets and
property of the corporation legally available for distribution shall be
distributed ratably among the holders of the Series A Preferred and Series B
Preferred as follows: (1) as among the series of Series A Preferred and Series B
Preferred, one-sixth (1/6) of the remaining assets and property of the
corporation legally available for distribution shall be distributed to holders
of Series A Preferred and five-sixths (5/6) of the remaining assets and property
of the corporation legally available for distribution shall be distributed to
holders of Series B Preferred, and (2) as among the holders of Series A
Preferred and Series B Preferred Stock of any one series, the aggregate amount
of assets and property available for distribution to such holders in accordance
with subparagraph (1) herein shall be distributed among such holders pro rata
based on the number of shares then held; and, no amount shall be paid or set
apart for payment on any series of Series A Preferred or Series B Preferred
unless, at the same time, amounts in proportion to the respective preferential
amounts to which the other series of Preferred Stock are entitled (in accordance
with subparagraph (1) herein) shall be paid or set apart for payment.
(cc) After payment has been made to the holders of the
Series A Preferred, Series B Preferred and Series C Preferred of the full
preferential amounts to which they shall be entitled, if any, as aforesaid, the
holders of the Series A Preferred, Series B Preferred and Series C Preferred
shall be entitled to receive, out of the remaining assets (up to a maximum of
$6,750,000), prior and in preference to any distribution of any of the assets or
surplus funds of the corporation to the holders of the Common Stock by reason of
their ownership of such stock:
12
<PAGE> 14
(i) For each share of Series C Preferred then held by
them the amount per share equal to the Series C Incremental Amount (as
hereinafter defined) divided by the number of shares of Series C Preferred then
outstanding. For purposes of Section (b)(4), the "Series C Incremental Amount"
shall equal $6,750,000 (or, if lesser, the entire remaining assets and property
of the corporation legally available for distribution after giving effect to the
provisions of paragraphs (b)(4)(aa) and (b)(4)(bb)) multiplied by a fraction,
the numerator of which shall be the number of shares of Common Stock issuable
upon conversion of the then outstanding Series C Preferred and the denominator
of which shall be the sum of the number of shares of Common Stock then
outstanding plus the number of shares of Common Stock issuable upon conversion
of the then outstanding Preferred Stock;
(ii) For each share of Series A Preferred then held
by them the amount per share equal to $6,750,000 (or, if lesser, the entire
remaining assets and property of the corporation legally available for
distribution after giving effect to the provisions of paragraphs (b)(4)(aa) and
(b)(4)(bb)) less the Series C Incremental Amount , with such result multiplied
by a fraction of one-sixth (1/6) (such product hereinafter referred to as the
"Series A Residual Amount"), and then divided by the number of shares of Series
A Preferred then outstanding; provided, that the maximum Series A Residual
Amount distributable to the holders of Series A Preferred Stock pursuant to this
paragraph shall not exceed $0.50 multiplied by the number of shares of Series A
Preferred then held and any Series A Residual Amount in excess of such maximum
(the "Series A Excess Amount") shall be distributed to holders of Series B
Preferred as provided in, and subject to the conditions of, paragraph
(4)(cc)(iii); and
(iii) For each share of Series B Preferred then held
by them the amount per share equal to $6,750,000 (or, if lesser, the entire
remaining assets and property of the corporation legally available for
distribution after giving effect to the provisions of paragraphs (b)(4)(aa) and
(b)(4)(bb)) less the Series C Incremental Amount, with such result multiplied by
a fraction of five-sixths (5/6), with the resulting product added to the Series
A Excess Amount (if any) and such sum then divided by the number of shares of
Series B Preferred then outstanding; provided, that the maximum amount
distributable to the holders of Series B Preferred Stock pursuant to this
paragraph shall not exceed $2.50 multiplied by the number of shares of Series B
Preferred then held;
and no amount shall be paid or set apart for payment on any series of Series A
Preferred, Series B Preferred or Series C Preferred unless, at the same time,
amounts in proportion to the respective preferential amounts to which the other
series of Preferred Stock are entitled as aforesaid shall be paid or set apart
for payment.
(dd) After payment has been made to the holders of the
Preferred Stock of the full preferential amounts to which they shall be
entitled, if any, as aforesaid, any remaining proceeds shall be distributed
ratably to the holders of the Common Stock and Preferred Stock based upon the
number of shares of Common Stock then held (with each share of Preferred Stock
being treated as that number of shares of Common Stock into which such share of
Preferred Stock is at that time convertible).
13
<PAGE> 15
(ee) For purposes of this Section (b)(4), a merger of the
corporation with or into any other corporation or corporations, or the merger of
any other corporation or corporations into the corporation, in which merger the
shareholders of the corporation receive distributions in cash or securities of
another corporation or corporations as a result of such merger (unless the
shareholders of this corporation hold more than a majority of the voting equity
securities of the surviving corporation), or a sale, conveyance or disposition
of all or substantially all of the assets of this corporation shall be treated
as a liquidation, dissolution or winding up of the corporation.
(ff) Notwithstanding Sections 4(aa), 4(bb), 4(cc), and
4(dd), as authorized by Section 402.5(c) of the California Corporations Code,
the provisions of Sections 502 and 503 of the California Corporations Code shall
not apply with respect to repurchases by the corporation of shares of Common
issued to or held by employees, directors or consultants of the corporation or
its subsidiaries upon termination of their employment or services pursuant to
agreements providing for the right of such repurchase between the corporation
and such persons.
(5) Covenants.
(aa) In addition to any other rights provided by law, so
long as any Series A Preferred or Series B Preferred shall be outstanding, this
corporation shall not, without first obtaining the affirmative vote or written
consent of the holders of not less than a majority (determined on the basis of
assumed conversion of all Preferred Stock into Common Stock) of the outstanding
shares of Series A Preferred and Series B Preferred, voting as a class:
(i) amend or repeal any provision of, or add any
provision to, this corporation's Articles of Incorporation or Bylaws if such
action would materially and adversely alter or change the rights, preferences,
privileges or restrictions of any outstanding Series A Preferred or Series B
Preferred;
(ii) authorize or issue shares of any class of stock
having any preference or priority as to dividends, voting rights, liquidation
preferences or assets superior to or on a parity with any such preference or
priority of the Series A Preferred or Series B Preferred or authorize or issue
shares of stock of any class or any bonds, debentures, notes or other
obligations convertible into or exchangeable for, or having option rights to
purchase, any shares of stock of this corporation having any preference or
priority as to dividends, voting rights, liquidation preferences or assets
superior to or on a parity with any such preference or priority of the Series A
Preferred or Series B Preferred;
(iii) reclassify any shares of Common Stock into
shares having any preference or priority as to dividends, voting rights,
liquidation preferences or assets superior to or on a parity with any such
preference or priority of the Series A Preferred or Series B Preferred;
(iv) pay or declare any dividend on any shares of
Common Stock (except dividends payable solely in shares of Common Stock) while
any Series A Preferred
14
<PAGE> 16
or Series B Preferred remains outstanding or apply any of its assets to the
redemption, retirement, purchase or acquisition, directly or indirectly, through
subsidiaries or otherwise, of any shares of Common Stock, except from officers,
directors, employees or consultants of the corporation upon termination of the
employment or consulting relationship between the corporation and such persons
pursuant to the terms of restrictive stock agreements providing for such
repurchase of such shares of Common Stock between the corporation and such
persons;
(v) merge with or into any other corporation (other
than a wholly-owned subsidiary of this corporation) resulting in the exchange of
50% of the outstanding shares of this corporation for securities issued, or
caused to be issued, by the acquiring corporation or its subsidiary, or sell or
otherwise transfer in a single transaction or a series of related transactions
all or substantially all assets of this corporation; or
(vi) increase the authorized number of shares of
Series A Preferred or Series B Preferred.
(bb) In addition to any other rights provided by law, so
long as any Series C Preferred shall be outstanding, this corporation shall not,
without first obtaining the affirmative vote or written consent of the holders
of not less than a majority of the outstanding shares of Series C Preferred,
voting separately as a class:
(i) amend or repeal any provision of, or add any
provision to, this corporation's Articles of Incorporation or Bylaws if such
action would materially and adversely alter or change the rights, preferences,
privileges or restrictions of any outstanding Series C Preferred;
(ii) authorize or issue shares of any class of stock
having any preference or priority as to dividends, voting rights, liquidation
preferences or assets superior to or on a parity with any such preference or
priority of the Series C Preferred or authorize or issue shares of stock of any
class or any bonds, debentures, notes or other obligations convertible into or
exchangeable for, or having option rights to purchase, any shares of stock of
this corporation having any preference or priority as to dividends, voting
rights, liquidation preferences or assets superior to or on a parity with any
such preference or priority of the Series C Preferred;
(iii) reclassify any shares of Common Stock into
shares having any preference or priority as to dividends, voting rights,
liquidation preferences or assets superior to or on a parity with any such
preference or priority of the Series C Preferred;
(iv) pay or declare any dividend on any shares of
Common Stock (except dividends payable solely in shares of Common Stock) while
any Series C Preferred remains outstanding or apply any of its assets to the
redemption, retirement, purchase or acquisition, directly or indirectly, through
subsidiaries or otherwise, of any shares of Common Stock, except from officers,
directors, employees or consultants of the corporation upon termination of the
employment or consulting relationship between the corporation and such
15
<PAGE> 17
persons pursuant to the terms of restrictive stock agreements providing for such
repurchase of such shares of Common Stock between the corporation and such
persons;
(v) merge with or into any other corporation (other
than a wholly-owned subsidiary of this corporation) resulting in the exchange of
50% of the outstanding shares of this corporation for securities issued, or
caused to be issued, by the acquiring corporation or its subsidiary, or sell or
otherwise transfer in a single transaction or a series of related transactions
all or substantially all assets of this corporation;
(vi) increase the authorized number of shares of
Series C Preferred;
(vii) do any act or thing which would result in
taxation of the holders of shares of Series C Preferred under Section 305 of the
Internal Revenue Code of 1986, as amended (or any successor provision); or
(viii) amend the Bylaws of the corporation to increase
the number of authorized number of directors to more than seven (7).
(6) Residual Rights. All rights accruing to the
outstanding shares of this corporation not expressly provided for to the
contrary herein shall be vested in the Common Stock.
IV.
(a) Limitation of Directors' Liability. The liability of the directors
of this corporation for monetary damages shall be limited to the fullest extent
permissible under California law.
(b) Indemnification of Directors and Officers. This corporation is
authorized to indemnify the directors and officers of the corporation to the
fullest extent permissible under California law.
(c) Repeal or Modification. Any repeal of modification of the foregoing
provisions of this Article IV shall not adversely affect any right of
indemnification or limitation of liability of an agent of this corporation
relating to acts or omissions occurring prior to such repeal or modification."
4. The foregoing amendment and restatement of Articles of
Incorporation has been duly approved by the Board of Directors.
5. The foregoing amendment and restatement of Articles of
Incorporation has been duly approved by the required vote of shareholders in
accordance with Sections 902 and 903 of the Corporations Code. The total number
of outstanding shares of each class of stock entitled to
16
<PAGE> 18
vote with respect to the foregoing amendment was 1,007,601 shares of Common
Stock, 1,600,000 shares of Series A Preferred Stock, 5,120,000 shares of Series
B Preferred Stock, and 20,526,856 shares of Series C Preferred Stock. The number
of shares voting in favor of the amendment equaled or exceeded the vote
required. The percentage vote required was more than 50% of the outstanding
shares of Common Stock and more than 50% of the outstanding shares of each of
the Series A, Series B and Series C Preferred Stock.
17
<PAGE> 19
IN WITNESS WHEREOF, the undersigned have executed this certificate this
2nd day of August, 1995.
/s/ RAK KUMAR
-----------------------------------
RAK KUMAR, President
/s/ JAMES R. BUCKLEY
-----------------------------------
JAMES R. BUCKLEY, Secretary
The undersigned declare under penalty or perjury that the matters set
forth in the foregoing certificate are true of their own knowledge. Executed at
San Jose, California on August 2, 1995.
/s/ RAK KUMAR
-----------------------------------
RAK KUMAR, President
/s/ JAMES R. BUCKLEY
-----------------------------------
JAMES R. BUCKLEY, Secretary
18
<PAGE> 1
EXHIBIT 3.5
BYLAWS
OF
RASTER GRAPHICS, INC.
<PAGE> 2
BYLAWS OF
RASTER GRAPHICS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - CORPORATE OFFICES............................................... 1
1.1 PRINCIPAL OFFICE............................................... 1
1.2 OTHER OFFICES.................................................. 1
ARTICLE II - MEETINGS OF SHAREHOLDERS....................................... 1
2.1 PLACE OF MEETINGS.............................................. 1
2.2 ANNUAL MEETING................................................. 1
2.3 SPECIAL MEETING................................................ 1
2.4 NOTICE OF SHAREHOLDERS' MEETINGS............................... 2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE................... 2
2.6 QUORUM......................................................... 3
2.7 ADJOURNED MEETING; NOTICE...................................... 3
2.8 VOTING......................................................... 4
2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT.............. 4
2.10 SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING....... 5
2.11 RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING CONSENTS... 6
2.12 PROXIES....................................................... 6
2.13 INSPECTORS OF ELECTION........................................ 7
ARTICLE III - DIRECTORS..................................................... 7
3.1 POWERS......................................................... 7
3.2 NUMBER OF DIRECTORS............................................ 8
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS....................... 8
3.4 RESIGNATION AND VACANCIES...................................... 8
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE....................... 9
3.6 REGULAR MEETINGS............................................... 9
3.7 SPECIAL MEETINGS; NOTICE....................................... 9
3.8 QUORUM......................................................... 10
3.9 WAIVER OF NOTICE............................................... 10
3.10 ADJOURNMENT................................................... 10
3.11 NOTICE OF ADJOURNMENT......................................... 10
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING............. 10
3.13 FEES AND COMPENSATION OF DIRECTORS............................ 11
3.14 APPROVAL OF LOANS TO OFFICERS................................. 11
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE IV - COMMITTEES............................................................ 11
4.1 COMMITTEES OF DIRECTORS............................................... 11
4.2 MEETINGS AND ACTION OF COMMITTEES..................................... 12
ARTICLE V - OFFICERS 12
5.1 OFFICERS.............................................................. 12
5.2 ELECTION OF OFFICERS.................................................. 12
5.3 SUBORDINATE OFFICERS.................................................. 12
5.4 REMOVAL AND RESIGNATION OF OFFICERS................................... 13
5.5 VACANCIES IN OFFICES.................................................. 13
5.6 CHAIRMAN OF THE BOARD................................................. 13
5.7 PRESIDENT............................................................. 13
5.8 VICE PRESIDENTS....................................................... 13
5.9 SECRETARY............................................................. 14
5.10 CHIEF FINANCIAL OFFICER.............................................. 14
ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS... 15
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS............................. 15
6.2 INDEMNIFICATION OF OTHERS............................................. 15
6.3 PAYMENT OF EXPENSES IN ADVANCE........................................ 15
6.4 INDEMNITY NOT EXCLUSIVE............................................... 15
6.5 INSURANCE INDEMNIFICATION............................................. 16
6.6 CONFLICTS............................................................. 16
ARTICLE VII - RECORDS AND REPORTS.................................................. 16
7.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER.......................... 16
7.2 MAINTENANCE AND INSPECTION OF BYLAWS.................................. 17
7.3 MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS................. 17
7.4 INSPECTION BY DIRECTORS............................................... 17
7.5 ANNUAL REPORT TO SHAREHOLDERS; WAIVER................................. 18
7.6 FINANCIAL STATEMENTS.................................................. 18
7.7 REPRESENTATION OF SHARES OF OTHER CORPORATIONS........................ 18
ARTICLE VIII - GENERAL MATTERS..................................................... 19
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING................. 19
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS............................. 19
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED.................... 19
8.4 CERTIFICATES FOR SHARES............................................... 20
</TABLE>
-ii-
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
Page
----
<S> <C>
8.5 LOST CERTIFICATES.......................................... 20
8.6 CONSTRUCTION; DEFINITIONS.................................. 20
ARTICLE IX - AMENDMENTS................................................. 20
9.1 AMENDMENT BY SHAREHOLDERS.................................. 20
9.2 AMENDMENT BY DIRECTORS..................................... 21
</TABLE>
-iii-
<PAGE> 5
BYLAWS
OF
RASTER GRAPHICS, INC.
ARTICLE I
ARTICLE I - CORPORATE OFFICES1
1.1 PRINCIPAL OFFICE
The board of directors shall fix the location of the principal
executive office of the corporation at any place within or outside the State of
California. If the principal executive office is located outside such state and
the corporation has one or more business offices in such state, then the board
of directors shall fix and designate a principal business office in the State of
California.
1.2 OTHER OFFICES
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II
ARTICLE II - MEETINGS OF SHAREHOLDERS
2.1 PLACE OF MEETINGS
Meetings of shareholders shall be held at any place within or outside
the State of California designated by the board of directors. In the absence of
any such designation, shareholders' meetings shall be held at the principal
executive office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of shareholders shall be held each year on a date
and at a time designated by the board of directors. In the absence of such
designation, the annual meeting of shareholders shall be held on the Third
Thursday of April in each year at 10:00 a.m. However, if such day falls on a
legal holiday, then the meeting shall be held at the same time and place on the
next succeeding full business day. At the meeting, directors shall be elected,
and any other proper business may be transacted.
2.3 SPECIAL MEETING
A special meeting of the shareholders may be called at any time by the
board of directors, or by the chairman of the board, or by the president, or by
one or more shareholders holding
<PAGE> 6
shares in the aggregate entitled to cast not less than ten percent (10%) of the
votes at that meeting.
If a special meeting is called by any person or persons other than the
board of directors or the president or the chairman of the board, then the
request shall be in writing, specifying the time of such meeting and the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the chairman of the board, the president, any vice president or
the secretary of the corporation. The officer receiving the request shall cause
notice to be promptly given to the shareholders entitled to vote, in accordance
with the provisions of Sections 2.4 and 2.5 of these bylaws, that a meeting will
be held at the time requested by the person or persons calling the meeting, so
long as that time is not less than thirty-five (35) nor more than sixty (60)
days after the receipt of the request. If the notice is not given within twenty
(20) days after receipt of the request, then the person or persons requesting
the meeting may give the notice. Nothing contained in this paragraph of this
Section 2.3 shall be construed as limiting, fixing or affecting the time when a
meeting of shareholders called by action of the board of directors may be held.
2.4 NOTICE OF SHAREHOLDERS' MEETINGS
All notices of meetings of shareholders shall be sent or otherwise
given in accordance with Section 2.5 of these bylaws not less than ten (10) (or,
if sent by third-class mail pursuant to Section 2.5 of these bylaws, thirty
(30)) nor more than sixty (60) days before the date of the meeting. The notice
shall specify the place, date, and hour of the meeting and (i) in the case of a
special meeting, the general nature of the business to be transacted (no
business other than that specified in the notice may be transacted) or (ii) in
the case of the annual meeting, those matters which the board of directors, at
the time of giving the notice, intends to present for action by the shareholders
(but subject to the provisions of the next paragraph of this Section 2.4 any
proper matter may be presented at the meeting for such action). The notice of
any meeting at which directors are to be elected shall include the name of any
nominee or nominees who, at the time of the notice, the board intends to present
for election.
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a director has a direct or indirect financial
interest, pursuant to Section 310 of the Corporations Code of California (the
"Code"), (ii) an amendment of the articles of incorporation, pursuant to Section
902 of the Code, (iii) a reorganization of the corporation, pursuant to Section
1201 of the Code, (iv) a voluntary dissolution of the corporation, pursuant to
Section 1900 of the Code, or (v) a distribution in dissolution other than in
accordance with the rights of outstanding preferred shares, pursuant to Section
2007 of the Code, then the notice shall also state the general nature of that
proposal.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of shareholders shall be given either (i)
personally or (ii) by first-class mail or (iii) by third-class mail but only if
the corporation has outstanding shares held of record by five hundred (500) or
more persons (determined as provided in Section 605 of the Code) on the record
date for the shareholders' meeting, or (iv) by telegraphic or other written
-2-
<PAGE> 7
communication. Notices not personally delivered shall be sent charges prepaid
and shall be addressed to the shareholder at the address of that shareholder
appearing on the books of the corporation or given by the shareholder to the
corporation for the purpose of notice. If no such address appears on the
corporation's books or is given, notice shall be deemed to have been given if
sent to that shareholder by mail or telegraphic or other written communication
to the corporation's principal executive office, or if published at least once
in a newspaper of general circulation in the county where that office is
located. Notice shall be deemed to have been given at the time when delivered
personally or deposited in the mail or sent by telegram or other means of
written communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the shareholder
at that address, then all future notices or reports shall be deemed to have been
duly given without further mailing if the same shall be available to the
shareholder on written demand of the shareholder at the principal executive
office of the corporation for a period of one (1) year from the date of the
giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
shareholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
2.6 QUORUM
The presence in person or by proxy of the holders of a majority of the
shares entitled to vote thereat constitutes a quorum for the transaction of
business at all meetings of shareholders. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough shareholders to
leave less than a quorum, if any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
2.7 ADJOURNED MEETING; NOTICE
Any shareholders' meeting, annual or special, whether or not a quorum
is present, may be adjourned from time to time by the vote of the majority of
the shares represented at that meeting, either in person or by proxy. In the
absence of a quorum, no other business may be transacted at that meeting except
as provided in Section 2.6 of these bylaws.
When any meeting of shareholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place are announced at the meeting at which the
adjournment is taken. However, if a new record date for the adjourned meeting is
fixed or if the adjournment is for more than forty-five (45) days from the date
set for the original meeting, then notice of the adjourned meeting shall be
given. Notice of any such adjourned meeting shall be given to each shareholder
of record entitled to vote at the adjourned meeting in accordance with the
provisions of Sections 2.4 and 2.5 of these bylaws. At any
-3-
<PAGE> 8
adjourned meeting the corporation may transact any business which might have
been transacted at the original meeting.
2.8 VOTING
The shareholders entitled to vote at any meeting of shareholders shall
be determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 702 through 704 of the Code (relating to
voting shares held by a fiduciary, in the name of a corporation or in Joint
ownership).
The shareholders' vote may be by voice vote or by ballot; provided,
however, that any election for directors must be by ballot if demanded by any
shareholder at the meeting and before the voting has begun.
Except as provided in the last paragraph of this Section 2.8, or as may
be otherwise provided in the articles of incorporation, each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted to a
vote of the shareholders. Any shareholder entitled to vote on any matter may
vote part of the shares in favor of the proposal and refrain from voting the
remaining shares or, except when the matter is the election of directors, may
vote them against the proposal; but, if the shareholder fails to specify the
number of shares which the shareholder is voting affirmatively, it will be
conclusively presumed that the shareholder's approving vote is with respect to
all shares which the shareholder is entitled to vote.
If a quorum is present, the affirmative vote of the majority of the
shares represented and voting at a duly held meeting (which shares voting
affirmatively also constitute at least a majority of the required quorum) shall
be the act of the shareholders, unless the vote of a greater number or a vote by
classes is required by the Code or by the articles of incorporation.
At a shareholders' meeting at which directors are to be elected, a
shareholder shall be entitled to cumulate votes (i.e., cast for any candidate a
number of votes greater than the number of votes which such shareholder normally
is entitled to cast) if the candidates' names have been placed in nomination
prior to commencement of the voting and the shareholder has given notice prior
to commencement of the voting of the shareholder's intention to cumulate votes.
If any shareholder has given such a notice, then every shareholder entitled to
vote may cumulate votes for candidates in nomination either (i) by giving one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which that shareholder's shares are
normally entitled or (ii) by distributing the shareholder's votes on the same
principle among any or all of the candidates, as the shareholder thinks fit. The
candidates receiving the highest number of affirmative votes, up to the number
of directors to be elected, shall be elected; votes against any candidate and
votes withheld shall have no legal effect.
2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT
The transactions of any meeting of shareholders, either annual or
special, however called and noticed, and wherever held, shall be as valid as
though they had been taken at a meeting duly held after regular call and notice,
if a quorum be present either in person or by proxy, and if, either
-4-
<PAGE> 9
before or after the meeting, each person entitled to vote, who was not present
in person or by proxy, signs a written waiver of notice or a consent to the
holding of the meeting or an approval of the minutes thereof. The waiver of
notice or consent or approval need not specify either the business to be
transacted or the purpose of any annual or special meeting of shareholders,
except that if action is taken or proposed to be taken for approval of any of
those matters specified in the second paragraph of Section 2.4 of these bylaws,
the waiver of notice or consent or approval shall state the general nature of
the proposal. All such waivers, consents, and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by the Code to be
included in the notice of the meeting but not so included, if that objection is
expressly made at the meeting.
2.10 SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action which may be taken at any annual or special meeting of
shareholders may be taken without a meeting and without prior notice, if a
consent in writing, setting forth the action so taken, is signed by the holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take that action at a meeting at which all
shares entitled to vote on that action were present and voted.
In the case of election of directors, such a consent shall be effective
only if signed by the holders of all outstanding shares entitled to vote for the
election of directors. However, a director may be elected at any time to fill
any vacancy on the board of directors, provided that it was not created by
removal of a director and that it has not been filled by the directors, by the
written consent of the holders of a majority of the outstanding shares entitled
to vote for the election of directors.
All such consents shall be maintained in the corporate records. Any
shareholder giving a written consent, or the shareholder's proxy holders, or a
transferee of the shares, or a personal representative of the shareholder, or
their respective proxy holders, may revoke the consent by a writing received by
the secretary of the corporation before written consents of the number of shares
required to authorize the proposed action have been filed with the secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
shareholders has not been received, then the secretary shall give prompt notice
of the corporate action approved by the shareholders without a meeting. Such
notice shall be given to those shareholders entitled to vote who have not
consented in writing and shall be given in the manner specified in Section 2.5
of these bylaws. In the case of approval of (i) a contract or transaction in
which a director has a direct or indirect financial interest, pursuant to
Section 310 of the Code, (ii) indemnification of a corporate "agent," pursuant
to Section 317 of the Code, (iii) a reorganization of the corporation, pursuant
to
-5-
<PAGE> 10
Section 1201 of the Code, and (iv) a distribution in dissolution other than in
accordance with the rights of outstanding preferred shares, pursuant to Section
2007 of the Code, the notice shall be given at least ten (10) days before the
consummation of any action authorized by that approval.
2.11 RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING CONSENTS
For purposes of determining the shareholders entitled to notice of any
meeting or to vote thereat or entitled to give consent to corporate action
without a meeting, the board of directors may fix, in advance, a record date,
which shall not be more than sixty (60) days nor less than ten (10) days before
the date of any such meeting nor more than sixty (60) days before any such
action without a meeting, and in such event only shareholders of record on the
date so fixed are entitled to notice and to vote or to give consents, as the
case may be, notwithstanding any transfer of any shares on the books of the
corporation after the record date, except as otherwise provided in the Code.
If the board of directors does not so fix a record date:
(a) the record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the close of
business on the business day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the business day next preceding
the day on which the meeting is held; and
(b) the record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, (i) when no prior
action by the board has been taken, shall be the day on which the first written
consent is given, or (ii) when prior action by the board has been taken, shall
be at the close of business on the day on which the board adopts the resolution
relating to that action, or the sixtieth (60th) day before the date of such
other action, whichever is later.
The record date for any other purpose shall be as provided in Article
VIII of these bylaws.
2.12 PROXIES
Every person entitled to vote for directors, or on any other matter,
shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the secretary
of the corporation. A proxy shall be deemed signed if the shareholder's name is
placed on the proxy (whether by manual signature, typewriting, telegraphic
transmission or otherwise) by the shareholder or the shareholder's
attorney-in-fact. A validly executed proxy which does not state that it is
irrevocable shall continue in full force and effect unless (i) the person who
executed the proxy revokes it prior to the time of voting by delivering a
writing to the corporation stating that the proxy is revoked or by executing a
subsequent proxy and presenting it to the meeting or by voting in person at the
meeting, or (ii) written notice of the death or incapacity of the maker of that
proxy is received by the corporation before the vote pursuant to that proxy is
counted; provided, however, that no proxy shall be valid after the expiration of
eleven (11) months from the date of the proxy, unless otherwise provided in the
-6-
<PAGE> 11
proxy. The dates contained on the forms of proxy presumptively determine the
order of execution, regardless of the postmark dates on the envelopes in which
they are mailed. The revocability of a proxy that states on its face that it is
irrevocable shall be governed by the provisions of Sections 705(e) and 705(f) of
the Code.
2.13 INSPECTORS OF ELECTION
Before any meeting of shareholders, the board of directors may appoint
an inspector or inspectors of election to act at the meeting or its adjournment.
If no inspector of election is so appointed, then the chairman of the meeting
may, and on the request of any shareholder or a shareholder's proxy shall,
appoint an inspector or inspectors of election to act at the meeting. The number
of inspectors shall be either one (1) or three (3). If inspectors are appointed
at a meeting pursuant to the request of one (1) or more shareholders or proxies,
then the holders of a majority of shares or their proxies present at the meeting
shall determine whether one (1) or three (3) inspectors are to be appointed. If
any person appointed as inspector fails to appear or fails or refuses to act,
then the chairman of the meeting may, and upon the request of any shareholder or
a shareholder's proxy shall, appoint a person to fill that vacancy.
Such inspectors shall:
(a) determine the number of shares outstanding and the voting
power of each, the number of shares represented at the meeting, the existence of
a quorum, and the authenticity, validity, and effect of proxies;
(b) receive votes, ballots or consents,
(c) hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the election
or vote with fairness to all shareholders.
ARTICLE III
ARTICLE III - DIRECTORS
3.1 POWERS
Subject to the provisions of the Code and any limitations in the
articles of incorporation and these bylaws relating to action required to be
approved by the shareholders or by the
-7-
<PAGE> 12
outstanding shares, the business and affairs of the corporation shall be managed
and all corporate powers shall be exercised by or under the direction of the
board of directors.
3.2 NUMBER OF DIRECTORS*
The number of directors of the corporation shall be not less than four
(4) nor more than seven (7). The exact number of directors shall be four (4)
until changed, within the limits specified above, by a bylaw amending this
Section 3.2, duly adopted by the board of directors or by the shareholders. The
indefinite number of directors may be changed, or a definite number may be fixed
without provision for an indefinite number, by a duly adopted amendment to the
articles of incorporation or by an amendment to this bylaw duly adopted by the
vote or written consent of holders of a majority of the outstanding shares
entitled to vote; provided, however, that an amendment reducing the fixed number
or the minimum number of directors to a number less than five (5) cannot be
adopted if the votes cast against its adoption at a meeting, or the shares not
consenting in the case of an action by written consent, are equal to more than
sixteen and two-thirds percent (16-2/3%) of the outstanding shares entitled to
vote thereon. No amendment may change the stated maximum number of authorized
directors to a number greater than two (2) times the stated minimum number of
directors minus one (1).
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS
Directors shall be elected at each annual meeting of shareholders to
hold office until the next annual meeting. Each director, including a director
elected to fill a vacancy, shall hold office until the expiration of the term
for which elected and until a successor has been elected and qualified.
3.4 RESIGNATION AND VACANCIES
Any director may resign effective on giving written notice to the
chairman of the board, the president, the secretary or the board of directors,
unless the notice specifies a later time for that resignation to become
effective. If the resignation of a director is effective at a future time, the
board of directors may elect a successor to take office when the resignation
becomes effective.
Vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote or
written consent of the shareholders or by court order may be filled only by the
affirmative vote of a majority of the shares represented and voting at a duly
held meeting at which a quorum is present (which shares voting affirmatively
also constitute a majority of the required quorum), or by the unanimous written
consent of all shares entitled to vote thereon. Each director so elected shall
hold office until the next annual meeting of the shareholders and until a
successor has been elected and qualified.
- ----------
* See attached amendments.
-8-
<PAGE> 13
A vacancy or vacancies in the board of directors shall be deemed to
exist (i) in the event of the death, resignation or removal of any director,
(ii) if the board of directors by resolution declares vacant the office of a
director who has been declared of unsound mind by an order of court or convicted
of a felony, (iii) if the authorized number of directors is increased, or (iv)
if the shareholders fail, at any meeting of shareholders at which any director
or directors are elected, to elect the number of directors to be elected at that
meeting.
The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors, but any such election
other than to fill a vacancy created by removal, if by written consent, shall
require the consent of the holders of a majority of the outstanding shares
entitled to vote thereon.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
Regular meetings of the board of directors may be held at any place
within or outside the State of California that has been designated from time to
time by resolution of the board. In the absence of such a designation, regular
meetings shall be held at the principal executive office of the corporation.
Special meetings of the board may be held at any place within or outside the
State of California that has been designated in the notice of the meeting or, if
not stated in the notice or if there is no notice, at the principal executive
office of the corporation.
Any meeting, regular or special, may be held by conference telephone or
similar communication equipment, so long as all directors participating in the
meeting can hear one another; and all such directors shall be deemed to be
present in person at the meeting.
3.6 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice
if the times of such meetings are fixed by the board of directors.
3.7 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
-9-
<PAGE> 14
3.8 QUORUM
A majority of the authorized number of directors shall constitute a
quorum for the transaction of business, except to adjourn as provided in Section
3.10 of these bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the board of directors, subject to the provisions of
Section 310 of the Code (as to approval of contracts or transactions in which a
director has a direct or indirect material financial interest), Section 311 of
the Code (as to appointment of committees), Section 317(e) of the Code (as to
indemnification of directors), the articles of incorporation, and other
applicable law.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.9 WAIVER OF NOTICE
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or (ii) who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such directors. All such waivers, consents, and approvals shall be
filed with the corporate records or made part of the minutes of the meeting. A
waiver of notice need not specify the purpose of any regular or special meeting
of the board of directors.
3.10 ADJOURNMENT
A majority of the directors present, whether or not constituting a
quorum, may adjourn any meeting to another time and place.
3.11 NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting need not
be given unless the meeting is adjourned for more than twenty-four (24) hours.
If the meeting is adjourned for more than twenty-four (24) hours, then notice of
the time and place of the adjourned meeting shall be given before the adjourned
meeting takes place, in the manner specified in Section 3.7 of these bylaws, to
the directors who were not present at the time of the adjournment.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the board of directors
may be taken without a meeting, provided that all members of the board
individually or collectively consent in writing to that action. Such action by
written consent shall have the same force and effect as a unanimous vote of the
board of directors. Such written consent and any counterparts thereof shall be
filed with the minutes of the proceedings of the board.
-10-
<PAGE> 15
3.13 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if
any, for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.13 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services.
3.14 APPROVAL OF LOANS TO OFFICERS*
The corporation may, upon the approval of the board of directors alone,
make loans of money or property to, or guarantee the obligations of, any officer
of the corporation or its parent or subsidiary, whether or not a director, or
adopt an employee benefit plan or plans authorizing such loans or guaranties
provided that (i) the board of directors determines that such a loan or guaranty
or plan may reasonably be expected to benefit the corporation, (ii) the
corporation has outstanding shares held of record by 100 or more persons
(determined as provided in Section 605 of the Code) on the date of approval by
the board of directors, and (iii) the approval of the board of directors is by a
vote sufficient without counting the vote of any interested director or
directors.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one (1) or more committees, each
consisting of two or more directors, to serve at the pleasure of the board. The
board may designate one (1) or more directors as alternate members of any
committee, who may replace any absent member at any meeting of the committee.
The appointment of members or alternate members of a committee requires the vote
of a majority of the authorized number of directors. Any committee, to the
extent provided in the resolution of the board, shall have all the authority of
the board, except with respect to:
(a) the approval of any action which, under the Code, also
requires shareholders' approval or approval of the outstanding shares;
(b) the filling of vacancies on the board of directors or in any
committee;
(c) the fixing of compensation of the directors for serving on
the board or any committee,
(d) the amendment or repeal of these bylaws or the adoption of
new bylaws;
- -----------
* This section is effective only if it has been approved by the shareholders in
accordance with Sections 315(b) and 152 of the Code
-11-
<PAGE> 16
(e) the amendment or repeal of any resolution of the board of
directors which by its express terms is not so amendable or repealable,
(f) a distribution to the shareholders of the corporation, except
at a rate or in a periodic amount or within a price range determined by the
board of directors; or
(g) the appointment of any other committees of the board of
directors or the members of such committees.
4.2 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by and held and
taken in accordance with, the provisions of Article III of these bylaws, Section
3.5 (place of meetings), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice),
Section 3.10 (adjournment), Section 3.11 (notice of adjournment), and Section
3.12 (action without meeting), with such changes in the context of those bylaws
as are necessary to substitute the committee and its members for the board of
directors and its members; provided, however, that the time of regular meetings
of committees may be determined either by resolution of the board of directors
or by resolution of the committee, that special meetings of committees may also
be called by resolution of the board of directors, and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The board of directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, a secretary, and
a chief financial officer. The corporation may also have, at the discretion of
the board of directors, a chairman of the board, one or more vice presidents,
one or more assistant secretaries, one or more assistant treasurers, and such
other officers as may be appointed in accordance with the provisions of Section
5.3 of these bylaws. Any number of offices may be held by the same person.
5.2 ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Section 5.3 or Section 5.5 of
these bylaws, shall be chosen by the board, subject to the rights, if any, of an
officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or may empower the president to
appoint, such other officers as the business of the corporation may require,
each of whom shall hold office for such
-12-
<PAGE> 17
period have such authority, and perform such duties as are provided in these
bylaws or as the board of directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by the
board of directors at any regular or special meeting of the board or, except in
case of an officer chosen by the board of directors, by any officer upon whom
such power of removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the
board of directors to the chairman of the board, if there be such an officer,
the president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction, and control of the business and the officers of the corporation. He
shall preside at all meetings of the shareholders and, in the absence or
nonexistence of a chairman of the board, at all meetings of the board of
directors. He shall have the general powers and duties of management usually
vested in the office of president of a corporation, and shall have such other
powers and duties as may be prescribed by the board of directors or these
bylaws.
5.8 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors, shall perform all
the duties of the president and when so acting shall have all the
-13-
<PAGE> 18
powers of, and be subject to all the restrictions upon, the president. The vice
presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for the respectively by the board of directors,
these bylaws, the president or the chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the board of
directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors and shareholders. The minutes shall show the
time and place of each meeting, whether regular or special (and, if special, how
authorized and the notice given), the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
shareholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register, or a duplicate share register, showing the names of
all shareholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the board of directors required to be given by law or
by these bylaws. He shall keep the seal of the corporation, if one be adopted,
in safe custody and shall have such other powers and perform such other duties
as may be prescribed by the board of directors or by these bylaws.
5.10 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all money and other valuables
in the name and to the credit of the corporation with such depositaries as may
be designated by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his
transactions as chief financial officer and of the financial condition of the
corporation, and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or these bylaws.
-14-
<PAGE> 19
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner
permitted by the Code, indemnify each of its directors and officers against
expenses (as defined in Section 317(a) of the Code), judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding (as defined in Section 317(a) of the Code), arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Article VI, a "director" or "officer" of the corporation
includes any person (i) who is or was a director or officer of the corporation,
(ii) who is or was serving at the request of the corporation as a director or
officer of another corporation, partnership, joint venture, trust or other
enterprise, or (iii) who was a director or officer of a corporation which was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the extent and in the manner
permitted by the Code, to indemnify each of its employees and agents (other than
directors and officers) against expenses (as defined in Section 317(a) of the
Code), judgments, fines, settlements, and other amounts actually and reasonably
incurred in connection with any proceeding (as defined in Section 317(a) of the
Code), arising by reason of the fact that such person is or was an agent of the
corporation. For purpose of this Article VI an "employee" or "agent" of the
corporation (other than a director or officer) includes any person (i) who is or
was an employee or agent of the corporation, (ii) who is or was serving at the
request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was an
employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.3 PAYMENT OF EXPENSES IN ADVANCE
Expenses incurred in defending any civil or criminal action or
proceeding for which indemnification is required pursuant to Section 6.1 or for
which indemnification is permitted pursuant to Section 6.2 following
authorization thereof by the Board of Directors shall be paid by the corporation
in advance of the final disposition of such action or proceeding upon receipt of
an undertaking by or on behalf of the indemnified party to repay such amount if
it shall ultimately be determined that the indemnified party is not entitled to
be indemnified as authorized in this Article VI.
6.4 INDEMNITY NOT EXCLUSIVE
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in an official capacity and as
-15-
<PAGE> 20
to action in another capacity while holding such office, to the extent that such
additional rights to indemnification are authorized in the Articles of
Incorporation.
6.5 INSURANCE INDEMNIFICATION
The corporation shall have the power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation against any liability asserted against or incurred by such
person in such capacity or arising out of such person's status as such, whether
or not the corporation would have the power to indemnify him against such
liability under the provisions of this Article VI.
6.6 CONFLICTS
No indemnification or advance shall be made under this Article VI,
except where such indemnification or advance is mandated by law or the order,
judgment or decree of any court of competent jurisdiction, in any circumstance
where it appears:
(1) That it would be inconsistent with a provision of the Articles
of Incorporation, these bylaws, a resolution of the shareholders or an agreement
in effect at the time of the accrual of the alleged cause of the action asserted
in the proceeding in which the expenses were incurred or other amounts were
paid, which prohibits or otherwise limits indemnification; or
(2) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER
The corporation shall keep either at its principal executive office or
at the office of its transfer agent or registrar (if either be appointed), as
determined by resolution of the board of directors, a record of its shareholders
listing the names and addresses of all shareholders and the number and class of
shares held by each shareholder.
A shareholder or shareholders of the corporation who holds at least
five percent (5%) in the aggregate of the outstanding voting shares of the
corporation or who holds at least one percent (1%) of such voting shares and has
filed a Schedule 14B with the Securities and Exchange Commission relating to the
election of directors, may (i) inspect and copy the records of shareholders'
names, addresses, and shareholdings during usual business hours on five (5)
days' prior written demand on the corporation, (ii) obtain from the transfer
agent of the corporation, on written demand and on the tender of such transfer
agent's usual charges for such list, a list of the names and addresses of the
shareholders who are entitled to vote for the election of directors, and their
shareholdings, as of the most recent record date for which that list has been
compiled or as of a date specified by the shareholder after the date of demand.
Such list shall be made available
-16-
<PAGE> 21
to any such shareholder by the transfer agent on or before the later of five (5)
days after the demand is received or five (5) days after the date specified in
the demand as the date as of which the list is to be compiled.
The record of shareholders shall also be open to inspection on the
written demand of any shareholder or holder of a voting trust certificate, at
any time during usual business hours, for a purpose reasonably related to the
holder's interests as a shareholder or as the holder of a voting trust
certificate.
Any inspection and copying under this Section 7.1 may be made in person
or by an agent or attorney of the shareholder or holder of a voting trust
certificate making the demand.
7.2 MAINTENANCE AND INSPECTION OF BYLAWS
The corporation shall keep at its principal executive office or, if its
principal executive office is not in the State of California, at its principal
business office in California the original or a copy of these bylaws as amended
to date, which bylaws shall be open to inspection by the shareholders at all
reasonable times during office hours. If the principal executive office of the
corporation is outside the State of California and the corporation has no
principal business office in such state, then the secretary shall, upon the
written request of any shareholder, furnish to that shareholder a copy of these
bylaws as amended to date.
7.3 MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS
The accounting books and records and the minutes of proceedings of the
shareholders, of the board of directors, and of any committee or committees of
the board of directors shall be kept at such place or places as are designated
by the board of directors or, in absence of such designation, at the principal
executive office of the corporation. The minutes shall be kept in written form,
and the accounting books and records shall be kept either in written form or in
any other form capable of being converted into written form.
The minutes and accounting books and records shall be open to
inspection upon the written demand of any shareholder or holder of a voting
trust certificate, at any reasonable time during usual business hours, for a
purpose reasonably related to the holder's interests as a shareholder or as the
holder of a voting trust certificate. The inspection may be made in person or by
an agent or attorney and shall include the right to copy and make extracts. Such
rights of inspection shall extend to the records of each subsidiary corporation
of the corporation.
7.4 INSPECTION BY DIRECTORS
Every director shall have the absolute right at any reasonable time to
inspect all books, records, and documents of every kind as well as the physical
properties of the corporation and each of its subsidiary corporations. Such
inspection by a director may be made in person or by an agent or attorney. The
right of inspection includes the right to copy and make extracts of documents.
-17-
<PAGE> 22
7.5 ANNUAL REPORT TO SHAREHOLDERS; WAIVER
The board of directors shall cause an annual report to be sent to the
shareholders not later than one hundred twenty (120) days after the close of the
fiscal year adopted by the corporation. Such report shall be sent at least
fifteen (15) days (or, if sent by third-class mail, thirty-five (35) days)
before the annual meeting of shareholders to be held during the next fiscal year
and in the manner specified in Section 2.5 of these bylaws for giving notice to
shareholders of the corporation.
The annual report shall contain (i) a balance sheet as of the end of
the fiscal year, (ii) an income statement, (iii) a statement of changes in
financial position for the fiscal year, and (iv) any report of independent
accountants or, if there is no such report, the certificate of an authorized
officer of the corporation that the statements were prepared without audit from
the books and records of the corporation.
The foregoing requirement of an annual report shall be waived so long
as the shares of the corporation are held by fewer than one hundred (100)
holders of record.
7.6 FINANCIAL STATEMENTS
If no annual report for the fiscal year has been sent to shareholders,
then the corporation shall, upon the written request of any shareholder made
more than one hundred twenty (120) days after the close of such fiscal year,
deliver or mail to the person making the request, within thirty (30) days
thereafter, a copy of a balance sheet as of the end of such fiscal year and an
income statement and statement of changes in financial position for such fiscal
year.
If a shareholder or shareholders holding at least five percent (5%) of
the outstanding shares of any class of stock of the corporation makes a written
request to the corporation for an income statement of the corporation for the
three-month, six-month or nine-month period of the then current fiscal year
ended more than thirty (30) days before the date of the request, and for a
balance sheet of the corporation as of the end of that period, then the chief
financial officer shall cause that statement to be prepared, if not already
prepared, and shall deliver personally or mail that statement or statements to
the person making the request within thirty (30) days after the receipt of the
request. If the corporation has not sent to the shareholders its annual report
for the last fiscal year, the statements referred to in the first paragraph of
this Section 7.6 shall likewise be delivered or mailed to the shareholder or
shareholders within thirty (30) days after the request.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the corporation or by the certificate of an authorized
officer of the corporation that the financial statements were prepared without
audit from the books and records of the corporation.
7.7 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the chief
financial officer, the secretary or assistant secretary of this corporation, or
any other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on
-18-
<PAGE> 23
behalf of this corporation all rights incident to any and all shares of any
other corporation or corporations standing in the name of this corporation. The
authority herein granted may be exercised either by such person directly or by
any other person authorized to do so by proxy or power of attorney duly executed
by such person having the authority.
ARTICLE VIII
GENERAL MATTERS
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the shareholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the
shareholders entitled to exercise any rights in respect of any other lawful
action (other than action by shareholders by written consent without a meeting),
the board of directors may fix, in advance, a record date, which shall not be
more than sixty (60) days before any such action. In that case, only
shareholders of record at the close of business on the date so fixed are
entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided in the Code.
If the board of directors does not so fix a record date, then the
record date for determining shareholders for any such purpose shall be at the
close of business on the day on which the board adopts the applicable resolution
or the sixtieth (60th) day before the date of that action, whichever is later.
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED
The board of directors, except as otherwise provided in these bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
-19-
<PAGE> 24
8.4 CERTIFICATES FOR SHARES
A certificate or certificates for shares of the corporation shall be
issued to each shareholder when any of such shares are fully paid. The board of
directors may authorize the issuance of certificates for shares partly paid
provided that these certificates shall state the total amount of the
consideration to be paid for them and the amount actually paid. All certificates
shall be signed in the name of the corporation by the chairman of the board or
the vice chairman of the board or the president or a vice president and by the
chief financial officer or an assistant treasurer or the secretary or an
assistant secretary, certifying the number of shares and the class or series of
shares owned by the shareholder. Any or all of the signatures on the certificate
may be facsimile.
In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed on a certificate ceases to be that
officer, transfer agent or registrar before that certificate is issued, it may
be issued by the corporation with the same effect as if that person were an
officer, transfer agent or registrar at the date of issue.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The board of
directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board may require; the board
may require indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Code shall govern the construction of these
bylaws. Without limiting the generality of this provision, the singular number
includes the plural, the plural number includes the singular, and the term
"person" includes both a corporation and a natural person.
ARTICLE IX
AMENDMENTS
9.1 AMENDMENT BY SHAREHOLDERS
New bylaws may be adopted or these bylaws may be amended or repealed by
the vote or written consent of holders of a majority of the outstanding shares
entitled to vote; provided, however, that if the articles of incorporation of
the corporation set forth the number of authorized
-20-
<PAGE> 25
directors of the corporation, then the authorized number of directors may be
changed only by an amendment of the articles of incorporation.
9.2 AMENDMENT BY DIRECTORS
Subject to the rights of the shareholders as provided in Section 9.1 of
these bylaws, bylaws, other than a bylaw or an amendment of a bylaw changing the
authorized number of directors (except to fix the authorized number of directors
pursuant to a bylaw providing for a variable number of directors), may be
adopted, amended or repealed by the board of directors.
-21-
<PAGE> 26
CERTIFICATE OF ADOPTION OF BYLAWS
OF
RASTER GRAPHICS, INC.
Certificate by Secretary of Adoption by Shareholders' Vote
The undersigned hereby certifies that he is the duly elected,
qualified, and acting Secretary of Raster Graphics, Inc. and that the foregoing
Bylaws, comprising twenty-five (25) pages, were submitted to the shareholders
pursuant to a written consent dated November 15, 1988 and were ratified by
the vote of shareholders entitled to exercise the majority of the voting power
of the corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
affixed the corporate seal this 17th day of November 1988.
/s/ Deane Gardner
------------------------
Deane Gardner, Secretary
-2-
<PAGE> 27
AMENDMENT OF BYLAWS
OF RASTER GRAPHICS, INC.
Pursuant to a written consent of directors of Raster Graphics, Inc.
(the "Company"), dated November 15, 1988, Section 3.2 of the Company's Bylaws
was amended, effective as of and conditioned on the closing of the sale of the
Company's Series B Preferred Stock pursuant to that certain Series B Preferred
Stock Purchase Agreement dated November 18, 1988, which closing occurred on
November 28, 1988, to read as follows:
3.2 NUMBER OF DIRECTORS
The number of directors of the corporation shall be not less than
four (4) nor more than seven (7). The exact number of directors shall
be seven (7) until changed, within the limits specified above, by a
bylaw amending this Section 3.2, duly adopted by the board of directors
or by the shareholders. The indefinite number of directors may be
changed, or a definite number may be fixed without provision for an
indefinite number, by a duly adopted amendment to the articles of
incorporation or by an amendment to this bylaw duly adopted by the vote
or written consent of holders of a majority of the outstanding shares
entitled to vote; provided, however, that an amendment reducing the
fixed number or the minimum number of directors to a number less than
five (5) cannot be adopted if the votes cast against its adoption at a
meeting, or the shares not consenting in the case of an action by
written consent, are equal to more than sixteen and two-thirds percent
(16-2/3%) of the outstanding shares entitled to vote thereon. No
amendment may change the stated maximum number of authorized directors
to a number greater than two (2) times the stated minimum number of
directors minus one (1).
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office
expires.
<PAGE> 28
CERTIFICATE OF AMENDMENT OF BYLAWS
OF
RASTER GRAPHICS, INC.
Certificate by Secretary of Adoption by Directors' Consent
The undersigned hereby certifies that he is the duly elected,
qualified, and acting Secretary of Raster Graphics, Inc. (the "Company") and
that the foregoing amendment to the Company's Bylaws, comprising one (1) page,
was submitted to the directors pursuant to a written consent dated November 15,
1988 and was ratified by the unanimous vote of directors and that the condition
precedent to effectiveness of the amendment as stated in the written consent
adopting the amendment, the closing of the sale of the Company's Series B
Preferred Stock pursuant to that certain Series B Preferred Stock Purchase
Agreement dated November 18, 1988, was satisfied on November 28, 1988.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
affixed the corporate seal this 28th day of November 1988.
/s/ Deane Gardner
------------------------
Deane Gardner, Secretary
<PAGE> 29
AMENDMENT OF BYLAWS
OF
RASTER GRAPHICS, INC.
Pursuant to a written consent of shareholders of Raster Graphics, Inc.
dated February 8, 1990, Section 3.2 of the Company's Bylaws was amended to read
as follows:
3.2 NUMBER OF DIRECTORS
The number of directors of the corporation shall be not less than
five (5) nor more than nine (9). The exact number of directors shall be
eight (8) until changed, within the limits specified above, by a bylaw
amending this Section 3.2, duly adopted by the board of directors or by
the shareholders. The indefinite number of directors may be changed, or
a definite number may be fixed without provision for an indefinite
number, by a duly adopted amendment to the articles of incorporation or
by an amendment to this bylaw duly adopted by the vote or written
consent of holders of a majority of the outstanding shares entitled to
vote; provided, however, that an amendment reducing the fixed number or
the minimum number of directors to a number less than five (5) cannot
be adopted if the votes cast against its adoption at a meeting, or the
shares not consenting in the case of an action by written consent, are
equal to more than sixteen and two-thirds percent (16-2/3%) of the
outstanding shares entitled to vote thereon. No amendment may change
the stated maximum number of authorized directors to a number greater
than two (2) times the stated minimum number of directors minus one
(1).
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office
expires.
<PAGE> 30
CERTIFICATE OF AMENDMENT
OF THE BYLAWS OF
RASTER GRAPHICS, INC.
The undersigned, being the Assistant Secretary of Raster Graphics,
Inc., hereby certifies that the Bylaws of this corporation were amended,
effective May 27, 1993, by the Board of Directors as follows:
Section 3.2 was amended in its entirety to read as follows:
"3.2 NUMBER OF DIRECTORS
The number of directors of the corporation shall not be less than
five (5) nor more than nine (9). The exact number of directors shall be
seven (7) until changed, within the limits specified above, by a bylaw
amending this Section 3.2, duly adopted by the board of directors or by
the shareholders. The indefinite number of directors may be changed, or
a definite number may be fixed without provision for an indefinite
number, by a duly adopted amendment to the articles of incorporation or
by an amendment to this bylaw duly adopted by the vote or written
consent of holders of a majority of the outstanding shares entitled to
vote; provided, however that an amendment reducing the fixed number or
the minimum number of directors to a number less than five (5) cannot
be adopted if the votes cast against its adoption at a meeting, or the
shares not consenting in the case of an action by written consent, are
equal to more than sixteen and two-thirds percent (16-2/3%) of the
outstanding shares entitled to vote thereon. No amendment may change
the stated maximum number of authorized directors to a number greater
than two (2) times the stated minimum number of directors minus one
(1).
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office
expires."
Dated: May 27, 1993
/s/ Michael W. Hall
------------------------------------
Michael W. Hall, Assistant Secretary
<PAGE> 1
EXHIBIT 10.1
RASTER GRAPHICS, INC.
1988 STOCK OPTION PLAN
AS AMENDED MARCH 9, 1989
AS AMENDED MAY 20, 1992
AS AMENDED MAY 12, 1993
AS AMENDED APRIL 26, 1995
AS AMENDED JUNE 15, 1995
AS AMENDED MAY 16, 1996
1. Purposes of the Plan. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and Consultants
of the Company and to promote the success of the Company's business.
Options granted hereunder may be either Incentive Stock Options or
Nonstatutory Stock Options (are hereafter defined), at the discretion of the
Board and as reflected in the terms of the written option agreement. Stock
Purchase Rights (as hereafter defined) may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board" shall mean the Committee, if one has been appointed, or
the Board of Directors of the Company, if no Committee is appointed.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan, if one is
appointed.
(d) "Common Stock" shall mean the Common Stock of the Company.
(e) "Company" shall mean Raster Graphics, Inc., a California
corporation.
(f) "Consultant" shall mean any person who is engaged by the Company
or any Parent or Subsidiary to render consulting services and is compensated for
such consulting services, and any director of the Company whether compensated
for such services or not; provided that if and in the event the Company
registers any class of any equity security pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the term
Consultant shall thereafter not include directors who are not compensated for
their services or are paid only a director's fee by the Company.
<PAGE> 2
(g) "Continuous Status as an Employee or Consultant" shall mean the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of sick leave, military leave, or any other
leave of absence approved by the Board; provided that such leave is for a period
of not more than ninety (90) days or reemployment upon the expiration of such
leave is guaranteed by contract or statute.
(h) "Employee" shall mean any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(i) "Incentive Stock Option" shall mean an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(j) "Nonstatutory Stock Option" shall mean an Option not intended to
qualify as an Incentive Stock Option.
(k) "Option" shall mean a stock option granted pursuant to the Plan.
(l) "Optioned Stock" shall mean the Common Stock subject to an
Option or a Stock Purchase Right.
(m) "Optionee" shall mean an Employee or Consultant who receives an
Option or Stock Purchase Right.
(n) "Parent" shall mean a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(o) "Plan" shall mean this 1988 Stock Option Plan.
(p) "Restricted Stock" shall mean shares of Common Stock acquired
pursuant to a grant of a Stock Purchase Right under Section 11 below.
(q) "Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(r) "Stock Purchase Right" shall mean the right to purchase Common
Stock pursuant to Section 11 below.
(s) "Subsidiary" shall mean a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13
of the Plan, the maximum aggregate number of shares which may be optioned and
sold under the Plan is 7,800,000 shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock.
-2-
<PAGE> 3
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan.
4. Administration of the Plan.
(a) Procedure. The Plan shall be administered by the Board of
Directors of the Company.
(i) Subject to subparagraph (ii), the Board of Directors may
appoint a Committee consisting of not less than two members of the Board of
Directors to administer the Plan on behalf of the Board of Directors, subject to
such terms and conditions as the Board of Directors may prescribe. Once
appointed, the Committee shall continue to serve until otherwise directed by the
Board of Directors. Members of the Board who are either eligible for Options or
have been granted Options may vote on any matters affecting the administration
of the Plan or the grant of any Options pursuant to the Plan, except that no
such member shall act upon the granting of an Option to himself, but any such
member may be counted in determining the existence of a quorum at any meeting of
the Board during which action is taken with respect to the granting of Options
to him.
(ii) Notwithstanding the foregoing subparagraph (i), if and in
any event the Company registers any class of any equity security pursuant to
Section 12 of the Exchange Act, from the effective date of such registration
until six months after the termination of such registration, any grants of
Options to officers or directors shall only be made by the Board of Directors;
provided, however, that if a majority of the Board of Directors is eligible to
participate in this Plan or any other stock option or other stock plan of the
Company or any of its affiliates, or has been eligible at any time during the
prior one-year period (or, if shorter, the period following the initial
registration of the Company's equity securities under Section 12 of the Exchange
Act), any grants of Options to directors must be made by, or only in accordance
with the recommendation of, a Committee consisting of three or more persons, who
may but need not be directors or employees of the Company, appointed by the
Board of Directors and having full authority to act in the matter, none of whom
is eligible to participate in this Plan or any other stock option or other stock
plan of the Company or any of its affiliates, or has been eligible at any time
during the prior one-year period (or, if shorter, the period following the
initial registration of the Company's equity securities under Section 12 of the
Exchange Act). Any Committee administering the Plan with respect to grants to
officers who are not also directors shall conform to the requirements of the
preceding sentence. Once appointed, the Committee shall continue to serve until
otherwise directed by the Board of Directors.
(iii) Subject to the foregoing subparagraphs (i) and (ii), from
time to time the Board of Directors may increase the size of the Committee and
appoint additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies however caused, or
remove all members of the Committee and thereafter directly administer the Plan.
(b) Powers of the Board. Subject to the provisions of the Plan, the
Board shall have the authority, in its discretion: (i) to grant Incentive Stock
Options, Nonstatutory Stock Options or Stock Purchase Rights, (ii) to determine,
upon review of relevant information and in accordance with Section 8(b) of the
Plan, the fair market value of the Common Stock; (iii) to determine the exercise
-3-
<PAGE> 4
price per share of Options to be granted and the purchase price per share of
Stock Purchase Rights to be granted, which exercise price and purchase price
shall be determined in accordance with Section 8(a) of the Plan; (iv) to
determine the Employees or Consultants to whom, and the time or times at which,
Options or Stock Purchase Rights shall be granted and the number of shares to be
represented by each Option or Stock Purchase Right; (v) to interpret the Plan;
(vi) to prescribe, amend and rescind rules and regulations relating to the Plan;
(vii) to determine the terms and provisions of each Option or Stock Purchase
Right granted (which need not be identical) and, with the consent of the holder
thereof, modify or amend each Option or Stock Purchase Right; (viii) to
authorize any person to execute on behalf of the Company any instrument required
to effectuate the grant of an Option or Stock Purchase Right previously granted
by the Board; and (ix) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(c) Effect of Board's Decision. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options or Stock Purchase Rights granted under the Plan.
5. Eligibility.
(a) Nonstatutory Stock Options and Stock Purchase Rights may be
granted to Employees and Consultants. Incentive Stock Options may be granted
only to Employees. An Employee or Consultant who has been granted an Option or
Stock Purchase Right may, if he or she is otherwise eligible, be granted
additional Options or Stock Purchase Rights.
(b) No Incentive Stock Option may be granted to an Employee which,
when aggregated with all other incentive stock options granted to such Employee
by the Company or any Parent or Subsidiary, would result in Shares having an
aggregate fair market value (determined for each Share as of the date of grant
of the Option covering such Share) in excess of $100,000 becoming first
available for purchase upon exercise of one or more incentive stock options
during any calendar year.
(c) Section 5(b) of the Plan shall apply only to an Incentive Stock
Option evidenced by an "Incentive Stock Option Agreement" which sets forth the
intention of the Company and the Optionee that such Option shall qualify as an
incentive stock option. Section 5(b) of the Plan shall not apply to any Option
evidenced by a "Nonstatutory Stock Option Agreement" which sets forth the
intention of the Company and the Optionee that such Option shall be a
Nonstatutory Stock Option.
(d) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his or her right or the
Company's right to terminate his or her employment or consulting relationship at
any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 19 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 15 of the Plan.
-4-
<PAGE> 5
7. Term of Option. The term of each Incentive Stock Option shall be ten
(10) years from the date of grant thereof or such shorter term as may be
provided in the Incentive Stock Option Agreement. The term of each Nonstatutory
Stock Option shall be ten (10) years and one (1) day from the date of grant
thereof or such shorter term as may be provided in the Nonstatutory Stock Option
Agreement. However, in the case of an Option granted to an Optionee who, at the
time the Option is granted, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, (a) if the Option is an Incentive Stock Option, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Incentive Stock Option Agreement, or (b) if the
Option is a Nonstatutory Stock Option, the term of the Option shall be five (5)
years and one (1) day from the date of grant thereof or such shorter term as may
be provided in the Nonstatutory Stock Option Agreement.
8. Exercise Price and Consideration.
(a) The per Share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the fair
market value per Share on the date of grant.
(B) granted to any Employee, the per Share exercise price
shall be no less than 100% of the fair market value per Share on the date of
grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of the grant of
such Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be no less than 110% of the fair market value per
Share on the date of the grant.
(B) granted to any person, the per Share exercise price
shall be no less than 85% of the fair market value per Share on the date of
grant.
(b) The fair market value shall be determined by the Board in its
discretion; provided, however, that where there is a public market for the
Common Stock, the fair market value per Share shall be the mean of the bid and
asked prices (or the closing price per share if the Common Stock is listed on
the National Association of Securities Dealers Automated Quotation ("NASDAQ")
National Market System) of the Common Stock for the date of grant, as reported
in the Wall Street Journal (or, if not so reported, as otherwise reported by the
NASDAQ System) or, in the event the Common Stock is listed on a stock exchange,
the fair market value per Share shall be the closing price on such exchange on
the date of grant of the Option, as reported in the Wall Street Journal.
-5-
<PAGE> 6
(c) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Board (and, in the case of an Incentive Stock Option, shall be determined at
the time of grant) and may consist entirely of cash, check, promissory note,
other Shares of Common Stock which (i) either have been owned by the Optionee
for more than six (6) months on the date of surrender or were not acquired,
directly or indirectly, from the Company, and (ii) have a fair market value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised, or any combination of such methods of
payment, or such other consideration and method of payment for the issuance of
Shares to the extent permitted under Sections 408 and 409 of the California
General Corporation Law. In making its determination as to the type of
consideration to accept, the Board shall consider if acceptance of such
consideration may be reasonably expected to benefit the Company (Section 315(b)
of the California General Corporation Law).
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan; provided, however, that all Options shall be exercisable at the rate of at
least 20% per year over five years from the date of grant.
(i) An Option may not be exercised for a fraction of a Share.
(ii) An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the Board, consist
of any consideration and method of payment allowable under Section 8(c) of the
Plan. Until the issuance (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 13 of the Plan.
(iii) Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(b) Termination of Status as an Employee or Consultant. In the event
of termination of an Optionee's Continuous Status as an Employee or Consultant
(as the case may be), such Optionee may, but only within thirty (30) days (or
such other period of time, not exceeding three (3) months in the case of an
Incentive Stock Option or six (6) months in the case of a Nonstatutory Stock
Option, as is determined by the Board, with such determination in the case of an
Incentive Stock Option being made at the time of grant of the Option) after the
date of such termination (but in no event later than the date of expiration of
the term of such Option as set forth in the Option Agreement),
-6-
<PAGE> 7
exercise his or her Option to the extent that he or she was entitled to exercise
it at the date of such termination. To the extent that he or she was not
entitled to exercise the Option at the date of such termination, or if he or she
does not exercise such Option (which he or she was entitled to exercise) within
the time specified herein, the Option shall terminate.
(c) Disability of Optionee. Notwithstanding the provisions of
Section 9(b) above, in the event of termination of an Optionee's Continuous
Status as an Employee or Consultant as a result of his or her disability,
Optionee may, but only within six (6) months (or such other period of time not
exceeding twelve (12) months as is determined by the Board, with such
determination in the case of an Incentive Stock Option being made at the time of
grant of the Option) from the date of such termination (but in no event later
than the date of expiration of the term of such Option as set forth in the
Option Agreement), exercise his or her Option to the extent Optionee was
entitled to exercise it at the date of such termination. To the extent that
Optionee was not entitled to exercise the Option at the date of termination, or
if Optionee does not exercise such Option (which Optionee was entitled to
exercise) within the time specified herein, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee:
(i) during the term of the Option who is at the time of his or
her death an Employee or Consultant of the Company and who shall have been in
Continuous Status as an Employee or Consultant since the date of grant of the
Option, the Option may be exercised, at any time within six (6) months following
the date of death (but in no event later than the date of expiration of the term
of such Option as set forth in the Option Agreement), by the Optionee's estate
or by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent of the right to exercise that would have
accrued had the Optionee continued living and remained in Continuous Status as
an Employee or Consultant six (6) months after the date of death, subject to the
limitation set forth in Section 5(b); or
(ii) within thirty (30) days (or such other period of time not
exceeding three (3) months as is determined by the Board, with such
determination in the case of an Incentive Stock Option being made at the time of
grant of the Option) after the termination of Continuous Status as an Employee
or Consultant, the Option may be exercised, at any time within six (6) months
following the date of death (but in no event later than the date of expiration
of the term of such Option as set forth in the Option Agreement), by the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right to exercise that
had accrued at the date of termination.
(e) Rule 16b-3. Options granted to persons subject to Section 16(b)
of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
10. Non-Transferability of Options. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
-7-
<PAGE> 8
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Board determines that it
will offer Stock Purchase Rights under the Plan, it shall advise the offeree in
writing of the terms, conditions and restrictions related to the offer,
including the number of Shares that such person shall be entitled to purchase,
the price to be paid (which price shall not be less than 85% of the fair market
value of the Shares as of the date of the offer, as determined pursuant to
Section 8(b)), and the time within which such person must accept such offer,
which shall in no event exceed thirty (30) days from the date upon which the
Board made the determination to grant the Stock Purchase Right. The offer shall
be accepted by execution of a Restricted Stock purchase agreement in the form
determined by the Board. Shares purchased pursuant to the grant of a Stock
Purchase Right shall be referred to herein as "Restricted Stock."
(b) Repurchase Option. Unless the Board determines otherwise, the
Restricted Stock purchase agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
employment or consulting relationship with the Company for any reason (including
death or disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at such rate as the Board may
determine.
(c) Other Provisions. The Restricted Stock purchase agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Board in its sole discretion. In addition, the
provisions of Restricted Stock purchase agreements need not be the same with
respect to each purchaser.
(d) Rights as a Stockholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
stockholder, and shall be a stockholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
12. Stock Withholding to Satisfy Withholding Tax Obligations. At the
discretion of the Board, Optionees may satisfy withholding obligations as
provided in this paragraph. When an Optionee incurs tax liability in connection
with an Option or Stock Purchase Right, which tax liability is subject to tax
withholding under applicable tax laws, and the Optionee is obligated to pay the
Company an amount required to be withheld under applicable tax laws, the
Optionee may satisfy the withholding tax obligation by electing to have the
Company withhold from the Shares to be issued upon exercise of the Option, or
the Shares to be issued in connection with the Stock Purchase Right, if any,
that number of Shares having a fair market value (as determined pursuant to
Section 8(b)) equal to the amount required to be withheld. The fair market value
of the Shares to be withheld shall be determined on the date that the amount of
tax to be withheld is to be determined (the "Tax Date").
All elections by an Optionee to have Shares withheld for this purpose
shall be made in writing in a form acceptable to the Board and shall be subject
to the following restrictions:
-8-
<PAGE> 9
(a) the election must be made on or prior to the applicable Tax
Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option or Stock Purchase Right as to which the election
is made;
(c) all elections shall be subject to the consent or disapproval of
the Board;
(d) if the Optionee is subject to Rule 16b-3, the election must
comply with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option or Stock Purchase
Right is exercised but such Optionee shall be unconditionally obligated to
tender back to the Company the proper number of Shares on the Tax Date.
13. Adjustments Upon Changes in Capitalization or Merger. Subject to
any required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option or Stock Purchase Right, and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but as to which no Options or Stock Purchase Rights have yet been
granted or which have been returned to the Plan upon cancellation or expiration
of an Option or Stock Purchase Right, as well as the price per share of Common
Stock covered by each such outstanding Option or Stock Purchase Right, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to an
Option or Stock Purchase Right.
In the event of the proposed dissolution or liquidation of the
Company, the Board shall notify the Optionee at least fifteen (15) days prior to
such proposed action and, to the extent it has not been previously exercised,
the Option or Stock Purchase Right will terminate immediately prior to the
consummation of such proposed action. The Board may, in the exercise of its sole
discretion in such instances, declare that any Option or Stock Purchase Right
shall terminate as of a date fixed by the Board and give each Optionee the right
to exercise his or her Option or Stock Purchase Right as to all or any part of
the Optioned Stock, including Shares as to which the Option or Stock Purchase
Right would not otherwise be exercisable. In the event of a proposed sale of all
or substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, the Option or Stock Purchase Right shall be
assumed or an equivalent option or right shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation. With
respect to any
-9-
<PAGE> 10
option granted prior to January 4, 1992, in the event that such successor
corporation does not agree to assume such Option or to substitute an equivalent
option, the Board shall, in lieu of such assumption or substitution, provide for
the Optionee to have the right to exercise such Option as to all of the Optioned
Stock, including Shares as to which such Option would not otherwise be
exercisable. If the Board makes an Option fully exercisable in lieu of
assumption or substitution in the event of a merger or sale of assets, the Board
shall notify the Optionee that the Option shall be fully exercisable for a
period of fifteen (15) days from the date of such notice, and the Option will
terminate upon the expiration of such period.
14. Time of Granting Options and Stock Purchase Rights. The date of
grant of an Option or Stock Purchase Right shall, for all purposes, be the date
on which the Board makes the determination granting such Option or Stock
Purchase Right. Notice of the determination shall be given to each Employee or
Consultant to whom an Option or Stock Purchase Right is so granted within a
reasonable time after the date of such grant.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may amend or terminate the
Plan from time to time in such respects as the Board may deem advisable;
provided, however, that the Company will obtain the approval of the shareholders
of the Company for any amendment to the Plan in such a manner and to the extent
necessary to comply with the requirements of Rule 16b-3 promulgated under the
Exchange Act and/or Section 422 of the Code (or any other applicable law or
regulation, including the requirements of the NASD or an established stock
exchange).
(b) Shareholder Approval. If any amendment requiring shareholder
approval under Section 15(a) of the Plan is made subsequent to the first
registration of any class of equity securities by the Company under Section 12
of the Exchange Act, such shareholder approval shall be solicited as described
in Section 19 of the Plan, if and to the extent required by the Exchange Act
and/or the rules and regulations promulgated thereunder.
(c) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not adversely affect Options already granted
(except to the extent contemplated by the Option) and such Options shall remain
in full force and effect, unless mutually agreed otherwise between the Optionee
and the Board (or other body then administering the Plan), which agreement must
be in writing and signed by the Optionee and the Company.
16. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
-10-
<PAGE> 11
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
17. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
18. Option and Stock Purchase Rights Agreements. Options and Stock
Purchase Rights shall be evidenced by written agreements in such form as the
Board shall approve.
19. Shareholder Approval.
(a) Continuance of the Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months before or after the date
the Plan is adopted.
(b) If and in the event that the Company registers any class of
equity securities pursuant to Section 12 of the Exchange Act, any required
approval of the shareholders of the Company obtained after such registration
shall be solicited substantially in accordance with Section 14(a) of the
Exchange Act and the rules and regulations promulgated thereunder.
(c) If any required approval by the shareholders of the Plan itself
or of any amendment thereto is solicited at any time otherwise than in the
manner described in Section 19(b) hereof, then the Company shall, at or prior to
the first annual meeting of shareholders held subsequent to the later of (1) the
first registration of any class of equity securities of the Company under
Section 12 of the Exchange Act or (2) the granting of an Option hereunder to an
officer or director after such registration, do the following:
(i) furnish in writing to the holders entitled to vote for the
Plan substantially the same information which would be required (if proxies to
be voted with respect to approval or disapproval of the Plan or amendment were
then being solicited) by the rules and regulations in effect under Section 14(a)
of the Exchange Act at the time such information is furnished; and
(ii) file with, or mail for filing to, the Securities and
Exchange Commission four copies of the written information referred to in
subsection (i) hereof not later than the date on which such information is first
sent or given to shareholders.
20. Information to Optionees and Purchasers. The Company shall provide
to each Optionee and to each individual who acquired Shares pursuant to the
Plan, during the period which such Optionee or purchaser has one or more Options
or Stock Purchase Rights outstanding, and, in the case of an
-11-
<PAGE> 12
individual who acquired Shares pursuant to the Plan, during the period such
individual owns such Shares, copies of a balance sheet and an income statement
at least annually. The Company shall not be required to provide such information
to key employees whose duties in connection with the Company assure their access
to equivalent information.
-12-
<PAGE> 1
EXHIBIT 10.2
RASTER GRAPHICS, INC.
1996 STOCK PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and Consultants
of the Company and to promote the success of the Company's business.
Options granted hereunder may be either Incentive Stock
Options (as defined under Section 422 of the Code) or Nonstatutory Stock
Options, at the discretion of the Board and as reflected in the terms of the
written option agreement. Stock purchase rights may also be granted under the
Plan.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Administrator" shall mean the Board or any of its
Committees appointed pursuant to Section 4 of the Plan.
(b) "Affiliate" shall mean an entity in which the Company
owns an equity interest.
(c) "Applicable Laws" shall have the meaning set forth in
Section 4(a) below.
(d) "Board" shall mean the Board of Directors of the
Company.
(e) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(f) "Committee" shall mean the Committee appointed by the
Board of Directors in accordance with Section 4(a) of the Plan, if one is
appointed.
(g) "Common Stock" shall mean the Common Stock of the
Company.
(h) "Company" shall mean Raster Graphics, Inc., a Delaware
corporation.
(i) "Consultant" shall mean any person who is engaged by the
Company or any Parent, Subsidiary or Affiliate to render consulting services and
is compensated for such consulting services, and any director of the Company
whether compensated for such services or not; provided that if and in the event
the Company registers any class of any equity security pursuant to Section 12 of
the Exchange Act, the term Consultant shall thereafter not include directors who
are not compensated for their services or are paid only a director's fee by the
Company.
<PAGE> 2
(j) "Continuous Status as an Employee or Consultant" shall
mean the absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of sick leave, military leave, or any other
leave of absence approved by the Administrator; provided that such leave is for
a period of not more than 90 days or reemployment upon the expiration of such
leave is guaranteed by contract or statute. For purposes of this Plan, a change
in status from an Employee to a Consultant or from a Consultant to an Employee
will not constitute a termination of employment.
(k) "Director" shall mean a member of the Board.
(l) "Employee" shall mean any person, including Named
Executives, Officers and Directors employed by the Company or any Parent,
Subsidiary or Affiliate of the Company. The payment by the Company of a
director's fee to a Director shall not be sufficient to constitute "employment"
of such Director by the Company.
(m) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(n) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system including without limitation the
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("Nasdaq") System, its Fair Market Value shall be the
closing sales price for such stock as quoted on such system on the date of
determination (if for a given day no sales were reported, the closing bid on
that day shall be used), as such price is reported in The Wall Street Journal or
such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq System
(but not on the National Market thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the bid and asked prices for the Common Stock or;
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Administrator.
(o) "Incentive Stock Option" shall mean an Option intended
to qualify as an incentive stock option within the meaning of Section 422 of the
Code, as designated in the applicable written option agreement.
(p) "Named Executive" shall mean any individual who, on the
last day of the Company's fiscal year, is the chief executive officer of the
Company (or is acting in such capacity) or among the four highest compensated
officers of the Company (other than the chief executive
-2-
<PAGE> 3
officer). Such officer status shall be determined pursuant to the executive
compensation disclosure rules under the Exchange Act.
(q) "Nonstatutory Stock Option" shall mean an Option not
intended to qualify as an Incentive Stock Option, as designated in the
applicable written option agreement.
(r) "Officer" shall mean a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(s) "Option" shall mean a stock option granted pursuant to
the Plan.
(t) "Optioned Stock" shall mean the Common Stock subject to
an Option.
(u) "Optionee" shall mean an Employee or Consultant who
receives an Option.
(v) "Parent" shall mean a "parent corporation," whether now
or hereafter existing, as defined in Section 424(e) of the Code.
(w) "Plan" shall mean this 1996 Stock Plan.
(x) "Restricted Stock" shall mean shares of Common Stock
acquired pursuant to a grant of a Stock Purchase Right under Section 11 below.
(y) "Rule 16b-3" shall mean Rule 16b-3 promulgated under the
Exchange Act as the same may be amended from time to time, or any successor
provision.
(z) "Share" shall mean a share of the Common Stock, as
adjusted in accordance with Section 15 of the Plan.
(aa) "Stock Purchase Right" shall mean the right to purchase
Common Stock pursuant to Section 11 below.
(bb) "Subsidiary" shall mean a "subsidiary corporation,"
whether now or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of
Section 15 of the Plan, the maximum aggregate number of shares that may be
optioned and sold under the Plan is 800,000. The Shares may be authorized, but
unissued, or reacquired Common Stock.
If an Option or Stock Purchase should expire or become unexercisable
for any reason without having been exercised in full, the unpurchased Shares
that were subject thereto shall, unless the Plan shall have been terminated,
become available for future grant under the Plan. Notwithstanding any other
provision of the Plan, shares issued under the Plan and later repurchased by the
Company shall not become available for future grant or sale under the Plan.
-3-
<PAGE> 4
4. Administration of the Plan.
(a) Composition of Administrator.
(i) Multiple Administrative Bodies. If permitted by
Rule 16b-3, and by the legal requirements relating to the administration of
incentive stock option plans, if any, of applicable securities laws and the Code
(collectively, the "Applicable Laws"), the Plan may (but need not) be
administered by different administrative bodies with respect to Directors,
Officers who are not directors and Employees who are neither Directors nor
Officers.
(ii) Administration with respect to Directors and
Officers. With respect to grants of Options or Stock Purchase Rights to
Employees or Consultants who are also Officers or Directors of the Company, the
Plan shall be administered by (A) the Board, if the Board may administer the
Plan in compliance with Rule 16b-3 as it applies to a plan intended to qualify
thereunder as a discretionary plan and Section 162(m) of the Code as it applies
so as to qualify grants of Options to Named Executives as performance-based
compensation, or (B) a Committee designated by the Board to administer the Plan,
which Committee shall be constituted in such a manner as to permit the Plan to
comply with Rule 16b-3 as it applies to a plan intended to qualify thereunder as
a discretionary plan, to qualify grants of Options to Named Executives as
performance-based compensation under Section 162(m) of the Code and otherwise so
as to satisfy the Applicable Laws.
(iii) Administration with respect to Other Persons. With
respect to grants of Options to Employees or Consultants who are neither
Directors nor Officers of the Company, the Plan shall be administered by (A) the
Board or (B) a Committee designated by the Board, which Committee shall be
constituted in such a manner as to satisfy the Applicable Laws.
(iv) General. If a Committee has been appointed
pursuant to subsection (ii) or (iii) of this Section 4(a), such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board. From time to time the Board may increase the size of any Committee and
appoint additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies (however caused)
and remove all members of a Committee and thereafter directly administer the
Plan, all to the extent permitted by the Applicable Laws and, in the case of a
Committee appointed under subsection (ii), to the extent permitted by Rule 16b-3
as it applies to a plan intended to qualify thereunder as a discretionary plan,
and to the extent required under Section 162(m) of the Code to qualify grants of
Options to Named Executives as performance-based compensation.
(b) Powers of the Administrator. Subject to the provisions
of the Plan and in the case of a Committee, the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(m) of the Plan;
-4-
<PAGE> 5
(ii) to select the Employees and Consultants to whom
Options may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options
are granted hereunder;
(iv) to determine the number of shares of Common Stock
to be covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the
Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder
(including, but not limited to, the share price and any restriction or
limitation, or any vesting acceleration or waiver of forfeiture restrictions
regarding any Option and/or the shares of Common Stock relating thereto, based
in each case on such factors as the Administrator shall determine, in its sole
discretion);
(vii) to determine whether, to what extent and under
what circumstances Common Stock and other amounts payable with respect to an
award under this Plan shall be deferred either automatically or at the election
of the participant (including providing for and determining the amount, if any,
of any deemed earnings on any deferred amount during any deferral period); and
(viii) to reduce the exercise price of any Option to the
then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted;
(c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.
5. Eligibility.
(a) Recipients of Grants. Nonstatutory Stock Options may be
granted to Employees and Consultants. Incentive Stock Options may be granted
only to Employees, provided, however, that Employees of an Affiliate shall not
be eligible to receive Incentive Stock Options. An Employee or Consultant who
has been granted an Option may, if he or she is otherwise eligible, be granted
an additional Option or Options.
(b) Type of Option. Each Option shall be designated in the
written option agreement as either an Incentive Stock Option or a Nonstatutory
Stock Option. However, notwithstanding such designations, to the extent that the
aggregate Fair Market Value of Shares with respect to which Incentive Stock
Options are exercisable for the first time by an Optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock Options.
For purposes of
-5-
<PAGE> 6
this Section 5(b), Incentive Stock Options shall be taken into account in the
order in which they were granted, and the Fair Market Value of the Shares shall
be determined as of the time the Option with respect to such Shares is granted.
(c) No Employment Rights. The Plan shall not confer upon
any Optionee any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with his or her
right or the Company's right to terminate his or her employment or consulting
relationship at any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the
earlier to occur of its adoption by the Board or its approval by the
shareholders of the Company as described in Section 21 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 17 of the Plan.
7. Term of Option. The term of each Option shall be the term
stated in the Option Agreement; provided, however, that in the case of an
Incentive Stock Option, the term shall be no more than ten (10) years from the
date of grant thereof or such shorter term as may be provided in the Option
Agreement. However, in the case of an Option granted to an Optionee who, at the
time the Option is granted, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Option shall be five (5) years from the date of
grant thereof or such shorter term as may be provided in the Option Agreement.
8. Limitation on Grants to Employees. Subject to adjustment as
provided in this Plan, the maximum number of Shares which may be subject to
options or stock purchase rights granted to any one Employee under this Plan for
any fiscal year of the Company shall be 500,000.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per Share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be such price as is
determined by the Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of
the grant of such Incentive Stock Option, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant;
(B) granted to any other Employee, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
-6-
<PAGE> 7
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of the
grant of such Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the per Share exercise price shall be no less than 110% of the Fair Market Value
per Share on the date of the grant;
(B) granted to a person who, at the time of the
grant of such Option, is a Named Executive of the Company, the per share
Exercise Price shall be no less than 100% of the Fair Market Value on the date
of grant;
(iii) In the case of an Option granted on or after the
effective date of registration of any class of equity security of the Company
pursuant to Section 12 of the Exchange Act and prior to six months after the
termination of such registration, the per Share exercise price shall be no less
than 100% of the Fair Market Value per Share on the date of grant.
(b) Permissible Consideration. The consideration to be paid
for the Shares to be issued upon exercise of an Option, including the method of
payment, shall be determined by the Administrator (and, in the case of an
Incentive Stock Option, shall be determined at the time of grant) and may
consist entirely of (1) cash, (2) check, (3) promissory note, (4) other Shares
that (x) in the case of Shares acquired upon exercise of an Option either have
been owned by the Optionee for more than six months on the date of surrender or
were not acquired, directly or indirectly, from the Company, and (y) have a Fair
Market Value on the date of surrender equal to the aggregate exercise price of
the Shares as to which said Option shall be exercised, (5) authorization from
the Company to retain from the total number of Shares as to which the Option is
exercised that number of Shares having a Fair Market Value on the date of
exercise equal to the exercise price for the total number of Shares as to which
the Option is exercised, (6) delivery of a properly executed exercise notice
together with irrevocable instructions to a broker to deliver promptly to the
Company the amount of sale or loan proceeds required to pay the exercise price,
(7) delivery of an irrevocable subscription agreement for the Shares that
irrevocably obligates the option holder to take and pay for the Shares not more
than twelve months after the date of delivery of the subscription agreement, (8)
any combination of the foregoing methods of payment, or (9) such other
consideration and method of payment for the issuance of Shares to the extent
permitted under Applicable Laws. In making its determination as to the type of
consideration to accept, the Administrator shall consider if acceptance of such
consideration may be reasonably expected to benefit the Company.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable at such times and under such
conditions as determined by the Administrator, including performance criteria
with respect to the Company and/or the Optionee, and as shall be permissible
under the terms of the Plan.
An Option may not be exercised for a fraction of a Share.
-7-
<PAGE> 8
An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received by
the Company. Full payment may, as authorized by the Administrator, consist of
any consideration and method of payment allowable under Section 9(b) of the
Plan. Until the issuance (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 15 of the Plan.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Status as an Employee or Consultant. In
the event of termination of an Optionee's Continuous Status as an Employee or
Consultant, such Optionee may, but only within thirty (30) days (or such other
period of time, not exceeding three (3) months in the case of an Incentive Stock
Option or six (6) months in the case of a Nonstatutory Stock Option, as is
determined by the Administrator, with such determination in the case of an
Incentive Stock Option being made at the time of grant of the Option) after the
date of such termination (but in no event later than the date of expiration of
the term of such Option as set forth in the Option Agreement), exercise his or
her Option to the extent that he or she was entitled to exercise it at the date
of such termination. To the extent that the Optionee was not entitled to
exercise the Option at the date of such termination, or if the optionee does not
exercise such Option (which he or she was entitled to exercise) within the time
specified herein, the Option shall terminate.
(c) Disability of Optionee. Notwithstanding Section 10(b)
above, in the event of termination of an Optionee's Continuous Status as an
Employee or Consultant as a result of his or her total and permanent disability
(as defined in Section 22(e)(3) of the Code), he or she may, but only within six
(6) months (or such other period of time not exceeding twelve (12) months as is
determined by the Administrator, with such determination in the case of an
Incentive Stock Option being made at the time of grant of the Option) from the
date of such termination (but in no event later than the date of expiration of
the term of such Option as set forth in the Option Agreement), exercise his or
her Option to the extent he or she was entitled to exercise it at the date of
such termination. To the extent that he or she was not entitled to exercise the
Option at the date of termination, or if he does not exercise such Option (which
he was entitled to exercise) within the time specified herein, the Option shall
terminate.
(d) Death of Optionee. In the event of the death of an
Optionee:
-8-
<PAGE> 9
(i) during the term of the Option who is at the time of his
death an Employee or Consultant of the Company and who shall have been in
Continuous Status as an Employee or Consultant since the date of grant of the
Option, the Option may be exercised, at any time within six (6) months (or such
other period of time, not exceeding six (6) months, as is determined by the
Administrator, with such determination in the case of an Incentive Stock Option
being made at the time of grant of the Option) following the date of death (but
in no event later than the date of expiration of the term of such Option as set
forth in the Option Agreement), by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance but only to
the extent of the right to exercise that would have accrued had the Optionee
continued living and remained in Continuous Status as an Employee or Consultant
three (3) months (or such other period of time as is determined by the
Administrator as provided above) after the date of death, subject to the
limitation set forth in Section 5(b); or
(ii) within thirty (30) days (or such other period of time
not exceeding three (3) months as is determined by the Administrator, with such
determination in the case of an Incentive Stock Option being made at the time of
grant of the Option) after the termination of Continuous Status as an Employee
or Consultant, the Option or may be exercised, at any time within six (6) months
following the date of death (but in no event later than the date of expiration
of the term of such Option as set forth in the Option Agreement), by the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right to exercise that
had accrued at the date of termination.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing of the terms, conditions and restrictions related
to the offer, including the number of Shares that such person shall be entitled
to purchase, the price to be paid (which price shall not be less than 85% of the
Fair Market Value of the Shares as of the date of the offer), and the time
within which such person must accept such offer, which shall in no event exceed
thirty (30) days from the date upon which the Administrator made the
determination to grant the Stock Purchase Right. The offer shall be accepted by
execution of a Restricted Stock Purchase Agreement in the form determined by the
Administrator. Shares purchased pursuant to the grant of a Stock Purchase Right
shall be referred to herein as "Restricted Stock."
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the higher of either the original
purchase price or the Fair Market Value on the date of the repurchase.
(c) Other Provisions. The Restricted Stock Purchase
Agreement shall contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined
-9-
<PAGE> 10
by the Administrator in its sole discretion. In addition, the provisions of
Restricted Stock Purchase Agreements need not be the same with respect to each
purchaser.
(d) Rights as a Shareholder. Once the Stock Purchase Right
is exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 15
of the Plan.
(e) Rule 16b-3. Options granted to persons subject to
Section 16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain
such additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
12. Withholding Taxes. As a condition to the exercise of Options
and Stock Purchase Rights granted hereunder, the Optionee or Stock Purchase
Right holder shall make such arrangements as the Administrator may require for
the satisfaction of any federal, state, local or foreign withholding tax
obligations that may arise in connection with the exercise, receipt or vesting
of such Option or Stock Purchase Right. The Company shall not be required to
issue any Shares under the Plan until such obligations are satisfied.
13. Stock Withholding to Satisfy Withholding Tax Obligations. At
the discretion of the Administrator, Optionees and Stock Purchase Right holders
may satisfy withholding obligations as provided in this paragraph. When an
Optionee or Stock Purchase Right holder incurs tax liability in connection with
an Option or Stock Purchase Right which tax liability is subject to tax
withholding under applicable tax laws, and the Optionee or Stock Purchase Right
holder is obligated to pay the Company an amount required to be withheld under
applicable tax laws, the Optionee or Stock Purchase Right holder may satisfy the
withholding tax obligation by one or some combination of the following methods:
(a) by cash payment, or (b) out of the Optionee's or the Stock Purchase Right
holder's current compensation, (c) if permitted by the Administrator, in its
discretion, by surrendering to the Company Shares that (i) in the case of Shares
previously acquired from the Company, have been owned by the Optionee or Stock
Purchase Right holder for more than six months on the date of surrender, and
(ii) have a fair market value on the date of surrender equal to or less than the
Optionee's or the Stock Purchase Right holder's marginal tax rate times the
ordinary income recognized, or (d) by electing to have the Company withhold from
the Shares to be issued upon exercise of the Option or Stock Purchase Right that
number of Shares having a fair market value equal to the amount required to be
withheld. For this purpose, the fair market value of the Shares to be withheld
shall be determined on the date that the amount of tax to be withheld is to be
determined (the "Tax Date").
Any surrender by an Officer or Director of previously owned
Shares to satisfy tax withholding obligations arising upon exercise of an Option
or Stock Purchase Right must comply with the applicable provisions of Rule 16b-3
and shall be subject to such additional
-10-
<PAGE> 11
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
All elections by an Optionee or Stock Purchase Right
holder to have Shares withheld to satisfy tax withholding obligations shall be
made in writing in a form acceptable to the Administrator and shall be subject
to the following restrictions:
(a) the election must be made on or prior to the applicable
Tax Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option or Stock Purchase Right as to which the election
is made;
(c) all elections shall be subject to the consent or
disapproval of the Administrator;
(d) if the Optionee or Stock Purchase Right holder is an
Officer or Director, the election must comply with the applicable provisions of
Rule 16b-3 and shall be subject to such additional conditions or restrictions as
may be required thereunder to qualify for the maximum exemption from Section 16
of the Exchange Act with respect to Plan transactions.
In the event the election to have Shares withheld is
made by an Optionee or Stock Purchase Right holder and the Tax Date is deferred
under Section 83 of the Code because no election is filed under Section 83(b) of
the Code, the Optionee shall receive the full number of Shares with respect to
which the Option or Stock Purchase Right is exercised but such Optionee or Stock
Purchase Right holder shall be unconditionally obligated to tender back to the
Company the proper number of Shares on the Tax Date.
14. Non-Transferability of Options and Stock Purchase Rights.
Options and Stock Purchase Rights may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or by
the laws of descent or distribution. The designation of a beneficiary by an
Optionee or Stock Purchase Right holder will not constitute a transfer. An
Option or Stock Purchase Right may be exercised, during the lifetime of the
Optionee or Stock Purchase Right holder only by the Optionee or Stock Purchase
Right holder or a transferee permitted by this Section 14.
-11-
<PAGE> 12
15. Adjustments Upon Changes in Capitalization; Corporate
Transactions.
(a) Adjustment. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, the number of shares of Common
Stock that have been authorized for issuance under the Plan but as to which no
Options or Stock Purchase Rights have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, the maximum number of shares of Common Stock for which Options
or Stock Purchase Rights may be granted to any employee under Section 8 of the
Plan, and the price per share of Common Stock covered by each such outstanding
Option or Stock Purchase Right, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Administrator, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option
or Stock Purchase Right.
(b) Corporate Transactions. In the event of the proposed
dissolution or liquidation of the Company, the Option or Stock Purchase Right
will terminate immediately prior to the consummation of such proposed action,
unless otherwise provided by the Administrator. The Administrator may, in the
exercise of its sole discretion in such instances, declare that any Option or
Stock Purchase Right shall terminate as of a date fixed by the Administrator and
give each Optionee or Stock Purchase Right holder the right to exercise his or
her Option or Stock Purchase Right as to all or any part of the Optioned Stock
or Restricted Stock, including Shares as to which the Option or Stock Purchase
Right would not otherwise be exercisable. In the event of a proposed sale of all
or substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, the Option or Stock Purchase Right may be
assumed or an equivalent option or stock purchase right substituted by such
successor corporation or a parent or subsidiary of such successor corporation.
In the event the Option or Stock Purchase Right is not assumed or substituted,
the Optionee or Stock Purchase Right holder shall have the right to exercise the
Option or Stock Purchase Right as to all of the Optioned Stock or Restricted
Stock, including Shares as to which the Option would not otherwise be
exercisable, and any Restricted Stock held by a purchaser shall be released from
the Company's repurchase option.
16. Time of Granting Options and Stock Purchase Rights. The date
of grant of an Option or Stock Purchase Right shall, for all purposes, be the
date on which the Administrator makes the determination granting such Option or
Stock Purchase Right or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Employee or Consultant to
whom an Option or Stock Purchase Right is so granted within a reasonable time
after the date of such grant.
-12-
<PAGE> 13
17. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may amend or
terminate the Plan from time to time in such respects as the Board may deem
advisable; provided that, the following revisions or amendments shall require
approval of the shareholders of the Company in the manner described in Section
21 of the Plan:
(i) any increase in the number of Shares subject to
the Plan, other than an adjustment under Section 15 of the Plan;
(ii) any change in the designation of the class of
persons eligible to be granted Options or Stock Purchase Rights;
(iii) any change in the limitation on grants to
employees as described in Section 8 of the Plan or other changes which would
require shareholder approval to qualify options or stock purchase rights granted
hereunder as performance-based compensation under Section 162(m) of the Code; or
(iv) any revision or amendment requiring shareholder
approval in order to preserve the qualification of the Plan under Rule 16b-3.
(b) Shareholder Approval. If any amendment requiring
shareholder approval under Section 17(a) of the Plan is made subsequent to the
first registration of any class of equity securities by the Company under
Section 12 of the Exchange Act, such shareholder approval shall be solicited as
described in Section 21 of the Plan.
(c) Effect of Amendment or Termination. Any such amendment
or termination of the Plan shall not affect Options or Stock Purchase Rights
already granted and such Options or Stock Purchase Rights shall remain in full
force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee or Stock Purchase Right Holder
and the Board, which agreement must be in writing and signed by the Optionee or
Stock Purchase Right Holder and the Company.
18. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option or Stock Purchase Right unless the
exercise of such Option or Stock Purchase Right and the issuance and delivery of
such Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance.
As a condition to the exercise of an Option or Stock Purchase
Right, the Company may require the person exercising such Option or Stock
Purchase Right to represent and warrant at the time of any such exercise that
the Shares are being purchased only for investment and
-13-
<PAGE> 14
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
19. Reservation of Shares. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan. The inability of
the Company to obtain authority from any regulatory body having jurisdiction,
which authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
20. Agreements. Options and Stock Purchase Rights shall be
evidenced by written agreements in such form as the Board shall approve.
21. Shareholder Approval.
(a) Continuance of the Plan shall be subject to approval by
the shareholders of the Company within twelve (12) months before or after the
date the Plan is adopted. Such shareholder approval shall be obtained in the
manner and to the degree required under applicable federal and state law and the
rules of any stock exchange upon which the Shares are listed.
(b) In the event that the Company registers any class of
equity securities pursuant to Section 12 of the Exchange Act, any required
approval of the shareholders of the Company obtained after such registration
shall be solicited substantially in accordance with Section 14(a) of the
Exchange Act and the rules and regulations promulgated thereunder.
(c) If any required approval by the shareholders of the Plan
itself or of any amendment thereto is solicited at any time otherwise than in
the manner described in Section 21(b) hereof, then the Company shall, at or
prior to the first annual meeting of shareholders held subsequent to the later
of (1) the first registration of any class of equity securities of the Company
under Section 12 of the Exchange Act or (2) the granting of an Option or Stock
Purchase Right hereunder to an officer or director after such registration, do
the following:
(i) furnish in writing to the holders entitled to vote
for the Plan substantially the same information that would be required (if
proxies to be voted with respect to approval or disapproval of the Plan or
amendment were then being solicited) by the rules and regulations in effect
under Section 14(a) of the Exchange Act at the time such information is
furnished; and
(ii) file with, or mail for filing to, the Securities
and Exchange Commission four copies of the written information referred to in
subsection (i) hereof not later than the date on which such information is first
sent or given to shareholders.
22. Information to Optionees and Purchasers. The Company shall
provide to each Optionee and Stock Purchase Right holder, during the period for
which such Optionee or holder
-14-
<PAGE> 15
has one or more Options or Stock Purchase Rights outstanding, copies of all
annual reports and other information which are provided to all shareholders of
the Company.
-15-
<PAGE> 1
EXHIBIT 10.3
RASTER GRAPHICS, INC.
1996 DIRECTORS' STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Directors' Stock
Option Plan are to attract and retain the best available personnel for service
as Directors of the Company, to provide additional incentive to the Outside
Directors of the Company to serve as Directors, and to encourage their continued
service on the Board.
All options granted hereunder shall be "nonstatutory stock
options".
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Board" shall mean the Board of Directors of the
Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" shall mean the Common Stock of the
Company.
(d) "Company" shall mean Raster Graphics, Inc., a Delaware
corporation.
(e) "Continuous Status as a Director" shall mean the absence
of any interruption or termination of service as a Director.
(f) "Director" shall mean a member of the Board.
(g) "Employee" shall mean any person, including officers
and directors, employed by the Company or any Parent or Subsidiary of the
Company. The payment of a director's fee by the Company shall not be sufficient
in and of itself to constitute "employment" by the Company.
(h) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
(i) "Option" shall mean a stock option granted pursuant
to the Plan. All options shall be nonstatutory stock options (i.e., options that
are not intended to qualify as incentive stock options under Section 422 of the
Code).
(j) "Optioned Stock" shall mean the Common Stock subject
to an Option.
(k) "Optionee" shall mean an Outside Director who
receives an Option.
(l) "Outside Director" shall mean a Director who is not
an Employee.
(m) "Parent" shall mean a "parent corporation", whether
now or hereafter existing, as defined in Section 424(e) of the Code.
(n) "Plan" shall mean this 1996 Directors' Stock Option
Plan.
<PAGE> 2
(o) "Share" shall mean a share of the Common Stock, as
adjusted in accordance with Section 11 of the Plan.
(p) "Subsidiary" shall mean a "subsidiary corporation",
whether now or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of
Section 11 of the Plan, the maximum aggregate number of Shares which may be
optioned and sold under the Plan is 150,000 Shares (the "Pool") of Common Stock.
The Shares may be authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any
reason without having been exercised in full, the unpurchased Shares which were
subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan. If Shares which were acquired upon
exercise of an Option are subsequently repurchased by the Company, such Shares
shall not in any event be returned to the Plan and shall not become available
for future grant under the Plan.
4. Administration of and Grants of Options under the Plan.
(a) Administrator. Except as otherwise required herein, the
Plan shall be administered by the Board.
(b) Procedure for Grants. All grants of Options hereunder
shall be automatic and non discretionary and shall be made strictly in
accordance with the following provisions:
(i) No person shall have any discretion to select
which Outside Directors shall be granted Options or to determine the number of
Shares to be covered by Options granted to Outside Directors.
(ii) Each Outside Director shall be automatically
granted an Option to purchase Shares (the "First Option") as follows: (A) with
respect to persons who are Outside Directors on the effective date of this Plan,
as determined in accordance with Section 6 hereof, 10,000 shares on such
effective date, and (B) with respect to any other person, 10,000 shares on the
date on which such person first becomes an Outside Director, whether through
election by the shareholders of the Company or appointment by the Board of
Directors to fill a vacancy.
(iii) After the First Option has been granted to an
Outside Director, such Outside Director shall thereafter be automatically
granted an Option to purchase 5,000 Shares (a "Subsequent Option") on the first
day of each fiscal year of the Company on and after 1997, provided that, on such
date, he or she shall have served on the Board for at least six (6) months prior
to such date.
(iv) Notwithstanding the provisions of subsections (ii)
and (iii) hereof, in the event that a grant would cause the number of Shares
subject to outstanding Options plus the number of Shares previously purchased
upon exercise of Options to exceed the Pool, then each such automatic grant
shall be for that number of Shares determined by dividing the total number of
-2-
<PAGE> 3
Shares remaining available for grant by the number of Outside Directors
receiving an Option on such date on the automatic grant date. Any further grants
shall then be deferred until such time, if any, as additional Shares become
available for grant under the Plan through action of the shareholders to
increase the number of Shares which may be issued under the Plan or through
cancellation or expiration of Options previously granted hereunder.
(v) Notwithstanding the provisions of subsections (ii)
and (iii) hereof, any grant of an Option made before the Company has obtained
shareholder approval of the Plan in accordance with Section 17 hereof shall be
conditioned upon obtaining such shareholder approval of the Plan in accordance
with Section 17 hereof.
(vi) The terms of each First Option granted hereunder
shall be as follows:
(1) the First Option shall be exercisable only
while the Outside Director remains a Director of the Company, except as set
forth in Section 9 hereof.
(2) the exercise price per Share shall be 100% of
the fair market value per Share on the date of grant of the First Option,
determined in accordance with Section 8 hereof.
(3) the First Option shall become exercisable in
installments cumulatively as to 33 1/3% of the Shares subject to the First
Option on each of the first, second and third anniversaries of the date of grant
of the Option.
(vii) The terms of each Subsequent Option granted
hereunder shall be as follows:
(1) the Subsequent Option shall be exercisable
only while the Outside Director remains a Director of the Company, except as set
forth in Section 9 hereof.
(2) the exercise price per Share shall be 100% of
the fair market value per Share on the date of grant of the Subsequent Option,
determined in accordance with Section 8 hereof.
(3) the Subsequent Option shall become exercisable
as to one hundred percent 100% of the Shares subject to the Subsequent Option on
the first anniversary of the date of grant of the Subsequent Option.
(c) Powers of the Board. Subject to the provisions and
restrictions of the Plan, the Board shall have the authority, in its discretion:
(i) to determine, upon review of relevant information and in accordance with
Section 8(b) of the Plan, the fair market value of the Common Stock; (ii) to
determine the exercise price per share of Options to be granted, which exercise
price shall be determined in accordance with Section 8(a) of the Plan; (iii) to
interpret the Plan; (iv) to prescribe, amend and rescind rules and regulations
relating to the Plan; (v) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an Option previously
granted hereunder; and (vi) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
-3-
<PAGE> 4
(d) Effect of Board's Decision. All decisions,
determinations and interpretations of the Board shall be final and binding on
all Optionees and any other holders of any Options granted under the Plan.
(e) Suspension or Termination of Option. If the President or
his or her designee reasonably believes that an Optionee has committed an act of
misconduct, the President may suspend the Optionee's right to exercise any
option pending a determination by the Board of Directors (excluding the Outside
Director accused of such misconduct). If the Board of Directors (excluding the
Outside Director accused of such misconduct) determines an Optionee has
committed an act of embezzlement, fraud, dishonesty, nonpayment of an obligation
owed to the Company, breach of fiduciary duty or deliberate disregard of the
Company rules resulting in loss, damage or injury to the Company, or if an
Optionee makes an unauthorized disclosure of any Company trade secret or
confidential information, engages in any conduct constituting unfair
competition, induces any Company customer to breach a contract with the Company
or induces any principal for whom the Company acts as agent to terminate such
agency relationship, neither the Optionee nor his or her estate shall be
entitled to exercise any option whatsoever. In making such determination, the
Board of Directors (excluding the Outside Director accused of such misconduct)
shall act fairly and shall give the Optionee an opportunity to appear and
present evidence on Optionee's behalf at a hearing before the Board or a
committee of the Board.
5. Eligibility. Options may be granted only to Outside
Directors. All Options shall be automatically granted in accordance with the
terms set forth in Section 4(b) hereof. An Outside Director who has been
granted an Option may, if he or she is otherwise eligible, be granted an
additional Option or Options in accordance with such provisions.
The Plan shall not confer upon any Optionee any right with
respect to continuation of service as a Director or nomination to serve as a
Director, nor shall it interfere in any way with any rights which the Director
or the Company may have to terminate his or her directorship at any time.
6. Term of Plan; Effective Date. The Plan shall become effective
on the effectiveness of the registration statement under the Securities Act of
1933 relating to the Company's initial public offering of securities. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 13 of the Plan.
7. Term of Options. The term of each Option shall be ten (10)
years from the date of grant thereof.
-4-
<PAGE> 5
8. Exercise Price and Consideration.
(a) Exercise Price. The per Share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be 100% of the fair
market value per Share on the date of grant of the Option.
(b) Fair Market Value. The fair market value shall be
determined by the Board; provided, however, that where there is a public market
for the Common Stock, the fair market value per Share shall be the mean of the
bid and asked prices of the Common Stock in the over-the-counter market on the
date of grant, as reported in The Wall Street Journal (or, if not so reported,
as otherwise reported by the National Association of Securities Dealers
Automated Quotation ("Nasdaq") System) or, in the event the Common Stock is
traded on the Nasdaq National Market or listed on a stock exchange, the fair
market value per Share shall be the closing price on such system or exchange on
the date of grant of the Option, as reported in The Wall Street Journal. With
respect to any Options granted hereunder concurrently with the initial
effectiveness of the Plan, the fair market value shall be the Price to Public as
set forth in the final prospectus relating to such initial public offering.
(c) Form of Consideration. The consideration to be paid for
the Shares to be issued upon exercise of an Option shall consist entirely of
cash, check, other Shares of Common Stock having a fair market value on the date
of surrender equal to the aggregate exercise price of the Shares as to which
said Option shall be exercised (which, if acquired from the Company, shall have
been held for at least six months), or any combination of such methods of
payment and/or any other consideration or method of payment as shall be
permitted under applicable corporate law.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable at such times as are set forth in
Section 4(b) hereof; provided, however, that no Options shall be exercisable
prior to shareholder approval of the Plan in accordance with Section 17 hereof
has been obtained.
An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may consist of any consideration and
method of payment allowable under Section 8(c) of the Plan. Until the issuance
(as evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. A share certificate for the number of Shares so acquired
shall be issued to the Optionee as soon as practicable after exercise of the
Option. No adjustment will be made for a dividend or other right for which the
record date is prior to the date the stock certificate is issued, except as
provided in Section 11 of the Plan.
-5-
<PAGE> 6
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(b) Termination of Status as a Director. If an Outside
Director ceases to serve as a Director, he or she may, but only within ninety
(90) days after the date he or she ceases to be a Director of the Company,
exercise his or her Option to the extent that he or she was entitled to exercise
it at the date of such termination. Notwithstanding the foregoing, in no event
may the Option be exercised after its term set forth in Section 7 has expired.
To the extent that such Outside Director was not entitled to exercise an Option
at the date of such termination, or does not exercise such Option (which he or
she was entitled to exercise) within the time specified herein, the Option shall
terminate.
(c) Disability of Optionee. Notwithstanding Section 9(b)
above, in the event a Director is unable to continue his or her service as a
Director with the Company as a result of his or her total and permanent
disability (as defined in Section 22(e)(3) of the Internal Revenue Code), he or
she may, but only within six (6) months (or such other period of time not
exceeding twelve (12) months as is determined by the Board) from the date of
such termination, exercise his or her Option to the extent he or she was
entitled to exercise it at the date of such termination. Notwithstanding the
foregoing, in no event may the Option be exercised after its term set forth in
Section 7 has expired. To the extent that he or she was not entitled to exercise
the Option at the date of termination, or if he or she does not exercise such
Option (which he or she was entitled to exercise) within the time specified
herein, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an
Optionee:
(i) During the term of the Option who is, at the time
of his or her death, a Director of the Company and who shall have been in
Continuous Status as a Director since the date of grant of the Option, the
Option may be exercised, at any time within six (6) months following the date of
death, by the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise that would have accrued had the Optionee continued living and
remained in Continuous Status as Director for twelve (12) months (or such lesser
period of time as is determined by the Board) after the date of death.
Notwithstanding the foregoing, in no event may the Option be exercised after its
term set forth in Section 7 has expired.
(ii) Within three (3) months after the termination of
Continuous Status as a Director, the Option may be exercised, at any time within
six (6) months following the date of death, by the Optionee's estate or by a
person who acquired the right to exercise the Option by bequest or inheritance,
but only to the extent of the right to exercise that had accrued at the date of
termination. Notwithstanding the foregoing, in no event may the option be
exercised after its term set forth in Section 7 has expired.
10. Nontransferability of Options. The Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution or pursuant to a
qualified domestic relations order (as defined by the Code or the rules
thereunder). The designation of a beneficiary by an Optionee does not constitute
a transfer.
-6-
<PAGE> 7
An Option may be exercised during the lifetime of an Optionee only by the
Optionee or a transferee permitted by this Section.
11. Adjustments Upon Changes in Capitalization; Corporate
Transactions.
(a) Adjustment. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, the number of shares of Common Stock which have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or which have been returned to the Plan upon cancellation or expiration
of an Option, and the number of shares of Common Stock issuable pursuant to the
automatic grant provisions of Section 4 hereof, as well as the price per share
of Common Stock covered by each such outstanding Option shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
(b) Corporate Transactions. In the event of (i) a dissolution
or liquidation of the Company, (ii) a sale of all or substantially all of the
Company's assets, (iii) a merger or consolidation in which the Company is not
the surviving corporation, or (iv) any other capital reorganization in which
more than fifty percent (50%) of the shares of the Company entitled to vote are
exchanged, the Company shall give to the Eligible Director, at the time of
adoption of the plan for liquidation, dissolution, sale, merger, consolidation
or reorganization, either a reasonable time thereafter within which to exercise
the Option, including Shares as to which the Option would not be otherwise
exercisable, prior to the effectiveness of such liquidation, dissolution, sale,
merger, consolidation or reorganization, at the end of which time the Option
shall terminate, or the right to exercise the Option, including Shares as to
which the Option would not be otherwise exercisable (or receive a substitute
option with comparable terms), as to an equivalent number of shares of stock of
the corporation succeeding the Company or acquiring its business by reason of
such liquidation, dissolution, sale, merger, consolidation or reorganization.
12. Time of Granting Options. The date of grant of an Option
shall, for all purposes, be the date determined in accordance with Section 4(b)
hereof. Notice of the determination shall be given to each Outside Director to
whom an Option is so granted within a reasonable time after the date of such
grant.
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may amend or
terminate the Plan from time to time in such respects as the Board may deem
advisable; provided that, to the extent necessary and desirable to comply with
Rule 16b-3 under the Exchange Act (or any other
-7-
<PAGE> 8
applicable law or regulation), the Company shall obtain approval of the
shareholders of the Company to Plan amendments to the extent and in the manner
required by such law or regulation. Notwithstanding the foregoing, the
provisions set forth in Section 4 of this Plan (and any other Sections of this
Plan that affect the formula award terms required to be specified in this Plan
by Rule 16b-3) shall not be amended more than once every six months, other than
to comport with changes in the Code, the Employee Retirement Income Security Act
of 1974, as amended, or the rules thereunder.
(b) Effect of Amendment or Termination. Any such amendment
or termination of the Plan that would impair the rights of any Optionee shall
not affect Options already granted to such Optionee and such Options shall
remain in full force and effect as if this Plan had not been amended or
terminated, unless mutually agreed otherwise between the Optionee and the Board,
which agreement must be in writing and signed by the Optionee and the Company.
14. Conditions Upon Issuance of Shares. Shares shall not be
issued pursuant to the exercise of an Option unless the exercise of such Option
and the issuance and delivery of such Shares pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance. As a
condition to the exercise of an Option, the Company may require the person
exercising such Option to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares, if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
relevant provisions of law.
15. vation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. Inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
16. Option Agreement. Options shall be evidenced by written
option agreements in such form as the Board shall approve.
17. Shareholder Approval. Continuance of the Plan shall be subject
to approval by the shareholders of the Company at or prior to the first annual
meeting of shareholders held subsequent to the granting of an Option hereunder.
If such shareholder approval is obtained at a duly held shareholders' meeting,
it may be obtained by the affirmative vote of the holders of a majority of the
outstanding shares of the Company present or represented and entitled to vote
thereon. If such shareholder approval is obtained by written consent, it may be
obtained by the written consent of the holders of a majority of the outstanding
shares of the Company. Options may be granted, but not exercised, before such
shareholder approval.
-8-
<PAGE> 1
EXHIBIT 10.4
RASTER GRAPHICS, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1996 Employee Stock
Purchase Plan of Raster Graphics, Inc..
1. Purpose. The purpose of the Plan is to provide employees of
the Company and its Designated Subsidiaries with an opportunity to purchase
Common Stock of the Company. It is the intention of the Company to have the Plan
qualify as an "Employee Stock Purchase Plan" under Section 423 of the Internal
Revenue Code of 1986, as amended. The provisions of the Plan shall, accordingly,
be construed so as to extend and limit participation in a manner consistent with
the requirements of that section of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the
Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" shall mean the Common Stock of the
Company.
(d) "Company" shall mean Raster Graphics, Inc., a Delaware
corporation.
(e) "Compensation" shall mean all regular straight time
gross earnings and sales commissions, and shall not include payments for
incentive compensation, overtime, shift premium, incentive payments, bonuses and
other compensation.
(f) "Continuous Status as an Employee" shall mean the
absence of any interruption or termination of service as an Employee. Continuous
Status as an Employee shall not be considered interrupted in the case of a leave
of absence agreed to in writing by the Company, provided that such leave is for
a period of not more than 90 days or reemployment upon the expiration of such
leave is guaranteed by contract or statute.
(g) "Contributions" shall mean all amounts credited to the
account of a participant pursuant to the Plan.
(h) "Designated Subsidiaries" shall mean the Subsidiaries
which have been designated by the Board from time to time in its sole discretion
as eligible to participate in the Plan.
(i) "Employee" shall mean any person, including an Officer,
who is customarily employed for at least twenty (20) hours per week and more
than five (5) months in a calendar year by the Company or one of its Designated
Subsidiaries.
<PAGE> 2
(j) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(k) "Purchase Date" shall mean the last day of each Purchase
Period of the Plan.
(l) "Offering Date" shall mean the first business day of
each Offering Period of the Plan.
(m) "Offering Period" shall mean a period of twelve (12)
months commencing on January 1 and July 1 of each year, except for the first
Offering Period as set forth in Section 4(a).
(n) "Officer" shall mean a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(o) "Plan" shall mean this Employee Stock Purchase Plan.
(p) "Purchase Period" shall mean a period of six (6) months
within an Offering Period, except for the first Purchase Period as set forth in
Section 4(b).
(q) "Subsidiary" shall mean a corporation, domestic or
foreign, of which not less than 50% of the voting shares are held by the Company
or a Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
3. Eligibility.
(a) Any person who is an Employee as of the Offering Date of
a given Offering Period shall be eligible to participate in such Offering Period
under the Plan, subject to the requirements of Section 5(a) and the limitations
imposed by Section 423(b) of the Code.
(b) Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan (i) if,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own stock and/or hold outstanding options to purchase stock possessing
five percent (5%) or more of the total combined voting power or value of all
classes of stock of the Company or of any subsidiary of the Company, or (ii) if
such option would permit his or her rights to purchase stock under all employee
stock purchase plans (described in Section 423 of the Code) of the Company and
its Subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) of fair market value of such stock (determined at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
4. Offering Periods and Purchase Periods.
(a) Offering Periods. The Plan shall be implemented by a
series of Offering Periods of twelve (12) months duration, with new Offering
Periods commencing on or about January 1 and July 1 of each year (or at such
other time or times as may be determined by the
-2-
<PAGE> 3
Board of Directors). The first Offering Period shall commence on the beginning
of the effective date of the Registration Statement on Form S-1 for the initial
public offering of the Company's Common Stock (the "IPO Date") and continue
until June 30, 1997. The Plan shall continue until terminated in accordance with
Section 20 hereof. The Board of Directors of the Company shall have the power to
change the duration and/or the frequency of Offering Periods with respect to
future offerings without shareholder approval if such change is announced at
least fifteen (15) days prior to the scheduled beginning of the first Offering
Period to be affected. Eligible employees may not participate in more than one
Offering Period at a time.
(b) Purchase Periods. Each Offering Period shall consist of
two (2) consecutive purchase periods of six (6) months duration. The last day
of each Purchase Period shall be the "Purchase Date" for such Purchase Period. A
Purchase Period commencing on January 1 shall end on the next June 30. A
Purchase Period commencing on July 1 shall end on the next December 31. The
first Purchase Period shall commence on the IPO Date and shall end on December
31, 1996. The Board of Directors of the Company shall have the power to change
the duration and/or frequency of Purchase Periods with respect to future
purchases without shareholder approval if such change is announced at least
fifteen (15) days prior to the scheduled beginning of the first Purchase Period
to be affected.
5. Participation.
(a) An eligible Employee may become a participant in the
Plan by completing a subscription agreement on the form provided by the Company
and filing it with the Company's payroll office prior to the applicable Offering
Date, unless a later time for filing the subscription agreement is set by the
Board for all eligible Employees with respect to a given offering. The
subscription agreement shall set forth the percentage of the participant's
Compensation (which shall be not less than 1% and not more than 10%) to be paid
as Contributions pursuant to the Plan.
(b) Payroll deductions shall commence on the first payroll
following the Offering Date and shall end on the last payroll paid on or prior
to the last Purchase Period of the Offering Period to which the subscription
agreement is applicable, unless sooner terminated by the participant as provided
in Section 10.
6. Method of Payment of Contributions.
(a) The participant shall elect to have payroll deductions
made on each payday during the Offering Period in an amount not less than one
percent (1%) and not more than ten percent (10%) of such participant's
Compensation on each such payday. All payroll deductions made by a participant
shall be credited to his or her account under the Plan. A participant may not
make any additional payments into such account.
(b) A participant may discontinue his or her participation
in the Plan as provided in Section 10, or, on one occasion only during the
Offering Period, may decrease the rate of his or her Contributions during the
Offering Period by completing and filing with the
-3-
<PAGE> 4
Company a new subscription agreement. The change in rate shall be effective as
of the beginning of the next calendar month following the date of filing of the
new subscription agreement, if the agreement is filed at least ten (10) business
days prior to such date and, if not, as of the beginning of the next succeeding
calendar month.
(c) Notwithstanding the foregoing, to the extent necessary
to comply with Section 423(b)(8) of the Code and Section 3(b) herein, a
participant's payroll deductions may be decreased to 0% at such time during any
Offering Period which is scheduled to end during the current calendar year that
the aggregate of all payroll deductions accumulated with respect to such
Offering Period and any other Offering Period ending within the same calendar
year equal $21,250. Payroll deductions shall re-commence at the rate provided in
such participant's subscription Agreement at the beginning of the first Offering
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10.
7. Grant of Option.
(a) On the Offering Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Purchase Date a number of shares of the Company's
Common Stock determined by dividing such Employee's Contributions accumulated
prior to such Purchase Date and retained in the participant's account as of the
Purchase Date by the lower of (i) eighty-five percent (85%) of the fair market
value of a share of the Company's Common Stock on the Offering Date, or (ii)
eighty-five percent (85%) of the fair market value of a share of the Company's
Common Stock on the Purchase Date; provided however, that the maximum number of
shares an Employee may purchase during each Offering Period shall be determined
at the Offering Date by dividing $25,000 by the fair market value of a share of
the Company's Common Stock on the Offering Date, and provided further that such
purchase shall be subject to the limitations set forth in Sections 3(b) and 13.
The fair market value of a share of the Company's Common Stock shall be
determined as provided in Section 7(b).
(b) The option price per share of the shares offered in a
given Offering Period shall be the lower of: (i) 85% of the fair market value of
a share of the Common Stock of the Company on the Offering Date; or (ii) 85% of
the fair market value of a share of the Common Stock of the Company on the
Purchase Date. The fair market value of the Company's Common Stock on a given
date shall be determined by the Board in its discretion based on the closing
price of the Common Stock for such date (or, in the event that the Common Stock
is not traded on such date, on the immediately preceding trading date), as
reported by the National Association of Securities Dealers Automated Quotation
(Nasdaq) National Market or, if such price is not reported, the mean of the bid
and asked prices per share of the Common Stock as reported by Nasdaq or, in the
event the Common Stock is listed on a stock exchange, the fair market value per
share shall be the closing price on such exchange on such date (or, in the event
that the Common Stock is not traded on such date, on the immediately preceding
trading date), as reported in The Wall Street Journal. For purposes of the
Offering Date under the first Offering Period under the Plan, the fair market
value of a share of the Common Stock of the Company shall be the Price to Public
as set forth in the final prospectus filed with the Securities and Exchange
Commission pursuant to Rule 424 under the Securities Act of 1933, as amended.
-4-
<PAGE> 5
8. Exercise of Option. Unless a participant withdraws from the
Plan as provided in paragraph 10, his or her option for the purchase of shares
will be exercised automatically on each Purchase Date of an Offering Period, and
the maximum number of shares, including fractional shares, subject to the option
will be purchased at the applicable option price with the accumulated
Contributions in his or her account. The shares purchased upon exercise of an
option hereunder shall be deemed to be transferred to the participant on the
Purchase Date. During his or her lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.
9. Delivery. As promptly as practicable after each Purchase Date
of each Offering Period, the Company shall arrange the delivery to each
participant, as appropriate, of a certificate representing the shares purchased
upon exercise of his or her option or the deposit of such number of shares with
the broker selected by the Company for administration of Plan stock purchases,
as determined by the Company. Any cash remaining to the credit of a
participant's account under the Plan after a purchase by him or her of shares at
the termination of each Purchase Period, shall be carried over to the next
Purchase Period if the Employee continues to participate in the Plan, or if the
Employee does not continue to participate, shall be returned to said
participant.
10. Voluntary Withdrawal; Termination of Employment.
(a) A participant may withdraw all but not less than all the
Contributions credited to his or her account under the Plan at any time prior to
each Purchase Date by giving written notice to the Company. All of the
participant's Contributions credited to his or her account will be paid to him
or her promptly after receipt of his or her notice of withdrawal and his or her
option for the current period will be automatically terminated, and no further
Contributions for the purchase of shares will be made during the Offering
Period.
(b) Upon termination of the participant's Continuous Status
as an Employee prior to the Purchase Date of an Offering Period for any reason,
including retirement or death, the Contributions credited to his or her account
will be returned to him or her or, in the case of his or her death, to the
person or persons entitled thereto under Section 15, and his or her option will
be automatically terminated.
(c) In the event an Employee fails to remain in Continuous
Status as an Employee of the Company for at least twenty (20) hours per week
during the Offering Period in which the employee is a participant, he or she
will be deemed to have elected to withdraw from the Plan and the Contributions
credited to his or her account will be returned to him or her and his or her
option terminated.
(d) A participant's withdrawal from an offering will not
have any effect upon his or her eligibility to participate in a succeeding
offering or in any similar plan which may hereafter be adopted by the Company.
11. Automatic Withdrawal. If the fair market value of the shares
on the first Purchase Date of an Offering Period is less than the fair market
value of the shares on the Offering Date for such Offering Period, then every
participant shall automatically (i) be withdrawn from such
-5-
<PAGE> 6
Offering Period at the close of such Purchase Date and after the acquisition of
shares for such Purchase Period, and (ii) be enrolled in the Offering Period
commencing on the first business day subsequent to such Purchase Period.
12. Interest. No interest shall accrue on the Contributions of a
participant in the Plan.
13. Stock.
(a) The maximum number of shares of the Company's Common
Stock which shall be made available for sale under the Plan shall be 400,000
shares, subject to adjustment upon changes in capitalization of the Company as
provided in Section 19. If the total number of shares which would otherwise be
subject to options granted pursuant to Section 7(a) on the Offering Date of an
Offering Period exceeds the number of shares then available under the Plan
(after deduction of all shares for which options have been exercised or are then
outstanding), the Company shall make a pro rata allocation of the shares
remaining available for option grant in as uniform a manner as shall be
practicable and as it shall determine to be equitable. In such event, the
Company shall give written notice of such reduction of the number of shares
subject to the option to each Employee affected thereby and shall similarly
reduce the rate of Contributions, if necessary.
(b) The participant will have no interest or voting right in
shares covered by his or her option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan
will be registered in the name of the participant or in the name of the
participant and his or her spouse.
14. Administration. The Board, or a committee named by the Board,
shall supervise and administer the Plan and shall have full power to adopt,
amend and rescind any rules deemed desirable and appropriate for the
administration of the Plan and not inconsistent with the Plan, to construe and
interpret the Plan, and to make all other determinations necessary or advisable
for the administration of the Plan. The composition of the committee shall be in
accordance with the requirements to obtain or retain any available exemption
from the operation of Section 16(b) of the Exchange Act pursuant to Rule 16b-3
promulgated thereunder.
15. Designation of Beneficiary.
(a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such participant's death
subsequent to the end of a Purchase Period but prior to delivery to him or her
of such shares and cash. In addition, a participant may file a written
designation of a beneficiary who is to receive any cash from the participant's
account under the Plan in the event of such participant's death prior to the
Purchase Date of an Offering Period. If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be required for
such designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant (and his or her spouse, if any) at any time by written notice. In
the event of the death of a participant and
-6-
<PAGE> 7
in the absence of a beneficiary validly designated under the Plan who is living
at the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
16. Transferability. Neither Contributions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in Section 15) by the participant. Any such attempt
at assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds in
accordance with Section 10.
17. Use of Funds. All Contributions received or held by the
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such Contributions.
18. Reports. Individual accounts will be maintained for each
participant in the Plan. Statements of account will be given to participating
Employees promptly following the Purchase Date, which statements will set forth
the amounts of Contributions, the per share purchase price, the number of shares
purchased and the remaining cash balance, if any.
19. Adjustments Upon Changes in Capitalization; Corporate
Transactions.
(a) Adjustment. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each option under the Plan which has not yet been exercised and the number of
shares of Common Stock which have been authorized for issuance under the Plan
but have not yet been placed under option (collectively, the "Reserves"), as
well as the price per share of Common Stock covered by each option under the
Plan which has not yet been exercised, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of shares of Common Stock effected without receipt of consideration by
the Company; provided, however, that conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration". Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an option.
(b) Corporate Transactions. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period will terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board. In the event of
-7-
<PAGE> 8
a proposed sale of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation, each option under the
Plan shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation,
unless the Board determines, in the exercise of its sole discretion and in lieu
of such assumption or substitution, to shorten the Offering Period then in
progress by setting a new Purchase Date (the "New Purchase Date"). If the Board
shortens the Offering Period then in progress in lieu of assumption or
substitution in the event of a merger or sale of assets, the Board shall notify
each participant in writing, at least ten (10) days prior to the New Purchase
Date, that the Purchase Date for his or her option has been changed to the New
Purchase Date and that his or her option will be exercised automatically on the
New Purchase Date, unless prior to such date he or she has withdrawn from the
Offering Period as provided in Section 10. For purposes of this paragraph, an
option granted under the Plan shall be deemed to be assumed if, following the
sale of assets or merger, the option confers the right to purchase, for each
share of option stock subject to the option immediately prior to the sale of
assets or merger, the consideration (whether stock, cash or other securities or
property) received in the sale of assets or merger by holders of Common Stock
for each share of Common Stock held on the effective date of the transaction
(and if such holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding shares of
Common Stock); provided, however, that if such consideration received in the
sale of assets or merger was not solely common stock of the successor
corporation or its parent (as defined in Section 424(e) of the Code), the Board
may, with the consent of the successor corporation and the participant, provide
for the consideration to be received upon exercise of the option to be solely
common stock of the successor corporation or its parent equal in fair market
value to the per share consideration received by holders of Common Stock and the
sale of assets or merger.
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock, and in the event of the Company being consolidated with or merged into
any other corporation.
20. Amendment or Termination.
(a) The Board of Directors of the Company may at any time
terminate or amend the Plan. Except as provided in Section 19, no such
termination may affect options previously granted, nor may an amendment make any
change in any option theretofore granted which adversely affects the rights of
any participant. In addition, to the extent necessary to comply with Rule 16b-3
under the Exchange Act, or under Section 423 of the Code (or any successor rule
or provision or any applicable law or regulation), the Company shall obtain
shareholder approval in such a manner and to such a degree as so required.
(b) Without shareholder consent and without regard to
whether any participant rights may be considered to have been adversely
affected, the Board (or its committee) shall be entitled to change the Offering
Periods and Purchase Periods, limit the frequency and/or number of changes in
the amount withheld during an Offering Period, establish the exchange ratio
-8-
<PAGE> 9
applicable to amounts withheld in a currency other than U.S. dollars, permit
payroll withholding in excess of the amount designated by a participant in order
to adjust for delays or mistakes in the Company's processing of properly
completed withholding elections, establish reasonable waiting and adjustment
periods and/or accounting and crediting procedures to ensure that amounts
applied toward the purchase of Common Stock for each participant properly
correspond with amounts withheld from the participant's Compensation, and
establish such other limitations or procedures as the Board (or its committee)
determines in its sole discretion advisable which are consistent with the Plan.
21. Notices. All notices or other communications by a participant
to the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued
with respect to an option unless the exercise of such option and the issuance
and delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
As a condition to the exercise of an option, the Company may
require the person exercising such option to represent and warrant at the time
of any such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
23. Term of Plan; Effective Date. The Plan shall become effective
upon the earlier to occur of its adoption by the Board of Directors or its
approval by the shareholders of the Company. It shall continue in effect for a
term of twenty (20) years unless sooner terminated under Section 20.
24. Additional Restrictions of Rule 16b-3. The terms and
conditions of options granted hereunder to, and the purchase of shares by,
persons subject to Section 16 of the Exchange Act shall comply with the
applicable provisions of Rule 16b-3. This Plan shall be deemed to contain, and
such options shall contain, and the shares issued upon exercise thereof shall be
subject to, such additional conditions and restrictions as may be required by
Rule 16b-3 to qualify for the maximum exemption from Section 16 of the Exchange
Act with respect to Plan transactions.
-9-
<PAGE> 10
RASTER GRAPHICS, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
New Election ______
Change of Election ______
1. I, ________________________, hereby elect to participate in the
RASTER GRAPHICS, INC. 1996 Employee Stock Purchase Plan (the "Plan") for the
Offering Period ______________, 19__ to _______________, 19__, and subscribe to
purchase shares of the Company's Common Stock in accordance with this
Subscription Agreement and the Plan.
2. I elect to have Contributions in the amount of ____% of my
Compensation, as those terms are defined in the Plan, applied to this purchase.
I understand that this amount must not be less than 1% and not more than 10% of
my Compensation during the Offering Period. (Please note that no fractional
percentages are permitted).
3. I hereby authorize payroll deductions from each paycheck during
the Offering Period at the rate stated in Item 2 of this Subscription Agreement.
I understand that all payroll deductions made by me shall be credited to my
account under the Plan and that I may not make any additional payments into such
account. I understand that all payments made by me shall be accumulated for the
purchase of shares of Common Stock at the applicable purchase price determined
in accordance with the Plan. I further understand that, except as otherwise set
forth in the Plan, shares will be purchased for me automatically on the Purchase
Date of each Offering Period unless I otherwise withdraw from the Plan by giving
written notice to the Company for such purpose.
4. I understand that I may discontinue at any time prior to the
Purchase Date my participation in the Plan as provided in Section 10 of the
Plan. I also understand that I can decrease the rate of my Contributions on one
occasion only during any Offering Period by completing and filing a new
Subscription Agreement with such decrease taking effect as of the beginning of
the calendar month following the date of filing of the new Subscription
Agreement, if filed at least ten (10) business days prior to the beginning of
such month. Further, I may change the rate of deductions for future Offering
Periods by filing a new Subscription Agreement, and any such change will be
effective as of the beginning of the next Offering Period. In addition, I
acknowledge that, unless I discontinue my participation in the Plan as provided
in Section 10 of the Plan, my election will continue to be effective for each
successive Offering Period.
5. I have received a copy of the Company's most recent description of
the Plan and a copy of the complete "RASTER GRAPHICS, INC. 1996 Employee Stock
Purchase Plan." I understand that my participation in the Plan is in all
respects subject to the terms of the Plan.
<PAGE> 11
6. Shares purchased for me under the Plan should be issued in the
name(s) of (name of employee or employee and spouse only):
------------------------------------
------------------------------------
7. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due to me under the Plan:
NAME: (Please print)
-------------------------------------
(First) (Middle) (Last)
- ------------------------------------ -------------------------------------
(Relationship) (Address)
-------------------------------------
8. I understand that if I dispose of any shares received by me
pursuant to the Plan within 2 years after the Offering Date (the first day of
the Offering Period during which I purchased such shares) or within 1 year after
the Purchase Date, I will be treated for federal income tax purposes as having
received ordinary compensation income at the time of such disposition in an
amount equal to the excess of the fair market value of the shares on the
Purchase Date over the price which I paid for the shares, regardless of whether
I disposed of the shares at a price less than their fair market value at the
Purchase Date. The remainder of the gain or loss, if any, recognized on such
disposition will be treated as capital gain or loss.
I hereby agree to notify the Company in writing within 30 days
after the date of any such disposition, and I will make adequate provision for
federal, state or other tax withholding obligations, if any, which arise upon
the disposition of the Common Stock. The Company may, but will not be obligated
to, withhold from my compensation the amount necessary to meet any applicable
withholding obligation including any withholding necessary to make available to
the Company any tax deductions or benefits attributable to the sale or early
disposition of Common Stock by me.
9. If I dispose of such shares at any time after expiration of the
2-year and 1-year holding periods, I understand that I will be treated for
federal income tax purposes as having received compensation income only to the
extent of an amount equal to the lesser of (1) the excess of the fair market
value of the shares at the time of such disposition over the purchase price
which I paid for the shares under the option, or (2) 15% of the fair market
value of the shares on the Offering Date. The remainder of the gain or loss, if
any, recognized on such disposition will be treated as capital gain or loss.
-2-
<PAGE> 12
I understand that this tax summary is only a summary and is subject to
change. I further understand that I should consult a tax advisor concerning the
tax implications of the purchase and sale of stock under the Plan.
10. I hereby agree to be bound by the terms of the Plan. The
effectiveness of this Subscription Agreement is dependent upon my eligibility to
participate in the Plan.
SIGNATURE:_________________________________
SOCIAL SECURITY #:_________________________
DATE:______________________________________
SPOUSE'S SIGNATURE (necessary
if beneficiary is not spouse):
___________________________________________
(Signature)
___________________________________________
(Print name)
-3-
<PAGE> 13
RASTER GRAPHICS, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
I, __________________________, hereby elect to withdraw my
participation in the RASTER GRAPHICS, INC. 1996 Employee Stock Purchase Plan
(the "Plan") for the Offering Period _________. This withdrawal covers all
Contributions credited to my account and is effective on the date designated
below.
I understand that all Contributions credited to my account will be paid
to me within ten (10) business days of receipt by the Company of this Notice of
Withdrawal and that my option for the current period will automatically
terminate, and that no further Contributions for the purchase of shares can be
made by me during the Offering Period.
The undersigned further understands and agrees that he or she shall be
eligible to participate in succeeding offering periods only by delivering to the
Company a new Subscription Agreement.
If the undersigned is an Officer or Director of RASTER GRAPHICS, INC.
or other person subject to Section 16 of the Securities Exchange Act of 1934,
the undersigned further understands that under rules promulgated by the U.S.
Securities and Exchange Commission he or she may not re-enroll in the Plan for a
period of six (6) months after withdrawal.
Dated:___________________ _________________________________
Signature of Employee
_________________________________
Social Security Number
<PAGE> 1
EXHIBIT 10.5
RASTER GRAPHICS, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of <<Date>> by
and between Raster Graphics, Inc., a California corporation (the "Company"), and
<<Name>> ("Indemnitee").
WHEREAS, the Company and Indemnitee recognize the increasing difficulty
in obtaining directors' and officers' liability insurance, the significant
increases in the cost of such insurance and the general reductions in the
coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting officers and directors
to expensive litigation risks at the same time as the availability and coverage
of liability insurance has been severely limited;
WHEREAS, Indemnitee does not regard the current protection available as
adequate under the present circumstances, and Indemnitee and other officers and
directors of the Company may not be willing to continue to serve as officers and
directors without additional protection; and
WHEREAS, the Company desires to attract and retain the services of
highly qualified individuals, such as Indemnitee, to serve as officers and
directors of the Company and to indemnify its officers and directors so as to
provide them with the maximum protection permitted by law.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. Indemnification.
(a) Third Party Proceedings. The Company shall indemnify
Indemnitee if Indemnitee is or was a party or is threatened to be made a party
to any threatened, pending or completed action or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) actually and reasonably incurred by
Indemnitee in connection with such action or proceeding if Indemnitee acted in
good faith and in a manner Indemnitee reasonably believed to be in the best
interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe Indemnitee's conduct was
unlawful. The termination of any action or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that (i) Indemnitee did not act in
good faith and in a manner which Indemnitee reasonably believed to be in the
best
<PAGE> 2
interests of the Company, or (ii) with respect to any criminal action or
proceeding, Indemnitee had reasonable cause to believe that Indemnitee's conduct
was unlawful.
(b) Proceedings By or in the Right of the Company. The
Company shall indemnify Indemnitee if Indemnitee was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
proceeding by or in the right of the Company or any subsidiary of the Company to
procure a judgment in its favor by reason of the fact that Indemnitee is or was
a director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) and, to the fullest extent
permitted by law, amounts paid in settlement, in each case to the extent
actually and reasonably incurred by Indemnitee in connection with the defense or
settlement of such action or proceeding if Indemnitee acted in good faith and in
a manner Indemnitee reasonably believed to be in the best interests of the
Company and its shareholders, except that no indemnification shall be made in
respect of any claim, issue or matter as to which Indemnitee shall have been
adjudged to be liable to the Company in the performance of Indemnitee's duty to
the Company and its shareholders unless and only to the extent that the court in
which such action or proceeding is or was pending shall determine upon
application that, in view of all the circumstances of the case, Indemnitee is
fairly and reasonably entitled to indemnity for expenses and then only to the
extent that the court shall determine.
2. Expenses; Indemnification Procedure.
(a) Advancement of Expenses. The Company shall advance all
expenses incurred by Indemnitee in connection with the investigation, defense,
settlement or appeal of any civil or criminal action or proceeding referenced in
Section l(a) or (b) hereof (but not amounts actually paid in settlement of any
such action or proceeding). Indemnitee hereby undertakes to repay such amounts
advanced only if, and to the extent that, it shall ultimately be determined that
Indemnitee is not entitled to be indemnified by the Company as authorized
hereby. The advances to be made hereunder shall be paid by the Company to
Indemnitee within twenty (20) days following delivery of a written request
therefor by Indemnitee to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to his right to be indemnified under this Agreement, give
the Company notice in writing as soon as practicable of any claim made against
Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to the Chief Executive
Officer of the Company at the address shown on the signature page of this
Agreement (or such other address as the Company shall designate in writing to
Indemnitee). Notice shall be deemed received three business days after the date
postmarked if sent by domestic certified or registered mail, properly addressed;
otherwise notice shall be deemed received when such notice shall actually be
received by the Company. In addition, Indemnitee shall give the Company such
information and cooperation as it may reasonably require and as shall be within
Indemnitee's power.
-2-
<PAGE> 3
(c) Procedure. Any indemnification provided for in Section 1
shall be made no later than forty-five (45) days after receipt of the written
request of Indemnitee. If a claim under this Agreement, under any statute, or
under any provision of the Company's Articles of Incorporation or Bylaws
providing for indemnification, is not paid in full by the Company within
forty-five (45) days after a written request for payment thereof has first been
received by the Company, Indemnitee may, but need not, at any time thereafter
bring an action against the Company to recover the unpaid amount of the claim
and, subject to Section 13 of this Agreement, Indemnitee shall also be entitled
to be paid for the expenses (including attorneys' fees) of bringing such action.
It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in connection with any action or
proceeding in advance of its final disposition) that Indemnitee has not met the
standards of conduct which make it permissible under applicable law for the
Company to indemnify Indemnitee for the amount claimed, but the burden of
proving such defense shall be on the Company, and Indemnitee shall be entitled
to receive interim payments of expenses pursuant to Subsection 2(a) unless and
until such defense may be finally adjudicated by court order or judgment from
which no further right of appeal exists. It is the parties' intention that if
the Company contests Indemnitee's right to indemnification, the question of
Indemnitee's right to indemnification shall be for the court to decide, and
neither the failure of the Company (including its Board of Directors, any
committee or subgroup of the Board of Directors, independent legal counsel, or
its shareholders) to have made a determination that indemnification of
Indemnitee is proper in the circumstances because Indemnitee has met the
applicable standard of conduct required by applicable law, nor an actual
determination by the Company (including its Board of Directors, any committee or
subgroup of the Board of Directors, independent legal counsel, or its
shareholders) that Indemnitee has not met such applicable standard of conduct,
shall create a presumption that Indemnitee has or has not met the applicable
standard of conduct.
(d) Notice to Insurers. If, at the time of the receipt of a
notice of a claim pursuant to Section 2(b) hereof, the Company has director and
officer liability insurance in effect, the Company shall give prompt notice of
the commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be
obligated under Section 2(a) hereof to pay the expenses of any proceeding
against Indemnitee, the Company, if appropriate, shall be entitled to assume the
defense of such proceeding, with counsel approved by Indemnitee, which approval
shall not be unreasonably withheld, upon the delivery to Indemnitee of written
notice of its election so to do. After delivery of such notice, approval of such
counsel by Indemnitee and the retention of such counsel by the Company, the
Company will not be liable to Indemnitee under this Agreement for any fees of
counsel subsequently incurred by Indemnitee with respect to the same proceeding,
provided that (i) Indemnitee shall have the right to employ his counsel in any
such proceeding at Indemnitee's expense; and (ii) if (A) the employment of
counsel by Indemnitee has been previously authorized by the Company, (B)
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such defense
or (C) the Company shall not, in fact, have
-3-
<PAGE> 4
employed counsel to assume the defense of such proceeding, then the fees and
expenses of Indemnitee's counsel shall be at the expense of the Company.
3. Additional Indemnification Rights; Nonexclusivity.
(a) Scope. Notwithstanding any other provision of this
Agreement, the Company hereby agrees to indemnify the Indemnitee to the fullest
extent permitted by law, notwithstanding that such indemnification is not
specifically authorized by the other provisions of this Agreement, the Company's
Articles of Incorporation, the Company's Bylaws or by statute. In the event of
any change, after the date of this Agreement, in any applicable law, statute or
rule which expands the right of a California corporation to indemnify a member
of its board of directors, an officer or other corporate agent, such changes
shall be, ipso facto, within the purview of Indemnitee's rights and Company's
obligations, under this Agreement. In the event of any change in any applicable
law, statute or rule which narrows the right of a California corporation to
indemnify a member of its Board of Directors, an officer or other corporate
agent, such changes, to the extent not otherwise required by such law, statute
or rule to be applied to this Agreement shall have no effect on this Agreement
or the parties' rights and obligations hereunder.
(b) Nonexclusivity. The indemnification provided by this
Agreement shall not be deemed exclusive of any rights to which Indemnitee may be
entitled under the Company's Articles of Incorporation, its Bylaws, any
agreement, any vote of shareholders or disinterested directors, the California
General Corporation Law, or otherwise, both as to action in Indemnitee's
official capacity and as to action in another capacity while holding such
office. The indemnification provided under this Agreement shall continue as to
Indemnitee for any action taken or not taken while serving in an indemnified
capacity even though he may have ceased to serve in such capacity at the time of
any action or other covered proceeding.
4. Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred by him in the investigation, defense, appeal or settlement of any civil
or criminal action or proceeding, but not, however, for the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for the portion of
such expenses, judgments, fines or penalties to which Indemnitee is entitled.
5. Mutual Acknowledgment. Both the Company and Indemnitee
acknowledge that in certain instances, Federal law or applicable public policy
may prohibit the Company from indemnifying its directors and officers under this
Agreement or otherwise. Indemnitee understands and acknowledges that the Company
has undertaken or may be required in the future to undertake with the Securities
and Exchange Commission to submit the question of indemnification to a court in
certain circumstances for a determination of the Company's right under public
policy to indemnify Indemnitee.
6. Directors' and Officers' Liability Insurance. The Company
shall, from time to time, make the good faith determination whether or not it is
practicable for the Company to obtain and maintain a policy or policies of
insurance with reputable insurance companies providing the
-4-
<PAGE> 5
officers and directors of the Company with coverage for losses from wrongful
acts, or to ensure the Company's performance of its indemnification obligations
under this Agreement. Among other considerations, the Company will weigh the
costs of obtaining such insurance coverage against the protection afforded by
such coverage. In all policies of directors' and officers' liability insurance,
Indemnitee shall be named as an insured in such a manner as to provide
Indemnitee the same rights and benefits as are accorded to the most favorably
insured of the Company's directors, if Indemnitee is a director, or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer, or of the Company's key employees, if Indemnitee is not an officer or
director but is a key employee. Notwithstanding the foregoing, the Company shall
have no obligation to obtain or maintain such insurance if the Company
determines in good faith that such insurance is not reasonably available, if the
premium costs for such insurance are disproportionate to the amount of coverage
provided, if the coverage provided by such insurance is limited by exclusions so
as to provide an insufficient benefit, or if Indemnitee is covered by similar
insurance maintained by a subsidiary or parent of the Company.
7. Severability. Nothing in this Agreement is intended to
require or shall be construed as requiring the Company to do or fail to do any
act in violation of applicable law. The Company's inability, pursuant to court
order, to perform its obligations under this Agreement shall not constitute a
breach of this Agreement. The provisions of this Agreement shall be severable as
provided in this Section 7. If this Agreement or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify Indemnitee to the full extent permitted by
any applicable portion of this Agreement that shall not have been invalidated,
and the balance of this Agreement not so invalidated shall be enforceable in
accordance with its terms.
8. Exceptions. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement.
(a) Excluded Acts. To indemnify Indemnitee for any acts or
omissions or transactions from which a director may not be relieved of liability
under the California General Corporation Law.
(b) Claims Initiated by Indemnitee. To indemnify or advance
expenses to Indemnitee with respect to proceedings or claims initiated or
brought voluntarily by Indemnitee and not by way of defense, except with respect
to proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
Section 317 of the California General Corporation Law, but such indemnification
or advancement of expenses may be provided by the Company in specific cases if
the Board of Directors has approved the initiation or bringing of such suit, or
(c) Lack of Good Faith. To indemnify Indemnitee for any
expenses incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous, or
-5-
<PAGE> 6
(d) Insured Claims. To indemnify Indemnitee for expenses or
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) which
have been paid directly to Indemnitee by an insurance carrier under a policy of
directors' and officers' liability insurance maintained by the Company; or
(e) Claims Under Section 16{b). To indemnify Indemnitee for
expenses and the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute.
9. Effectiveness of Agreement. To the extent that the
indemnification permitted under the terms of certain provisions of this
Agreement exceeds the scope of the indemnification expressly permitted by
Section 317 of the California General Corporation Law, such provisions shall not
be effective unless and until the Company's Articles of Incorporation authorize
such additional rights of indemnification. In all other respects, the balance of
this Agreement shall be effective as of the date set forth on the first page and
may apply to acts or omissions of Indemnitee which occurred prior to such date
if Indemnitee was an officer, director, employee or other agent of the Company,
or was serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, at the time such act or omission occurred.
10. Construction of Certain Phrases.
(a) For purposes of this Agreement, references to the
"Company" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees or
agents, so that if Indemnitee is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, Indemnitee
shall stand in the same position under the provisions of this Agreement with
respect to the resulting or surviving corporation as Indemnitee would have with
respect to such constituent corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on Indemnitee with respect to an employee
benefit plan; and references to "serving at the request of the Company" shall
include any service as a director, officer, employee or agent of the Company
which imposes duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its participants, or
beneficiaries.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
-6-
<PAGE> 7
12. Successors and Assigns. This Agreement shall be binding upon
the Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
13. Attorneys' Fees. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, the court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement or to enforce
or interpret any of the terms of this Agreement, Indemnitee shall be entitled to
be paid all court costs and expenses, including attorneys' fees, incurred by
Indemnitee in defense of such action (including with respect to Indemnitee's
counterclaims and cross-claims made in such action), unless as a part of such
action the court determines that each of Indemnitee's material defenses to such
action were made in bad faith or were frivolous.
14. Notice. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed duly
given (i) if delivered by hand and receipted for by the party addressee, on the
date of such receipt, or (ii) if mailed by domestic certified or registered mail
with postage prepaid, on the third business day after the date postmarked.
Addresses for notice to either party are as shown on the signature page of this
Agreement, or as subsequently modified by written notice.
15. Consent to Jurisdiction. The Company and Indemnitee each
hereby irrevocably consent to the jurisdiction of the courts of the State of
California for all purposes in connection with any action or proceeding which
arises out of or relates to this Agreement and agree that any action instituted
under this Agreement shall be brought only in the state courts of the State of
California.
16. Choice of Law. This Agreement shall be governed by and
its provisions construed in accordance with the laws of the State of California
as applied to contracts between California residents entered into and to be
performed entirely within California.
-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
RASTER GRAPHICS, INC.
By:________________________________
Title:_____________________________
Address: 3025 Orchard Parkway
San Jose, CA 95134
AGREED TO AND ACCEPTED:
INDEMNITEE: <<Name>>
_________________________________________
(Signature)
Address:_________________________________
_________________________________________
_________________________________________
-8-
<PAGE> 1
EXHIBIT 10.7
RASTER GRAPHICS, INC.
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
August 4, 1995
<PAGE> 2
TABLE OF CONTENTS
PAGE
----
SECTION 1 - Termination and Waiver of Prior Rights...................... 2
1.1 Termination of Prior Rights................................. 2
SECTION 2 - Amendment................................................... 2
SECTION 3 - Restrictions on Transferability of Securities;
Compliance with Securities Act.............................. 2
3.1 Restrictions on Transferability............................. 2
3.2 Certain Definitions......................................... 3
3.3 Restrictive Legends......................................... 5
3.4 Notice of Proposed Transfers................................ 6
3.5 Requested Registration...................................... 7
3.6 Company Registration........................................ 9
3.7 Registration on Form S-3.................................... 10
3.8 Expenses of Registration.................................... 11
3.9 Indemnification............................................. 12
3.10 Information by Holder....................................... 14
3.11 Rule 144 Reporting.......................................... 14
3.12 Transfer of Registration Rights............................. 14
3.13 Standoff Agreement.......................................... 15
3.14 Termination of Rights....................................... 15
SECTION 4 - Miscellaneous............................................... 15
4.1 Governing Law............................................... 16
4.2 Entire Agreement............................................ 16
4.3 Notices, etc................................................ 16
4.4 Counterparts................................................ 16
4.5 Severability................................................ 16
4.6 Titles and Subtitles........................................ 16
i
<PAGE> 3
RASTER GRAPHICS, INC.
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
This Amended and Restated Registration Rights Agreement (the
"AGREEMENT") is made as of the 4th day of August, 1995, by and among Raster
Graphics, Inc., a California corporation (the "COMPANY"), the holders of the
Company's outstanding Series A Preferred Stock (the "SERIES A HOLDERS"), the
holders of the Company's outstanding Series B Preferred Stock (the "SERIES B
HOLDERS"), the holders of the Company's outstanding Series C Preferred Stock
(the "SERIES C HOLDERS"), the holders of warrants to purchase the Company's
Series B Preferred Stock and Common Stock (the "WARRANT HOLDERS"), and
shareholders of Onyx Graphics Corporation, a Delaware corporation who will
receive shares of the Company's Series C Preferred Stock in connection with the
terms of the Agreement and Plan of Reorganization dated June 12, 1995 (the
"Reorganization Agreement") (the "SERIES C PURCHASERS"). The Series A Holders,
Series B Holders, Series C Holders, Warrant Holders and Series C Purchasers are
hereinafter collectively referred to as the "HOLDERS."
RECITALS:
WHEREAS, the Company, the Series A Holders, the Series B Holders, the
Series C Holders and the Warrant Holders have previously entered into that
certain Amended and Restated Registration Rights Agreement dated as of February
16, 1995 (the "PRIOR RIGHTS AGREEMENT"), pursuant to which the Series A Holders,
Series B Holders, the Series C Holders and the Warrant Holders were granted
certain registration rights with respect to shares of Common Stock issuable upon
(i) conversion of the Series A Shares (as hereafter defined), the Series B
Shares (as hereafter defined), and the Series C Shares (as hereafter defined);
(ii) exercise of the Common Warrants (as hereafter defined); and (iii)
conversion of the shares of Series B Preferred Stock issuable upon exercise of
the Series B Warrants (as hereafter defined).
WHEREAS, the Company and Onyx Graphics Corporation have entered into
the Reorganization Agreement pursuant to which the Company shall issue, and the
Series C Purchasers shall acquire, shares of the Company's Series C Preferred
Stock.
WHEREAS, the Company and the Holders desire that the Series A Holders,
the Series B Holders, the Series C Holders, the Warrant Holders and the Series C
Purchasers be granted substantially identical registration rights. For purposes
of this Agreement, the Series A Shares, Series B Shares, Series C Shares and any
Series B Preferred Stock issued upon exercise of the Series B Warrants are
sometimes collectively referred to hereinafter as "PREFERRED."
WHEREAS, the Company, the Series A Holders, the Series B Holders, the
Series C Holders and the Warrant Holders desire to terminate the Prior Rights
Agreement and, in lieu of the registration rights and certain other rights and
obligations contained therein, to accept the registration rights set forth
herein.
<PAGE> 4
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
SECTION 1
Termination and Waiver of Prior Rights
1.1 Termination of Prior Rights. Effective and contingent upon
execution of this Agreement by holders of a majority of the Registrable
Securities (as such term is defined in Section 3.2 of the Prior Rights
Agreement) and upon the closing of the transactions contemplated by the
Reorganization Agreement, the Prior Rights Agreement is hereby declared null and
void and is amended and restated in its entirety to read as set forth in this
Agreement, and the Company and the Holders hereby agree to be bound by the
provisions hereof as the sole agreement of the Company and the Holders with
respect to registration rights of the Company's securities. Upon termination of
the Prior Rights Agreement as aforesaid, this Agreement is hereby entered into
on behalf of all Series A Holders, Series B Holders, Series C Holders, Warrant
Holders and Series C Purchasers as provided in Section 2.1 of the Prior Rights
Agreement.
SECTION 2
Amendment
2.1 Amendment. Except as expressly provided herein, neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the party against whom enforcement
of any such amendment, waiver, discharge or termination is sought; provided,
however, that any provisions hereof may be amended, waived, discharged or
terminated upon the written consent of the Company and the holders of a majority
of the outstanding Registrable Securities (as defined below), determined on the
basis of assumed conversion of all Preferred into Registrable Securities.
SECTION 3
Restrictions on Transferability of Securities;
Compliance with Securities Act
3.1 Restrictions on Transferability. The Series A Shares, the Series B
Shares, the Series C Shares, the Common Stock issuable upon conversion of the
Series A Shares, the Series B Shares and the Series C Shares, the Common
Warrants (and the Common Stock issuable upon exercise thereof), and the Series B
Warrants and the Series B Preferred Stock issuable upon exercise thereof (and
the Common Stock issuable upon conversion of such Series B Preferred Stock)
shall not be sold, assigned, transferred or pledged except upon the conditions
specified in this Section 3, which conditions are intended to ensure compliance
with the provisions of the Securities Act (as hereafter defined). Each Holder
will cause any proposed purchaser, assignee, transferee, or pledgee of the
Series A Shares, the Series B Shares, the Series C Shares, the Common Stock
issuable upon conversion of the Series A Shares, the Series B Shares and the
Series C Shares, the Common Warrants (and the Common Stock issuable upon
exercise thereof) and the Series B Warrants (and the Series B Preferred Stock
issuable upon exercise thereof and
2
<PAGE> 5
the Common Stock issuable upon conversion of such Series B Preferred Stock) held
by a Holder to agree to take and hold such securities subject to the provisions
and upon the conditions specified in this Section 3.
3.2 Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
"COMMISSION" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"RESTRICTED SECURITIES" shall mean the securities of the
Company required to bear any of the legends set forth in Section 3.3 hereof.
"REGISTRABLE SECURITIES" shall mean:
(i) Common Stock issued or issuable upon the conversion of
the outstanding shares of the Company's Series A Preferred Stock issued pursuant
to that certain Loan and Investment Agreement dated as of August 21, 1987 by and
the between the Company and the parties listed as signatories thereto (the
"SERIES A SHARES");
(ii) Common Stock issued or issuable upon the conversion of
the outstanding shares of the Company's Series B Preferred Stock issued pursuant
to (a) that certain Series B Preferred Stock Purchase Agreement dated November
28, 1988 between the Company and the parties listed as signatories thereto, and
(b) that certain Series B Preferred Stock Purchase Agreement dated as of
December 19, 1989 by and the between the Company and the parties listed on
Exhibit A thereto, as amended by that certain Addendum Agreement dated as of
March 6, 1990 (collectively, the "SERIES B SHARES");
(iii) Common Stock issued or issuable upon the conversion of
the outstanding shares of the Company's Series C Preferred Stock issued pursuant
to (a) that certain Series C Stock Purchase Agreement dated May 27, 1993 between
the Company and the parties listed on Exhibit A attached thereto, (b) that
certain Series C Preferred Stock Purchase Agreement dated February 16, 1995
between the Company and the parties listed as signatories thereto, and (c) that
certain Agreement and Plan of Reorganization dated June 12, 1995 by and among
the Company, Raster Acquisition Corporation, a Delaware corporation and a wholly
owned subsidiary of the Company and Onyx Graphics Corporation, a Delaware
corporation (collectively, the "SERIES C SHARES");
(iv) any Common Stock of the Company issued or issuable in
respect of the Company's Common Stock or other securities issued or issuable
pursuant to the conversion of the Series A, Series B and/or Series C Shares upon
any stock split, stock dividend, recapitalization, or similar event, or any
Common Stock otherwise issued or issuable with respect to the Series A, Series B
and/or Series C Shares;
3
<PAGE> 6
(v) any Common Stock of the Company issued or issuable upon
exercise of those certain Common Stock Purchase Warrants issued:
(a) on November 28, 1988 to Merrill, Pickard, Anderson
& Eyre and MPAE Technology Partners for the purchase of 249,234 and 5,086 shares
of Common Stock, respectively;
(b) on March 30, 1989 to Kleiner, Perkins, Caufield &
Byers IV and KPCB Zaibatsu Fund I for the purchase of 349,505 and 18,395 shares
of Common Stock, respectively;
(c) on December 19, 1989 to purchase up to an
aggregate of 621,302 shares of Common Stock in connection with the sale and
issuance of the Company's Series B Preferred Stock to the Series B Holders;
(d) on March 6, 1990 to purchase up to an aggregate of
177,515 shares of Common Stock in connection with the sale and issuance of the
Company's Series B Preferred Stock to the Series B Holders; and
(e) on March 6, 1990 to Dominion Ventures, Inc. for
the purchase of 7,730 shares of Common Stock (the warrants referred to in
subsections (a) through (e) above are hereafter collectively referred to as the
"COMMON WARRANTS");
(vi) any Common Stock issued or issuable upon conversion of
the Series B Preferred Stock issued or issuable upon exercise of those certain
Series B Preferred Stock Purchase Warrants issued on January 11, 1989, June 12,
1989 and March 6, 1990 to Dominion Ventures, Inc. for the purchase of 49,500,
2,500 and 26,270 shares, respectively, of Series B Preferred Stock (the "SERIES
B WARRANTS"); and
(vii) any Common Stock of the Company issued or issuable in
respect of any Common Stock issued pursuant to the exercise of the Common
Warrants or the conversion of the Series B Preferred Stock issuable upon
exercise of the Series B Warrants upon any stock split, stock dividend,
recapitalization, or similar event, or any Common Stock otherwise issued or
issuable with respect to such Common Stock;
provided, however, that Common Stock or other securities shall only be treated
as Registrable Securities if and so long as (A) they have not been sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction, (B) they have not been sold in a transaction exempt from
the registration and prospectus delivery requirements of the Securities Act
under Section 4(1) thereof so that all transfer restrictions and restrictive
legends with respect thereto are removed upon the consummation of such sale, or
(C) the registration rights associated with such securities have not been
terminated pursuant to Section 3.14 hereof.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
4
<PAGE> 7
"REGISTRATION EXPENSES" shall mean all expenses incurred by
the Company in complying with Sections 3.5, 3.6 and 3.7 hereof, including,
without limitation, all registration, qualification and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for the Company, blue
sky fees and expenses, and the expense of any special audits incident to or
required by any such registration (but excluding the compensation of regular
employees of the Company which shall be paid in any event by the Company).
"SELLING EXPENSES" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the securities
registered by the Holders and all fees and disbursements of counsel for the
Holders (as limited by Section 3.8).
"HOLDER" shall mean any Holder holding Registrable Securities
or Preferred and any person holding Registrable Securities or Preferred to whom
the rights under this Section 3 have been transferred in accordance with Section
3.12 hereof.
"INITIATING HOLDERS" shall mean any Holder or transferee of
Holders under Section 3.12 hereof who in the aggregate are Holders of not less
than twenty percent (20%) of the Registrable Securities.
3.3 Restrictive Legends.
(a) Each form of warrant or certificate representing (i) the
Common Warrants, Series B Warrants, Series A Shares, Series B Shares or Series C
Shares, (ii) the Company's Series B Preferred Stock issuable upon exercise of
the Series B Warrants (and the Common Stock issuable upon conversion thereof),
(iii) the Company's Common Stock issuable upon exercise of the Common Warrants
or conversion of the Series A Shares, Series B Shares or Series C Shares and
(iv) any other securities issued in respect of the Common Warrants, Series B
Warrants, Series A Shares, Series B Shares, Series C Shares or Common Stock
issued upon exercise or conversion thereof, or upon any stock split, stock
dividend, recapitalization, merger or similar event, shall (unless otherwise
permitted by the provisions of Section 3.4 below) be stamped or otherwise
imprinted with a legend in the following form (in addition to any legend
required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD,
TRANSFERRED OR PLEDGED IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL (WHICH MAY
BE COUNSEL FOR THE COMPANY) REASONABLY ACCEPTABLE TO IT
STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT;
PROVIDED THAT NO SUCH OPINION SHALL BE REQUIRED FOR SALES
PURSUANT TO RULE 144. COPIES OF THE AGREEMENT COVERING THE
PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF
RECORD
5
<PAGE> 8
OF THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE
PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.
(b) In addition, each form of warrant or certificate
referred to in Section 3.3(a) hereof representing Series A Shares, Series B
Shares, Series C Shares, Series B Warrants or Common Warrants (or Common Stock
or Series B Preferred Stock issuable upon conversion or exercise thereof)
purchased by a person or entity not a resident of the United States of America
shall be stamped or otherwise imprinted with a legend in the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
("ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES ("STATE ACT") AND MAY NOT BE TRANSFERRED OR OTHERWISE
DISPOSED OF FOR A PERIOD OF NINETY (90) DAYS AFTER THE DATE ON
THE FACE HEREOF, AND THEREAFTER MAY NOT BE TRANSFERRED TO A
CITIZEN OR RESIDENT OF THE UNITED STATES OF AMERICA, INCLUDING
THE ESTATE OF ANY SUCH PERSON, A TRUST OF WHICH ANY SUCH
PERSON IS A BENEFICIARY, OR A CORPORATION, PARTNERSHIP, TRUST
OR OTHER ENTITY ORGANIZED UNDER THE LAWS OF THE UNITED STATES
OF AMERICA, ITS TERRITORIES, POSSESSIONS AND ALL AREAS UNDER
THE JURISDICTION OF THE UNITED STATES OF AMERICA, UNLESS THE
ISSUER HAS RECEIVED AN OPINION OF COUNSEL, REASONABLY
SATISFACTORY TO THE ISSUER, THAT SUCH TRANSFER WILL NOT BE IN
VIOLATION OF THE ACT OR ANY APPLICABLE STATE ACT.
(c) Each Holder consents to the Company making a notation on
its records and giving instructions to any transfer agent of the Common
Warrants, Series B Warrants, Series A Shares, Series B Shares, Series C Shares
or the Common Stock issuable upon exercise or conversion thereof in order to
implement the restrictions on transfer established in this Section 3. Such
legend shall be removed by the Company from any certificate at such time as the
holder of the shares represented by the certificate satisfies the requirements
of Rule 144(k) under the Securities Act, provided that Rule 144(k) as then in
effect does not differ substantially from Rule 144(k) as in effect as of the
date of this Agreement, and provided further that the Company has received from
the Holder a written representation that (i) such Holder is not an affiliate of
the Company (as defined in Regulation D promulgated under the Securities Act)
and has not been an affiliate during the preceding three months, (ii) at least
three (3) years has elapsed since the later of the date the securities were
acquired from the Company or from an affiliate of the Company, (iii) such Holder
otherwise satisfies the requirements of Rule 144(k) as then in effect with
respect to such shares, and (iv) such Holder will submit the certificate for any
such shares to the Company for reapplication of the legend at such time as the
holder becomes an affiliate of the Company or otherwise ceases to satisfy the
requirements of Rule 144(k) as then in effect.
3.4 Notice of Proposed Transfers. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of
6
<PAGE> 9
this Section 3.4. Prior to any proposed sale, assignment, transfer or pledge of
any Restricted Securities, unless there is in effect a registration statement
under the Securities Act covering the proposed transfer, the holder thereof
shall give written notice to the Company of such holder's intention to effect
such transfer, sale, assignment or pledge. Each such notice shall describe the
manner and circumstances of the proposed transfer, sale, assignment or pledge in
sufficient detail, and shall be accompanied at such holder's expense by either
(i) an unqualified written opinion of legal counsel who shall, and whose legal
opinion shall, be reasonably satisfactory to the Company addressed to the
Company, to the effect that the proposed transfer of the Restricted Securities
may be effected without registration under the Securities Act, or (ii) a "no
action" letter from the Commission to the effect that the transfer of such
securities without registration will not result in a recommendation by the staff
of the Commission that action be taken with respect thereto, whereupon the
holder of such Restricted Securities shall be entitled to transfer such
Restricted Securities in accordance with the terms of the notice delivered by
the holder to the Company. The Company will not require such a legal opinion or
"no action" letter (a) in any transaction in compliance with Rule 144, or (b) in
any transaction in which a Holder which is a partnership distributes Series A
Shares, Series B Shares, Series C Shares, Common Warrants, Series B Warrants or
Series B Preferred Stock or Common Stock issuable upon exercise or conversion
thereof after six months after the purchase of such securities solely to
partners thereof for no consideration, provided that each transferee agrees in
writing to be subject to the terms of this Section 3.4. Each certificate
evidencing the Restricted Securities transferred as above provided shall bear,
except if such transfer is made pursuant to Rule 144, the appropriate
restrictive legend set forth in Section 3.3 above, except that such certificate
shall not bear such restrictive legend if in the opinion of counsel for such
holder and the Company such legend is not required in order to establish
compliance with any provisions of the Securities Act.
3.5 Requested Registration.
(a) Request for Registration. In case the Company shall
receive from Initiating Holders a written request that the Company effect any
registration, qualification or compliance with respect to the Registrable
Securities, the anticipated aggregate offering price, net of underwriting
discounts and commissions, which would exceed $10,000,000 pursuant to a
registration statement under the Securities Act, the Company will:
(i) within ten (10) days give written notice of the
proposed registration, qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its best efforts to
effect such registration, qualification or compliance (including, without
limitation, the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act and any other governmental requirements or regulations) as may be
so requested and as would permit or facilitate the sale and distribution of all
or such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request received
by the Company within 30 days after receipt of such written notice from the
Company;
7
<PAGE> 10
Provided, however, that the Company shall not be obligated to take any action to
effect any such registration, qualification or compliance pursuant to this
Section 3.5:
(A) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(B) Prior to the earlier of (1) June 30, 1997, or (2)
the date six (6) months immediately following the closing date of the Company's
first public offering of securities pursuant to a registration statement filed
under the Securities Act (other than a registration of securities in a Rule 145
transaction or relating to any employee benefit plan);
(C) During the period starting with the date sixty
(60) days prior to the Company's estimated date of filing of, and ending on the
date six (6) months immediately following the effective date of, any
registration statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Company is actively employing in good
faith all reasonable efforts to cause such registration statement to become
effective and that the Company's estimate of the date of filing such
registration statement is made in good faith;
(D) After the Company has effected two such
registrations pursuant to this subparagraph 3.5(a), such registrations have been
declared or ordered effective and the securities offered pursuant to such
registrations have been sold; or
(E) If the Company shall furnish to such Holders a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its shareholders for a registration statement to be filed in the
near future, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 3.5 shall be deferred for a period not to
exceed ninety (90) days; provided, however, that the Company may not use this
right more than once in any twelve month period.
Subject to the foregoing clauses (A) through (E), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Initiating Holders.
(b) Limitations on Subsequent Registration Rights. From and
after the date hereof, the Company shall not enter into any agreement with any
holder or prospective holder of any securities of the Company which would allow
such holder or prospective holder to require the Company to include shares or
securities in any registration initiated under this Section 3.5 or Section 3.6
(other than piggyback rights granted to capital equipment lessors of the
Company), nor shall the Company include any shares or securities for its own
account in any registration initiated under this Section 3.5, without the
written consent of the Holders of a majority of the shares of Registrable
Securities for which registration has been requested, unless such shares or
8
<PAGE> 11
securities are entitled to be included in such registration only to the extent
that the inclusion of such securities will not diminish the amount of
Registrable Securities which are included.
(c) Underwriting. The right of any Holder to registration
pursuant to Section 3.5 shall be conditioned upon such Holder's participation in
the underwriting arrangements required by this Section 3.5 and the inclusion of
such Holder's Registrable Securities in the underwriting to the extent requested
to the extent provided herein.
The Company shall (together with all Holders proposing to distribute
their securities through such underwriting) enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by a majority in interest of the Initiating Holders (which managing underwriter
shall be reasonably acceptable to the Company). Notwithstanding any other
provision of this Section 3.5, if the managing underwriter advises the
Initiating Holders in writing that marketing factors require a limitation of the
number of shares to be underwritten, then the Company shall so advise all
holders of Registrable Securities who have requested to participate in such
offering and the number of shares of Registrable Securities that may be included
in the registration and underwriting shall be allocated among all Holders
thereof in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities held by such Holders at the time of filing the
registration statement. No Registrable Securities excluded from the underwriting
by reason of the underwriter's marketing limitation shall be included in such
registration.
If any Holder of Registrable Securities disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration, and such Registrable Securities shall not be
transferred in a public distribution prior to ninety (90) days after the
effective date of such registration; provided, however, that, if by the
withdrawal of such Registrable Securities a greater number of Registrable
Securities held by other Holders may be included in such registration (up to the
maximum of any limitation imposed by the underwriters), then the Company shall
offer to all Holders who have included Registrable Securities in the
registration the right to include additional Registrable Securities in the same
proportion used in determining the underwriter limitation in this Section
3.5(c).
3.6 Company Registration.
(a) Notice of Registration. If at any time or from time to
time, the Company shall determine to register any of its securities, either for
its own account or the account of a security holder or holders exercising their
respective demand registration rights, other than (i) a registration relating
solely to employee benefit plans or (ii) a registration relating solely to a
Securities and Exchange Commission Rule 145 transaction, the Company will:
(i) promptly give to each Holder written notice
thereof; and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable
9
<PAGE> 12
Securities specified in a written request or requests, made within 30 days after
receipt of such written notice from the Company by any Holder, but, except as
provided below, only to the extent that such inclusion will not diminish the
number of securities included by the Company.
(b) Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 3.6(a)(i). In such event, the right of any Holder to
registration pursuant to Section 3.6 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company (or by the
holders who have demanded such registration). Notwithstanding any other
provision of this Section 3.6, if the managing underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, then (a) if such registration is the first registered offering of
the sale of the Company's securities to the public, the managing underwriter may
exclude some or all of the Registrable Securities to be included in the
secondary portion of such registration or (b) if such registration is other than
the first registered offering of the sale of the Company's securities to the
general public, the managing underwriter may limit the number of Registrable
Securities requested by Holders to be included in the secondary portion of such
registration to not less than thirty percent (30%) of the securities proposed to
be distributed through such underwriting. The Company shall so advise all
Holders and the other permitted holders distributing their securities through
such underwriting pursuant to piggyback registration rights similar to this
Section 3.6, and the number of shares of Registrable Securities and other
securities that may be included in the registration and underwriting shall be
allocated among all Holders and other permitted holders in proportion, as nearly
as practicable, to the respective amounts of Registrable Securities held by such
Holders and other securities held by other permitted holders at the time of
filing the registration statement. If any Holder or other permitted holder
disapproves of the terms of any such underwriting, he may elect to withdraw
therefrom by written notice to the Company and the managing underwriter. Any
securities excluded or withdrawn from such underwriting shall be withdrawn from
such registration, and shall not be transferred in a public distribution prior
to ninety (90) days after the effective date of the registration statement
relating thereto.
(c) Right to Terminate Registration. The Company shall have
the right to terminate or withdraw any registration initiated by it under this
Section 3.6 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.
3.7 Registration on Form S-3.
(a) If any Holder requests that the Company file a
registration statement on Form S-3 (or any successor form to Form S-3) for a
public offering of shares of the Registrable Securities (the reasonably
anticipated aggregate price to the public of which would exceed $500,000), and
the Company is a registrant entitled to use Form S-3 to register the Registrable
Securities for such an offering, the Company shall, as soon as practicable,
effect such registration;
10
<PAGE> 13
provided, however, that the Company shall not be required to effect more than
two registrations pursuant to this Section 3.7 in any 12-month period. The
Company will (i) promptly give written notice of the proposed registration to
all other Holders, and (ii) as soon as practicable, use its best efforts to
effect such registration (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws and appropriate compliance
with applicable regulations issued under the Securities Act and any other
governmental requirements or regulations) as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Registrable Securities as are specified in such request, together with all or
such portion of the Registrable Securities of any Holder or Holders joining in
such request as are specified in a written request received by the Company
within thirty (30) days after receipt of such written notice from the Company.
The substantive provisions of Section 3.5(c) shall be applicable to each
registration initiated under this Section 3.7.
(b) Notwithstanding the foregoing, the Company shall not be
obligated to take any action pursuant to this Section 3.7: (i) in any particular
jurisdiction in which the Company would be required to execute a general consent
to service of process in effecting such registration, qualification or
compliance unless the Company is already subject to service in such jurisdiction
and except as may be required by the Securities Act; (ii) if the Company, within
ten (10) days of the receipt of the request of the Initiating Holders, gives
notice of its bona fide intention to effect the filing of a registration
statement with the Commission within ninety (90) days of receipt of such request
(other than with respect to a registration statement relating to a Rule 145
transaction, an offering solely to employees or any other registration which is
not appropriate for the registration of Registrable Securities); (iii) during
the period starting with the date sixty (60) days prior to the filing of, and
ending on a date three (3) months following the effective date of, a
registration statement (other than with respect to a registration statement
relating to a Rule 145 transaction, an offering solely to employees or any other
registration which is not appropriate for the registration of Registrable
Securities), provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective; or
(iv) if the Company shall furnish to such Holder a certificate signed by the
President of the Company stating that in the good faith judgment of the Board of
Directors it would be seriously detrimental to the Company or its shareholders
for registration statements to be filed in the near future, then the Company's
obligation to use its best efforts to file a registration statement shall be
deferred for a period not to exceed ninety (90) days from the receipt of the
request to file such registration by such Holder. The Company shall use
reasonable efforts to qualify for the use of Form S-3. Any registration pursuant
to this Section 3.7 shall not be counted as a registration pursuant to Section
3.5.
3.8 Expenses of Registration. All Registration Expenses incurred in
connection with any registration pursuant to Sections 3.5 and 3.7, up to three
(3) registrations pursuant to Section 3.6 and the cost of one special legal
counsel to represent all of the Holders together for each such registration
shall be borne by the Company, provided that the Company shall not be required
to pay any Selling Expenses or the Registration Expenses of any registration
proceeding begun pursuant to Section 3.5, the request of which has been
subsequently withdrawn by the Initiating Holders, unless the Holders of a
majority of the Registrable Securities agree to forfeit the right to a demand
registration pursuant to Section 3.5. The Holders of Registrable Securities to
have
11
<PAGE> 14
been registered shall bear all such Registration Expenses pro rata on the
basis of the number of shares to have been registered. Notwithstanding the
foregoing, however, if at the time of the withdrawal, the Holders have learned
of a material adverse change in the condition, business or prospects of the
Company from that known to the Holders at the time of their request, then the
Holders shall not be required to pay any of said Registration Expenses or to
forfeit the right to a demand registration.
3.9 Indemnification.
(a) The Company will indemnify each Holder, each Holder's
officers and directors and partners, and each person controlling such Holder
within the meaning of Section 15 of the Securities Act, with respect to which
registration, qualification or compliance has been effected pursuant to this
Section 3, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, preliminary or final prospectus, offering circular or
other document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation (or alleged violation) by the
Company of the Securities Act or the Securities and Exchange Act of 1934, as
amended, or of any rule or regulation promulgated thereunder applicable to the
Company in connection with any such registration, qualification or compliance,
and the Company will reimburse each such Holder, each Holder's officers and
directors, and each person controlling such Holder, each such underwriter and
each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action; provided, however,
that the Company will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement or omission or alleged untrue statement or omission, made in
reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder, controlling person or
underwriter and stated to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its officers and directors
and each person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, preliminary or final prospectus, offering circular or other document,
or any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Company, such Holders, such directors, officers,
12
<PAGE> 15
persons, underwriters or control persons for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
preliminary or final prospectus, offering circular or other document in reliance
upon and in conformity with written information furnished to the Company by an
instrument duly executed by such Holder and stated to be specifically for use
therein; provided, however, that in no event shall the indemnification provided
by any Holder hereunder exceed the gross proceeds received by such Holder for
the sale of such Holder's securities pursuant to such registration.
(c) Each party entitled to indemnification under this
Section 3.9 (the "INDEMNIFIED PARTY") shall give notice to the party required to
provide indemnification (the "INDEMNIFYING PARTY") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense; provided, however, that an Indemnified Party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the Indemnifying Party, if
representation of such Indemnified Party by the counsel retained by the
Indemnifying Party would be inappropriate due to actual or potential differing
interests between such Indemnified Party and any other party represented by such
counsel in such proceeding. The failure of any Indemnified Party to give notice
as provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 3 unless the failure to give such notice is materially
prejudicial to an Indemnifying Party's ability to defend such action. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation.
(d) If the indemnification provided for in this Section 3.9
is held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the statement or omissions that resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statements of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
13
<PAGE> 16
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions of the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this
Section 3.9 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 3.
3.10 Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders as the Company may
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Section 3.
3.11 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Restricted Securities to the public without
registration, after such time as a public market exists for the Common Stock of
the Company, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times after the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended;
(b) File with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Securities Exchange Act of 1934, as amended (at any time after it has become
subject to such reporting requirements);
(c) So long as a Holder owns any Restricted Securities, to
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of said Rule 144 (at any
time after 90 days after the effective date of the first registration statement
filed by the Company for an offering of its securities to the general public),
and of the Securities Act and the Securities Exchange Act of 1934, as amended,
(at any time after it has become subject to such reporting requirements), a copy
of the most recent annual or quarterly report of the Company, and such other
reports and documents of the Company and other information in the possession of
or reasonably obtainable by the Company as a Holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing a Holder to
sell any such securities without registration.
3.12 Transfer of Registration Rights. The rights to cause the
Company to register securities granted Holders under Sections 3.5, 3.6 and 3.7
may be assigned to a transferee or assignee in connection with any transfer or
assignment of Registrable Securities by a Holder (together with any affiliate)
provided that: (a) such transfer may otherwise be effected in accordance with
applicable securities laws, (b) notice of such assignment is given to the
Company, and (c) such transferee or assignee (i) is a wholly-owned subsidiary or
constituent partner
14
<PAGE> 17
(including limited partners) or otherwise an affiliate of such Holder, or (ii)
acquires from such Holder at least 500,000 shares (appropriately adjusted for
stock splits, stock dividends, reverse stock splits or similar events) of
Registrable Securities (assuming conversion of all Preferred).
3.13 Standoff Agreement. Each Holder agrees in connection with any
registration of the Company's securities that, upon request of the Company or
the underwriters managing any underwritten offering of the Company's securities,
not to sell, make any short sale of, loan, grant any option for the purchase of,
or otherwise dispose of any Registrable Securities (other than those included in
the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 180
days) from the effective date of such registration as may be requested by the
Company or such managing underwriters; provided, however, that:
(a) Such agreement shall be applicable only to the first
such registration statement of the Company which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
and
(b) All officers and directors of the Company enter into
similar agreements. In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
3.14 Termination of Rights.
(a) The rights of any particular Holder to cause the Company
to register securities under Sections 3.5, 3.6 and 3.7 shall terminate with
respect to such Holder at such time, following a bona fide, firmly underwritten
public offering of shares of Common Stock registered under the Securities Act
(provided that the aggregate gross offering price equals or exceeds
$10,000,000), as such Holder is able to dispose of all of his or its Registrable
Securities in one three-month period pursuant to the provisions of Rule 144,
provided that such Holder holds not more than 1% of the outstanding voting stock
of the Company.
(b) Notwithstanding the provisions of paragraph (a) of this
Section 3.14, this Agreement and all rights hereunder shall terminate at 5:00
p.m. California time on the date seven (7) years after the closing date of the
Company's first firm underwritten public offering.
SECTION 4
Miscellaneous
4.1 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of California as
they apply to contracts entered into and wholly to be performed in the State of
California. The parties expressly stipulate that any litigation under this
Agreement shall be brought in the state courts of the County of Santa Clara,
15
<PAGE> 18
California and in the United States District Court for the Northern District of
California. The parties agree to submit to the jurisdiction and venue of those
courts.
4.2 Entire Agreement. This Agreement and the other documents
delivered at the Closing (as defined in the Series C Agreement) in connection
with the transactions contemplated by the Series C Agreement, constitute the
full and entire understanding and agreement between the parties with regard to
the subjects hereof and thereof, and no party shall be liable or bound to any
other party in any manner by any warranties, representations or covenants except
as specifically set forth herein or therein.
4.3 Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (a) if to a Holder, at such address as such Holder shall have
furnished to the Company in writing, or (b) if to any other holder of any
Preferred or Common Stock, at such address as such holder shall have furnished
the Company in writing, or, until any such holder so furnishes an address to the
Company, then to and at the address of the last holder of such shares who has so
furnished an address to the Company, or (c) if to the Company, at its address
set forth on the cover page of the Series C Agreement and addressed to the
attention of the Corporate Secretary, or at such other address as the Company
shall have furnished to the Holders.
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or 72
hours after the same has been deposited in a regularly maintained receptacle for
the deposit of the United States mail, addressed and mailed as aforesaid.
4.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the parties
hereto, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
4.5 Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to any
party.
4.6 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
16
<PAGE> 19
The foregoing Agreement is hereby executed as of the date first above
written.
"COMPANY"
RASTER GRAPHICS, INC.
By: /s/ Raster Graphics, Inc.
---------------------------------------
Title:
--------------------------------------
"HOLDERS"
/s/ Jean-Claude Asscher
- --------------------------------------------
Jean-Claude Asscher
ASSOCIATED VENTURE INVESTORS II
By: /s/ Associated Venture Investors II
---------------------------------------
Title:
--------------------------------------
ASSOCIATED VENTURES INVESTORS - PGF
By: /s/ Associated Ventures Investors - PGF
---------------------------------------
Title:
--------------------------------------
AVI PARTNERS II, N.V.
By: /s/ AVI Partners II, N.V.
---------------------------------------
Title:
--------------------------------------
17
<PAGE> 20
/s/ Diosdado P. Banatao
- ----------------------------------
/s/ Maria Banatao
- ----------------------------------
DIOSDADO P. BANATAO AND
MARIA BANATAO
BAY PARTNERS IV
By: Bay Management Company IV,
General Partner
By: /s/ Bay Partners IV
-----------------------------
General partner
BPIV
By: /s/ BPIV
-----------------------------
General Partner
CHANG LEE KEE, INC.
By: /s/ Chang Lee Kee, Inc.
-----------------------------
Title:
----------------------------
DOMINION VENTURES, INC.
By: /s/ Dominion Ventures, Inc.
------------------------------
Title:
----------------------------
ELECTRONIC MARKETING LTD.
By: /s/ Electronic Marketing Ltd.
-----------------------------
Title:
----------------------------
18
<PAGE> 21
FALCON VENTURES, L.P.
By: Its General Partner:
BACK BAY PARTNERS VI L.P.
By: One of Its General Partners of BACK BAY PARTNERS VI L.P.:
JOHN HANCOCK VENTURE CAPITAL MANAGEMENT, INC.
By: /s/ Falcon Ventures, L.P.
----------------------------------
Title:
---------------------------------
FOGARTY FAMILY REVOCABLE TRUST
DATED 9/14/71 AS AMENDED AND
RESTATED 2/14/91
By: /s/ Fogarty Family Revocable Trust
----------------------------------
Title:
---------------------------------
GODFREY T. AND PEGGY W. FONG,
TRUSTEES OF THE GODFREY AND
PEGGY FONG TRUST UTA
DATED AUGUST 8, 1984
By: /s/ Godfrey T. Fong
----------------------------------
By: /s/ Peggy W. Fong
----------------------------------
Title:
---------------------------------
19
<PAGE> 22
HANCOCK VENTURE PARTNERS III, L.P.
By: Its General Partner:
BACK BAY PARTNERS V L.P.
By: One of Its General Partners
JOHN HANCOCK VENTURE
CAPITAL MANAGEMENT, INC.
By: /s/ Hancock Venture Partners III, L.P.
---------------------------------------
Title:
--------------------------------------
HILLTOP ENTERPRISES LTD.
By: /s/ Hilltop Enterprises Ltd.
---------------------------------------
Title:
--------------------------------------
/s/ Craig Johnson
- --------------------------------------------
CRAIG W. JOHNSON
/s/ Jeffrey W. Jue
- --------------------------------------------
JEFFREY W. JUE
KLEINER PERKINS CAUFIELD & BYERS IV
By: /s/ Kleiner Perkins Caufield & Byers IV
---------------------------------------
Title:
--------------------------------------
20
<PAGE> 23
- -------------------------------
/s/ Richard Kniss
- -------------------------------
RICHARD KNISS
/s/ Elizabeth Kniss
- -------------------------------
ELIZABETH KNISS
KPCB ZAIBATSU FUND
By: /s/ KPCB Zaibatsu Fund
--------------------------
Title:
-------------------------
/s/ Brian R. Leach
- -------------------------------
BRIAN R. LEACH
/s/ Sen Lin
- -------------------------------
SEN LIN
/s/ Chi Ming Lee
- -------------------------------
CHI MING LEE
/s/ Sien Fong Leong
- -------------------------------
SIEN FONG LEONG
LUZON INVESTMENTS LTD.
By: /s/ Luzon Investments Ltd.
--------------------------
Title:
-------------------------
21
<PAGE> 24
MAYFLOWER FUND LIMITED PARTNERSHIP
By: Its General Partner:
BACK BAY PARTNERS IV L.P.
By: One of Its General Partners
JOHN HANCOCK VENTURE CAPITAL
MANAGEMENT, INC.
By: /s/ Mayflower Fund Limited Partnership
----------------------------------------
Title:
---------------------------------------
MERRILL, PICKARD, ANDERSON & EYRE IV
By: /s/ Merrill, Pickard, Anderson & Eyre IV
----------------------------------------
Title:
---------------------------------------
MITSUI COMTEK CORP.
By: /s/ Mitsui Comtek Corp.
----------------------------------------
Title:
---------------------------------------
MPAE TECHNOLOGY PARTNERS
By: /s/ MPAE Technology Partners
----------------------------------------
Title:
---------------------------------------
NKK U.S.A. CORPORATION
By: /s/ NKK U.S.A. Corporation
----------------------------------------
Title:
---------------------------------------
22
<PAGE> 25
NORWEST EQUITY PARTNERS IV,
A Minnesota Limited Partnership
By: /s/ Norwest Equity Partners IV
--------------------------------------
Title:
-------------------------------------
O.W&W PACRIM INVESTMENTS LIMITED
By: /s/ O.W&W Pacrim Investments Limited
--------------------------------------
Title:
-------------------------------------
PACIFIC COAST CARDIAC AND VASCULAR
SURGEONS, T&M SUBTRUST
By: /s/ Pacific Coast Cardiac and Vascular
--------------------------------------
Surgeon, T&M Subtrust
--------------------------------------
Title:
--------------------------------------
PORTOLA VALLEY VENTURES
By: /s/ Portola Valley Ventures
--------------------------------------
Title:
-------------------------------------
SHIMIZU CORPORATION, FKA SHIMIZU
CONSTRUCTION CO., LTD.
By: /s/ Shimizu Corporation, fka Shimizu
Construction Co., Ltd.
--------------------------------------
Title:
-------------------------------------
23
<PAGE> 26
TECHNO II PARTNERSHIP
By: Techno-Investment Co., Ltd.
By: /s/ Techno-Investment Co., Ltd.
-----------------------------------
Title:
----------------------------------
TOKYO VENTURE CAPITAL CO., LTD.
By: /s/ Tokyo Venture Capital Co., Ltd.
-----------------------------------
Title:
----------------------------------
U.S. VENTURE PARTNERS
By: /s/ U.S. Venture Partners
-----------------------------------
Title:
----------------------------------
WALDEN CAPITAL PARTNERS
By: /s/ Walden Capital Partners
-----------------------------------
Title:
----------------------------------
WALDEN INTERNATIONAL III, C.V.
By: /s/ Walden International III, C.V.
-----------------------------------
Title:
----------------------------------
WALDEN INVESTORS
By: /s/ Walden Investors
-----------------------------------
Title:
----------------------------------
24
<PAGE> 27
WALDEN VENTURES
By: /s/ Walden Ventures
-------------------------
Title:
------------------------
WS INVESTMENT CO. 88B
By: /s/ WS Investment Co. 88B
-------------------------
Title:
------------------------
/s/ Frank Yung
- ------------------------------
FRANK YUNG
/s/ Robert A. Zettler
- ------------------------------
ROBERT A. ZETTLER
- ------------------------------
(Typed or Printed Name)
By:
--------------------------
Title:
------------------------
25
<PAGE> 28
U.S VENTURE PARTNERS III,
A California Limited Partnership,
By BHMS Partners III,
A California Limited Partnership,
Its General Partner
By: /s/ U.S. Venture Parnters III
---------------------------------------
SECOND VENTURES LIMITED PARTNERSHIP
By BHMS Partners III,
A California Limited Partnership,
Its General Partner
By: /s/ Second Ventures Limited Partnership
---------------------------------------
U.S.V. ENTREPRENEUR PARTNERS
A California Limited Partnership,
By BHMS Partners III,
A California Limited Partnership,
Its General Partner
By: /s/ U.S.V. Entrepreneur Partners
---------------------------------------
26
<PAGE> 29
"SERIES C PURCHASERS"
/s/ Malcolm Burne
- ---------------------
Malcolm Burne
/s/ Cris Cannon
- ---------------------
Chris Cannon
/s/ Rodney Zimmer
- ---------------------
Rodney Zimmer
/s/ Tereve Hanley
- ---------------------
Tereve Hanley
/s/ Weston Edwards
- ---------------------
Weston Edwards
/s/ Don Feagan
- ---------------------
Don Feagan
/s/ Michelle McFadden
- ---------------------
Michelle McFadden
/s/ Charles Edwards
- ---------------------
Charles Edwards
/s/ Dean Wittmann
- ---------------------
Dean Wittmann
/s/ Max Derhak
- ---------------------
Max Derhak
27
<PAGE> 1
EXHIBIT 10.8
PRODUCT AGREEMENT
This Agreement, effective the _____ day of October, 1990, is entered
into by and between
Raster Graphics, Inc. a California corporation having principal offices
at 285 N. Wolfe Road, Sunnyvale, California 94086 ("RGI"), and
Oce Graphics France S.A., a French corporation having principal offices
at 1, rue Jean Lemoine, 94003 Creteil Cedex, France ("Oce").
WHEREAS, RGI is engaged in the development, engineering, manufacturing,
sales and distribution of color electrostatic plotters having characteristics
not available in Oce's current product line, and related supplies and spare
parts, which RGI desires to market and sell through Oce's distribution network
on an exclusive basis in the Exclusive Territory defined below and on a
non-exclusive basis in the Non-Exclusive Territory defined below; and
WHEREAS, Oce is engaged in the sales, marketing, distribution and
servicing of printers and plotters manufactured by Oce and others, and Oce
desires to enhance its product line by distributing RGI's color electrostatic
plotters and related supplies and spare parts, on an exclusive basis in the
Exclusive Territory defined below and on a non-exclusive basis in the
Non-Exclusive Territory defined below, and to service such plotters.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and promises contained in this Agreement, the parties agree as
follows:
1. Definitions
1.1 "Exclusive Territory" means the countries identified
as such in Exhibit F.
1.2 "Foreign OEM Corporation" means a seller of OEM Systems
which maintains its corporate headquarters outside of the Exclusive Territory.
1.3 "Nonexclusive Territory" means all countries and regions
of the world not included in the Exclusive Territory or the Reserved Territory.
1.4 "OEM System" means a system produced by or for a Foreign
OEM Corporation which includes hardware and software elements in addition to a
Product, and in which such hardware and software elements represent a
significant augmentation of the Product, based on an objective examination of
such factors as functionality and performance.
1.5 "New Plotter" means a color electrostatic plotter system
of a type meeting specifications other than those set forth in Exhibit D.
1.6 "Plotter" means a color electrostatic plotter system of a
type listed in Exhibit D.
1.7 "Products" means Plotters, Supplies and Spare Parts.
<PAGE> 2
1.8 "Product Modification" means a modification to a Product
which does not affect the conformance of the Product to its specifications as
defined in Exhibit D.
1.9 "Reserved Territory" means the countries identified as
such in Exhibit F.
1.10 "Spare Parts" means replacement parts for the Plotters.
1.11 "Supplies" means consumables intended for use with the
Plotters, including those listed in Exhibit D.
1.12 "Territory" means the Exclusive Territory and the
Nonexclusive Territory.
1.13 "Effective Date" means the date first given above.
1.14 "First Year" means a period beginning with the Effective
Date and ending fifteen (15) months after acceptance by Oce of the tenth (l0th)
Plotter purchased by Oce under this Agreement.
1.15 "Second Year" means a twelve (12) month period
immediately following the First Year.
1.16 "Subsequent Year" means a twelve (12) month period
beginning on the anniversary date of the Second Year.
1.17 "Year" means the First Year, the Second Year or a
Subsequent Year.
2. Appointment
2.1 Grant of Rights. RGI hereby grants to Oce and Oce hereby
accepts a limited nontransferable right and license to purchase, resell,
distribute, advertise, market and solicit sales of, and service, the Products.
Oce may exercise such right and license directly, and indirectly through Oce's
distributor, dealer and service networks. Oce shall take all lawful and
reasonable measures to prevent sales in the Reserved Territory by third-party
resellers of Products obtained through Oce.
2.2 Scope of Rights. Oce's right and license shall be
nonexclusive within the Nonexclusive Territory and exclusive within the
Exclusive Territory, and shall be subject to the Exceptions and Conditions
stated below. Oce shall not advertise, market, or solicit sales of the Products
within the Reserved Territory without the prior written consent of RGI. Upon
request of Oce, RGI will review with RGI's distributor for the Reserved
Territory, Mitsui Comtek, the possibility of granting distribution rights to Oce
under this Agreement to advertise, market and solicit sales of the Products in
the Reserved Territory countries of Singapore, Hong Kong, Taiwan, the People's
Republic of China and South Korea.
2.3 Exceptions to and Enforcement of Exclusive Rights. RGI may
authorize Foreign OEM Corporations to sell OEM Systems in the Exclusive
Territory, provided that RGI shall take all lawful and reasonable measures by
contract and otherwise to procure the sales of the
-2-
<PAGE> 3
Products in OEM Systems through Foreign OEM Corporations in the Exclusive
Territory and to prevent sales of the Products in the Exclusive Territory other
than through Oce or in OEM Systems sold by Foreign OEM Corporations. Oce shall
be entitled to compensating payment from RGI for sales of Products in the
Exclusive Territory other than sales of Products through Oce or as part of OEM
Systems sold by a Foreign OEM Corporation, such compensating payment to be
twenty percent (20%) of the sum of the number of Plotters multiplied by the
price paid by Oce for the Plotters.
2.4 Conditions to Exclusive Rights. As a condition to
maintaining its exclusive rights, Oce shall place orders requesting delivery of
Plotters within each Year in the "Exclusive Minimum" defined in Exhibit G.
Orders in excess of the "Exclusive Minimum" for a given Year will be credited
against the "Exclusive Minimum" for the succeeding year. All Products sold in
the Exclusive Territory by Foreign OEM Corporations shall be deemed to be part
of the "Exclusive Minimum" defined in Exhibit G.
2.5 Conversion of Exclusive Rights. If Oce fails to place firm
orders for the "Exclusive Minimum" for a given Year, RGI may give written notice
to Oce of RGI's intent to convert the Exclusive Territory to Non-Exclusive
Territory. Such notice shall include RGI sales data justifying the conversion,
and offer Oce a stated period of not less than thirty (30) days in which to
place firm orders to meet the "Exclusive Minimum" for such Year. If at the end
of the stated period Oce has not placed firm orders to meet the "Exclusive
Minimum" for such Year, RGI may upon notice to Oce convert the Exclusive
Territory to Non-Exclusive Territory.
2.6 Conditions to Non-Exclusive Rights. As a condition to
maintaining its nonexclusive rights, Oce shall place orders requesting delivery
of Plotters within each Year in the "Non-Exclusive Minimum" defined in Exhibit
G. Orders in excess of the "Non-Exclusive Minimum" for a given Year will be
credited against the "Non-Exclusive Minimum" for the succeeding year. All
Products sold in the Exclusive Territory by Foreign OEM Corporations shall be
deemed to be part of the "Non-Exclusive Minimum" defined in Exhibit G.
2.7 Termination of Non-Exclusive Rights. If Oce fails to place
firm orders for the "Non-Exclusive Minimum" for a given Year, RGI may give
written notice to Oce of RGI's intent to terminate Oce's right and license to
purchase, resell, distribute, advertise, market and solicit sales of the
Plotters. Such notice shall include RGI sales data justifying such termination,
and offer Oce a stated period of not less than thirty (30) days in which to
place firm orders to meet the "Non-Exclusive Minimum" for such Year. If at the
end of the stated period Oce has not placed firm orders to meet the
"Non-Exclusive Minimum" for such Year, RGI may upon notice to Oce terminate
Oce's right and license with respect to the Plotters. Such termination shall not
terminate Oce's right and license to purchase, resell and distribute Spare Parts
and Supplies for the Plotters or to service the Plotters or to sell existing
inventory of Plotters.
2.8 Reports to Oce. Not less than one month prior to the end
of each Year, RGI shall provide Oce in writing with information (such as
detailed RGI estimates of worldwide Product sales) sufficient for Oce to
estimate the Exclusive Minimum and Non-Exclusive Minimum for the succeeding
Year. After the First Year, RGI shall, by the tenth (10th) business day
following each three-month period, provide Oce in writing with information (such
as detailed
-3-
<PAGE> 4
actual quantifies of RGI's worldwide orders and sales of Products for such
three-month period), sufficient for Oce to determine its performance
Year-to-date against the Exclusive Minimum and Non-Exclusive Minimum.
Information provided in the form indicated in Exhibit G shall be deemed
sufficient for such purposes.
2.9 Audit. Upon written request of Oce and during normal RGI
business hours, RGI shall permit its records to be audited by an independent,
third-party of Oce's choosing, to the extent necessary to verify calculation of
the Exclusive Minimum and Non-Exclusive Minimum. Oce shall pay the cost of such
audit, and shall be promptly reimbursed by RGI for such cost if a discrepancy of
more than five percent (5%) of the amount of an Exclusive Minimum or
Non-Exclusive Minimum is uncovered in the audit.
3. Terms of Purchase and Sale.
3.1 No Inconsistent Terms. All Product purchases under this
Agreement shall be subject to the terms and conditions of this Agreement, except
as otherwise agreed in a writing signed by an officer of RGI and an officer of
Oce. RGI and Oce hereby waive any inconsistent terms contained in any purchase
order or order acknowledgement or similar document issued pursuant to this
Agreement.
3.2 Prices.
3.2.1 Prices and Discounts. All Product prices to Oce
shall be as stated in RGI's standard U.S. Price List for the same or
substantially similar products, set forth in Exhibit A, less applicable
discounts as set forth in Exhibit B. Prices shall include delivery on the terms
provided in this Agreement, and packing for shipment in accordance with the
specifications of Exhibit D or, in the absence of such specifications, in a
manner suitable for overseas air freight shipment.
3.2.2 Price Changes. Upon not less than thirty (30)
days' written notice to Oce, RGI may increase and shall decrease prices to Oce
consistent with changes to RGI's standard U.S. Price List for the same or
substantially similar Products; except that, RGI shall not increase Product
prices other than Spare Parts and Supplies prices until the end of the one (1)
year period commencing on the date of the first shipment of a Plotter to Oce
under this Agreement. Price increases shall not apply to any purchase quantities
ordered before the effective date of the price increase. Price decreases shall
apply to all purchase quantities ordered by Oce but not shipped by RGI prior to
the effective date of the price decrease.
3.2.3 Taxes. Product prices do not include any
federal, state or local governmental taxes and duties applicable to the purchase
and sale. Oce shall bear all such taxes (specifically excluding taxes on the
income of RGI) or duties that may be applicable to the purchase and sale. When
RGI has the legal obligation to collect such taxes or duties, a corresponding
amount shall be added to Oce's invoice and paid by Oce, unless Oce provides RGI
with a valid tax exemption certificate authorized by the appropriate taxing
authority.
-4-
<PAGE> 5
3.3 Sole Remuneration. The difference between Oce's purchase
price and Oce's selling price to its customers will be Oce's sole remuneration
for sale of the Products.
3.4 Equitable Treatment. RGI may offer to third parties terms
and conditions of Product purchase and sale which are the same as or different
from those provided in this Agreement. However, RGI shall offer to Oce terms and
conditions comparable to those offered as from the date of this Agreement to any
Foreign OEM Corporation(s), subject to Oce's acceptance of other terms and
conditions also accepted by the third party which may be less advantageous to
Oce than those provided in this Agreement.
3.5 Order Forecasts. Annually on October 1, Oce shall notify
RGI in writing of Oce's forecast of Product sales for the succeeding calendar
year. By the tenth (l0th) business day of each calendar month (commencing not
less than thirty days after the Effective Date), Oce shall notify RGI in writing
of Oce's forecast for Product purchase orders for the succeeding six (6)
calendar months, specifying the quantity of each Product for each such month.
3.6 Firm Order Commitments.
3.6.1 Initial Orders. Oce shall place firm initial
orders with RGI for Products in the quantities and on or before the dates set
forth in Exhibit I. Notwithstanding provisions in this Agreement for
rescheduling of deliveries, the delivery dates for such orders may not be
extended beyond the dates set forth in Exhibit I.
3.6.2 Forecast Commitments. Oce's forecasts shall be
non-binding, except that Oce shall during each calendar month place firm orders
with RGI for not less than fifty percent (50%) of the quantifies of Products
forecast for such month in Oce's forecast notified to RGI during the immediately
preceding month.
3.7 Orders. All orders for Products submitted by Oce shall be
by written purchase orders sent to RGI not less than ninety (90) days prior to
the first day of the requested month of delivery, and requesting delivery dates
within one hundred twenty (120) days from the date of the purchase order and
during the term of this Agreement. An order initially transmitted to RGI by
telefax shall be deemed received by RGI upon transmission, provided that a
confirming written purchase order is received by RGI within ten (10) days of the
date of transmission. All orders will specify the Products ordered by
description and by Product numbers assigned by RGI (if any), quantity of each
Product, requested delivery date(s), and any other information reasonably
requested by RGI.
3.8 Order Acceptance. RGI shall, within fifteen (15) days
following receipt of an order placed under this Agreement, notify Oce in writing
of RGI's acceptance or rejection of the order; an order not accepted or rejected
within such time shall be deemed accepted in the quantities stated and with
delivery dates assigned as requested in such order. An acceptance initially
transmitted to Oce by telefax shall be deemed received by Oce upon transmission.
A confirming written acceptance will be sent to Oce within ten (10) days of the
date of transmission. RGI's acceptance will identify the order, assign the
delivery date(s), and include other information
-5-
<PAGE> 6
reasonably requested by Oce. The assigned delivery date of a Product shall be
within thirty (30) days of the delivery date requested in the order for such
Product.
3.9 Order Acceptance Commitments. RGI shall accept all orders
received from Oce in a given month which are within the quantities of Products
as originally forecast for such month. RGI shall use diligent efforts to accept
orders for quantities in excess of the quantities forecast.
3.10 Rescheduling Deliveries. Oce may, upon written notice at
least thirty (30) days prior to the delivery date initially assigned for a group
of Product units, defer delivery of up to fifty percent (50%) of the Product
units scheduled for delivery on such date. Delivery of such Product units may be
deferred not more than sixty (60) days from the initially specified delivery
date. Product delivery dates may not be deferred more than one time.
3.11 Order Cancellation. Oce may, without any cancellation
charge, cancel up to twenty-five percent (25%) of an order upon notice given to
RGI at least thirty (30) days before the assigned delivery date for the Products
covered by the cancellation. Oce may, without any cancellation charge, cancel up
to fifty percent (50%) of an order upon notice given to RGI at least sixty (60)
days before the assigned delivery date for the Products covered by the
cancellation. The percentage of an order cancelled shall be determined with
reference to the total purchase price of all Products covered by the order. Oce
may not otherwise cancel an order without written permission of RGI.
4. Delivery, Inspection, Acceptance, Shipping.
4.1 Delivery. RGI shall deliver each Product unit ordered by
Oce under this Agreement F.O.B. RGI's facilities in California on the assigned
delivery date or, if the delivery date is deferred as provided in this
Agreement, on the deferred delivery date. Upon Oce's request, RGI shall procure
the shipment of the Product units ordered by Oce to the address designated by
Oce, the shipment to be made by a reliable transport company.
4.2 Late Delivery. Late delivery of a Product unit shall
entitle Oce to delay payment of the unpaid balance of the purchase price for
such Product by a period equal to the number of days the delivery is late. For
example, if the assigned delivery date (or deferred delivery date) were
September 1, and actual delivery occurs on September 6, then the second
installment payment (if normally due net 60 days) would not be due until
November 11 (65 days after an invoice dated as of the actual delivery date). An
order for a Product unit not delivered within thirty (30) days of the assigned
delivery date may be cancelled by Oce without penalty and shall be counted
toward the Exclusive Minimum and Non-Exclusive Minimum.
4.3 Inspection and Testing. RGI shall notify Oce in writing
(preferably by telefax) of the date on which RGI intends to deliver each
Product, fourteen (14) days in advance of such date, giving Oce an opportunity
to inspect and test the Product at RGI's facilities in California following
delivery. Within seven (7) days following receipt of such notice, Oce shall
notify RGI whether Oce will inspect and test the Product and, if so, specify a
reasonable time schedule for such inspection and testing. Plotter inspection and
testing shall be in accordance
-6-
<PAGE> 7
with the criteria set forth in Exhibit E. RGI shall provide facilities, material
and any technical assistance at RGI's location, as reasonably requested by Oce
in connection with inspection and testing. RGI and Oce each shall bear,
respectively, all costs and expenses they incur in connection with such
inspection and testing.
4.4 Product Acceptance. A Product shall be deemed accepted by
Oce (i) upon notice of acceptance from Oce to RGI, (ii) upon delivery by RGI if
Oce fails to specify a time schedule for inspection and testing, (iii) at the
end of the time schedule set for inspection and testing if Oce fats to inspect
and test in accordance with the specified time schedule, or (iv) at the end of
the time schedule set for inspection and testing if Oce fails to notify RGI of
rejection of the Product within such time schedule. Risk of loss of a Product
shall pass to Oce upon acceptance.
4.5 Rejection. Written notice of rejection of a Product shall
specify in detail the reasons for which the Product is being rejected. Rejection
of a Product which fails to meet the inspection and testing criteria set forth
in Exhibit E shall be conclusively deemed reasonable.
4.6 Packing for Shipment. RGI shall, promptly following
acceptance of a Product, pack the Product and mark for shipment to such address
as directed in writing by Oce. Unless otherwise directed in writing by Oce, each
Product shall be packed by RGI in accordance with the specifications for such
Product as set forth in Exhibit D or, in the absence of such specifications, in
a manner suitable for overseas air freight shipment.
5. Payment Terms.
5.1 For Plotters. Payment for the purchase price of a Plotter
purchased under this Agreement shall be due as follows: (1) a portion of the
purchase price in advance of delivery as set forth in Exhibit C, and (2) the
balance within sixty (60) days after date of invoice received from RGI following
delivery. RGI shall apply against any prepayment which is due any amount
credited to Oce for other purposes under this Agreement, upon written request
from Oce.
5.2 For Spare Parts and Supplies. Payment for the purchase
price of Spare Parts and Supplies purchased under this Agreement shall be due in
full within sixty days after date of invoice received from RGI.
5.3 Invoice Date. An invoice for the purchase price of a
Product shall be provided to Oce not later than thirty (30) days following
acceptance of the Product, and shall be dated not earlier than the date of
acceptance.
6. Product Evolution and Qualification.
6.1 New Plotter Notice and Offer. RGI shall notify Oce of the
intended introduction of any New Plotter as soon as possible, but in no event
later than one hundred twenty (120) days prior to any public announcement of
such New Plotter. RGI's notice shall include (i) basic specifications for the
New Plotter in the form of Exhibit D, Part 1.1, and (ii) RGI's intended prices
and discounts for the New Plotter. RGI shall at the same time offer Oce the
right to add such New Plotter as a Plotter under this Agreement, in accordance
with the qualification procedure defined below; RGI shall take no action
inconsistent with such right of
-7-
<PAGE> 8
Oce before Oce has had an opportunity to qualify the New Plotter for inclusion
as a Plotter under this Agreement.
6.2 New Plotter Qualification Procedure.
6.2.1 First Notice to RGI. If Oce wishes to proceed
with qualification of the New Plotter for inclusion as a New Plotter under this
Agreement, Oce shall so notify RGI within fifteen (15) days following receipt of
notice from RGI under Section 6.1.
Delivery to RGI of an original of this Agreement
executed by Oce shall serve as such notice for purposes of RGI's Model 424
plotter, and the parties shall proceed with qualification of RGI's Model 424
plotter in accordance with the procedures of Sections 6.2.2 and 6.2.5.
6.2.2 Approvals and Evaluation Prototype. Upon
receipt of notice from Oce under Section 6.2.1 of Oce's intent to qualify the
New Plotter, RGI shall (i) promptly and diligently pursue approval of the New
Plotter by such safety and regulatory bodies as may be reasonably designated by
Oce under Section 6.3.1, (ii) promptly provide Oce with safety information for
the New Product in accordance with Section 6.3.2, and (iii) make available to
Oce for evaluation a prototype unit of such New Plotter for an evaluation period
of not more than thirty (30) days.
6.2.3 Second Notice to RGI. Within the evaluation
period of Section 6.2.2, Oce shall (i) inform and discuss with RGI whether Oce
still wishes to qualify the New Plotter for inclusion as a Plotter for purposes
of this Agreement and, if so, (ii) agree with RGI upon supplemental product
specifications for the New Plotter in the form of Exhibit D, Part 1.2, and
inspection and testing criteria for acceptance of the New Plotter in the form of
Exhibit E, and (iii) if deemed necessary by Oce for qualification purposes,
place an order with RGI for a first production unit of the New Plotter meeting
the basic and supplemental product specifications. The parties shall then
negotiate in good faith the price and discounts to Oce for production units of
the New Plotter and amend Exhibits A and/or B accordingly. In case of
disagreement on price and/or discounts, RGI shall not offer the New Plotter to
third parties within the Exclusive Territory for better prices and/or discounts
than offered to Oce without Oce first being offered those better terms.
6.2.4 First Production Unit. RGI shall, following
receipt of an order from Oce under Section 6.2.3, deliver to Oce as soon as
practicable a first production unit of the New Plotter meeting the basic and
supplemental product specifications. Oce's purchase price for the first
production unit of the New Plotter shall be as determined by negotiation under
Section 6.2.3.
6.2.5 Notice of Qualification. Oce shall notify RGI
whether Oce has qualified the first production unit of the New Plotter (i)
within thirty (30) days of Oce's acceptance of the first production unit of the
New Plotter in accordance with the inspection and testing criteria for
acceptance of the New Plotter notified to RGI under Section 6.2.3 or, (ii) if no
-8-
<PAGE> 9
first production unit of the New Plotter is ordered by Oce, within the
evaluation period of Section 6.2.2.
6.3 Product Safety and Related Matters.
6.3.1 Safety and Regulatory Approvals. RGI shall be
responsible for pursuing such safety and regulatory approvals of the Plotter as
may be reasonably requested by Oce. A request to obtain approvals of the
Technische Uberwachungsverein (TUV) and Verband Deutscher Elektrotechniker (VDE)
bodies shall be deemed reasonable. In the event that Oce fails to qualify the
New Plotter for inclusion as a Plotter under this Agreement, reasonable
out-of-pocket expenses incurred by RGI in pursuing safety and regulatory
approvals of the New Plotter at Oce's request shall be reimbursed to RGI by Oce,
up to a maximum of five thousand U.S. dollars (US $5,000); otherwise, such
expenses shall be borne by RGI. Oce may, but shall not be obliged to, obtain
safety and regulatory approvals at Oce's cost and expense. Oce and RGI shall
provide one another with reasonably requested assistance and information for
pursuing safety and regulatory approvals. RGI shall provide Oce with copies of
all safety and regulatory approval certificates pertaining to the Products. RGI
represents and warrants that, as from the grant of any safety or regulatory
approval, each Product delivered to Oce under this Agreement to which such
approval is applicable shall meet the approval standards.
6.3.2 Safety Information. RGI shall be responsible
for providing Oce with safety information concerning the Products, and for
promptly providing Oce with updated safety information in case of a change of
composition of the Products. Such safety information shall include the
information requested in the Safety Data Questionnaires of Exhibit J, and any
reports on mutagenicity (Amestest) and toxicity of the Products. RGI represents
and warrants that safety information provided to Oce for the Products is and
will be correct and complete. If Oce wishes further safety information
concerning the Products, it shall consult RGI and the parties shall cooperate to
find a solution (including a partition of costs) acceptable to the parties,
provided that RGI shall not withhold further safety information which is
available to RGI and which Oce or Oce's affiliated companies may require to
comply with applicable laws and regulations within the Territory.
6.3.3 Safety Reporting. Oce or Oce's affiliated
companies may be requested and/or obliged to provide third parties in the
Territory (such as Authorities, Health and Environmental Committees, Customs,
Medical Staffs, and/or others), with respect to possible consequences of the
Products to human health, to the environment or to safety, with information such
as the composition of the Products and/or effects of the Products. RGI shall use
its best efforts to provide such information, upon Oce's request, either to Oce
or directly to such third parties.
6.3.4 Notification to the Other Party. If either
party is informed or believes that sale, use or storage of the Products would be
detrimental or would have unfavorable consequences to human health, to the
environment and/or to safety, it shall immediately give the other party in
writing all necessary information relating to such detrimental or unfavorable
consequences. In case legal restrictions would prevent marketing, use, sale
and/or storage of the Products in Territory or a part thereof because the
Products would be detrimental or unfavorable
-9-
<PAGE> 10
to human health, to the environment and/or to safety, the parties shall consult
with one another and use their best efforts to find an appropriate solution, and
if the consultation will not offer a solution acceptable to both parties Oce may
cancel pending orders for the Products destined for the country or countries
where such restrictions exist. RGI agrees to take back Oce's new and unused
stock of the affected Products at the prices paid to RGI for such Products.
6.3.5 Notification to Authorities. RGI represents
that the chemicals and/or substances supplied to Oce under this Agreement have
been notified (or will be notified prior to first delivery thereof to Oce under
this Agreement) to the competent authorities in the European Economic Community
(EEC), United States of America (USA), Canada and Australia, to the extent
required by law.
6.4 Effect of Qualification. Upon notice from Oce to RGI of
qualification of a New Plotter, (i) the New Plotter shall become a Plotter for
purposes of this Agreement and the corresponding basic and supplemental product
specifications shall become a part of Exhibit D, the corresponding inspection
and testing criteria shall become a part of Exhibit E, (ii) Oce shall place a
first order for a production lot of such Plotters, and (iii) RGI shall within
thirty (30) days make a complete escrow deposit for such Plotters and related
Spare Parts and Supplies pursuant to the Technology Escrow Agreement referenced
in Section 11.2.2 and Exhibit L.
6.5 Non-Approval of New Plotter. In the event that a
significant standards organization in the Territory (such as TUV or VDE) fails
to approve a New Plotter, (i) RGI and Oce shall use diligent efforts to define
modifications needed to obtain approval, (ii) RGI shall at no charge to Oce
modify or provide Oce at no cost with Spare Parts and technical information for
Oce to modify any New Plotters delivered prior to approval, and (iii) Oce may
defer delivery, until such modifications are effected and approval is obtained,
of any New Plotters ordered by Oce prior to approval.
6.6 Existing Inventory and Pending Orders. If a New Plotter is
offered for sale by RGI which competes directly (considering cost, performance
and functionality) with Plotters purchased by Oce, then (i) RGI shall use
reasonable efforts to assist Oce in the sale or other disposition of such
Plotters as are in Oce inventory, (ii) Oce shall have the right to cancel up to
fifty percent (50%) of pending orders for such Plotters not delivered to Oce
before receipt of notice of the New Plotter, by giving notice of cancellation to
RGI within fourteen (14) days after receipt by Oce of notice of the New Plotter,
and (iii) Oce shall have the right to convert to orders for other Products the
balance of pending orders for such Plotters not delivered to Oce before receipt
of notice of the New Plotter, by giving notice of conversion to RGI within
fourteen (14) days after receipt by Oce of notice of the New Plotter. Orders
converted under this provision shall be counted toward Exclusive Minimum and
Non-Exclusive Minimum.
7. Field Service and ECOs.
7.1 Field Service. Maintenance and technical service and
support for Products purchased by end users directly or indirectly through Oce
shall be the responsibility of Oce. Oce will also make available in the
Exclusive Territory maintenance and technical service and support for Products
purchased by end users through a source sanctioned by Oce under this Agreement;
-10-
<PAGE> 11
such maintenance and technical service and support shall be offered on terms and
conditions comparable to those offered to end users purchasing Products through
Oce.
7.2 ECO Notification. Any Product Modification which may
affect Oce's inventory of Spare Parts and Supplies, or Oce's procedures for
maintenance or technical service and support, shall be described in detail by
RGI in a written Engineering Change Order ("ECO"). RGI shall provide Oce with a
copy of each ECO as soon as possible, but in no event less than thirty (30) days
prior to implementing the changes described in the ECO in any Product delivered
to Oce.
7.3 Existing Inventory and Pending Orders. If a Product
Modification affects Oce's requirements for inventory of Spare Parts, then (i)
RGI shall use reasonable efforts to assist Oce in the sale or other disposition
of Oce's inventory of affected Spare Parts, and (ii) Oce shall have the right to
cancel pending orders for affected Spare Parts not delivered to Oce before
receipt of notice of the Product Modification, by giving notice of cancellation
to RGI within fourteen (14) days after receipt by Oce of notice of the Product
Modification.
8. Warranties.
8.1 Express Warranties. RGI hereby warrants to Oce that each
Product sold, replaced, repaired or reconditioned by RGI under this Agreement
(i) will be free from defects in material and workmanship for a period of one
hundred twenty (120) days from the date of acceptance of the Product, and (ii)
conforms to its specifications (whether or not included in an Exhibit to this
Agreement).
8.2 Exclusions. The express warranties provided in this
Agreement shall not apply to Product defects: (i) caused through no fault of RGI
during shipment to or from Oce, (ii) caused by the use or operation of the
Product in a manner inconsistent with the Product specifications or Product
documentation customarily supplied by RGI with the Product and consistent with
the Product specifications, (iii) caused by modifications or alterations made to
the Products without the written approval of RGI, or (iv) caused by maintenance
performed on the Products inconsistent with written instructions from RGI.
8.3 Warranty Claims. If a Product purchased under this
Agreement fails to operate properly during the warranty period, Oce shall
attempt to make repairs through Oce's field service network in a manner
consistent with written maintenance instructions from RGI. If such attempt is
unsuccessful, RGI shall, promptly upon written notice from Oce, give Oce
instructions for return or other disposition of the Product and shall credit Oce
for the purchase price of the Product. Oce shall in any event promptly provide
RGI with a service report describing in reasonable detail the Product failure
and the attempt to repair, including an itemization of any Spare Parts installed
and of labor and costs incurred. RGI shall credit Oce for labor and costs
incurred at Oce's then-standard rates for such repair and for the purchase price
of any Spare Parts installed, it being understood that the credit to Oce for
labor during each quarter will be limited to three hundred U.S. dollars (US
$300) multiplied by the number of Plotters purchased during the previous
quarter. This limit will be periodically reviewed in the light of experience.
Oce will justify the labor charges by service reports related to machine
failure. Oce
-11-
<PAGE> 12
shall return or otherwise dispose of any defective Product or component thereof
as directed in writing by RGI, at RGI's expense. RGI shall bear all reasonable
costs of shipment between Oce and RGI for returned or replaced Products.
8.4 Disclaimer. RGI MAKES NO WARRANTIES OTHER THAN THE EXPRESS
LIMITED WARRANTIES PROVIDED IN THIS AGREEMENT, EITHER EXPRESSED OR IMPLIED, WITH
RESPECT TO THE PRODUCTS. RGI SPECIFICALLY DISCLAIMS THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
8.5. Warranty to Oce Customers. Oce may offer warranties or no
warranties to Oce customers for the Products as Oce deems appropriate. RGI shall
have no obligation to honor any warranty made by Oce.
9. RGI Assistance to Oce.
9.1 Documentation. It is intended that Oce will prepare its
own documentation and other materials for advertising, promotion, sales, service
and training with respect to the Products, which may be based upon RGI's
documentation. For this purpose, RGI will, promptly upon written request from
Oce, provide Oce at no charge with limited quantities of each item of RGI
documentation and other materials for the Products, and With master copies
(suitable for reproduction, such as camera-ready artwork or electronic files) of
such items. If Oce requests more than limited quantities, RGI shall provide
these to Oce at no charge if available, or at cost plus fifteen percent (15%)
markup.
9.2 Software. It is intended that Oce will modify software
drivers and other software customarily distributed by RGI with the Plotters to
suit the needs of the markets in which Oce will distribute, sell and service the
Plotters. For this purpose, RGI will, promptly upon written request from Oce,
provide Oce at no charge with source code and object code copies such software
in electronic form. Oce's license to copy and distribute such software shall be
limited to one (1) copy for each Plotter purchased, plus a reasonable number of
additional copies for replacement of lost or damaged copies, service use,
archival purposes, and the like. Oce's customers shall be permitted to make
archival copies of such software.
9.3 Firmware. It is intended that Plotters distributed, sold
and serviced by Oce may contain firmware which differs from that contained in
Plotters sold by RGI for distribution other than through Oce (containing, for
example, multilingual error-message capabilities, and test-plot capabilities
employing Oce trademarks or logos). RGI and Oce shall collaborate to develop
such differing firmware, and RGI shall upon written request of Oce provide Oce
with executable electronic copies thereof and related instructions sufficient to
enable Oce to prepare read-only-memory components embodying such firmware for
use with the Plotters.
9.4 Training. RGI shall provide at no charge to Oce, at RGI's
facilities in California, field service and sales training to Oce's personnel at
periodic intervals, with the frequency, format and content of such training to
be determined by RGI in consultation with Oce. Any additional such training
shall be provided by RGI upon request of Oce at RGI's standard
-12-
<PAGE> 13
rates thereof. Oce shall pay all costs for travel, food, and lodging by Oce
personnel in connection with all such training.
9.5 Technical Information. RGI shall provide Oce with all
technical information reasonably necessary for Oce to certify, sell, distribute,
maintain and service the Products.
9.6 Technical Support. RGI will provide all technical support
and assistance reasonably requested by Oce. Technical support and assistance
provided by telephone from RGI's facilities in California during RGI's normal
business hours shall be provided at no charge to Oce. Other technical support
and assistance, such as travel of technical experts to Oce or end-user sites,
shall be provided at RGI's then-standard rates.
10. Availability of Spare Parts and Supplies.
10.1 Guaranteed Supply. RGI shall make available to Oce under
this Agreement Spare Parts and Supplies for Plotters for a period of five (5)
years after written notice to Oce of RGI's discontinuation of any such Product.
10.2 Notice of Discontinuation. RGI shall give Oce reasonable
advance notice of RGI's intent to discontinue supply of any Spare Parts or
Supplies and an opportunity for Oce to place a final order therefor.
10.3 Right to Make. RGI shall, prior to discontinuing supply
of any Spare Parts or Supplies to Oce, provide Oce with all information
(including manufacturing files, supplier lists, and the like) and assistance
reasonably necessary for Oce to make, have made or acquire through RGI's sources
the discontinued Spare Parts or Supplies.
10.4 Supplies. Oce will be allowed to develop or have
developed at its own cost supplies (such as paper, film, toner) and subsequently
acquire, buy and resell and distribute same freely without any charges or
payments to RGI. RGI will make available to Oce within fifteen (15) days upon
Oce's first order all basic specifications necessary to develop the aforesaid
supplies. RGI will make available to Oce as soon as possible upon execution of
this Agreement but not later than fifteen (15) days upon Oce's first order a
list of RGI's qualified suppliers of the aforesaid supplies and allows Oce to
purchase directly from those qualified suppliers the supplies but not earlier
than before September 1, 1991. Oce will make available to RGI as soon as
possible upon its qualification the list of qualified suppliers, if any, with
respect to supplies developed by Oce for the Plotters. Oce allows RGI to contact
and discuss directly with these qualified suppliers terms and conditions for
supply. Neither party will be responsible or liable for the terms and conditions
with respect to the purchase and/or distribution of supplies by the other party
from such suppliers.
11. Guarantee of Supply.
11.1 Allocation Among Customers. To the extent that RGI is
unable to timely manufacture and deliver ordered Products to its customers, RGI
shall allocate for delivery to Oce during each month, on a Product-by-Product
basis, the greater of: (i) twenty four percent (24%)
-13-
<PAGE> 14
of RGI's production (on a Product by Product basis), and (ii) a portion of the
available quantities of the affected Products which is not less than the portion
of the total quantities of such Products (on a Product by Product basis) ordered
by all RGI customers for delivery during such month.
11.2 Manufacturing Rights.
11.2.1 Manufacturing License. Contemporaneously with
this Agreement, RGI and Oce have entered into a Plotter Manufacturing License
Agreement in the form of Exhibit K.
11.2.2 Technology Escrow. Contemporaneously with this
Agreement, RGI and Oce have entered into a Technology Escrow Agreement in the
form of Exhibit L. RGI shall, at all times during the term of this Agreement and
for a period of five (5) years thereafter, maintain a current deposit for each
Product with an Escrow Agent of all information and materials defined in the
Technology Escrow Agreement.
12. Term & Termination.
12.1 Term. This Agreement will continue in force for a fixed
term of five (5) Years unless terminated earlier in accordance with its terms.
At the end of the fixed term, this Agreement will automatically be renewed for
additional one year periods unless no later than six months before the
expiration of the initial term or any such renewal term, either party gives the
other party written notice of non-renewal.
12.2 Termination for Cause.
12.2.1 This Agreement may be terminated by a party
without penalty upon thirty (30) days' written notice if:
(i) the RGI Model 424 Plotter is not
qualified by Oce within the time period set forth in Section 6.2.5.,
(ii) Oce's Non-Exclusive rights are
terminated as provided in Section 2.6,
(iii) the non-terminating party assigns
rights or obligations under this Agreement other than as permitted in this
Agreement, or
(iv) the non-terminating party is in
material breach of this Agreement, the material breach is specified in the
notice of termination, and the non-terminating party fails to cure such breach
within the thirty-day period of the notice of termination.
12.2.2 This Agreement may be terminated by a party
without penalty immediately upon giving notice if proceedings under any
bankruptcy, insolvency or similar legislation are instituted by or against the
non-terminating party, or the non-terminating party makes an assignment for the
benefit of creditors, or a receiver is appointed for all or a substantial part
of the non-terminating party's assets.
-14-
<PAGE> 15
12.3 Fulfillment of Orders upon Termination. Upon termination
of this Agreement, other than for failure of Oce to make payments, RGI shall
continue to fulfill, subject to the terms of Section 3 above, all orders
accepted by RGI prior to the date of termination; provided that, all orders for
Plotters shall provide for delivery to occur not later than sixty (50) days
following termination.
12.4 Payments. Termination by either party shall not relieve
the other party of its obligation to make any and all payments due under this
Agreement, or relieve either party of obligations incurred prior to termination
or of obligations which by their nature or term survive termination.
12.5 Survival of Certain Terms. The provisions of Sections 1,
2.1, 2.7, 2.9, 3.1, 3.2, 3.3, 3.4, 3.8, 3.9, 3.10, 3.11, 4, 5, 6.3, 7, 8, 9.1,
9.2, 9.3, 9.5, 9.5, 10, 11, 12.3, 12.4, 12.5, 13, 14, 15, 15.2, 17.1, 17.4, 175,
17.5, 17.7, 17.8, 17.9, 17.10, 17.11, 17.12, 17.13, 17.14, 17.15, 17.16, 17.17
and 17.18, and of the Exhibits, shall survive the termination of this Agreement
for any reason. All other rights and obligations of the parties shall cease upon
termination of this Agreement.
13. Indemnification.
13.1 Indemnity. As and to the extent expressly provided in
this Agreement, when one party ("Indemnifying Party") has a specific obligation
to indemnify the other party ("Indemnified Party"), the Indemnifying Party
shall, at its expense, defend, indemnify, protect and hold the Indemnified Party
harmless in any suit, claim or proceeding brought against the Indemnified Party
and against any related costs, losses, damages and expenses (including the
reasonable fees of attorneys and other professionals) incurred in connection
with the subject matter of the indemnity (collectively "Claims"), provided that
the Indemnifying Party is promptly notified of any such Claims and given
necessary assistance and authority, information and assistance from the
Indemnified Party to defend and settle the Claims. The Indemnifying Party shall
be given exclusive control of a Claim, provided that the Indemnifying Party (i)
accepts full responsibility for the Claim (without regard to any limitation of
liability otherwise applicable under this Agreement) and (ii) permits legal
counsel for the Indemnified Party to assist in the defense and settlement of the
Claim. The Indemnifying Party shall have no liability for settlements or costs
incurred without its consent.
13.2 Intellectual Property Infringement. RGI shall indemnify
Oce, in the manner provided in Section 13.1 above, in the event of any Claim (as
defined in Section 13.1) that the Products infringe any copyright or trade
secret right under the laws of any jurisdiction in the Territory, or that the
Products infringe any patent right under the laws of the United States, the
United Kingdom, France, The Netherlands, the Federal Republic of Germany, Italy,
Switzerland and/or Sweden. Should Oce's use or sale of any Products or any part
thereof be enjoined, or in the event that RGI desires to avoid any threatened
claim of intellectual property infringement, RGI may, at its option and expense,
either (a) substitute equivalent non-infringing Products for the infringing
item, (b) modify the infringing item so that it no longer infringes but has the
same fit, form and function, or (c) obtain for Oce the right to continue using
and selling such item. If none of the foregoing is commercially practicable, RGI
may obtain possession of the item which is
-15-
<PAGE> 16
the subject of the injunction or claim (to the extent such item is within the
control of Oce) and refund to Oce the Product purchase price paid by Oce, if
any, plus corresponding shipping costs paid by Oce. The foregoing indemnity
shall not apply if and to the extent that an alleged infringement arises from
the combination of any Product with products or equipment not supplied by RGI
and the Chan would have been avoided but for the particular combination.
Further, such indemnity shall not apply, and Oce agrees to indemnify RGI against
any Claim against RGI to the extent that an alleged infringement arises from
RGI's manufacture or assembly of any item to the specification or design of Oce.
RGI's liability under this Section 13.2 shall not be
limited as provided in Section 16.2; except that, RGI's liability under this
Section 13.2 shall be limited as provided Section 16.2 as to Claims that the
Products infringe any patent of a jurisdiction other than the United States if
RGI gives Oce necessary authority, information and assistance to defend and
settle Claims that the Products infringe any patent of a jurisdiction other than
the United States.
THE FOREGOING STATES THE ENTIRE LIABILITY AND
OBLIGATION OF RGI AND OCE WITH RESPECT TO INFRINGEMENT OR CLAIMS OF INFRINGEMENT
OF ANY PATENT, COPYRIGHT, TRADE SECRET OR OTHER INTELLECTUAL PROPERTY RIGHT BY
THE PRODUCTS OR ANY PART THEREOF.
13.3 Disclosure. RGI shall (i) promptly disclose to Oce
information known to RGI concerning actual or potential infringement or claims
of infringement by the Products of intellectual property rights of any third
party in any jurisdiction, in sufficient detail for Oce to assess the risk of
corresponding infringement in the Territory, and (ii) provide Oce upon request
with information concerning the Products in sufficient detail for Oce to assess
such risk.
13.4 RGI Liability for Product Safety and Environmental
Damage. RGI shall indemnify Oce, in the manner provided in Section 13.1 above,
in the event of any Claim (as defined in Section 13.1) for loss, damage, injury
or death of any person caused by the Products purchased under this Agreement (or
their waste). RGI shall not be held responsible for any liabilities or claims if
the loss, damage, injury or death (i) arises from the modification of the
Products other than by or with the approval of RGI or as required by a safety or
regulatory approval body, (ii) if the Products in question have been used,
installed, maintained or serviced in a manner inconsistent with written
instructions of Raster Graphics, or (iii) is due to the gross negligence of
anyone other than Raster Graphics.
14. Proprietary Rights.
14.1 Confidential Information. Information which is to be held
confidential shall be supplied in writing and marked as confidential. If
confidential information is orally disclosed, then it shall be subsequently
confirmed in writing within ten (10) days of the disclosure and marked as
confidential. Such confidential information shall be protected by the recipient
from disclosure to others with at least the same degree of care as that which is
accorded to its own proprietary information, but in no event with less than
reasonable care. The foregoing shall not apply to information which is generally
known and available to the public through no fault of the recipient, information
independently developed by the receiving party without reference to the
-16-
<PAGE> 17
other party's information, information later supplied to the receiving party
from third parties not subject to confidentiality obligations to the other
party, and information already known to the receiving party at the time of
receipt. In the event of termination of this Agreement, there shall be no use or
disclosure by a party of any confidential information of the other party for a
period of five (5) years after termination of this Agreement, except such use as
necessary for Oce to service Products purchased under this Agreement.
14.2 Remedies. Any use or attempted use of confidential
information in violation of Section 14.1 is a breach of this Agreement which may
cause irreparable harm to the owner entitling the owner to seek injunctive
relief in addition to all legal remedies.
14.3 Intellectual Property License. RGI hereby grants to Oce,
and Oce accepts, a worldwide, nontransferable, royalty-free right and license,
without right of sublicense, to use, copy, translate, modify and prepare
derivative works of Product documentation, software and firmware supplied by RGI
under this Agreement. Oce may affix proprietary marks and legends of Oce's
choosing to such documentation, software and firmware, for use only in
connection with purchase, resale, distribution, advertising, marketing and
soliciting sales of, and servicing, the Products.
14.4 Trademarks. Products (including their packaging)
delivered to Oce by RGI under this Agreement shall be labeled with such
trademarks and other markings as may be reasonably requested in writing by Oce.
Neither party is otherwise authorized by this Agreement to use any trademark of
the other without prior written approval of an officer of the party having
rights in the trademark. Oce shall indemnify RGI against any loss or damage
resulting from delivery of Products by RGI to Oce with trademarks requested by
Oce.
15. Import and Export Controls.
15.1 Products Subject to Controls. All obligations of RGI to
provide Products and technical assistance under this Agreement shall be subject
to United States laws and regulations from time to time governing the license
and delivery of technology and products abroad by persons subject to the
jurisdiction of the United States, including the Export Administration Act of
1979, as amended, any successor legislation, and the Export Administration
Regulations issued by the Department of Commerce, International Trade
Administration, or Office of Export Licensing.
15.2 Compliance by Oce. Oce agrees that unless prior
authorization is obtained from the Office of Export Licensing, it will not
export, reexport or transship directly or indirectly, to country groups Q, S, W,
Y, or Z (as defined in the Export Administration Regulations), any of the
technical data disclosed to Oce or the direct product of such technical data.
15.3 RGI Assistance. RGI shall, upon written request, provide
to Oce in writing all information reasonably required in connection with any
application for export license for the Products or technical data
-17-
<PAGE> 18
related to the Products. RGI shall promptly supply to Oce any information
available to RGI which specifically concerns export of the Products or technical
data related to the Product, including opinions of third parties as to the
proper export classification of the Products or data.
15.4 Execution of Documents. RGI shall upon written request
execute and provide to Oce lawful documents reasonably required by Oce to effect
the export and import of Products and technical data related to the Products as
contemplated under this Agreement, including Certificates of Origin for the
Products.
16. Limitation of Liability.
16.1 Purchase Price. RGI's liability under this Agreement,
regardless of the form of action, shall not exceed the price paid by Oce for all
Products purchased under this Agreement, except (i) except as otherwise provided
in this Agreement with respect to Intellectual Property Infringement, and (ii)
as to product safety and environmental damages, RGI's liability shall be the
greater of the price paid by Oce for all Products purchased under this Agreement
and the amount (not less than ten million US dollars) of coverage specified in
RGI's general liability insurance policy. RGI shall maintain such insurance
coverage in force during the term of this Agreement and provide proof of
coverage upon request from Oce. The provisions of Sections 16.1 and 16.2 shall
not limit the amount of any compensating payment due under Section 2.3.
16.2 Limitation on Damages. The liability of one party to the
other party arising out of this Agreement shall be limited to the amount of
direct damages actually incurred, except (i) as otherwise provided in this
Agreement with respect to indemnification, and (ii) with respect to RGI
liability for safety and environmental damages. Neither party shall be liable to
the other for costs of procurement of substitute products or services, for lost
profits, or for special, indirect, consequential or incidental damages, however
caused and on any theory of liability, arising out of this Agreement. The
limitations shall apply even if the damaged party has been advised of the
possibility of such damages, and notwithstanding any failure of essential
purpose of any limited remedy provided in this Agreement.
17. General.
17.1 Exhibits. The attached Exhibits A through L, as modified
from time to time in a manner permitted under this Agreement, shall form a part
of this Agreement.
17.2 Oce Financial Information. Oce shall provide to RGI
public financial information concerning Oce on an annual basis.
17.3 RGI Financial Information. RGI shall provide Oce with
financial information reasonably requested by Oce on a semi-annual basis for the
months ending March and September of each year.
17.4 Announcements. Neither party shall make any public
announcement concerning this Agreement or the relationship of the parties under
this Agreement without first obtaining the advice and consent of the other party
concerning the content and timing of such announcement.
-18-
<PAGE> 19
17.5 Independent Contractors. The relationship of RGI and Oce
established by this Agreement is that of independent contractors, and nothing
contained in this Agreement shall be construed to (i) give either party the
power to direct and control the day-to-day activities of the other, or (ii)
allow either party to create or assume any obligation on behalf of the other for
any purpose. All financial obligations associated with Oce's business are the
sole responsibility of Oce and all financial obligations associated with RGI's
business are the sole responsibility of RGI.
17.6 Representations. Oce shall have sole responsibility for
all statements and representations made by Oce regarding RGI or the Products, to
the extent that such statements or representations are inconsistent with
information provided to Oce by RGI.
17.7 Governmental Consent. Oce shall be responsible for
obtaining the consent, approval or authorization of, or designation, declaration
or filing with, any governmental authority in the Territory which is required in
connection with the valid execution, performance and delivery of this Agreement.
17.8 Governing Law. This Agreement shall be governed by, and
construed under, the laws of the State of California, exclusive of State rules
of conflicts of law and of the United Nations Convention on the Sale of Goods.
17.9 Dispute Resolution. The sole and exclusive remedy with
respect to any controversy, claim or dispute between the parties to this
Agreement arising under this Agreement or any common law, statutory or
regulatory provision shall be recourse to arbitration in New York, New York in
accordance with the then-effective Rules of Conciliation and Arbitration of The
International Chamber of Commerce by three (3) arbitrators appointed according
to those Rules. Each party hereby expressly waives any fight it may have to any
remedy in a court of law. Any award of the arbitrators shall be final and
conclusive on the parties, judgment upon such award may be certified in any
court of competent jurisdiction and no appeal shall lie therefrom.
Notwithstanding the foregoing, either party may apply to a court of law (and
equity) for injunctive relief; provided, that it is the intent of the parties
that the merits of any claim will be ultimately determined by arbitration in the
manner provided above.
17.10 Government Procurement. No U.S. Government or other
government procurement regulations will be deemed included in this Agreement or
binding on a party unless specifically accepted in writing by the party to be
bound.
17.11 Language. This Agreement is in the English language
only, which shall be controlling in all respects. All communications and notices
to be made or given pursuant to this Agreement shall be in the English language.
17.12 Notices. Any notice required or permitted to be given
under this Agreement shall be in writing and shall be given for all purposes by
delivery in person, by prepaid registered or certified mail, or by telegram,
telex, cable or telefax, addressed to the party to be notified at the address
given above for such party, or to such other address as may be furnished from
time to time by notice from such party. A notice shall be effective upon
receipt, and shall be deemed received seven (7) days after dispatch if sent by
mail.
-19-
<PAGE> 20
17.13 Force Majeure. Nonperformance by a party of any
obligation hereunder, other than an obligation to pay money, shall be excused to
the extent that performance is rendered impossible by an event of force majeure,
including strike, fire, flood, governmental acts or orders or restrictions,
failure of suppliers, or any other reason where failure to perform is beyond the
reasonable control of, and is not caused by, the negligence of the
non-performing party. The non-performing party shall upon the occurrence of such
an event forthwith notify the other of the occurrence and the practical effect
of such event. All Oce purchase orders for Products which are received by RGI
during the period of delay caused by force majeure and purchase orders
previously received which become cancelled by RGI due to force majeure will be
included in the Exclusive Minimum and Non-Exclusive Minimum provided in this
Agreement. If the performance of the non-performing party is delayed for more
than sixty (60) days, the parties shall consult with one another to seek a
mutually satisfactory solution. If the delay persists for more than one hundred
twenty (120) days, the party other than the non-performing party may cancel any
or all pending orders for Products and/or terminate this Agreement, without
penalty.
17.14 Non-Assignability and Binding Effect. Neither party
shall assign any of its rights and obligations under this Agreement without the
prior written consent of the other. Oce may assign any of its rights and/or
obligations under this Agreement to an entity owned or controlled by an entity
owning or controlling Oce. Subject to the foregoing, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their successors
and assigns.
17.15 Severability. If any provision of this Agreement is held
invalid by any law, rule, order or regulation of any government, or by the final
determination of any state or federal court or of an arbitration panel, such
invalidity shall not affect the enforceability of any other provisions not held
to be invalid.
17.16 Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties relating to the subject matter herein
and merges all prior discussions between them.
17.17 Modification. No modification of, or amendment to, this
Agreement, or any waiver of any rights under this Agreement, shall be effective
unless in writing signed by an officer of the party to be charged.
17.18 Power to Enter Agreement. Each party hereby warrants and
represents to the other that it has full power and authority to enter into this
Agreement and to grant all rights and licenses contained herein.
-20-
<PAGE> 21
In witness whereof, the parties have caused this Agreement to
be executed by their duly authorized representatives.
RASTER GRAPHICS, INC. OCE GRAPHICS FRANCE S.A.
By: /s/ Raster Graphics By: /s/ OCE Graphics France S.A.
-------------------------------- -----------------------------
Name: ______________________________ Name: ___________________________
Title: _____________________________ Title: __________________________
Date: ______________________________ Date: ___________________________
-21-
<PAGE> 22
Exhibit A
RGI's Standard U.S. Price List
Raster Graphics Inc.
ColorStation Model "D"
Price List
Model Description U.S. List Price
ColorStation D
All ColorStations are equipped with: Paper catch tray, User Manual and Power
Cord.
Model 224 200 DPI, 24" width $27,900
Model 424 400 DPI, 24" width (includes 200/400 DPI) $31,900
Factory-Installed Options
Option 504 40 MB Plot Management Option $ 2,995
Option 554 100 MB Plot Management Option $ 3,995
Option 700 PC Connectivity Kit $ 149
Note: - Model 504 will accept HPGL plot files up to 100 MB
and Model 554 will handle up to 250 MB plit files
- Allows for Autoshade or Targa/RGB applications when
purchased with Option 700
- Provides the ability to do plit nesting and tiling of
HPGL files
- Provides unique ability to mix vector and raster data
on the same plot
<PAGE> 23
Raster Graphics Inc.
ColorStation
Supplies Price List
Media and Toners
----------------
Media
U.S. List
Item Nbr Description Price per Roll
TB-24 Premium Bond Paper (24" x 500' roll) $ 79.50
48 rolls per pallet
MT-24 Translucent (24" x 500' roll-2 rolls per $321.75
ctn) 84 rolls per pallet
MF-34 Matte Backed Film, 3 mil (24"x200' roll) $424.25
36 rolls per pallet
Toners (Pallet 120 cartons - U.S. List Price
- ------ (Four 32 oz. bottles per carton) per Carton
-------------------------------- ---------------
T-32 B,C,M & Y Toner $ 62.25
Replenishers (Pallet 180 cartons - Six 8 oz.
------------ bottles per carton)
-------------------
P-08 B,C,M & Y Replenisher $ 50.25
(Pallet 168 Cartons - Six 3 oz.
bottles per carton)
-------------------
Enhancers (Pallet 168 Cartons - Six 3 oz.
--------- bottles per carton)
-------------------
E-03 B,C,M & Y Enhancer $ 88.25
Dispersant (Pallet 120 Cartons - Four 32 oz.
bottles per carton)
-------------------
D-??X Cleaning Dispersant $ 17.95
<PAGE> 24
Exhibit B
Discount Schedule
Item(3) Discount
- ------- --------
First 100 units of Model 424 (or equivalent) Plotter 45%
Model 424 (or equivalent) Plotter, after first 100 units 50%
All other Products (including Spare Parts, excluding Supplies) 45%
Supplies in pallet quantities 35%
Supplies in less than pallet quantities 15%
<PAGE> 25
Exhibit C
Payment Terms
During the First Year of this Agreement, fifty percent (50%) of the purchase
price of each Plotter shall be due as a prepayment not less than ninety (90)
days prior to the assigned delivery date for the Plotter.
The prepayment terms will be renegotiated for the Second Year and Subsequent
Years upon notice from either party to the other, such notice to be given not
less than thirty (30) day prior to the commencement of the Year to which the
renegotiated prepayment terms shall apply.
<PAGE> 26
Exhibit D
Product Specifications
1. Model 424 and equivalents
1.1 Model 424 basic product specifications (standard RGI product)
1.1.x [In detail]
1.2 Model 424 supplemental product specifications (product as modified
for Oce)
1.2.1 Regulatory requirements (FCC, VDE, etc.)
1.2.2 Safety Approval Standards (UL, TUV, etc.)
1.2.3 Language (Multi-lingual error messages, etc.)
1.2.4 Finishing and marking (colors, logos, etc. for Product and
package)
1.2.5 Package specifications (e.g., suitable for intended means of
shipment)
1.2.6 Product & Material Safety Data Questionnaires
1.2.7 Other
1.3 Model 424 spare parts specifications
1.3.x (see list above)
1.4 Model 424 supplies specifications
1.4.x (see list above)
<PAGE> 27
OEM SPECIFICATION
Oce A1 MODEL
9-13-90
PAPER HANDLING
- --------------
1. FINISHED PAPER SIZE:
24 INCH x 36 INCH (609.6x914.4mm)
2. WRITING AREA:
23.04 inchx33.27 inch (585.2x845mm)
3. OUTPUT TRAY:
Holds approximately 20 plots
4. MEDIA TYPE:
Opaque bond, translucent, .003 inch matt film
FRONT PALE CONTROLS
- -------------------
1. DISPLAY TYPE:
Menu-driven LCD
2. CONTAINS:
Communications set-up
Pen width/color controls
Internal color chart
Media type
Contrast control
Plot counter (on/off reset)
Multiple copies (set before plot is sent to plotter)
Replot (set after last plot is finished)
Plot nesting Place up to 8 plots on a single sheet
Field service information
3. PLOT CANCEL KEY
4. DRAFT MODE KEY (200 dpi x 200 dpi)
<PAGE> 28
TONER SUPPLY
- ------------
1. CONTAINERS:
Four one-quart plastic bottles (required for machine operation)
8 oz. replenishers
3 OZ. enhancers
ENVIRONMENTAL FACTORS
- ---------------------
1. TEMPERATURE
50 degrees to 90 degrees (10 degrees to 32 degrees C) operating
15 degrees to 140 degrees F(-10 degrees to 60 degrees C) storage
2. HUMIDITY:
30 to 70% (non-condensing) operating
15 to 85% (non-condensing) storage
PHYSICAL SPECIFICATIONS:
- ------------------------
1. DIMENSIONS:
30 H x 33W x 27.5 D inches (760 x 830 x 700 mm)
2. WEIGHT:
265 lb. (121 kg) unit
330 lb. (151 kg) ship [wt. excl/supplies]
POWER REQUIREMENTS
- ------------------
1. POWER SUPPLY:
100/120/220/240 Vac 47-63 Hz
80 VA max. standby 273 BTU/Hr.
250 VA max. operating 852 BTU/Hr.
<PAGE> 29
PLOT SPEED:
1. PLOT SPEED
Approximately 1.75 inches per second
1 pass per color 200 dpi (draft mode)
2 pass per color 400 dpi (optional enhanced mode)
2. SYSTEM THROUGHPUT:
200 dpi (draft mode) 1.5 minutes in monochrome
Approximately 4.0 minutes in color
Note: time is dependent on data rate and file size
Test setup:
Everex model 386/25
Raster Graphics spool driver, Centronics parallel
Standard plot file Timetest.plt (1.4 Meg byte HP-GL plot file)
Total time to plot full color 9 min. (transfer time 5 min.)
Optional 400 dpi (enhanced mode) 2.5 min. monochrome
Approximately 7.5 min. in color
Note: time is dependent on data rate and file size
Test setup:
Everex model 386/25
Raster Graphics spool driver, Centronics parallel
Standard plot file Timetest.plt (1.4 Meg byte HP-GL plot file)
Total time to plot full color 11 min. (transfer time 5 min.)
Optional 200 dpi IMAGE MODE
Test setup:
Everex model 386/25
Raster Graphics RGIMAGE driver
Standard image plot file Image.tga (820 byte file)
Total time to plot first image 9.5 min.
<PAGE> 30
COMMUNICATIONS
1. DATA CAPACITY:
Handles a 2.0 MB HP-GL data file standard
40 MB & 100 MB options required large vector files
and imaging applications
2. DATA FORMAT:
HP-GL compatible, 16 logical pens, 256 color choices for line drawings
16 width settings/pen from 0.005-0.08 in. (0.15mm - 20.5 mm)
Imaging Compatibility: TARGA, Autoshade(TM)
Raster Interface
3. DATA RATE:
RS-232C up to 38.4K baud
4. HARDWARE INTERFACES:
Built-in RS-232C
Built-in Centronic 8-bit parallel
RESOLUTION
1. STANDARD MODEL:
200 dpi x 200 dpi
2. OPTIONAL MODEL:
400 dpi x 400 dpi or 200 dpi x 200 dpi selectable
<PAGE> 31
CERTIFICATIONS
1. SAFETY APPROVALS
UL Listed UL-478 5th Edition
CSA Approved, CSA-22.2 No 220
TUV - GS Mark
2. EMI
FCC Class A Verified
PLOT QUALITY
NOTE. ALL TESTS TO BE WITH RASTER GRAPHICS APPROVED TONERS AND PAPER
1. REGISTRATION:
Using test pattern RGtest1
Black to Cyan, Magenta and Yellow plus or minus 0.004 in. (plus or
minus 0.10 mm)
NOTE. Measurement to be made in four test areas on the RGtest1 plot.
Measurements are centerline to centerline in both horizontal
and vertical directions.
2. LINE ACCURACY:
Within 0.05% maximum accumulated error over 10 in. (254 mm)
Within .005 in. (0.013 cm) under 10 inches
Note: @ 77 degrees F (25 degrees C) & 50% RH or on milar media
3. DROP OUT:
Using test pattern RGtest1
No drop allowed in test area (part of plot that is covered with dots)
<PAGE> 32
4. FLARING:
Flair and nominal dot or line to be less than 2 times the nominal dot
or line size.
EXAMPLE. If nominal dot is .005x.005 then dot plus flair
can be 0.01x0.01 in. (0.025x0.025 cm) max.
5. BACKGROUND:
Using test pattern RGtest1
Measured background to have a maximum delta E value
of less than 1.5
PROCEDURE.
Equipment Minolta CM 1000
First measure untoned area at beginning of plot
also place 8 layers of plotter paper under test area
to eliminate the effect of what is under test sample.
Next take measurement in the four box areas on plot
Average delta E must be less than 1.5
NOTE: Due to the cut sheet nature of the plotter some
background staining will occur outside the imaging area
at the start and end of the plot.
PRIMARY AND SECONDARY COLOR:
NOTE. TEST MUST BE CONDUCTED WITH FRESH TONERS
Using test pattern RGtest2
At this time primary and secondary color will be a visual
specification based on samples and descriptions of samples
First run test pattern RGtest2
This plot contains solid primary color bars across the page
that vary in width from .25, .50, 1.0 inches
This plot is run in draft mode
The plot must show good solid fill on each primary color across
<PAGE> 33
the page on the .25 inch wide bar only. The .5 and the 1.0 inch
bar may have some variation in color and density.
Secondary colors can have some slight variation in color and fill.
Using test pattern RGtest3 (must have 400dpi option)
First run test pattern RGtest3
This plot contains solid primary color bars across the page
that vary in width from .25, .50, 1.0 inches
This plot is run in ENHANCED MODE
The plot must show good solid fill on each primary color across
the page with very little variation in color and density.
Secondary colors must almost no variation in color
7. OVERALL PLOT QUALITY:
Using test plot Timetest.plt
This plot is a 1.4 Meg byte HP-GL plot file
The plot must be free of any dropout and of good quality
<PAGE> 34
RGI OCE MODEL A1
PROCUREMENT SPECIFICATION
<PAGE> 35
<TABLE>
<CAPTION>
CONTENTS PAGE
-------- ----
<S> <C> <C>
1.0 PRODUCT DESCRIPTION 3
2.0 PERFORMANCE SPECIFICATION 4
3.0 INTERFACE SPECIFICATION 8
CENTRONICS PARALLEL
RS-232 SERIAL INTERFACE
4.0 SPARE PARTS LIST 8
5.0 DOCUMENTATION AVAILABILITY LIST 8
</TABLE>
2
<PAGE> 36
1.0 PRODUCT DESCRIPTION
The Raster Graphics Colorstation is a color electrostatic plotter and
controller and is purchased from Raster Graphics Inc. 285 N. Wolfe
Road, Sunnyvale, CA 94086. The model A1 has a 24 inch paper width and
36 inch length, is a cutsheet (roll paper supply) four color multiple
pass plotter. The plotter has a built in HPGL Interpreter and raster
converter, it can also accept formatted Raster data.
3
<PAGE> 37
2.0 PERFORMANCE SPECIFICATION
ENVIRONMENTAL
1. TEMPERATURE
50 to 90 F (10 to 32 C) operating
15 to 140 F (-10 to 60 C) storage
2. HUMIDITY
30 TO 70 % (non-condensing) operating
15 to 85 % (non-condensing) storage
PHYSICAL SPECIFICATIONS
1. DIMENSIONS
30H X 33W X 27.5D (760 X 830 X 700 mm)
2. WEIGHT
265 lb. (121 kg) unit
330 lb. (151 kg) shipping
3. SHIPPING
See appendix A
4
<PAGE> 38
CERTIFICATIONS
1. SAFETY APPROVALS
UL listed UL-478 5th Edition
CSA approved, CSA-22.2 No 220
TUV -GS Mark
2. EMI
FCC Class A verified
POWER REQUIREMENTS
1. POWER SUPPLY
100/120/220/240 VAC 47-63 HZ
80 VA max. standby 273 BTU/Hr.
250 VA max. operating 852 BTU/Hr.
RESOLUTION
1. STANDARD MODEL
200 X 200 Dots/Inch
4608 Dots/Horizontal line
6654 Dots/Vertical line
2. OPTIONAL MODEL
400 X 400 DPI OR 200 X 200 dpi selectable
9216 Dots/Horizontal line (400 dpi)
13308 Dots/Vertical line (400 dpi)
5
<PAGE> 39
REGISTRATION
Black to Cyan, Magenta and Yellow +0.004 in. (+0.10 mm)
NOTE: Measurements are centerline to centerline in both horizontal and
vertical directions.
ACCURACY
Within 0.05% maximum accumulated error over 10 in. (254 mm)
Within .005 in. (0.013 cm) under 10 inches
WRITING MEDIA
1. PAPER SIZE
24 X 36 inch ( 609.6 X 914.4 mm)
2. WRITING AREA
23.04 X 33.27 inch ( 585.2 X 845 mm)
3. OUTPUT TRAY
Approximately 20 sheet capacity
4. MEDIA TYPE
Opaque bond, translucent, .003 inch matte film
5. TONER SUPPLY
Four one-quart plastic bottles (required for machine operation)
8 oz. replenishers
3 oz. enhancers
6
<PAGE> 40
FRONT PANEL CONTROLS
1. DISPLAY TYPE
Menu-driven LCD
2. CONTAINS
Communications set-up
Pen width/color controls
Internal color chart
Media type
Contrast control
Plot counter (on/off reset)
Multiple copies (set before plot is sent to plotter)
Replot (set after last plot is finished)
Plot nesting (8 plots/sheet)
Field service information
3. PLOT CANCEL KEY
4. DRAFT MODE KEY (200 dpi X 200 dpi)
5. ENHANCED MODE KEY (400 dpi X 400 dpi)
7
<PAGE> 41
3.0 INTERFACE SPECIFICATION
1. HARDWARE INTERFACES
Built in RS-232C
Built in Centronics 8 - bit parallel
2. DATA RATE
RS-232C up to 38.4K baud
3. DATA FORMAT
HP-GL compatible, 16 logical pens, 256 color choices for line
drawings 16 width settings/pen from 0.005 - 0.08 in.(0.15 - 20.5
mm)
Raster Interface
4. DATA CAPACITY
Standard: 2.0 MB HP-GL data file
Optional: 40 or 100 MB data file (required for large vector files
and Imaging applications)
4.0 SPARE PARTS LIST
See Appendix B
5.0 DOCUMENTATION AVAILABILITY LIST
See Appendix C
8
<PAGE> 42
APPENDIX A
(PACKAGING AND SHIPPING DOCUMENTATION)
<PAGE> 43
Rastergraphics Vibration Test Data Lansmont Corporation
2088 Sunset Drive
Pacific Grove, CA 93950
<TABLE>
<CAPTION>
Product: Color Station
Test Input Resonances
----------------------------------------------------------------------------------
Location Monitored Freq Range Sweep Rate Primary Bandwidth Secondary
Side Down Hz G's oct/min Hz Q Hz Hz Q Hz Q Plot # Test#
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
YELLOW TONER STATION BASE 3-200 0.50 2.00 33.0 2.4 18-90 56.0 3.0 1 1
----- ---- ---- ---- --- ------ ---- --- ---- ---
BLACK TONER STATION BASE 3-200 0.50 2.00 50.0 6.0 14-111 92.0 3.2 2 2
----- ---- ---- ---- --- ------ ---- --- ---- ---
PRINT HEAD
BASE 3-200 0.50 2.00 48.0 3.4 14-111 60.0 3.0 3 3
----- ---- ---- ---- --- ------ ---- --- ---- ---
AIR PUMP
BASE 3-200 0.50 2.00 7.0 3.8 3-12 4 4
----- ---- ---- ---- --- ------ ---- --- ---- ---
TONER TRAY PUMP BOARD
BASE 3-200 0.50 2.00 38.0 8.0 3-74 3.2 2.4 49.0 7.0 5 5
----- ---- ---- ---- --- ------ ---- --- ---- ---
E-BOX BOARD
BASE 3-200 0.50 2.00 37.0 2.6 18-85 55.0 4.0 80.0 2.0 6 6
----- ---- ---- ---- --- ------ ---- --- ---- ---
TRANSPORTER
BASE 3-200 0.50 2.00 30.0 3.8 9-40 15.0 1.6 7 7
----- ---- ---- ---- --- ------ ---- --- ---- ---
TRANSPORTER
FRONT 3-200 0.50 2.00 35.0 3.8 16-50 18.0 1.9 75.0 1.9 8 8
----- ---- ---- ---- --- ------ ---- --- ---- ---
TRANSPORTER
RIGHT 3-200 0.50 2.00 18.0 6.0 10-40 9 9
----- ---- ---- ---- --- ------ ---- --- ---- ---
CHASSIS
BASE 3-200 0.50 2.00 36.0 2.4 12-50 10 11
----- ---- ---- ---- --- ------ ---- --- ---- ---
</TABLE>
Page 1
<PAGE> 44
Rastergraphics Vibration Test Data Lansmont Corporation
2088 Sunset Drive
Pacific Grove, CA 93950
<TABLE>
<CAPTION>
Product: COLOR STATION SHIPPING CONTAINER
Test Input (sine) Test Input (random)
----------------------------------------------------------------
Frequency Random Spectrum Dwell Time Test #
Side Down Hz G's (if used) minutes
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BASE 20.0 0.50 15 13
BASE TRUCK/AIR 15 14
</TABLE>
Page 2
<PAGE> 45
Rastergraphics Drop Test Data Lansmont Corporation
2088 Sunset Drive
Pacific Grove, CA 93950
<TABLE>
<CAPTION>
Product: COLOR STATION SHIPPING CONTAINER
Drop Height Side Down Response Plot # Test #
(inches) Location Monitored G's msec ips
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BASE
28.00 CHASSIS 53.4 FA 32.1 314.6 1 15
ROT. EDGE
12.0 CHASSIS 4.3 FA 50.4 40.4 2 16
ROTATIONAL EDGE DROP
ONTO THE BACK EDGE.
ROLL OVER
CHASSIS 7.2 FA 69.4 86.6 3 17
ROLL OVER FROM BALANCE
POINT ONTO THE BACK SIDE.
-SCREW LOSE IN THE MAGENTA
STATION.
</TABLE>
FA = Faired Acceleration
Page 1
<PAGE> 46
Rastergraphics Vibration Test Data Lansmont Corporation
2088 Sunset Drive
Pacific Grove, CA 93950
<TABLE>
<CAPTION>
Product: COLOR STATION SHIPPING CONTAINER
Test Input (sine) Test Input (random)
----------------------------------------------------------------
Frequency Random Spectrum Dwell Time Test #
Side Down Hz G's (if used) minutes
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BASE 20.0 0.50 15 13
BASE TRUCK/AIR 15 14
</TABLE>
Page 2
<PAGE> 47
DATE AND TIME REQUIRED: MASTER COPY CUTTING LIST NO.
----------------- --------------------
1 LEFT 1 RIGHT
DATE: 6/4/90 QUANTITY: 2 PER PACK W.O.:
-------- ---------------- ---------------
ACCOUNT: RASTERGRAPHICS PART NAME: PART NO.: LG. PLOTTER
-------------------- ---------------- ---------------
O.D.: STYLE: END CAPS I.D.:
-------------------- ---------------- ---------------
CASE'L S/UP K/D UP/ARROW OTHER:
----- ----- ----- ----- -----------
<TABLE>
<CAPTION>
================================================================================
QUANTITY DESCRIPTION QUANTITY DESCRIPTION
================================================================================
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
54000 FOAM
- --------------------------------------------------------------------------------
1 2 x 6 x 31
- --------------------------------------------------------------------------------
3 2 x 4 x 31
- --------------------------------------------------------------------------------
2 2 x 6 x 26 1/2
- --------------------------------------------------------------------------------
1 2 1/2 x 2 1/2 x 21
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROPRIETARY INFORMATION
ALL RIGHTS RESERVED. NO PART OF ---------------------------------------
THIS WORK MAY BE REPRODUCED OR
TRANSMITTED IN ANY FORM OR BY ANY ---------------------------------------
MEANS ELECTRONIC OR MECHANICAL,
INCLUDING PHOTOCOPYING OR RECORDING ---------------------------------------
OR BY ANY INFORMATION STORAGE OR
RETRIEVAL SYSTEM, WITHOUT ---------------------------------------
PERMISSION IN WRITING FROM FUTURE
PACKAGING, INC. ---------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
CLEAT: 144 = @
- --------------------------------------- ------- ------ -------
POV: 144 = @
- --------------------------------------- ------- ------ -------
5/16 PLY: 144 = @
- --------------------------------------- ------- ------ -------
3/8 PLY: 144 = @
- --------------------------------------- ------- ------ -------
PLY: 144 = @
- --------------------------------------- ------- ------ -------
LUMBER : 144 = @
- --------------------------------------- ------- ------ -------
NAILS : /40 = @
- --------------------------------------- ------- ------ -------
TOTAL LUMBER & PLY $
- --------------------------------------- ----------
TOTAL OTHER MAT'LS $
- --------------------------------------- ----------
- --------------------------------------------------------------------------------
<PAGE> 48
DATE AND TIME REQUIRED: MASTER COPY CUTTING LIST NO.
----------------- -------------------
DATE: 5/31/90 QUANTITY: W.O.:
-------- ---------------- ---------------
LG. 224
ACCOUNT: RASTER GRAPHICS PART NAME: ELECTROSTATIC PLOTTER PART NO.: PLOTTER 424
--------------- --------------------- -----------
37 5/8 x 31 1/4
O.D.: STYLE: 601 D/E/S W/SLEEVE DST I.D.: x 45 1/2
---------------- ---------------------- --------------
CASE'L S/UP X K/D UP/ARROW OTHER:
----- ----- ----- ----- -----------
STENCIL -- P/N 2400-01
<TABLE>
<CAPTION>
================================================================================
QUANTITY DESCRIPTION QUANTITY DESCRIPTION
================================================================================
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
FALSE BASE 1 DST W/ SLEEVE 500# DW; K; P2P
- --------------------------------------------------------------------------------
1 3/4 PLY 34 1/4 X 24 1/8 1 CORNER CUT TRAY 37 5/8 X 31 1/4 X 8
- --------------------------------------------------------------------------------
2 2 X 4 X 32 3/4 1 CTN; RSC; K ID 28 X 28 X 4
- --------------------------------------------------------------------------------
1 2 X 4 X 24 1/8 MATCH DRILL 1 SCORED PAD 37 5/6 X 3 X 8
TO HANGAR BOLTS
- --------------------------------------------------------------------------------
1 2 X 4 X 21 1/8
- --------------------------------------------------------------------------------
2 2 X 6 X 11 /LAMINATE TO 2" 2 S4000 END CAPS (SPECIAL ORDER)
- --------------------------------------------------------------------------------
2 1/2 PLY X 5 1/2 X 11 /BEV FLAT
- --------------------------------------------------------------------------------
2 3/8 X 3 HANGAR BOLTS
- --------------------------------------------------------------------------------
2 3/8 WING NUTS W/ FN
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
N95 BLUE PROPRIETARY INFORMATION
- --------------------------------------- ALL RIGHTS RESERVED. NO PART OF
3 2 x 9 x 24 1/8 THIS WORK MAY BE REPRODUCED OR
- --------------------------------------- TRANSMITTED IN ANY FORM OR BY ANY
MEANS ELECTRONIC OR MECHANICAL,
- --------------------------------------- INCLUDING PHOTOCOPYING OR RECORDING
BASE OR BY ANY INFORMATION STORAGE OR
- --------------------------------------- RETRIEVAL SYSTEM, WITHOUT
1 3/4 PLY 37 1/2 x 31 1/8 PERMISSION IN WRITING FROM FUTURE
- --------------------------------------- PACKAGING, INC.
3 3 x 4 x 32 1/8
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RAMP
- --------------------------------------------------------------------------------
1 1/4 PLY 37 x 24 1/8 - BEV TO
SHARP POINT
- --------------------------------------------------------------------------------
2 1 x 2 x 37 RAMP GUIDES
- --------------------------------------------------------------------------------
1 2 x 2 x 24 1/8 NAIL TO RAMP
- --------------------------------------------------------------------------------
USE GOOD LUMBER!
- --------------------------------------------------------------------------------
CLEAT: 144 = @
- --------------------------------------- ----- ----- -------
POV: 144 = @
- --------------------------------------- ----- ----- -------
5/16 PLY: 144 = @
- --------------------------------------- ----- ----- -------
3/8 PLY: 144 = @
- --------------------------------------- ----- ----- -------
PLY: 144 = @
- --------------------------------------- ----- ----- -------
LUMBER : 144 = @
- --------------------------------------- ----- ----- -------
NAIL : /40 = @
- --------------------------------------- ----- ----- -------
TOTAL LUMBER & PLY $
- --------------------------------------- --------
TOTAL OTHER MAT'LS $
- --------------------------------------- --------
=================================================================================
</TABLE>
<PAGE> 49
RE: RASTER GRAPHICS
24" PLOTTER
EA 500# DW SLEEVE; KRAFT
I.D. 37 5/8 x 31 1/4 x 45 1/4
EA 500# DW DST TO FIT SLEEVE; KRAFT
EA CTN; RSC; KRAFT I.D. 26 1/8 x 2 5/8 x 26 5/8
OPENING ON ENDS 275 #C/F
EA SCORED PADS 37 x 3 x 8 275 #C/F
EA CORNER CUT TRAY 500# DW; KRAFT
37 5/8 x 31 1/4 x 8 I.D. OF WELL
PROPRIETARY INFORMATION
ALL RIGHTS RESERVED. NO PART OF
THIS WORK MAY BE REPRODUCED OR
TRANSMITTED IN ANY FORM OR BY ANY
MEANS, ELECTRONIC OR MECHANICAL,
INCLUDING PHOTOCOPYING OR RECORDING
OR BY ANY INFORMATION STORAGE OR
RETRIEVAL SYSTEM, WITHOUT
PERMISSION IN WRITING FROM FUTURE
PACKAGING, INC.
<PAGE> 50
APPENDIX B
( SPARE PARTS LIST )
<PAGE> 51
SPARES
22" PARTS USED IN A1 MACHINE
<TABLE>
<CAPTION>
Part Number Description
- -----------------------------------------
<S> <C>
0109-1001 DRAM chip
0111-1004 SCSI controller chip
2200-3004 pump board
2200-3006 pressure sensor assy
2200-3010 belt edge sensor assy
2200-3012 load sensor board
2200-3017 VCR board
2200-4136 air tank
2200-5002 encoder
2200-5005 vacuum reel assy
2200-5012 toner pump
2200-5018 nozzle actuator
2200-5049 fan assy
2200-5053 disk drive assy
2200-5054 drive motor assy
2200-5057 tubing reel sensor assy
2200-5058 cutter index sensor assy
2200-5079 steering sensor assy
2200-5089 tracker motor
2200-5090 feed motor assy
2200-6077 bellows, manifold
2200-7010 e-box cable
2200-7011 e-box cable
2200-7013 disk cable
2200-7014 disk cable
<CAPTION>
A1 (24")
<S> <C>
2400-3001 HEAD
2400-3002 INTERLOCK PCB
2400-3003 AIR VALVE PCB
2400-3004 FRONT PANEL PCB
2400-3005 POWER SUPPLY PCB
2400-3006 DRIVER PCB
2400-4034 FOUNTAIN ROLLER
2400-4053 DRYING BLADE
2400-4059 MEDIA EJECT STRIP
2400-5001 UPPER TRANSPORT
2400-5002 PAPER TRAY ASSY.
2400-5010 TONING STATION
2400-5011 CUTTER ASSY.
2400-5013 BELT ASSY.
2400-5016 AIR PUMP
2400-5017 FOUNTAIN ACTUATOR
2400-5018 HEAD ACTUATOR
2400-5019 AIR VALVE ASSY.
2400-5020 "E" BOX ASSY.
2400-5022 POWER SWITCH CABLE
2400-5024 NOZZLE ASSY.
2400-5027 AIR VALVE, CLIPPARD
2400-5028 DRYING WIPER, LEFT
2400-5029 DRYING WIPER, RIGHT
2400-5030 AIR VALVE, KIP
2400-6016 MANIFOLD, L.E. 24"
2400-6017 MANIFOLD, T.E. 24"
2400-7000 AIR VALVE CABLE
2400-7001 CHASSIS INTERLOCK CAB
</TABLE>
<PAGE> 52
<TABLE>
<S> <C>
2400-7002 INTERLOCK TO PWR SUPL
2400-7003 CHASSIS CABLE
2400-7004 HEAD POWER CABLE
2400-7005 HEAD DATA CABLE
2400-7007 POWER SUPPLY CABLE
2400-? VACUUM TUBING, 24"
</TABLE>
<PAGE> 53
APPENDIX C
( DOCUMENTATION AVAILABILITY LIST )
<PAGE> 54
Kits and Manual Documentation for Oce'
09/17/90
<TABLE>
<CAPTION>
Manuals and Kits Part #
<S> <C>
Manual 24" ColorStation 0505-0091
MSDS Documentation 2200-5111
MS-DOS Documentation Appendix 2200-5107
MS-DOS Plotting Utility 0506-0003
Shipping Kit 2400-5038
Starter Kit 2400-5037
P.C. Kit 2200-5092
P.C. Kit Utility Manual Supplement 0505-0087
Shipping Crate 0505-0090
</TABLE>
<PAGE> 55
Rastergraphics Vibration Test Data Lansmont Corporation
2088 Sunset Drive
Pacific Grove, CA 93950
- --------------------------------------------------------------------------------
Product: COLOR STATION SHIPPING CONTAINER
<TABLE>
<CAPTION>
Test Input (sine) Test Input (random)
---------------------- -----------------------------------------
Frequency Random Spectrum Dwell Time Test #
Side Down Hz G's (if used) minutes
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BASE 20.0 0.50 15 13
BASE TRUCK/AIR 15 14
</TABLE>
- --------------------------------------------------------------------------------
04/02/90 Page 2
<PAGE> 56
09/25/90
Manuals and Kits Part #
Manual 24" ColorStation 0505-0091
MSDS Documentation 2200-5111
MS-DOS Documentation Appendix 2200-5107
MS-DOS Plotting Utility 0506-0003
Shipping Kit 2400-5038
Starter Kit 2400-5037
P.C. Kit 2200-5092
P.C. Utility Manual Supplement 0505-0087
Shipping Crate 0505-0090
Paper & Film
24" x 500' Translucent paper 2400-0403
24" x 500' Imaging paper 2400-0405
24" x 500' Premium bond paper 2400-0401
24" x 500' Matte film 2400-0402
24" x 500' Clear film 2400-0408
Toner
Black toner 2200-0011 4 bottles
Cyan toner 2200-0012 4 bottles
Magenta toner 2200-0013 4 bottles
Yellow toner 2200-0014 4 bottles
Enhancer
Black enhancer 2200-0020 6 bottles
Cyan enhancer 2200-0021 6 bottles
Magenta enhancer 2200-0022 6 bottles
Yellow enhancer 2200-0023 6 bottles
Replenisher
Black replenisher 2200-0015 6 bottles
Cyan replenisher 2200-0016 6 bottles
Magenta replenisher 2200-0017 6 bottles
Yellow replenisher 2200-0018 6 bottles
Cleaning dispersant 2200-0019 4 bottles
<PAGE> 57
TEST 8
PLOT SPEED
Approximately 1.75 inches per second
1 pass per color in the Draft Mode
2 passes per color in the Enhance Mode
TEST 9
SYSTEM THROUGHPUT
200 DPI (draft mode) 1.5 minutes in monochrome and approximately 4 minutes
in color plots.
NOTE: Time is dependent on data rate and file size.
TEST SETUP:
Everex model 386/25
Raster Graphics spool driver, Centronics parallel
Standard plot file Timetest.plt (1.4 meg. byte HP-GL plot file)
Total time to plot full color 9 minutes (transfer time 5 min.)
400 DPI (enhanced mode) 2.5 min. in monochrome and approximately 7.5 min.
in color plots.
NOTE: Time is dependent on data rate and file size.
TEST SETUP:
Everex model 386/25
Raster Graphics spool driver, Centronics parallel
Standard plot file Timetest.plt (1.4 meg. byte HP-GL plot file)
Total time to plot full color 11 minutes (transfer time 5 min.)
200 DPI (Image mode)
Everex mode 386/25
Raster Graphics RGIMAGE driver, Centronics parallel.
Standard image plot file Image. tga (820 byte file).
Total time to plot first image is 9.5 minutes.
<PAGE> 58
Exhibit E
Inspection and Testing Criteria for Product Acceptance
7 lines deleted
[Including time periods for notices and for completing tests -- see Section
4.3.]
1. Plotters
1.1 Model 424 Plotter
2. Spare Parts
2.1 For Model 424 Plotter
3. Supplies
3.1 For Model 424 Plotter
- Page 33 -
<PAGE> 59
RGI OCE MODEL A1
ACCEPTANCE TEST SPECIFICATION
NOTE: This specification is considered preliminary and is subject to
modifications or refinements until the first 40 units have been
shipped or 160 days have elapsed since the signing of purchasing
agreement, which ever occurs first.
<PAGE> 60
TEST 1
REGISTRATION
Using RGTEST1 test pattern the Black to Cyan, Magenta and Yellow must be
within + or - .004 in. or 0.10 mm.
Note: Measurement to be made in four test areas on the RGTEST1 plot.
Measurement are centerline to centerline in both horizontal and
vertical directions.
TEST 2
LINE ACCURACY
Within 0.05% maximum accumulated error over 10 in. (254 mm)
Within .005 in. (0.013 cm) under 10 in. (254 mm)
Note: @ 77 deg. F (25 deg. C) and 50% RH or on Milar media.
TEST 3
DROP OUT (WRITING HEAD.NIB)
Using RGTEST1 test pattern
Within the special test pattern area generated specifically for dropout
detection NO DROPOUTS may occur.
TEST 4
FLARING
There may be no more than 1 flared dots in 1 square centimeter in the
center of any of the square halftone patterns. In any test pattern there be
no single dot or line width that is flared greater than 2 times nominal dot
size.
EXAMPLE: If nominal dot is .005 x .005 then dot plus flare can be no larger
than 0.01 X 0.01 in. (0.025 x 0.025 cm).
<PAGE> 61
TEST 5
BACKGROUND
Using RGTEST1 test pattern, the measured background must have a maximum
delta E value of less than 1.5
PROCEDURE: Equipment = Minolta CM 1000
First measure untoned area at beginning of plot, also place 8
layers of plotter paper under test area to eliminate the effect
of the material directly beneath the test area.
Next take a measurement in each of the four box areas on the
plot and average the sum of the four measurements. The average
delta E must be less than 1.5.
NOTE: Do to the cut sheet nature of the plotter some background staining
will occur outside the imaging area at the start and end of the plot.
TEST 6
PRIMARY AND SECONDARY COLOR
NOTE: Test must be conducted with fresh toners.
Using RGTEST2 test pattern the primary color bars must show good solid fill
in all colors for the .25 in. bars. The .5 and 1 in. bars may contain some
variation, but must visually compare to the control sample plot. Secondary
colors can have some slight variation in color and fill, but must visually
compare to the control sample plot.
Using RGTEST3 test pattern the primary color bars must show good solid fill
in all colors for all of the bars, but must visually compare to the control
sample plot. Secondary colors must have almost no variation in color, but
must visually compare to the control sample plot.
TEST 7
OVERALL PLOT QUALITY
Using TIMETEST.PLT plot output (Carson Mansion)
This plot must be free of any dropouts and be of good quality and must
visually compare to the control sample.
<PAGE> 62
Exhibit F
Exclusive Territory and Reserved Territory
Exclusive Territory
The United Kingdom, including the Isle of Man and Channel Islands
Eire
France
Spain
Portugal, including Azores
Gibraltar
Andorra
Monaco
Netherlands
Belgium
Luxembourg
West Germany, including West Berlin
Switzerland
Austria
Liechtenstein
Italy, including the Vatican City
Denmark
Norway
Sweden
Finland
East Germany
Poland
Czechosovakia
Hungary
Bulgaria
Romania
Greece
Albania
Yugoslavia
Ireland
USSR
Turkey
Reserved Territory
Indonesia, Philippines, Singapore, Malaysia, Thailand, Kampuchea, Laos, Vietnam,
Burma, Hong Kong, Taiwan, People's Republic of China, Japan, North Korea and
South Korea
- Page 34 -
<PAGE> 63
Exhibit G
"Exclusive Minimum" and "Non-Exclusive Minimum"
1. "Exclusive Minimum"
1.1 First Year: Two Hundred (200) Plotter Units
1.2 Second Year and each Subsequent Year:
The Exclusive Minimum is reached when Ordered Volume (as defined
below) is equal or superior to twenty four percent (24%) of Total
Volume (as defined below).
Ordered Volume is the value of all Plotters (as defined in Section
1.6) purchased by Oce during the respective Year, as valued at
the U.S. Price List in effect at the beginning of the corresponding
Year.
Total Volume is the value of all Plotters (as defined in Section 1.6)
sold by RGI during the respective Year, as valued at the U.S. Price
list in effect at the beginning of the corresponding Year.
2. "Non-Exclusive Minimum"
2.1 First Year: One Hundred Fifty (150) Plotter Units
2.2 Second Year and each Subsequent Year:
The Non-Exclusive Minimum is reached when Ordered Volume (as
defined below) is equal or superior to eighteen percent (18%) of
Total Volume (as defined below).
Ordered Volume is the value of all Plotters (as defined in
Section 1.6) purchased by Oce during the respective Year, as
valued at the U.S. Price List in effect at the beginning of the
corresponding Year.
Total Volume is the value of all Plotters (as defined in Section
1.6) sold by RGI during the respective Year, as valued at the
U.S. Price list in effect at the beginning of the corresponding
Year.
- Page 35 -
<PAGE> 64
Exhibit H
OEM System Definition and Compensating Payment Calculation
[ THIS EXHIBIT DELIBERATELY LEFT BLANK ]
- Page 36 -
<PAGE> 65
Exhibit I
Initial Orders
1. Within the evaluation period of Section 6.2.2 for the prototype of
RGI's Model 424 plotter, Oce shall place with RGI a firm order under
Section 6.2.3 (iii) for one (1) production unit of RGI's Model 424
plotter upon execution of this Agreement, for immediate delivery.
2. Upon qualification of RGI's Model 424 plotter in accordance with the
procedures of Sections 6.2.2 through 6.2.5, Oce shall place with RGI a
firm order under Section 6.4 for a production lot of not less than
forty (40) units of RGI's Model 424 plotters, requesting delivery over
a period of one hundred twenty) (120) days.
OCE shall not be required to take delivery of Plotters from RGI until
after a complete Deposit has been made and verified as provided in the
Technology Escrow Agreement attached as Exhibit L. In addition, Oce
shall be entitled to refund of any prepayment made for such Plotters if
such Deposit has not been made and verified as of the assigned delivery
date for the initial production lot of Plotters.
- Page 37 -
<PAGE> 66
ELECTRICAL INSTALLATION DATA
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
Describe 50 and 60 Hz versions separately
<S> <C> <C>
Rated frequency 50 Hz 60 Hz
Rated voltage 100/120/220/240 V 100/120/220/240 V
Rated current (max.) 2.5/2.1/1.2/1.1 A 2.5/2.1/1.2/1.1 A
Power factor cos phi 0.65 0.65
----------------- -----------------
Required mains fuse A A
----------------- -----------------
Machine fuse T3/T1.6 A T3/T1.6 A
----------------- -----------------
Power consumption in stand-by 0.08 kW 0.08 kW
----------------- -----------------
Power consumption during
continuous operation 0.25 kW 0.25 kW
----------------- -----------------
Measuring report number(s)
Enclose copy of measuring report -----------------
Supply connection /X/ cord with plug
/_/ fixed connection
Safety class (according to IEC 536.) /_/I /_/II /_/III
Protection class (according to IEC 529) IP
------------------
Type label(s)
Enclose copy of the type label(s)
</TABLE>
ENERGY CONSUMPTION
- -------------------------------------------------------------------------
Standard: ASTM F757-82 Attachment A
Plug-in energy Wh
----------------
Warm-up plus stand-by energy Wh
----------------
Stand-by energy Wh
----------------
Copying energy plus stand-by Wh
----------------
Measuring report number(s)
Enclose copy of measuring report(s) -----------
<PAGE> 67
[OCE LOGO]
Chemical composition
- -------------------------------------------------------------------------
Ingredients List all ingredients. Indicate each
ingredient by its Chemical Abstract
Services Registry number and name.
Indicate the percentage of each
ingredient in mass %.
<TABLE>
<CAPTION>
No. CAS registry No. Mass % Chemical name
<S> <C> <C> <C>
1. 64742-48-9 >98% NA Contains Petroleum Solvent
(ISOPAR G)
2. Trade Secrets <2% -
3. - - -
4. - - -
5. - - -
6. - - -
7. - - -
8. - - -
</TABLE>
Impurities Does the product contain any impurity
which necessitates special measures for
the use, maintenance or waste disposal
of the product?
/X/ No.
/_/ Yes, please indicate
<PAGE> 68
ADDENDUM - PAGE 2
Chemical Composition
Toners, T-32B, T-32C, T-32M and T-32Y. Replenishers, R-08B, R-08C, R-08M and R-
08Y. Dispersant, D-32X will state:
<TABLE>
<CAPTION>
No. CAS registry No. Mass % Chemical Name
- --- ---------------- ------ -------------
<S> <C> <C> <C>
1. 64742-48-9 > 98% NA, contains petroleum
solvent (Isopar G)
2. polymers, pigments and
dyes claimed as trade
secrets < 2%
</TABLE>
Enhancers, E-03B., E-03C, E-03M and E-03Y will state:
<TABLE>
<CAPTION>
No. CAS registry No. Mass % Chemical Name
- --- ---------------- ------ -------------
<S> <C> <C> <C>
1. 64742-48-9 > 92% NA, contains petroleum
solvent (Isopar G)
2. polymers, pigments and
dyes claimed as trade
secrets
</TABLE>
All products will have the box labeled "no" check on the bottom of the page
where it is asked of the product contains any impurity which necessitates
special measures for the use, maintenance or waste disposal of the product.
<PAGE> 69
[OCE LOGO]
Physical / Chemical data
- -------------------------------------------------------------------------
Appearance and odour (at 20(degree) C)
<TABLE>
<CAPTION>
BLACK LIQUID, FAINT PETROLEUM Describe appearance, colour, form (gas-
HYDROCARBON ODOD liquid- solid- paste- powder) and
odour.
<S> <C>
Density (water = 1.0)
0.75
In case of powder, state bulk density.
N/A
Particle size range of powder um
------------
Melting point (degree)C
------------
Boiling point (degree)C
------------
Vapour pressure mbar at (degree)C
------------ -----------
Vapour density (air = 1.0)
Solubility in water < 1.0 g/l at 25(degree)C
------------ ----
Or express as: insoluble, slightly soluble,
very soluble, emulsifiable, etc.
Soluble in which other solvents If insoluble in water indicate any other
MISCIBLE WITH MINERAL SPIRITS solvent suitable e.g. for cleaning.
AND OTHER ALIPHATIC SOLVENTS
ph (as supplied)
ESSENTIALLY NEUTRAL (7)
PH IN PRODUCT IS NOT DILUTED % solution:
------------- ----------
Indicate the ph and concentration of the
solution or dilution as used.
</TABLE>
FIRE AND EXPLOSION INFORMATION
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Hazard data
<S> <C>
Flash point 38 (degree)C
-------
Explosion limits
Lower Explosive Limit (LEL) 0.8 vol %
-------
(Estimated) 53.2 g/m(3)
-------
Upper Explosive Limit (UEL) 7.0 vol %
-------
(Estimated) 465.0 g/m(3)
-------
</TABLE>
<PAGE> 70
ADDENDUM - PAGE 3
Physical / Chemical data
Appearance and odour (at 20 C)
All Black toner products, (Toners, Replenishers and Enhancers) T-32B, R-08B and
E-03B will state:
Black Liquid. Faint petroleum hydrocarbon odor.
All Cyan toner products, (Toners, Replenishers and Enhancers) T-32C, R-08C and
E-03C will state:
Cyan liquid. Faint petroleum hydrocarbon odor.
All Magenta toner products, (Toners, Replenishers and Enhancers) T-32M, R-08M
and E- 03M will state:
Magenta liquid. Faint petroleum hydrocarbon odor.
All Yellow toner products, (Toners, Replenishers and Enhancers) T-32Y, R-08Y and
E- 03Y will state:
Yellow liquid. Faint petroleum hydrocarbon odor.
Dispersant, D-32X will state:
Colorless liquid. Faint petroleum hydrocarbon odor.
Density (water = 1,0)
Toners, T-32B, T-32C, T-32M and T-32Y. Replenishers, R-08B, R-08C, R-08M and R-
08Y. Dispersant, D-32X will state: 0.75
Enhancers, E-03B, E-03C, E-03M and E-03Y will state: 0.78
<PAGE> 71
[OCE LOGO] 4
Stability / / stable / / unstable
Hazardous polymerization / / may occur /x/ will not occur
Incompatibility (materials to -
avoid)
Avoid contact with strong Indicate materials which may
oxidants such as liquid cause a hazardous reaction and
chlorine, concentrated oxygen, the resulting hazardous
sodium hypochlorite, or reaction products.
calcium hypochlorite.
Hazardous decomposition
products -
Fumes, smoke carbon monoxide, Indicate hazardous
aldehydes and other decomposition products caused
decomposition products, in the by heating, burning or
case of incomplete combustion. oxidation, e.g. CO, NOx, HCl.
Unusual fire and explosion -
hazards
No unusual hazards. Indicate hazards caused by
physical agents (heat,
radiation, shock, friction,
etc.), violent reaction with
water, dust explosion etc.
Precautions
Condition to avoid -
Keep product away from heat, Indicate any condition that
pilot lights, static may cause the hazards filled
electricity, and open flame. up under hazard data.
Special precautions -
Store product in approved fire Indicate special precautions
containment cabinet. to be taken in handling and
storage to avoid above
mentioned hazardous
conditions.
Fire fighting
Extinguishing media -
Special fire fighting
procedures -
Use dry chemical, foam or If water is unsuitable,
carbon dioxide. Water may be specify the fire fighting
ineffective, but water may be media to be used. Also list
used to keep fire exposed any necessary personal
containers cool. If a lead or protective equipment.
spill has ignited, use water,
spray to disperse the vapors and
to protect anyone attempting to
stop a leak. Water spray may
be used to flush spills away
from exposures. Minimize
breathing gases, vapor, fumes
or decomposition products. Use
supplied-air breathing
equipment for enclosed or
confined spaces or as
otherwise needed.
<PAGE> 72
[OCE LOGO] 5
Health information
Toxicity data
LC50 (rat, 4h inhalation) NA mg/m(3)
------
LC50 (rat, oral) > 5000 mg/kg
------
Other test results
LD50 (rabbit) > 3160 mg/kg
Fill up other known test
results such as:
Laboratory animal studies have - LD 50 (rabbit, dermal).
shown that prolonged and - Eye Irritation (rabbit).
repeated inhalation exposure - Skin irritation (rabbit).
to light hydrocarbon vapors in - Skin sensitization (guinea pig).
the same naphtha boiling range - Human Patch.
as this product can produce - Mutagenicity tests, e.g.:
adverse kidney effects in male - Arnes
rats. However, these effects - WP 2
were not observed in similar - Micronucleus Assays.
studies female rats and male - Subacute and/or chronic tests.
and female mice and in limited Indicate each test method used.
studies with other animal
species. Additionally in a
number of human studies there
was no clinical evidence of
such effects at normal
occupational levels. It is
therefore highly unlikely that
the kidney effects observed in
male rats have significant
implications for humans
exposed at or below the
recommended vapor limits in
the workplace.
Health hazard data
Threshold Limit Value 1800mg/m(3) _____ ppm
The value at right is for an 8 Indicate the source and date
hour day. Source - Exxon (Mfg. of the maximum concentration
of isoparg solvent) June 1, as recommended by supplier.
1989
skin penetration? / / yes / / no
Symptoms of overexposure
High vapor concentrations (> Describe acute and chronic
1000 ppm) are irritating to effects and symptoms of
the eyes and the respiratory overexposure, including
tract, and may cause sensitization.
headaches, dizziness,
anesthesia, drowsiness,
unconsciousness, and other
central nervous system
effects, including death.
Inhalation Minute amounts aspirated into the lungs during ingestion or
vomiting may cause mild to severe pulmonary injury and possibly
death.
Ingestion Product has low order of active oral-toxicity.
Eye contact Product contacting the eyes may cause eye irritation.
Skin contact Prolonged or repeated 'skin contact' with this product tends to
remove skin oils, possibly leading to irritation or dermatitis.
Other health hazards
Health studies have shown that many Indicate any known health
petroleum hydrocarbons and synthetic hazards like:
lubricants pose potential human health - mutagenicity
risks which may vary from person to -careinogenicity
person as a precaution, exposure to
liquids, vapors, mists or fumes should
be minimized.
<PAGE> 73
[OCE LOGO] 6
Special protection information Specify recommended types of
personal protection equipment
and the recommended rate of
ventilation.
Respiratory protection -
Eye protection: Use splash goggles or face shield when eye contact may occur.
Protective gloves: Use chemical-resistant gloves, if needed to avoid prolonged
or repeated skin contact.
Ventilation/local exhaust: Use only with ventilation sufficient to prevent
exceeding recommends exposure limit or buildup of explosive concentrations of
vapor in air.
Other protective equipment: Use chemical resistant apron or other impervious
clothing, if needed to avoid contaminating regular clothing, which could result
in prolonged or repeated skin contact.
First aid
Inhalation: If overcome by vapor, remove from exposure and call a physician
immediately. If breathing is irregular or has stopped, start resuscitation,
administer oxygen, if available.
Ingestion: If ingested, DO NOT induce vomiting, call a physician immediately.
Eye contact: If splashed into the eyes, flush with clear water for 15 minutes or
until irritation subsides. if irritation persists, call a physician.
Skin contact: In case of skin contact, remove any contaminated clothing and wash
skin thoroughly with soap and water.
Medical treatment -
NA Indicate any special medical
treatment by a physician,
necessary in case of
overexposure.
Environmental information
Biodegradability -
NA State: BOD (Biological Oxygen
Demand - 5 days at 20 degrees
C) and COD (Chemical Oxygen
Demand) or equivalent test
results.
Aquatic toxicity -
State e.g. LC50 (fish) or
TLm96.
Other environmental Information -
State e.g. partition
coefficient n-octanol/water.
<PAGE> 74
[OCE LOGO] 7
Spillage and waste procedure
Steps to be taken in case of
spillage or leakage
Shut off and eliminate all Indicate any applicable precautions
ignition sources. Keep people such as:
away. Recover free product. - avoid breathing gases and vapours.
Add sand, earth, or other - avoid contact with liquids and
suitable absorbent to spill solids.
area. Minimize breathing - remove sources of ignition.
vapors. Minimize skin contact. - use special cleaning equipment.
Ventilate confined spaces. - use personal protective equipment.
Open all windows and doors.
Keep product out of sewers and
watercourses by diking and
impounding. Advise authorities
if product has entered or may
enter sewers, watercourses, or
extensive land areas. Assure
conformity with applicable
governmental regulations.
Continue to observe
precautions for volatile,
combustible vapors from
absorbed material.
Waste disposal method
Treat as hazardous chemical Indicate disposal method in
waste in accordance with EPA accordance with legal regulations,
regulations. such as:
- flush with water.
- incinerate.
- land fill.
- treat as hazardous chemical waste.
Classification and labelling
Transport State class, number, packaging
group etc. in accordance with
the regulations of
ADR-IMO-IATA.
ADR/RID Class
---------
No.
---------
Packaging group
---------
IMO/IMDG Class
---------
IMDG-page
---------
EmS No.
---------
Packaging group
---------
IATA/RAR Class III
---------
UN No. 1/255
---------
Packaging group 3
---------
<PAGE> 75
6
Maintenance materials
Maintenance materials are all chemical products used for installation and
maintenance by service technicians and/or customers. Examples: cleaning liquids,
glues, lubricants, preservatives.
Complete a Material Safety Data Questionnaire for each maintenance material.
No. Name
1. - Brasso - MSDS is being forwarded
2. - Alcohol wipes - Contains isopropyl alcohol (MSDS attached)
3. -
4. -
5. -
Supplies and Consumables
Examples: toner, developer, photo-conductor, silicon oil, copy materials.
Complete a Material Safety Data Questionnaire for each supply or consumable.
No. Name
1. - T-32B Black toner 1 box of 4 32 oz Bottles
2. - T-32C Cyan toner 1 box of 4 32 oz Bottles
3. - T-32M Magenta toner 1 box of 4 32 oz Bottles
4. - T-32Y Yellow toner 1 box of 4 32 oz Bottles
5. - R-08B Black replenisher 1 box of 6 8 oz Bottles
<PAGE> 76
6a
Supplies and Consumables (Continued)
No. Name
6. R-08C 1 Box of 6 8 oz. Bottles
7. R-08M 1 Box of 6 8 oz. Bottles
8. R-08Y 1 Box of 6 8 oz. Bottles
9. E-03B 1 Box of 6 3 oz. Bottles
10. E-03C 1 Box of 6 3 oz. Bottles
11. E-03M 1 Box of 6 3 oz. Bottles
12. E-03Y 1 Box of 6 3 oz. Bottles
<PAGE> 77
[OCE LOGO] 8
Labelling Indicate symbols, R- and
S-phrases and dangerous
ingredients according to
Directive 67/548/EEC and
supplements.
Symbol(s) -
R - phrases No. -
S- phrases No. -
Dangerous ingredients -
Additional information
- --------------------------------------------------------------------------------
Indicate any safety
information not mentioned
above.
Indicate any annexes.
Add user instructions if
available.
<PAGE> 78
[OCE LOGO] 9
Certification
- --------------------------------------------------------------------------------
Statement The undersigned certifies that:
/ / all ingredients of the product are filled
up in the section Chemical composition.
/ / the ingredients Nos. _______ are notified
to EINECS.
/ / the ingredients Nos. _______ are notified
to TSCA.
/ / the product is packed and labelled in
accordance with the international
regulations for the transportation of
dangerous goods (IATA/IMO/ADR) and the EEC
directives for the classification, packaging
and labelling of dangerous substances and
preparations.
/ / Oce will be informed in good time before
any modification in the product
(composition, packing or label).
Authorization
- --------------------------------------------------------------------------------
Name of authorized person -
Function -
Date -
Signature -
<PAGE> 79
Exhibit J
Safety Data Questionnaires
- Page 38 -
<PAGE> 80
[OCE LOGO]
PRODUCT SAFETY DATA QUESTIONNAIRE
890420/mgo
In order to enable us to judge the risks of the equipment and to take adequate
precautions, necessary for safe handling, use, storage, transport and disposal,
we request you to fill up this form as completely as possible.
After evaluation of the received data it may be necessary for us to request
additional information on the product.
Please fill up all blanks.
If any particulars are not available or not relevant for
the evaluation of the product's safety, please indicate:
N.A. = not applicable
U = unknown
Return this completed form to:
Oce-Nederland B.V.
p.o. box 101
5900 MA VENLO
The Netherlands
For the attention of:
GENERAL INFORMATION
- --------------------------------------------------------------------------------
Supplier -
Product name of supplier -
Process description -
(for example: Console model plain paper copying machine.
Selenium photoconductive drum, powder toner).
Optionals -
Oce type No. -
(to be completed by Oce)
Project No. -
(to be completed by Oce)
Add overall picture of the system
<PAGE> 81
2
Dimensions and weight
- -------------------------------------------------------------------------------
Depth ________mm
Width ________mm
Height ________mm
Weight ________kg
Weight distribution over
the supporting points / / equally distributed under use
and service conditions.
/ / not equally distributed under
use and service conditions.
Indicate the weight on each supporting point under worst case condition.
Workroom and ambient conditions
- --------------------------------------------------------------------------------
Temperature _______ degrees C
Relative humidity _______% R.H.
Specify minimum and maximum temperature and relative humidity in which the
machine will operate properly
Air purity -
Indicate any air pollutants which may affect proper operation
Minimum installation area ___m x ___m
Area has to include working space and space for service activities
Recommend the minimum room volume and minimum workroom ventilation considering
Vapours/Gases/Dust (page 5)
Workroom volume __________m(3)
Workroom ventilation __________m(3)/h
Is machine equipped with exhaust pipe? / / no
/ / yes. Please specify!
<PAGE> 82
3
Electrical installation data
- --------------------------------------------------------------------------------
Describe 50 and 60 Hz versions separately
Rated frequency 50 Hz 60 Hz
Rated voltage ____/____/____ V ____/____/____ V
Rated current (max.) ____/____/____ A ____/____/____ A
Power factor cos phi __________ __________
Required mains fuse __________ A __________ A
Machine fuse __________ A __________ A
Power consumption in stand-by __________ kW __________ kW
Power consumption during
continuous operation __________ kW __________ kW
Measuring report number(s) __________
Enclose copy of measuring report
Supply connection / / cord with plug
/ / fixed connection
Safety class (according to IEC 536.) / / I / / II / / III
Protection class (according to IEC 529) IP __________
Type label(s)
Enclose copy of the type label(s)
Energy consumption
- --------------------------------------------------------------------------------
Standard: ASTM F757-82 Attachment A
Plug-in energy __________Wh
Warm-up plus stand-by energy __________Wh
Stand-by energy __________Wh
Copying energy plus stand-by __________Wh
Measuring report number(s) __________
Enclose copy of measuring report(s)
<PAGE> 83
EMISSIONS
- ------------------------------------------------------------------------
RADIO INTERFERENCE
50 Hz machines must comply with the legislation in the Federal Republic of
Germany (Amtsblt Vfg 1046/1984). 60 Hz machines must comply with US FCC Rules
and Regulations, Part 15 subpart J, computing device.
CERTIFICATES
For 50 Hz machines the RFI approval mark of VDE or TUV must have been acquired.
Zeichengenehmigungs-Ausweissnummer / / TUV-FS
-----
/ / VDE
--------
For 60 Hz machines the supplier must certify compliance with US FCC Rules and
Regulations.
FCC Compliance measuring report
------------
Enclose copy of certificate(s) and compliance measuring report.
Acoustical noise
Standard: ISO 3744 and ISO 7779
Sound power level during stand-by dB(A)
-------------
Sound power level during copying / printing <55 dB(A)
-------------
Sound pressure level during stand-by,
in operator / bystander position* dB(A)
-------------
Sound pressure level during copying /printing,
in operator / bystander position* dB(A)
-------------
Impulse sound pressure level 75 dB(A)
-------------
Measuring report number(s)
Enclose copy of report(s)
-------------
*If applicable operator position otherwise bystander
Radiation
Standard for laser products: IEC 825.
Threshold Limit Values for Physical Agents in the Work Environment Adopted by
ACGIH.
Aspects to be taken into consideration:
- - lasers
- - lamps
- - visual displays
The emission spectrum of the light source and the radiation outside the machine
must be measured. Also electromagnetic radiation, if not already measured with
regard to radio interference (e.g. magnetic radiation of monitor screens).
Measuring report number(s)
Enclose copy of report(s).
<PAGE> 84
4
Emissions
- --------------------------------------------------------------------------------
RADIO INTERFERENCE
50 Hz machines must comply with the legislation in the Federal Republic of
Germany (Amtsbit Vig 1046/1984). 60 Hz machines must comply with US FCC Rules
and Regulations, Part 15 subpart J, computing device.
CERTIFICATES
For 50 Hz machines the RFI approval mark of VDE or TUV must have been acquired.
Zeichengenehmigungs-Ausweissnummer / / TUV-FS _________
/ / VDE _____________
For 60 Hz machines the supplier must certify compliance with US FCC Rules and
Regulations.
FCC Compliance measuring report __________
Enclose copy of certificate(s) and compliance measuring report.
ACOUSTICAL NOISE
Standard: ISD 3744 and ISO 7779
Sound power level during stand-by __________dB(A)
Sound power level during copying/printing __________dB(A)
Sound pressure level during stand-by,
in operator/bystander position* __________dB(A)
Sound pressure level during copying/printing,
in operator/bystander position* __________dB(A)
Impulse sound pressure level __________dB(A)
Measuring report number(s) __________
Enclose copy of report(s)
*If applicable operator position otherwise bystander
RADIATION
Standard for laser products: IEC 825.
Threshold Limit Values for Physical Agents in the Work Environment Adopted by
ACGIH.
Aspects to be taken into consideration:
- - lasers
- - lamps
- - visual displays
The emission spectrum of the light source and the radiation outside the machine
must be measured. Also electromagnetic radiation, if not already measured with
regard to radio interference (e.g. magnetic radiation of monitor screens).
Measuring report number(s)
Enclose copy of report(s).
<PAGE> 85
Vapours / Gases / Dust
Emission measurements must be focused on emissions to be expected from the
machine and the materials used. For ozone see section 22 (Determination of
ozone intrinsic emission rates) of Standard ECMA-129 Safety of Information
Technology Equipment (ITE).
Ozone intrinsic emission rate __________mg/min
Dust emission __________mg/m(3)
Other emissions __________
Measuring report number(s) __________
Enclose copy of report(s).
Electrical / mechanical safety
- -------------------------------------------------------------------------
Standards: IEC 950, IEC 820 for laser products and UL 1950
CERTIFICATES
For 50 Hz machines the TUV-GS approval mark must have been acquired
Zeichengenehmigung-Ausweissnummer TUV or
TUV-Bauart approval mark. TUV GS:IEC 950
-------------------------
For 60 Hz machines the UL approval mark must have been acquired.
UL Report ULvol , sec
-------- -------
Possible other approvals
-------------------------
Enclose copy of certificate(s). UL 478
CSA 22.2 No. 220
Safety Labeling
- -------------------------------------------------------------------------
Labeling in the operator and service access area
List all labels to warn for any hazards (e.g. lasers, high temperature areas,
high voltage, moving or rotating machine parts, etc.)
Specify location of the labels.
Enclose copy of the label(s).
<PAGE> 86
5
VAPOURS/GASES/DUST
Emission measurements must be focused on emissions to be expected from the
machine and the materials used. For ozone see section 22 (Determination of ozone
intrinsic emission rates) of Standard ECMA-129 Safety of Information Technology
Equipment (ITE).
Ozone intrinsic emission rate __________mg/min
Dust emission __________mg/m(3)
Other emissions __________
Measuring report number(s) __________
Enclose copy of report(s).
Electrical/mechanical safety
- --------------------------------------------------------------------------------
Standards: IEC 950, IEC 820 for laser products and UL 1950
CERTIFICATES
For 50 Hz machines the TUV-GS approval mark must have been acquired
Zeichengenehmigung-Ausweissnummer TUV or __________
TUV-Bauart approval mark.
For 60 Hz machines the UL approval mark must have been acquired.
UL Report ULvol_____sec_____
Possible other approvals __________________
Enclose copy of certificate(s).
Safety labelling
- --------------------------------------------------------------------------------
Labelling in the operator and service access area
List all labels to warn for any hazards (e.g. lasers, high temperature areas,
high voltage, moving or rotating machine parts, etc.).
Specify location of the labels.
Enclose copy of the label(s).
<PAGE> 87
6
Maintenance materials
- --------------------------------------------------------------------------------
Maintenance materials are all chemical products used for installation and
maintenance by service technicians and/or customers. Examples: cleaning liquids,
glues, lubricants, preservatives.
Complete a Material Safety Data Questionnaire for each maintenance material.
No. Name
1. -
2. -
3. -
4. -
5. -
Supplies and Consumables
- --------------------------------------------------------------------------------
Examples: toner, developer, photo-conductor, silicon oil, copy materials.
Complete a Material Safety Data Questionnaire for each supply or consumable.
No. Name
1. -
2. -
3. -
4. -
5. -
<PAGE> 88
7
Waste handling
- --------------------------------------------------------------------------------
State whether special measures are necessary for waste disposal of machine parts
and consumables.
Undesired substances
- --------------------------------------------------------------------------------
State that this product does not contain / / asbestos
/ / PCB (polychlorobiphenyl)
/ / PCT (polychloroterphenyl)
Does the product contain any part for which special measures have to be taken
(use, maintenance, waste) due to the presence of substances such as arsenic,
beryllium, cadmium, mercury, etc.
/ / no
/ / yes. Indicate machine parts
and substances
Operator manual & Service manual
- --------------------------------------------------------------------------------
Enclose operator manual and service manual
Additional information
- --------------------------------------------------------------------------------
Indicate any safety information not mentioned above.
List all enclosures and annexes.
<PAGE> 89
8
Authorization
- --------------------------------------------------------------------------------
Names of authorized person -
Function -
Date -
Signature -
<PAGE> 90
1
[OCE LOGO]
MATERIAL SAFETY DATA QUESTIONNAIRE
871118
In order to enable us to judge the risks of the product and to take adequate
precautions, necessary for safe handling, use, storage, transport and disposal,
we request you to fill up this form as completely as possible.
After evaluation of the received data and consideration of toxicological
information on the ingredients in scientific literature it may be necessary for
us to request additional information on the product or its ingredients.
Please fill up all blanks.
If any particulars are lacking, please indicate:
N.A. = not applicable
U = unknown
Return this completed form to:
Oce-Nederland B.V.
p.o. box 101
5900 MA VENLO
The Netherlands
for the attention of:
General information
- --------------------------------------------------------------------------------
Product name -
Indicate product name as it
appears on the packing.
Packing -
Describe kind of packing
and contents by weight or
volume.
Supplier -
Address -
Contact person -
Emergency telephone no. -
This document was created with the Oce 6950/6550 system and printed on the Oce
6750.
<PAGE> 91
2
[OCE LOGO]
Chemical composition
- --------------------------------------------------------------------------------
Ingredients List all ingredients. Indicate each ingredient by its
Chemical Abstract Services Registry number and name.
Indicate the percentage of each ingredient in mass %.
No. CAS registry No. Mass % Chemical name
1. - - -
2. - - -
3. - - -
4. - - -
5. - - -
6. - - -
7. - - -
8. - - -
Impurities Does the product contain any impurity which
necessitates special measures for the use, maintenance
or waste disposal of the product.
/ / no
/ / yes, please indicate
-
<PAGE> 92
3
[OCE LOGO]
Physical/Chemical data
- --------------------------------------------------------------------------------
Appearance and odour (at 20 degrees C)
Describe appearance, colour, form
(gas-liquid-solid-paste-power)
and odour.
Density (water = 1.0) -
In case of powder, state bulk
density.
Particle size range of power _______ (Greek symbol mu)m
Melting point _______ degrees C
Boiling point _______ degrees C
Vapour pressure _______ mbar at _______ degrees C
Vapour density (air = 1,0) -
Solubility in water _______ g/l at _______ degrees C
-
Or express as: insoluble,
slightly soluble, very soluble,
emulsifiable etc.
Soluble in which other solvents -
If insoluble in water indicate
any other solvent suitable e.g.
for cleaning.
pH (as supplied) -
pH in ________ % solution: ________
Indicate the pH and concentration
of the solution or dilution as
used.
Fire and explosion information
- --------------------------------------------------------------------------------
Hazard data
Flash point __________ degrees C
Explosion limits
Lower Explosive Limit (LEL) __________ vol %
__________ g/m(3)
Upper Explosive Limit (UEL) __________ vol %
__________ g/m(3)
<PAGE> 93
[OCE LOGO]
<TABLE>
<S> <C> <C>
Stability / /stable / /unstable
Hazardous polymerization / /may occur / /will not occur
Incompatibility (materials to avoid) -
Indicate materials which
may cause a hazardous
reaction and the
resulting hazardous
reaction products.
Hazardous decomposition products -
Indicate hazardous decomposition products caused by
heating, burning or oxidation, e.g. CO, NOx, HCI.
Unusual fire and explosion hazards -
Indicate hazards caused by physical agents (heat,
radiation, shock, friction etc.), violent reaction
with water, dust explosion etc.
PRECAUTIONS
Conditions to avoid -
Indicate any condition that may cause the hazards
filled up under hazard data.
Special precautions -
Indicate special precautions to be taken in handling
and storage to avoid above mentioned hazardous
conditions.
FIRE FIGHTING
Extinguishing media -
Special fire fighting procedures -
If water is unsuitable, specify the fire fighting
media to be used. Also list any necessary personal
protective equipment.
</TABLE>
<PAGE> 94
[OCE LOGO]
HEALTH INFORMATION
- --------------------------------------------------------------------------------
TOXICITY DATA
<TABLE>
<S> <C>
LC50 (rat, 4h inhalation) ____________ mg/m3
LD50 (rat, oral) ____________ mg/kg
Other test results -
Fill up other known test results such as:
- LD50 (rabbit, dermal).
- Eye irritation (rabbit).
- Skin irritation (rabbit).
- Skin sensitization (guinea pig.).
- Human Patch.
- Mutagenicity tests, e.g.:
- Ames
- WP2
- Micronucleus Assays.
- Subacute and/or chronic tests.
Indicate each test method used.
HEALTH HAZARD DATA
Threshold Limit Value ___________ mg/m(3) _________ ppm
Indicate the source and data or the maximum
concentration as recommended by supplier.
skin penetration / / yes / / no
Symptoms of overexposure -
Describe acute and chronic effects and symptoms of
overexposure, including sensitization.
Inhalation -
Ingestion -
Eye contact -
Skin contact -
Other health hazards -
Indicate any known health hazards like:
- mutgenicity
- carcinogenicity
</TABLE>
<PAGE> 95
[OCE LOGO]
<TABLE>
<S> <C>
SPECIAL PROTECTION INFORMATION SPECIFY RECOMMENDED TYPES OF PERSONAL PROTECTION
EQUIPMENT AND THE RECOMMENDED RATE OF VENTILATION.
Respiratory protection -
Eye protection -
Protective gloves -
Ventilation/local exhaust -
Other protective equipment -
FIRST AID
Inhalation -
Ingestion -
Eye contact -
Skin contact -
MEDICAL TREATMENT -
Indicate any special medical treatment by a
physician, necessary in case of overexposure.
ENVIRONMENTAL INFORMATION
- -----------------------------------------------------------------------------------------------------------
Biodegradability -
State: BOD (Biological Oxygen Demand - 5 days at 20
degrees Centigrade) and COD (Chemical Oxygen Demand) or
equivalent test results.
Aquatic toxicity -
State e.g. LC50 (fish) or TLm96.
Other environmental information -
State e.g. partition coefficient n-octanol/water.
</TABLE>
<PAGE> 96
[OCE LOGO]
SPILLAGE AND WASTE PROCEDURE
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
STEPS TO BE TAKEN IN CASE OF SPILLAGE OR LEAKAGE -
Indicate any applicable precautions such as:
- avoid breathing gases and vapours.
- avoid contact with liquids and solids.
- remove sources of ignition.
- use special cleaning equipment.
- use personal protective equipment
etc.
Waste disposal method -
Indicate disposal method in accordance with legal
regulations, such as:
- flush with water.
- incinerate.
- land fill.
- treat as hazardous chemical waste.
CLASSIFICATION AND LABELLING
- --------------------------------------------------------------------------------------------------------
TRANSPORT State class, number, packaging group etc. in
accordance with the regulations of ADR-IMO-IATA.
ADR/RID Class ____________
No. ____________
Packaging group ____________
IMO/IMDG Class ____________
IMDG-page ____________
EmS No. ____________
Packaging group ____________
IATA/RAR Class ____________
UN No. ____________
Packaging group ____________
</TABLE>
<PAGE> 97
[OCE LOGO] EXHIBIT J
MATERIAL SAFETY DATA QUESTIONNAIRE
S71114
In order to enable us to judge the risks of the product and to take adequate
precautions, necessary for safe handling, use, storage, transport and disposal,
we request you to fill up this form as completely as possible.
After evaluation of the received data and consideration of toxicological
information on the ingredients in scientific literature it may be necessary for
us to request additional information on the product or its ingredients.
Please fill up all blanks.
If any particulars are lacking, please indicate:
N.A. = not applicable
U = unknown
Return this completed form to:
For the attention of:
General information
- ------------------------------------------------------------------------
Product name
BLACK TONER Indicate product name as it appears on the
T-32B packing.
Packing
4 x 32 oz (946 CC) Describe kind of packing and contents by
weight or volume.
Supplier RASTER GRAPHICS, INC.
Address 285 N. Wolfe Rd.
Sunnyvale, CA 94086
Contact person
Steven Igoe
Emergency telephone no.
(408) 738-7800
This document was created with the Oce 6950/6550 system and printed on the
Oce 6750.
<PAGE> 98
EXHIBIT K
MANUFACTURING LICENSE AGREEMENT
- Page 39 -
<PAGE> 99
EXHIBIT K
MANUFACTURING LICENSE AGREEMENT
This Agreement, effective the first day of October, 1990, is entered into by
and between
Raster Graphics, Inc. a California corporation having principal offices
at 285 N. Wolfe Road, Sunnyvale, California 94086 ("RGI"), and
Oce Graphics France S.A., a French corporation having principal offices
at 1, rue Jean Lemoine, 94003 Creteil Cedex, France ("Oce").
WHEREAS, RGI and Oce have entered into or will enter into a "Product Agreement"
concerning color electrostatic plotters and related products ("Products" as
defined in the Product Agreement) and certain related intellectual property of
RGI;
WHEREAS, RGI and Oce have entered into or will enter into a "Technology Escrow
Agreement" under which RGI will make deposits related to the Products with an
escrow agent, pursuant to which the deposits may be released to Oce;
WHEREAS, RGI and Oce desire this Manufacturing License Agreement to be
supplementary to the Product Agreement and to the Technology Escrow Agreement
pursuant to 11 United States Code ("USC") Section 365(n);
WHEREAS, an assured supply of the Products, and continuing access to rights
related to the Products, is critical to Oce in the conduct of its business
relating to the Products and in exercising its rights under the Product
Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt of which is
hereby acknowledged, and in consideration of the promises, mutual covenants and
conditions contained herein, the parties hereto agree as follows:
1. Definitions.
1.1 "Deposit" means Deposit as defined in the Technology Escrow
Agreement.
1.2 "Plotter" means Plotter as defined in the Product Agreement.
1.3 "Product" means a Product as defined in the Product Agreement.
- Page 1 -
<PAGE> 100
1.4 "Product Agreement" means the Product Agreement effective the
_____ day of October, 1990 by and between RGI and Oce, and to
which a draft of this Manufacturing License Agreement is
attached as Exhibit K.
1.5 "Technology Escrow Agreement" means the Technology Escrow
Agreement effecting the first day of October, 1990 by and
between RGI, Oce and an Escrow Agent, a draft of which is
attached to the Manufacturing License Agreement as Exhibit L.
1.6 "Type A1 Plotter" means a Plotter capable of producing plots
of approximately 841 mm by 595 mm sheet size (approximately
European A1 size).
2. License Grant.
2.1 General. Subject to the terms and conditions of this
Agreement, RGI hereby grants to Oce, who hereby accepts from
RGI, a nonexclusive, perpetual, irrevocable right and license,
without right of sublicense, to manufacture and have
manufactured Products and to exercise all rights of Oce under
the Product Agreement. This right and license includes a right
and license under all worldwide intellectual property rights
of RGI, and a right and license to obtain, use and copy all or
any portion of the Deposit, as well as the right to purchase
tooled parts from RGI tooling for manufacturing of the
Products. If tooled parts are unavailable for purchase from
RGI tooling on reasonable prices, in reasonable quantities and
within reasonable delivery times, Oce's right and license
shall include the right (i) to obtain and use all information
needed to have tooling made for manufacturing of the Products
or (ii) to use all tooling for manufacturing of the Products.
No other right, title or interest with respect to the
Plotters, the Deposit, or any intellectual property rights of
RGI therein are granted by RGI under this Agreement. Oce shall
only start with the manufacturing of the Products upon RGI's
general assignment of debts, insolvency, bankruptcy or similar
events such as appointment of a receiver or failure to
delivery Plotters or Spare Parts for a period of ninety (90)
days or more after the assigned delivery date (or deferred
delivery date, in the event of deferral under Section 3.10 of
the Product Agreement) in which RGI obligated to deliver the
Potters or Spare Parts pursuant to the Product Agreement.
2.2 Rights of Modification. In addition, on the terms and
conditions provided in the preceding paragraph, Oce is hereby
granted the right to make modifications to the Products.
Notwithstanding any other provisions of this Manufacturing
License Agreement, and the provisions of the Product
- Page 2 -
<PAGE> 101
Agreement and the Technology Escrow Agreement, Oce will own
all right, title and interest in such modifications by Oce.
2.3 Component Suppliers. Oce may, but shall not be obliged to,
purchase Plotter components from third-party suppliers of RGI.
2.4 Effective Date. All rights and licenses granted to Oce under
this Agreement shall be effective as of the date first written
above.
2.5 No Trademark Rights. No right is granted by this Agreement
with respect to any trademarks, tradenames, logos or other
proprietary marks or legends of RGI.
3. Royalty Payments.
3.1 Initial Unit Royalty.
3.1.1 Amount. For the first Plotter unit of a given type
manufactured by Oce hereunder, Oce shall pay RGI an
initial unit royalty determined in accordance with
the following schedule, in which months are measured
from the date of qualification by Oce under the
Product Agreement of a Plotter of the type in
question:
Through month 24
Two million U.S. dollars (US $2,000,000)
Following month 24, through month 36
One and one-half million U.S. dollars (US
$1,500,000)
Following month 36, through month 48
One million U.S. dollars (US $1,000,000)
Following month 48, through month 60
Five hundred thousand U.S. dollars (US
$500,000)
Following month 60
One U.S. dollar (US $1.00)
3.1.2 When Payable. The initial unit royalty for a given
type of Plotter shall be due and payable in
accordance with the provisions of the Technology
Escrow Agreement.
- Page 3 -
<PAGE> 102
3.2 Additional Unit Royalty.
3.2.1 Amount. For each Plotter unit of a given type manufactured
by Oce after the first such unit, Oce shall pay RGI an
additional per unit royalty of four percent (4%) of Oce's
list price for the Plotter unit, less any customer discounts.
3.2.2 When Payable. The additional unit royalty for a given
Plotter shall be due and payable within (30) days following
the end of the calendar quarter in which such Plotter is sold
by Oce. For this purpose, the date of a sale by Oce shall be:
(i) For a sale to a purchaser unrelated to Oce, the date on
which Oce makes delivery to the purchaser,
(ii) For a sale to a purchaser related to Oce, the date on
which the Plotter is delivered to a purchaser unrelated
to Oce
3.3 Advance Payments and Credits Due to Oce. Payments made to RGI
pursuant to the Product Agreement, for Products ordered prior to the
Technology Receipt Date but not delivered within ninety (90) days
after the assigned delivery date (as it may be rescheduled in
accordance with the Product Agreement) may upon request from Oce be
applied in payment of any amounts due to RGI under this Agreement.
Credits from RGI to Oce for any purpose under the Products Agreement
may upon request from Oce be applied in payment of any amounts due
to RGI under this Agreement.
3.4 Alternative to Royalty Payments for Type A1 Plotter. RGI hereby
offers to Oce, as an alternative to and in lieu of the Initial Unit
Royalty (under Section 3.1) for the Type A1 Plotter, the option to
purchase eight hundred thousand (800,000) shares of Raster Graphics
preferred stock at a price of two and one-half U.S. dollars (US
$2.50) per share, prior to December 28, 1990. If Oce exercises such
option, the Initial Unit Royalty for the Type A1 Plotter shall be
waived, and the Additional Unit Royalty (under Section 3.2) for the
Type A1 Plotter shall be reduced to three percent (3%) of Oce's list
price for the Plotter unit, less any customer discounts.
- Page 4 -
<PAGE> 103
4. Technology Transfer.
4.1 Escrow Deposit. RGI shall at all times during the term of this
Agreement maintain the Deposit with Escrow Agent current as provided
in the Technology Escrow Agreement.
4.2 Delivery of Technology. The Deposit will be released to Oce in
accordance with the terms of the Technology Escrow Agreement. RGI
shall upon written request from Oce deliver to Oce any tangibles or
intangibles required to remedy any deficiencies in the Deposit.
4.3 Technical Assistance. To the extent feasible, RGI shall provide Oce
with all technical assistance reasonably requested by Oce in
connection with the manufacture of the initial Plotter unit of each
type hereunder. As consideration for such assistance, Oce shall pay
RGI a fee according to RGI's current standard rates therefor,
provided that such fee may not exceed a reasonable fee. In
addition, Oce shall reimburse RGI for all reasonable travel expenses
incurred by RGI in connection with providing such assistance.
5. Term and Termination.
5.1 Term. The term of this Agreement will be perpetual, unless
terminated as provided below.
5.2 Termination of Product Agreement. This Agreement will automatically
terminate in the event there is a termination of Oce's non-exclusive
Plotter distribution rights under the Product Agreement prior to the
commencement of production of the first Plotter hereunder.
5.3. Termination for Cause. In addition, either party may, without
penalty, terminate this Agreement effective upon thirty (30) days
written notice to the other party in the event of any of the
following:
(i) The other party materially breaches this Agreement (e.g.,
fails to make payment, indemnify or maintain confidentiality,
etc., as provided herein) or the Product Agreement;
(ii) The other party assigns any rights or obligations under this
Agreement in violation of the provisions of this Agreement;
(iii) A petition for relief under any bankruptcy, insolvency or
similar
- Page 5-
<PAGE> 104
legislation is filed by the other party, or the other party
makes an assignment for the benefit of creditors, or a
receiver is appointed for all or a substantial part of the
other party's assets; or
(vi) The other party ceases to conduct actively business related
to this Agreement.
6. General
6.1 Product Agreement Provisions Incorporated. The provisions of the
following sections of the Product Agreement are hereby incorporated
in this Manufacturing License Agreement:
5.3, 9., 10, 13.1, 13.2, 13.3, 14., 15., 16., 17.5, 17.6, 17.7,
17.8, 17.9, 17.10, 17.11, 17.12, 17.15, 17.16, 17.17 and 17.18.
Notwithstanding the foregoing, to the extent that the provisions
referenced above conflict with any provisions of this Agreement, the
provisions for this Agreement will prevail.
6.2 Warranty of Power to Grant Licenses. RGI represents and warrants
that it has the power and the right to grant rights and licenses to
Oce as provided in this Agreement.
6.3 RGI agrees that it shall not sue Oce or object against Oce's
employing or hiring any (ex-)employees of RGI with respect to the
manufacturing of the Products pursuant to this Agreement.
RASTER GRAPHICS, INC. OCE GRAPHICS FRANCE, S.A.
By: /s/ RASTER GRAPHICS, INC. By: /s/ OCE GRAPHICS FRANCE, S.A.
------------------------- ----------------------------------
- Page 6 -
<PAGE> 105
EXHIBIT L
TECHNOLOGY ESCROW AGREEMENT
- Page 40 -
<PAGE> 106
EXHIBIT L
TECHNOLOGY ESCROW AGREEMENT
Account Number _____________
This Agreement, effective the 1st-day of October, 1990, is entered into by and
between
Raster Graphics, Inc. a California corporation having principal offices
at 285 N. Wolfe Road, Sunnyvale, California 94086 ("RGI"), and
Oce Graphics France S.A., a French corporation having principal offices
at 1, rue Jean Lemoine, 94003 Creteil Cedex, France ("Oce"), and
Data Securities International, Inc., a Delaware corporation having
principal offices at 49 Stevenson Street, Suite 550, San Francisco, CA
94105, ("Escrow Agent").
WHEREAS, RGI and Oce have entered into or will enter into a "Product Agreement"
concerning color electrostatic plotters and related products ("Products" as
defined in the Product Agreement) and certain related intellectual property of
RGI;
WHEREAS, RGI and Oce have entered into or will enter into a "Manufacturing
License Agreement" under which Oce shall have the right to manufacture the
Products;
WHEREAS, RGI and Oce desire this Technology Escrow Agreement to be supplementary
to the Product Agreement and to the Manufacturing License Agreement pursuant to
11 United States Code ("USC") Section 365(n);
WHEREAS, availability of or access to certain data, technology and other
materials, and to rights, related to the Products, is critical to Oce in the
conduct of its business relating to the Products and in exercising its rights
under the Product Agreement and under the Manufacturing License Agreement;
WHEREAS, RGI has deposited or will deposit with Escrow Agent data, technology
and other materials related to the Products to provide for retention and
controlled access for Oce under the conditions specified below;
NOW THEREFORE, for good and valuable consideration, the receipt of which is
hereby acknowledged, and in consideration of the promises, mutual covenants and
conditions contained herein, the parties hereto agree as follows:
- Page 1 -
<PAGE> 107
1. Definitions.
1.1 "Account" means the deposit account established by Escrow Agent
under this Agreement.
1.2 "Deposit" means the Initial Deposit, and all supplements to the
Initial Deposit.
1.3 "Initial Deposit" means all materials initially supplied by RGI to
Escrow Agent as specified by an accompanying description in the form
of Exhibit B-0.
2. Account. Following the execution of this Agreement and the payment of
set-up and deposit fees to Escrow Agent, Escrow Agent shall open an
Account in the name of RGI for the benefit of Oce. The opening of the
Account means that Escrow Agent shall establish an account ledger in the
name of RGI and that RGI and Oce shall receive renewal notices as
provided in Section 10.2. Until RGI makes an Initial Deposit with
Escrow Agent, Escrow Agent shall have no obligation to RGI or Oce except
as defined by this section.
3. Deposits.
3.1 Initial Deposit. Upon receipt by Escrow Agent of an Initial
Deposit, the accompanying description shall be deemed added to this
Agreement as Exhibit B-1. Escrow Agent shall issue to RGI and Oce a
copy of Exhibit B-1 within ten (10) days of receipt by Escrow Agent
of the Initial Deposit.
3.2 Supplements to Deposit. RGI shall maintain the Deposit current by
depositing with the Escrow Agent a supplement to the Deposit, and an
accompanying description, within thirty (30) days of delivery to Oce
of a Product requiring such supplement. Upon receipt by Escrow
Agent of a supplement to the Deposit, the accompanying description
shall be deemed added to this Agreement as an addendum to Exhibit
B-1. Escrow Agent shall issue to RGI and Oce a copy of the
addendum to Exhibit B-1 within ten (10) days of receipt by Escrow
Agent of the supplement.
3.2 Segregation by Product. RGI shall segregate portions of the Deposit
by Product, identify the Product to which each portion of the
Deposit relates, and indicate on the accompanying description to
which Product each
- Page 2 -
<PAGE> 108
portion of the Deposit relates. Escrow Agent shall include such
indications on each copy of Exhibit B-1 and addendum to Exhibit B-1
issued by Escrow Agent.
3.3 Certification. Following receipt by Escrow Agent of the Initial
Deposit, RGI shall certify to Escrow Agent and to Oce by written
notice given at least every twelve (12) months (and more frequently
upon written request from Oce) that the Deposit in possession of
the Escrow Agent is then correct, complete and current.
3.4 Transfer of Copy Title. RGI hereby transfers to Escrow Agent all
rights in the title to all copies of the Deposit, provided that
Escrow Agent shall hold such Deposit and rights pursuant to the
provisions of this Agreement.
4. Deposit Inspection and Verification.
4.1 Inspection by Escrow Agent. Promptly upon the receipt of any
Deposit materials, Escrow Agent will visually match the labeling of
such materials with the accompanying description and notify RGI and
Oce of any discrepancy. Escrow Agent shall not be responsible for
verifying the contents of the Deposit materials or validating the
accuracy of RGI's labeling.
4.2 Verification by or for Oce. Oce (or responsible third parties
selected by Oce and acceptable to RGI) is hereby authorized to
inspect, audit and verify the accuracy, completeness and
sufficiency of the Deposit. RGI hereby grants Escrow Agent the
permission to grant Oce access to the Deposit for such inspection,
audit and verification, and to release to Oce information
pertaining to directory lists and/or table of contents of computer
media, manuals, schematics, and manufacturing documents.
Escrow Agent is hereby also authorized to inspect, audit and verify
the Deposit or materials to be deposited to confirm the quality
thereof for the benefit of Oce. RGI hereby grants to Escrow
Agent the permission to release to Oce copies of any executables or
object code modules prepared by Escrow Agent during its "Load and
Compile" validation level for the purposes of determining the
content and quality of the Deposit.
If requested by Oce, RGI agrees to permit one employee of Oce to be
present at RGI's facility and to observe the compilation or
verification of the material to be deposited by RGI.
- Page 3 -
<PAGE> 109
4.3 Use of RGI Facilities. RGI hereby grants Oce (or third parties
selected by Oce and acceptable to RGI) and Escrow Agent the right
to use the facilities of RGI (including computer systems), free of
charge, for the purposes of inspection, audit and verification of
the Deposit. RGI shall make available without charge any technical
and support personnel necessary for such inspection, audit and
verification.
5. Warranties and Representations of RGI. RGI hereby warrants and represents
to Oce and to Escrow Agent that:
(i) The Deposit shall at all times consist of all information and
grants of rights necessary and sufficient to enable Oce to fully
exercise its rights under the Product Agreement and under the
Manufacturing License Agreement without the aid of RGI or any other
person (other than RGI's customary suppliers) or reference to any
other materials. Such exercise shall include the manufacture,
sales, marketing, distribution, enhancement, maintenance and
servicing of the Products. Such information and grants of rights
shall include, but shall not be limited to, data, technology,
technical documentation, know-how, descriptions, software and
firmware source and object code on magnetic media, test programs,
drawings, supplier lists, authorizations to purchase from RGI
suppliers, parts lists, engineering plans and memoranda,
manufacturing instructions, descriptions of tooling and jigs,
maintenance tools, descriptions and locations of programs and other
materials not owned by RGI, licenses of and authorizations to use
intellectual property rights of RGI and others, and other materials
and grants of rights, whether or not proprietary to RGI.
(ii) The description of the Deposit, as provided to Escrow Agent and as
included in Exhibit B, is correct and complete.
These representations shall be deemed to be made continuously throughout
the term of this Agreement.
6. Treatment of Deposit.
6.1 Storage and Control. Escrow Agent shall establish a receptacle in
which it shall place the Deposit, and shall put the receptacle
under the control of one or more of its officers, selected by
Escrow Agent, whose identity shall be available to RGI and Oce at
all times.
- Page 4 -
<PAGE> 110
6.2 Duty of Care. Escrow Agent shall exercise a professional level of
care in carrying out the terms of this Agreement as it would with
similar items of its own, but in no event less than a reasonable
level of care.
6.3 Confidentiality. Escrow Agent acknowledges RGI's assertion that the
Deposit shall contain proprietary data of RGI and that Escrow Agent
has an obligation to preserve and protect that confidentiality,
consistent with the terms of this Agreement. Escrow Agent shall not
divulge, disclose or otherwise make the Deposit available to third
parties, or make any use of the Deposit, except as provided in this
Agreement or as otherwise permitted in writing by RGI. This
obligation shall continue indefinitely notwithstanding termination
of this Agreement.
6.4 Duplication. RGI grants Escrow Agent the irrevocable right to
duplicate the Deposit as necessary to preserve and safely store the
Deposit, and to provide copies thereof to Oce as authorized by this
Agreement. Escrow Agent shall reproduce on all copies of the
Deposit made by Escrow Agent any proprietary or confidentiality
notices contained in the Deposit originally deposited with it by
RGI.
7. Release of Deposit to Oce.
7.1 Conditions for Release. The only conditions for release of the
Deposit or any portion thereof to Oce shall be (i) notice from Oce
to Escrow Agent requesting release of the Deposit or a stated
portion thereof, (ii) payment of Escrow Agent's customary fee for
release, and (iii) payment of the Initial Unit Royalty to the
Escrow Agent for delivery to RGI, in accordance with the
Manufacturing License Agreement. Escrow Agent shall immediately
release the Deposit to Oce upon satisfaction of the conditions for
release defined in this Section and shall promptly deliver the
Initial Unit Royalty to RGI.
7.2 Notice to RGI. Escrow shall upon release of the Deposit to Oce
notify RGI of the release by certified mail with a copy of the
notice from the Oce.
7.3 Conditions for Use. Following a release of the Deposit or portions
of the Deposit as provided in this Agreement, Oce shall have the
non-exclusive right to use the released portion(s) of the Deposit
for the limited purposes of (i) continuing to exercise the rights
granted to Oce under the Product Agreement, in accordance with the
terms of the Product Agreement, and (ii) exercising the rights
granted to Oce under the
- Page 5 -
<PAGE> 111
Manufacturing License Agreement, in accordance with the terms of
the Manufacturing Agreement.
8. Audit Rights.
8.1 Records. Escrow Agent shall keep clear and detailed records of the
activities undertaken and materials prepared pursuant to this
Agreement. RGI and Oce will be entitled at reasonable times, during
normal business hours of Escrow Agent and upon reasonable notice to
Escrow Agent, to inspect the records of Escrow Agent with respect
to this Agreement.
8.2 Deposit. RGI or Oce will be entitled, upon reasonable notice to
Escrow Agent and during normal Escrow Agent business hours, at the
facilities designated by Escrow Agent, accompanied by a designated
employee of Escrow Agent, to inspect the physical status and
condition of the Deposit. The Deposit may not be changed by RGI or
Oce during the audit.
9. Designated Representative. RGI and Oce shall each designate one individual
to receive notices from Escrow Agent and to act on behalf of RGI and Oce
respectively in relation to the performance of their obligations under
this Agreement. A party may change its designated representative upon
notice given to the other parties, in the manner stated in Exhibit A.
10. Term and Termination.
10.1 Term. This Agreement will have an initial term of five (5) years,
commencing on the effective date first written above. This
Agreement shall be renewed for additional one-year terms in
accordance with the extension provisions set forth in the Product
Agreement, upon receipt by Escrow Agent of the specified renewal
fees.
10.2 Notice and Expiry. If renewal fees are not received within thirty
(30) days prior to the end of a term, Escrow Agent shall so notify
RGI and Oce. If the renewal fees are not received within thirty
(30) days after such notice is given, this Agreement will expire
without further notice and without liability of Escrow Agent to the
RGI or Oce.
10.3 Termination.
10.3.1 Upon Release of Deposit. This Agreement shall terminate
upon
- Page 6 -
<PAGE> 112
(i) release of the Deposit or a copy of the Deposit to Oce
and (ii) receipt by Escrow Agent of the complete payment
of all outstanding invoices. Oce has the right to pay
renewal fees and other related fees.
10.3.2 Upon Failure to Pay Fees. Escrow Agent may terminate its
obligations under this Agreement (other than its
obligations with respect to the Deposit under Section 6.3)
if invoiced fees are not paid within sixty (60) days of
receipt of invoice, provided that (i) Escrow Agent
notifies RGI and Oce of its intent to so terminate under
this Section and offers RGI and Oce in such notice a
period of not less than thirty (30) days in which to cure,
(ii) RGI and Oce fail to cure within such thirty (30) day
period, and (iii) Escrow Agent gives RGI and Oce notice of
termination at the conclusion of such thirty (30) day
period. Termination shall be effective upon receipt by RGI
and Oce of the notice of termination given at the
conclusion of the thirty (30) day period. Termination of
Escrow Agent's obligations under this Agreement shall not
terminate the rights and obligations of RGI and Oce with
respect to one another under this Agreement, and RGI and
Oce shall promptly engage a substitute Escrow Agent for
the purposes of this Agreement.
10.4 Return of Deposit. All duties and obligations of Escrow Agent to
RGI and Oce will terminate upon expiry or termination of this
Agreement. Escrow Agent shall return the Deposit to RGI only after
all outstanding invoices and the deposit return fees are paid. If
the fee(s) are not received by the renewal date of this Agreement,
Escrow Agent shall, at its option, destroy or return the Deposit to
RGI.
11. Fees.
11.1 When due. All service fees will be due in full at the time of the
request for service. Annual renewal fees will be due in full upon
the receipt of invoice unless otherwise specified by the invoice.
11.2 Late Payment. If payment is not timely received by Escrow Agent,
Escrow Agent shall have the right to accrue and collect interest at
the rate of one and one-half percent (1.5%) per month from the date
of invoice for all late payments.
11.3 Schedule of Fees. All service fees and annual renewal fees will be
paid
- Page 7 -
<PAGE> 113
by Oce and are those specified in Escrow Agent's Schedule of Fees
in effect at the time of renewal, or request for service, except as
otherwise agreed. For any service not listed on the Schedule of
Fees, Escrow Agent shall provide a quote prior to rendering such
service.
11.4 Increases. For any increase in Escrow Agent's standard fees,
Escrow Agent shall notify RGI and Oce at least ninety (90) days
prior to any renewal of this Agreement.
12. Indemnification. RGI and Oce agree to defend and indemnify Escrow Agent and
hold Escrow Agent harmless from and against all claims, actions and suits,
whether in contract or in tort, and from and against any and all
liabilities, losses, damages, costs, charges, penalties, counsel fees, and
other expenses of any nature (including, without limitation, settlement
costs) incurred by Escrow Agent as a result of performance of this Agreement
except in the event of gross negligence of Escrow Agent or willful
misconduct of Escrow Agent.
13. General.
13.1 Authority to Act. Escrow Agent may act in reliance upon any written
instruction, instrument or signature reasonably believed to be
genuine and may assume that any person giving written notice,
request, advice or instruction on behalf of a party in connection
with or relating to this Agreement has been duly authorized to do
so.
13.2 Failure to Perform. Escrow Agent is not responsible for failure to
fulfill its obligations under this Agreement due to causes beyond
its control.
13.3 Announcements. Neither party shall make any public announcement
concerning this Agreement or the relationship of the parties under
this Agreement without first obtaining the advice and consent of
the other party concerning the content and timing of such
announcement.
13.4 Governing Law. This Agreement shall be governed by, and construed
under, the laws of the State of California, exclusive of State
rules of conflicts of law and of the United Nations Convention on
the Sale of Goods.
13.5 Dispute Resolution. The sole and exclusive remedy with respect to
any controversy, claim or dispute between the parties to this
Agreement arising under this Agreement or any common law, statutory
or regulatory
-Page 8-
<PAGE> 114
provision shall be recourse to arbitration in New York, New York in
accordance with the then-effective Rules of Conciliation and
Arbitration of The International Chamber of Commerce by three (3)
arbitrators appointed according to those Rules; RGI and Oce shall
each select one arbitrator and the third arbitrator shall be
selected by the arbitrators selected by RGI and Oce. Each party
hereby expressly waives any right it may have to any remedy in a
court of law. Any award of the arbitrators shall be final and
conclusive on the parties, judgment upon such award may be
certified in any court of competent jurisdiction and no appeal
shall lie therefrom. Notwithstanding the foregoing, a party may
apply to a court of law (and equity) for injunctive relief;
provided, that it is the intent of the parties that the merits of
any claim will be ultimately determined by arbitration in the
manner provided above.
13.6 Language. This Agreement is in the English language only, which
shall be controlling in all respects. All communications and
notices to be made or given pursuant to this Agreement shall be in
the English language.
13.7 Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be given for all purposes
by delivery in person, by prepaid registered or certified mail, or
by telegram; telex, cable or telefax, addressed to the party to be
notified at the address given in this Agreement for notices to such
party, or to such other address as may be furnished from time to
time by notice from such party. A notice shall be effective upon
receipt, and shall be deemed received seven (7) days after dispatch
if sent by mail.
13.8 Severability. If any provision of this Agreement is held invalid by
any law, rule, order or regulation of any government, or by the
final determination of any state or federal court or of an
arbitration panel, such invalidity shall not affect the
enforceability of any other provisions not held to be invalid.
13.9 Entire Agreement. This Technology Escrow Agreement, and the Product
Agreement and the Manufacturing License Agreement between RGI and
Oce, set forth the entire agreement and understanding of the
parties relating to the subject matter herein and merges all prior
discussion between them.
13.10 Exhibits. The attached Exhibits, as modified from time to time in a
manner permitted under this Agreement, shall form a part of this
Agreement.
-Page 9-
<PAGE> 115
13.11 Modification. No modification of, or amendment to, this Agreement,
or any waiver of any rights under this Agreement, shall be
effective unless in writing signed by an officer of the party to be
charged.
13.12 Power to Enter Agreement. Each party hereby warrants and represents
to the other that it has full power and authority to enter into
this Agreement and to grant all rights and licenses contained
herein.
In witness whereof, the parties have caused this Agreement to be executed by
their duly authorized representative.
RASTER GRAPHICS, INC. OCE GRAPHICS FRANCE S.A.
By: /s/ Andreas Bibl By: /s/ OCE GRAPHICS FRANCE S.A.
------------------------- ----------------------------
Name: Andreas Bibl Name:
------------------------ --------------------------
Title: President / CEO Title: Chairman
----------------------- --------------------------
Date: Oct. 1st, 1990 Date: Oct. 1st, 1990
------------------------ ---------------------------
ESCROW AGENT
By:
--------------------------
Name:
------------------------
Title:
-----------------------
Date:
------------------------
-Page 10-
<PAGE> 116
Exhibit A
Technology Escrow Agreement
Account Number ________
Designated Representatives and Locations
For RGI:
Address Notices to:
Designated Representative & Phone:
Address Invoices to:
For Oce:
Address Notices to: Mr. Terry Haney, Vice-President Engineering
Oce Graphics USA, Inc.
385 Ravendale Drive
P.O. Box 7169
Mountain View, CA 94309
Designated Representative Mr. Terry Haney, Vice-President Engineering
& Phone: (415) 966-9552
Address Invoices to: Same as above
For Escrow Agent:
Address Notices to: Mr. Jim Matysiak, Area Sales Manager
Data Securities International, Inc.
49 Stevenson Street, Suite 550
San Francisco, CA 94105
Designated Representative Mr. Jim Matysiak, Area Sales Manager
& Phone: (415) 541-9013
Address Invoice Inquiries and Fee Remittances to: Same as above
All requests from RGI or Oce to change the designated representative must be
given in writing and signed by an officer of RGI or Oce as the case may be.
Date: __________________
-Page 11-
<PAGE> 117
Exhibit B
Technology Escrow Agreement
Account Number _________
Description of Deposit Materials_
RGI, pursuant to a Technology Escrow Agreement, hereby deposits the below
described materials into the above referenced Deposit Account by transferring
them to Escrow Agent. The Deposit Type is: (check space that applies)
____ Initial Deposit _____ Supplement
DEPOSIT MATERIALS
Name
Version
Date
CPU/OS
Compiler
Application
Utilities needed
Special operating instructions
Item Description Media Quantity
I certify that the above describe materials were delivered/sent to Escrow Agent.
By
Name
Title
For
Date
Materials Received.
-Page 12-
<PAGE> 118
By
Name
Title
For Escrow Agent
Date
DEFINITIONS
RGI may Update the Deposit Account with Supplemental Materials.
Supplemental Materials are materials that are to be added to the existing
Deposit by RGI. The Supplemental materials will be incorporated into the
existing Deposit and treated as the whole.
Replacement Materials are materials which replace the entire existing deposit
materials. RGI may request to replace the entire existing deposit. The existing
Deposit materials on deposit that have been contractually allowed to be replaced
will be dealt with as specified in the Technology Escrow Agreement, or its
Exhibits and Addenda.
Escrow Agent reserves the right to destroy the existing deposit for which return
of deposit fees have not been paid. Escrow Agent will notify RGI of such action.
WARRANTY BE RGI
RGI represents and warrants that it is lawfully possessed of all Deposit
Materials stored under the Deposit Agreement and has the authority to store them
in accordance with the terms thereof.
OBLIGATIONS OF Escrow Agent
To hold these Deposit Materials and treat them as called for in the Technology
Agreement. If a Technology Escrow Agreement does not exist then to not disclose,
divulge nor otherwise make available to any third party the deposited materials
except pursuant to an agreement between RGI and Escrow Agent or under the
compulsion of a valid court order.
AMENDMENT
This form acts as an Amendment, if one is called for.
-Page 13-
<PAGE> 119
July 17, 1991
HAT EGOU/2340
AMENDMENT TO THE MANUFACTURING LICENSE AGREEMENT
BETWEEN RASTER GRAPHICS INC, AND OCE GRAPHICS FRANCE S.A.
Effective as per July __, 1991 Raster Graphics Inc., a Californian corporation
having its principal office at 285 N. Wolfe Road, Sunnyvale, California 94086
(hereinafter "RGI") and Oce Graphics France S.A., a French corporation having
its principal offices at 1 rue Jean Lemoine, 94003 Creteil Cedex, France
(hereinafter "Oce") agree to amend the Manufacturing License Agreement dated
October 1, 1990 (hereinafter "Agreement") between RGI and Oce as follows:
1. - The definition of "Plotter" in article 1.2 shall be replaced
by the following: "Plotter means Plotter as defined in the
Product Agreement, as well as and including any New Plotter
which becomes a Plotter in accordance with Article 6.4 of the
Product Agreement.
2. The following definitions shall be added to article 1:
1.7 "Loan Agreement" means the Loan Agreement dated as of June 21,
1991 by and among RGI, NKK Corporation, NUF Corporation, Oce
and Oce USA Holding Inc.
1.8 "Security Agreement" means the Security Agreement by and among
RGI, NKK and Oce which is executed and delivered in accordance
with the Loan Agreement.
3. From Oce's right and license to manufacture and have manufactured the
Products as stated in article 2.1 shall be excluded the right and
license to manufacture the Products in Japan; except that, Oce shall
retain the right to authorize third parties to manufacture in Japan
components (such as heads, integrated circuits and casings) purchased
by Oce to manufacture the Products outside Japan.
4. The following shall be added to article 2.1:
- In line 4 after the word "Products": "including but not
restricted to the right to manufacture the electrostatic
head";
- After the last sentence: "Oce further shall be authorized to
start manufacturing of the Products upon occurence of any of
the following events:
(i) RGI fails to repay the outstanding principal amount
and accrued interest of the loan made by Oce USA
Holding Inc. pursuant to the Loan Agreement, when
due, irrespective of the 120-day extension period for
the repayment of the loan (to allow RGI to seek
outside financing to repay the loan);
<PAGE> 120
(ii) RGI is in default of any provision of Section 6 of
the Loan Agreement, irrespective of the 120-day
extension period for the repayment of the loan (to
allow RGI to seek outside financing to repay the
loan), or;
(iii) The election by Oce under Section 2H (i) or 2K of the
Loan Agreement to commence manufacturing RGI
Products.
5. In article 3.1 the schedule of initial unit royalties shall be replaced
by the following schedule:
Amount for each of Type A1 and Type A0 Plotter:
Through month 24
One million seven hundred thousand US Dollars (USD 1,700,000)
Following month 24 through month 36
One million two hundred seventy-five thousand US Dollars (USD
1,275,000)
Following month 36 through month 48
Eight hundred fifty thousand US Dollars (USD 850,000)
Following month 48 through month 60
Four hundred twenty-five thousand US Dollars (USD 425,000)
Following month 60
One US Dollar (USD 1.00)
Amount for other Products
The initial unit royalty for Products other than the Type A1 Plotter
and Type A0 Plotter shall be mutually agreed to by Oce and RGI.
6. The following articles shall be added to article 3:
3.5 Manner of Payment
3.5.1
Payments to Escrow Account. the initial unit royalty paid by Oce into
the escrow account shall be applied as follows:
(i) first, to refund the initial unit royalty to Oce if such is
required under this Agreement and the Loan Agreement.
(ii) Second, to pay all principal, accrued interest and other
amounts, if any, when such are due and payable under the Loan
Agreement and the promissory note delivered pursuant thereto.
(iii) Third, to pay to Oce all of RGI's obligations to refund
prepayments and other amounts under the Product Agreement.
-2-
<PAGE> 121
(iv) Fourth, to pay all other monetary obligations, if any, of RGI
to Oce and Oce USA Holding Inc. under the Loan Agreement and
the promissory note and Security Agreement executed in
connection therewith, this Agreement and the Product
Agreement.
3.5.2
Abatement of Running Royalty Payments. In addition, RGI agrees that if
the amount of the initial unit royalty paid into escrow is less than
the aggregate amount of all obligations of RGI to Oce describe din
Section 3.5.1 above, Oce may defer its payment of running royalties
under Section 3.2 until payment in full of the above amounts shall have
been made by RGI or until Oce's credits against such obligations have
been reduced to zero.
3.6 Taxes
The royalties payable by Oce pursuant to this Agreement do not include
local, state, federal or foreign income taxes. RGI shall be responsible
for the payment of all such income taxes associated with the royalties
paid by Oce hereunder (except for taxes based on Oce's income, which
shall be paid by Oce. Oce shall be entitled to deduct and withhold from
any payment due to RGI hereunder RGI income taxes levied by the
government of France. If such taxes are withheld by Oce, Oce shall send
to RGI a tax certificate showing payment of the taxes.
7. The following paragraph shall be added to article 5:
5.4
Continuation of Rights/Survival of Certain Terms. Notwithstanding the
termination or cancellation of this Agreement for any reason, the
rights granted to Oce pursuant to Section 2.1 above existing as of the
effective date of such termination or cancellation, and the obligation
of Oce to pay the fees set forth in Section 3 of this Agreement shall
survive the termination or cancellation of this Agreement; provided
that the exercise by Oce of its rights under Section 2.1 after such
termination or cancellation is subject to the conditions that Oce (a)
has paid to RGI the fees set forth in Section 3 above, which have
become due and payable prior to the termination or cancellation of this
Agreement, (b) pays to RGI the fees set forth in Section 3 above, which
become due and payable subsequent to the termination or cancellation of
this Agreement, if, but only if, this Agreement is terminated by RGI
for a material breach of this Agreement by Oce and (c) complies with
its obligations to maintain RGI proprietary information confidential.
Should RGI file a voluntary petition with a United States bankruptcy
court to seek protection under the United States bankruptcy law, or
should an involuntary petition be filed against RGI which RGI fails to
contest in a timely fashion or which petition is consented to by RGI,
Oce may, in its sole discretion, elect to retain Oce's rights under
this Agreement as they existing immediately prior to the filing of the
petition pursuant to the procedures set forth in the United States
bankruptcy law, including but not limited to 11 U.S.C. Section 365(n),
upon
-3-
<PAGE> 122
rejection of this Agreement by the trustee representing RGI or RGI as
debtor-in-possession.
Unless expressly modified herein, all other provisions of the Agreement shall
remain in full force and effect in their original form.
WHEREFORE, the Parties have caused this Agreement to be duly executed as of the
day and year first above written.
Raster Graphics Inc. Oce Graphics France S.A.
By: /s/ Raster Graphics Inc. By: /s/ OCE Graphics France S.A.
------------------------- ----------------------------
Title: _____________________ Title: _________________________
Date: ______________________ Date: _________________________
-4-
<PAGE> 123
29 April 1992
Raster Graphics Inc.
285 N. Wolfe Road
Sunnyvale, CA 94086-3820
USA
Dear Sirs,
This letter sets forth amendment nr. 1 of the Product Agreement between Raster
Graphics Inc. and Oce Graphics France S.A. as of 1st October 1990.
This amendment will become effective as of 1st March 1992.
1. The A0 Model Plotter, as described in Annex V to the Loan Agreement as
of June 21, 1991 is a New Plotter for purposes of Section 1.5 of the
Product Agreement. Notwithstanding the foregoing sentence a New Plotter
shall not include color electrostatic plotters for which RGI receives
third party funding to develop and which is not significantly similar
to the A0 machine.
2. The definition of the term First Year in Section 1.14, with respect to
the A0 Model Plotter, shall mean a period of 12 months beginning on 1st
April 1992 or on such later date as results from item 4 of this letter.
3. Oce agrees to place an initial purchase order (the Initial Order) for
eighty (80) A0 Models by April 30, 1992 with estimated scheduled
delivery dates, on a monthly basis, between May 1, 1992 and March 31,
1993. The Initial Order shall be firm and noncancelable, save as
provided in item 5 below.
4. If RGI fails to meet the development plan, timetable and milestones, as
described in Annex V to the Loan Agreement, Oce shall grant to RGI a
term of no longer than three (3) months to remedy its failure in which
case the commencement date of the First Year, (as defined in item 2
above), will be extended by the number of days RGI needs to remedy its
failure and (2) the dates provided in item 3 above will be extended by
the same number of days.
5. If RGI fails to remedy its failure as provided in item 4, Oce reserves
the right to cancel the Initial Order. If Oce cancels the Initial
Order, RGI may convert Oce's exclusive rights with respect to the A0
Model Plotter to non exclusive rights upon written notice to Oce.
6. Oce agrees to confirm, by written purchase orders, deliveries under the
Initial Order.
<PAGE> 124
With respect to the first three months (May, June and July 1992) such
confirmations shall be sent to RGI within one week from the date of the
Initial Order.
With respect to each subsequent month such confirmation will be sent to
RGI three months before the actual required delivery date.
Notwithstanding the provisions of Section 3.10 of the Agreement, the
deliveries for such purchase order may not be rescheduled beyond March
31, 1992, except as provided in item 4 above.
7. Prepayment, as describe din Exhibit C of the Agreement, for deliveries
under the Initial Order will be made simultaneously with the
confirmations as provided in item 6 above.
8. Oce's right and license for the Oce Model 424 (A1 Plotter) are
non-exclusive for both the Exclusive Territory and the Non-Exclusive
Territory. Consequently no minimum commitments shall apply for the Oce
Model 424, neither in terms of Exclusive Minimum, nor in terms of
Non-Exclusive Minimum and the provisions of Exhibit G of the Agreement
shall apply only to the A0 Model.
9. Exhibit G is amended as follows, with due observance of item 8 hereof:
1. Exclusive Minimum.
1.1 For the First and Second Year (as defined in item 2 above):
100 units A0 Models for each such year.
2. Non-Exclusive Minimum.
2.1 For the First and Second Year (as defined in item 2 above): 80
units A0 Models for each such year.
2.2 For the subsequent years as per the original Section 2.2, it
being understood that in accordance with item 8 hereabove, the
term "the value of all Plotters" as used in Section 2.2 of
Exhibit G shall mean only "the value of all A0 Model
Plotters."
10. In the discount Schedule contained in Exhibit B of the Agreement, the
first line is deleted and the second line is replaced by:
"Models 424 and A0 Models . . . . . . 45%."
The Discount Schedule will be renegotiated (i) for all future orders if
Oce does not purchase A0 Model Plotters with aggregate List prices of
at least US $4,000,000 per Year upon written notice from RGI, (ii) for
any order not prepaid as described in paragraph 1 of Exhibit C of the
Agreement upon written notice from RGI, and/or (iii) for all orders
scheduled for delivery after the First Year (as defined in
-2-
<PAGE> 125
item 2 above) and Subsequent Years upon no less than 30 days notice
from RGI following notice from Oce as described in Exhibit C of the
Agreement (concerning renegotiations on prepayment terms). Notice to be
given by RGI shall not be less than 14 days after RGI has received
notice from Oce.
11. The payment terms contained in the first paragraph of Exhibit C shall
apply only for the First Year (as defined in item 2 above). They will
be renegotiated for the following years as provided in the second
paragraph of Exhibit C.
12. For the avoidance of doubt and in accordance with Section 2M of the
Loan Agreement, it is hereby confirmed that the Term of the Agreement
as provided in its Section 12.1 is seven (7) years, thus ending on 1st
October 1997, unless terminated earlier in accordance with its terms.
13. In all events Oce's distribution rights with respect to the A0 Model
Plotter and any new Plotter will become nonexclusive (in both the
Exclusive Territory and in the Nonexclusive Territory) after the Second
Year.
14. Provided that Oce plotter distribution rights have not terminated then,
if during the periods April 1, 1994 through March 31, 1996, RGI
contemplates to grant nonexclusive distribution rights with respect to
the A0 Model Plotter (in the Exclusive Territory), other than terms and
conditions offered to a Foreign OEM corporation, to either of the
following companies: Calcomp, Hewlett-Packard, Xerox, Intergraph,
Mutoh, Graphtec, Roland and/or 3M (hereinafter called the Offerees)
then the following provisions will apply:
a) Before granting distribution rights to any of the Offerees,
RGI will offer to Oce the terms and conditions, including without
limitation any debt/equity financing or quantity commitments and
pricing, for such distribution rights as RGI contemplates to offer to
such Offeree. Oce will have 30 thirty days to accept the said terms and
conditions in writing.
(b) If Oce accepts the offer, RGI shall not grant distribution
rights with respect to the A0 Model Plotter to the respective Offeree.
If Oce does not accept the offer within the said 30 (thirty) day
period, then, and only then, RGI may extend the same offer and the same
terms and conditions to the respective Offeree. The Offeree will have
30 thirty days to accept the said offer.
(c) If the Offeree accepts the offer, then RGI may grant
nonexclusive distribution rights under the offered terms to the
respective Offeree. RGI shall not enter into any distribution
relationship with the said Offeree under terms and conditions, in
particular regarding quantity commitments and pricing/payment, which
are different from such terms and conditions offered to Oce pursuant to
paragraph a) hereabove.
-3-
<PAGE> 126
(d) RGI shall notify Oce forthwith in writing of the acceptance or
rejection of the offer by the Offeree.
15. To the extent that Oce's distribution rights become nonexclusive (or
terminate) for any reason, Oce will not be entitled to compensating
payments as described in Section 2.3 of the Agreement.
16. Except as expressly provided in this Amendment letter, all other
provisions of the Agreement shall remain in full force and effect in
their original form. Any ambiguity between the Agreement and this
Amendment No. 1 shall be resolved in favor of the interpretation
resulting from Amendment No. 1.
17. Nothing contained in this Amendment Letter shall in any way be
considered as an amendment of any of the provisions of the Loan
Agreement and no provisions of the Loan Agreement shall be effected by
this Amendment Letter.
If you agree with the contents of this letter, we would appreciate it if you
would confirm so, by signing and returning the enclosed copy of this letter.
Regards,
SEEN AND AGREED
Oce Graphics France S.A. Raster Graphics Inc.
/s/ Jean Pierre Dupont /s/ Rak Kumar
------------------------------ ---------------------------
Jean Pierre Dupont Rak Kumar
Vice President Marketing President, CEO
and Strategic Planning
-4-
<PAGE> 127
Fax Number - 011 33 1 49560821
January 20, 1994
Adrien Gimenez
Director B.U. Graphics
Oce Graphics France S.A.
3, rue des Archives - B.P. 138
94004 - Creteil cedex FRANCE
Dear Adrien:
This letter sets forth amendment number 2 of the Product Agreement
between Raster Graphics, Inc. (RGI) and Oce Graphics France S.A. (Oce) as of
1st, October 1990.
This amendment will become effective as of January 13, 1994 and shall
terminate as of December 31, 1994.
1. 436CX Order and Pricing
Oce will place a purchase order for a total of 40 (forty) 436CX units,
as configured below, for delivery as follows:
10 units in March 1994 (order before January 31, 1994)
10 units in April 1994 (order before February 28, 1994)
10 units in May 1994 (order before March 28, 1994)
10 units in June 1994 (order before March 31, 1994)
Notwithstanding the provision of Section 3.10 and 3.11, the deliveries
for such purchase order may not cancelled nor be rescheduled beyond June 30,
1994.
RGI guarantees a unit selling price of $22,400 (twenty-two thousand
four hundred U.S. Dollars) to Oce for a Model 436CX with 116 MB Plot Management
Option (Model 551), Toner Autoconcentrate Add System (Model 540) and CalComp
58-68000 Emulation Model (591).
The unit price will be $22,000 (twenty-two thousand two hundred U.S.
Dollars) if Oce supplies and installs the additional 4MB DRAMs for the CalComp
Emulation.
The above unit prices will be remain in effect after the first 40 units
provided all scheduled deliveries are before December 31, 1994.
<PAGE> 128
2. Technical Warranty
Oce has the right to check the reliability of the 436CX at RGI's
premises before the end of February. If the current reliability problems are not
solved on the 436CX's tested, Oce will have the right to cancel the purchase
orders placed under this amendment and if cancelled the exclusivity extension
noted in Item 4 below will terminate.
3. Other Options
Oce will use its best efforts to promote sales of other 436CX options
such as the 497 MB Hard Disk Drive, Ethernet TCP/IP Interface and Imbedded
Postscript Interpreter.
4. Exclusivity Rights
If Oce commits, on or before June 30, 1994, to place purchase orders
with RGI for an average of 10 units per month for the three month period July,
August and September, with delivery October 30, 1994, the exclusivity for the
436CX will be extended to September 30, 1994. If Oce commits, on or before
September 30, 1994, to place purchase orders with RGI for an average of 10 units
per months for the three month period October, November and December, with
delivery by January 31, 1994. Notwithstanding the provisions of Sections 3.10
and 3.11, the deliveries for such purchase orders may not cancelled nor be
rescheduled beyond January 31, 1995.
5. General
Except as expressly provided in this Amendment above, all other
provisions of the Agreement shall remain in full force and effect in their
original form.
WHEREFORE, RGI and Oce have caused this Agreement to be duly executed
as of the day and year first written above.
Raster Graphics, Inc. Oce Graphics France S.A.
By: /s/ Rak Kumar By: /s/ Adrien Gimenez
----------------------- -----------------------
Rak Kumar Adrien Gimenez
CEO and President Director B.U. Graphics
-2-
<PAGE> 129
Raster Graphics Inc.
3025 Orchard Parkway
San Jose, CA 95134
USA
Department Product Planning
Date 6.3.1995
Our reference HDGR/RGI.2
Dear Sirs,
This letter sets forth Amendment number 3 of the Product Agreement
between Raster Graphics Inc. ("RGI"), and Oce Graphics France S.A. ("Oce") as of
1st October 1990 (the "Product Agreement").
1) This amendment is effective as of September 1, 1994.
2) The amendments of the Product Agreement as contained in its
amendment number 1 of 29 April 1992 are not applicable to this amendment number
3.
3) The DCS 5400 Printer (hereafter the "Added Product"), as specified
in Annex 1 of this letter, is a New Plotter in terms of article 1.5 of the
Product Agreement.
4) In respect of the Added Product, the rights granted by article 2.1
of the Product Agreement shall be non-exclusive. The territory in which such
rights may be exercised shall comprise all countries of the world, except Japan.
5) The articles 2.2 through 2.9 of the Product Agreement and
consequently its Exhibit G shall not apply with respect to the Added Product.
6) The prices for the Added Product shall be their US list prices as
mentioned in Annex 1 to this letter, less a discount, in terms of Exhibit B of
the Product Agreement, of 35%. Oce shall have the right to apply the discount
percentage at the lower of the US list prices or International list prices. With
respect to the Added Product, the term OEM Corporation as used in article 3.4 of
the Product Agreement shall be replaced by the term "International Distributor
of RG".
7) With respect to the Added Product a new sentence shall be added to
article 3.5 of the Product Agreement, reading: "Oce's forecasts as mentioned in
this article shall be non-binding."
8) With respect to the Added Product, article 3.6 of the Product
Agreement shall not apply.
<PAGE> 130
9) The periods of 90 days and 120 days as mentioned in article 3.7 of
the Product Agreement shall with respect to the Added Product be 60 days and 90
days respectively.
10) Notwithstanding article 5.1 and Exhibit C of the Product Agreement,
the payment terms with respect to the Added Product shall be 50% at ordering
date and 50% within 60 days after date of invoice received from RGI following
delivery.
11) Except as expressly provided for in this Amendment, all other
provisions of the Product Agreement shall remain in full force and effect.
If you agree with the contents of this letter, please confirm so by
signing and returning the enclosed copy of this letter.
Regards,
Seen and agreed
Oce Graphics France S.A. Raster Graphics Inc.
/s/ OCE Graphics France S.A. /s/ Rak Kumar
- ---------------------------- ---------------------------------
By: By: Rak Kumar, CEO and President
-2-
<PAGE> 131
ANNEX 1 to Amendment nr. 3 of the Product Agreement as of March 6, 1995.
<TABLE>
<CAPTION>
Product Description US list price International list price
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DS 5400 Digital Color Station 5400 $99,500.- $ 109,000.-
DCS 54S5 Optional Fifth Toning Station $ 9,950.- $ 10,950.-
</TABLE>
-3-
<PAGE> 1
EXHIBIT 10.9
PURCHASE AGREEMENT
This Purchase Agreement ("Agreement") is entered into this 9th day of
March, 1996 by and between ENCAD, Inc., a California corporation located at
6059 Cornerstone Court West, San Diego, California 92121 ("Buyer"), and Onyx
Graphics Corporation, located at 6905 South High Tech Drive, Midvale, Utah
84047 ("Seller").
RECITALS
WHEREAS, Seller is in the business of developing, manufacturing and
selling PRODUCTS (as defined hereinbelow); and
WHEREAS, Buyer desires to resell Seller's PRODUCTS, either with Buyer's
Products, or otherwise for use with Buyer's products; and
WHEREAS, Seller desires to sell, and Buyer desires to purchase PRODUCTS
for the purposes stated above.
NOW, THEREFORE, in consideration of the mutual premises contained
herein, Seller and Buyer agree as follows:
I. PRODUCTS.
A. Seller licenses and grants to Buyer the worldwide right to use
and resell PRODUCTS for use with Buyer's printers/plotters, in the A0/A1 and
larger inkjet printer market ("Market"). Buyer's right to resell specifically
includes sales of PRODUCTS to Buyer's OEM's (Original Equipment Manufacturers),
Integrators (system sellers), VAR's (Value Added Resellers), Distributors, etc.
PRODUCT prices are described in Exhibit "A" hereto.
B. PRODUCTS shall meet Buyer's specifications, as indicated on the
attached Exhibit "B" hereto.
C. During the term of this Agreement, Seller shall notify Buyer of
any changes to PRODUCTS 90 days in advance of the incorporation of such changes
in production units of PRODUCTS, and Seller shall either update Seller's Beta
unit or provide Buyer with a new Beta unit (all hardware modifications will
require new a Beta unit). Buyer will notify Seller within 30 days of receipt of
the specifications of such changes, and the Beta unit (or upgrade), if Buyer
does not want the changes to be incorporated into the PRODUCTS that Buyer
receives. Seller shall notify Buyer of new products intended to replace
PRODUCTS at least 90 days prior to any such event, and Seller shall provide
Buyer with a Beta unit. Buyer will notify Seller within 30 days of receipt of
the specifications of such new products, and the Beta unit, whether Buyer
wishes to change over to such new products, or to continue receiving PRODUCTS.
D. Should liquidation, bankruptcy or any other events prevent
Seller from supplying PRODUCTS to Buyer, and if Seller does not provide for a
third party acceptable to
Page 1 Initial: /s/ BRP
___________
Seller Buyer
<PAGE> 2
Buyer to continue to fulfill Seller's obligations pursuant to this Agreement,
Buyer will thereby be automatically granted the unilateral, unconditional
right to elect to undertake a license to manufacture, or have manufactured,
PRODUCTS (to the extent Seller is legally capable of granting such rights), and
Seller will immediately prepare and deliver to Buyer a third party Product
Definition Package ("Package"). The Package will include the names, addresses
and contact personnel of all third parties involved in the PRODUCT
manufacturing process, and any and all information (proprietary as well as
non-proprietary) and materials necessary to enable Buyer to manufacture and
support PRODUCT in the most expeditious manner reasonably possible, including
the software current release and revisions to be provided by Seller on a 3.5
inch exchangeable disk magnetic media, source codes, algorithms, etc. Seller
further agrees to maintain the Package on a current basis. Buyer agrees to
maintain such information and materials in confidence.
E. Seller hereby grants to Buyer the right to use and sell future
products of Seller which are similar to, upgrades to, improvements to, revisions
to, or substitutes for Products
II. PRICES
A. Product prices are as indicated in Exhibit A for each item of
PRODUCT purchased from Seller. Inasmuch as pricing for PRODUCTS will be market
driven, and substantially similar products could be introduced into the market
at lower prices. Seller and Buyer acknowledge that it may be necessary to
conduct an extraordinary review of pricing in consideration of such market
pressures or other factors. Such an extraordinary review will be completed
within thirty (30) days of written notice by either party. In the event Seller
and Buyer cannot agree upon such a review, either party may exercise its right
under Section IV below.
B. Seller represents and agrees that Buyer's pricing for Products
is, and will at all times during the term of this Agreement, be at least as
favorable as Seller's pricing for the same basic product to any other customer
of Seller purchasing similar quantities. Seller shall immediately advise Buyer
of any price reduction(s) for PRODUCTS sold at any other customer of Seller,
and Seller shall immediately reduce the price of PRODUCTS to Buyer accordingly.
C. Payments shall be remitted by Buyer, net forty-five (45) days
of the date of invoice. Deliveries of defective PRODUCTS which are rejected by
Buyer for quality reasons, and notified to Seller within the same forty-five
(45) day period, shall be credited to Buyer if the defect is found to be
justified after examination and testing, and after receipt of a credit note,
the invoice amount shall be reduced accordingly.
III. TERM. This Agreement shall be effective from the date hereof, and
shall continue until terminated, as provided for herein.
Page 2 Initial /s/ BRP
----------
Seller Buyer
<PAGE> 3
IV. TERMINATION. This Agreement may be terminated, as follows:
A. In the event a breach or default is not cured within thirty (30)
days of receipt of a written notice thereof from the non-defaulting party, such
non-defaulting party may immediately terminate this Agreement. Such a breach or
default shall specifically include, but not be limited to, Seller's failure or
inability to provide PRODUCTS in quantity or quality reasonably satisfactory to
Buyer. Failure of PRODUCTS to meet Buyer's specifications indicated on Exhibit
"B" shall be conclusive evidence of unsatisfactory quality.
B. In the event Buyer and Seller cannot, in good faith, renegotiate
prices pursuant to paragraph II. A. hereof within thirty (30) days of written
request to do so, the Agreement may be immediately terminated by either party.
Termination pursuant to this provision, however, will have no effect upon
Buyer's obligations with regard to outstanding binding purchase orders.
C. In the event either party becomes unable to fulfill its obligations
of this Agreement, to any degree, as a consequence of a voluntary or
involuntary petition in bankruptcy, a reorganization or rearrangement of its
business affairs, becoming insolvent or having a receiver appointed, making an
assignment for the benefit of creditors, or suffering any judgment which
remains unsatisfied or unappealed for thirty (30) days, then the other party
may immediately terminate this Agreement, and without prejudice to any other
remedy to which that party may be entitled.
D. Either party may terminate this Agreement, without cause, upon 180
days written notice.
E. Such rights of termination are absolute, and both parties have
considered their expenditures in preparing for performance pursuant to this
Agreement, and losses possibly resulting in the event of its termination, and
as a result, neither party shall be responsible to the other for damages by
reason of such termination of this Agreement.
F. Should this Agreement be terminated prior to payment of money due
pursuant hereto, such amounts shall be paid as and when due in accordance with
the terms hereof. All orders received by Seller as of the effective date of
termination shall be unaffected by such termination.
G. Upon termination of this Agreement for any reason, whatsoever,
Seller shall accept a final one-time order from Buyer for PRODUCTS, to be
submitted within thirty (30) days of termination.
H. The obligations of confidentiality, payment and indemnity arising
prior to termination will continue after termination of this Agreement.
V. SHIPPING TERMS.
PRODUCTS shall be sold to Buyer F.O.B. Seller's facilities in Utah.
Buyer shall send orders to Seller's above mentioned address, and Seller shall
deliver PRODUCTS pursuant to Buyer's instructions. Buyer is entitled to
determine a transportation method. If
Page 3 Initial /s/ BRP
-----------
Seller Buyer
<PAGE> 4
no transportation method is stated, Seller may select a shipping method. Any
costs of shipping, shipping insurance, custom duties and other shipping
expenses are exclusively borne by Buyer, except as provided for herein. Seller
will use its best efforts to meet any increase in Buyer's requested PRODUCT
delivery quantities. Should PRODUCT orders exceed Seller's available inventory,
Seller will grant Buyer priority in manufacturing and shipment.
VI. PACKAGING.
A. Seller will package and label PRODUCTS pursuant to Exhibit B.
B. Seller shall package shipments to meet commercially accepted
industry standards, and shall include with each shipment a packing list which
has Seller's part number, Buyer's purchase order number, description by line
item, and quantity shipped.
VII. INSPECTION.
Seller shall inspect PRODUCTS before shipment, and agrees to promptly
replace defective PRODUCTS at no cost to Buyer.
VIII. CONFIDENTIALITY.
The parties anticipate that technical and business information may be
disclosed between the parties for the purpose of this Agreement, such
information being considered by them to be confidential and proprietary. A
party furnishing such information will be referred to as a "disclosing party",
and a party receiving such information will be referred to as a "receiving
party". In order to provide for the protection of such confidential and
proprietary information from unauthorized use or disclosure, the parties hereby
agree that disclosure or use of such information shall be subject to the
following terms and conditions:
i) Both parties agree that all confidential and proprietary
commercial and technical information as disclosed to the receiving party
by the disclosing party, whether orally or in writing, will be
maintained by the receiving party in confidence, provided that all
disclosures in writing are marked with a confidential or proprietary
legend, and that oral disclosures are identified as confidential or
proprietary at the time of disclosure, and thereafter confirmed in
writing as confidential or proprietary within thirty (30) days after
the oral disclosure. The receiving party may, however, in furtherance
of the aforesaid purpose(s), disclose such information to its officers,
and those of its employees and others under its control, all of whom
will be advised of this provision and agree to accept the obligations
hereunder.
ii) The receiving party additionally agrees to take
reasonable care to safeguard the confidential nature of such
information, and such reasonable care shall not be less than the degree
of care used to prevent disclosure of its own proprietary information.
The receiving party will not be liable for disclosure or use of such
information; 1) if the information is in, or becomes part of, the
public
Page 4 Initial /s/ BRP
------------
Seller Buyer
<PAGE> 5
domain other than through a breach of this Agreement by the receiving
party; 2) if such information is disclosed to the receiving party by a
third party as a matter of right; 3) if the information is disclosed or
used by the receiving party with the disclosing party's prior written
approval; 4) if the information is required by any judicial or other
order, or by any governmental law or regulation; 5) if it can be
demonstrated that such information was known by the receiving party
at the time of its disclosure to the receiving party by the disclosing
party; or 6) if such information is developed by the receiving party
independent of the disclosing party's information.
IX. LIMIT OF LIABILITY. Seller shall not be responsible for failure of
PRODUCTS which have been altered or modified other than by Seller.
X. SPECIFIC OBLIGATION OF BUYER. Except as provided for herein, Buyer
will not attempt to modify, reverse engineer or decompile PRODUCTS.
XI. WARRANTY AND SUPPORT.
A. Support and training shall be as provided in the attached
Exhibit "C" hereto.
B. Hardware Warranty:
(i) Units shall be warranted to be in good operating condition,
and free from defects in material and workmanship for a period of 15
months from the date of shipment to Buyer.
(ii) Defective PRODUCTS will be exchanged for PRODUCTS of like
vintage, as fully tested and reconditioned as necessary.
(iii) During the Warranty period, PRODUCTS returned will be
shipped to Seller at Seller's expense, and Seller will pay return
freight unless PRODUCTS are not defective, in which case Buyer shall
pay return freight.
C. Software Warranty:
Software shall be error free and operating without interruption. If
a defect is found, and notice thereof given to Seller, all efforts will be made
to eliminate such error as quickly as possible. A complete exchange of software
will be carried out if the operation of a PRODUCT is unacceptable due to such
defect. Any revision, new version or new release will not alter Seller's
specification of the Software without the prior written approval of Buyer.
XII. FORECASTS AND PURCHASE ORDERS.
Buyer hereby provides Seller a Product forecast through the end of 1996,
as follows:
Page 5 Initial /s/ BRP
------------
Seller Buyer
<PAGE> 6
March July 30 November 30
- -----------------------------------------------------
April 30 August 30 December 30
- -----------------------------------------------------
May 20 September 30
- -----------------------------------------------------
June 20 October 30 Total 250
- -----------------------------------------------------
This forecast shall be binding through September, 1996, however, orders
for July, August and September may, at Buyer's election, be rescheduled out as
necessary, through March, 1997. Prior to September 30, 1996, Buyer shall
provide Seller with an updated and additional forecast through December, 1997.
Subsequent forecasts shall be binding for the initial three (3) months, and
Buyer will update the non-binding portions monthly, such that Seller will have
binding purchase orders for three (3) months at the beginning of each month.
Except as provided for in the preceding paragraph, Buyer may not
reschedule shipments within thirty (30) days of scheduled ship dates, however,
Buyer may reschedule other such shipments up to six (6) months out.
XIII. TRADEMARKS, TRADE NAMES AND PATENTS.
A. Buyer hereby recognizes Seller's rights of ownership in all
registered trademarks, trade names, patents, and patents pending associated
with the PRODUCTS. Subject to the terms of this Agreement, Buyer will act
consistently with such rights, and act to preserve them in the course of
reselling PRODUCTS. Seller grants to Buyer a license and right to use Seller's
trademarks and trade names in connection with Buyer's resale of PRODUCTS.
B. Seller will indemnify, defend and hold harmless Buyer from
infringement or alleged infringement of patents, trademarks, copyrights or
other intellectual property rights of any third party, and Seller will pay any
judgment for any such infringement by any PRODUCTS, if 1) Buyer promptly
notifies Seller, in writing, of any alleged infringement, 2) Buyer allows
Seller to defend with counsel reasonably satisfactory to Buyer, and 3) Buyer
cooperates with Seller. Seller will not be liable for infringement due to
PRODUCTS modified by Buyer, thereby causing the infringement or alleged
infringement due to PRODUCTS modified by Buyer, thereby causing the
infringement or alleged infringement. In order to avoid infringement (even if
not alleged), Seller may, at its option and at no charge to Buyer, obtain a
license to use, modify or substitute an equivalent item for the infringing
PRODUCT, or refund the purchase price and transportation costs thereof to Buyer.
XIV. INDEMNIFICATION.
Each party agrees to indemnify, defend and hold the other party
harmless from any and all claims, suits, actions, proceedings and costs of any
kind, including attorneys fees and legal expenses, arising from any act or
omission for which, and to the extent that the indemnifying party is
responsible.
XV. ADDITIONAL TERMS AND CONDITIONS.
A. This Agreement supersedes all prior communications or understandings
between Buyer and Seller, and constitutes the entire Agreement between the
parties. In the
Page 6
Initials: /s/ BRP
------------
Seller Buyer
<PAGE> 7
event of a conflict or inconsistency between the terms of this Agreement and
those of any purchase order, quotation, solicitation, or other communication,
the terms of this Agreement shall be controlling.
B. Captions and headings used in this Agreement are for reference
purposes only, and are not to be considered with regard to the interpretation
or intent of any provisions hereof.
C. Both parties have had an opportunity to review this Agreement with
their counsel, and to negotiate this Agreement. Therefore, any laws, statutes
or precedents to the effect that ambiguities are to be construed in favor of a
non-drafting party to an agreement are hereby waived, and any such ambiguities
or uncertainties hereof are to be resolved without regard to which party
drafted this Agreement.
D. Non-performance under this Agreement shall be excused, and neither
party shall be liable for any loss, damage, penalty, or expense, to the extent
that such performance is rendered impossible or delayed by fire, flood, acts of
God or the public enemy, acts of the Government, labor difficulties, riots,
casualties, accidents, shortage of transportation facilities, losses of goods
in public warehouses, inability to obtain materials or any other cause where
the failure to perform or delay is beyond the reasonable control of the
non-performing party, and without the negligence of such party.
E. Each party shall conduct its business related to this Agreement in
an ethical and business-like manner, and in compliance with the applicable laws
and regulations of all government entities. Each party shall demonstrate to the
other compliance with all applicable laws and regulations at the request of
the other.
F. Any waiver or delay in the exercise by either party of its rights
to terminate hereunder, or to enforce any provision of this Agreement for any
breach by the other party shall not prejudice that party's right of termination
or enforcement, or recovery for any further, continuing or other breach.
G. Buyer and Seller represent and warrant to each other that each has
the right and power to enter into this Agreement, and that there are no
outstanding assignments, grants, licenses, encumbrances, obligations or
agreements, written or oral or implied, inconsistent with this Agreement.
H. Disputes arising under this Agreement shall be submitted to
arbitration in San Diego, California, in accordance with such rules as the
parties jointly agree upon. If the parties are unable to agree upon arbitration
procedures, arbitration shall be conducted in accordance with the appropriate
rules of the American Arbitration Association.
I. Notices and other communications by either party under this
Agreement shall be deemed given upon confirmation of transmission by facsimile,
or three (3) days after being deposited in the mail as certified, postage
pre-paid, and addressed as follows:
Page 7 Initial /s/ BRP
------------
Seller Buyer
<PAGE> 8
If to Buyer:
ENCAD, Inc.
6059 Cornerstone Ct. W.
San Diego, CA 92121
Attn: General Counsel
If to Seller:
Onyx Graphics Corporation
6915 South High Tech Drive
Midvale, Utah 84047
Attn: Chuck Edwards, President
J. Buyer shall have the right, but not the obligation to terminate
this Agreement if, at any time, there is a change in ownership of Seller of
more than 50%, or if Seller merges into another entity, or if substantially all
of Seller's assets and business are acquired by another party, or if Seller
ceases, for any reason, to conduct business.
K. The relationship created between the parties hereto is that of
Seller and Buyer, and neither party, nor any of its employees, dealers,
customer or agents, shall be deemed to be representatives, agents or employees
of the other party for any purpose, whatsoever, nor shall they, or any of them,
have any authority or right to assume or create any obligation of any kind or
nature, express or implied, on behalf of the other party, not to accept service
of any legal process of any kind addressed to or intended for the other party.
L. If any provisions of this Agreement shall be held to be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not be affected or impaired thereby.
M. This Agreement, and the rights and duties hereunder, shall not
be assignable by either party except upon written consent of the other party.
N. This Agreement shall be governed by the laws of State of
California of the United States of America.
O. In the event any legal action is brought by either party in
connection with this Agreement, each party shall bear its own costs, attorneys
fees and other expenses incurred during such action.
P. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, and all of which together shall
constitute one and the same instrument.
Q. This Agreement may not be amended or modified except in
writing, signed by both parties.
R. No waiver will be effective unless in writing and signed by the
party against whom the waiver is to be enforced.
Page 8 Initial /s/ BRP
-----------
Seller Buyer
<PAGE> 9
S. The following Exhibits are hereby incorporated into, and made a
part of this Agreement:
Exhibit A - Product Prices
Exhibit B - Product Specifications
Exhibit C - Support and Training
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first hereinabove mentioned.
SELLER: Onyx Graphics Corporation BUYER: ENCAD, Inc.
BY: /s/ Chuck Edwards BY: /s/ ENCAD, Inc.
----------------------------- -------------------------------
Chuck Edwards, President
Page 9 Initial /s/ BRP
---------------
Seller Buyer
<PAGE> 10
EXHIBIT A
---------
PRODUCT PRICES
Initially, and until September 30, 1996. Buyer shall pay seller $4,150.00 per
unit of Product purchased. Buyer and Seller agree to re-evalute pricing at that
time, and to re-negotiate pricing in good faith, and as may be reasonably
necessary considering the volume of Products purchased and resold by Buyer,
competitive products and pricing in the market, and other factors as necessary.
Demo Price: $2,000.00 - 8 maximum per year (not for resale).
<PAGE> 11
EXHIBIT B
PRODUCT SPECIFICATIONS
Product: Pentium Processor (133 Hz)
32 MB RAM
1 GB HD
Ethernet: 10Base2 and 10BaseT
32 bit 1MB PCI Video Board
Microsoft Mouse
QIS Color Blind exclusive -- Product must support QIS Color
Blind links in order to be acceptable.
Updates: Buyer to receive 90 days prior written notice of software
updates, with a Beta unit made available 90 days before release
of product.
Labels: The following labels must be present on the outside of Products:
Safety: CE, UL, CSA, GS (all safety certification is
mandatory)
Logos: ENCAD
Extreme Color Printing
(Logos will be supplied by Buyer as "stickers"
to Seller)
Shipping: Buyer part number with logos (including Seller's "Onyx" logo)
and other items on exterior of the end shipping box.
Buyer requires the shipping containers (Seller to Buyer) to be
free of shipping labels.
Manual: Seller to supply electronic copy to Buyer. Electronic manuals
will be supplied to Seller by Buyer for printing.
Buyer to supply electronic copies of manuals, registration
cards, color profiles, letters of conformity, which Seller will
package with Products.
Other items: Seller to supply drop test data
Seller to supply electronic file of manual
Seller to supply CE mark data
Seller to supply working unit for NovaJet Pro 50
Buyer to supply "ENCAD" and "Extreme Color Printing" logos
(electronic form)
Buyer to supply sticker with safety marks and S/N (electronic
form)
Buyer to supply ENCAD manual and registration card (electronic
form)
Initial /s/ BRP
------------
Seller Buyer
<PAGE> 12
EXHIBIT C
SUPPORT AND TRAINING
Training: Seller to provide Buyer 2 days of training in San Diego for
support issues including, but not limited to, set-up,
installation of current/update software, use of functions,
explanation of benefits, work-flow, and known problems with
possible work-arounds. Buyer will provide training to
distributors as needed via on-site training, PPT, and
telecommunicatons. Participants will include help desk, service
personnel, inside sales, and sales personnel.
Technical
Support: Buyer will receive initial technical training as stated above.
With this information Buyer will provide front line support to
domestic end users and international distributors. Seller has
a toll free hot line number (8:30 a.m. to 5:30 p.m. MDT) and a
24 hour BBS and Web page accessible by Buyer's technical
support staff when necessary.
Service
Support: Products will be considered "replaceable modules". Buyer's
third party service supplier ships new unit to user; user ships
failed unit to Buyer's service provider; Buyer's service
provider ships failed unit to Seller; Seller ships replacement
unit to Buyer's service provider.
Seller shall supply Buyer or Buyer's service provider with five
(5) units of Product at all times, without cost to Buyer, in
order to deliver a replacement module to an end user as
expeditiously as possible. In the event the actual failure rate
should indicate a need for such supply to be increased or
decreased, Buyer and Seller will reasonably negotiate an
appropriate adjustment to this provision.
Initial /s/ BRP
-------------
Seller Buyer
<PAGE> 1
EXHIBIT 10.10
LEASE AGREEMENT
BASIC LEASE INFORMATION
LEASE DATE: August 29, 1994
LESSOR: Principal Mutual Life Insurance Company
LESSOR'S ADDRESS: 711 High Street
Des Moines, IA 50309
LESSEE: RASTERGRAPHICS, A California Corporation
LESSEE'S ADDRESS: 285 N. Wolfe Road
Sunnyvale, California 94086
LOT: The tax parcel on which the Building is
located.
PREMISES: Approximately 60,060 square feet as
shown on Exhibit A.
PREMISES ADDRESS: BUILDING: 3025 Orchard Parkway, San
Jose, California
LOT:
TAX PARCEL # 097-12-128
PARK: 3041 and 3025 Orchard Parkway, San
Jose, California
TERM: January 1, 1995 ("Commencement Date"),
through December 31, 2001.
BASE RENT: See Addendum I
SECURITY DEPOSIT: $45,645.60
LESSEE'S SHARE OF OPERATING EXPENSE: 100%
LESSEE'S SHARE OF TAX EXPENSE: 100%
LESSEE'S SHARE OF UTILITY EXPENSES: 100%
PERMITTED USES: Sales, engineering, assembly, service
and distribution of electronic printers
and other legally related office uses.
INSURANCE AMOUNT: Bodily injury limit of not less than
$1,000,000 per occurrence. Property
damage limit of not less than $1,000,000
per occurrence. With $2,000,000 general
aggregate and $3,000,000 umbrella
policies.
PARKING SPACES: Approximately Two Hundred Thirty One
(231) auto parking stalls.
EXHIBITS: Exhibit A - Premises
Exhibit B - Tenant Improvements
Exhibit C - Rules and Regulations
Exhibit D - CC&Rs
Exhibit E - Commencement Date Memorandum
Exhibit F - Sample From Tenant Estoppel
Certificate
ADDENDA: Addendum I: Adjustments to Rent
<PAGE> 2
LEASE AGREEMENT
DATE: This Lease is made and entered into as of the Lease Date defined on
Page 1. The Basic Lease information set forth on Page 1 and this Lease
are and shall be construed as a single instrument.
1. PREMISES: Lessor hereby leases to Lessee upon the terms and conditions
contained herein the Premises.
2. ADJUSTMENT OF COMMENCEMENT DATE: If Lessor cannot deliver possession of
the Premises on the Commencement Date, Lessor shall not be subject to
any liability nor shall the validity of the Lease be affected; provided
the Lease term and the obligation to pay Rent shall commence on the
date possession is tendered and the termination date shall be extended
by a period of time equal to the period computed from the Commencement
Date to the date possession is tendered. In the event that Lessor
permits Lessee to occupy the Premises prior to the Commencement Date,
such occupancy shall be subject to all the provisions of this Lease.
The Commencement Date shall not be adjusted for delays in the
installation of the elevator. If however, the elevator is not
operational by January 22, 1995, then Lessor, at Lessor's sole cost,
shall provide forklift access to the second floor of the Premises until
the elevator is operation. The Lessee shall have the right to terminate
this Lease if the improvements are delayed, by no fault of Lessee, for
more than ninety (90) days after January 1, 1995.
3. RENT: Lessee agrees to pay Lessor, without prior notice or demand, the
Base Rent described on Page 1, payable in advance at Lessor's address
shown on Page 1 on the first day of each month throughout the term of
the Lease. In addition to the Rent set forth on Page 1, Rent also
includes Lessee's share of Operating Expenses and Tax Expenses and
Utilities as specified in Paragraph 6.A., 6.B., and 7, of this Lease,
and the term "Rent" whenever used herein refers to all these amounts.
4. SECURITY DEPOSIT: Upon Lessee's execution of this Lease, Lessee shall
deposit with Lessor as a Security Deposit for the performance by Lessee
of its obligations under this Lease the amount described on Page 1. If
Lessee is in default, Lessor may use the Security Deposit, or any
portion thereof, to cure the default or to compensate Lessor for all
damage sustained by Lessor resulting from Lessee's default. Lessee
shall immediately on demand pay to Lessor a sum equal to the portion of
the Security Deposit so applied so as to maintain the Security Deposit
in the sum initially deposited with Lessor. As soon as practicable, but
in no event later than thirty (30) days after the termination of this
Lease, Lessor shall return the Security Deposit to Lessee, less such
amounts as are reasonably necessary to remedy Lessee's defaults. Lessor
shall not be required to keep the Security Deposit separate from other
funds, and, unless otherwise required by law, Lessee shall not be
entitled to interest on the Security Deposit.
5. TENANT IMPROVEMENTS: Lessor shall install The improvements ("Tenant
Improvements") on the Premises as described and in accordance with the
criteria set forth in Exhibit B, attached and incorporated herein by
this reference.
6. EXPENSES:
a. OPERATING EXPENSES: In addition to the Rent set forth in
Paragraph 3, Lessee shall pay its share, which is defined on
Page 1, of all operating expenses. "Operating Expenses" are
defined as the total amounts paid or payable by the Lessor
during and/or with respect to this Lease Term, and as such
term may be amended in connection with the ownership,
maintenance, repair and operation of the Premises, the
Building and the Lot, or where applicable, of the Park
referred to on Page 1. These Operating Expenses may include,
but are not limited to:
i. Lessor's cost of non-structural repairs to and
maintenance of the roof and exterior walls of the
Building;
ii. Lessor's cost of maintaining the outside paved area,
landscaping and other common areas for the Park;
-2-
<PAGE> 3
iii. Lessor's annual cost of all risk and other insurance
including earthquake endorsements for the Building
and the Lot and rental loss insurance;
iv. Lessor's cost of modifications to the Building
occasioned by any rules, laws or regulations
effective subsequent to the commencement of the
Lease;
v. Lessor's cost of modifications to the Building
occasioned by any rules, laws or regulations arising
from Lessee's use of the Premises regardless of when
such rules, laws or regulations became effective;
vi. Lessee shall directly pay the cost of preventative
maintenance contracts including, but not limited to,
contracts for elevator systems and heating,
ventilation and air conditioning systems, with
bi-monthly service, with Lessor having the right to
audit the work performed on a quarterly basis and
perform work if maintenance is not adequately
performed by Lessee, with such costs included in
operating costs;
vii. Lessor's cost of security and fire protection
services for the Project, if in Lessor's sole
discretion such services are provided; and
viii. As compensation to Lessor for accounting and
management services rendered, an additional amount
equal to five percent (5%) of the sum of (i) the
total cost and expenses described in Paragraphs 6.A.
above and 6.B. below excluding property tax expenses
and insurance expenses with evidence supplied to
Landlord's property manager that such expenses have
been paid, and (ii) all common area utility costs for
the Project.
ix. Capital Equipment greater than five thousand
($5,000.00) dollars shall be amortized over their
useful life, but in no event longer than 10 years,
and that monthly amortization shall be added to the
Base Rent.
x. Operating expenses shall not include any costs
associated with environmental remediation work prior
to Lessee's occupancy or currently under the
Premises.
The costs in items iv and v above shall be amortized into the
Lease based upon generally accepted accounting principals
b. TAX EXPENSES: In addition to the Rent set forth in Paragraph
3. Lessee shall pay its share, which is defined on Page 1, of
all real property taxes applicable to the land and
improvements included within the Lot. The term "Tax Expense"
includes any form of tax and assessment (general, special,
ordinary or extraordinary), commercial rental tax, payments
under any improvement bond or bonds, license, rental tax,
transaction tax, levy, or penalty imposed by authority having
the direct or indirect power of tax (including any city,
county, state or federal government, or any school,
agricultural, lighting, drainage or other improvement district
thereof) as against any legal or equitable interest of Lessor
in the Premises, Lot or Park, as against Lessor's right to
rent or other income therefrom, or as against Lessor's
business of leasing the Premises or the occupancy of Lessee or
any other tax, fee, or excise, however described, other than
income, inheritance or estate taxes, including any value added
tax, or any tax imposed in substitution, partially or totally,
of any tax previously included within the definition of real
property taxes, or any additional tax the nature of which was
previously included within the definition of real property
tax.
c. PAYMENT OF EXPENSES: Lessor shall estimate the Operating
Expense and Tax Expense for the calendar year in which the
Lease commences. Commencing on the Commencement Date,
one-twelfth (1/12th) of this estimate shall be paid by Lessee
to Lessor on the first day of each month of the remaining
months of the calendar year. Thereafter, Lessor may estimate
such expenses as of the beginning of each calendar year and
require Lessee to pay one-twelfth (1/12th) of such
-3-
<PAGE> 4
estimated amount as additional Rent hereunder on the first day
of each month. Not later than March 31 of the following
calendar year, or as soon thereafter as reasonably possible,
including the year following the year in which this Lease
terminates, Lessor shall endeavor to furnish Lessee with a
true and correct accounting of actual Operating Expenses and
Tax Expenses, and within thirty (30) days of Lessor's delivery
of such accounting, Lessee shall pay to Lessor, the amount of
any underpayment. Notwithstanding the foregoing, failure by
Lessor to give such accounting by such date shall not
constitute a waiver of Lessor of its right to collect Lessee's
share of any underpayment. Lessor shall credit the amount of
any overpayment by Lessee toward the next estimated monthly
installment(s) falling due, or where the term of the Lease has
expired, refund the amount of overpayment to Lessee.
7. UTILITIES: Lessee shall pay the cost of all water, sewer use and
connection fees, gas, heat, electricity, telephone and other utilities
billed or metered separately to Lessee. For utility fees or use charges
that are not billed separately to Lessee, Lessee shall pay the amount
which is attributable to Lessee's use of the Premises. In addition,
Lessee shall within fifteen (15) days after receiving a bill from
Lessor pay Lessor its share, which is described on Page 1, of any
common area utility costs.
8. LATE CHARGES: Lessee acknowledges that late payment by Lessee to Lessor
of Rent, Lessee's share of Operating Expenses, Tax Expenses, utility
costs or other sums due hereunder, will cause Lessor to incur costs not
contemplated by this Lease and the exact amount of such costs are
extremely difficult and impracticable to fix. Such costs, include
without limitation, processing and accounting charges, and late charges
that may be imposed on Lessor by the terms of any note secured by any
encumbrance against the Premises. Therefore, if any installment of Rent
or other sums due from Lessee is not received by Lessor within five (5)
days of the date due, Lessee shall pay to Lessor a sum equal to five
percent (5%) of such overdue amount as a late charge. The parties agree
that this late charge represents a fair and reasonable estimate of the
costs that Lessor will incur by reason of late payment by Lessee.
Acceptance of any late charge shall not constitute a waiver of Lessee's
default with respect to the overdue amount, nor prevent Lessor from
exercising any of the other rights and remedies available to Lessor.
9. USE OF PREMISES: The Premises are to be used for the uses stated on
Page 1 and for no other purposes without Lessor's prior written
consent.
Lessee shall not do or permit anything to be done in or about the
Premises nor keep or bring anything therein which will in any way
increase the existing rate of or affect any policy of fire or other
insurance upon the Building or any of its contents, or cause a
cancellation of any insurance policy. Lessee shall not do or permit
anything to be done in or about the Premises which will in any way
allow the Premises to be used for any improper, immoral, unlawful or
objectionable purpose, nor shall Lessee cause, maintain or permit any
nuisance in, on or about the Premises. Lessee shall not damage or
deface or otherwise commit or suffer to be committed any waste in or
upon the Premises. Lessee shall honor the terms of all recorded
covenants, conditions and restrictions relating to the property on
which the Premises are located as noted in Exhibit D. Lessee shall
honor the rules and regulations attached to and made a part of this
Lease and any other reasonable regulations of the Lessor related to
parking and the operation of the Building.
10. ALTERATIONS AND ADDITIONS: Lessee shall not install any signs, fixtures
or improvements to the Premises without the prior written consent of
Lessor which consent shall not be unreasonably withheld or delayed
beyond ten (10) working days. Lessee shall keep the Premises and the
property on which the Premises are situated free from any liens arising
out of any work performed, materials furnished or obligations incurred
by or on behalf of Lessee. As a condition to Lessor's consent to the
installation of any fixtures or improvements, Lessor may require Lessee
to post a completion bond for up to 150% of the cost of the work. Upon
termination of this Lease, Lessee shall remove all signs, fixtures,
furniture and furnishings and if requested by Lessor, remove any
improvements made by Lessee, and repair any damage caused by the
installation or removal of such signs, fixtures, furniture, furnishings
and improvements and leave Premises in as good condition as they were
in at the time of the commencement of this Lease, excepting for
reasonable wear and tear. At the time Lessee notifies Lessor of any
Alterations and
-4-
<PAGE> 5
Additions, Lessor shall notify Lessee of the improvements which Lessor
will require to be removed at the expiration of this Lease.
11. REPAIRS AND MAINTENANCE: Lessee shall, at Lessee's sole cost and
expense, maintain the Premises and adjacent areas in good, clean and
safe condition and repair to the reasonable satisfaction of the Lessor
any damage caused by Lessee or its employees, agents, invitees,
licensees or contractors. Without limiting the generality of the
foregoing, and within the interior of space, Lessee shall be solely
responsible for maintaining and repairing all plumbing, electrical
wiring and equipment, lighting, and interior walls. Lessor may repair
the heating, ventilation and air conditioning systems as deemed
necessary by Lessor and Lessee shall pay the cost of such repairs if
Lessee has not completed such repairs as deemed necessary by Lessor
within at least thirty (30) days from written notice.
Except for repairs rendered necessary by the negligence of Lessee, its
agents, customers, employees and invitees, Lessor agrees, at Lessor's
sole cost and expense, to keep in good repair the structural portions
of the roof, foundations and exterior walls of the Premises (exclusive
of glass and exterior doors), and underground utility and sewer pipes
outside the exterior wails of the Building.
Except for normal maintenance and repair of the items outlined above,
Lessee shall have no right of access to or install any device on the
roof of the Building nor make any penetrations of the roof of the
Building without the express prior written consent of Lessor.
12. INSURANCE: Lessee shall at all times during the term of this Lease, and
at its sole cost and expense, maintain workers compensation insurance
and comprehensive general liability insurance against liability for
bodily injury and property damage with liability limits as set forth on
Page 1 with such insurance naming Lessor and Owner as an additional
insured and including such endorsements as may be commercially
available and reasonably required by Lessor. In no event shall the
limits of said policy or policies be considered as limiting the
liability of Lessee under this Lease.
All insurance shall be with companies licensed to do business with the
Insurance Commissioner of the State of California. A certificate of all
such insurance shall be delivered to the Lessor prior to the
Commencement Date of this Lease, and annually thereafter over the term
of the Lease, which shall certify that the policy names Lessor and the
Owner as an additional insured and that the policy shall not be
canceled or altered without thirty (30) days prior written notice to
Lessor.
13. LIMITATION OF LIABILITY AND INDEMNITY: Except for damage resulting from
the active negligence or willful misconduct of Lessor or its authorized
representatives, Lessee agrees to save and hold Lessor harmless and
indemnify Lessor from and against all liabilities, charges and expenses
(including reasonable attorneys' fees, costs of court and expenses
necessary in the prosecution or defense of any litigation) by reason of
injury to person or property, from whatever cause, while in or on the
Premises, or in any way connected with the Premises or with the
improvements or personal property therein, including any liability for
injury to person or property of Lessee, its agents or employees or
third party persons.
14. ASSIGNMENT AND SUBLEASING: Lessee shall not assign or transfer this
Lease nor sublet all or any portion of the Premises without the written
consent of Lessor, which shall not be unreasonably withheld. If Lessee
seeks to sublet or assign all or any portion of the Premises, a copy of
the proposed sublease or assignment agreement and all agreements
collateral thereto, shall be delivered to Lessor at least twenty one
(21) days prior to the commencement of the sublease or assignment (the
"Proposed Effective Date"). In the event the sublease (1) by itself or
taken together with prior sublease(s) covers or totals, as the case may
be, more than fifty percent (50%) of the rentable square feet of the
Premises or (2) is for a term which by itself or taken together with
prior or other subleases is greater than fifty percent (50%) of the
period remaining in the term of this Lease as of the time of the
Proposed Effective Date, then Lessor shall have the right, to be
exercised by giving written notice to Lessee, to recapture the space
described in the sublease. If such recapture notice is given, it shall
serve to
-5-
<PAGE> 6
terminate this Lease with respect to the proposed sublease space, or,
if the proposed sublease space covers all the Premises, it shall serve
to terminate the entire term of this Lease, in either case as of the
Proposed Effective Date. However, no termination of this Lease with
respect to part or all of the Premises shall become effective without
the prior written consent, where necessary, of the holder of each deed
of trust encumbering the Premises or any part thereof. If this Lease is
terminated pursuant to the foregoing with respect to less than the
entire Premises, the Rent shall be adjusted on the basis of the
proportion of square feet retained by Lessee to the square feet
originally demised and this Lease as so amended shell continue
thereafter in full force and effect, except where the Lease has been
terminated by Lessor under this Paragraph 14. Each permitted assignee
or sublessee shall assume and be deemed to assume this Lease and shall
be and remain liable jointly and severally with Lessee for payment of
Rent and for the due performance of, and compliance with all the terms,
covenants, conditions and agreements herein contained on Lessee's part
to be performed or complied with, for the term of this Lease. In the
event of any sublease or assignment of all or any portion of the
Premises where the Rent reserved in the sublease or assignment exceeds
the Rent or pro rata portion of the Rent, as the case may be, for such
space reserved in the Lease, Lessee shall pay the Lessor monthly, as
additional Rent, at the same time as the monthly installments of Rent
hereunder, one-half (1/2) of the excess of the Rent reserved in the
sublease over the Rent reserved in this Lease applicable to the
sublease space.
15. SUBROGATION: Subject to the approval of their respective insurers,
Lessor and Lessee hereby mutually waive their respective rights of
recovery against each other from any insured loss. Each party shall
obtain any special endorsements, if required by their insurer, to
evidence compliance with the aforementioned waiver.
16. AD VALOREM TAXES: Lessee shall pay before delinquent all taxes assessed
against the personal property of the Lessee and all taxes attributable
to any leasehold improvements made by Lessee.
17. RIGHT OF ENTRY: Lessee grants Lessor or its agents the right to enter
the Premises at all reasonable times for purposes of inspection,
exhibition, repair and alteration. Lessor shall at all times have and
retain a key with which to unlock all the doors in, upon and about the
Premises, excluding Lossee's vaults and safes, and Lessor shall have
the right to use any and all means Lessor deems necessary to enter the
Premises in an emergency. Lessor shall also have the right to place
"for rent" and/or "for sale" signs on the outside of the Premises.
Lessee hereby waives any claim from damages or for any injury or
inconvenience to or interference with Lessee's business, or any other
loss occasioned thereby except for any claim for any of the foregoing
arising out of the negligent acts or omissions of Lessor or its
authorized representatives.
18. ESTOPPEL CERTIFICATE: Lessee shall execute and deliver to Lessor, upon
not less than five (5) days prior written notice, a statement in
writing certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification) and
the date to which the Rent and other charges are paid in advance, if
any, and acknowledging that there are not, to Lossee's knowledge, any
uncured defaults on the part of Lessor hereunder or specifying such
defaults as are claimed. Any such statement may be conclusively relied
upon by any prospective purchaser or encumbrancer of the Premises.
Lessee's failure to deliver such statement within such time shall be
conclusive upon the Lessee that (1) this Lease is in full force and
effect, without modification except as may be represented by Lessor;
(2) there are no uncured defaults in the Lessor's performance; and (3)
not more than one month's rent has been paid in advance.
19. LESSEE'S DEFAULT: The occurrence of any one or more of the following
events shall constitute a default and breach of this Lease by Lessee:
a. The vacation or abandonment of the Premises by the Lessee.
b. The failure by Lessee to make any payment of Rent or any other
payment required hereunder the date said payment is due.
-6-
<PAGE> 7
c. The failure of Lessee to observe, materially perform or comply
with any of the conditions or provisions of this Lease for a
period, unless otherwise noted heroin, of ten (10) days after
written notice.
d. The Lessee becoming the subject of any bankruptcy (including
reorganization or arrangement proceedings pursuant to any
bankruptcy act) or insolvency proceeding whether voluntary or
involuntary when such bankruptcy has not been withdrawn within
thirty (30) days.
e. The Lessee using or storing Hazardous Materials on the
Premises other than as permitted by the provisions of
Paragraph 29 below.
20. REMEDIES FOR LESSEE'S DEFAULT: In the event of Lossee's default or
breach of the Lease, Lessor may terminate Lessee's right to possession
of the Premises by any lawful means in which case this Lease shall
terminate and Lessee shall immediately surrender possession of the
Premises to Lessor. In addition, the Lessor shall have the immediate
right of re-entry, and if this right of re-entry is exercised following
abandonment of the Premises by Lessee, Lessor may consider any personal
property belonging to Lessee and left on the Premises to also have been
abandoned.
If Lessee breaches this Lease and abandons the property before the end
of the term, or if Lessee's right to possession is terminated by Lessor
because of a breach of the Lease, then in either such case, Lessor may
recover from Lessee all damages suffered by Lessor as a result of
Lossee's failure to perform its obligations hereunder, including, but
not restricted to, the worth at the time of the award (computed in
accordance with Paragraph (3) of Subdivision (a) of Section 1951.2 of
the California Civil Code) of the amount by which the Rent then unpaid
hereunder for the balance of the Lease term exceeds the amount of such
loss of Rent for the same period which the Lessee proves could be
reasonably avoided by Lessor and in such case, Lessor prior to the
award, may relet the Premises for the purpose of mitigating damages
suffered by Lessor because of Lessee's failure to perform its
obligations hereunder; provided, however, that even though Lessee has
abandoned the Premises following such breach, this Lease shall
nevertheless continue in full force and effect for as long as the
Lessor does not terminate Lossee's right of possession, and until such
termination, Lessor may enforce all its rights and remedies under this
Lease, including the right to recover the Rent from Lessee as it
becomes due hereunder. The "worth at the time of the award" within the
meaning of Subparagraphs (a)(1) and (a)(2) of Section 1951.2 of the
California Civil Code shall be computed by allowing interest at the
rate of ten percent (10%) per annum.
The foregoing remedies are not exclusive; they are cumulative in
addition to any remedies now or later allowed by law or to any
equitable remedies Lessor may have, and to any remedies Lessor may have
under bankruptcy laws or laws affecting creditor's rights generally.
The waiver by Lessor of any breach of any term of this Lease shall not
be deemed a waiver of such term or of any subsequent breach thereof.
21. HOLDING OVER: If Lessee holds possession of the Premises after the term
of this Lease with Lessor's consent, Lessee shall become a tenant from
month to month upon the terms specified at a monthly Rent of 125% of
the Rent due on the last month of the Lease term, payable in advance on
or before the first day of each month. All options, if any, granted,
under the terms of this Lease shall be deemed terminated and be of no
effect during said month to month tenancy. Lessee shall continue in
possession (as a tenant at sufferance) until such tenancy shall be
terminated by either Lessor or Lessee giving written notice of
termination to the other party at least thirty (30) days prior to the
effective date of termination.
22. LESSOR'S DEFAULT: Lessee agrees to give any holder of a deed of trust
encumbering the Premises ("Trust Deed Holders"), by certified mail, a
copy of any notice of default served upon the Lessor by Lessee,
provided that prior to such notice Lessee has been notified in writing
(by way of Notice of Assignment of Rents and Leases, or otherwise) of
the address of such Trust Deed Holder. Lessee further agrees that if
Lessor shall have failed to cure such default within the time, if any,
provided for in this Lease, then the Trust Deed Holders shall have an
additional thirty (30) days within which to cure such
-7-
<PAGE> 8
default or if such default cannot be cured within that time, then such
additional time as may be necessary, if within such thirty (30) days,
the Trust Deed Holder has commenced and is diligently pursuing the
remedies necessary to cure such default (including but not limited to
commencement of foreclosure proceedings, if necessary to effect such
cure), in which event this Lease shall not be terminated while such
remedies are being so diligently pursued.
23. PARKING: Lessee shall have the use of the number of undesignated
parking spaces set forth on Page 1. Lessor shall exercise its best
efforts to insure that such spaces are available to Lessee for its use,
but Lessor shall not be required to enforce Lossee's right to use the
same.
24. SALE OF PREMISES: In the event of any sale of the Premises by Lessor,
Lessor shall be and is hereby released from its obligation to perform
under this Lease; and the purchaser, at such sale or any subsequent
sale of the Premises shall be deemed, without any further agreement
between the parties or their successors in interest or between the
parties and any such purchaser, to have assumed and agreed to carry out
any and all of the covenants and obligations of the Lessor under this
Lease.
25. WAIVER: No delay or omission in the exercise of any right or remedy of
Lessor on any default by Lessee shall impair such a right of remedy or
be construed as a waiver.
The subsequent acceptance of Rent by Lessor after breach by Lessee of
any covenant or term of this Lease shall not be deemed a waiver of such
breach, other than a waiver of timely payment for the particular Rent
payment involved, and shall not prevent Lessor from maintaining an
unlawful detainer or other action based on such breach.
No payment by Lessee or receipt by Lessor of a lesser amount than the
monthly Rent and other sums due hereunder shall be deemed to be other
than on account of the earliest Rent or other sums due, nor shall any
endorsement or statement on any check or accompanying any check or
payment be deemed an accord and satisfaction; and Lessor may accept
such check or payment without prejudice to Lessor's right to recover
the balance of such Rent or other sum or pursue any other remedy
provided in this Lease.
26. CASUALTY DAMAGE: If the Premises or any part thereof shall be damaged
by fire or other casualty, Lessee shall give prompt written notice
thereof to Lessor. In case the Building shall be so damaged by fire or
other casualty that substantial alteration or reconstruction of the
Building shall, in Lessor's sole opinion, be required (whether or not
the Premises shall have been damaged by such fire or other casualty),
Lessor may, at its option, terminate this Lease by notifying Lessee in
writing of such termination within sixty (60) days after the date of
such damage, in which event the Rent shall be abated as of the date of
such damage. If Lessor does not elect to terminate this Lease, Lessor
shall within sixty (60) days after the date of such damage commence to
repair and restore the Building and shall proceed with reasonable
diligence to restore the Building (except that Lessor shall not be
responsible for delays outside its control) to substantially the same
condition in which it was immediately prior to the happening of the
casualty, except that Lessor shall not be required to rebuild, repair
or replace any part of Lessee's furniture, furnishings or fixtures and
equipment removable by Lessee or any improvements installed by Lessee
under the provisions of this Lease. If more than fifty (50%) of the
Premises are damaged by fire or other casualty as reasonably determined
by Lessor and the Premises cannot be restored within one hundred eighty
(180) days after the date of such damage, then Lessee, at its option,
may terminate this Lease. Lessor shall not in any event be required to
spend for such work an amount in excess of the insurance proceeds
actually received by Lessor as a result of the fire or other casualty.
Lessor shall not be liable for any inconvenience or annoyance to
Lessee, injury to the business of Lessee, loss of use of any part of
the Premises by the Lessee or less of Lessee's personal property
resulting in any way from such damage or the repair thereof, except
that, subject to the provisions of the next sentence, Lessor shall
allow Lessee a fair diminution of Rent during the time and to the
extent the Premises or portion of the Premises are unfit for occupancy.
During any period that Base Rent payable hereunder is abated or
reduced, Lessee's obligation to pay its proportionate share of
operating expenses, tax expenses, and utilities shall be similarly
abated or reduced. If the Premises or any other portion of the Building
be damaged by fire or other casualty resulting from the fault or
negligence of Lessee or any of Lessee's agents, employees, or invitees,
the Rent
-8-
<PAGE> 9
shall not be diminished during the repair of such damage and Lessee
shall be liable to Lessor for the cost and expense of the repair and
restoration of the Building caused thereby to the extent such cost and
expense is not covered by insurance proceeds.
Except as otherwise provided in this Paragraph 27., Lessee hereby
waives the provisions of Sections 1932(2.), 1933(4.), 1941 and 1942 of
the California Civil Code.
27. CONDEMNATION: If twenty-five percent (25%) or more of the Premises is
taken for any public or quasi-public purpose of any lawful government
power or authority or sold to a governmental entity to prevent such
taking, the Lessee or the Lessor may terminate this Lease as of the
date when physical possession of the Premises is taken by the taking
authority. Lessee shall not because of such taking assert any claim
against the Lessor or the taking authority for any compensation because
of such taking, and Lessor shall be entitled to receive the entire
amount of any award without deduction for any estate of interest or
interest of Lessee. If a twenty five percent (25%) or more of the
Building or the Lot is so taken, Lessor at its option may terminate
this Lease. If Lessor does not elect to terminate this Lease, Lessor
shall, if necessary, promptly proceed to restore the Premises or the
Building to substantially its same condition prior to such partial
taking, allowing for the reasonable effects of such taking, and a
proportionate allowance shall be made to Lessee for the Rent
corresponding to the time during which, and to the part of the Premises
of which, Lessee is deprived on account of such taking and restoration.
Lessor shall not be required to spend funds for restoration in excess
of the amount received by Lessor as compensation awarded.
28. HAZARDOUS MATERIALS: Subject to the remaining provisions of this
paragraph, Lessee shall be entitled to use and store only those
Hazardous Materials (defined below), that are necessary for Lessee's
business, provided that such usage and storage is in full compliance
with all applicable local, state and federal statutes, orders,
ordinances, rules and regulations (as interpreted by judicial and
administrative decisions). Lessor shall have the right at all times
during the term of this Lease to (i) inspect the Premises, (ii) conduct
tests and investigations to determine whether Lessee is in compliance
with the provisions of this paragraph, and (iii) request lists of all
Hazardous Materials used, stored or located on the Premises; the cost
of all such inspections, tests and investigations to be borne by
Lessee, if Lessor reasonably believes they are necessary. Lessee shall
give to Lessor immediate verbal and follow-up written notice of any
spills, releases or discharges of Hazardous Materials on the Premises,
or in any common areas or parking lots (if not considered part of the
Premises), caused by the acts or omissions of Lessee, or its agents,
employees, representatives, invitees, licensees, subtenants, customers
or contractors. Lessee covenants to investigate, clean up and otherwise
remediate any spill, release or discharge of Hazardous Materials caused
by the acts or omissions of Lessee, or its agents, employees,
representatives, invitees, licensees, subtenants, customers or
contractors at Lossee's cost and expense; such investigation, clean up
and remediation to be performed after Lessee has obtained Lessor's
written consent, which shall not be unreasonably withheld; provided,
however, that Lessee shall be entitled to respond immediately to an
emergency without first obtaining Lessor's written consent. Lessee
shall indemnify, defend and hold Lessor harmless from and against any
and all claims, judgments, damages, penalties, fines, liabilities,
losses, suits, administrative proceedings and costs (including, but not
limited to, attorneys' and consultant fees) arising from or related to
the use, presence, transportation, storage, disposal, spill, release or
discharge of Hazardous Materials on or about the Premises caused by the
acts or omissions of Lessee, its agents, employees, representatives,
invitees, licensees, subtenants, customers or contractors. Lessee shall
not be entitled to install any tanks under, on or about the Premises
for the storage of Hazardous Materials without the express written
consent of Lessor, which may be given or withheld in Lessor's sole
discretion. As used herein, the term Hazardous Materials shall mean (i)
any hazardous or toxic wastes, materials or substances, and other
pollutants or contaminants, which are or become regulated by all
applicable local, state and federal laws; (ii) petroleum; (iii)
asbestos; (iv) polychlorinated biphenyls; and (v) radioactive
materials. The provisions of this paragraph shall survive the
termination of this Lease.
Lesser warrants that to the best of its knowledge, based on a Level 1
Environmental Assessment dated July 19, 1993 by E2C, Inc. (Job
No.1770600) there are no Hazardous Materials on the Premises prior to
the Lessee's occupancy.
-9-
<PAGE> 10
Lessor further warrants, to the best of its knowledge, that since
October 20, 1993, no Hazardous Materials have been used or placed on or
about the Premises, and that no action, proceeding, or claim is pending
or threatened concerning the Premises or the Park concerning any
Hazardous Material or pursuant to any environmental law.
Lesser shall indemnify Lessee from and against any and all costs and
expenses actually incurred by Lessee and paid to unaffiliated third
parties which costs and expenses are required to be expended by Lessee
pursuant to the terms of a final clean up order issued by a government
entity having jurisdiction, which final clean up order requires Lessee
to clean up or remediate a release, spill or discharge of Hazardous
Materials on the Premises, Building or Lot, to the extent such clean up
or remediation results from (i) the acts or omissions of Lessor; or
(ii) as a result of Hazardous Materials known to Lessor to exist on or
under the Premises, the Buildings, or the Lot, prior to the date of
this Lease. This indemnity by Lessor shall not include any costs of
defense of Lessee, any third party claims or recovery against Lessee,
and damages or injuries to property, person or natural resources, or
any costs or expenses not required by the final clean up order. This
indemnity by Lessor shall not be construed to create an independent
obligation for Lessor to perform or pay for any remediation or clean up
over and above what Lessor would otherwise be required to perform by
law following a final adjudication of said matter.
Notwithstanding the foregoing, but subject to Paragraph 31(d), nothing
in this Lease shall impair Lessee's right at law or in equity against
Lessor or third parties with respect to Hazardous Materials.
29. ENVIRONMENTAL DISCLOSURE AND CERTIFICATION STATEMENT: Prior to the
commencement of this Lease, within thirty (30) days after the execution
of this Lease and annually on the anniversary of the execution of the
Lease (each such date being hereinafter referred to as a "Disclosure
Date"), Lessee shall disclose and certify to Lessor in writing (the
"Environmental Disclosure and Certification Statement") the names and
amounts of all Hazardous Materials (other than general office supplies
which are being stored for future use or used on the Premises in such
quantities as do not constitute a violation of any Environmental Law
and are customarily stored or used in commercial industrial buildings
in Santa Clara County, California) which are on each Disclosure Date,
used, generated, treated, handled, stored or disposed of at, on, about
or below the Premises. The Environmental Disclosure and Certification
Statement shall also include information on storage locations, methods,
permits required, discharge points and waste streams of Hazardous
Materials.
30. FINANCIAL STATEMENTS: Within ten (10) days after Lessor's request
Lessee shall deliver to Lessor the then current audited financial
statements of Lessee (including interim periods following the end of
the last fiscal year for which annual statements are available) which
statements shall be prepared or compiled by a certified public
accountant and shall present fairly the financial condition of Lessee
at such dates and the result of its operations and changes in its
financial positions for the periods ended on such dates. If an audited
financial statement has not been prepared, Lessee shall provide Lessor
with an unaudited financial statement and/or such other information,
the type and form of which are acceptable to Lessor in Lessor's
reasonable discretion, which reflects the financial condition of
Lessee.
31. GENERAL PROVISIONS:
a. TIME. Time is of the essence in this Lease and with respect to
each and all of its provisions in which performance is a
factor.
b. SUCCESSORS AND ASSIGNS. The covenants and conditions herein
contained, subject to the provisions as to assignment, apply
to and bind the heirs, successors, executors, administrators
and assigns of the parties hereto.
c. RECORDATION. Lessee shall not record this Lease or a short
form memorandum hereof without the prior written consent of
the Lessor.
-10-
<PAGE> 11
d. LESSOR'S PERSONAL LIABILITY. The liability of Lessor (which,
for purposes of this Lease, shall include Lessor and the owner
of the Building if other than the Lessor) to Lessee for any
default by Lessor under the terms of this Lease shall be
limited to the actual interest of Lessor and its present or
future partners in the Building and Lessee agrees to look
solely to Lessor's or Lessor's present or future partners'
actual interest in the Building for the recovery of any
judgment against Lessor, it being intended that Lessor shall
not be personally liable for any judgment or deficiency. The
liability of Lessor under this Lease is limited to its actual
period of ownership of title to the Building, and Lessor shall
be released from liability upon transfer of title to the
Building, as long as transferee assumes the obligations of
Lessor hereunder.
e. SEPARABILITY. Any provisions of this Lease which shall prove
to be invalid, void or illegal shall in no way affect, impair
or invalidate any other provisions hereof and such other
provision shall remain in full force and effect.
f. CHOICE OF LAW. This Lease shall be governed by the laws of the
State of California.
g. ATTORNEYS' FEES. In the event any legal action is brought to
enforce or interpret the provisions of this Lease, the
prevailing party therein shall be entered to recover all costs
and expenses including reasonable attorneys' fees.
h. This Lease supersedes any prior agreements and contains the
entire agreement of the parties on matters covered. No other
agreement, statement or promise made by any party that is not
in writing and signed by all parties to this Lease shall be
binding.
i. WARRANTY OF AUTHORITY. Each person executing this agreement on
behalf of a party represents and warrants that (1) such person
is duly and validly authorized to do so on behalf of the
entity it purports to so bind, and (2) if such party is a
partnership, corporation or trustee, that such partnership,
corporation or trustee has full right and authority to enter
into this Lease and perform all of its obligations hereunder.
j. NOTICES. All notices and demands required or permitted to be
sent to the Lessor or Lessee shall be in writing and shall be
sent by United States mail, postage prepaid, certified or by
personal delivery or by overnight courier, or facsimile
addressed to Lessor c/o Tarlton Properties Inc., (Property
Manager) 300 Second Street, Suite 109, Los Altos, CA 94022, or
to Lessee at the Premises, or to such other place as such
party may designate in a notice to the other party given as
provided herein. Notice shall be deemed given upon the earlier
of actual receipt or the third day following deposit in the
United States mail.
k. INTERLINEATION. The use of any underlining or strikeouts
within the Lease is to distinguish modifications made to the
standard lease form. No other meaning or emphasis is intended
by this use, nor should any be inferred.
32. OPTION TO EXTEND THE LEASE: Provided Lessee is not in default in the
performance of any of its obligations under the Lease, Lessee shall
have the right, at its option, to extend the term of the Lease for five
(5) years, (the "Extended Term"). The lease for the Premises during the
Extended Term shall be upon the same terms, covenants and conditions as
are set forth in the Lease, other than rent, Tenant Improvements, and
the term of the leasehold. If Lessor does not receive from Lessee
written notice of Lessee's exercise of the option one hundred and
eighty (180) days prior to the expiration of the term (the "Option
Notice"), then this option shall terminate. The monthly rent for the
Extended Term shall be the then current effective market rent, for
comparable R&D space (the "Fair Rental Value") to be determined as set
forth below. The Fair Rental Value shall not include tenant improvement
value that Lessee may add to the Premises during its occupancy. Said
case shall only take place if specific improvements can be pointed to
as Lessee's own improvements. Upon determination of the rent for the
Extended Term pursuant to the terms outlined above, the parties shall
immediately execute an amendment to the Lease stating the minimum
monthly rent for the Extended Term. Lessee shall have no other right to
extend the
-11-
<PAGE> 12
term of the Lease unless Lessor and Lessee otherwise agree in writing.
This option is personal to Lessee and may not be assigned, voluntarily
or involuntarily, separate from or as part of the Lease except in
connection with an assignment of the Lease not requiring Lessor's
consent pursuant to paragraph 14 above. Any assignment shall not, in
any way affect or limit the liability of Lessee pursuant to the Lease.
Notwithstanding the timely giving of the Option Notice, if Lessee is in
default of any provisions of the Lease on the date of commencement of
the Extended Term, at Lessor's option, all rights of Lessee under this
option shall terminate and be of no force and effect.
Lessor and Lessee shall attempt, in good faith, to agree on the Fair
Rental Value for the premises as used or permitted to be used by Lessee
as of the commencement of the extended term(s). If the parties cannot
agree within thirty days from the Option Notice either the option
terminates or the parties agree that, then the Fair Rental Value shall
be determined by an appraisal to be conducted as follows: each party
shall appoint a real estate appraiser, who shall be a member of the
American Institute of Real Estate Appraisers and who has at least five
(5) years experience appraising R & D and office space located in the
vicinity of the Premises. If the two appraisers are not able to agree
on the fair market rental within fifty (50) days after the Option
Notice, the appraisers shall select a third appraiser with the
qualifications set forth above, who shall, within ten (10) days, choose
one or the other appraisals conducted by Lessors and Lessees appraisers
as Fair Rental Value.
33. SUBORDINATION: Subject to Lessee's receipt of a commercially reasonable
non-disturbance agreement, and without the necessity of any additional
document being executed by Lessee for the purpose of effecting a
subordination, and at the election of Lessor or any bona fide mortgagee
or deed of trust beneficiary with a lien on all or portion of the
Premises or any ground lessor with respect to the Project and/or
Building, this Lease shall be subject to and subordinate at all times
to:
(a) all ground leases or underlying leases which may now exist or
hereafter be executed affecting the Building or the land upon
which the Building is situated or both, and
(b) the lien of any mortgage or deed of trust which may now exist
or hereafter be executed in any amount for which the Building,
land, ground leases or underlying leases, or Lessor's interest
or estate in any of said items is specified as security.
Notwithstanding the foregoing, Lessor shall have the right to
subordinate or cause to be subordinated any such ground leases or
underlying leases or any such liens to this Lease. In the event that
any ground lease or underlying lease terminates for any reason or any
mortgage or deed of trust is foreclosed or a conveyance in lieu of
foreclosure is made for any reason, Lessee shall, notwithstanding any
subordination, attorn to and become the Lessee of the successor in
interest to Lessor; provided, however, such lessor or lender shall
deliver to Lessee a commercially reasonable non-disturbance agreement
stating that Lessee's possession shall not be disturbed. Lessee
covenants and agrees to execute and deliver, upon Lessee's receipt of
such commercially reasonable non-disturbance agreement and upon demand
by Lessor and in the form reasonably requested by Lessor, any
additional documents evidencing the priority or subordination of this
Lease with respect to any such ground leases or underlying leases of
the lien of any such mortgage or deed of trust. Lessee's failure to
timely execute and deliver such additional documents shall constitute
an additional default hereunder. In the event Lessor fails to deliver
to Lessee a commercially reasonably non-disturbance agreement from the
current lender of the Project prior to the Commencement Date, Lessee
shall have the right to terminate this Lease upon five (5) business
days notice to Lessor.
34. COMMENCEMENT DATE: The Lease shall commence upon the latter of
the completion of Tenant Improvements referenced the Addendum
or January 1, 1995.
-12-
<PAGE> 13
IN WITNESS WHEREOF, this Lease is executed on the date and year first
written above.
LESSEE:
Rastergraphics Incorporated
a California Corporation
By: /s/ Rastergraphics Incorporated
____________________________________ Its: President
LESSOR:
Principal Mutual Life Insurance
an Iowa Corporation
By: /s/ Principal Mutual Life Insurance
____________________________________ Its: President
-13-
<PAGE> 14
EXHIBIT A
Legal Description: All that certain real property situated in the City of San
Jose, County of Santa Clara, State of California, described as follows:
Parcel One:
All of lot 1 , as shown on that Parcel Map filed for record in the
Office of the Recorder of the County of Santa Clara, State of
California on May 2, 1985, in Book 542 of Maps, Page(s) 36 and 37.
Parcel Two:
A non-exclusive easement for vehicular ingress and egress, appurtenant
to Parcel One above, 13 feet in width adjoining the southeasterly line
of said Parcel One, as provided for in that certain reciprocal easement
agreement by and between Renco Associates, A California General
Partnership and Larry D. Russel, Et Al, recorded January 8, 1982 in
Book G543, Page 746.
<PAGE> 15
EXHIBIT B
JACK & COHEN Builders, Inc. Page 1
CONCEPTUAL BUDGET
Raster Graphics Rev. #: 7 based on DES/Raster REV of 9/14/94
3025 Orchard Parkway 9/15/94 prepared by J. Hanson/D. Ross
60,060 SF leasable
20,850 SF mfg area
<TABLE>
<CAPTION>
DIV Description Quantity Unit $/Unit TOTAL ACTUAL
- --- ----------- -------- ---- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C>
2 SITEWORK 7,035
-----------------------------------
50 demolition 445 LF 12.00 5,340 (E) walls to be removed
50 demolition 1 LS 0.00 0 in electrical scope
60 demolition, concrete 75 SF 15.00 1,125 plumbing trenches, wall cuts
70 demolition, carpet 950 SF 0.60 570
3 CONCRETE 1,875
-----------------------------------
300 in-place - patch 75 LF 25.00 1,875 trenches
300 containment curb 80 LF 0.00 0 curb @ H3 storage
4 MASONRY 0
-----------------------------------
not used 0
5 METALS 400
-----------------------------------
500 misc fabrications 1 LS 400.00 400 counter brackets, etc.
6 WOOD & PLASTICS 17,000
-----------------------------------
100 rough carpentry 1 LS 1500.00 1,500 misc blocking & bracing
100 rough carpentry 2 EA 1250.00 2,500 new exhaust openings
100 rough carpentry 2 EA 1500.00 3,000 frame openings new AC uni
200 finish carpentry 1 LS 1500.00 1,500 misc
200 finish carpentry 1 LS 2500.00 2,500 handrail modification ADA
410 casework & counters 4 EA 300.00 1,200 modify RR counters
410 casework & counters 12 LF 400.00 4,800 breakroom/coffee upper & lower+ctr
7 THERMAL & MOISTURE 2,000
-----------------------------------
500 roofing, membrane 4 EA 500.00 2,000 misc patching
8 DOORS, GLASS, HARDWARE 40,620
-----------------------------------
100 doors/frames/hdwre 8 EA 750.00 6,000 1-hr doors, 3x7
100 doors/frames/hdwre 1 EA 0.00 0 2-hr doors, pair 3x7
100 doors/frames/hdwre 3 EA 1125.00 3,375 1-hr doors, pair 6x7
100 doors/frames/hdwre 3 EA 885.00 2,655 (N) pr. standard dr/fr/hdwre
100 doors/frames/hdwre 13 EA 590.00 7,670 (N) single standard dr/fr/hdwre
100 doors/frames/hdwre 11 EA 200.00 2,200 relocated dr/frames
500 HM sidelight frames 3 EA 350.00 1,050 glazed, (4)2x7 & (1)4x7
500 HM window frames 2 EA 350.00 700 glazed, 4x4 & 3x3
710 replace (E) door
hdwre 45 EA 250.00 11,250 for ADA/T24 and function change
710 SD activated closers 1 EA 800.00 800 guess on quantity
800 storefront doors 6 EA 400.00 2,400 modify for compliance
800 glazing & mirrors 2 EA 180.00 360 ADA full height
800 glazing & mirrors 240 SF 9.00 2,160 in restrooms
</TABLE>
<PAGE> 16
EXHIBIT B2
WORK LETTER AGREEMENT
Lessee and Lessor are executing simultaneously with this Work Letter Agreement,
a lease (the "Lease") of even date herewith covering certain Premises described
on Page 1 of the Lease. This Work Letter Agreement is incorporated into said
Lease as Exhibit "B" thereto. In consideration of the mutual covenants
contained in the Lease, Lessee and Lessor hereby agree that the Premises shall
be improved as set forth herein.
1. BASE BUILDING: Lessor and Lessee understand and acknowledge that this Work
Letter Agreement relates only to the construction of "non-base building"
improvements ("Tenant Improvements") for the Premises.
2. PRELIMINARY PLANS AND SPECIFICATIONS:
a. PRELIMINARY PLANS: Lessee and Lessor have prepared, using Lessor's
architect, a preliminary plan and an outline of specifications
("Preliminary Plans") for the construction of the Tenant Improvements
for the Premises.
b. PRELIMINARY CONSTRUCTION DRAWINGS: Lessor shall deliver to Lessee, not
later than September 16, 1994, a preliminary design for the Premises
("Preliminary Construction Drawings") based upon the Preliminary Plans.
c. DESIGN INFORMATION: Lessee shall deliver to Lessor, not later than
September 20, 1994, information (the "Design Information") sufficient
to permit Lessor to prepare the "Plans" described in Paragraph 3 below.
Such information to be supplied by Lessee shall include its mark-up of
the Preliminary construction Drawings, as well as all necessary design
criteria for the construction of the Tenant Improvements, including,
without limitation, the following information:
i. The locations of doors (including the truck door), partitioning,
ceiling layouts, lighting fixtures, electrical outlets and
switches, and telephone outlets;
ii. The location and extent of special floor loading;
iii. The location and description of plumbing requirements;
iv. The amount of additional electrical loads and location of areas
requiring such additional electrical loads;
v. Any structural or architectural installations;
vi. The location and dimensions of telephone equipment rooms; and
vii. Other special requirements.
3. FINAL PLANS: Lessor shall prepare or cause to be prepared final plans and
specifications substantially in conformity with the Preliminary Plans and
which incorporate the Design Information to be delivered to Lessor pursuant
to Paragraph 2(b) above. "Plans" shall hereinafter mean final plans as may
be changed from time to time in accordance with Paragraph 8 below. All
Plans shall be delivered to Lessee as soon as reasonably possible from the
date hereof, subject, however to periods of delay encountered by Lessor in
the preparation of Plans resulting from requests by Lessee for changes in
the Plans subsequent to the date hereof. Within ten (10) days after
delivery of the Plans, Lessee shall set forth in writing with particularity
and precision any correction or changes necessary to bring the Plans into
substantial conformity with the Preliminary Plans and the Design
Information, except that Lessee may not object to any logical development
or refinement of the Preliminary Plans and the Design Information. Lessor
and Lessee hereby agree to act with diligence to cause the Plans to be
approved and signed by the parties, in duplicate, by no later than
September 30, 1994. Following such approval and execution of the Plans
changes may be made only in accordance with Paragraph 8 below. In the event
that Lessee fails to approve the Plans pursuant to the provisions of this
Paragraph 3 and as a result of such failure this Lease is terminated,
unless such failure is due to Lessor's unreasonable interpretation of the
Preliminary Plans and Design Information, Lessee agrees to indemnify Lessor
for any and all nonreimbursed expenses, including, but not limited to,
architects' fees, engineering fees, non-refundable good faith deposits and
attorney's fees incurred by Lessor in connection with the preparation of
the Plans and construction of the Premises.
4. IMPROVEMENT BUDGET: Lessor shall enter into a guaranteed maximum price
contract with Jack and Cohen Builders, as General Contractor for the
construction of the Tenant Improvements in accordance with conceptual
budget #7 (attached). Lessor shall cause to be prepared and Lessor shall
deliver to Lessee as soon as reasonably possible following approval of the
Plans by the parties, a detailed estimate of the Costs of the Tenant
Improvements (the "Improvement Budget"), which "Costs" shall consist of
those elements described in the definition of "costs" set forth in
Paragraph 5 below. Lessor agrees to deliver a "turn-key" set
<PAGE> 17
of Tenant improvements detailed in conceptual Budget #7. This guaranteed
maximum cost is included for reference purposes. Lessor and Lessee
hereby agree to use their commercially reasonable best efforts to
approve the Improvement Budget by no later than October 1, 1994. The
bid specifications to be submitted to the subcontractors, for the
purpose of preparing the budget for the Costs, shall be detailed and
shall set forth clearly on an item-by-item basis the components of the
work to be submitted to each approved subcontractor. In no event shall
the final Improvement Budget exceed the Improvement Allowance (as
hereinafter defined) without Lessee's prior written consent. Changes to
the final Improvement Budget may be made only in accordance with
Paragraph 8 below.
5. IMPROVEMENT ALLOWANCE: Lessor hereby agrees to fund an improvement
allowance for Tenant Improvements as in Paragraph 3, above. In addition,
Lessor will fund the following additional improvements: i) Full service
2-stop elevator, ii) New roof and roof screen on lower/rear portion of
building, iii) Exterior ADA compliance items, iv) Outside H-3 Hazardous
Materials containment structure approved by City Building and Fire
Departments, v) Newly sealed and striped parking lot pavement, vi) A
voluntary seismic structural upgrade to building, vii) Refurbished HVAC
equipment, to be fully operational, plus new HVAC units to serve Tenants
approved floor plans. Improvement Allowance shall include a 5%
construction management fee to be paid to Tariton Properties, Inc. for
managing the satisfactory completion of design, construction and ready
for occupancy.
CONSTRUCTION: Upon approval by the parties of the Improvement Budget,
Lessor shall use its commercially reasonable best efforts to
substantially complete the Improvements on or before the Anticipated
Commencement Date set forth in Paragraph 3(b) of the Lease. Lessor shall
not authorize construction of any Improvements which will result in
"Outside Costs" (i.e., those improvements which are not within the scope
of work contemplated by the Improvement Budget approved by the parties
pursuant to the provisions of Paragraph 4 above) unless: (i) Lessee
shall have delivered written approval to Lessor of such Outside Costs,
or (ii) such Outside Costs occur as a result of a "force majeure events"
described below. Lessor shall not be liable for any direct or indirect
damages as a result of delays in construction of the Improvements due to
events "force majeure events") which generally affect the progress of
construction beyond Lessor's reasonable control, including, but not
limited to, fire, earthquake, inclement weather or other acts of God,
strikes, boycotts; availability of materials and labor; changes in
governmental regulations or requirements; changes in the Plans or
Improvement Budget pursuant to Paragraph 8 below; or Lessee Delays
defined in Paragraph 4(d) of the Lease.
7. AUDITS: All costs associated with the Tenant Improvements will be
audited in accordance with generally accepted accounting practices by
Lorrin C. Tarlton, Jr. or John Tarlton, as Construction Manager, with
Lessee participating in audit if it so chooses.
8. CHANGES IN PLANS: The attached Plans and specifications have been
approved by Lessor and Lessee pursuant to Paragraphs 3, 4 and 5 above.
Lessee shall have the right to request changes in the Plans, provided,
however, that: (a) such requests shall not result in any structural or
material change in the Tenant Improvements as determined by Lessor; (b)
such requests conform to applicable governmental agencies and, if
necessary, are approved by the applicable governmental agencies; (c) all
additional charges of implementing such changes including, without
limitation, architectural fees, increases in construction costs and
other related charges shall be included in Lessor's Costs and payable by
Lessee in accordance with the provisions of Paragraph 5 above; (d) such
requests shall constitute an agreement on the part of Lessee to any
delay in completion of the Tenant Improvements caused by reviewing,
processing and implementing the changes; and (e) such requests shall
constitute "Lessee Delays". Each request for changes in accordance
herewith shall be in writing and if approved by Lessor, shall be
approved in writing.
9. COMPLETION OF TENANT IMPROVEMENTS: The Premises shall be deemed to be
"Ready for Occupancy" when the work of construction of the Tenant
Improvements has been substantially completed in accordance with the
Plans (subject to the normal so-called "punch list items") as evidenced
by the delivery to Lessor and Lessee of a certificate from Lessor's
Construction Manager with a copy of a temporary certificate (if legally
required as a condition of occupancy) permitting occupancy of the
Premises issued by the City of San Jose. Lessor shall diligently
complete as soon as reasonably possible any items of work and adjustment
not completed when the Premises are Ready for Occupancy. Subject to
Lessee's obligation to pay certain Costs in excess of the Improvement
Allowance (as provided in Paragraph 4 above). Lessor hereby agrees to
indemnify, defend and hold Lessee harmless from and against any liens
filed in connection with the construction of the Tenant Improvements.
10. QUALITY OF CONSTRUCTION: Lessor and Lessee hereby agree that all Tenant
Improvements shall be constructed by Jack and Cohen Builders, Inc.
pursuant to a contract on a guaranteed maximum price basis which shall
be prepared based upon and through negotiation and competitive bidding.
Lessor hereby agrees that the general contractor's construction manager
shall have previous experience in similar projects which is reasonably
satisfactory to Lessee. Lessor warrants and represents to Lessee that
all work shall be done in a good and workmanlike manner and in
compliance with all applicable laws and lawful ordinances, by-laws,
regulations and orders of governmental authority and of the insurers of
the Building. Lessor makes no representations, warranties or guarantees,
expressed or implied, including warranties of merchantability or
<PAGE> 18
use of Premises, except as expressly set forth herein and in the Lease. Upon
written request by Lessee in each instance, Lessor shall enforce for the
benefit of Lessee all warranties, if any, received by Lessor from Jack and
Cohen Builders, Inc. or others in connection with the construction of the
Tenant Improvements to the extent that said warranties cover any defects in
the Improvements which Lessee is required to repair hereunder.
11. CONSTRUCTION REPRESENTATIVE: In connection with the original construction
of the Tenant Improvements, each party shall be bound by the acts of its
respective Construction Representative appointed by each party upon the
execution of this Lease. Lessor's Construction Representative is Lorrin C.
Tarlton, or John Tarlton and Lessee's Construction Representative is Seb
Nardecchia. A party may designate a substitute Construction Representation
by giving written notice to the other party.
12. EARLY ENTRY:
a. LESSEE'S FINISHING WORK: If prior to the Commencement Date, Lessee
desires to enter upon a portion of the Premises, upon reasonable written
notice to Lessor, in order to install trade fixtures and equipment and to
commence construction of any improvements within the Premises to be
constructed by Lessee at Lessee's sole cost and expense ("Lessee's
Finishing Work"), such entry by Lessee for the purpose of construction of
Lessee's Finishing Work shall be subject to all of the conditions set
forth in this Paragraph 12.
b. CONTROL OF WORK. Should Lessee elect to enter the Premises under the
terms of this Paragraph 12 for Construction of Lessee's Finishing Work,
it is hereby agreed that Lessee, its employees, its agents, its
independent contractors, its suppliers and any other person under
Lessee's direct control ("Lessee's Personnel") installing Lessee's
Finishing Work on the Premises shall be subject to and shall work under
the direction of Lessor and Jack & Cohen Builders, Inc. If, in the sole
reasonable judgment of Lessor, the presence of Lessee's Personnel or the
work that is being performed by Lessee's Personnel shall interfere with
Lessor's work of Construction, detrimentally affect Lessor's ability to
comply with its commitments for completing its work of improvement in the
Premises. Lessor shall have the right to order any or all of Lessee's
early entry work to cease on 24 hours written notice. If Lessor requires
such cessation of work because there exists interference with the work of
construction of the Tenant Improvements, Lessee shall have Lessee's
Personnel remove from the Premises all of Lessee's tools, equipment and
materials.
c. CONDITIONS OF OCCUPANCY. If Lessee desires to exercise its right of
early entry in accordance with the provisions of this Paragraph, Lessee
further agrees to: (i) pay for and provide certificates evidencing the
existence and amounts of liability insurance carried by Lessee, which
coverage shall be reasonably approved by Lessor; (ii) pay utility charges
reasonably allocated to Lessee by Lessor; (iii) indemnify and save Lessor
and the Premises harmless from and against all liens, liabilities,
losses, damages, costs, expenses, demands, actions, causes of action and
claims (including without limitation, attorney's fees and legal costs)
arising out of the use, construction, or occupancy of the Premises by
Lessee, and/or its agents, employees, contractors and servants prior to
the Commencement Date; and (iv) comply with all applicable laws,
regulations, permits and other approvals applicable to such early entry
work on the Premises.
<PAGE> 19
EXHIBIT C- RULES & REGULATIONS
PAGE 1 OF 1
LEASE DATED AUGUST 29, 1994 BETWEEN
RASTERGRAPHICS INCORPORATED, A CALIFORNIA CORPORATION
("LESSEE")
AND
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
("LESSOR")
1. No advertisement, picture or sign of any sort shall be displayed on or
outside the Premises without the prior written consent of Lessor. Lessor
shall have the right to remove any such unapproved item without notice and
at Lessee's expense.
2. Lessee shall not regularly park motor vehicles in designated parking areas
after the conclusion of normal daily business activity.
3. Lessee shall not use any method of heating or air conditioning other than
that supplied by Lessor without the consent of Lessor.
4. All window covering installed by Lessee and visible from the outside of
the building require the prior written approval of Lessor.
5. Lessee shall not use, keep or permit to be used or kept any foul or
noxious gas or substance or any flammable or combustible materials on or
around the Premises.
6. Lessee shall not alter any lock or install new locks or bolts on any door
at the Premises without the prior consent of Lessor.
7. Lessee agrees not to make any duplication of the keys to the common area
doors of the building duplicate keys without the prior consent of Lessor.
8. Lessee shall park motor vehicles in those general parking areas as
designated by lessor except for loading and unloading. During those
periods of loading and unloading, Lessee shall not unreasonably interfere
with traffic flow within the Project and loading and unloading areas of
other Lessees.
9. Lessee shall not disturb, solicit or canvas any occupant of the Building
or Project and shall cooperate to prevent same.
10. No person shall go on the roof without Lessor's permission except for
inspections, repairs or maintenance.
11. Business machines and mechanical equipment belonging to Lessee which cause
noise or vibration that may be transmitted to the structure of the
Building, to such a degree as to be objectionable to Lessor or other
Lessee, shall be placed and maintained by Lessee, at Lessee's expense, on
vibration eliminators or other devices sufficient to eliminate noise or
vibration.
12. All goods, including material used to store goods, delivered to the
Premises of Lessee shall be immediately moved into the Premises and shall
not be left in parking or receiving areas overnight.
13. Tractor trailers which must be unhooked or parked with dolly wheels beyond
the concrete loading areas must use steel plates or wood blocks under the
dolly wheels to prevent damage to the asphalt paving surfaces. No parking
or storing of such trailers will be permitted in the auto parking areas of
the Project or on streets adjacent thereto.
14. Forklifts which operate on asphalt paving areas shall not have solid
rubber tires and shall only use tires that do not damage the asphalt.
15. Lessee is responsible for the storage and removal of all trash and
surface. All such trash and refuse shall be contained in suitable
receptacles stored behind screened enclosures at locations
approved by Lessor.
16. Lessee shall not store or permit the storage or placement of goods or
merchandise in or around the common areas surrounding the Premises. No
displays or sales or merchandise shall be allowed in the parking lots or
other common areas.
<PAGE> 20
EXHIBIT D
RECORDING REQUESTED BY: ) REG FEE 14- 7254900
) MICRO 1- RECORDED AT THE REQUEST OF
) LIEN NOT TITLE INSURANCE AND
_______________________________) SMPF TRUST COMPANY
WHEN RECORDED RETURN TO: ) 8:00
RENCO ASSOCIATES ) JAN 8 1982 A.M.
ATTN: DONALD H. VERMEIL )
1211 SCOTT BLVD., SUITE 102 ) JAN 8 1982
SANTA CLARA, CA 95051 ) GEORGE A MANN, RECORDER
SANTA CLARA COUNTY,
OFFICIAL RECORDS
G543 PAGE 746
RECIPROCAL EASEMENT AGREEMENT
This Reciprocal Easement Agreement is entered into, to be effective on the
date it is recorded in the official records of Santa Clara by and between RENCO
ASSOCIATES, a California general partnership ("Renco") and Larry D. Russel and
Janet Russel, his wife, and Thomas P. Masters and Virginia B. Masters, his wife,
(collectively "Russel and Masters").
RECITALS:
WHEREAS, Renco is the owner of that certain real property located in the
City of San Jose, County of Santa Clara, State of California more particularly
described as Lot 2 as shown within that certain instrument entitled, "Approval
of the Director of Private Development of San Jose approving lot line adjustment
between two or more adjacent parcels", recorded on May 14, 1981 in Book "G" o8B
of Official Records of Santa Clara County at Page 607 (the "Renco Land"); and
WHEREAS, Russel and Masters is the owner of that certain real property
located in the City of San Jose, County of Santa Clara, State of California more
particularly described as Lot 3 as shown within that certain instrument
entitled, "Approval of the Director of Private Development of San Jose approving
lot line adjustment between two or more adjacent parcels", recorded on May 14,
1981 in Book "G" o8B of Official Records of Santa Clara County at Page 607 (the
"Russel and Masters Land"); and
<PAGE> 21
G543 PAGE 747
WHEREAS, the parties desire to grant to each other mutual and reciprocal
easements over their respective Lands along their common boundary for purposes
of providing common ingress and egress to each others parcel and to set forth
their agreement with respect to the construction and maintenance of certain
improvements thereon.
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein and for other valuable consideration, receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Easement by Renco: Renco hereby grants to Russel and Masters
a non-exclusive easement and right of way over, across and through a portion of
the Renco Land as more particularly described on Exhibit "A" hereto and
delineated on Exhibit A-x hereto for the limited purpose of using said easement
area in common with Renco to provide vehicular ingress and egress to their
respective Lands.
2. Grant of Easement by Russel and Masters: Russel and Masters hereby
grants to Renco a non-exclusive easement and right of way over, across and
through a portion of the Russel and Masters Land as more particularly described
on Exhibit "B" hereto and delineated on Exhibit B-x hereto for the limited
purpose of using said easement area in common with Russel and Masters to provide
vehicular ingress and egress to their respective Lands.
3. Easements Shall Be Appurtenant: The easement granted by Renco to
Russel and Masters herein shall be appurtenant to the Russel and Masters Land.
The easement granted by Russel and Masters to Renco herein shall be appurtenant
to the Renco Land.
4. Limitations on Use of Easement Areas: The parties hereto each agree
that the mutual easements granted herein are made solely for purposes of
providing a common driveway for the joint use by the owners, tenants and
invitees using and/or occupying the respective Lands of each and for no other
purpose. In this regard each of the parties agrees that it shall not:
<PAGE> 22
(a) Construct any improvements on or within the
respective easement areas except as specifically permitted herein; nor
(b) Take any act which would prevent or impair the others
free use of the easement areas for the free flow of vehicular ingress to and
egress from the other Lands; nor
(c) Allow the parking of any vehicles or the storage of
any materials within the easement areas.
5. Construction of Easement Area Improvements and Maintenance of
Same: Each of the parties hereto agrees to fully cooperate with the other in
causing the easement area to be improved, in accordance with the requirements of
requisite governmental authorities, as a driveway sufficient to service each of
the parties respective Lands and to thereafter fully cooperate in causing the
easement areas to be properly maintained in good condition and repair. All costs
incurred for purposes of constructing the required improvements and maintaining
same shall be shared fifty percent (50%) by Renco and fifty percent (50%) by
Russel and Masters.
6. Rights of Mortgagees: No breach of any of the provisions
contained herein, or any enforcement thereof, shall defeat or render invalid the
lien of any mortgage or deed of trust now or hereafter executed upon the real
property subject thereto; provided, however, that if said real property is sold
under a foreclosure of any mortgage or under the provisions of any deed of
trust, any purchaser at such sale and his successors and assigns shall hold any
and all property so purchased subject to all of the terms and conditions
contained herein.
7. Covenants Running With The Land:
A. The covenants and agreements of Renco hereunder are
made by Renco on its own behalf (as owner of the Renco Land) and on behalf of
the successive owners of the Renco Land for the direct benefit of the Russel and
Masters Land, Russel and
<PAGE> 23
Masters (as owner of the Russel and Masters Land), and the successive owners of
the Russel and Masters Land, it being the intent of Renco and Russel and Masters
that the foregoing covenants and agreements of Renco shall be "covenants running
with the land" as defined in California Civil Code Section 1468, the burdens of
which shall be binding on the Renco Land and its successive owners for the
direct benefit of the Russel and Masters Land and its successive owners.
B. The covenants and agreements of Russel and Masters
hereunder are made by Russel and Masters on their own behalf (as owner of the
Russel and Masters Land) and on behalf of the successive owners of the Russel
and Masters Land for the direct benefit of the Renco Land, Renco (as owner of
the Renco Land), and the successive owners of the Renco Land, it being the
intent of Russel and Masters and Renco that the foregoing covenants and
agreements of Russel and Masters shall be "covenants running with the land" as
defined in California Civil Code Section 1468, the burdens of which shall be
binding on the Russel and Masters Land and its successive owners for the direct
benefit of the Renco Land and its successive owners.
C. Notwithstanding the foregoing, unless the transferor
and the transferee otherwise specifically agree in writing, upon the sale
conveyance or assignment by the transferor of said transferor's entire interest
in the real property burdened by the respective easement granted herein which
burdens said real property, the transferor shall be released from, and the
transferee shall assume, liability hereunder as set forth in California Civil
Code Section 1466, which provides:
"No one, merely by reason of having acquired an estate subject
to a covenant running with the land, is liable for a breach of the
covenant before he acquired the estate, or after he has parted with it
or ceased to enjoy its benefits."
8. Miscellaneous: In the event that any provision (or provisions)
of this Agreement is, or hereinafter is, adjudged to be, for any reason,
unenforceable or invalid, it is the specific intent of the parties hereto that
the remainder hereof shall
<PAGE> 24
subsist and remain in full force and effect. Time is of the essence for the
performance of each and every covenant and the satisfaction of each and every
condition contained in this Agreement. The headings contained in this Agreement
are for the purpose of reference only, and shall not be considered in the
construction or interpretation of any provision hereof. This Agreement may be
executed in any number of counterparts, each of which is an original, but all of
which constitute one agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement with an
interest to be bound hereby as of the date this Agreement is recorded.
RENCO:
Dated: 1/5/82 Renco Associates
-------- a California general partnership
By /s/ Renco Associates
-----------------------------
a General Partner
By /s/ Renco Associates
-----------------------------
a General Partner
Dated: 1/5/82
-------- RUSSEL AND MASTERS
By /s/ Larry D. Russel
-----------------------------
Larry D. Russel
By /s/ Janet Russel
-----------------------------
Janet Russel
By /s/ Thomas P. Masters
-----------------------------
Thomas P. Masters
By /s/ Virginia B. Masters
-----------------------------
Virginia B. Masters
<PAGE> 25
ADDENDUM I
ADJUSTMENTS TO RENT
Page 1 of 1
Lease Dated August 29, 1994 Between
Rastergraphics Incorporated, A California Corporation
("Lessee")
and
Principal Mutual Life Insurance Company
("Lessor")
1. Lessor and Lessee agree that the Base Rent referenced on Page 1 and on
Page 2, Paragraph 3 of the lease shall be as follows:
<TABLE>
<CAPTION>
Base Rent Months Payable
- --------- --------------
<S> <C>
$0.00 January 1, 1995 through March 31, 1995
$30,030.00 April 1, 1995 through December 31, 1995
$42,042.00 January 1, 1996 through December 31, 1996
$43,243.20 January 1, 1997 through December 31, 1997
$44,444.40 January 1, 1998 through December 31, 1998
$45,045.00 January 1, 1999 through December 31, 1999
$45,045.00 January 1, 2000 through December 31, 2000
$45,645.60 January 1, 2001 through December 31, 2001
</TABLE>
<PAGE> 26
RE 1860 Barber Lane, 1820 & 1840 McCarthy Blvd.
Dear Tenant
Please be advised that effective ____________________, the undersigned has sold
the above-referenced project to G. Drew Gibson, Jr., and Kay M. Gibson, Husband
and Wife, as Community Property, Steven G. Speno and Roxanne D. Speno, Husband
and Wife, as Community Property, D.P. Middlemas, Trustee of The Middlemas Trust
U/D/T Restated July 27, 1989, Stanley F. Brockhoff, Trustee of The Stanley F.
Brockhoff Family Trust U/D/T Restated September 12, 1990, Raymond E. Wirta and
Sandra M. Wirta, Husband and Wife, as Community Property, William T. Benson,
Trustee of the Benson Trust II, established September 11, 1989, Orchard/Barber
Properties, L.P. A California Limited Partnership, Everett Davis III, Trustee of
the Davis Management Trust, and McCarthy REO Partners, L.P., A California
Limited Partnership. Any security deposit which you paid to the undersigned has
been delivered to the purchasers in accordance with Section 1950.7 of the
California Civil Code.
Effective ____________________, all future rental payments should be sent to the
following:
Gibson Speno Companies, 1731 Technology Drive, Suite 340
San Jose, California 95110
Any questions regarding maintenance and management of the property should be
addressed to:
Gibson Speno Companies, 1731 Technology Drive, Suite 340
San Jose, California 95110
PRINCIPAL MUTUAL LIFE INSURANCE
COMPANY
By: /s/ Principal Mutual Life Insurance Company
-------------------------------------------
Title:
----------------------------------------
By:
------------------------------------------
<PAGE> 27
Loan No. 31-0850422
ESTOPPEL AND ATTORNMENT AGREEMENT
This ESTOPPEL AND ATTORNMENT AGREEMENT ("Agreement") is made as of
January 26, 1996, by and between RASTERGRAPHICS, a California corporation
("Tenant") and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Lender"), with reference
to the following facts and intentions of the parties:
RECITALS
A. G. DREW GIBSON, JR., STEVEN G. SPENO, D.P. MIDDLEMAS, Trustee of The
Middlemas Trust u/d/t restated July 27, 1989, STANLEY F. BROCKHOFF, Trustee of
The Stanley F. Brockhoff Family Trust u/d/t restated September 12, 1990, RAYMOND
E. WIRTA, WILLIAM T. BENSON, Trustee of The Benson Trust II, established
September 11, 1989, ORCHARD/BARBER PROPERTIES, L.P., a California limited
partnership, MCCARTHY REO PARTNERS, L.P., a California limited partnership, KAY
M. GIBSON, ROXANNE D. SPENO, SANDRA M. WIRTA and EVERETT DAVIS, III, Trustee of
The Davis Management Trust ("Owner") is or is about to become the owner of the
land described in Exhibit A attached hereto ("Land") and the improvements
thereon commonly known as 3025 Orchard Parkway, San Jose, California 95103
("Improvements") and the owner of the landlord's interest in the lease
identified below in Recital B ("Lease"). The Land and the Improvements are
collectively referred to herein as the "Property."
B. Tenant is presently the owner of the Tenant's interest in that Lease
dated August 29, 1994, which was originally executed by Principal Mutual Life
Insurance Company, as Landlord, and by Tenant. (Said lease and the referenced
amendment(s) thereto are collectively referred to herein as the "Lease").
C. Owner, as borrower or as co-borrower with one or more other
co-borrower(s), has applied to Lender for, and Lender proposes to make, a loan
("Loan") the principal amount of which will be evidenced by, among other things,
a promissory note ("Note") in the principal amount of the Loan.
D. The Note and certain other obligations under the Loan will be
secured by, among other things, a Deed of Trust and Absolute Assignment of Rents
and Leases and Security Agreement (and Fixture Filing) ("Deed of Trust") upon
the Property.
E. As a condition to making the Loan, Lender has required that Tenant
furnish certain assurances to, and make certain agreements with, Lender,
regarding the Lease and regarding the rights, obligations and interests of
Tenant under the Lease.
THEREFORE, Tenant warrants and represents to, and agrees with and for
the benefit of, Lender, as follows:
-2-
<PAGE> 28
1. ASSIGNMENT APPROVED. Tenant acknowledges that as a condition
of the Loan, Owner will assign to Lender all of the landlord's interest in and
to the Lease, including rent and other sums to become due thereunder, and Tenant
hereby consents to that assignment to Lender.
2. ESTOPPEL. Tenant warrants and represents to Lender that:
2.1 Lease Effective. The Lease has been duly executed and
delivered by Tenant and, subject to the terms and conditions thereof, the Lease
is in full force and effect and the obligations of Tenant thereunder are valid
and binding.
2.2 Term; Entire Agreement. The Lease is for a total term of
Seven (7) years, commencing January 1, 1995, and ending December 31, 2001, has
not been modified, altered or amended in any respect and contains the entire
agreement between Owner and Tenant with respect to the Property, except as
follows: None.
Option to Extend. Tenant has one (1) five (5) year
option to extend at market rent. Tenant must give 180 days notice prior to
expiration of the original term.
2.3 No Other Assignment. Paragraph not used.
2.4 Minimum Rent. As of the date hereof, the annual minimum
rent under the Lease is $42,042.00, subject to any escalation and/or percentage
rent and/or common area maintenance charges, in accordance with the terms and
provisions of the Lease.
2.5 No Advance Rents, Offsets or Concessions. Subject to leaky
windows on second floor and two air conditioning compressors, issues of which
have been disclosed to the Owner, no rent has been paid by Tenant in advance
under the Lease except for $None, which amount represents rent for the period
beginning N/A, and ending N/A. Tenant has no charge or claim of offset under the
Lease or otherwise, against rents or other amounts due or to become due
thereunder. No concessions of any sort, including, without limitation, any
so-called "discounts," "free rent" or "discounted rent," have been agreed to or
are in effect except for None.
2.6 Security Deposit. A security deposit in the amount of
$45,645.60 has been paid by Tenant as required by applicable Lease provisions.
2.7 No Default. Subject to leaky windows on second floor and
two air conditioning compressors, issues of which have been disclosed to the
Owner, all commitments, arrangements or understandings made to induce Tenant to
enter into the Lease have been fully satisfied as of the date hereof, and, to
the best of Tenant's knowledge, there currently exists no breach, default, or
event or condition which, with the giving of notice or the passage of time or
both, would constitute a breach or default, either by Tenant or Owner under the
Lease.
2.8 Tenant Improvements, Occupancy. Subject to leaky windows
on second floor and two air conditioning compressors, issues of which have been
disclosed to the Owner, all space and improvements covered by the Lease have
been completed and furnished to the
-3-
<PAGE> 29
satisfaction of Tenant, all conditions required under the Lease have been met,
and Tenant has accepted and taken possession of and presently occupies the
Leased Premises.
2.9 No Transfers. Tenant has not assigned, transferred or
hypothecated its interest under the Lease, except as follows: None.
2.10 No Other Agreements. Except as expressly provided in the
Lease, Tenant: (a) does not have any right to renew or extend the term of the
Lease; and (b) does not have any right, title, or interest in, or with respect
to, the Property other than as tenant under the Lease. There are no
understandings, contracts, agreements, subleases, assignments, or commitments of
any kind whatsoever, with respect to the Lease or the Property except as
expressly provided in the Lease.
2.11 No Purchase Option or Refusal Rights. Tenant does not
have any option or preferential right to purchase all or any part of the
Property, except as follows: None.
3. AGREEMENT. Tenant agrees that, so long as the Deed of Trust remains
in effect:
3.1 Modification, Termination and Cancellation. Without
Lender's prior written consent, Tenant will neither agree to, nor make any
payment or furnish consideration of any nature or sort to Owner or any other
party in respect of, any termination or cancellation of the Lease (in whole or
in part) or any material modification thereof. Any termination, cancellation or
material modification of the Lease made without Lender's prior written consent
shall not be binding upon Lender.
3.2 Notices of Default; Cure Rights. Tenant will notify Lender
in writing concurrently with any notice given to Owner of any default by Owner
under the Lease, and Tenant agrees that Lender shall have the right (but not the
obligation) to cure any breach or default specified in such notice within the
time periods set forth below, and that Tenant will not declare a default of the
Lease, or seek to terminate the Lease if Lender cures such default within
fifteen (15) days from and after the expiration of the time period provided in
the Lease for the cure thereof by Owner; provided, however, that if such default
cannot with diligence be cured by Lender within such fifteen (15) day period,
the commencement of action by Lender within such fifteen (15) day period to
remedy the same shall be deemed sufficient so long as Lender pursues such cure
with diligence.
3.3 No Advance Rents. Tenant will make no payments or
prepayments of rent more than one (1) month in advance of the time when the same
become due under the Lease.
3.4 Compliance With Instructions Regarding Lease Payments.
Upon receipt by Tenant of written notice from Lender that Lender has elected to
terminate the license to collect rents and other sums coming due under the
Lease, as provided in the Deed of Trust, and instructing that payment thereafter
of all such amounts shall be made by Tenant directly to Lender, Tenant shall
comply with such instruction to pay without determining whether any Loan
-4-
<PAGE> 30
default has occurred. Owner agrees that Tenant shall have no liability to Owner
for making such payments to Lender.
3.5 Insurance Proceeds and Condemnation Awards. Paragraph not
used.
4. ATTORNMENT. Should title to the Property and the landlord's interest
in the Lease be transferred to Lender or any other person or entity
("Transferee") by or in-lieu of judicial or nonjudicial foreclosure of the Deed
of Trust, Tenant agrees as follows for the benefit of the Transferee effective
immediately upon the occurrence of any such transfer:
4.1 Lease Priority. Lender and Tenant acknowledge and agree
that (a) the Lease shall be deemed to have been, or to be (as the case may be),
absolutely and unconditionally senior in priority to the Deed of Trust, and (b)
this Agreement shall be the whole agreement and only agreement with regard to
the relative priorities of the Lease and the Deed of Trust, and (c) insofar as
concerns those relative priorities, this Agreement shall supersede and cancel
any prior agreements regarding the same, including, without limitation, those
provisions, if any, contained in the Lease which provide for, contemplate or
purport to authorize the automatic or optional subordination of the Lease to a
deed or deeds of trust or to a mortgage or mortgages. Tenant will not be named
by Lender as a party in any foreclosure action or similar proceeding relating to
the Deed of Trust.
4.2 Payment of Rent. Upon written notice, Tenant shall pay to
Transferee all rental payments required to be made by Tenant pursuant to the
terms of the Lease for the remainder of the Lease term.
4.3 Continuation of Performance. Tenant shall be bound to
Transferee in accordance with all of the provisions of the Lease (but subject to
any modifications of those provisions and any other qualification(s), if any,
set forth elsewhere in this Agreement) for the remainder of the Lease term, and
Tenant hereby attorns to Transferee as its landlord, such attornment to be
effective and self-operative without the execution of any further instrument
immediately upon Transferee succeeding to the landlord's interest in the Lease
and giving written notice thereof to Tenant.
4.4 No Offset. Paragraph not used.
4.5 Subsequent Transfer. If Transferee, by succeeding to the
landlord's interest in the Lease, should become obligated to perform the
covenants of the landlord thereunder, then, upon any further transfer by
Transferee of the landlord's interest under the Lease, all of such obligations
of Transferee following such transfer shall terminate as to Transferee.
5. MISCELLANEOUS.
5.1 Reliance by Lender. Paragraph not used.
5.2 Heirs, Successors and Assigns. The covenants herein shall
be binding upon, and inure to the benefit of, the heirs, successors and assigns
of the parties hereto.
-5-
<PAGE> 31
Whenever necessary or appropriate to give logical meaning to a provision of this
Agreement, the term "Owner" shall be deemed to mean the then current owner of
the Property and the landlord's interest in the Lease.
5.3 Addresses; Request for Notice. All notices and other
communications that are required or permitted to be given to a party under this
Agreement shall be in writing and shall be sent to such party, either by
personal delivery, by overnight delivery service, by certified first class mail,
return receipt requested, or by facsimile transmission, to the address or
facsimile number below. All such notices and communications shall be deemed
effective upon receipt of such delivery, in the case of personal delivery when
sent with confirmation of receipt in the case of facsimile transmission, or 3
business days following deposit in the mail in the case of certified first class
mail delivery.
The addresses and facsimile numbers of the parties shall be:
Tenant: Lender:
Rastergraphics Wells Fargo Bank, N.A.
3025 Orchard Parkway C/O WFRF
San Jose, CA 95413 P.O. Box 5902
Santa Rosa, CA 95407
FAX No.: (707) 546-1736
provided, however, any party shall have the right to change its address for
notice hereunder by the giving of written notice thereof to the other party in
the manner set forth in this Agreement.
5.4 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute and be construed as one and the same instrument.
5.5 Section Headings. Section headings in this Agreement are
for convenience only and are not to be construed as part of this Agreement or in
any way limiting or applying the provisions hereof.
5.6 Attorneys' Fees. If any legal action, suit or proceeding
is commenced, between Tenant and Lender regarding their respective rights and
obligations under this Agreement, the prevailing party shall be entitled to
recover, in addition to damages or other relief, costs and expenses, attorneys'
fees and court costs (including, without limitation, expert witness fees). As
used herein, the term "prevailing party" shall mean the party which obtains the
principal relief it has sought, whether by compromise settlement or judgment. If
the party which commenced or instituted the action, suit or proceeding shall
dismiss or discontinue it without the concurrence of the other party, such other
party shall be deemed the prevailing party.
6. INCORPORATION. Exhibit A and the Owner's Consent are attached hereto
and incorporated herein by this reference.
-6-
<PAGE> 32
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"Lender" "Tenant"
WELLS FARGO BANK RASTERGRAPHICS,
NATIONAL ASSOCIATION a California corporation
By: ______________________________________ By: ________________________
Susan Jo Gibson
Vice President and Loan Its: _______________________
Administration Manager
-7-
<PAGE> 33
OWNER'S CONSENT
The undersigned, which owns or is about to acquire the Property and the
landlord's interest in the Lease, hereby consents to the execution of the
foregoing ESTOPPEL AND ATTORNMENT AGREEMENT, and to implementation of the
agreements and transactions provided for therein.
"Owner"
ORCHARD/BARBER PROPERTIES, L.P.,
a California limited partnership
By: WESTMONT INVESTMENT COMPANY,
INC., a California corporation,
General Partner
By:____________________________
Its:___________________________
MCCARTHY REO PARTNERS, L.P.,
a California limited partnership
By: _________________________________
Everett Davis, III, Trustee of
The Everett Davis, III, Separate
Property Trust, established
March 31, 1981,
General Partner
________________________________________
EVERETT DAVIS, III, Trustee of the Davis
Management Trust
________________________________________
KAY M. GIBSON
________________________________________
ROXANNE D. SPENO
________________________________________
SANDRA M. WIRTA
________________________________________
G. DREW GIBSON, JR.
-8-
<PAGE> 34
________________________________________
STEVEN G. SPENO
________________________________________
D.P. MIDDLEMAS, Trustee of The Middlemas
Trust w/d/t restated July 27, 1989
________________________________________
STANLEY F. BROCKHOFF, Trustee of The
Stanley F. Brochoff Family Trust w/d/t
restated September 12, 1990
________________________________________
REYMOND E. WIRTA
________________________________________
WILLIAM T. BENSON, Trustee of the Benson
Trust II, established September 11, 1989
-9-
<PAGE> 35
EXHIBIT A
(DESCRIPTION OF LAND)
EXHIBIT A to ESTOPPEL AND ATTORNMENT AGREEMENT dated as of January 26,
1996, executed by "Tenant", and WELLS FARGO BANK, NATIONAL ASSOCIATION, as
"Lender".
All that certain land located in the City of San Jose, County of Santa
Clara, State of California, described as follows:
PARCEL ONE:
All of Lot 1, as shown on that Parcel Map filed for record in the office of the
Recorder of the County of Santa Clara, State of California on May 2, 1985, in
Book 452 of Maps, page(s) 36 and 37.
PARCEL TWO:
A non-exclusive easement of vehicular ingress and egress, appurtenant to Parcel
One above, 13 feet in width adjoining the Southeasterly line of said Parcel One,
as provided for in that certain Reciprocal Easement Agreement by and between
Renco Associates, a California General Partnership and Larry D. Russel, et al,
recorded January 8, 1992 in Book G543, page 746.
Assessors Parcel No. 097-12-128
<PAGE> 1
EXHIBIT 10.11
DEVELOPMENT AND PURCHASE AGREEMENT
Development and Purchase Agreement, dated March 16, 1996 (the
"Effective Date"), among RASTER Graphics Inc., a California corporation
("RASTER"), and [*], a Delaware corporation.
WHEREAS, [*], either itself or through one or more of its subsidiaries,
including but not limited to [*] i [*], a [*] corporation ([*]) and [*], a [*]
corporation ([*]), (all of which are hereinafter collectively referred to as
[*]) intends to develop and produce [*] (as hereafter defined) and an [*]
(as hereafter defined) for use with such [*];
WHEREAS, RASTER has developed, is developing or having developed on its
behalf a product application into which it wishes to incorporate both the
[*] and [*]; and
WHEREAS, [*] desires to obtain commitments for use and purchase of
the Products (as hereafter defined) and RASTER is willing to give such support
and commitments;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I - DEFINITIONS
1.1. DEFINITIONS: As used herein, the following terms shall have
the following meanings:
[*]: has the meaning specified in the first "Whereas"
clause of this Agreement.
[*] - SPECIFICATION: means the design and performance,
characteristics, specifications and criteria for the printheads set forth in
ANNEX 1 hereto.
DEVELOPMENT FEE: has the meaning specified in Section 2.4.
RASTER: has the meaning specified in the preamble to this
Agreement.
[*]
[*]
[*]
[*]
PRODUCT: means [*] [*]
[*] Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 2
ARTICLE II - DEVELOPMENT
2.1. [*] DEVELOPMENT. [*] shall undertake and have responsibility for
a development program to develop a [*] meeting the specifications in
Annex 1. [*] will use all commercially reasonable efforts to ensure that the
delivery requirements identified in Annex 2 are met.
2.2. [*] DEVELOPMENT. [*] shall undertake and have responsibility for
a development program to develop an [*] capable of working with the RASTER
[*] product to be developed pursuant to Section 2.3 below. [*] will use all
commercially reasonable efforts to ensure that the delivery requirements
identified in Annex 3 are met.
2.3. [*] DEVELOPMENT. RASTER has responsibility for development of
a [*] product incorporating the [*] and [*] . [*] will make its personnel
reasonably available to consult with RASTER regarding the technical
specifications for the [*] and [*] .
2.4. DEVELOPMENT FEE. RASTER will pay to [*] a fee (the "Development
Fee") of [*] [*]. [*] [*] of such Development Fee will be payable on the
Effective Date of this agreement, with the balance to be paid in two
installments of [*] [*] and [*], payable on the three month and six month
anniversary of the Effective Date, if [*] has met the [*] delivery
requirements set forth in this agreement.
The Development Fee described above will be fully refundable to RASTER
if [*] is unable to deliver [*] and [*] Systems according to the schedules and
specifications set forth in Annexes 1, 2 and 3.
[*] further agrees that for a period of six (6) months after the
Effective Date, it will not sell [*] to any other customer who has not paid a
similar Development Fee and who intends to use the [*] in a [*] for a [*] ,
except that [*] may sell [*] without charging such a fee to other customers (i)
that make a purchase volume commitment at least twice as large as the commitment
of RASTER hereunder, or (ii) with whom [*], prior to the date hereof, has
entered into a purchase agreement or other agreement including a pricing
commitment for [*] ; and further provided that [*] shall be permitted to sell
[*] samples for use in normal qualification and evaluation of the [*]
technology without charging any such fee to the customer.
ARTICLE III - TESTING AND TOOLING
3.1. TESTING AND TEST DATA. [*] will conduct ongoing performance
and reliability testing to assure the compliance to the [*] specifications
in Annex 1. [*] will make lifetime data for initial [*] production available
to RASTER by March 1, 1996. [*] delivered to RASTER in March 1996 and later
will comply with the specification in Annex 1, and test data supplied to
RASTER will support the specified failure rates. In the event that [*] cannot
supply [*] which meet the lifetime specification and supporting test data to
show failure statistics which indicate that the specified failure rate has
been achieved,
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
-2-
<PAGE> 3
RASTER will have the option to terminate this contract and to have the
Development Fee refunded. [*] will also establish quality control procedures
to assure compliance to the [*] specification throughout the life of this
agreement.
3.2. TOOLING.
(a) [*] will purchase, install on its premises and maintain
in good working order all tooling necessary to manufacture [*] so as to meet
the purchase schedule set forth in ANNEX 2.
(b) [*] will purchase, install on its premises and maintain
in good working order all tooling necessary to manufacture [*] so as to
meet the purchase schedule set forth in ANNEX 3. [*] shall obtain RASTER's prior
approval before purchasing any special [*] tools or [*] tools to produce the [*]
. If RASTER approves the purchase of special [*] tools or [*] tools to build the
[*] , RASTER shall reimburse [*] for all such tooling costs incurred by [*] for
the [*] within thirty days after request therefore by [*], and after [*]
receives such reimbursement all such tooling shall be the property of RASTER. If
special [*] tools or [*] tools are required to build the [*] and RASTER fails to
approve their purchase, [*] shall have no obligation to refund any of the
Development Fee.
ARTICLE IV - PRODUCT PURCHASE
4.1. PURCHASE COMMITMENT.
(a) Provided that [*] can deliver [*] and [*] in sufficient
quantifies, RASTER agrees it shall purchase [*] of the [*] it requires from [*]
for the product referred to in Section 2.3 hereof. Provided that [*] can deliver
[*] and [*] according to the schedules provided in ANNEX 1, ANNEX 2, and ANNEX
3, RASTER will at a minimum purchase each month from [*] the number of [*] and
quantities of [*] , for the respective purchase prices, as set forth in ANNEX 2
and ANNEX 3 respectively. The [*] purchased by RASTER shall only be used by
RASTER in the [*] product developed pursuant to Section 2.3 hereof. In the event
that RASTER requires [*] for a special application and the [*] provided by [*]
is not suitable for such application, then RASTER shall give [*] at least 90
days written notice of the specifications for the [*] that is required. If [*]
is unable to produce the [*] for the special application at the end of the 90
day period, then RASTER may purchase [*] for the special application from a
supplier other than [*]. However, at such time as [*] is able to supply [*]
suitable for the special application, it shall notify RASTER it is able to
supply such [*] , and sixty days following the date [*] notifies RASTER it is
able to supply such [*] RASTER shall also purchase [*] of the [*] for the
special application from [*]. During the sixty day period after the date [*]
notifies RASTER it is able to supply the [*] for the special application RASTER
shall not purchase any more [*] for the special application from any third party
supplier than RASTER reasonably expects to sell during such period. If [*] is
unable to supply the [*] for the special application, nothing contained herein
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
-3-
<PAGE> 4
shall relieve RASTER of it obligation to purchase [*] of the [*] provided
pursuant to Section 2.1 from [*].
(b) RASTER's obligations under paragraph (a) of this Section
4.1 shall be unconditional and absolute, and shall not be deferred, excused,
limited by any right of set-off or otherwise affected for any reason whatsoever
(including but not limited to, failure of [*] to produce the requisite number of
[*] because of a failure of RASTER to fulfill its obligations under Section
2.3).
4.2. DELIVERY, PAYMENT.
(a) All [*] purchased by RASTER under this Agreement will be
delivered Ex Works (INCOTERMS 1990) at [*] factory in [*], [*]. All deliveries
of [*] will be accompanied by an invoice issued by [*]. The invoice will state
the amount owed by RASTER (including all sales, value-added or other taxes) in
local currency of the point of origin of the [*] . RASTER shall pay such amount
within 30 days of receipt of such invoice by wire transfer to such account at
such bank as [*] shall designate in the invoice. Amounts outstanding after such
30 days period shall bear interest at the lower of 10% per annum and the maximum
legal rate.
(b) All [*] purchased by RASTER under this Agreement will
be delivered Ex Works (INCOTERMS 1990) at [*] factory. All deliveries of [*]
will be accompanied by an invoice issued by [*]. The invoice will state the
amount owed by RASTER (including all sales, value-added or other taxes) in local
currency of the point of origin of the [*] . RASTER shall pay such amount
within 30 days of receipt of such invoice by wire transfer to such account at
such bank as [*] shall designate in the invoice. Amounts outstanding after such
30 days period shall bear interest at the lower of 10% per annum and the maximum
legal rate.
4.3. WARRANTIES
(a) [*] warranty shall run to both RASTER and RASTER's
customers. [*] warrants that the Products shall be free of defects in
materials and workmanship for a period of one year from the date of product
shipment by [*] hereunder. [*] obligations hereunder shall be limited,
at [*] option, to repair and replacement of defective parts and materials
or refund of the purchase price. Allegedly defective Products shall be returned
[*] at the expense of RASTER or RASTER's customer, and upon receipt thereof
[*] shall determine whether the Product is defective. RASTER shall provide
reasonable documentation to [*] to support any alleged defect in any
Product. If [*] finds the product is defective, it shall reimburse RASTER or
RASTER's customer for the cost of shipping the product to [*].
(b) [*] shall have no liability whatsoever under or as a
result of any warranty, whether express or implied, made by RASTER to any of its
customers.
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
-4-
<PAGE> 5
(c) [*] shall not be liable to RASTER or any other person
(including any purchaser of Products or [*] containing Products from RASTER)
for any incidental, consequential or punitive damages or for any compensation
for lost profits arising out of or in connection with this Agreement or the
sale of Products.
EXCEPT FOR THE EXPRESS WARRANTY SET FORTH IN THIS SECTION 4.3, THERE
ARE NO WARRANTIES EXPRESS OR IMPLIED WITH RESPECT TO THE PRODUCTS, INCLUDING,
BUT NOT LIMITED TO, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
4.4 REPLACEMENTS AND RETURNS
(a) Replacement of Defective Products. RASTER may return to
[*] any Product that RASTER believes is defective under [*]'s standard
warranty contained herein provided that RASTER obtains a Return Material
Authorization number prior to returning the Product to [*]. Upon receipt of
the allegedly defective Product [*] shall test the Product, and at it's
option and expense, repair or replace the Product, or refund the purchase price
thereof. [*] shall pay all cost of shipment between [*] and RASTER in
connection with any such repair or replacement.
(b) Modification of Products. [*] shall give RASTER at
least ninety (90) days prior written notice of all engineering modifications to
Products in RASTER's inventory if such changes effect form, fit, and function.
If, in [*]'s judgment, such modifications preclude or materially limit
RASTER's sale of such product, [*] shall use reasonable efforts to assist
RASTER in the sale or other disposition of effected inventory. If, after such
efforts, Products remain in RASTER's inventory, then [*] shall' offer to
substitute modified Products at no additional charge to RASTER for the Products
remaining in RASTER's inventory that are no more than 120 days old. [*]
shall pay freight and shipping charges in connection with any such replacements.
(c) Introduction of New Products. [*] shall give RASTER at
least ninety (90) days prior written notice of the introduction of any new
products which, in [*]'s judgment, preclude or materially limit RASTER from
selling any Products in its inventory, and [*] shall use reasonable efforts
to assist RASTER in the sale or disposition of such existing inventory.
(d) Return Material Authorization. A Return Material
Authorization shall be obtained by RASTER in connection with any return of
Products under this agreement.
ARTICLE V - PATENTS AND LICENSES
5.1. INVENTIONS AND DISCOVERIES. All patents for inventions or
discoveries used or embodied in the [*] or [*], or for any method of
manufacturing the [*] or [*], conceived or made heretofore or during the term
of this Agreement, shall be assigned to and owned by [*] or its designee.
-5-
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 6
5.2. [*]'S SALE OF [*]. Except as hereafter provided, as long as
RASTER only purchases [*] for use in the [*] product developed by RASTER
pursuant to Section 2.3 above from [*], [*] and its affiliates will not sell,
distribute or market [*] (or any component thereof) for use in the [*]
product developed by RASTER to end-users through the after market. In the
event RASTER purchases [*] for use in the [*] product developed by RASTER
pursuant to Section 2.3 above from a vendor other than [*], [*] and its
affiliates may sell, distribute or market [*] (or any component thereof) to
end-users through the after market.
5.3 INTELLECTUAL PROPERTY INDEMNITY. [*] agrees, at its
expense to defend and indemnify RASTER in any suit, claim, or proceeding brought
against RASTER alleging that the [*] or [*] under normal use, infringe a
patent, copyright, trademark, trade secret obligation of [*] or a third party,
provided that [*] is promptly notified of any such claim, given reasonable
assistance from RASTER and exclusive control of the defense and settlement.
Further [*] agrees to pay any damage and costs finally awarded against RASTER
in any such suit by reason of infringement, but [*] shall have no liability
for settlements or costs incurred without its consent. Should RASTER's use or
sale of any Product or any part thereof be enjoined, or in the event that [*]
desires to minimize its liability hereunder, [*] may, at its option and
expense, either (a) substitute equivalent non-infringing Products for the
infringing item, (b) modify the infringing item so that it no longer infringes
but remains equivalent, or (c) obtain for RASTER the right to continue using
such item. If none of the foregoing is feasible, [*] may obtain possession of
the products which are the subject of the injunction or claim and refund to
RASTER the purchase price, plus corresponding shipping costs paid by RASTER.
The foregoing indemnity shall not apply if and to the extent that an alleged
infringement arises from the combination of any item or equipment not supplied
by [*]. Further, such indemnity shall not apply and RASTER agrees to indemnify
[*] against any damages and costs awarded against or incurred by [*] to the
extent that an alleged infringement arises from [*] manufacture or assembly of
any item to the specification or design of RASTER.
The foregoing states the entire liability and obligation of
manufacturer with respect to infringement or claims of infringement of any
patent, copyright, trade secret or other intellectual property right by the
Product or any part thereof.
ARTICLE VI - TERM AND TERMINATION
6.1. TERM. Unless earlier terminated in accordance with Section 6.2.,
this Agreement shall terminate on December 31, 1997; provided, however, that
RASTER has the right to renew the contract, if PASTIER is not then in default,
for an additional twelve month period. Thereafter, this Agreement shall be
automatically extended for successive periods of one year unless terminated by
either party giving the other party at least three months written notice prior
to the expiration of any such renewal period, or unless otherwise terminated in
accordance with the provisions of this Agreement.
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
-6-
<PAGE> 7
6.2. TERMINATION.
(a) In the event of a material breach of this Agreement by
either [*] or RASTER not cured within forty-five (45) days following written
notice thereof given by the party not in default to the party in default, then,
and in addition to all other rights and remedies a party may have at law or in
equity the party not in default may at its option terminate this Agreement and
such termination shall become effective forty-five (45) days following the date
of such notice; provided, however, that if such default involves a technical
problem with the [*] or [*], then [*] shall have sixty (60) days from the
receipt of written notice to cure the default before this Agreement may be
terminated.
(b) [*] or RASTER shall have the right to terminate this
Agreement by written notice of termination to other other, effective upon
receipt of such notice by the other, in the event of any one of the following:
(i) liquidation of the other, (ii) insolvency or bankruptcy of the other,
whether voluntary or involuntary, (iii) failure of a party to satisfy any
judgment against it.
(c) Termination of this Agreement for any cause whatsoever
shall in no manner interfere with, affect or prevent the collection by [*]
of any and all sums of money due to it and then unpaid. Termination of the
contract because of default by [*] will result in the refund of any remaining
amount of the Development Fee.
(d) Upon expiration or termination of this Agreement for any
reason, the rights conferred on RASTER pursuant to Section 5.2. shall cease,
provided that RASTER may sell or otherwise dispose of its then-existing
inventory of Products incorporating such rights.
ARTICLE VII - MISCELLANEOUS
7.1. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of Texas (regardless of the laws that might
otherwise govern under applicable principles of conflicts of law).
7.2. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the respective successors and assigns of
the parties hereto.
7.3. SEVERABILITY. If any provision of this Agreement is held to be
unenforceable for any reason, it shall be adjusted rather than voided, if
possible, in order to achieve the intent of the parties to this Agreement to the
extent possible. In any event, all other provisions of this Agreement shall be
deemed valid and enforceable to the full extent possible.
7.4. ENTIRE AGREEMENT. This Agreement, including the ANNEXES hereto
constitute the entire Agreement by the parties relating to the subject matter
herein and supersedes all other prior and contemporaneous Agreements,
negotiations, correspondence, undertakings and communications of the parties,
oral or written, with respect to the subject matter hereof.
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
-7-
<PAGE> 8
7.5. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which taken
together shall constitute one and the same instrument.
7.6. NOTICES. Any notice or other communication required or permitted
under this Agreement shall be in writing and shall be deemed sufficiently given
when delivered in person, or transmitted by telegram or telecopier (confirmed by
mail) addressed as follows:
if to [*], at:
[*]
[*]
[*]
Attn: Vice-President, OEM Sales and Marketing
if to RASTER, at:
RASTER Graphics, Inc.
3025 Orchard Parkway
San Jose, CA 95134
Attn: Vice-President, Finance
or, in each case, at such other address as may be specified in writing
to the other parties hereto.
7.7. NO JOINT VENTURE, ETC. The parties hereto are independent
contractors and this Agreement does not constitute the parties having entered
into a joint venture nor shall it constitute any party the agent or legal
representative of the other party for any purposes whatsoever, and neither party
shall have any express or implied right or authority to assume or to create any
obligation or responsibility on behalf of or in the name of the other party or
to bind the other party in any manner.
7.8. ASSIGNMENT. This Agreement may not be assigned by any party
without the prior written consent of the others, which consent will not be
unreasonably withheld, except for assignment in the event of an acquisition or
purchase of substantially all of the assets of a party.
7.9. WAIVER, MODIFICATION. [*] or RASTER may by written notice to
the other (i) extend the time for the performance of any of the obligations or
other actions of the other under this Agreement, (ii) waive compliance with any
of the conditions or covenants of the other contained in this Agreement and
(iii) waive or modify performance of any of the obligations of the other under
this Agreement. The waiver by party hereto of a breach on any provision of this
Agreement shall not operate as or be construed as a waiver of any preceding or
succeeding breach and no failure by either party to exercise any right or
privilege thereunder shall be deemed a waiver of such party's rights or
privileges thereunder or shall be deemed a waiver of such party's rights to
exercise the same at any subsequent time or times thereunder.
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
-8-
<PAGE> 9
7.10. FORCE MAJEURE. Except for the payment of monies owed, no party
shall be responsible or liable to the others for, nor shall this Agreement be
terminated as a result of, any delay or failure to perform any of its
obligations thereunder, if such delay or failure results from circumstances
beyond the control of such party, including but not limited to requisition by
any government authority or any other governmental order or regulation,
earthquake, failure of public utilities or common carriers, fire, flood,
explosion, acts of God, epidemics, strikes, lockouts, riots or other civil
commotion, wars or enemy action.
7.11. DISCLOSURE. Each party agrees (and agrees to cause its
affiliates, employees, agents and representatives) to comply with the terms of
ANNEX 4 entitled Agreement number JE-96-05-537. RASTER hereby agrees and
consents to the disclose by either [*] of the terms of this Agreement to the
extent such disclosure may be reasonably requested by any person who shall have
licensed to [*] or one its affiliates any intellectual property used in
[*] or [*] .
7.12 DISPUTE RESOLUTION. The sole and exclusive remedy with respect to
any controversy, claim, or dispute between parties to this agreement arising
under this agreement or common law, statutory or regulatory provision shall be
recourse to arbitration in New York, New York in accordance with the
then-effective Rules of Conciliation and Arbitration of The International
Chamber of Commerce by three (3) arbitrators appointed according to those rules.
Each party hereby waives any right it may have to any remedy in a court of law.
Any award of the arbitrators shall be final and conclusive on the parties,
judgment upon such award may be certified in any court of competent jurisdiction
and no appeal shall lie therefrom. Notwithstanding the foregoing, either party
may apply to a court of law (and equity) for injunctive relief; provided, that
it is the intent of the parties that the merits of any claim will be ultimately
determined by arbitration in the manner provided above.
7.13 LEGAL EXPENSES. The prevailing party in any legal action brought
by one party against the other and arising out of this agreement shall be
entitled, in addition to any other rights and remedies it may have, to
reimbursement for its expenses, including court costs and reasonable attorney's
fees.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day first above written.
[*]
By:
--------------------------------
Name: [*]
Title: Executive Vice President
RASTER Graphics, Inc.
By:
--------------------------------
Name:
Title:
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
-9-
<PAGE> 10
SIGNATURE PAGE TO DEVELOPMENT AND PURCHASE AGREEMENT DATED MARCH 16, 1996 BY AND
BETWEEN RASTER GRAPHICS, INC., AND [*] INTERNATIONAL,
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
-10-
<PAGE> 11
ANNEX 1
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
[*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TECHNOLOGY [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------
ACTIVITY [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------
*[*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------
*[*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------
*[*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[*] [*] [*] [*]
[*] [*]
[*] [*]
* [*] shall be subject to modification by [*] after testing which shall be
completed by March 31, 1996, and must be a minimum of [*].
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 12
ANNEX 2
FIRM ORDER FOR:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
type delivery-date pieces per month prices per pcs in [*]
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
[*] 12/15/95 [*] [*]
- -------------------------------------------------------------------------------------------------------------
[*] 12/22/95 [*] [*]
- -------------------------------------------------------------------------------------------------------------
[*] Mar 96 [*] [*]
- -------------------------------------------------------------------------------------------------------------
[*] Apr-May 96 [*] [*]
- -------------------------------------------------------------------------------------------------------------
[*] Jun-Jul 96 [*] [*]
- -------------------------------------------------------------------------------------------------------------
[*] Aug-Oct 96 [*] [*]
- -------------------------------------------------------------------------------------------------------------
[*] Nov 96 - Jan 97 [*] [*]
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
</TABLE>
- - For further deliveries after those in the above table, RASTER will place a
firm order for a minimum of three months with a nine month forecast.
- - The delivery-dates and volumes for 2 months has always to be fixed; the
delivery-dates for the rest of the firm order-volume can be moved, but has
to be purchased within 3 month period.
- - From January 1997 on, the price will depend on the volume for a 12 month
period, with the volume dependency as shown in the table below.
- - Prices for contract extensions will not be greater than those in the
following table.
- - Volumes for a 12 month period which are less than [*] will result in a
back billing at a higher price as per the table below for the actual number
of units ordered.
- - If volumes are less than [*] between February 1997 and June
1997, RASTER shall pay [*] an additional [*] per [*] required
to be purchased from January 1996 through June 1997.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
[*] [*]
- ------------------------ -----------------------------------------
VOLUME OF ONE [*] [*] PER PIECE
ORDER [*] [*] [*]
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
[*] [*] [*] [*]
- ---------------------------------------------------------------------------------------------
[*] [*] [*] [*]
- --------------------------------------------------------------------------------------------
[*] [*] [*] on request
- ---------------------------------------------------------------------------------------------
[*] [*] [*] on request
- ---------------------------------------------------------------------------------------------
[*] on request on request on request
- ---------------------------------------------------------------------------------------------
</TABLE>
For deliveries after November 1, 1996, [*] will credit [*] [*] for each
[*] [*] until [*], which RASTER has paid as a Development Fee, is reached.
[*] shall have no obligation to refund any amount to RASTER in the event RASTER
fails to order enough [*] to recoup the Development Fee.
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 13
ANNEX 3
FIRM ORDER FOR:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
type delivery-date # [*] price [*] in $
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
[*] Jan-Mar 96 [*] [*]
- ------------------------------------------------------------------------------
[*] Apr-July 96 [*] [*]
- ------------------------------------------------------------------------------
[*] Aug-Oct 96 [*] [*]
- ------------------------------------------------------------------------------
[*] Nov 96-Jan 97 [*] [*]
- ------------------------------------------------------------------------------
</TABLE>
- - For further deliveries after those in the above table, RASTER will place a
firm order for a minimum of three months with a nine month forecast.
- - Number of [*] in the above table are per month in total [*] .
- - Number of [*] will be at RASTER's choice.
- - The delivery-dates and volumes for 2 months has always to be fixed, the
delivery-dates for the rest of the firm order volume can be moved, but has
to be purchased within three months.
- - [*]
- - [*] will be delivered in [*] containing [*] of [*] , and the price
thereof will be based on a price of [*] [*] .
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 1
EXHIBIT 11.1
RASTER GRAPHICS, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE LOSS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED
----------------------------------------------
DECEMBER 31, DECEMBER 30, DECEMBER 31,
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net income (loss).................................. $ 41 $ (2,128) $ 77
======= ======= =======
Computations of weighted average common and
weighted average common shares outstanding....... 354 329 220
Common equivalent shares from stock options,
convertible preferred stock and warrants......... 3,909 -- 6,168
Shares related to SAB Nos. 55, 64, and 83.......... 784 784 784
------- ------- -------
Shares used in computing net loss per share........ 5,047 1,113 7,172
======= ======= =======
Net loss per share................................. $ 0.01 $ (1.91) $ 0.01
======= ======= =======
</TABLE>
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
1. Onyx Graphics Corporation -- wholly owned subsidiary of the Company
incorporated in Delaware.
2. Raster Graphics GmbH -- wholly owned subsidiary of the Company incorporated
in Germany.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Consolidated Financial Data" and "Experts" and to the use of our report dated
February 23, 1996, except as to Note 13, as to which the date is July , 1996,
related to Raster Graphics, Inc, in the Registration Statement (Form S-1) and
related Prospectus of Raster Graphics, Inc. for the registration of
shares of its common stock.
Our audits also included the financial statement schedule of Raster
Graphics, Inc. listed in Item 16(b). This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
San Jose, California
July , 1996
------------------------
The foregoing consent is in the form that will be signed upon the
completion of the reincorporation of the Company from California to Delaware and
the reverse stock split.
/s/ ERNST & YOUNG LLP
San Jose, California
June 19, 1996
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Onyx Graphics Corporation:
We consent to the use of our report dated November 11, 1994, on the
statements of operations and cash flows of Onyx Graphics Corporation for the
year ended September 30, 1994 included herein and to the reference to our firm
under the heading "Experts" in the Prospectus.
/s/ KPMG Peat Marwick LLP
Salt Lake City, Utah
June 21, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1550
<SECURITIES> 0
<RECEIVABLES> 6034
<ALLOWANCES> 467
<INVENTORY> 3248
<CURRENT-ASSETS> 10497
<PP&E> 4334
<DEPRECIATION> 2882
<TOTAL-ASSETS> 12343
<CURRENT-LIABILITIES> 5126
<BONDS> 504
0
6
<COMMON> 0
<OTHER-SE> 6707
<TOTAL-LIABILITY-AND-EQUITY> 12343
<SALES> 26045
<TOTAL-REVENUES> 26045
<CGS> 16598
<TOTAL-COSTS> 16598
<OTHER-EXPENSES> 9336
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57
<INCOME-PRETAX> 160
<INCOME-TAX> 83
<INCOME-CONTINUING> 77
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 77
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
