FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
(Mark One)
X Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
- --- Act of 1934
- --- For the quarterly period ended MARCH 31, 1995.
- --- Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _________ to _________
Commission file number: 0-14025
SOFTWARE PUBLISHING CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 94-2707010
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3165 KIFER ROAD
SANTA CLARA, CALIFORNIA 95051
(Address of principal executive offices, including zip code)
(408) 986-8000
(Registrant's telephone number, including area code)
------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days:
Yes X No
--- ---
As of April 30, 1995 there were 12,479,240 shares of the Registrant's Common
Stock outstanding.
<PAGE>
SOFTWARE PUBLISHING CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Page no.
Item 1. Financial Statements:
Consolidated Balance Sheets -
March 31, 1995 and September 30, 1994................. 3
Consolidated Statements of Operations -
Three and six months ended March 31, 1995 and 1994.... 4
Consolidated Statements of Cash Flows -
Six months ended March 31, 1995 and 1994.............. 5
Notes to Consolidated Financial Statements................. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 8
PART II. OTHER INFORMATION
Item 5 Legal Proceedings..........................................12
Item 6. Exhibits and Reports on Form 8-K...........................12
Signatures.................................................13
2
<PAGE>
PART I. FINANCIAL INFORMATION
SOFTWARE PUBLISHING CORPORATION
CONSOLIDATED BALANCE SHEETS
(000's omitted, except share data; unaudited)
ASSETS Mar. 31, 1995 Sept. 30, 1994
------------- --------------
Current assets:
Cash & short term investments .............. $ 43,997 $ 47,559
Accounts receivable, net of allowance
for doubtful accounts of $873 and $1,009 10,596 12,770
Inventories ................................ 1,710 1,286
Prepaid expenses and other current assets .. 1,292 1,367
-------- --------
Total current assets ............................ 57,595 62,982
Property and equipment, net ..................... 3,290 3,796
Other assets .................................... 1,042 841
-------- --------
Total assets .................................... $ 61,927 $ 67,619
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable ..................... $ 6,297 $ 8,692
Income taxes payable ....................... 3,032 2,013
Other accrued liabilities .................. 14,327 15,330
-------- --------
Total current liabilities ....................... 23,656 26,035
Accrued lease obligations ....................... 10,116 11,399
Acquisition related liability ................... 2,903 --
-------- --------
Total liabilities ............................... 36,675 37,434
-------- --------
Stockholders' equity:
Common stock
Authorized: 30,000,000 shares,
$0.001 par value Issued and
outstanding: 12,479,240 and
12,441,042 shares, respectively .......... 13 13
Capital in excess of par value
Net unrealized loss on securities .......... 19,799 19,664
Retained earnings .......................... (492) --
Total stockholders' equity ...................... 5,932 10,508
-------- --------
Total liabilities and stockholders' equity ...... 25,252 30,185
-------- --------
$ 61,927 $ 67,619
======== ========
The accompanying notes are an integral part of these financial statements.
3
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<TABLE>
SOFTWARE PUBLISHING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(000's omitted, except per share data; unaudited)
<CAPTION>
Three months ended Six months ended
Mar 31, 1995 Mar 31, 1994 Mar 31, 1995 Mar 31, 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net revenues ............................................... $ 9,019 $ 14,468 $ 21,406 $ 37,171
Cost of revenues ........................................... 2,174 2,627 4,441 7,212
--------- --------- --------- ---------
Gross profit .......................................... 6,845 11,841 16,965 29,959
--------- --------- --------- ---------
Operating expenses:
Marketing and sales ................................... 5,241 10,555 11,455 21,440
Research and development .............................. 2,843 4,943 5,654 9,994
General and administrative ............................ 1,604 2,025 2,639 3,886
Restructuring and lease obligations ................... -- 7,843 -- 7,843
In process research and development ................... 4,756 -- 4,756 --
--------- --------- --------- ---------
Total operating expenses ................................... 14,444 25,366 24,504 43,163
--------- --------- --------- ---------
Loss from operations ....................................... (7,599) (13,525) (7,539) (13,204)
Other income, net of other expenses ........................ 900 4,739 1,209 4,809
--------- --------- --------- ---------
Loss before income taxes ................................... (6,699) (8,786) (6,330) (8,395)
Income tax benefit ......................................... 1,755 -- 1,755 --
--------- --------- --------- ---------
Net loss .............................................. (4,944) (8,786) (4,575) (8,395)
Dividends on redeemable preferred stock .................... -- -- -- (29)
--------- --------- --------- ---------
Net loss available to common stockholders .................. $ (4,944) $ (8,786) $ (4,575) $ (8,424)
========= ========= ========= =========
Net loss per common share .................................. $ (0.40) $ (0.71) $ (0.37) $ (0.68)
========= ========= ========= =========
Shares used in computing net loss per share ................ 12,479 12,391 12,460 12,363
========= ========= ========= =========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
4
<PAGE>
SOFTWARE PUBLISHING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's omitted, unaudited)
Six months ended
Cash flows from operating activities: Mar. 31, 1995 Mar. 31, 1994
------------- -------------
Net loss ............................................... $ (4,575) $ (8,395)
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization ..................... 1,379 2,723
Non-cash restructuring and other charges .......... -- 1,623
In-process research and development ............... 4,756 --
Net change in operating assets and liabilities:
Accounts receivable ........................... 2,174 7,987
Other current assets .......................... (349) (814)
Trade accounts payable and other accrued
liabilities................................. (4,839) (11,320)
Income taxes receivable and payable ........... 1,019 7,249
Accrued restructuring and lease obligations ... (1,322) 1,715
-------- --------
Net cash provided (used) by operating activities ....... (1,757) 768
-------- --------
Cash flows from investing activities:
Acquisition of property and equipment ............. (1,164) (998)
Increase in other non-current assets .............. (284) (996)
Decrease in short-term investments ................ 15,617 18,605
-------- --------
Net cash provided (used) by investing activities ....... 14,169 16,611
-------- --------
Cash flows from financing activities:
Issuance of capital stock, net of repurchases ..... 135 340
Redemption of preferred stock and payment
of dividends .................................... -- (2,700)
-------- --------
Net cash provided (used) by financing activities ....... 135 (2,360)
-------- --------
Net increase in cash and cash equivalents .............. 12,547 15,019
Cash and cash equivalents:
Beginning balance ................................. 18,320 2,039
-------- --------
Ending balance .................................... $ 30,867 $ 17,058
======== ========
Supplemental disclosure:
Income tax paid during the period, net of refunds $ (2,799) $ (7,257)
========= ========
The accompanying notes are an integral part of these financial statements.
5
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SOFTWARE PUBLISHING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(unaudited)
1. The unaudited financial information furnished herein reflects all
adjustments, consisting only of normal recurring adjustments, which in the
opinion of management are necessary to fairly state the Company's and its
subsidiaries' consolidated financial position, the results of their
operations, and their cash flows for the periods presented. This Quarterly
Report on Form 10-Q should be read in conjunction with the Company's
audited financial statements for the year ended September 30, 1994 included
in the 1994 Annual Report to Stockholders. The consolidated results of
operations for the six month period ended March 31, 1995 are not
necessarily indicative of results to be expected for the entire fiscal year
ending September 30, 1995.
2. Investment Securities
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt
and Equity Securities" (FAS 115). The Company adopted the provisions of FAS
115 effective October 1, 1994. Under the provisions of FAS 115, the Company
has classified its investments in debt securities as "available-for-sale."
Such investments are now recorded at fair value, with unrealized gains and
losses reported as a separate component of shareholders' equity. Interest
income is still recorded using an effective interest rate, with the
associated discount or premium amortized to interest income.
The cost of securities sold is based on the specific identification method.
In accordance with the provisions of FAS 115, prior period financial
statements have not been restated to reflect the change in accounting
principle. The cumulative effect as of December 31, 1994 of adopting FAS
115 was to decrease the opening balance of shareholders' equity by $0.3
million to reflect the net unrealized loss on investments classified as
available-for-sale and previously recorded at cost.
Cash and short term investments comprised (in thousands):
Mar 31, 1995 Sept. 30, 1994
------------ --------------
Cash and cash equivalents ............... $30,867 $18,320
Short term investments .................. 13,130 29,239
------- -------
$43,997 $47,559
======= =======
3. Inventories are primarily finished goods and are stated at the lower of
first-in, first-out cost or market.
4. Other accrued liabilities comprised (in thousands):
Mar 31, 1995 Sept. 30, 1994
------------ --------------
Reserve for returns and exchanges ............... $ 2,152 $ 4,563
Current portion of lease obligations ............ 3,263 3,331
Rebates and channel marketing programs .......... 2,159 2,029
Accrued compensation and benefits ............... 1,566 1,176
Restructuring accruals .......................... 515 860
Current portion of acquisition related liability 2,100 --
Other accrued liabilities ....................... 2,572 3,371
------- -------
$14,327 $15,330
======= =======
6
<PAGE>
5. The Company acquired Digital Paper Corporation, a developer of visual
communications software technology, during the second quarter of fiscal
1995. The privately held company was purchased for total consideration of
approximately $5.0 million. The Company may pay up to an additional $1.5
million in cash upon the achievement of certain unit, revenue and technical
milestones over the next three years. The assets acquired consisted
primarily of in-process visual communication software that the Company
intends to incorporate into its products. As a result of this acquisition,
the Company took an one time charge of $4.8 million in the second quarter
of fiscal 1995, for the portion of the transaction related to in-process
research and development.
6. Net income per common share has been computed using the weighted average
number of common and common equivalent shares (when dilutive) outstanding
during each period. The difference between primary and fully diluted net
income per common share is not significant.
7
<PAGE>
SOFTWARE PUBLISHING CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
North America and international net revenues for the periods ended March 31,
1995 and 1994, and the percentage of change of net revenues were as follows:
Three months Six months
(dollars in millions) ended Mar 31, ended Mar 31,
------------- Percent ------------- Percent
1995 1994 Change 1995 1994 Change
---- ---- ------ ---- ---- -----
North America $ 5.9 $ 8.5 (30)% $ 13.6 $ 24.2 (44)%
International 3.1 6.0 (48)% 7.8 13.0 (40)%
----- ----- ---- ------ ------ -----
Total net revenues $ 9.0 $14.5 (38)% $ 21.4 $ 37.2 (42)%
====== ===== ====== ======
Net revenues in the second quarter of fiscal 1995 decreased by 38% compared to
the second quarter of fiscal 1994 and net revenues for the first six months of
fiscal 1995 decreased by 42% compared to the first six months of 1994. The
decline in net revenues in the second quarter and first six months of fiscal
1995 resulted primarily from decreased sales of Harvard Graphics for Windows and
the continuing decline in the sales of Harvard Graphics DOS. Harvard Graphics
Version 3.0 for Windows, which began shipping in July 1994, was at the peak of
its version upgrade life cycle during the fourth quarter of fiscal 1994 and was
at its peak decline during the second quarter of fiscal 1995. The Company does
not expect any significant increase in its Harvard Graphics net revenues until
the Company is able to introduce a Harvard Graphics version based on Microsoft
Windows 95, which is now scheduled for release in the Company's fourth quarter
of fiscal 1995. The continuing significant decline in sales of DOS products,
including Harvard Graphics DOS and Professional Write DOS, contributed as well
to this decline in net revenues, as the Company continues to experience an
overall ongoing decline in the DOS market. Additionally, the Company completed
the sale of its Superbase product line to Computer Concepts Corporation in June
1994, which resulted in further declines in net revenues following June 30,
1994. Also contributing to these declines was the continuing effects of intense
competition worldwide, particularly in the Windows market, and a soft economy in
Europe.
Net revenues in the second quarter of fiscal 1995 included sales from the
Company's four most recently released products: Harvard Spotlight released in
June 1994, Harvard Chart XL released in September 1994, OnFile released in
December 1994, and Montage released in March 1995. These products accounted for
an aggregate of approximately 12% of the net revenues in the second quarter of
fiscal 1995, up from approximately 8% in the first quarter of fiscal 1995.
The Harvard Graphics series of presentation graphics products represented 80% of
total net revenues in the second quarter of fiscal 1995 compared with 84% in the
second quarter of fiscal 1994, and 87% of total revenues in the first six months
of fiscal 1995 and 1994. Net revenues from sales of all products on the Windows
platform in the second quarter of fiscal 1995 accounted for 80% of total net
revenues compared to 62% in the second quarter of fiscal 1994; and 83% of total
net revenues in the first six months of fiscal 1995 as compared to 71% in the
first six months of fiscal 1994.
Cost of revenues was $2.2 million or 24% of net revenues in the second quarter
of fiscal 1995 as compared to $2.6 million or 18% of net revenues in the second
quarter of fiscal 1994, and $4.4 million or 21% of net revenues in the first six
months of fiscal 1995 as compared to $7.2 million or 19% of net revenues in the
first six months of fiscal 1994. Cost of revenues in the second quarter and
first six months of fiscal 1995 in absolute dollars decreased as compared to the
comparable periods in fiscal 1994 primarily because of reduced sales and lower
manufacturing overhead expenses which were partially offset by increased charges
for obsolete inventory principally in the international operations and overall
lower average selling prices. Since April 1994, the Company has experienced a
positive impact of lower
8
<PAGE>
overhead and employee-related costs resulting from a reorganization and
reduction in work force, but these savings have been more than offset by the
unfavorable impact of reduced revenues.
The Company's gross margins and operating income may be affected in particular
periods by the timing of product introductions and other promotional pricing and
rebate offers, as well as return privileges and marketing promotions in
connection with new product introductions and upgrades. These promotions may
have a negative influence on average selling prices and gross margins. Gross
margins have been, and will continue to be, adversely affected by competitive
pricing strategies in the industry as a whole, including competitive upgrade
pricing and alternative licensing arrangements.
The Company believes that its revenues and the results of operations for fiscal
year 1995 have been and will continue to be adversely affected by the delay in
the introduction of Microsoft Windows 95 which is now scheduled for release in
the Company's fourth quarter of fiscal 1995. This postponement will in turn
delay the upgrade cycle of the Company's products. Although revenue
opportunities have been delayed due to the postponement of Microsoft Windows 95,
the Company has been able to somewhat offset this adverse affect with
alternative marketing programs in the second quarter of fiscal 1995 and hopes to
continue to do so in the third quarter of fiscal 1995. Since the Company's net
revenues for the current version of Harvard Graphics for Windows has declined in
the first and second quarters of fiscal 1995, the Company has been introducing
alternative marketing programs in an effort to sustain demand for this product.
The Company believes that end users are continuing to migrate from the DOS to
the Windows platform, but cannot predict the rate of this transition or the
degree to which it will affect net revenues or gross margins in the future. The
Company expects increased competition, including price competition, in both the
DOS and Windows markets in the future. Some of the Company's competitors have
introduced suites of products which include products that directly compete with
the Company's products which are bundled with other office software programs by
the same or multiple competitors, and are sold at an all-inclusive price. The
Company believes these offerings of product suites have adversely affected the
Company's net revenues, and will continue to adversely affect the sales of
Harvard Graphics products in the future. The Company does not currently offer a
suite of products, but offers products that complement competitive suite
products. In order for the Company to increase its revenues, it must introduce
new marketing strategies and continue to develop and introduce new technologies
and products through strategic alliances, acquisitions or internal development.
Any delay in these planned strategies, difficulties encountered in introducing
new products or marketing programs, or failure of the Company's products to
compete successfully with products offered by other vendors could materially and
adversely affect net revenues and profitability.
The Company believes that its results of operations have been adversely affected
by delays in introduction of Microsoft Windows 95, increased price competition,
market uncertainties, offerings of product suites by competitors, and a decline
in the DOS market. In the future, the Company's operating results could be
adversely affected by these and other factors, such as delays in new product
introductions, the mix of product sales or distribution channels, and customer
choices regarding operating systems.
Total operating expenses in absolute dollars in the second quarter of fiscal
1995 decreased by $10.9 million as compared to the second quarter of fiscal
1994. Total operating expenses in absolute dollars in the first six months of
fiscal 1995 decreased by $18.7 million as compared to the first six months of
fiscal 1994. Operating expenses in the second quarter of fiscal 1995 included a
one-time $4.8 million in-process research and development charge related to the
acquisition of Digital Paper, Inc. as described below. Operating expenses in the
first fiscal quarter of 1995 included a reversal of $0.9 million which resulted
from the resolution of an operational legal dispute. Operating expenses in the
second quarter of fiscal 1994 included a $7.8 million charge to restructuring.
Excluding the above non-recurring items, operating expenses decreased in the
second quarter of fiscal 1995 by $7.8 million or 45% as compared to the second
quarter of fiscal 1994; and, excluding the above non-recurring items, operating
expenses decreased in the first six months of fiscal 1995 by $14.6 million or
41% as compared to the first six months of fiscal 1994. These decreases were
principally attributable to reductions in personnel and facilities expenses, as
well as improved operating expense management. The Company expects to continue
to aggressively manage its overall cost structure in the future, although there
can be no assurance that it will succeed in costs reduction efforts.
9
<PAGE>
Marketing and sales expenses were $5.2 million or 58% of net revenues in the
second quarter of fiscal 1995 as compared to $10.6 million or 73% of net
revenues in the second quarter of fiscal 1994; and $11.5 million or 54% of net
revenues in the first six months of fiscal 1995 as compared to $21.4 million or
58% in the first six months of fiscal 1994. The decrease in absolute dollars is
the result of reduced expenses for advertising and promotions, as well as
reduced employee related expenses because of the restructuring and related
reduction in work force which included the closure of several sales offices both
in North America and various International locations.
Research and development expenses were $2.8 million or 32% of net revenues in
the second quarter of fiscal 1995 as compared to $4.9 million or 34% of net
revenues in the second quarter of fiscal 1994; and $5.7 million or 26% of net
revenues in the first six months of fiscal 1995 as compared to $10.0 million or
27% in the first six months of fiscal 1994. The Company believes that it is
necessary to continue to invest in research and development to remain
competitive. However, as a result of the restructuring actions taken by the
Company in the fourth quarter of fiscal 1993 and the second quarter of fiscal
1994, internal research and development expenses are expected to be lower in
absolute dollars in fiscal 1995 than in fiscal 1994. As in the second quarter of
fiscal 1995, the Company intends to continue to acquire externally developed
technology, explore strategic alliances and other methods of acquiring
technology, as well as continuing to invest in internal development projects.
Because of the inherent uncertainties associated with software development
projects, there can be no assurance that the Company's research and development
efforts will result in successful product introductions or increased revenues.
General and administrative expenses were $1.6 million or 18% of net revenues in
the second quarter of fiscal 1995 as compared to $2.0 million or 14% of net
revenues in the second quarter of fiscal 1994; and $2.6 million or 12% of net
revenues in the first six months of fiscal 1995 as compared to $3.9 million or
11% in the first six months of fiscal 1994. General and administrative expenses
in the first quarter of fiscal 1995 included a $0.9 million reversal of reserves
resulting from the resolution of an operational legal dispute. The decrease in
absolute dollars in the year to date expenses for fiscal 1995 as compared to
fiscal 1994, is attributable to reduced employee related expenses because of the
restructuring and related reduction in work force undertaken in the second
quarter of fiscal 1994.
In the second quarter of fiscal 1995, the Company acquired Digital Paper
Corporation, a developer of visual communications software technology. The
privately held company was purchased for total consideration of approximately
$5.0 million. The Company may pay up to an additional $1.5 million in cash upon
the achievement of certain unit, revenue and technical milestones over the next
three years. As a result of this acquisition, the Company took an one time
charge of $4.8 million in the second quarter of fiscal 1995, for the portion of
the transaction related to in-process research and development.
Other income and expense in the second quarter of fiscal 1995 was $0.9 million
as compared to $4.7 million in the second quarter of fiscal 1994; and $1.2
million in the first six months of fiscal 1995 as compared to $4.8 million in
the first six months of fiscal 1994. Other income in the second quarter of
fiscal 1994 included an arbitration award of $2.6 million, a gain of $1.2
million realized on the sale of an investment, and a $0.5 million due to
settlement of legal proceedings. Exclusive of these items, other income
increased slightly in the first six months of fiscal 1995 as compared to the
first six months of fiscal 1994 because of lower foreign exchange losses and
higher interest income.
The Company booked a tax benefit of $1.8 million in the second quarter of fiscal
1995 due to the tax refund received during the quarter.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
For the second quarter of fiscal 1995, cash and short term investments increased
$0.4 million to $44.0 million. This increase resulted from a tax refund offset
by cash used for operating activities and purchase of capital equipment.
Management believes the existing cash and short term investments, cash generated
from operations and the Company's potential borrowing ability will be sufficient
to meet its currently anticipated liquidity and capital expenditure requirements
at least through fiscal 1996.
In fiscal 1994, the Company invoiced approximately 27% of its total sales in
foreign currencies, and expects this practice to continue at about the same rate
in fiscal 1995. Although the Company has not currently engaged in hedging
activities, the Company's exposure for foreign currency exchange gains and
losses has been partially mitigated as the Company incurred operating expenses
in most of the currencies in which it invoiced customers. The company may in the
future hedge certain specific contractual obligations in foreign currency. The
Company's foreign exchange gains and losses will fluctuate from period to period
depending on the movement in exchange rates.
11
<PAGE>
SOFTWARE PUBLISHING CORPORATION
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company, Fred Gibbons and Irfan Salim were named as defendants in
two class action lawsuits initially filed in the United States District
Court for the Northern District of California in April and May 1993. As
subsequently amended and consolidated, the complaint alleges securities
law violations in connection with disclosures by the Company. The class
period alleged in the amended complaint is October 1, 1992 to April 2,
1993. The Company and the other defendants have agreed to a settlement
under which the Company and other defendants have been released from
any further liabilities, and such settlement has been approved by court
order.
The Company is also a defendant in certain other litigation. Management
is of the opinion that the ultimate outcome of this litigation will not
have a material adverse affect on the future operations or financial
condition of the Company.
Item 6. Exhibits & Reports on Form 8-K
(a) Exhibits. The following Exhibits are filed as part of, or
incorporated by reference into, this report:
10.4 Stock purchase agreement among Software Publishing
Corporation, Digital Paper Inc, Daniel J. Fraisl, Carl
Meyer and Anthony N. Hoeber dated March 31, 1995.
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the fiscal quarter
ended March 31, 1995.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 15, 1995 SOFTWARE PUBLISHING CORPORATION
(Registrant)
/s/ MIRIAM K. FRAZER
--------------------------------------------
Miriam K. Frazer,
Vice President Finance,
Chief Financial Officer
(Principal Financial and Accounting Officer)
13
STOCK PURCHASE AGREEMENT
Dated March 31, 1995
among
SOFTWARE PUBLISHING CORPORATION,
a Delaware corporation
and
DIGITAL PAPER, INC.,
a California corporation
and
Daniel J. Fraisl,
Carl Meyer
and
Anthony N. Hoeber
<PAGE>
TABLE OF CONTENTS
PAGE
1. PURCHASE AND SALE OF THE COMPANY SHARES ............................. 1
2. CONSIDERATION ....................................................... 1
2.1 Purchase Price ................................................. 1
2.2 Unconditional Payments ......................................... 2
2.3 Conditional Payments ........................................... 3
2.4 Escrow ......................................................... 5
2.5 Acceleration and Full Payment of Consideration for
Company Shares ................................................. 5
2.6 Security Interest in Escrow Funds .............................. 5
3. CLOSING; DELIVERY ................................................... 5
3.1 Closing Date ................................................... 5
3.2 Deliveries at the Closing ...................................... 5
3.3 deliveries After the Closing ................................... 6
4. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS .................. 6
4.1 Authorization of Transaction ................................... 6
4.2 Noncontravention ............................................... 6
4.3 Company Shares ................................................. 7
4.4 Adequate Disclosure ............................................ 7
5. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS ...................... 7
5.1 Organization ................................................... 7
5.2 Authorization .................................................. 7
5.3 Capitalization ................................................. 8
5.4 No Conflicts ................................................... 8
5.5 Title .......................................................... 8
5.6 Compliance with Laws and Other Instruments ..................... 9
5.7 Instruments .................................................... 9
5.8 Real Property .................................................. 10
5.9 Environmental Laws ............................................. 10
5.10 Tax Returns; Other Reports ..................................... 10
5.11 Financial Statements ........................................... 10
5.12 Absence of Undisclosed Liabilities ............................. 11
5.13 Books and Records .............................................. 11
5.14 Inventories .................................................... 11
5.15 Accounts Receivable ............................................ 11
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TABLE OF CONTENTS
(Continued)
PAGE
5.16 Commitments.................................................... 11
5.17 Insurance...................................................... 12
5.18 Material Contracts. .......................................... 12
5.19 Defaults....................................................... 13
5.20 License and Permits............................................ 13
5.21 Condition of Assets; Warranties................................ 13
5.22 Intangible Rights.............................................. 13
5.23 Registration List; Trademarks.................................. 14
5.24 Labor Matters.................................................. 14
5.25 Employee Benefit Plans......................................... 14
5.26 Key Personnel.................................................. 14
5.27 Solvency....................................................... 15
5.28 Litigation..................................................... 15
5.29 Disclosure..................................................... 15
5.30 Brokers and Finders............................................ 15
6. REPRESENTATIONS AND WARRANTIES OF BUYER.............................. 15
6.1 Organization and Authority...................................... 15
6.2 Enforceability.................................................. 15
6.3 Finders and Brokers............................................. 15
6.4 Absence of Liens on Escrow Funds................................ 16
7. ADDITIONAL AGREEMENTS AND COVENANTS.................................. 16
7.1 Conduct of Business............................................. 16
7.2 Third Party Consents............................................ 17
7.3 Litigation...................................................... 17
7.4 Press Releases.................................................. 17
7.5 Key Man Life Insurance.......................................... 17
7.6 Registered Stock................................................ 18
7.7 Further Assurances.............................................. 18
7.8 Confidential Treatment.......................................... 18
7.9 Delivery of Exhibits and Schedules; Other Material.............. 19
7.10 Access to Books and Records..................................... 19
7.11 Employment of Shareholders...................................... 20
7.12 License with SGI................................................ 20
7.13 Section 341(f) Election......................................... 20
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TABLE OF CONTENTS
(Continued)
PAGE
7.14 Payment of Liabilities; Distribution of Cash and Receivables.... 20
8. CONDITIONS TO BUYER'S OBLIGATIONS AT CLOSING......................... 21
8.1 Representations and Warranties.................................. 21
8.2 Performance of Obligations of the Company and the Shareholders.. 21
8.3 Government Approvals............................................ 21
8.4 Third Party Approvals........................................... 21
8.5 Material Adverse Change......................................... 21
8.6 Litigation...................................................... 21
8.7 Deliveries by the Company....................................... 21
8.8 Employment Agreements........................................... 22
8.9 Opinion of Counsel to the Company............................... 22
8.10 Escrow Agreement................................................ 22
8.11 Employee Proprietary Information Agreement...................... 22
8.12 The Company's Officer's Certificate............................. 22
8.13 Company Disclosure Schedule..................................... 22
8.14 Due Diligence................................................... 22
8.15 Newly Enacted Laws.............................................. 22
9. CONDITIONS TO THE OBLIGATIONS OF COMPANY AND SHAREHOLDERS
CLOSING.............................................................. 22
9.1 Representations and Warranties.................................. 23
9.2 Performance of Obligations of Buyer............................. 23
9.3 Delivery of Purchase Price...................................... 23
9.4 Litigation...................................................... 23
9.5 Escrow Agreement................................................ 23
9.6 Security Agreement.............................................. 23
9.7 Approval of SGI Agreement....................................... 23
10. TERMINATION.......................................................... 23
10.1 Reasons for Termination......................................... 23
10.2 Effect.......................................................... 24
10.3 Risk of Loss to Assets.......................................... 24
11. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION......................... 24
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TABLE OF CONTENTS
(Continued)
PAGE
11.1 Survival of Representations..................................... 24
11.2 Indemnity by the Shareholders................................... 24
11.3 Indemnity by the Buyer.......................................... 25
11.4 Indemnification Procedures...................................... 25
11.5 Buyer's Defense of Certain Claims............................... 25
11.6 Payment of Indemnification Claims............................... 26
11.7 Limitations on Indemnification.................................. 26
12. ARBITRATION.......................................................... 27
12.1 Arbitration Rules............................................... 27
12.2 Selection of Arbitrators........................................ 27
12.3 Confidentiality of Arbitration Matters.......................... 27
12.4 Binding Effect of Arbitration................................... 27
12.5 Out-of-Pocket Expenses.......................................... 28
12.6 Pre-Hearing Discovery........................................... 28
13. DEFINITIONS.......................................................... 28
Accelerating Event................................................... 29
Affiliate(s)......................................................... 29
Approvals............................................................ 29
A.S.A.P. Version 1................................................... 29
A.S.A.P. Version 2................................................... 29
Assets............................................................... 29
Buyer................................................................ 29
Digital Business..................................................... 29
Change of Control.................................................... 29
Claims............................................................... 30
Closing ............................................................ 30
Closing Date......................................................... 30
Company.............................................................. 30
Completion of Development............................................ 30
Customer ............................................................ 30
Delivery Date........................................................ 30
Documentation........................................................ 30
Employee ............................................................ 30
Environmental Law.................................................... 30
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TABLE OF CONTENTS
(Continued)
PAGE
First Commercial Shipment............................................ 31
Fraisl............................................................... 31
GAAP................................................................. 31
Governmental Authority............................................... 31
Hazardous Substance.................................................. 31
Hoeber............................................................... 31
Indemnified Person................................................... 31
Indemnifying Person.................................................. 31
Instruments.......................................................... 31
Just Cause........................................................... 31
Law.................................................................. 32
Liability............................................................ 32
Licensee ............................................................ 32
Lien................................................................. 32
Meyer................................................................ 32
Operating Agreements................................................. 32
Object Code.......................................................... 32
Permitted Liens...................................................... 32
Person .............................................................. 33
Personal Property.................................................... 33
Product Derivatives.................................................. 33
Product Updates...................................................... 33
Purchase Agreement................................................... 33
Purchase Price....................................................... 33
Sell-Through Units................................................... 33
Software Product" or "Software Products.............................. 33
Source Code.......................................................... 34
Transaction Documents................................................ 34
Understanding........................................................ 34
14. POST-CLOSING COVENANTS............................................... 34
14.1 Income Tax...................................................... 34
14.2 Development, Marketing and Sale of the
Company's Software Products..................................... 34
14.3 Transfer of the Assets.......................................... 34
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TABLE OF CONTENTS
(Continued)
PAGE
15. GENERAL PROVISIONS................................................... 35
15.1 Entire Agreement............................................... 35
15.2 Expenses....................................................... 35
15.3 Headings....................................................... 35
15.4 Notices........................................................ 35
15.5 Waiver......................................................... 36
15.6 Successors and Assigns......................................... 37
15.7 Governing Law; Consent to Personal Jurisdiction................ 37
15.8 No Third Party Beneficiary..................................... 37
15.9 Severability................................................... 37
15.10 Execution in Counterparts...................................... 37
EXHIBITS
A - Promissory Note
B - Escrow Agreement
C - Security Agreement
D - Shareholders' Disclosure Schedule
E - Company Disclosure Schedule
F - Employment Agreement
G - Opinion of the Company's Legal Counsel
H - Employee Proprietary Information Agreement
SCHEDULES
4.3 - Shareholdings
5.11 - Balance Sheet
5.17 - The Company's Insurance and Bonds
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STOCK PURCHASE AGREEMENT
THIS AGREEMENT made this 31st day of March, 1995 is by and among
Software Publishing Corporation, a Delaware corporation (the "BUYER") located at
3165 Kifer Road, Santa Clara, California 95051, Digital Paper, Inc., a
California corporation, located at 10068 Pasadena Avenue, Cupertino, CA 95014
(the "COMPANY"), and Daniel J. Fraisl ("FRAISL"), Carl Meyer ("MEYER") and
Anthony N. Hoeber ("HOEBER"), together the owners of 100% of the outstanding
capital stock of the Company (collectively referred to as the "SHAREHOLDERS").
All terms not defined in the text of this Agreement are defined in Section 13 of
this Agreement.
WHEREAS, the Company is engaged in the business of owning and operating
a software company (hereinafter referred to as the "DIGITAL BUSINESS"); and
WHEREAS, the Shareholders own all of the outstanding capital stock of
the Company (the "COMPANY SHARES"); and
WHEREAS, the Shareholders have expressed an interest in selling to
Buyer all of their Company Shares pursuant to the terms and conditions set forth
herein; and
WHEREAS, Buyer has expressed an interest in acquiring all of the
Company Shares from the Shareholders pursuant to the terms and conditions set
forth herein; and
WHEREAS, the parties desire to enter into a written agreement which
sets forth the respective rights and obligations with respect to the sale of the
Company Shares by the Shareholders and the purchase of the Company Shares by
Buyer pursuant to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual and several promises and covenants set forth herein, the parties hereto
agree as follows:
1. PURCHASE AND SALE OF THE COMPANY SHARES Upon the terms and subject
to the conditions set forth in this Agreement, each of the Shareholders hereby
severally (and not jointly) agrees to convey, sell, transfer, assign and deliver
to Buyer, and Buyer agrees to purchase from each of the Shareholders, as of the
Closing Date, free and clear of any and all Liens, all right, title and interest
of the Shareholders, as of the Closing Date, in and to all of the issued and
outstanding Company Shares for the consideration set forth in Section 2 below.
2. CONSIDERATION.
2.1 Purchase Price. In consideration of the sale and
transfer of the Company Shares, Buyer shall pay the Shareholders the
consideration set forth in this Section 2 (the "PURCHASE PRICE").
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2.2 Unconditional Payments. Buyer shall pay to the
Shareholders, pro-rata based on the number of Company Shares held by each
Shareholder as of the Closing Date, aggregate payments as follows:
(a) Payments at Closing. At the Closing, Buyer
shall (i) pay to the Shareholders $2,000,000 by check or wire transfer of
immediately available funds (the "INITIAL PAYMENT") and (ii) execute and deliver
to the Shareholders a non-interest bearing promissory note due not later than
the tenth anniversary of the Closing Date in the aggregate principal amount of
$3,300,000, substantially in the form attached hereto as EXHIBIT A (the
"Promissory Note").
(b) Acceleration of Promissory Note. Buyer's
obligation to pay the Shareholders the following amounts under the Promissory
Note will be accelerated and become immediately due and payable on the following
dates:
(1) On April 7, 1996, $1,650,000 subject
to the Promissory Note shall be accelerated and become immediately due and
payable by Buyer to the Shareholders with (i) $750,000 of such amount to be paid
in cash or by check or wire transfer and (ii) an additional $900,000 of such
amount to be paid either: (A) in cash by check or by wire transfer; (B) in
shares of Buyer's Common Stock with the number of such shares equal to the
quotient determined by dividing $900,000 by the average closing price of the
Buyer's Common Stock as listed on the Nasdaq National Market for the three days
prior to the date of payment as set forth in the Wall Street Journal; or (C) a
combination thereof, with the form of such payments as between cash or Buyer's
Common Stock under item (ii) to be in Buyer's sole discretion; provided,
however, that Buyer agrees to pay cash if either Buyer no longer has shares of
its Common Stock publicly traded on a nationally recognized system or exchange
or the shares of Common Stock to be issued to Shareholders have not been
registered prior to issuance (or are otherwise issued so as not to be
"restricted securities" for purposes of the Securities Act of 1933, as amended).
It is each of the parties' understanding that the following milestones will be
achieved by April 7, 1996: (i) the A.S.A.P. Version 1 is being sold in the
marketplace, (ii) the core code base included in the A.S.A.P. Version 1 and the
Smartslide technology is localizable and (iii) the next two-year product plan
grid for the Smartslide Technology will have been agreed upon and finalized by
Buyer and the Shareholders; provided that the failure to attain one or more of
such milestones shall not be deemed a breach of this Agreement by any party and
not affect the unconditional right of the Shareholders to receive full payment
of the amounts owing pursuant to the Promissory Note and this Section 2.2 on
April 7, 1996.
(2) On April 7, 1997, the remaining
$1,650,000 balance subject to the Promissory Note shall be accelerated and
become immediately due and payable by Buyer to the Shareholders with (i)
$750,000 of such amount to be paid in cash, or by check or wire transfer and
(ii) an additional $900,000 of such amount to be paid either: (A) in cash by
check or by wire transfer; (B) in shares of Buyer's Common Stock with the number
of such shares equal to the quotient determined by dividing $900,000 by the
average closing price of
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the Buyer's Common Stock as listed on the Nasdaq National Market for the three
days prior to the date of payment as set forth in the Wall Street Journal; or
(C) a combination thereof, with the form of such payments as between cash or
Buyer's Common Stock under item (ii) to be in Buyer's sole discretion; provided,
however, that Buyer agrees to pay cash if Buyer no longer has shares of its
Common Stock publicly traded on a nationally recognized system or exchange or
the shares of Common Stock to be issued to Shareholders have not been registered
prior to issuance (or are otherwise issued so as not to be "restricted
securities" for purposes of the Securities Act of 1933, as amended). It is each
of the parties' understanding that the following milestones will be achieved by
April 7, 1997: (i) the A.S.A.P. Version 2 product that will be mutually agreed
upon by the Buyer and the Shareholders is being sold in the marketplace, (ii)
the Smartslide technology has been ported to the 32 bit/Windows '95 platform and
(iii) the Smartslide technology is used in creating a product which addresses at
least one market segment that is not addressed by the A.S.A.P. Version 1
product; provided that the failure to attain one or more of such milestones
shall not be deemed a breach of this Agreement by either party and not affect
the unconditional right of the Shareholders to receive full payment of the
amounts owing pursuant to the Promissory Note and this Section 2.2 on April 7,
1997.
Upon any payment to Buyer out of the Escrow Funds for any
indemnification claim pursuant to Section 11 of this Agreement, the Promissory
Note shall be reduced by an amount of money equal to the amount of the payment
from the Escrow Funds for such indemnification claim. At the time of any payment
to the Shareholders by Buyer under this Section 2.2, an amount of money equal to
the dollar amount represented by such payment shall be withdrawn from the Escrow
and returned to Buyer pursuant to the terms of the Escrow Agreement.
2.3 Conditional Payments. Subject to the availability of funds
in the Escrow Account as of the date a payment is provided for under this
Section 2.3 due to the payment to Buyer of any Indemnification Claims pursuant
to Section 11.2 of this Agreement, Buyer shall cause the Escrow Agent to pay to
the Shareholders, pro-rata based on the number of Company Shares held by each
Shareholder as of the Closing Date, additional payments as follows:
(a) Buyer shall cause the Escrow Agent to pay
$250,000 to the Shareholders in cash or by check or by wire transfer upon the
occurrence of each of the following events (such that an aggregate of $1,000,000
shall be paid to the Shareholders if all such events in this Section 2.3(a) so
occur).
(i) Completion of Development of the
Company's A.S.A.P. Version 1 product, so long as such Completion of Development
occurs no later than August 30, 1995 (the "Engineering Release Date").
(ii) Completion of Development of the
Company's next released product (the "SECOND PRODUCT"), so long as such
Completion of Development occurs no later than September 15, 1996. For the
purposes of this Agreement, the Second Product shall include, without
limitation: (i) A.S.A.P. Version 2 product; and (ii) any other Product
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Derivative that incorporates the Smartslide technology and that Buyer or its
Affiliates or Licensees separately markets or sells within its reseller or OEM
channels.
(iii) The date that cumulative Sell-Through
Units of the Company's A.S.A.P. Version 1 product exceed 50,000 units sold or
licensed by Buyer and its Affiliates and Licensees within a twelve-month period,
provided that this milestone is achieved no later than eighteen months following
First Customer Shipment of such product ("FIRST CUSTOMER SHIPMENT DATE"). For
purposes of determining the number of Sell-Through Units for purposes of
Sections 2.3(a)(iii), 2.3(a)(iv) and 2.3(b) below in the event of a licensing of
a product for multi-users for a fixed license fee, the number of Sell-Through
Units shall be determined by: (i) the number of multiple users authorized by the
license agreement or (ii) in the event of a licensing of an unlimited number of
licensees within a Person or at a geographic site, dividing the license fee by
Buyer's then average selling price for the product so licensed.
(iv) The date that cumulative Sell-Through
Units of the Company's A.S.A.P. products, the Second Product and any other
Product Derivative that incorporates the Smartslide technology, together, by
Buyer and its Affiliates and Licensees exceed a number of units in any
twelve-month period to be mutually agreed upon by the parties hereto prior to
September 15, 1996, provided that this milestone is achieved no later than 36
months following the First Customer Shipment Date. Each of the Shareholders and
Buyer agree to negotiate in good faith as to the unit number to be agreed and to
consider the then current market for such products and Buyer's sales projections
for such products. If the parties are unable to reach agreement as to the unit
number, then the parties agree to submit a determination of the unit amount to
Arbitration as set forth under Section 12 of this Agreement.
(b) Buyer shall pay the Shareholders up to an
additional $500,000 if cumulative revenues to Buyer and its Affiliates from the
sale of Sell-Through Units of the A.S.A.P. products, the Second Product and any
other Product Derivative that incorporates the Smartslide technology, together,
by Buyer, its Affiliates and Licensees equals or exceeds an aggregate of
$18,000,000 (the "SALES MINIMUM") during the three-year period following the
First Customer Shipment Date as follows: Buyer will have the obligation to pay
the Shareholders as set forth below in cash or by check or by wire transfer (i)
$71,429 following the achievement of the Sales Minimum and (ii) an additional
$71,429 following the achievement of each additional $1,000,000 of revenues from
the sale of Sell-Through Units, up to a maximum payment by Buyer to the
Shareholders of $500,000 upon the achievement of at least $25,000,000 of
revenues to Buyer and its Affiliates from the sale or license of cumulative
Sell-Through Units within such three-year period. Such additional payments
pursuant to this Section 2.3(b) shall: (i) be made by Buyer within forty-five
(45) days of the date following each of the three anniversaries of the First
Customer Shipment Date in which such additional payments shall have accrued in
favor of the Shareholders; and (ii) be accompanied by a statement setting forth
in reasonable detail the cumulative revenue to the Company of SellThrough Units
of such products. Shareholders shall have the right, at their cost, to have an
independent auditor of Shareholders' choice perform an audit of the books and
financial records
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<PAGE>
of Buyer and its Affiliates to verify the accuracy and completeness of payments
pursuant to this Section 2.3(b) on reasonable notice to Buyer during Buyer's
business hours; provided that such audits shall occur during the three-month
period following the end of each anniversary of the First Customer Shipment
Date.
2.4 Escrow. $4,800,000 (the "ESCROW FUNDS") shall be deposited
by Buyer with an escrow agent as provided in the Escrow Agreement of even date
herewith, in substantially the form attached hereto as EXHIBIT B or as otherwise
mutually agreed between the parties prior to the Closing. Subject to the terms
of the Escrow Agreement, any interest earned on such amount deposited with the
escrow agent shall be for the sole account of Buyer, and will be paid to Buyer
in accordance with the Escrow Agreement. Upon each of the payments in cash or
stock by Buyer to the Shareholders set forth in Section 2.2 above, an equivalent
amount of money shall be deducted from the escrow funds and such amount shall be
returned to Buyer in accordance with the Escrow Agreement.
2.5 Acceleration and Full Payment of Consideration for Company
Shares. Notwithstanding any term or condition of Section 2.2 or 2.3 above, any
amount payable pursuant to said sections shall become immediately due and
payable to the Shareholders within forty-five (45) days following the occurrence
of an Accelerating Event, except as set forth in Section 14.3 of this Agreement.
2.6 Security Interest in Escrow Funds. At the Closing,
Buyer shall grant to Shareholders a security interest in the Escrow Funds in
accordance with that certain Security Agreement to be in form reasonably
acceptable to Buyer and the Shareholders and to be in substantially the form
attached hereto as EXHIBIT C.
.
3. CLOSING; DELIVERY.
3.1 Closing Date. The closing (the "CLOSING") of the purchase
and sale of the Company Shares shall take place at the offices of Wilson,
Sonsini, Goodrich & Rosati, Buyer's legal counsel, located at 650 Page Mill
Road, Palo Alto, California, at 4:00 P.M. on or before April 7, 1995, or such
other date and time as shall be mutually agreed upon by the parties hereto (the
"CLOSING DATE").
3.2 Deliveries at the Closing. At the Closing, (i) the
Shareholders will deliver to the Buyer the various certificates, instruments,
documents and agreements referred to in Section 8 below; (ii) the Buyer will
deliver to the Shareholders the various certificates, instruments, documents and
agreements referred to in Section 9; (iii) each of the Shareholders will deliver
to the Buyer stock certificates representing all of such Shareholder's Company
Shares (which together shall represent all of the Company Shares), endorsed in
blank or accompanied by duly executed assignment documents; (iv) the Buyer will
deliver to each of the Shareholders the consideration specified in Section 2.2
above multiplied by a fraction of the numerator of which shall be the number of
Company Shares held by such Shareholder immediately prior to the Closing and the
denominator of which shall be all Company Shares
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outstanding immediately prior to the Closing; (v) Buyer will deliver to the
Shareholders the Promissory Note; and (vi) Buyer will deposit the $4,800,000 in
the escrow pursuant to Section 2.4 above.
3.3 Deliveries After the Closing. On the dates set forth in
Section 2.2(b) and upon the achievement of the conditions as set forth in
Section 2.3 and subject to Section 2.5 hereof, the Buyer will deliver to each of
the Shareholders the consideration specified in Sections 2.2 and 2.3 above, as
applicable, multiplied by a fraction of the numerator of which shall be the
number of Company Shares immediately prior to the Closing and the denominator of
which shall be all Company Shares outstanding immediately prior to the Closing.
4. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.
Each Shareholder severally represents and warrants to the Buyer that the
representations and warranties of such Shareholder in this Section 4.1 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as through the Closing
Date were substituted for the date of this Agreement through this Section 4),
except as set forth in the disclosure schedule delivered by the Shareholders to
the Buyer on the date hereof (and initialed by the Buyer), a copy of which is
attached hereto as EXHIBIT D (referred to herein as "Shareholders' Disclosure
Schedule"). Shareholders' Disclosure Schedule will be arranged in paragraphs
corresponding to the numbered paragraphs contained in this Section 4; provided
that any information or disclosure contained in the Shareholders' Disclosure
Schedule shall be deemed to qualify each of the representations and warranties
set forth below in this Section 4. Each Shareholder severally represents and
warrants as follows:
4.1 Authorization of Transaction. The Shareholder has full
power and authority to execute and deliver this Agreement, to consummate the
transactions contemplated hereunder and to perform such Shareholder's
obligations hereunder and no other proceedings on the part of such Shareholder
are necessary to authorize the execution, delivery and performance of this
Agreement. This Agreement constitutes the valid and legally binding obligation
of the Shareholder, enforceable against such Shareholder in accordance with its
terms and conditions, provided that such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to the enforcement of creditors' rights, and that
such enforcement may be limited by the general principles of equity. The
Shareholder need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order to consummate the transactions contemplated by this Agreement.
4.2 Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
nor the performance of the Shareholder's obligations hereunder, will (A) violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government, governmental
agency, or court to which the Shareholder is subject, (B)
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conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, franchise, permit or other arrangement to which the Shareholder is a
party or by which such Shareholder is bound or to which any of such
Shareholder's assets are subject.
4.3 Company Shares. The Shareholder holds of record and owns
beneficially the number of Company Shares set forth next to such Shareholder's
name in the Schedule of Share Holdings attached hereto as SCHEDULE 4.3 hereto
free and clear of any restrictions on transfer, taxes, security interests,
liens, pledges, encumbrances, charges, options, warrants, purchase rights,
contracts, commitments, equities, claims, and demands. Upon delivery of the
stock certificates representing the Company Shares at Closing and payment
therefor as provided in Section 2 above, Buyer will acquire valid title to the
Company Shares held by such Shareholder, free and clear of all security
interests, liens, pledges, encumbrances, charges and restrictions on transfer
created by the Shareholders. The Shareholder is not a party to any option,
warrant, purchase right, or other contract or commitment that could require the
Shareholder to sell, transfer, or otherwise dispose of any capital stock of the
Company (other than this Agreement). The Shareholder is not a party to any
voting trust, proxy, or other agreement or understanding with respect to the
voting of any capital stock of the Company.
4.4 Adequate Disclosure. The Shareholder has been given copies
of the Financial Statements of the Company and has conducted such investigation
regarding the financial condition and prospects of the Company as such
Shareholder deems appropriate under the circumstances. The Shareholder is
satisfied that the purchase price for the Company Shares hereunder is fair and
reasonable. In selling the Company Shares hereunder, Shareholder is not relying
upon any representations or warranties of any of the Company, the Buyer or their
respective directors, officers, employees or agents.
5. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS. Except as set forth
in EXHIBIT E, (the "COMPANY DISCLOSURE SCHEDULE") the Shareholders, jointly and
severally, represent as of the date of this Agreement and as of the Closing Date
(with an update to such Schedule of Exceptions dated as of the Closing Date to
identify any material change thereto as of the Closing Date) as follows:
5.1 Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of California.
The Company is an S Corporation for federal and California state income tax
purposes. The Company has all requisite power and authority and all required
licenses and permits to own, lease and operate its properties and assets and to
conduct its business as presently conducted and as proposed to be conducted.
5.2 Authorization. The Company has full power and authority to
execute and deliver the Transaction Documents, and to consummate the
transactions contemplated hereby herein. The execution, delivery and performance
of the Transaction Documents, and the
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consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized in accordance with California General Corporation Law and
any other applicable Law by all necessary corporate action on the part of the
Company, and such authorization is in full force and effect as of the date of
this Agreement and will remain in full force and effect as of the Closing Date.
The Company has duly executed and delivered this Agreement and the obligations
imposed on the Company by this Agreement constitute the valid and binding
obligations and agreements of the Company, enforceable against the Company in
accordance with its terms as of the date of this Agreement and as of the Closing
Date, provided that such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to the enforcement of creditors' rights, and that such enforcement may
be limited by the general principles of equity.
5.3 Capitalization. The entire authorized capital stock of the
Company consists of 10,000,000 Company Shares, of which 2,160,000 Company Shares
are issued and outstanding and 840,000 Company Shares are reserved for issuance
upon the exercise of stock options pursuant to the Company's Stock Option Plan,
none of which are outstanding. All of the issued and outstanding Company Shares
have been duly authorized, are validly issued, fully paid, and nonassessable.
All of the issued and outstanding Company Shares are held of record by the
respective Shareholders as set forth in Schedule 4.3. There are no outstanding
or authorized options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights, preemptive rights or other contracts or
commitments that could require the Company to issue, sell, or otherwise cause to
become outstanding any of its capital stock. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation, or similar
rights with respect to the Company. There are no voting trusts, proxies, or
other agreements or understandings with respect to the voting of the capital
stock of the Company.
5.4 No Conflicts. The execution, delivery and performance by
the Company of the Transaction Documents, and the consummation of the
transactions contemplated hereby and thereby have not and will not with or
without the giving of notice or the passage of time, or both, (i) violate,
conflict with, or breach any provision of the Company's Articles of
Incorporation or Bylaws or any order, writ, injunction, judgment, decree, Law,
ordinance, rule or regulation applicable to the Company or to any of the Assets,
or (ii) violate, require consent under, conflict with, breach, cause a default
of, or provide grounds for termination, cancellation, or acceleration of
performance in respect of, or result in the creation or imposition of a Lien
pursuant to, any Understanding to which the Company is a party or by which the
Company or any of the Assets may be bound or otherwise affected. Other than as
set forth on the Company Disclosure Schedule attached hereto, no consent,
notice, approval, order or authorization of, or registration, declaration or
filing with (collectively "APPROVALS") any Governmental Authority or any other
party to an Understanding to which the Company is a party, or with respect to
which the Company or any of the Assets may be bound or affected, is required by
the Company in connection with the execution or delivery of the Transaction
Documents or the consummation by the Company of the transactions contemplated
hereby or thereby.
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5.5 Title. The Company has good and marketable title,
including all intellectual property rights, in and to the Assets, free and clear
of all Liens, except for Permitted Liens.
5.6 Compliance with Laws and Other Instruments.
(a) To the Knowledge of the Shareholders, the
Company is in compliance with all Laws and all orders, writs, injunctions,
awards, judgments and decrees applicable to the Company or its assets,
properties or businesses and is in full compliance with the requirements of any
Governmental Authority having jurisdiction over the Company, any of the Assets
or any portion of the Digital Business. As used in this Section 5, to the
"Knowledge of the Shareholders'" shall be limited to knowledge actually
possessed by the Shareholders assuming due inquiry with respect to any such
matter regarding which a Shareholder had such actual knowledge.
(b) The Company is not in default under or in
violation of any provision of its Articles of Incorporation, Bylaws, any
promissory note, indenture or other evidence of indebtedness or security
interest with respect thereto, any lease, license, including any Governmental
Authority license, or other Understanding to which the Company is a party or by
which it or any of the Assets is bound or may be affected, the effect of which
would be to impair the ability of the Company to operate any of the Assets as
presently operated, and each of the foregoing is in full force and effect and
constitutes a valid and binding obligation of the parties thereto, except as the
same may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to the enforcement of
creditors' rights and by general principles of equity.
(c) The Company has not received written notice
from any party to any Operating Agreement, Governmental Authority license or
other instrument affecting any parcel of real property related to the Digital
Business or Assets that such party intends to terminate or cancel the same and,
to the Company's knowledge, there are no offsets or specific defenses to the
enforceability of any such Operating Agreement, Governmental Authority license
or instrument.
5.7 Instruments. On or before the Delivery Date, the Company
shall have furnished to Buyer complete and accurate copies of any and all
Governmental Licenses, Operating Agreements, permits and all other relevant and
applicable agreements, contracts, licenses and permits used by the Company and
necessary for Buyer's ownership or operation of the Digital Business
(hereinafter collectively referred to as the "INSTRUMENTS"). As of the date of
this Agreement, each of the Instruments is valid under applicable Law. The
Company has complied with all provisions of the Instruments required to be
complied with by the Company and is not in material default under such
Instrument nor has any event occurred which under such Instrument would
constitute a material default by the Company upon the giving of notice or lapse
of time, or both. Each such Instrument is valid, binding and enforceable by the
Company in accordance with its terms; provided that such enforcement may
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be subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to the enforcement of
creditors' rights, and that such enforcement may be limited by the general
principles of equity. The consummation of this Agreement will not affect the
validity, enforceability or continuity of any of the Instruments.
5.8 Real Property. The Company does not own any real property.
The Company Disclosure Schedule sets forth a complete and correct list and
description of each lease of real property to which the Company is a party (as
lessee or lessor), including a description of all significant plants and
structures located on such properties. Each such lease is valid and enforceable
and is not in default. The Company does not use any real property in the conduct
of the Digital Business, except real property subject to the leases listed.
5.9 Environmental Laws. The Company has not received any
notice from the United States Environmental Protection Agency or from any other
governmental authorities that the Company is liable or potentially liable under
any Laws for the costs of investigating or remediating any hazardous materials,
including without limitation the Comprehensive Environmental Response,
Compensation & Liability Act. The Company has not used, released, stored,
treated, transported or disposed of any hazardous materials in violation of any
Law. The Company has not received citations from any governmental agency for
noncompliance with such agency's requirements in connection with hazardous
materials, including any air, water, or environmental pollution pertaining to
the Digital Business. As the Company currently conducts its Digital Business,
the Company has all permits necessary for the Company to conduct is business as
presently conducted under applicable Laws for (a) any releases or emissions of
hazardous materials, including without limitation the federal Clean Water Act
and the Clean Air Act, and (b) the storage, treatment, or disposal of any
hazardous materials as regulated by federal and state law, including without
limitation the Resource Conservation & Recovery Act. There are no pending or
unresolved claims, citations, or written notices from private parties alleging
the violation of any Laws with respect to environmental matters.
5.10 Tax Returns; Other Reports. The Company has duly and
timely filed in proper form all federal, state and local income, franchise,
sales and other tax returns which relate to the Digital Business. All taxes,
fees and assessments of whatsoever nature upon any of the Assets which are due
and payable have been paid. To the extent that such taxes have not been paid or
reports have not been filed or submitted, the same shall, to the extent due, be
paid, filed or submitted on or before the Closing Date by the Company, and any
taxes accrued or incurred from the date hereof to the Closing and any tax
returns and documents with respect to all such matters, shall be paid and filed
or submitted by the Company as provided by and in accordance with applicable law
prior to the Closing Date. There are no determined tax deficiencies or proposed
tax assessments against the Company which relate to the Digital Business or
against the Digital Business or Assets.
5.11 Financial Statements. Attached hereto as SCHEDULE 5.11
is a copy of the Company's unaudited balance sheet as of April 4, 1995,
including all notes thereto (the
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"BALANCE SHEET"). The Balance Sheet (i) agrees in all material respects with the
Company's books and records, (ii) has been prepared in accordance with GAAP, and
(iii) is complete and accurate in all material respects, and fairly presents the
financial position of the Company as of the date of the Balance Sheet; except
that the Balance Sheet does not contain notes as required by GAAP and may be
subject to year-end adjustments, which will not be material in the aggregate.
5.12 Absence of Undisclosed Liabilities. The Company has no
liabilities or obligations of any nature (whether absolute or contingent and
whether or no accrued), except (a) liabilities and obligations that are
reflected or reserved for in the Balance Sheet, (b) liabilities or obligations
incurred in the ordinary course of business and consistent with past practices
since the date of the Balance Sheet and (none of which, individually or in the
aggregate, is, or will be prior to the Closing Date, have a Material Adverse
Effect), (c) liabilities and obligations disclosed in the Company Disclosure
Schedule and (d) liabilities and obligations not required to be so reflected or
disclosed by GAAP or otherwise because of their failure to meet the materiality
thresholds set forth herein.
5.13 Books and Records. The records and books of account of
the Company are, as of the date of this Agreement, and will be on the Closing
Date, fully current and contain true, full and accurate records in all material
respects of all matters necessary to fairly present the financial position of
the Company as of such dates. All such records, books and documents of the
Company (including documents of title) are in the Company's possession or under
its control and are complete and accurate in all material respects as of the
date of this Agreement and will be complete and accurate as of the Settlement
Date.
5.14 Inventories. The inventories of the Company included as
assets on the Balance Sheet or thereafter acquired, are, and all such
inventories shown on the Closing Balance Sheets will be, all items of a quality
and quantity usable or saleable in the ordinary and usual course of business and
within time periods not materially greater than the customary turnover periods
for such items, except for inventory items which are obsolete or not usable or
saleable in the ordinary course of businesses which have been written down to an
amount not in excess of net realizable market value or for which adequate
reserves or allowances have been provided. The values of which inventories are
carried are stated at cost not in excess of net realizable value, cost being
based on the first-in first-out method, consistent with the past practice, and
in accordance with GAAP applied on a consistent basis.
5.15 Accounts Receivable. Except to the extent of applicable
reserves for doubtful accounts included in the Balance Sheet, all of the
accounts, notes and other receivables owing to the Company as of the date hereof
constitute, and owing to the Company as of the Closing Date will constitute,
valid and enforceable claims arising from bona fide transactions in the ordinary
course of business, and there are no claims, refusals to pay or other rights of
set-off against any thereof. Except as set forth in the Company Disclosure
Schedule, (a) there is no account receivable or note receivable pledged to any
third party and (b) to the
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best of the knowledge of the Company, there is no reason to believe any such
account receivable or note receivable will not be collected in accordance with
its terms.
5.16 Commitments. The Company Disclosure Schedule identifies
each commitment or unfulfilled promise of the Company which requires an
expenditure in an aggregate amount over time of Five Thousand Dollars
($5,000.00) or more, including without limitation any commitment for capital
improvements or any obligations under any Governmental License which affects any
of the Assets or the Digital Business.
5.17 Insurance. The Company Disclosure Schedule contains a
list of all insurance policies and bonds in force as of the date of this
Agreement with respect to the Company and any of its properties or assets,
including all of the Assets, showing for each policy or bond: (i) the coverage,
(ii) the amount of the premium, (iii) the name of the insurer, and (iv) the
termination date. Copies of all such insurance policies and bonds or accurate
summaries of the principal terms thereof are attached to SCHEDULE 5.17. All such
insurance policies and bonds shall remain in full force and effect.
5.18 Material Contracts. The Company Disclosure Schedule
constitutes a true and complete list, as of the date of this Agreement and as of
the Closing Date, of all Understandings which relate to, in any manner, the
Assets and of all Understandings with a value in excess of $5,000 individually
or $10,000 in the aggregate under which the Company is or may be obligated or
liable for cash payments, or delivery of services or other consideration over
the term of such Understanding. On or before the Delivery Date, the Company
shall have delivered to Buyer a complete and correct copy (or if oral, a
description) of all such Understandings. Except as set forth on the Company
Disclosure Schedule, the Company is not a party to any oral or written (i)
contract for the employment of any Employee, consultant, or independent
contractor; (ii) license agreement or distributor, dealer, manufacturer's
representative, sales agency, advertising, property management, or brokerage
contract; (iii) lease, mortgage, pledge, conditional sales contract, or security
agreement with respect to any real or personal property; (iv) indenture, bond,
note, guarantee, surety, or other obligation for or relating to borrowing or
lending money; (v) contract for the future purchase of materials, supplies,
services, merchandise, or equipment involving payments of more than $5,000 over
its remaining term (including periods covered by any option to renew by either
party); (vi) contract for the purchase, sale, or lease of any real estate or
other real property; (vii) agreement or arrangement for the sale of any of its
assets, inventories or properties for more than $5,000 or the grant of any
preferential rights to purchase any of its assets, inventories, properties, or
rights; (viii) contract which contains any provisions requiring the Company to
indemnify any other party thereto; (ix) contract which contains a covenant or
agreement which purports to limit the ability or right of the Company to engage
in any lawful business activity or compete with any person or entity; (x)
non-disclosure agreement relating to confidential and proprietary information
and data; (xi) outstanding loan to any person or entity; (xii) patent or
technology license consulting agreement or distributorship, dealer, agency, or
franchise agreement; or (xiii) other Understanding, involving any Liability in
excess of $5,000, which by its terms does not terminate or is not terminable by
the Company within thirty (30) days or
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upon thirty (30) days' (or less) notice. Each of the Understandings listed on
the Company Disclosure Schedule is valid and enforceable in accordance with its
terms, provided that such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to the enforcement of creditors' rights, and that such enforcement may
be limited by the general principles of equity. There are no material disputes
outstanding under any of such Understandings nor is the Company aware of any
basis for such a dispute, and the Company is not in breach or default in any
material respect thereunder, or any prior Understandings to which the Company
was a party or by which it was bound. The sale of the Company Shares, will not
impair any rights, contractual or otherwise, of the Company under any
Understandings set forth on the Company Disclosure Schedule. To the Knowledge of
the Shareholders, the consummation of the transactions contemplated by this
Agreement will not lead any party to terminate or otherwise alter its
contractual relations with the Company.
5.19 Defaults. There are no existing material breaches or
defaults or events which with the lapse of time or the giving of notice or both
would constitute an event of default by the Company or, to the best of the
knowledge of the Company, any other party under any Material Contract, which
material breaches or defaults individually or in the aggregate with all other
such breaches and defaults has had or may reasonably by expected to have a
Material Adverse Effect or result in a loss or cost to the Company of $5,000 in
any one case of $20,000 in the aggregate. No party has notified the Company in
writing of its intention to cease to perform any of its obligations under any
Material Contract and, to the best of the knowledge of the Company, each of the
Material Contracts is in full force and effect, with no dispute or basis
therefor existing with respect thereto.
5.20 License and Permits. Set forth in the Company Disclosure
Schedule is a description of each license or permit required for the conduct of
the Digital Business, together with the expiration date thereof and the name of
the Governmental Authority issuing such license or permit. Such licenses and
permits are valid and in full force and effect, and will not be terminated or
otherwise adversely affected by the consummation of the transactions
contemplated by the Transaction Document.
5.21 Condition of Assets; Warranties. To the knowledge of the
Shareholders, there is no development obstacle, error or problem that, upon
completion of development of Software Products currently under development by
the Company, will prevent such Software Products from complying in all material
respects with the current specifications for such Software Products as furnished
by the Company to Buyer. Buyer acknowledges that no other warranties of any
nature are provided by the Shareholders with respect to the Software Products,
which may contain errors or bugs.
5.22 Intangible Rights. To the Shareholders' Knowledge, the
Company has all right, title and interest in and to the Software Products,
including any and all rights heretofore held by any Affiliate of the Company.
Except to the extent, if any, set forth in the Company Disclosure Schedule, to
the best of the Shareholders' knowledge, the Software Products and the
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Documentation (a) are subject to no Liens; (b) the legal rights thereto owned by
the Company are adequate and sufficient to permit Buyer to sell or license
Software Products and to supply the User Documentation without obligation to any
third party (other than the Company as contemplated hereby); and (c) are freely
transferable or assignable by the Company and will not be rendered invalid or
affected in any way by virtue of the execution, delivery and performance of this
Agreement. Except as set forth in the Company Disclosure Schedule, to the
Shareholders' Knowledge, neither the Software Products nor the Documentation
infringes upon or conflicts with any rights of any third party; and no third
party has asserted or threatened to assert any claim against the Company or any
Customer concerning such an infringement or conflict. To the best knowledge of
the Shareholders, no third party is infringing the Company's rights in the
Software Products or the Documentation. The Company Disclosure Schedule lists
the names of all persons or entities other than the Company known by the
Shareholders to have a copy of or access to the Source Code of any Software
Product.
5.23 Registration List; Trademarks.
(a) The Company Disclosure Schedule lists all
patents, copyrights, trademarks, service marks and trade names, issued or
reissued to the Company, registered, applied for or pending under the Company's
name or assigned to the Company as of the date hereof in connection with the
Digital Business, all of which are included in the Assets, along with the
registration numbers, dates of issuances and names of the inventors or authors
of such patents, marks, names and copyrights, and any other related information
as reasonably requested by Buyer and available to the Company or in the
Company's possession or control.
(b) To the Knowledge of the Shareholders' and
except as disclosed in the Company Disclosure Schedule, no Trademark infringes
upon or conflicts with any rights of any third party, and no third party has
asserted or threatened to assert any claim against the Company or any Customer
concerning such an infringement or conflict.
5.24 Labor Matters. The Company is not a party to any
collective bargaining agreement covering any Employee. The Company has not
received notice of any claim or grievance by any Employee, which might have an
adverse effect upon the Digital Business (including without limitation any claim
or discrimination on the basis of race, age or sex), no arbitration proceeding
arising out of or under any collective bargaining or other labor agreement is
pending in respect of the Digital Business, and to the best of the Company's
knowledge no claim therefor has been asserted.
5.25 Employee Benefit Plans. The Company Disclosure Schedule
sets forth a list of all employee pension or welfare benefit plans, programs or
arrangements covering any of the employees (the "Employee Plans"). The Company
has made available to Buyer true and complete written descriptions of the
Employee Plans.
5.26 Key Personnel. The Company Disclosure Schedule sets
forth a list of the names, positions and current salaries of each Employee. To
the Knowledge of the
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Shareholders, no Employee intends to terminate his or her relationship with the
Company, except to the extent such Employee intends to accept employment with
Buyer upon consummation of the transactions contemplated hereby. All Employees
engaged in the development of the Software Products or otherwise with access to
confidential proprietary information concerning the Digital Business have
entered into written agreements with the Company which provide for
non-disclosure of such information and assignment to the Company of intellectual
property rights with respect to proprietary information and inventions developed
in the context of their employment or consulting relationship.
5.27 Solvency. As of the Closing Date, after giving effect to
the transactions contemplated by this Agreement, (a) the assets of the Company,
at fair valuations, exceed the sum of the Company's debts, (b) the Company has
adequate resources to be able to pay its debts as they become due, and (c) the
Company has generally been paying its debts as they become due.
5.28 Litigation. There is no Claim, investigation, or other
proceeding now pending before any court, arbitrator or Governmental Authority to
which the Company is a party or which involves any of the Instruments or is
related to any of the Assets and, to the Knowledge of the Shareholders', no
Claim, investigation or proceeding has been threatened against the Company and
there are no reasonable grounds therefor.
5.29 Disclosure. No representation or warranty or any
statement furnished by the Company to Buyer hereunder or in connection with the
Transaction Documents contains or will contain any untrue statement of material
fact or omit or will omit to state any material fact necessary to make the
statements contained herein or therein not misleading.
5.30 Brokers and Finders. Neither the Company nor any of its
affiliates have entered into any contract, arrangement, or understanding with
any person or firm which may result in any obligation of Buyer to pay any
finder's, broker's, or agent's fees or commissions or other like payments as a
result of the transactions contemplated by this Agreement.
6. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to the Company and the
Shareholders as of the date of this Agreement and as of the Closing Date as
follows:
6.1 Organization and Authority. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of Delaware;
has all requisite power, right, and authority to execute, deliver and perform
this Agreement; and has taken all action required by Law, its Certificate of
Incorporation and otherwise to authorize the execution, delivery and performance
of this Agreement.
6.2 Enforceability. This Agreement constitutes the legal,
valid, and binding obligation of Buyer enforceable against Buyer in accordance
with its terms, except as the same
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may be limited by bankruptcy, insolvency, reorganization, moratorium, or other
similar laws affecting generally the enforcement of creditors' rights and by
general principles of equity. There is no litigation at law, in equity, or in
any other proceeding or investigation pending or threatened against Buyer which
might materially impair the ability of Buyer to perform under this Agreement.
6.3 Finders and Brokers. Neither Buyer nor any of its
affiliates has entered into any contract, arrangement, or understanding with any
person or firm which may result in any obligation of the Company to pay any
finder's, broker's, or agent's fees or commissions or other like payments as a
result of the transactions contemplated by this Agreement.
6.4 Absence of Liens on Escrow Funds. Upon deposit by Buyer of
the Escrow Funds pursuant to Section 2.4 hereof, the Escrow Funds shall not be
subject to any Liens of any nature (other than the security interest of
Shareholders created pursuant to Section 2.6 hereof), and, during the term of
such escrow, Buyer agrees not to take any action that would serve or purport to
grant any Liens to any Person with respect to the Escrow Funds.
7. ADDITIONAL AGREEMENTS AND COVENANTS.
7.1 Conduct of Business. Between the date of this
Agreement and the Closing Date, other than with the Buyer's written consent or
as provided in Section 7.12 , 7.13, and 7.14 below, the Company shall, and the
Shareholders shall cause the Company to:
(a) Operate its business in the usual, regular
and ordinary course consistent with past practices;
(b) Use its best efforts to maintain and preserve
its business organization and retain the services of Employees in order to
preserve and not impair its good will and ongoing Digital Business;
(c) Comply with material terms and conditions of
each Understanding to which the Company is a party;
(d) Keep in effect comprehensive general liability
insurance and other insurance as required by Laws and as consistent with past
practice;
(e) Continue to make trade payments when due and
not reduce the rate at which those payments are made, as compared to past
practice and normal payment procedures under its leases, contracts, commitments
and other Understandings;
(f) Not sell, dispose of or encumber, or enter
into any agreement for the sale, disposition or encumbrance of, any of the
Assets, except as approved in writing by Buyer;
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(g) Not cancel or compromise any debt, except as
approved in writing by Buyer;
(h) Not knowingly and expressly waive or release
any rights of substantial value, except as approved in writing by Buyer
(i) Not sell, assign, transfer or grant any
rights under any franchises, authorizations, licenses, patents, inventions,
trademarks, service marks, trade names or copyright or rights with respect to
any know-how or other intangible assets of the Company;
(j) Not amend, terminate or enter into and
Understanding or Instrument to which the Company is or would become a party or
by which any Asset is or would become bound or affected, except as approved in
writing by Buyer;
(k) Not dispose of or permit to lapse any
franchise or other Governmental License, permit or authorization to which the
Company is a party or by which any of the Assets is affected;
(l) Not incur any Liability, other than in the
ordinary course of business;
(m) Not waive any material Claim or right of the
Company; and
(n) Not take voluntary action which would have
the reasonably foreseeable result of making any of the representations and
warranties contained in Section 6 untrue.
7.2 Third Party Consents. In the event that the assignment of
any Understanding or other Instrument requires the consent of any party thereto
prior to or as a result of the consummation of the sale of the Assets, the
Company shall use its best efforts to obtain such consents and shall furnish
copies of such consents to Buyer. The Company shall afford Buyer the opportunity
to review, approve and revise the form of any required consent prior to delivery
to the consenting party. If any such consent shall not be obtained, the Company
agrees to cooperate with Buyer to provide to Buyer after the Closing Date, the
benefits under any such Understanding or Instrument, including enforcement of
any and all rights of the Company against the other party to an Understanding or
Instrument arising out of the breach or cancellation thereof by such other party
or otherwise.
7.3 Litigation. If any Claim which involves the Company or any
of the Assets is threatened or asserted against the Company prior to the Closing
Date, the Company shall provide Buyer with written notice thereof within two (2)
days of the Company's discovery of such threat or Claim, and Buyer shall have
the right, but not the obligation, to assist in the defense of such Claim,
provided that if Buyer elects to engage its own counsel to assist in the defense
of such Claim, then Buyer shall pay the cost and expenses of its counsel.
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7.4 Press Releases. Neither the Company nor Buyer shall make
any press release or disclosure concerning this Agreement or the transactions
contemplated hereby without the approval of the other party, which approval
shall not be unreasonably withheld in the event disclosure is required by law or
regulation.
7.5 Key Man Life Insurance. Inasmuch as the employment
services to be provided by each of the Shareholders to the Buyer are critical to
the benefit of Buyer, Buyer will obtain, at Buyer's expense, effective as of the
Closing Date, key-man life insurance on the lives of each of the Shareholders
for the benefit of Buyer, in an amount to be determined by Buyer. The Company
and each of the Shareholders agree to assist and cooperate with Buyer in
applying for and maintaining such insurance.
7.6 Registered Stock. The parties agree that in the case that
Buyer chooses to issue shares of Common Stock pursuant to Section 2.2 of this
Agreement (the "REGISTERED SHARES") (i) Buyer will use its reasonable efforts to
register such shares prior to such issuance (or to otherwise cause such shares
to be issued in a manner so that they not deemed "restricted securities" for
purposes of the Securities Act of 1933, as amended, immediately thereafter) and
(ii) the Shareholders shall be entitled to sell the Registered Shares in the
public markets in any amounts and at any time that the Shareholders may
determine, provided, that (a) the Shareholders shall not sell during any one
week in excess of an aggregate of more than 25% of the daily sales volume of the
Company's Common Stock on the Nasdaq National Market (or other market if
appropriate) over the preceding two weeks, (b) provided, further, that the
Shareholders understand and agree that the Registered Shares will be sold by the
Shareholders only through a "DESIGNATED BROKER", which for purposes of this
Agreement shall be any one of three securities brokers making a market for
Buyer's Common Stock that is recommended to Shareholders by Buyer at the time of
such desired sale, (c) that prior to selling any Registered Shares, each
Shareholder agrees to first contact Buyer's Compliance Officer and to comply
with Buyer's Insider Trading Policy.
7.7 Further Assurances. From time to time hereafter, each
party will take all actions necessary to comply promptly with the provisions of
this Agreement and all other legal requirements which may be imposed on such
party with respect to the consummation of the transactions contemplated hereby
and will promptly cooperate with and furnish information to the other parties in
connection therewith. Each party will take all reasonable actions to obtain (and
to cooperate with the other party in obtaining) any Approval of, or any
exemption by, any Governmental Authority, or other third party required to be
obtained or made by such party or the taking of any action contemplated thereby
or by this Agreement. The parties agree that damages for breach of the foregoing
are not sufficient and that injunctive and other equitable relief is an
appropriate remedy.
7.8 Confidential Treatment. Each party to this Agreement shall
treat as confidential all Confidential Information of the other party, shall not
use such Confidential Information except as set forth herein, and shall not
disclose such Confidential Information to any third party except as may be
reasonably required pursuant to this Agreement, and shall
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treat such Confidential Information subject to confidentiality obligations at
least as protective as those set forth herein. Without limiting the foregoing,
each of the parties hereto shall use at least the same degree of care which it
uses to prevent the disclosure of its own confidential information of like
importance to prevent the disclosure of Confidential Information disclosed to it
by the other party.
(a) Excluded Information. Notwithstanding the
above, neither party shall have liability to the other with regard to any
Confidential Information of the other which (i) was in the public domain at the
time it was disclosed or becomes in the public domain through no fault of the
receiver, (ii) was known to the receiver, without restriction, at the time of
disclosure as shown by the files of the receiver in existence at the time of
disclosure, (ii) is disclosed with the prior written approval of the disclosing
party, (iv) was independently developed by the receiver without any use of the
Confidential Information and by employees or other agents of (or independent
contractors hired by) the receiver who have not been exposed to the Confidential
Information, (v) becomes known to the receiver, without restriction, from a
source other than the disclosing party that is not bound by a confidentiality
obligation to the disclosing party and without breach of this Agreement by the
receiver and otherwise not in violation of the disclosing party's rights, (vi)
is disclosed by the disclosing party to a third party without restrictions
similar to those contained in this Agreement, or (vii) is disclosed pursuant to
the order or requirement of a court, administrative agency, or other
governmental body, provided, however, that the receiver shall provide prompt
notice thereof to enable the disclosing party to seek a protective order or
otherwise prevent such disclosure.
(b) Enforcement. Each party shall exert its best
efforts, including, but not limited to, the execution of proprietary
non-disclosure agreements with employees and consultants, and legal action, to
enforce compliance with the provisions of this Section 7.8 by its partners,
directors, officers, employees, and any third party having access to the other
party's Confidential Information.
(c) Remedies. Unauthorized use by either party
of Confidential Information provided to it by the other party hereunder will
diminish the value to the other party of such information. Therefore, if either
party breaches any of its obligations with respect to confidentiality and
unauthorized use of Confidential Information hereunder, the other party shall be
entitled to equitable relief to protect its interest therein, including but not
limited to injunctive relief, as well as money damages.
(d) Termination. Upon any termination of this
Agreement pursuant to Section 10 below, each party shall return to the other
party any written documentation or material that was furnished by the other
party or that constitutes its Confidential Information and shall destroy any
copies or written summaries thereof.
7.9 Delivery of Exhibits and Schedules; Other Material.
The Company will promptly deliver or cause to be delivered to Buyer, and there
shall be attached hereto, such exhibits and schedules as shall be required by
this Agreement to the extent not previously
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delivered, in each case dated the date hereof, containing such information,
numbered such number as specified and otherwise in form, scope and content
satisfactory to Buyer. The Company shall provide updated exhibits and schedules
to Buyer at the Delivery Date.
7.10 Access to Books and Records. Between the date of this
Agreement and the Closing Date, the Company shall give, and shall cause its
counsel, accountants, employees and other representatives to give to Buyer, its
counsel, accountants, employees and other representatives, reasonable access
during normal business hours to all of the properties, books, reports, records,
Instruments, Understandings, commitments, and other documents of the Company
relating to the Assets and the Digital Business and shall permit the making of
copies thereof. In order to enable Buyer to complete its due diligence, as
provided for in Section 8.14 hereof, the Company shall furnish Buyer with all
information Buyer may reasonably request.
7.11 Employment of Shareholders. The Company and each of the
Shareholders understands and agrees that Buyer is purchasing the Company Shares
under the terms of this Agreement under the explicit agreement and condition
that each of the Shareholders will continue to work as employees of Buyer for
the entire two-year period following the Closing Date, and the benefit that
Buyer will obtain in the purchase of the Company Shares will be significantly
diminished in the event that any of the Shareholders cease to be an employee of
Buyer. Each of the Shareholders hereby covenants that he will not engage in any
conduct that will result in his termination by Buyer for Just Cause. Each
Shareholder agrees and acknowledges that in the event such Shareholder is
terminated by Buyer for Just Cause, then such Shareholder shall forego and waive
any right to any unpaid portion of the consideration set forth in Sections
2.2(b) and 2.3, allocable to such Shareholder as of the date of such
Shareholder's termination based upon the number of Company Shares held by such
Shareholder as of the Closing Date. Notwithstanding the foregoing, nothing
contained herein shall limit the ability of each Shareholder to terminate his
employment with the Buyer pursuant to Section 4(b) of such Shareholder's
Employment Agreement with Buyer without liability to Buyer hereunder or under
his Employment Agreement with Buyer.
7.12 License with SGI. The Shareholders and Buyer agree that
if the Company or the Shareholders (or any affiliate thereof) enter into a
license agreement with Silicon Graphics, Inc. ("SGI") that meets the following
criteria, then all moneys paid by SGI for this license shall be paid to the
Shareholders: (i) Buyer shall have approved the form of the license agreement;
(ii) the project under the license agreement shall not require additional
material resources of the Shareholders or the Company; (iii) the project under
the license agreement in no event shall require more than an aggregate of 20
hours from the Shareholders collectively subsequent to the Closing; (iv) Buyer
assumes no liabilities in connection with such license, and the Shareholders
shall indemnify Buyer for any Claims made or any loss incurred in connection
with such license agreement; and (v) there shall be no extensions or renewals of
such license agreement.
7.13 Section 341(f) Election. Buyer acknowledges and agrees
that, prior to Closing, the Company shall make an election under Section 341(f)
of the Internal Revenue
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Code. Following the Closing, Buyer agrees to honor such Section 341(f) election
and report for income tax purposes in a manner consistent with the requirements
of such election.
7.14 Payment of Liabilities; Distribution of Cash and
Receivables, On or before the Closing, the Company shall pay all known
contingent and liquidated liabilities except for those liabilities as set forth
on the Company Disclosure Schedule, and shall distribute all cash and accounts
receivable, which have been disclosed to Buyer, to the Shareholders. Buyer
agrees to cause the Company to pay to the Shareholders any payment received by
the Company with respect to any accounts receivable distributed to the
Shareholders.
8. CONDITIONS TO BUYER'S OBLIGATIONS AT CLOSING. The obligation
of Buyer to consummate the transactions contemplated by this Agreement are
subject to the satisfaction, on or prior to the Closing Date, of the following
conditions (any one or more of which conditions may be waived in the sole
discretion of Buyer):
8.1 Representations and Warranties. The representations and
warranties of the Company and the Shareholders set forth in Section 5 of this
Agreement shall be true and correct as of the date of this Agreement and as of
the Closing Date and Buyer shall have received a certificate signed by an
executive officer of the Company to such effect.
8.2 Performance of Obligations of the Company and the
Shareholders. The Company and the Shareholders shall have performed in all
material respects all obligations required to be performed by each of them under
this Agreement prior to the Closing Date, and Buyer shall have received a
certificate signed by an executive officer of the Company to such effect.
8.3 Government Approvals. All authorizations, consents, orders
or approvals of, or registrations, declarations or filings with, any Government
Authority necessary for the valid consummation and transactions contemplated by
this Agreement shall have been filed, occurred or obtained, and all applicable
waiting periods shall have expired and shall be in full force and effect, and
Buyer shall have received a certificate signed by an executive officer of the
Company to such effect.
8.4 Third Party Approvals. Any and all third-party approvals,
contractual or otherwise, relating to Understandings, licenses, leases or other
Instruments material to the Digital Business and necessary for the sale of the
Company Shares in accordance with the terms of this Agreement shall have been
obtained, and Buyer shall have received a certificate signed by an executive
officer of the Company to such effect.
8.5 Material Adverse Change. As of the Closing, there shall
have been no material adverse change, as determined in the sole discretion of
Buyer, in the condition of the Assets or the Digital Business nor shall the
Company have experienced any occurrence, circumstance, event, condition or state
of facts of any character, whether or not in the ordinary
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course of business and whether or not covered by insurance which might
reasonably be expected to result in any materially adverse change to the Assets
or the Digital Business, and Buyer shall have received a certificate signed by
an executive officer of the Company to such effect.
8.6 Litigation. No suit, action, proceeding, or other
litigation shall have been commenced or threatened by a party (other than Buyer)
which (i) seeks to restrain, enjoin or prevent the consummation of the sale of
the Company Shares hereunder or the transactions contemplated by this Agreement,
or (ii) questions the validity or legality of this Agreement or such
transactions.
8.7 Deliveries by the Company. The Company shall have
delivered to Buyer a copy of the source code and object code for the Software
Products.
8.8 Employment Agreements. Each of the Shareholders shall
have entered into an Employment Agreement containing non-competition provisions,
each for a three-year period, substantially in the form of EXHIBIT F attached
hereto.
8.9 Opinion of Counsel to the Company. Buyer shall have
received a written legal opinion from legal counsel to the Company dated as of
the Closing Date, substantially to the effect set forth in EXHIBIT G attached
hereto and otherwise in form and substance satisfactory to Buyer's legal
counsel.
8.10 Escrow Agreement. The parties hereto shall have
entered into an Escrow Agreement and shall be in form and substance acceptable
to Buyer.
8.11 Employee Proprietary Information Agreement. Each of
the Shareholders shall have entered into Buyer's standard form of Employee
Proprietary Information Agreement which is attached hereto as EXHIBIT H.
8.12 The Company's Officer's Certificate. The Company shall
have delivered to Buyer a certificate signed by the Chief Executive Officer of
the Company dated the Closing Date, and certifying that attached thereto is a
true and complete copy of all resolutions adopted by the Board of Directors of
the Company authorizing the execution, delivery and performance of this
Agreement by the Company and the transactions contemplated hereby, and that all
such resolutions are in full force and effect as of the date of this Agreement
and as of the Closing Date.
8.13 Company Disclosure Schedule. The Company and the
Shareholders agree to deliver to Buyer no later than Tuesday, April 4, 1995, the
final version of the Shareholders' Disclosure Schedule, Company Disclosure
Schedule and other documents and materials required hereunder to be delivered as
of such date, each of which shall be in a form satisfactory to Buyer.
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8.14 Due Diligence. Buyer shall be reasonably satisfied in all
material respects with the results of a legal and accounting review of the
Company, all reasonable requests of Buyer to the Company for additional
information shall have been accommodated, and the exhibits and schedules hereto
shall have been delivered to Buyer and its legal counsel and the disclosures
therein shall be reasonably satisfactory to Buyer.
8.15 Newly Enacted Laws. No Law shall have been enacted by any
Government Authority with jurisdiction over any of the Assets which would make
the consummation of the transactions contemplated by this Agreement illegal.
9. CONDITIONS TO THE OBLIGATIONS OF COMPANY AND SHAREHOLDERS AT
CLOSING. The obligations of the Company and the Shareholders to consummate the
transactions contemplated by this Agreement are subject to the satisfaction, on
or prior to the Closing Date, of the following conditions (any one or more of
which conditions may be waived in the sole discretion of the Company and the
Shareholders):
9.1 Representations and Warranties. The representations and
warranties of Buyer set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and as of the Closing Date,
and the Company shall have received a certificate signed by an executive officer
of Buyer to such effect.
9.2 Performance of Obligations of Buyer. Buyer shall have
performed in all material respects all obligations required to be performed by
Buyer under this Agreement prior to the Closing Date and the Company shall have
received a certificate signed by an executive officer of Buyer to such effect.
9.3 Delivery of Purchase Price. Buyer shall have delivered
the Purchase Price to the Company and the Escrow Agent as set forth in Section 2
of this Agreement.
9.4 Litigation. No suit, action, proceeding, or other
litigation shall have been commenced or threatened against the Company or Buyer
with respect to the sale of the Assets.
9.5 Escrow Agreement. The parties hereto shall have entered
into an Escrow Agreement, in substantially the form attached hereto as EXHIBIT B
and shall be in form and substance acceptable to the Shareholders.
9.6 Security Agreement. Buyer and the Shareholders shall have
entered into the Security Agreement, which shall be in the form and substance
acceptable to the Shareholders and the Buyer.
9.7 Approval of SGI Agreement. Buyer shall have given its
approval to the License Agreement with SGI as contemplated by Section 7.12 above
or shall have otherwise authorized the Company and/or the Shareholders (or any
affiliate thereof) to grant a license to SGI as provided in Section 7.12 above,
in a form reasonably acceptable to the Shareholders
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and Buyer.
10. TERMINATION.
10.1 Reasons for Termination. This Agreement may be terminated
as follows:
(a) by Buyer (i) if by the Closing Date the conditions
to the obliga tions of the Buyer set forth in Section 8 have not been met or
waived after both parties hereto have in good faith used their best efforts to
resolve any outstanding and unresolved condition or (ii) for any or no reason,
after April 7, 1995, if the Closing has not occurred by such date.
(b) by the Company and the Shareholders (i) if by the
Closing Date the conditions to the obligations of the Company and the
Shareholders set forth in Section 9 have not been met or waived after both
parties hereto have in good faith used their best efforts to resolve any
outstanding and unresolved condition or (ii) for any or no reason, after April
7, 1995, if the Closing has not occurred by such date.
10.2 Effect. In the event of the termination of this Agreement
and abandonment of the transactions contemplated hereby, this Agreement (except
for Sections 7.8, 10 and 12) shall become void and have no further effect,
without any liability on the part of any party or its partners, directors,
officers, shareholders or agents.
10.3 Risk of Loss to Assets. Any loss or damage on or prior to
the Closing Date due to fire, explosion, earthquake, windstorm, accident, flood,
act of God, war, seizure or any other casualty, whether similar or dissimilar,
occurring to any of the Assets shall, whether or not covered by insurance, be
the responsibility of the Buyer. If such loss or damage is sufficiently
substantial to preclude the resumption of normal operations or a substantially
complete restoration of the Digital Business prior to the earlier to occur of
(i) the Closing Date or (ii) thirty (30) days following the occurrence of the
event or casualty, or if such loss or damage materially and adversely affects
the value of the Assets or the Digital Business, the Company shall immediately
notify Buyer in writing, and Buyer, at any time within fifteen (15) days after
receipt of such notice or such shorter period prior to the Closing Date, may
elect to either (a) accept the proceeds of any insurance coverage, whether paid
by the insurer before or after the Closing Date, and consummate the transactions
contemplated by this Agreement, or (b) terminate this Agreement upon delivery of
written notice to the Company, and in the latter event all parties shall stand
fully released and discharged of any and all obligations under this Agreement.
11. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION.
11.1 Survival of Representations. All representations and
warranties of the Shareholders, as set forth in Sections 4 and 5 hereof, and of
Buyer, as set forth in Section 6 hereof, shall survive until the earlier of the
termination of this Agreement or the second anniversary of the date of this
Agreement.
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11.2 Indemnity by the Shareholders. Subject to the terms of
this Section 11, the Shareholders agree jointly to indemnify, defend, save, and
hold harmless Buyer and its directors, officers, employees, agents, and
attorneys from and against: any and all Claims that arise out of or relate in
any way to liabilities, obligations, damages, losses, costs or expenses of Buyer
(the "DAMAGES") resulting from any falsity, inaccuracy, incompleteness,
misrepresentation, breach or nonfulfillment of any representation, warranty,
covenant, condition or agreement on the part of the Company or the Shareholders
under this Agreement, or from any falsity, inaccuracy, incompleteness or
misrepresentation in or omission from any certificate or other instrument
furnished or to be furnished by the Company or Shareholders to Buyer under this
Agreement; provided that the liability of the Shareholders for a breach by a
Shareholder of such Shareholder's several obligations hereunder or the
warranties of such Shareholder pursuant to Section 4 hereof, shall be several
and not joint amongst the Shareholders so that only the breaching Shareholder
shall be liable to Buyer for the breach of his obligations, warranties and
representations under Section 4. Any obligation or liability of the Shareholders
to provide indemnification under this Section shall survive the termination of
this Agreement as set forth in Section 11.1 above.
11.3 Indemnity by the Buyer. Subject to the terms of this
Section 11, the Buyer agrees to indemnify, defend, save, and hold harmless the
Shareholders and their agents, and attorneys from and against: any and all
Claims that arise out of or relates in any way to liabilities, obligations,
damages, losses, costs or expenses of the Shareholders resulting from any
falsity, inaccuracy, incompleteness, misrepresentation, breach or nonfulfillment
of any representation, warranty, covenant, condition or agreement on the part of
the Buyer under this Agreement, or from any falsity, inaccuracy, incompleteness
or misrepresentation in or omission from any certificate or other instrument
furnished or to be furnished by the Buyer to the Shareholders under this
Agreement. Any obligation or liability of the Buyer to provide indemnification
under this Section shall survive the termination of this Agreement as set forth
in Section 11.1 above.
11.4 Indemnification Procedures. Upon obtaining knowledge of
the assertion or existence of any Claim which could give rise to a claim of
indemnity pursuant to Sections 11.2 or 11.3 above, the party seeking
indemnification (the "INDEMNIFIED PERSON") from the other party (the
"INDEMNIFYING PERSON") shall promptly provide the Indemnifying Person with
written notice of any such Claim, but the failure of the Indemnified Person to
so promptly notify the Indemnifying Person shall not affect the Indemnifying
Person's obligation pursuant to this Section 11 unless such failure materially
prejudices the Indemnifying Person's right to participate in the contest of such
Claim as hereinafter provided. Except as set forth in Section 11.5, the
Indemnifying Person shall have the right at its expense to employ counsel of its
choice to answer the charges and defend such Claim and the Indemnified Person
shall have the right, but not the obligation, to participate in the defense of
any such Claim; provided, however, that in the event that the Indemnifying
Person has employed counsel to defend a Claim (other than a Claim referred to in
Section 11.5) and the Indemnified Person elects to engage its own counsel to
assist in the defense, the Indemnified Person shall pay all costs and expenses
of its own counsel. So long as the Indemnifying Person is defending such Claim
in
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good faith, the Indemnified Person will not settle such Claim without the
Indemnifying Person's written consent, which consent shall not be unreasonably
withheld, and the Indemnifying Person will not settle any Claim on behalf of the
Indemnified Person without the Indemnified Person's written consent, which
consent shall not be unreasonably withheld. The Indemnified Person shall make
available to the Indemnifying Person all records and other materials at the
Indemnifying Person's expense, as shall reasonably be required by the
Indemnifying Person to contest such Claim.
11.5 Buyer's Defense of Certain Claims. Notwithstanding
Section 11.4, with respect to any Claims which relate to or are likely to affect
the continuing business of Buyer, including, without limitation, Buyer's
relationships with consumers, customers, vendors, lessors, suppliers or
Governmental Authorities, Buyer shall have the right (but not the obligation) to
employ counsel and to defend and/or settle such Claims, with the Shareholders'
consent (which shall not be unreasonably withheld) at the Shareholders' expense.
No settlement or compromise of any such Claim without the Shareholders' consent
shall be at the Shareholders' expense.
11.6 Payment of Indemnification Claims.
(a) In the event any indemnification claim arises
under Sections 11.2 or 11.3 hereof as a result of a Claim asserted against an
Indemnified Person, the failure of the Buyer or the Shareholders to pay the
Indemnified Person's costs and expenses (including without limitation Buyer's
attorneys' fees in accordance with Sections 11.4 and 11.5 hereof), within thirty
(30) days following demand therefor shall constitute a material breach of this
Agreement and the Indemnified Person may pursue retaining legal counsel to
assume its defense at the expense of the Indemnifying Person.
(b) In the event any indemnification claim is
asserted pursuant to Sections 11.2 or 11.3 hereto, if the Indemnifying Person
provides written notice to the Indemnified Person within fifteen (15) days
following the Indemnified Person's assertion of such claim that it is objecting
to the claim, then the parties shall attempt to resolve the dispute through
negotiations during a fifteen (15) day period following delivery of such notice
of objection to the Indemnified Person; however, if the dispute is not resolved
within such fifteen (15) day period, the dispute shall be referred to
arbitration in accordance with Section 12 hereof.
(c) Upon the assertion of an indemnification claim
under this Section 11 ("CLAIM"), the Claim will be satisfied first from the
Escrow Funds with the payment to come from the next payment due in time to the
Shareholders until all such Escrow Funds have been depleted. The Shareholders
shall be responsible for any deficiency amount between the amount of funds in
the Escrow Fund and the amount of Damages due and owing to Buyer.
11.7 Limitations on Indemnification. All payments due to
an Indemnified Person (or payable on behalf of an Indemnified Person) with
respect to any indemnification
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claims hereunder shall be limited as follows:
(a) In the absence of fraud, all payments
due to Buyer as the Indemnified Person (or payable on behalf of an Indemnified
Person) shall be limited to the Purchase Price and shall be the joint and
several obligation of the Shareholders; provided, however, that the total
obligation of any individual Shareholder to Buyer pursuant to this Section 11
shall be limited in the aggregate to that portion of the Purchase Price
previously paid to such Shareholder and payable to such Shareholder pursuant to
the Promissory Note or otherwise from the Escrow Fund (as reduced pursuant to
Section 7.11 hereof).
(b) No Indemnifying Person shall be required to
make any indemnification payments under Sections 11.2 or 11.3, as the case may
be, except to the extent that the cumulative amount of the Damages actually
incurred by the other party hereto actually exceeds the sum of Fifty Thousand
($50,000) Dollars (the "THRESHOLD AMOUNT"); provided, however, when such Damages
reach the Threshold Amount the Indemnifying Party shall indemnify the
Indemnified Party for all Damages, including the Threshold Amount.
(c) The amount of any payment or reimbursement
of Damages by the Indemnifying Party shall be net of any insurance proceeds or
settlement received by the Indemnified Party in connection with the Claim giving
rise to such loss, liability or expense less the cost of collecting such
proceeds or settlement.
12. ARBITRATION.
12.1 Arbitration Rules. Any and all disputes, controversies or
claims whether of law or fact and of any nature whatsoever arising from or
respecting this Agreement that are not resolved by the parties hereto, shall be
decided by arbitration in accordance with this Section 12 or otherwise by the
Arbitration Rules then in effect of the American Arbitration Association (the
"ARBITRATION RULES"). Unless otherwise agreed to in writing, the arbitration
shall be held in Santa Clara County, California. Reasonable written notice of
the time and place of arbitration shall be given to all parties to such
arbitration and their legal counsel as shall be required by Law (the
"ARBITRATION NOTICE"), in which case such persons or their authorized
representatives shall have the right to attend and/or participate in all the
arbitration hearings in such manner as the law shall require.
12.2 Selection of Arbitrators. The arbitrator shall be
selected as follows: in the event the parties to a dispute to be decided by
arbitration pursuant to this Section 12 agree on an arbitrator, the arbitration
shall be conducted by such arbitrator. In the event the parties to the
arbitration are unable to select an arbitrator, legal counsel to the parties to
such arbitration shall select an arbitrator within thirty (30) days following
receipt of a notice from a party of such party's election to submit an
unresolved matter to arbitration. In the event that neither the parties nor
their legal counsel are able to select an arbitrator, the arbitrator shall be
appointed in accordance with the Arbitration Rules. The arbitrator shall use his
or her best efforts to render a decision on the matter submitted to him or her
pursuant hereto within sixty (60) days
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following such person's appointment. The parties to the arbitration shall
equally bear the fees and expenses of the arbitrator.
12.3 Confidentiality of Arbitration Matters. At the written
request of either party to the arbitration, the arbitration proceedings will be
conducted in the utmost secrecy; in such case all documents, testimony and
records shall be received, heard and maintained by the arbitrator(s) in secrecy
under seal, available for the inspection only of the parties to such arbitration
and their respective approved agents, who shall agree in advance and in writing
to receive all such information confidentially and to maintain such information
in secrecy until such information shall become generally known.
12.4 Binding Effect of Arbitration. The arbitrator shall be
able to decree any and all relief of an equitable nature, including but not
limited to such relief as a temporary restraining order, a temporary and/or a
permanent injunction, and shall also be able to award damages, with or without
an accounting and costs. The final decision of the arbitrator shall constitute a
conclusive determination of the matter in question, shall be binding upon the
parties hereto and shall not be contested by any of them. The decree or judgment
of an award rendered by the arbitrator may be entered in any court having
jurisdiction thereof.
12.5 Out-of-Pocket Expenses. After the arbitrator has rendered
its decision and made its award, either party may, within seven (7) business
days from the date of the arbitrator's decision, request the same arbitrator to
assess against the other party any or all of the out-of-pocket expenses
(including reasonable attorneys', accountants', and other professionals' fees)
incurred by it in connection with proving or disproving, as the case may be, the
validity of the controversy or claim. All claims for out-of-pocket expenses
shall be decided in accordance with the Arbitration Rules then in effect.
12.6 Pre-Hearing Discovery. The parties agree to permit
pre-hearing discovery as follows:
(1) Discovery, in the form of document production,
oral deposition and interrogatory concerning the amount and method of
calculation of Claims, pursuant to the California Code of Civil Procedure,
subject to such limitations and modifications as may be imposed by the
Arbitrators in their sole discretion, should commence promptly upon receiving of
the Arbitration Notice. The parties shall exchange written requests for
production of documents within fifteen (15) days after the Arbitration Notice
and requested documents shall be produced for inspection within fifteen (15)
days thereafter. All written documents exchanged in response to written requests
for production of documents shall b exchanged as close to simultaneously as is
possible and if a document is not being produced, such document shall be listed
on a non-produced document list provided to the other party at the time of
document production. Each party shall have the right to object to document
requests in accordance with the California Code of Civil Procedure;
(2) The parties shall exchange lists of proposed
oral deposition
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witnesses on or before forty-five (45) days after receipt of the Arbitration
Notice. Counsel for the parties will meet promptly thereafter to agree on a
schedule of oral depositions to be taken as promptly as practicable. All oral
depositions shall be conducted in accordance with the California Code of Civil
Procedure. The testimony of oral deposition witnesses shall be given under oath;
(3) The parties will exchange copies of all
exhibits that the Parties propose to use at the arbitration and the curriculum
vitae of any expect to testify at the arbitration hearing on or before fifteen
(15) days prior to the date scheduled for the arbitration hearing; and
(4) Each party shall have the right to petition
the arbitrator for modification of the procedure set forth herein and, in such
event, the procedure shall be tolled pending the decision of the arbitrator.
13. DEFINITIONS.
All terms defined in this Agreement shall have the defined meanings
when used herein. The following terms shall have the following meanings:
"ACCELERATING EVENT" means (i) the liquidation and/or dissolution of
Buyer; (ii) a Change in Control of Buyer after which there is a material change
in Buyer's product plans for the A.S.A.P. products and the Smartslide
technology; or (iii) except as set forth in Section 14.3, the sale, transfer or
conveyance (including, without limitation, by way of an exclusive license
transferring substantially all rights) for the Assets or a material portion
thereof for aggregate consideration equal to or greater than (A) $5,300,000
during the two (2) year period following the Closing Date and (B) $6,800,000
after said two (2) year period.
"AFFILIATE(S)" of a party hereto means any Person, directly or
indirectly, controlled by, controlling or under common control with such party
through the ownership of more than 50% of the outstanding voting securities of
the Person so controlled.
"APPROVALS" shall have the meaning set forth in Section 5.4.
"A.S.A.P. VERSION 1" means the first engineering release of the
A.S.A.P. product which occurs no later than August 30, 1995.
"A.S.A.P. VERSION 2" means the next release of the A.S.A.P. product
which generates upgrade revenue from A.S.A.P. Version 1 users.
"ASSETS" shall mean the Software Product or Software Products, the
Documentation, all of those certain tangible and intangible rights, properties,
the assets set forth in Schedule 1 attached hereto and all good will associated
therewith.
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"BUYER" means Software Publishing Corporation, a Delaware corporation.
"DIGITAL BUSINESS" shall refer to all of the Assets and the Digital
Business as conducted as of the date of this Agreement or as of the Closing Date
by Seller.
"CHANGE OF CONTROL" means the occurrence of any of the following events:
(i) Any "PERSON" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of the Buyer representing more than 50% of
the total voting power represented by Buyer's then outstanding voting
securities; or
(ii) The shareholders of Buyer approve a merger
or consolidation of Buyer with any other corporation, other than a merger or
consolidation which would result in the voting securities of Buyer outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than fifty percent (50%) of the total voting power represented by
the voting securities of Buyer or such surviving entity outstanding immediately
after such merger or consolidation, or the shareholders of Buyer approve a plan
of complete liquidation of Buyer or an agreement for the sale or disposition by
Buyer of all or substantially all Buyer's assets.
"CLAIMS" means any and all personal injury, property damage, nuisance,
tort, contract or other claims, actions or demands brought at anytime by any
Person, any and all demands, actions or claims for investigation, remediation,
removal, closure or other action with respect to Hazardous Materials, and any
and all other suits, demands, actions, fines, penalties, claims, enforcement
actions, Liens, liabilities, damages, deficiencies, injunctions, attorneys'
fees, experts' fees, costs and expenses imposed, threatened, paid "CHANGE OF
CONTROL or incurred at any time, whether foreseeable or unforeseeable,
conditional or unconditional.
"CLOSING" shall have the meaning set forth in Section 3.1.
"CLOSING DATE" shall have the meaning set forth in Section 3.1.
"COMPANY" means Digital Paper, Inc., a California corporation.
"COMPLETION OF DEVELOPMENT" means, as to any Software Product, the
production of a "gold master" disk of such product.
"CUSTOMER" means any third party or Affiliate thereof to whom, prior to
the Closing, any one or more copies of the Software Products have been sold or
licensed by the Company.
"DELIVERY DATE" means the close of business on Tuesday, April 4, 1995,
upon which the Company and the Shareholders will deliver the Company Disclosure
Schedule,
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Shareholders' Disclosure Schedule and such other materials required to be so
delivered pursuant to this Agreement as provided in Sections 7.9 and 8.13 above.
"DOCUMENTATION" means the following information in any form whatsoever:
(a) all technical, design, development and installation information describing
the design and development of the Software Products, including Source Code,
source documentation, source listings and annotations, test data and test
results ("Technical Documentation"); and (b) the "user's guide" and all other
such reference manuals and support materials normally distributed to Customers
in connection with the distribution of the Software Products ("User
Documentation").
"EMPLOYEE" means an individual who performs services of any kind for
the Company.
"ENVIRONMENTAL LAW" means requirement of law pertaining to land use,
air, soil, surface water, groundwater (including the protection, cleanup,
removal, remediation or damage thereof), public or employee health or safety or
any other environmental matter, including, without limitation, the following
laws as the same may be amended from time to time: (a) Clean Air Act (42 U.S.C.
ss. 7401, et seq.); (b) Clean Water Act (33 U.S.C. ss. 1251, et seq.); (c)
Resource Conservation and Recovery Act (42 U.S.C. ss.6901, et seq.); (d)
Comprehensive Environmental Response Compensation and Liability Act (42 U.S.C.
ss.9601, et seq.); (e) Safe Drinking Water Act (42 U.S.C. ss. 300f, et seq.);
(f) Toxic Substances Control Act (15 U.S.C. ss.2601, et seq.); (g) Rivers and
Harbors Act (33 U.S.C. ss.401, et seq.); (h) Endangered Species Act (16 U.S.C.
ss.1531, et seq.); and (i) Occupational Safety and Health Act (29 U.S.C. ss.651,
et seq.); together with any other foreign or domestic laws (federal, state,
provincial or local) relating to emissions, discharges, releases or threatened
releases of any Hazardous Substance into ambient air, land, surface water,
groundwater, personal property or structures, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, discharge or handling of any Hazardous Substance.
"FIRST COMMERCIAL SHIPMENT" means the first shipment of a product to
any distributor, OEM, reseller or other customer that is: (i) paying a license
fee or purchase price therefor and (ii) not an alpha or beta site evaluation
customer of such product.
"FRAISL" refers to Daniel J. Fraisl.
"GAAP" means generally accepted accounting principles.
"GOVERNMENTAL AUTHORITY" means any local, state, federal, foreign or
international governmental authority agency or entity, including, but not
limited to, any court, tribunal or panel having jurisdiction over the matter at
issue.
"HAZARDOUS SUBSTANCE" means any matter that is labeled or regulated as
a pollutant, contaminant, hazardous or toxic substance, material, constituent or
waste or pollutant under any Environmental Law or by any governmental authority
and includes, without limitation, asbestos
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<PAGE>
and asbestos-containing materials and any material or substance that is: (a)
designated as a "hazardous substance" pursuant to section 307 of the Federal
Water Pollution Control Act, 33 U.S.C. section 1251, et seq. (33 U.S.C. ss.
1317); (b) defined as a "hazardous waste" pursuant to section 1004 of the
Federal Solid Waste Disposal Act, 42 U.S.C. section 6901, et seq. (42 U.S.C. ss.
6903); (c) defined as a "hazardous substance" pursuant to section 101 of the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
section 9601, et seq. (42 U.S.C. ss. 9601); or (d) so designated or defined
under any other applicable requirement of law.
"HOEBER" refers to Anthony N. Hoeber.
"INDEMNIFIED PERSON" shall have the meaning set forth in Section 11.4.
"INDEMNIFYING PERSON" shall have the meaning set forth in Section 11.4.
"INSTRUMENTS" shall have the meaning as set forth in Section 5.7.
"JUST CAUSE" shall mean a determination by the Buyer that the
Shareholder's termination is necessary because the Shareholder has engaged in
unfair competition with the Buyer, induced a customer of the Buyer to breach a
contract with the Buyer, made an unauthorized disclosure or otherwise misused
any of the Buyer's trade secrets or confidential information which has caused
material loss, damage or injury to the Buyer or otherwise materially endangered
the property, reputation or employees of the Buyer, committed an act of
embezzlement, fraud or theft with respect to Buyer property, violated any Buyer
policy or guideline which has caused material loss, damage or injury to the
Buyer or otherwise materially endangered the property, reputation or employees
of the Buyer or gross insubordination.
"LAW" means any national, international, state, or local law, statute,
rule, regulation, ordinance, requirement for approval or permit, judgment,
injunction, decree of any court of applicable jurisdiction, or any treaty,
international understanding, or other rule which has the force of law.
"LIABILITY" means any direct or indirect liability, indebtedness,
obligation, guarantee or endorsement, either accrued absolute, contingent or
otherwise, including, without limitation, loss contingencies as determined in
accordance with GAAP.
"LICENSEE" means any: (i) licensee of Buyer or its Affiliates, as to
the Software Products, or any Product Derivative, who is permitted to
sublicense, market and/or sell the product so licensed to end-users,
distributors, resellers or sublicensees; or (ii) any sublicensee of a Person
described in the preceding clause (i).
"LIEN" means any mortgage, deed of trust, pledge, hypothecation,
security interest, encumbrance, lien or charge of any kind, whether voluntarily
incurred or arising by operation
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<PAGE>
of law or otherwise, including any agreement to give any of the foregoing, any
conditional sale or other title retention agreement, any lease in the nature
thereof, and/or the filing of or agreement to give any financing statement under
the Uniform Commercial Code or comparable law of any jurisdiction.
"MEYER" refers to Carl Meyer.
"OPERATING AGREEMENTS" shall have the meaning as set forth in
ATTACHMENT B TO SCHEDULE 1.
"OBJECT CODE" shall mean the computer executable embodiment of the
computer code associated with a product derived from the related Source Code
form by a process normally referred to as compilation or other process which
translates the Source Code form or some intermediate code derived therefrom to a
form which is understood and acted upon by computers, regardless of the media on
which it is contained.
"PERMITTED LIENS" means liens for taxes not yet due and payable; any
carrier's, warehousemen's, mechanic's, materialmen's, repairmen's or other like
lien arising in the ordinary course of business; easements, rights-of-way,
restrictions, minor encroachments and other similar nonmonetary encumbrances
incurred in the ordinary course of business, which do not render the Asset
subject thereto unusable for the purpose intended, materially detract from the
value of the Asset or interfere with the ordinary use of the Asset in the
ordinary course of business.
"PERSON" means any entity, whether an individual, trustee, corporation,
general partnership, limited partnership, joint stock company, trust,
unincorporated organization, bank, business association, firm, joint venture,
Governmental Authority, or otherwise.
"PERSONAL PROPERTY" shall have the meaning set forth in Attachment A to
Schedule 1.
"PRODUCT DERIVATIVES" shall mean all computer software and programs,
and the related documentation, regardless of the form (Object Code or Source
Code) or intended use, developed by Buyer or its Affiliates or Licensees (a)
that consists of any translation, portation, modification, correction, addition,
extension, upgrade, improvement, compilation, abridgement or other form in which
the Software Products (or their successor versions, modules or parts thereof and
variants) may be recast, transformed or adapted, or (b) that is based on the
proprietary form, structure, design or ideas embodied in the Software Products.
"PRODUCT UPDATES" shall mean releases of the Software Product or any
Product Derivatives, whether in Source Code or Object Code form, encompassing
enhancements and other changes which are deemed by Purchaser, at its sole
discretion, to be logical improvements thereof, where such releases are
generally made available to Purchaser's supported licensees. "Product Updates"
shall include any options or enhancements to the
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<PAGE>
Software Product or any Product Derivative which Purchaser makes available for
use or distribution at separate cost.
"PURCHASE AGREEMENT" means the Stock Purchase Agreement dated March 31,
1995.
"PURCHASE PRICE" shall have the meaning set forth in Section 2.1.
"SELL-THROUGH UNITS" means that number of units that are sold or
licensed by contract resellers and distributors to end-users, plus units sold by
Buyer and its Affiliates and Licensees to end-users and OEMs directly, less any
units (or associated dollar value) of outstanding return material
authorizations.
"SOFTWARE PRODUCT" or "SOFTWARE PRODUCTS" shall mean the Company's
A.S.A.P. and SmartSlide software program and computer instructions or any
portion thereof, the features of which are described in ATTACHMENT C TO SCHEDULE
1, in Source Code form or Object Code form, including all things authored,
discovered, developed, made, perfected, improved, designed, engineered, devised,
acquired, produced, conceived or first reduced to practice by the Company or any
of its Employees (while employed by or acting on behalf of the Company) that
pertain to or are used in such program, or that are necessary to an
understanding or to the development of such program or to the performance by
such program of its intended functions or purposes, whether tangible or
intangible, in any stage of development, including without limitation
enhancements, designs, technological improvements, inventions, works of
authorship, trade secrets, formulas, processes, routines, sub-routines,
techniques, concepts, methods, ideas and algorithms, software tools owned by the
Company and used in connection with such program, Source Code, Object Code, flow
charts, diagrams, coding sheets, Source Code listings and annotations,
programmers' notes, information, work papers, work products and other materials
related thereto of any type whatsoever, together with all related proprietary
rights and trade secrets, all related patents and copyrights (whether pending,
applied for or issued) regardless of whether any or all of the foregoing
constitute copyrightable or patentable subject matter. "Software Products" shall
not include any third party software products or any programs or products of the
Company not used in the development of the Software Products.
"SOURCE CODE" shall mean the human readable embodiment of the computer
code associated with a computer software program implementing specific
algorithms from which the computer software program is derived, whether such
embodiment is contained on paper, magnetic media, electronic impulses or other
form or media.
"TRANSACTION DOCUMENTS means this Agreement (including the exhibits and
schedules hereto) and all related documents.
"UNDERSTANDING" shall mean any oral or written contract, license,
lease, agency agreement, distribution agreement, promise, easement, covenant,
condition, restriction, Lien, agreement, arrangement or other understanding of
any kind.
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<PAGE>
14. POST-CLOSING COVENANTS.
14.1 Income Tax. Following the Closing, Buyer agrees that it
shall: (i) cooperate with the Shareholders in preparing federal and state income
returns for the Company for the period from January 1, 1995 to the Closing Date;
(ii) not cause the Company to make an election under Section 338(h)(10) of the
Internal Revenue Code; and (iii) without the Shareholders' prior written consent
(which shall not be unreasonably withheld), amend any of the federal and state
income tax returns for periods prior to the Closing Date.
14.2 Development, Marketing and Sale of the Company's Software
Products. Following the Closing, Buyer agrees to use reasonable efforts to
develop, market and sell the Software Products, including without limitation the
A.S.A.P. Version 1 product and the A.S.A.P. Version 2 product.
14.3 Transfer of the Assets. In the event that Buyer shall
sell, transfer or convey (including, without limitation, any grant of an
exclusive license transferring substantially all rights to) the Assets or a
material portion thereof during any period prior to full payment or expiration
and/or termination of the Shareholders' conditional rights to payment pursuant
to Section 2.3 above, Buyer agrees to: (i) use reasonable efforts to cause the
transferee to assume Buyer's conditional payment obligations pursuant to said
Section 2.3; and (ii) in the event the consideration paid to Buyer is less than
the amounts specified in Section 13 to cause said transfer to be deemed an
"Accelerating Event" and provided further in the event that the transferee does
not so assume such obligations as provided in the preceding clause (i), pay to
the Shareholders 50% of any royalty or other consideration in excess of
$5,300,000 if such sale, transfer or conveyance of the Assets occurs prior to
the second anniversary of the Closing Date and $6,800,000 if such sale, transfer
or conveyance of the Assets occurs after the second anniversary of the Closing
Date payable by the transferee that is contingent upon and determined by the
use, licensing or sale by such transferee of the Assets until such time as the
Shareholders receive the maximum aggregate consideration to which Shareholders
are entitled to receive under said Section 2.3.
15. GENERAL PROVISIONS.
15.1 Entire Agreement. This Agreement, including the exhibits
and schedules attached hereto, and the Transaction Documents constitute the
entire understanding among the parties hereto with respect to the transactions
contemplated hereby and thereby and such agreements and documents supersede all
prior or concurrent arrangements or understandings, whether oral or written, and
no amendment or modification of this Agreement may be made except by a writing
signed by the parties hereto.
15.2 Expenses. Buyer shall bear its expenses and the
Shareholders shall bear their expenses and the Company's expenses in connection
with the preparation and negotiation of this Agreement, the carrying out of the
provisions of this Agreement and the consummation of the transactions
contemplated hereby, including without limitation all costs of the respective
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<PAGE>
parties' attorneys, accountants, consultants and investment advisers; provided
that, following the Closing Date, a party not in breach of this Agreement shall
be entitled to receive from the breaching party all expenses and costs incurred
by the nonbreaching party in connection with attempting to enforce the terms of
this Agreement.
15.3 Headings. The headings in this Agreement are intended
solely for convenience of reference and shall be given no effect in the
construction or interpretation of this Agreement.
15.4 Notices. All notices and other communications pursuant to
this Agreement shall be in writing and deemed to be sufficient if contained in a
written instrument and shall be deemed given if delivered personally,
telecopied, sent by nationally-recognized overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the addresses set forth below or to such other address as the party
to whom notice is to be given may have furnished to the other parties hereto in
writing in accordance herewith. Any such notice or communication shall be deemed
to have been received (A) in the case of personal delivery or delivery by
telecopier, on the date of such delivery, (B) in the case of
nationally-recognized overnight courier, on the next business day after the date
when sent and (C) in the case of mailing, on the third business day following
that on which the piece of mail containing such communication is posted.
If to Buyer: Software Publishing Corporation
3165 Kifer Road
P.O. Box 54983
Santa Clara, California 95056-0983
Attention: Miriam K. Frazer
Chief Financial Officer and
Vice President, Finance
Telecopier: (408) 450-7918
Telephone: (408) 450-7127
with a copy to: Wilson, Sonsini, Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Richard C. DeGolia, Esq.
Telecopier: (415) 493-6811
Telephone: (415) 493-9300
If to Daniel J. Fraisl: 21697 Lomita Avenue
Cupertino, California 95014
Telecopier: (408) 777-4401
Telephone: (408) 777-4400
If to Carl Meyer: 13575 Surrey Lane
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<PAGE>
Saratoga, California 95070
Telecopier: (408) 777-4401
Telephone: (408) 777-4400
If to Anthony N. Hoeber: 22281 Bellevue Avenue
Cupertino, California 95014
Telecopier: (408) 777-4401
Telephone: (408) 777-4400
with a copy to: Morrison & Foerster
755 Page Mill Road
Palo Alto, California 94304
Attention: Michael C. Phillips
Telecopier: (415) 494-0792
Telephone: (415) 813-5620
15.5 Waiver. No waiver by any party of any condition, or the
breach of any term, condition, covenant, agreement, representation or warranty
contained in this Agreement, in any one or more instances, shall be deemed to be
a further or continuing waiver of any such condition or breach of any other
term, covenant, agreement, representation, or warranty contained in this
Agreement.
15.6 Successors and Assigns. This Agreement and the rights and
obligations of the parties hereto shall bind and inure to the benefit of any
successor or successors of Buyer by way of reorganization, merger or
consolidation and any assignee of all or substantially all of its business and
assets or more than 50% of its shares of outstanding capital stock, but except
as to any such successor or assignee of Buyer, neither this Agreement nor any
rights or benefits hereunder may be assigned by Buyer or the Company or the
Shareholders without the prior written consent of the other party.
15.7 Governing Law; Consent to Personal Jurisdiction. This
Agreement shall be governed by and construed in accordance with the laws of the
State of California as such laws are applied to contracts entered into and to be
performed entirely within the State of California, without regard to conflict of
laws provisions. The Company and each of the Shareholders hereby expressly
consents to the personal jurisdiction of the state and federal courts located in
Santa Clara County, California for any lawsuit filed there against the Company
or any of the Shareholders by Buyer arising from or relating to this Agreement.
15.8 No Third Party Beneficiary. Nothing in this Agreement,
expressed or implied, is intended to confer on any other person other than the
parties hereto or their respective successors, assigns and legal
representatives, any rights, remedies, obligations or liabilities under or by
reason of this Agreement.
15.9 Severability. In the event that any one or more of the
provisions
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<PAGE>
contained in this Agreement or in any of the other Transaction Documents, shall
for any reason be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement or any other such instrument.
15.10 Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original and all of which together shall be deemed to be one and the same
instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written by their respective officers
thereunto duly authorized.
BUYER: THE COMPANY:
SOFTWARE PUBLISHING COMPANY DIGITAL PAPER, INC.
By:_______________________ By:_________________________
Irfan Salim Daniel J. Fraisl
Title: President Title: President
By:_______________________ ____________________________
Miriam K. Frazer Daniel J. Fraisl
Title: Chief Financial Officer and
Vice President, Finance
____________________________
Carl Meyer
____________________________
Anthony N. Hoeber
-39-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
IN THOUSANDS (EXCEPT EPS)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 30867
<SECURITIES> 13130
<RECEIVABLES> 11469
<ALLOWANCES> 873
<INVENTORY> 1710
<CURRENT-ASSETS> 1292
<PP&E> 3290
<DEPRECIATION> 0
<TOTAL-ASSETS> 61927
<CURRENT-LIABILITIES> 23656
<BONDS> 0
<COMMON> 13
0
0
<OTHER-SE> 25252
<TOTAL-LIABILITY-AND-EQUITY> 61927
<SALES> 9019
<TOTAL-REVENUES> 9019
<CGS> 2174
<TOTAL-COSTS> 2174
<OTHER-EXPENSES> 2843
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (6699)
<INCOME-TAX> 1755
<INCOME-CONTINUING> (4944)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4944)
<EPS-PRIMARY> (.40)
<EPS-DILUTED> 0
</TABLE>
