EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
QUALIX GROUP, INC.,
QUALIX SUBSIDIARY, INC.,
AND
OCTOPUS TECHNOLOGIES, INC.
JULY 14, 1996
TABLE OF CONTENTS
Page
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Article I - Plan or Reorganization.............................................................................. 1
1.1 Board of Directors' and Stockholders' Approval.................................................... 1
1.2 The Merger........................................................................................ 1
1.3 The Closing....................................................................................... 3
1.4 Effective Time.................................................................................... 3
1.5 Exemption from Registration: California Permit.................................................... 3
1.6 Restricted Securities............................................................................. 4
1.7 Surrender and Exchange of Outstanding Certificates, Warrants and
Options for Capital Stock; Status of Outstanding Certificates..................................... 4
1.8 Appraisal Rights.................................................................................. 5
1.9 Fractional Shares................................................................................. 5
1.10 Reorganization.................................................................................... 5
1.11 Pooling of Interest............................................................................... 5
1.12 Stockholder Agreement............................................................................. 5
Article II - Representations and Warranties of Octopus......................................................... 6
2.1 Organization and Standing......................................................................... 6
2.2 Capitalization.................................................................................... 6
2.3 Subsidiaries...................................................................................... 7
2.4 Authority, Approval, and Enforceability........................................................... 7
2.5 Financial Statements.............................................................................. 8
2.6 Accounts and Notes Receivable..................................................................... 9
2.7 Accounts and Notes Payable........................................................................ 9
2.8 Inventories....................................................................................... 9
2.9 Material Changes.................................................................................. 9
2.10 Returns........................................................................................... 10
2.11 Properties and Inventories........................................................................ 10
2.12 Insurance......................................................................................... 11
2.13 Purchase; Sale and Other Agreements............................................................... 11
2.14 Intellectual Property Rights...................................................................... 12
2.15 Employees and Employee Benefit Plans.............................................................. 13
2.16 Environmental and Safety Laws..................................................................... 14
2.17 Compliance with Laws.............................................................................. 14
2.18 Proprietary Information and Inventions and Confidentiality Agreements............................. 14
2.19 Absence of Litigation............................................................................. 15
2.20 No Brokers........................................................................................ 15
2.21 Accuracy of Documents and Information............................................................. 15
2.22 Taxes............................................................................................. 15
2.23 Compliance with Instruments....................................................................... 17
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Article III - Representations and Warranties of Qualix.......................................................... 18
3.1 Organization and Standing......................................................................... 18
3.2 Capitalization.................................................................................... 18
3.3 Subsidiaries...................................................................................... 20
3.4 Authority, Approval, and Enforceability........................................................... 20
3.5 Financial Statements.............................................................................. 21
3.6 Accounts and Notes Receivable..................................................................... 22
3.7 Accounts and Notes Payable........................................................................ 22
3.8 Inventories....................................................................................... 22
3.9 Material Changes.................................................................................. 22
3.10 Returns........................................................................................... 23
3.11 Properties and Inventories........................................................................ 23
3.12 Insurance......................................................................................... 24
3.13 Purchase, Sale and Other Agreements............................................................... 24
3.14 Intellectual Property Rights...................................................................... 25
3.15 Employees and Employee Benefit Plans.............................................................. 26
3.16 Environment and Safety Laws....................................................................... 27
3.17 Compliance with Laws.............................................................................. 27
3.18 Proprietary Information and Inventions and Confidentiality Agreements............................. 27
3.19 Absence of Litigation............................................................................. 27
3.20 No Brokers........................................................................................ 28
3.21 Accuracy of Documents and Information............................................................. 28
3.22 Taxes............................................................................................. 28
3.23 Compliance with Instruments....................................................................... 30
Article IV - Covenants of Octopus and Qualix................................................................... 30
4.1 Maintenance of Business........................................................................... 30
4.2 Absence of Certain Chances........................................................................ 31
4.3 Actions Contrary to Stated Intent................................................................. 32
4.4 Access to Information; Confidentiality............................................................ 32
4.5 No Solicitation................................................................................... 32
4.6 Octopus Stockholder Approval...................................................................... 33
4.7 Qualix Stockholder Approval....................................................................... 33
4.8 Consents.......................................................................................... 33
4.9 Efforts to Consummate............................................................................. 33
4.10 Public Announcements.............................................................................. 33
4.11 Employment Agreements............................................................................. 34
4.12 Qualix Certificate................................................................................ 34
4.13 Fairness Hearing.................................................................................. 34
4.14 Octopus Proprietary Information and Invention Agreements.......................................... 34
4.15 Disclosure Schedules.............................................................................. 35
Article V - Conditions to Obligations of Qualix, Subsidiary and Octopus....................................... 35
5.1 Consents and Approvals............................................................................ 35
5.2 No Actions........................................................................................ 35
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5.3 Proceedings and Documents.......................................................................... 35
5.4 Pooling Treatment.................................................................................. 35
5.5 Fairness Hearing................................................................................... 35
5.6 Dissenters......................................................................................... 36
5.7 Affiliate and Continuity of Interest Letters....................................................... 36
5.8 Qualix Certificate of Incorporation................................................................ 36
5.9 Directors.......................................................................................... 36
5.10 FIRPTA Certificates................................................................................ 36
Article VI - Additional Conditions to Obligations of Qualix..................................................... 36
6.1 Representations, Warranties, and Agreements........................................................ 36
6.2 Certificate........................................................................................ 36
6.3 Opinion of Counsel................................................................................. 37
6.4 Proceedings and Documents.......................................................................... 37
6.5 Non-Competition Agreements......................................................................... 37
6.6 Escrow Agreement................................................................................... 37
6.7 Opinion of Patent Counsel.......................................................................... 37
6.8 Capitalization..................................................................................... 37
6.9 Option Amendment Agreements........................................................................ 37
6.10 Delivery of Financial Statements................................................................... 37
6.11 Proprietary Information and Invention Agreements................................................... 37
Article VII - Additional Conditions to Obligation of Octopus.................................................... 38
7.1 Representations, Warranties, and Agreements........................................................ 38
7.2 Certificate........................................................................................ 38
7.3 Opinion of Counsel................................................................................. 38
7.4 Proceedings and Documents.......................................................................... 38
7.5 Employment Agreements.............................................................................. 38
Article VIII - Survival......................................................................................... 38
8.1 Survival of Representations and Warranties......................................................... 38
8.2 Octopus Stockholder Indemnification................................................................ 39
8.3 Qualix Indemnification............................................................................. 39
Article IX - Termination........................................................................................ 40
9.1 Termination by Mutual Consent...................................................................... 40
9.2 Termination by Octopus or Qualix................................................................... 40
9.3 Effect of Termination.............................................................................. 40
Article X - Miscellaneous....................................................................................... 41
10.1 Notices........................................................................................... 41
10.2 Entire Agreement; Modifications; Waiver........................................................... 42
10.3 Captions.......................................................................................... 42
10.4 Counterparts...................................................................................... 42
10.5 Successors and Assigns............................................................................ 42
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10.6 Governing Law.................................................................................... 42
10.7 Further Assurances............................................................................... 42
10.8 Each Party to Bear Own Costs..................................................................... 42
10.9 Attorney's Fees.................................................................................. 42
10.10 Nonsolicitation.................................................................................. 43
10.11 Transfer of Octopus Books and Assets............................................................. 43
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EXHIBITS
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Exhibit 1.1 Form of Articles of Merger
Exhibit 1.2(a)(ii) Form of Option Assumption Agreement
Exhibit 1.6(b)A Form of Affiliate Letter
Exhibit 1.6(b)B List of Affiliates
Exhibit 1.7(a) Form of Escrow Agreement
Exhibit 1.12A List of Certain Octopus Stockholders
Exhibit 1.12B Form of Stockholder's Agreement
Exhibit 2.2(a) Capitalization of Octopus
Exhibit 3.2(a) Capitalization of Qualix
Exhibit 4.11A Form of Employment and Non-Competition Agreement
Exhibit 4.11B Compensation Terms
Exhibit 4.12 Form of Restated Articles of Incorporation of Qualix
Exhibit 6.3 Opinion of Counsel of Octopus
Exhibit 7.3 Opinion of Counsel of Qualix
SCHEDULES
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Octopus Schedule
Qualix Schedule
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AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization is entered into as of July
14, 1996 among Qualix Group, Inc., a Delaware corporation ("Qualix"), Qualix
Subsidiary, Inc., a Pennsylvania corporation ("Subsidiary"), and Octopus
Technologies, Inc., a Pennsylvania corporation ("Octopus").
RECITALS
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A. The parties hereto intend that, subject to the terms and conditions
hereinafter set forth, Subsidiary will be merged with and into Octopus (the
"Merger"), whereby Octopus will become a wholly owned subsidiary of Qualix.
B. The parties hereto intend (i) that the Merger shall constitute a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code"), (ii) that the Merger be accounted for on a
pooling of interests basis by Qualix and (iii) that the Qualix capital stock
issued in connection with Merger will be issued in a transaction exempt from
registration under the Securities Act of 1933, as amended (the "Securities
Act"), by reason of Section 3(a)(10) thereof.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereto, intending to be legally bound, do hereby
agree as follows:
ARTICLE I
PLAN OF REORGANIZATION
1.1 Board of Directors' and Stockholders' Approval. The respective Boards
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of Directors of Qualix, Subsidiary and Octopus have duly adopted and approved
this Agreement and the Articles of Merger substantially in form attached hereto
is Exhibit 1.1 (the "Articles of Merger") shall be submitted to the stockholders
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of Qualix, Subsidiary and Octopus for approval in accordance with the applicable
provisions of the Corporations Code of California (the "California Law"), and of
Pennsylvania Business Corporation Law of the Commonwealth of Pennsylvania (the
"Pennsylvania Law").
1.2 The Merger. Subject to the terms and conditions of this Agreement, at
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the Effective Time (as hereinafter defined) Subsidiary shall be merged with and
into Octopus pursuant to the Articles of Merger, with Octopus as the surviving
corporation, (sometimes herein, the "Surviving Corporation"), which shall
continue its corporate existence under the laws of the State of Pennsylvania and
the separate existence of Subsidiary shall thereupon cease. The Articles of
Incorporation and Bylaws of Octopus in effect immediately preceding the Merger,
and the directors and officers of Octopus immediately preceding the merger,
shall be the Articles of Incorporation, Bylaws, directors and officers of the
Surviving Corporation.
(a)(i) At the Effective Time, (i) each share of Common Stock, without
par value, of Octopus ("Octopus Common Stock") issued and outstanding
immediately prior to the Merger shall be, pursuant to Section 1.7(a) hereof,
converted automatically into and exchanged for .034639835 (subject to adjustment
as provided below, the "Common Exchange Ratio") fully paid and nonassessable
shares of Common Stock, par value $0.000333-1/3) per share, of Qualix ("Qualix
Common Stock"), and (2) each share of Preferred Stock, without par value, of
Octopus ("Octopus Preferred Stock"), issued and outstanding immediately prior to
the Merger shall be, pursuant to Section 1.7(a) hereof, converted automatically
into and exchanged for .1871163 fully paid and nonassessable (subject to
adjustment as provided below, the "Preferred Exchange Ratio") shares of
Preferred Stock, par value $0.001 per share, of Qualix ("Qualix Preferred
Stock"); provided that in all such cases, any shares of Octopus Common Stock or
Octopus Preferred Stock (collectively, "Octopus Capital Stock") for which the
holder thereof has perfected appraisal rights under Pennsylvania Law and/or
California Law, as applicable ("Dissenting Shares"), shall not be converted into
Qualix Common Stock or Qualix Preferred Stock, as the case may be (collectively,
"Qualix Capital Stock"), but shall instead be converted into the right to
receive such consideration as may be determined to be due with respect to such
Dissenting Shares pursuant to the laws of the State of Pennsylvania and/or the
State of California, as applicable.
(a)(ii) At the Effective Time, Qualix shall assume and perform
Octopus's obligations under all options to purchase Octopus Common Stock
("Octopus Options") which remain outstanding as of the Effective Date, so that
after the Effective Date each such Octopus Option shall represent an option to
purchase Qualix Common Stock on the same terms and conditions currently
applicable to such option, including without limitation credit toward vesting
for time of employment at Octopus, except that (1) the per share exercise price
(rounded upward to the nearest full cent) shall be the quotient determined by
dividing the then current per share option exercise price of the option by the
Common Exchange Ratio; and (2) the number of shares of Octopus Common Stock
subject to the option (with any fractional share of Qualix Common Stock being
disregarded) shall be the product determined by multiplying the number of shares
of Octopus Common Stock subject to the option by the Common Exchange Ratio.
Octopus Options shall be assumed by Qualix pursuant to a stock option assumption
agreement substantially in the form of Exhibit 1.2(a)(ii) attached hereto (the
"Option Assumption Agreement"). It is the intention of the parties that each
assumed Octopus Option qualify as an "incentive stock option" within the meaning
of Section 422 of the Code ("ISOs") to the extent that such Octopus Option
constituted an ISO immediately prior to the Effective date. No assumed Octopus
Option will entitle the holder thereof to any additional benefits within the
meaning of Section 424(a)(2) of the Code that were not available prior to such
assumption.
(a)(iii) At the Effective Time, each share of capital stock of
Subsidiary ("Subsidiary Capital Stock") issued and outstanding immediately prior
to the Merger shall be, pursuant to Section 1.7(a) hereof, converted
automatically into and exchanged for one fully paid and nonassessable share of
Common Stock of Surviving Corporation.
(b) In the event that the capitalization of Octopus set forth in
Section 2.2 below or the capitalization of Qualix set forth in Section 3.2 below
changes in any
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respect on or before the Effective Time, the Common Exchange Ratio and the
Preferred Exchange Ratio shall be appropriately adjusted so that as of the
Effective Time the total number of shares of Qualix Capital Stock issued to
holders of Octopus Capital Stock pursuant to Section 1.2(a)(i) hereof and
reserved for issuance upon exercise of Octopus Options assumed by Qualix at the
Effective Time pursuant to Section 1.2(a)(ii) hereof represents 24% of the total
shares of Qualix Capital Stock outstanding (on an as converted basis) and
reserved for issuance upon exercise of outstanding options, warrants and other
rights to acquire Qualix Capital Stock (assuming no Dissenting Shares); and
(c) All shares of Qualix Common Stock issued pursuant to the Merger in
exchange for shares of Octopus Common Stock that are subject to a repurchase
right or vesting schedule of Octopus shall be subject to the same repurchase
rights and/or vesting schedules and other terms as applicable to such shares of
Octopus Common Stock, with Qualix succeeding to the rights of Octopus thereunder
and with a proportional adjustment to any per share repurchase price applicable
to such shares to reflect the exchange of securities at the exchange rate
provided for in this Article 1.
1.3 The Closing. Subject to termination of this Agreement as provided in
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Article IX below, the closing of the Merger shall take place at the offices of
Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx Xxxxxxxx & Xxxxxxxxx, LLP, 000 Xxxxxx Xxx,
Xxxxxx Xxxxx, Xxxx Xxxx, Xxxxxxxxxx at ____ p.m. on August _, 1996, or such
other place, time and date as Qualix and Octopus may mutually select (the
"Closing").
1.4 Effective Time. Upon the complete satisfaction or satisfactory waiver
---------------
of all conditions set forth in Articles V, VI and VII of this Agreement, the
Articles of Merger shall be executed and, simultaneously with the Closing, shall
be filed in the office of the Secretary of State of the State of Pennsylvania.
The Merger shall become effective immediately upon the filing of the Articles of
Merger and related officers' certificates with the Secretary of State of
Pennsylvania (the "Effective Time").
1.5 Exemption from Registration; California Permit. The parties hereto
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expect that the Qualix Capital Stock to be issued in connection with the Merger
will be issued in a transaction exempt from registration under the Securities
Act by reason of Section 3(a)(10) thereof, and that the issuance of the Qualix
Capital Stock and Qualix's assumption of the Octopus Options and Octopus
Warrants hereunder will be qualified under California Law, pursuant to Section
25121 thereof, after a fairness hearing has been held pursuant to the authority
granted by Section 25142 of such laws. Each of Qualix, Subsidiary and Octopus
shall use their respective best efforts (a) to file an application for such
hearing and qualification within five (5) business days from the date of this
Agreement and (b) to obtain such qualification.
1.6 Restricted Securities. The Qualix Capital Stock issued pursuant to the
---------------------
Merger will be subject to the following restrictions:
(a) restrictions imposed by applicable state securities laws;
3
(b) restrictions and obligations imposed in connection with
representations, warranties, and covenants contained in letters, in the form
attached hereto as Exhibit 1.6(b)A ("Affiliates Letters"), executed by those
stockholders of Octopus and Qualix listed on Exhibit 1.6(b)B ("Affiliates");
(c) certificates representing Qualix Capital Stock will bear legends
describing certain of the applicable restrictions on transferability referred to
in this Section 1.6; and
(d) during the period of duration specified by Qualix and an
underwriter of common stock or other securities of the Company, following the
date of the first sale to the public pursuant to a registration statement of
Qualix filed under the Securities Act, such Qualix Capital Stock shall not, to
the extent requested by Qualix and such underwriter, directly or indirectly, be
sold, offered for sale, subject to a contract for sale (including, without
limitation, any short sale), subject to any option to purchase or otherwise
transferred or disposed of (other than to donees who agree to be similarly
bound) at any time during such period except common stock included in such
registration; provided, however, that:
(i) such restriction shall be applicable only to the first such
registration statement of the Company which covers common stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
(ii) all officers and directors of the Company and all other
holders of Qualix Capital Stock with registration rights enter into similar
agreements;
(iii) such period shall not exceed one hundred and eighty (180)
days; and
(e) such restriction shall not preclude transfer in a private
transaction to an institutional buyer who agrees to be bound by such agreement.
4
1.7 Surrender and Exchange of Outstanding Certificates, Warrants and
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Options for Capital Stock: Status of Outstanding Certificates. The conversion of
-------------------------------------------------------------
shares of Octopus Capital Stock into Qualix Capital Stock as provided for by
this Agreement and the Articles of Merger shall occur automatically at the
Effective Time without further action by the holders thereof. Until surrendered,
each certificate that prior to the Effective Time represented shares of Octopus
Capital Stock will be deemed to evidence the right to receive the number of
shares of Qualix Capital Stock into which such Octopus Capital Stock have been
converted (less the number of shares of Qualix Capital Stock held in escrow
pursuant to the Escrow Agreement substantially in the form attached hereto as
Exhibit 1.7(a) (the "Escrow Agreement")). Qualix shall, within fifteen (15)
business days after the Effective Time, notify each holder of a certificate or
certificates theretofore representing a share or shares of Octopus Capital Stock
to surrender all of such holder's certificates to Qualix and upon surrender such
holder shall be entitled to receive in exchange a certificate or certificates
representing the Qualix Capital Stock into which such shares have been
converted, rounded to the nearest whole share [(less the number of shares of
Qualix Capital stock held in escrow pursuant to the Escrow Agreement)].
1.8 Appraisal Rights. Holders of Octopus Capital Stock who have complied
----------------
with all requirements for perfecting appraisal rights as set forth in
Pennsylvania Law or California Law, as applicable, shall be entitled to such
appraisal rights under such laws. Octopus and Qualix shall provide to each other
prompt written notice of any written demands for appraisal, withdrawals of
demands for appraisal, and any other instrument in respect thereof received by
either and the opportunity to participate in all negotiations and proceedings
with respect to demands for appraisal. Each holder of Dissenting Shares shall,
subject to Pennsylvania Law and California Law, as applicable, receive payment
therefor (but only after the value therefor shall have been agreed upon or
finally determined pursuant hereto). The holder of a Dissenting Shares as of the
Effective Time who shall, after the Effective Time, withdraw such holder's
demand for appraisal or lose such holder's right to demand appraisal, pursuant
to applicable law, shall be deemed to be converted, as of the Effective Time,
into shares Qualix Capital Stock as specified in Section 1.2 above, without
interest. Octopus agrees that, except with the prior written consent of Qualix,
or is required by applicable law, it will not voluntarily make any payment with
respect to, or settle or offer to settle, any demands for appraisal rights prior
to the Effective Date.
1.9 Fractional Shares. No fractional shares of Qualix Capital Stock shall
-----------------
be issued pursuant to the Merger. Instead, shares of Qualix Capital Stock issued
to any holder of Octopus Capital Stock pursuant to the Merger shall be rounded
up to the nearest whole number. The fractional share interests of each holder of
Octopus Capital Stock shall be aggregated for purposes of calculating any
fractional shares.
1.10 Reorganization. The parties hereto intend that the Merger shall
--------------
constitute a plan or reorganization and to consummate the Merger in accordance
with Section 368(a)(2)(E) of the Code.
1.11 Pooling of Interests. Parties hereto intend that the Merger shall be
--------------------
accounted for as a pooling of interests by Qualix.
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1.12 Stockholder Agreement. Each stockholder of Octopus listed on
---------------------
Exhibit 1.12A attached hereto shall have entered into a Stockholder Agreement in
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substantially the form of Exhibit 1.12B attached hereto.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF OCTOPUS
Except as set forth in the disclosure schedule dated as of the date
hereof executed by the President and Chief Financial Officer of Octopus (the
"Disclosure Schedule"), Octopus represents and warrants to Qualix as follows as
of the date hereof:
2.1 Organization and Standing.
--------------------------
(a) Octopus is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Pennsylvania, has all requisite
corporate power and authority to own, operate, and lease its properties and
carry on its business as now conducted, and is duly qualified to do business and
is in good standing as a foreign corporation in each jurisdiction in which the
failure to so qualify could or would have a material adverse effect on the
business, properties, condition (financial or otherwise), results of operations,
or prospects of Octopus (an "Octopus Material Adverse Effect").
(b) Octopus has delivered to Qualix complete and accurate copies of
its current Articles of Incorporation, as amended ("Octopus Articles"), and
current Bylaws, as amended ("Octopus Bylaws"), minutes of all of its directors'
and stockholders' meetings (including all meetings of all board committees) and
copies of all actions approved by the written consent of its stockholders or
directors (including all board committees). Octopus's stock books provided to
Qualix are complete and accurate as of the date hereof.
2.2 Capitalization.
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(a) The authorized capital of Octopus consists of:
(i) Preferred Stock. 3,000,000 shares of Preferred Stock, without
---------------
par value, of which 3,000,000 shares have been designated Class A Cumulative
Convertible Preferred Stock, 1,500,000 of which are issued and outstanding. The
Octopus Preferred Stock is owned by the persons, and in the numbers specified in
Exhibit 2.2(a) attached hereto. The rights, privileges and preferences of the
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Octopus Preferred Stock are as stated in Octopus's Articles of Incorporation.
(ii) Common Stock. 160,000,000 shares of common stock, without par
------------
value, of which 115,270,505 shares are issued and outstanding and are owned by
the persons, and in the numbers specified in Exhibit 2.2(a) attached hereto.
--------------
(b) Except as set forth on Section 2.2(a) of the Octopus Disclosure
Schedule, Octopus does not have outstanding any preemptive or subscription
rights, options,
6
warrants, rights to convert or exchange, capital stock equivalents, or other
rights to purchase or otherwise acquire any of Octopus's capital stock or other
securities.
(c) All of the issued and outstanding shares of Octopus's capital
stock have been duly authorized, validly issued, are fully paid and
nonassessable, and such capital stock, and all warrants and options to purchase
capital stock of Octopus, have been issued in full compliance with all
applicable federal and state securities laws. There have not been and are not
outstanding any adjustments made or required to be made to the conversion prices
set forth in the Octopus Articles. Each Octopus Option has been issued in
accordance with all state securities laws.
(d) Except for any restrictions imposed by applicable state and
federal securities laws, there is no right of first refusal, option, or other
restriction on transfer applicable to any shares of Octopus Capital Stock.
(e) Octopus is not under any obligation to register under the
Securities Act any shares of Octopus Capital Stock or any other of its
securities that might be issued in the future if the Merger were not
consummated.
(f) Octopus is not a party or subject to any agreement or
understanding (and, to Octopus's knowledge, there is no agreement or
understanding between or among any persons) that affects or relates to the
voting or giving of written consent with respect to any security.
(g) As set forth in the Octopus Articles, Octopus has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of its
equity securities or any interest therein or to pay any dividend or make any
other distributions in respect thereof.
2.3 Subsidiaries. Octopus does not own or control, directly or indirectly,
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any corporation, partnership, business, trust, or other entity.
2.4 Authority, Approval, and Enforceability.
---------------------------------------
(a) Subject to obtaining any required approvals of the holders of
Octopus Capital Stock, Octopus has full corporate power and authority to
execute, deliver, and perform its obligations under this Agreement, the Articles
of Merger and the Escrow Agreement (collectively, the "Octopus Agreements"), and
all corporate action on its part necessary for such execution, delivery, and
performance has been duly taken.
(b) Subject to obtaining any required approvals of the holders of
Octopus Capital Stock, the execution and delivery by Octopus of the Octopus
Agreements do not, and the performance and consummation of the transactions
contemplated by the Octopus Agreements will not, result in any conflict with,
breach or violation of or default, termination, or forfeiture under (or upon the
failure to give notice or the lapse of time, or both, result in any conflict
with, breach or violation of or default, termination, or forfeiture under) (i)
any terms or provisions of the Octopus Articles or Octopus Bylaws, (ii) any
statute, rule, regulation, judicial,
7
governmental, regulatory, or administrative decree, order, or judgment, or (iii)
any agreement, lease, or other instrument, including any of the Octopus Material
Agreements (as defined in Section 2.13 hereof), to which it is a party or to
which any of its assets is subject, the breach, violation, default, termination,
or forfeiture of which could or would result in an Octopus Material Adverse
Effect.
(c) No consent, approval, authorization, order, registration,
qualification, or filing of or with any court or any regulatory authority or any
other governmental or administrative body is required on its part for the
consummation by it of the transactions contemplated by this Agreement and the
Articles of Merger, except (i) the fairness hearing referred to in Section 1.5
hereof, (ii) qualification by permit pursuant to Section 25121 of the California
Law; (iii) any blue sky approvals referred to in Section 5.1 hereof, and (iv)
the filing of the Articles of Merger and related officers' certificates with the
Secretary of State of the State of Pennsylvania.
(d) Upon due execution and delivery by Octopus, the Octopus Agreements
will be its legal, valid, and binding obligation, enforceable against it in
accordance with the respective terms hereof and thereof, except as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and subject to the
availability of equitable remedies.
2.5 Financial Statements.
---------------------
(a) Octopus shall have delivered to Qualix complete copies of its
consolidated balance sheets as of December 31, 1994 and 1995 and the related
statements of operations, statements of stockholders' equity and statements of
cash flows for the years ended on each of December 31, 1994 and 1995
(collectively, the "Octopus Audited Financials") accompanied by the auditors'
report of its independent certified public accountants. The Octopus Audited
Financials (as defined below) present fairly its consolidated financial position
as of those dates and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles
("GAAP") applied on a consistent basis.
(b) Octopus shall have delivered to Qualix an unaudited consolidated
balance sheet as of June 30, 1996 and the related unaudited statements of
operations, statements of stockholders' equity and statements of cash flows for
the six (6) months then ended (the "Octopus Interim Financials"). Octopus will
have delivered Interim Financials (as defined below) which present fairly its
financial condition as of June 30, 1996 and the results of its operations and
its cash flows for the six (6) months then ended, in conformity with GAAP
applied on a basis consistent with the Octopus Audited Financials (except for
the absence of notes thereto and subject to normal year-end audit adjustments
which are not material). The Octopus Audited Financials and the Octopus Interim
Financials are hereinafter collectively referred to as the "Octopus Financials."
(c) There are no debts, liabilities, or claims against Octopus,
contingent or otherwise, not currently reflected in the Octopus Financials which
(i) are or would
8
be of a nature required to be reflected in a balance sheet prepared in
accordance with GAAP or (ii) which individually exceeds $10,000 or which, when
aggregated with such other debts, liabilities, and claims, exceeds $25,000.
Octopus's revenue recognition policies with respect to the Octopus Financials
have been made in accordance with GAAP. All of Octopus's general ledgers, books,
and records are located at Octopus's principal place of business. Octopus's
financial reserves are adequate to cover claims already incurred.
2.6 Accounts and Notes Receivable. Except as set forth in Section 2.6 of
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the Octopus Disclosure Schedule, and subject to any reserves set forth in the
Octopus Financials, all the accounts receivable and notes receivable owing to
Octopus as of the date hereof constitute, and as of the Effective Time will
constitute, valid and enforceable claims arising from bona fide transactions in
the ordinary course of business, and there are no known or asserted claims,
refusals to pay, or other rights of set-off against any thereof. The Aging
Report attached as Exhibit 2.6 to the Octopus Disclosure Schedule ("Octopus
Aging Report") sets forth (a) any account debtor or note debtor behind in its
payment by more than 90 days, (b) any account debtor or note debtor that has
refused (or, to the best knowledge of Octopus, threatened to refuse) to pay its
obligations for any reason, (c) to the best knowledge of Octopus, any account
debtor or note debtor that is insolvent or bankrupt, and (d) any account
receivable or note receivable which is pledged to any third party by Octopus.
2.7 Accounts and Notes Payable. Except as set forth in Section 2.7 of the
--------------------------
Octopus Disclosure Schedule, all accounts payable and notes payable by Octopus
to third parties as of the date hereof arose, and as of the Closing will have
arisen, in the ordinary course of business. The Octopus Aging Report sets forth
all accounts payable and notes payable of Octopus which have been outstanding
over 90 days.
2.8 Inventories. Except as set forth in Section 2.8 of the Octopus
-----------
Disclosure Schedule, the inventories of Octopus as of the date hereof include no
items which are below standard quality, or of a quality or quantity not usable
or salable in the normal course of business, the aggregate value of which has
not been written down on the books of account of Octopus to realizable market
value or with respect to which adequate reserves have not been provided in
accordance with GAAP and reasonable and prudent commercial practices in Octopus'
industry.
2.9 Material Changes. Since December 31, 1995, there has not been:
----------------
(a) any material change in Octopus's assets, liabilities, financial
condition, or operating results from that reflected in the Octopus Financials,
except changes in the ordinary course of business that have not been, in the
aggregate, material;
(b) any damage, destruction, or loss, whether or not covered by
insurance, adversely and materially affecting Octopus' business, properties,
prospects, or financial condition:
(c) any waiver or compromise by Octopus of a valuable right or of a
debt owed to it;
9
(d) any satisfaction or discharge of any lien, claim, or encumbrance
or payment of any obligation by Octopus, except in the ordinary course of
business and that is not material to its business, properties, prospects, or
financial condition;
(e) any material change to a material contract or material arrangement
by which Octopus or any of its material assets is bound or subject;
(f) any material change in any compensation arrangement or agreement
with any employee, officer, director, consultant or stockholder of Octopus;
(g) any sale, license, assignment, or transfer of any of Octopus's
patents, trademarks, copyrights, trade secrets, or other intangible assets other
than an immaterial license granted in the ordinary course of business;
(h) notification that there has been a loss of or cancellation of a
material order or contract by any of Octopus's customers;
(i) any mortgage, pledge, transfer of a security interest in, or lien
created by Octopus, with respect to any of its material properties or assets,
except liens for taxes not yet due or payable;
(j) any loans or guarantees made by Octopus to or for the benefit of
its employees, officers, or directors, or any members of their immediate
families, other than travel advances made in the ordinary course of its
business;
(k) any declaration, setting aside, or payment or other distribution
in respect of any of Octopus's capital stock, or any direct or indirect
redemption, purchase, or other acquisition of any of such stock by it;
(l) any other event or condition of any character that would result in
an Octopus Material Adverse Effect; or
(m) any agreement or commitment by Octopus to do any of the things
described in this Section 2.9.
2.10 Returns. There are no material pending warranty claims against
--------
Octopus or any of its products.
2.11 Properties and Inventories.
---------------------------
(a) Octopus has good and marketable title to, valid leasehold
interests in, or other rights to use all of the assets used in its operations or
necessary for the conduct of its business, free and clear of any mortgages,
pledges, security interests, licenses, encumbrances, restrictions, or adverse
claims, except as disclosed in the notes to the Octopus Audited Financials and
except for the lien of taxes not yet due and payable. All of the material assets
reflected on Octopus's balance sheets as at December 31, 1995 and June 30, 1996
are in good operating
10
condition, normal wear and tear excepted, and are adequate and suitable for the
purposes for which they are presently being used.
(b) Since June 30, 1996, there has not occurred any transfer of title
other than in the ordinary course of business, any abandonment, or any other
material loss with respect to, any of Octopus's property, plant, or equipment.
(c) The tangible personal property owned by Octopus and used in its
business at the date hereof is in good operating condition and repair. The value
of any fixed assets used in Octopus' business has not been written up or down,
other than pursuant to depreciation or amortization expense in accordance with
its historical practices.
2.12 Insurance. Octopus maintains policies of insurance covering its
---------
assets, properties, and business in type and amounts customary for similarly-
sized companies engaged in similar businesses. Octopus is in compliance with
each of such policies such that none of the coverage provided under such
policies has been invalidated. Section 2.12 of the Octopus Disclosure Schedule
contains (i) a description of all Octopus insurance policies currently in effect
and (ii) list all claims for more than $5,000 filed against existing or
predecessor insurance policies within the last two years.
2.13 Purchase, Sale and Other Agreements.
------------------------------------
(a) Octopus is not a party to or subject to any oral or written (any
such agreement, commitment, understanding, or arrangement referred to herein as
an "Octopus Material Agreement"):
(i) agreement for the purchase of inventory, supplies,
equipment, or other real or personal property, or the procurement of services,
except individual purchase orders or aggregate purchase orders to a single
vendor involving payments of less than $10,000;
(ii) lease or ownership of equipment, machinery, or other
personal property involving aggregate annual payments in excess of $10,000;
(iii) agreement for the sale, license or lease of products or
furnishing of its services except individual purchase orders or aggregate
purchase orders from a single customer, involving payments of less than $10,000;
(iv) joint venture, partnership, or other contract or arrangement
involving the sharing of profits;
(v) agreement relating to the purchase or acquisition, by merger
or otherwise, of a significant portion of its business, assets, or securities by
any other person or of any other person by it other than as contemplated herein;
11
(vi) agreement containing a covenant or covenants which purport to
limit its ability or right to engage in any lawful business activity or compete
with any person or entity;
(vii) agreement presently in effect pursuant to which it has appointed
any organization or person to act as its OEM, distributor, reseller or sales
agent or pursuant to which it has been appointed an OEM distributor or sales
agent by any third party;
(viii) agreement with any of its officers, directors, or holders of
more than 5% of the outstanding Octopus Capital Stock, other than stock option
or stock purchase plans or agreements, proprietary information agreements, or
employment agreements or commitments that are terminable by Octopus without any
liability or cost (including any liability for severance or separation
payments);
(ix) agreement for the license of any patent, copyright, trade secret,
or other proprietary right to or from Octopus, or indemnification by it with
respect to infringements of proprietary rights;
(x) agreements involving payments to or obligations of it not
otherwise described in this Section 2.13 in excess of $10,000;
(xi) agreements of indebtedness or capital equipment leases; or
(xii) powers of attorney.
(b) To the best of Octopus' knowledge after due inquiry, no party to any
such contract, agreement, or arrangement intends to cancel, withdraw, modify, or
amend such agreement or arrangement or return a product for reimbursement or
discontinue any provision of agreed upon services.
(c) Octopus has performed all material obligations required to be performed
by it on or prior to the date hereof under each contract, obligation,
commitment, agreement, undertaking, arrangement or lease referred to in this
Agreement, any Exhibit hereto, or the Octopus Disclosure Schedule and, to the
best of its knowledge after due inquiry, it is not in material default, breach,
or violation thereunder, or under any other agreements, and is not aware of any
facts from which it should reasonably conclude that it will not be able to
perform all material obligations required to be performed by it subsequent to
the date hereof under each such agreement, except for such defaults, breaches,
or violations under such instruments or obligations that would or could not have
an Octopus Material Adverse Effect.
2.14 Octopus' Intellectual Property Rights.
--------------------------------------
(a) Section 2.14(a) of the Octopus Disclosure Schedule sets forth all
of Octopus's patents, patent applications, and registered trademarks and
copyrights. Octopus has sufficient title and ownership of all patents,
trademarks, service marks, trade names, copyrights, trade secrets, information,
and proprietary rights and processes (collectively, "Octopus
12
Intellectual Property") necessary for its business as now conducted and as
proposed to be conducted without any conflict with or infringement of the rights
of others. There are no outstanding options, licenses, or agreements of any kind
relating to the foregoing, nor is it bound by or a party to any options,
licenses, or agreements of any kind with respect to the intellectual property
rights of any other person or entity. Octopus has not received any
communications nor is it aware of any entity alleging that it has violated or,
by conducting its business as proposed, would violate any intellectual property
rights of any other person or entity. Octopus is not aware that any of its
employees is obligated under any contract (including licenses, covenants, or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere with
the use of his or her best efforts to promote the interests of Octopus or that
would conflict with Octopus' business as proposed to be conducted. Neither the
execution nor delivery of the Agreements, nor the carrying on of Octopus'
business by its employees, nor the conduct of its business as proposed, will, to
the best of its knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated.
(b) Octopus is not making use of any patentable or unpatentable
invention or any confidential information in which any of its present or, to its
actual knowledge, past employees, has claimed a proprietary interest; and
Octopus is not actually aware of any facts that would give rise to such a claim.
(c) The Company has obtained valid enforceable assignments of
intellectual property rights from all employees and consultants who might be
considered inventors, authors or persons who have contributed to the Octopus
products and technology or other intellectual property.
2.15 Employees and Employee Benefit Plans.
-------------------------------------
(a) Except as set forth in Section 2.15 of the Octopus Disclosure
Schedule, Octopus is not a party to any pension, retirement, profit sharing,
savings, bonus, incentive, deferred compensation, group health plan (whether
insured or self-funded), disability or group life insurance plan or obligation,
employee welfare benefit plan, or to any collective bargaining agreement or
other agreement, written or oral, with any trade or labor union, employees'
association or similar organization. Octopus is not a party to, nor has made any
contribution to or otherwise incurred any obligation under, any "multiemployer
plan" as defined in Section 3(37) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA").
(b) There are no strikes or labor disputes pending or threatened by,
or, to the best of Octopus's knowledge, any attempts at union organization of
any of its employees. No employee or group of employees whose continued services
are material to Octopus's business as presently conducted and as intended to be
conducted has terminated employment and, to the best of Octopus's knowledge,
there is none that intends to do so.
13
(c) Section 2.15(c) of the Octopus Disclosure Schedule sets forth a
full and complete list of all directors, officers, employees, independent
contractors of, and consultants to Octopus as of June 30, 1996, specifying their
names and job descriptions, the total amount of compensation or other benefits
paid or payable, and the basis of such compensation or benefit, whether fixed or
commission or a combination thereof. The employment of each of Octopus's
employees, including employees of subsidiaries of Octopus, is "at will"
employment. Octopus has no obligations (i) to provide any particular form or
period of notice prior to termination, or (ii) to pay any of such employees any
severance or similar obligations in connection with termination of employment or
service provision or in connection with the Merger. Octopus does not owe and has
not accrued any bonuses or vacation pay or retirement benefits to any service
provider or former service provider, other than as set forth on the payroll
records delivered by Octopus to Qualix.
(d) Octopus has not violated any of the healthcare continuation
coverage requirements of the Consolidated Omnibus Budget Reconciliation Act of
1985 ("COBRA") applicable to its employees.
2.16 Environmental and Safety Laws. To the best of Octopus' knowledge after
-----------------------------
due inquiry, (i) Octopus is not in violation of any applicable statute, law, or
regulation relating to the environment or occupational health and safety, and
(ii) no material expenditures are or will be required in order to comply with
any such existing statute, law, or regulation.
2.17 Compliance with Laws. The business and operations of Octopus are in
--------------------
compliance with all federal, state, local, and county laws, ordinances,
regulations, judgments, orders, decrees, or rules of any court, arbitrator, or
governmental, regulatory, or administrative agency or entity, except where the
failure to so comply would not have an Octopus Material Adverse Effect. Octopus
has all valid and current permits, licenses, orders, authorizations,
registrations, approvals, and other analogous instruments (and each is in full
force and effect), and Octopus has made all filings and registrations and the
like necessary or required by law to conduct its business, except where the
failure to maintain such permits and other instruments or to make such filings
and registrations would not have an Octopus Material Adverse Effect. Octopus has
not received any governmental notice within two years of the date hereof of any
violation by Octopus of any such laws, rules, regulations, or orders. Octopus is
not in material default or material noncompliance under any such permits,
consents, or similar instruments. Copies of all such written licenses, permits
and approvals have been provided to Qualix.
2.18 Proprietary Information and Inventions and Confidentiality Agreements.
---------------------------------------------------------------------
Each current and past employee and officer of Octopus, and each current and past
consultant and service provider to Octopus with access to Octopus Intellectual
Property, has executed a proprietary information and inventions and
confidentiality agreement in the form provided to counsel to Qualix. Octopus is
not aware that any such persons is in violation thereof.
2.19 Absence of Litigation. Neither Octopus nor, to the best of its
---------------------
knowledge, any of its officers or directors is engaged in, or has received any
threat of, any litigation, arbitration, investigation, or other
proceeding relating to Octopus, its employee benefit plans,
14
property, Intellectual Property, business, assets, licenses, permits, or
goodwill, or against or affecting the Merger or the actions taken or
contemplated in connection therewith, nor, to the best of its knowledge, is
there any reasonable basis therefor. There is no action, suit, proceeding, or
investigation pending or threatened against Octopus that questions the validity
of the Agreements or the right of Octopus to enter into the Agreements or to
consummate the transactions contemplated hereby or thereby or which might result
in any adverse change in the assets, conditions, or properties of Octopus. There
is no action, suit, proceeding, or investigation by Octopus currently pending or
which it currently intends to initiate. Neither Octopus nor, to the best of its
knowledge, any of its officers or directors is bound by any judgment, decree,
injunction, ruling or order of any court, governmental, regulatory or
administrative department, commission, agency or instrumentality, arbitrator or
any other person which would or could have an Octopus Material Adverse Effect.
2.20 No Brokers. Octopus is not obligated for the payment of fees or
----------
expenses of any broker or finder in connection with the origin, negotiation, or
execution of the Agreements or in connection with any transaction
contemplated hereby or thereby.
2.21 Accuracy of Documents and Information. The copies of all instruments,
-------------------------------------
agreements, other documents and written information delivered by Octopus to
Qualix or its counsel are and will be complete and correct in all material
respects as of the date of delivery thereof. No representations or warranties
made by Octopus in this Agreement, nor any document, written information,
statement, financial statement, certificate, or exhibit prepared and furnished
or to be prepared and furnished by Octopus or its representatives to Qualix, or
stockholders pursuant hereto or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements or
facts contained herein or therein not misleading.
2.22 Taxes.
------
(a) All Tax returns, statements, reports and forms (including
estimated Tax returns and reports and information returns and reports) required
to be filed with any Taxing Authority with respect to any Taxable period ending
on or before the Effective Time, by or on behalf of Octopus or any of its
Subsidiaries (collectively, the "Octopus Returns"), have been or will be filed
when due (including any extensions of such due date), and all amounts shown due
thereon on or before the Effective Time have been or will be paid on or before
such date. The June 30, 1996 balance sheet included in the Octopus Interim
Financials (i) fully accrues all actual and contingent liabilities for Taxes
with respect to all periods through June 30, 1996 and Octopus and its
Subsidiaries have not and will not incur any Tax liability in excess of the
amount reflected on such balance sheet with respect to such periods, and (ii)
properly accrues in accordance with GAAP all liabilities for Taxes payable after
June 30, 1996 with respect to all transactions and events occurring on or prior
to such date. All information set forth in the notes to the Octopus Audited
Financials and Octopus Interim Financials relating to Tax matters is true,
complete and accurate in all material respects.
15
(b) No material Tax liability since June 30, 1996 has been incurred
other than in the ordinary course of business and adequate provision has been
made for all Taxes since that date in accordance with GAAP on at least a
quarterly basis. Octopus and its Subsidiaries have withheld and paid to the
applicable financial institution or Taxing Authority all amounts required to be
withheld. All Octopus Returns filed with respect to Taxable years of Octopus and
its Subsidiaries through the Taxable year ended December 31, 1995 in the case of
the United States, have been examined and closed or are Octopus Returns with
respect to which the applicable period for assessment under applicable law,
after giving effect to extensions or waivers, has expired. Neither Octopus nor
any of its Subsidiaries (or any member of any affiliated or combined group of
which Octopus or any of its Subsidiaries has been a member) has granted any
extension or waiver of the limitation period applicable to any Octopus Returns.
(c) There is no material claim, audit, action, suit, proceeding, or
investigation now pending or (to the best knowledge of Octopus or any of its
Subsidiaries) threatened against or with respect to Octopus or any of its
Subsidiaries in respect of any Tax or assessment. No notice of deficiency or
similar document of any Tax Authority has been received by Octopus or any of its
Subsidiaries, and there are no liabilities for Taxes (including liabilities for
interest, additions to tax and penalties thereon and related expenses) with
respect to the issues that have been raised (and are currently pending) by any
Tax Authority that could, if determined adversely to Octopus or any of its
Subsidiaries, materially and adversely affect the liability of Octopus or any of
its Subsidiaries for Taxes. Neither Octopus nor any of its Subsidiaries, nor any
other person on behalf of Octopus or any of its Subsidiaries, (i) has entered
into nor will it enter into any agreement or consent pursuant to Section 341(f)
of the Code (or any corresponding provision of state, local of Foreign income
Tax law) or (ii) has filed an election to be treated as an S corporation
pursuant to Section 1362 of the Code or any corresponding provision of state
law. There are no liens for Taxes upon the assets of Octopus or any of its
Subsidiaries except liens for current Taxes not yet due. Except as may be
required as a result of the Merger, neither Octopus nor any of its Subsidiaries
has been or will be required to include any material adjustment in Taxable
income for any Tax period (or portion thereof) pursuant to Section 481 or 263A
of the Code or any comparable provision under state or foreign Tax laws as a
result of transactions, events or accounting methods employed prior to the
Closing. Neither Octopus nor any of its subsidiaries is, or has been, a United
States real property holding corporation (as defined in Section 897(c)(2) of the
Code) during the applicable period specified in Section 897(C)(l)(A)(ii) of the
Code.
(d) There is no contract, agreement, plan or arrangement, including
but not limited to the provisions of this Agreement, covering any employee or
independent contractor or former employee or independent contractor of Octopus
or any of its Subsidiaries that, individually or collectively, could give rise
to the payment of any amount that would not be deductible by reason of Section
280G of the Code. Other than pursuant to this Agreement, neither Octopus nor any
or its Subsidiaries is a party to or bound by (or will prior to the Effective
Date become a party to or bound by) any tax indemnity, tax sharing or tax
allocation agreement (whether written, unwritten or arising under operation of
federal law as a result of being a member of a group filing consolidated tax
returns, under operation of certain state laws as a result of being a member of
a unitary group, or under comparable laws of other states or foreign
16
jurisdictions) which includes a party other than Octopus and its Subsidiaries.
None of the assets of Octopus or any of its Subsidiaries (i) is property that
Octopus or any of its Subsidiaries is required to treat as owned by any other
person pursuant to the so-called "safe harbor lease" provisions of former
Section 168(f)(8) of the Code, (ii) directly or indirectly secures any debt the
interest on which is tax exempt under Section 103(a) of the Code or (iii) is
"tax exempt use property" within the meaning of Section 168(h) of the Code.
Neither Octopus nor any of its Subsidiaries has participated in (or will prior
to the Effective Date participate in) an international boycott within the
meaning of Section 999 of the Code. Octopus and its Subsidiaries have heretofore
provided or made available to Qualix true and correct copies of all material Tax
Returns, and, as reasonably requested by Qualix prior to or following the date
hereof, information statements, reports, work papers, Tax opinions and memoranda
and other Tax data and documents.
(e) Section 2.22(e) of the Octopus Disclosure Schedule lists (i) any
intercompany transfer pricing agreements or other arrangements that have been
established by Octopus or any of its Subsidiaries in any foreign jurisdiction,
(ii) the periods, if any, that Octopus has been subject to the reporting
requirements of Section 6038A of the Code.
(f) For purposes of this Agreement, the following terms have the
following meanings: (A) "Tax" (and, with correlative meaning, "Taxes" and
"Taxable") means (i) any net income, alternative or add-on minimum tax, gross
income, gross receipts, sales, use, ad valorem, transfer, franchise, profits,
license, withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property, environmental or windfall profit tax, custom, duty or other
tax governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or any penalty, addition to tax or additional amount
imposed by any Governmental Entity (a "Taxing Authority") responsible for the
imposition of any such tax (domestic or foreign), (ii) any liability for the
payment of any amounts of the type described in (i) as a result of being a
member of an affiliated, consolidated, combined or unitary group for any Taxable
period and (iii) any liability for the payment of any amounts of the type
described in (i) or (ii) as a result of any express or implied obligation to
indemnify any other person and (B) "Subsidiary" (and, with correlative meaning,
"Subsidiaries") means a corporation or other entity whose voting securities are
owned or are otherwise controlled directly or indirectly by a parent corporation
or other intermediary entity in an amount sufficient to elect at least a
majority of the board of directors or other managers of such corporation or
other entity, which violation, conflict, breach or default is reasonably likely
to have an Octopus Material Adverse Effect.
2.23 Compliance with Instruments. Octopus is not in violation of or
---------------------------
conflict with, breach of or in default under (neither with the giving of notice
or the passage of time or both) any term or provision of the Octopus Articles or
the Octopus Bylaws, or any agreement, arrangement, contract, lease or other
instrument to which it or its properties is or may be subject.
17
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF QUALIX
Except as set forth in the disclosure schedule dated as of the date hereof
executed by the President and Chief Financial Officer of Qualix to Octopus (the
"Qualix Disclosure Schedule"), Qualix represents and warrants to Octopus as
follows as of the date hereof:
3.1 Organization and Standing.
--------------------------
(a) Qualix is, and the Subsidiary will be as of the Closing, a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware and the State of Pennsylvania, respectively, have
all requisite corporate power and authority to own, operate, and lease their
respective properties and carry on their respective businesses as now conducted,
and are each duly qualified to do business and are in good standing as a foreign
corporation in each jurisdiction in which the failure to so qualify could or
would have a material adverse effect on the business, properties, condition
(financial or otherwise), results of operations, or prospects of each such
entity (a "Qualix Material Adverse Effect").
(b) Qualix has delivered to Octopus complete and accurate copies of
the current Amended and Restated Certificate of Incorporation and Bylaws of
Qualix and the Certificate of Incorporation and Bylaws of Subsidiary and has
made available minutes of all of the directors' and stockholders' meetings
(including all meetings of all board committees) and copies of all actions
approved by the written consent of the stockholders or directors (including all
board committees). Qualix and Subsidiary's stock books provided to Octopus are
complete and accurate as of the date hereof.
3.2 Capitalization.
---------------
(a) The authorized capital of Qualix consists or will consist prior to
the Closing, of:
(i) Preferred Stock. 5,000,000 shares of Preferred Stock, par
---------------
value $0.000333-1/3 per share ("Qualix Preferred Stock"), of which 1,225,001
shares have been designated Series A Preferred Stock, 1,225,001 of which are
issued and outstanding; of which 923,077 shares have been designated Series B
Preferred Stock, 923,077 of which are issued and outstanding; of which 792,529
shares have been designated Series C Preferred Stock, 792,529 of which are
issued and outstanding; of which 1,400,000 shares have been designated Series D
Preferred Stock, 757,713 of which are issued and outstanding; and of which
280,674 shares have been designated Series E Preferred Stock, none of which are
issued and outstanding. The Qualix Preferred Stock is owned by the persons, and
in the numbers specified in Exhibit 3.2(a) attached hereto. The rights,
--------------
privileges and preferences of the Preferred Stock are as stated in Qualix's
Amended and Restated Certificate of Incorporation ("Qualix Certificate").
(ii) Common Stock. 20,000,000 shares of common stock, par value
------------
$0.001 per share ("Qualix Common Stock), of which 3,358,064 shares are issued
and
18
outstanding and are owned by the persons, and in the numbers specified in
Exhibit 3.2(a) attached hereto.
--------------
(b) The authorized capital of Subsidiary consists, or will consist
immediately prior to the closing, of 1,000 shares of Common Stock, par value
$0.0001 per share (the "Subsidiary Common Stock"), of which 1,000 shares are
issued and outstanding and owned by Qualix. The rights, privileges and
preference of the Subsidiary Common Stock are as stated in Subsidiary's Articles
of Incorporation ("Subsidiary Articles").
(c) Except as set forth on Section 3.2 (c) of the Qualix Disclosure
Schedule, Qualix does not have outstanding any preemptive or subscription
rights, options, warrants, rights to convert or exchange, capital stock
equivalents, or other rights to purchase or otherwise acquire any Qualix Capital
Stock. Subsidiary does not have outstanding any preemptive or subscription
rights, options, warrants, rights to convert or exchange, Capital Stock
equivalent, or other rights to purchase or otherwise acquire any Subsidiary
Capital Stock.
(d) All of the issued and outstanding shares of each of Qualix Capital
Stock and Subsidiary Capital Stock have been duly authorized, validly issued,
are fully paid and nonassessable, and such capital stock, and all warrants and
options to purchase capital stock of Qualix have been issued in full compliance
with all applicable federal and state securities laws. Except as set forth in
Section 3.2(d) of the Qualix Disclosure Schedule, there have not been and are
not outstanding any adjustments made or required to be made to the conversion
prices set forth in the Qualix certificate for the Subsidiary certificate. All
Qualix Options have been issued in accordance with Qualix 1991 Incentive Stock
Option Plan, as amended (the "Qualix Option Plan") and in accordance with all
state securities laws.
(e) Except for any restrictions imposed by applicable state and
federal securities laws and except as set forth in Section 3.2(e) of the Qualix
Disclosure Schedule, there is no right of first refusal, option, or other
restriction on transfer applicable to any shares of Qualix Capital Stock or
Subsidiary Common Stock.
(f) Except as set forth in Section 3.2(f) of the Qualix Disclosure
Schedule, Qualix is not under any obligation to register under the Securities
Act any shares of Qualix Capital Stock or any other of its securities that might
be issued in the future if the Merger were not consummated. Subsidiary is not
under any obligation to register under the Securities Act any shares of
Subsidiary Common Stock or any other securities that might be issued in the
future if the Merger were not consummated.
(g) Qualix is not a party or subject to any agreement or understanding
(and, to the knowledge of Qualix, there is no agreement or understanding between
or among any persons) that affects or relates to the voting or giving of written
consent with respect to any security.
3.3 Subsidiaries. Except for Subsidiary, neither Qualix nor Subsidiary
-----------
owns or controls, directly or indirectly, any corporation, partnership,
business, trust, or other entity.
19
3.4 Authority, Approval and Enforceability.
---------------------------------------
(a) Subject to obtaining any required approvals of the holders of its
capital stock, each of Qualix and Subsidiary has full corporate power and
authority to execute, deliver, and perform its respective obligations under this
Agreement and the Articles of Merger, and all corporate action on its part
necessary for such execution, delivery, and performance has been duly taken.
(b) Subject to obtaining any required approvals of the holders of
Qualix Capital Stock, the execution and delivery by Qualix of this Agreement,
the Articles of Merger, the Escrow Agreement, the Option Assumption Agreements
and the Employment and Non-Competition Agreements (as defined below)
(collectively, the "Qualix Agreements") do not, and the performance and
consummation of the transactions contemplated by the Qualix Agreements will not,
result in any conflict with, breach or violation of or default, termination, or
forfeiture under (or upon the failure to give notice or the lapse of time, or
both, result in any conflict with, breach or violation of or default,
termination, or forfeiture under) (i) any terms or provisions of the Qualix
Certificate or Qualix Bylaws, (ii) any statute, rule, regulation, judicial,
governmental, regulatory, or administrative decree, order, or judgment, or (iii)
any agreement, lease, or other instrument, including any of the Qualix Material
Agreements (as defined in Section 3.13 hereof) to which Qualix is a party or to
which any of Qualix's assets is subject, the breach, violation, default,
termination or forfeiture of which could or would result in an Qualix Material
Adverse Effect. Subject to obtaining any required approvals of the holders of
Subsidiary Capital Stock, the execution and delivery by Subsidiary of this
Agreement and the Articles of Merger do not, and the performance and
consummation of the transactions contemplated by the Qualix Agreements will not,
result in any conflict with, breach or violation of or default, termination, or
forfeiture under (or upon the failure to give notice or the lapse of time, or
both, result in any conflict with, breach or violation of or default,
termination, or forfeiture under) (i) any terms or provisions of the Subsidiary
Articles or Subsidiary Bylaws, (ii) any statute, rule, regulation, judicial,
governmental, regulatory, or administrative decree, order, or judgment, or (iii)
any agreement, lease, or other instrument hereof) to which Subsidiary a party or
to which any of Qualix's assets is subject, the breach, violation, default,
termination or forfeiture of which could or would result in an Qualix Material
Adverse Effect.
(c) No consent, approval, authorization, order, registration,
qualification, or filing of or with any court or any regulatory authority or any
other governmental or administrative body is required on its part or the part of
Qualix or Subsidiary for the consummation by Qualix or Subsidiary of the
transactions contemplated by this Agreement and the Articles of Merger, except
(i) the fairness hearing referred to in Section 1.5 hereof, (ii) qualification
by permit pursuant to Section 25121 of the California Law, (iii) any Blue Sky
approvals referred to in Section 6.1 hereof, and (iv) the filing of the Articles
of Merger and related officers' certificates with the Secretary of State of the
Commonwealth of Pennsylvania.
(d) Upon due execution and delivery by Qualix and Subsidiary, as the
case may be, the Qualix Agreements will be the legal, valid, and binding
obligations of Qualix and Subsidiary, as the case may be, enforceable against
each such entity in accordance with the
20
respective terms hereof and thereof, as the case may be, except as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and subject to the
availability of equitable remedies.
3.5 Financial Statements.
---------------------
(a) Qualix has delivered to Octopus complete copies of its balance
sheets as of June 30, 1994 and 1995 and the related statements of operations,
statements of stockholders' equity and statements of cash flows for the years
ended on each of June 30, 1994 and 1995 (collectively, the "Qualix Audited
Financials") accompanied by the auditors' report of its independent certified
public accountants. Qualix's Audited Financials present fairly its consolidated
financial position as of those dates and the results of its operations and its
cash flows for the years then ended in conformity with GAAP applied on a
consistent basis.
(b) Qualix has delivered to Octopus an unaudited consolidated balance
sheet as of May 31, 1996 and the related unaudited statements of operations,
statements of stockholders' equity and statements of cash flows for the eleven
(11) months then ended (the "Qualix Interim Financials"). Qualix's Interim
Financials present fairly its financial condition as of May 31, 1996 and the
results of its operations and its cash flows for the month then ended, in
conformity with GAAP applied on a basis consistent with its Audited Financials
(except for the absence of notes thereto and subject to normal year-end audit
adjustments which are not material). The Qualix Audited Financials and the
Qualix Interim Financials are hereinafter collectively referred to as the
"Qualix Financials."
(c) There are no debts, liabilities, or claims against Qualix,
contingent or otherwise, not currently reflected in the Qualix Financials which
(i) are or would be of a nature required to be reflected in a balance sheet
prepared in accordance with GAAP or (ii) which individually exceeds $25,000 or
which, when aggregated with such other debts, liabilities, and claims, exceeds
$75,000. Qualix's revenue recognition policies with respect to the Qualix
Financials have been made in accordance with GAAP. All of Qualix's general
ledgers, books, and records are located at Qualix's principal place of business.
Qualix's financial reserves are adequate to cover claims already incurred.
(d) Subsidiary has no assets, rights, liabilities, or obligations,
other than those provided for by this Agreement and the Articles of Merger.
3.6 Accounts and Notes Receivable. Except as set forth in the Qualix
-----------------------------
Disclosure Schedule, and subject to any reserves set forth in the Qualix
Financials, all the accounts receivable and notes receivable owing to Qualix as
of the date hereof constitute, and as of the Effective Time will constitute,
valid and enforceable claims arising from bona fide transactions in the ordinary
course of business, and there are no known or asserted claims, refusals to pay,
or other rights of set-off against any thereof. The Aging Report attached as
Exhibit 3.6 to the Qualix Disclosure Schedule ("Qualix Aging Report") sets forth
(a) any account debtor or note debtor behind in its payment by more than 90
days, (b) any account debtor or note debtor that has refused (or, to the best
knowledge of Qualix, threatened to refuse) to pay its obligations - for any
reason, (c) to the best knowledge of Qualix, any account debtor or note
21
debtor that is insolvent or bankrupt, and (d) any account receivable or note
receivable which is pledged to any third party by Qualix.
3.7 Accounts and Notes Payable. Except as set forth in the Qualix
--------------------------
Disclosure Schedule, all accounts payable and notes payable by Qualix to third
parties as of the date hereof arose, and as of the Closing will have arisen, in
the ordinary course of business. The Aging Report sets forth all accounts
payable and notes payable of Qualix which have been outstanding over 90 days.
3.8 Inventories. Except as set forth in the Qualix Disclosure Schedule,
-----------
the inventories of Qualix as of the date hereof include no items which are below
standard quality, or of a quality or quantity not usable or salable in the
normal course of business, the aggregate value of which has not been written
down on the books of account of Qualix to realizable market value or with
respect to which adequate reserves have not been provided in accordance with
GAAP and reasonable prudent commercial practices in Qualix's industry.
3.9 Material Changes. Since May 31, 1996, there has not been:
----------------
(a) any material change in Qualix's assets, liabilities, financial
condition, or operating results from that reflected in the Qualix Financials,
except changes in the ordinary course of business that have not been, in the
aggregate, material;
(b) any damage, destruction, or loss, whether or not covered by
insurance, adversely and materially affecting Qualix's business, properties,
prospects, or financial condition;
(c) any waiver or compromise by Qualix of a valuable right or of a debt
owed to it;
(d) any satisfaction or discharge of any lien, claim, or encumbrance or
payment of any obligation by Qualix, except in the ordinary course of business
and that is not material to its business, properties, prospects, or financial
condition;
(e) any material change to a material contract or material arrangement
by which Qualix or any of its material assets is bound or subject;
(f) any material change in any compensation arrangement or agreement
with any employee, officer, director, consultant or stockholder;
(g) any sale, license, assignment, or transfer of any of Qualix's
patents, trademarks, copyrights, trade secrets, or other intangible assets other
than an immaterial license granted in the ordinary course of business;
(h) notification that there has been a loss of or cancellation of a
material order or contract by any of Qualix's customers;
22
(i) any mortgage, pledge, transfer of a security interest in, or lien
created by Qualix, with respect to any of its material properties or assets,
except liens for taxes not yet due or payable;
(j) any loans or guarantees made by Qualix to or for the benefit of its
employees, officers, or directors, or any members of their immediate families,
other than travel advances made in the ordinary course of its business;
(k) any declaration, setting aside, or payment or other distribution in
respect of any of Qualix capital stock, or any direct or indirect redemption,
purchase, or other acquisition of any of such stock by it;
(l) any other event or condition of any character that would result in
a Qualix Material Adverse Effect; or
(m) any agreement or commitment by Qualix to do any of the things
described in this Section 3.9.
3.10 Returns. There are no material pending warranty claims against Qualix
-------
or any of its products.
3.11 Properties and Inventories.
--------------------------
(a) Qualix has good and marketable title to, valid leasehold interests
in, or other rights to use all of the assets used in its operations or necessary
for the conduct of its business, free and clear of any mortgages, pledges,
security interests, licenses, encumbrances, restrictions, or adverse claims,
except as disclosed in the notes to the Qualix Financials or as would not have a
Qualix Material Adverse Effect and except for the lien of taxes not yet due and
payable. All of the material assets reflected on Qualix's balance sheets as at
June 30, 1996 are in good operating condition, normal wear and tear excepted,
and are adequate and suitable for the purposes for which they are presently
being used.
(b) Since May 31, 1996, there has not occurred any transfer of title
other than in the ordinary course of business, any abandonment, or any other
material loss with respect to, any of Qualix's property, plant, or equipment.
(c) The tangible personal property owned by Qualix and used in its
business at the date hereof is in good operating condition and repair. The value
of any fixed assets used in Qualix's business has not been written up or down,
other than pursuant to depreciation or amortization expense in accordance with
its historical practices.
3.12 Insurance. Qualix maintains policies of insurance covering its assets,
---------
properties, and business in types and amounts customary for similarly-sized
companies engaged in similar businesses. Qualix is in compliance with each of
such policies such that none of the coverage provided under such policies has
been invalidated. Section 3.12 of the Qualix Disclosure Schedule contains a
description of all insurance policies currently in effect for Qualix.
23
3.13 Purchase, Sale and Other Agreements.
------------------------------------
(a) Each following agreement, commitment, understanding, or
arrangement, oral or written, to which Qualix or Subsidiary is a party or
subject is referred to herein as a "Qualix Material Agreement":
(i) agreement for the purchase of inventory, supplies,
equipment, or other real or personal property, or the procurement of services,
except individual purchase orders or aggregate purchase orders to a single
vendor involving payments of less than $25,000;
(ii) lease or ownership of equipment, machinery, or other
personal property involving aggregate annual payments in excess of $25,000;
(iii) agreement for the sale or lease of products or furnishing
of its services except individual purchase orders or aggregate purchase orders
from a single customer, involving payments of less than $25,000;
(iv) joint venture, partnership, or other contract or
arrangement involving the sharing of profits;
(v) agreement relating to the purchase or acquisition, by
merger or otherwise, of a significant portion of its business, assets, or
securities by any other person or of any other person by it other than as
contemplated herein;
(vi) agreement containing a covenant or covenants which purport
to limit its ability or right to engage in any lawful business activity or
compete with any person or entity;
(vii) agreement presently-in effect pursuant to which it has
appointed any organization or person to act as its OEM, distributor, reseller or
sales agent or pursuant to which it has been appointed an OEM distributor or
sales agent by any third party;
(viii) agreement with any of its officers, directors or holders of
more than 5% of the outstanding Qualix Capital Stock, other than stock option or
stock purchase plans or agreements, proprietary information agreements, or
employment agreements or commitments that are terminable by Qualix without any
liability or cost (including any liability for severance or separation
payments);
(ix) agreement for the license of any patent, copyright, trade
secret, or other proprietary right to or from Qualix, or indemnification by it
with respect to infringements of proprietary rights;
(x) agreements involving payments to or obligations of it not
otherwise described in this Section 3.13 in excess of $25,000;
(xi) agreements of indebtedness or capital equipment leases; or
24
(xii) powers of attorney.
(b) To the best of Qualix's knowledge after due inquiry, Qualix is not
in violation of any applicable statute, law, or regulation relating to the
environment or occupational health and safety, and no material expenditures are
or will be required in order to comply with any such existing statute, law, or
regulation. No party to any such contract, agreement, or arrangement intends to
cancel, withdraw, modify, or amend such agreement or arrangement or return a
product for reimbursement or discontinue any provision of agreed upon services.
(c) Qualix has performed all material obligations required to be
performed by it on or prior to the date hereof under each contract, obligation,
commitment, agreement, undertaking, arrangement or lease referred to in this
Agreement, any Exhibit hereto, or the Qualix Disclosure Schedule and, to the
best of its knowledge after due inquiry, it is not in material default, breach,
or violation thereunder, or under any other agreements, and is not aware of any
facts from which it should reasonably conclude that it will not be able to
perform all material obligations required to be performed by it subsequent to
the date hereof under each such agreement, except for such defaults, breaches,
or violations under such instruments or obligations that would or could not have
a Qualix Material Adverse Effect.
3.14 Qualix's Intellectual Property Rights.
--------------------------------------
(a) Section 3.14 of the Qualix Disclosure Schedule sets forth all of
Qualix's patents, patent applications, and registered trademarks and copyrights.
Qualix has sufficient title and ownership of all patents, trademarks, service
marks, trade names, copyrights, trade secrets, information, and proprietary
rights and processes (collectively, "Qualix Intellectual Property") necessary
for its business as now conducted and as proposed to be conducted without any
conflict with or infringement of the rights of others. There are no outstanding
options, licenses, or agreements of any kind relating to the foregoing, nor is
it bound by or a party to any options, licenses, or agreements of any kind with
respect to the intellectual property rights of any other person or entity.
Qualix has not received any communications nor is it aware of any entity
alleging that it has violated or, by conducting its business as proposed, would
violate any intellectual property rights of any other person or entity. Qualix
is not aware that any of its employees is obligated under any contract
(including licenses, covenants, or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of his or her best
efforts to promote the interests of Qualix or that would conflict with Qualix's
business as proposed to be conducted. Neither the execution nor delivery of the
Qualix Agreements, nor the carrying on of Qualix's business by its employees,
nor the conduct of its business as proposed, will, to the best of its knowledge,
conflict with or result in a breach of the terms, conditions or provisions of,
or constitute a default under, any contract, covenant or instrument under which
any of such employees is now obligated.
(b) Qualix is not making use of any patentable or unpatentable
invention or any confidential information in which any of its present or, to its
actual knowledge,
25
past employees, has claimed a proprietary interest; and Qualix is not actually
aware of any facts that would give rise to such a claim.
3.15 Employees and Employee Benefit Plans.
-------------------------------------
(a) Except as set forth in Section 3.15 of the Qualix Disclosure
Schedule, Qualix is not a party to any pension, retirement, profit sharing,
savings, bonus, incentive, deferred compensation, group health plan (whether
insured or self-funded), disability or group life insurance plan or obligation,
employee welfare benefit plan, or to any collective bargaining agreement or
other agreement, written or oral, with any trade or labor union, employees'
association or similar organization. Qualix is not a party to, nor has made any
contribution to or otherwise incurred any obligation under, any "multiemployer
plan" as defined in Section 3(37) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA").
(b) There are no strikes or labor disputes pending or threatened by,
or, to the best of Qualix's knowledge, any attempts at union organization of any
of its employees. No employee or group of employees whose continued services are
material to Qualix's business as presently conducted and as intended to be
conducted has terminated employment and, to the best of Qualix's knowledge,
there is none that intends to do so.
(c) The employment of each of Qualix's employees, including employees
of subsidiaries of Qualix, is "at will" employment. Qualix has no obligations
(i) to provide any particular form or period of notice prior to termination, or
(ii) to pay any of such employees any severance or similar obligations in
connection with termination of employment or service provision or in connection
with the Merger. Qualix does not owe and has not accrued any bonuses or vacation
pay or retirement benefits to any service provider or former service provider,
other than as set forth on the payroll records delivered by Qualix to Octopus.
(d) Qualix has not violated any of the health care continuation
coverage requirements of the Consolidated Omnibus Budget Reconciliation Act of
1985 ("COBRA") applicable to its employees.
3.16 Environmental and Safety Laws. Qualix is not in violation of any
-----------------------------
applicable statute, law, or regulation relating to the environment or
occupational health and safety, and no material expenditures are or will be
required in order to comply with any such existing statute, law, or regulation.
3.17 Compliance with Laws. The business and operations of Qualix are in
--------------------
compliance with all federal, state, local, and county laws, ordinances,
regulations, judgments, orders, decrees, or rules of any court, arbitrator, or
governmental, regulatory, or administrative agency or entity, except where the
failure to so comply would not have a Qualix Material Adverse Effect. Qualix has
all valid and current permits, licenses, orders, authorizations, registrations,
approvals, and other analogous instruments (and each is in full force and
effect), and Qualix has made all filings and registrations and the like
necessary or required by law to conduct its business, except where the failure
to maintain such permits and other instruments or
26
to make such filings and registrations would not have a Qualix Material Adverse
Effect. Qualix has not received any governmental notice within two years of the
date hereof of any violation by Qualix of any such laws, rules, regulations, or
orders. Qualix is not in material default or material noncompliance under any
such permits, consents, or similar instruments which default or noncompliance
would have a Qualix Material Adverse Effect. Copies of all such written
licenses, permits and approvals have been provided to Octopus.
3.18 Proprietary Information and Inventions and Confidentiality Agreements.
---------------------------------------------------------------------
Each current and past employee and officer of Qualix, and each current and past
consultant and service provider to Qualix with access to Qualix Intellectual
Property, has executed a proprietary information and inventions and
confidentiality agreement in the form provided to counsel to Octopus. Qualix is
not aware that any of such persons is in violation thereof.
3.19 Absence of Litigation. Neither Qualix nor, to the best of its
---------------------
knowledge, any of its officers or directors is engaged in, or has received any
threat of, any litigation, arbitration, investigation, or other proceeding
relating to Qualix, its employee benefit plans, property, Intellectual Property,
business, assets, licenses, permits, or goodwill, or against or affecting the
Merger or the actions taken or contemplated in connection therewith, nor, to the
best of its knowledge, is there any reasonable basis therefor. There is no
action, suit, proceeding, or investigation pending or threatened against Qualix
that questions the validity of the Qualix Agreements or the right of Qualix to
enter into the Qualix Agreements or to consummate the transactions contemplated
hereby or thereby or which might result in any adverse change in the assets,
conditions, or properties of Qualix. There is no action, suit, proceeding, or
investigation by Qualix currently pending or which it currently intends to
initiate. Neither Qualix nor, to the best of its knowledge, any of its officers
or directors is bound by any judgment, decree, injunction, ruling or order of
any court, governmental, regulatory or administrative department, commission,
agency or instrumentality, arbitrator or any other person which would or could
have a Qualix Material Adverse Effect.
3.20 No Brokers. Except as disclosed in the Qualix Disclosure Schedule,
----------
Qualix is not obligated for the payment of fees or expenses of any broker or
finder in connection with the origin, negotiation, or execution of this
Agreement or the Articles of Merger or in connection with any transactions
contemplated hereby or thereby.
3.21 Accuracy of Documents and Information. The copies of all instruments,
-------------------------------------
agreements, other documents and written information delivered by Qualix to
Octopus or its counsel are and will be complete and correct in all material
respects as of the date of delivery thereof. No representations or warranties
made by Qualix in this Agreement, nor any document, written information,
statement, financial statement, certificate, or exhibit prepared and furnished
or to be prepared and furnished by Qualix or its representatives to Octopus, or
in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make the statements or facts contained herein or
therein not misleading.
27
3.22 Taxes.
------
(a) All Tax returns, statements, reports and forms (including
estimated Tax returns and reports and information returns and reports)
required to be filed with any Taxing Authority with respect to any Taxable
period ending on or before the Effective Time, by or on behalf of Qualix or
any of its Subsidiaries (collectively, the "Qualix Returns"), have been or
will be filed when due (including any extensions of such due date), and all
amounts shown due thereon on or before the Effective Time have been or will be
paid on or before such date. The May 31, 1996 balance sheet included in the
Qualix Interim Financials (i) fully accrues all actual and contingent
liabilities for Taxes with respect to all periods through May 31, 1996 and
Qualix and its Subsidiaries have not and will not incur any Tax liability in
excess of the amount reflected on such balance sheet with respect to such
periods, and (ii) properly accrues in accordance with GAAP all liabilities for
Taxes payable after May 31, 1996 with respect to all transactions and events
occurring on or prior to such date. All information set forth in the notes to
the Qualix Audited Financials and Qualix Interim Financials relating to Tax
matters is true, complete and accurate in all material respects.
(b) No material Tax liability since May 31, 1996 has been incurred
other than in the ordinary course of business and adequate provision has been
made for all Taxes since that date in accordance with GAAP on at least a
quarterly basis. Qualix and its Subsidiaries have withheld and paid to the
applicable financial institution or Taxing Authority all amounts required to be
withheld. All Qualix Returns filed with respect to Taxable years of Qualix and
its Subsidiaries through the Taxable year ended June 30, 1995 in the case of the
United States, have been examined and closed or are Qualix Returns with respect
to which the applicable period for assessment under applicable law, after giving
effect to extensions or waivers, has expired. Neither Qualix nor any of its
Subsidiaries (or any member of any affiliated or combined group of which Qualix
or any of its Subsidiaries has been a member) has granted any extension or
waiver of the limitation period applicable to any Qualix Returns.
(c) There is no material claim, audit, action, suit, proceeding, or
investigation now pending or (to the best knowledge of Qualix or any of its
Subsidiaries) threatened against or with respect to Qualix or any of its
Subsidiaries in respect of any Tax or assessment. No notice of deficiency or
similar document of any Tax Authority has been received by Qualix or any of its
Subsidiaries, and there are no liabilities for Taxes (including liabilities for
interest, additions to tax and penalties thereon and related expenses) with
respect to the issues that have been raised (and are currently pending) by any
Tax Authority that could, if determined adversely to Qualix or any of its
Subsidiaries, materially and adversely affect the liability of Qualix or any of
its Subsidiaries for Taxes. Neither Qualix nor any of its Subsidiaries, nor any
other person on behalf of Qualix or any of its Subsidiaries, (i) has entered
into nor will it enter into any agreement or consent pursuant to Section 341(f)
of the Code (or any corresponding provision of state, local or Foreign Income
Tax law) or (ii) has filed and an election to be treated as an S corporation
pursuant to Section 1362 of the Code or any corresponding provision of state
law. There are no liens for Taxes upon the assets of Qualix or any of its
Subsidiaries except liens for current Taxes not yet due. Except as may be
required as a result of the Merger, neither Qualix nor any of its Subsidiaries
has been or will be required to include any material adjustment
28
in Taxable income for any Tax period (or portion thereof) pursuant to Section
481 or 263A of the Code or any comparable provision under state or foreign Tax
laws as a result of transactions, events or accounting methods employed prior to
the Closing. Neither Qualix nor any of its subsidiaries is, or has been, a
United States real property holding corporation (as defined in Section 897(c)(2)
of the Code) during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code.
(d) There is no contract, agreement, plan or arrangement, including
but not limited to the provisions of this Agreement, covering any employee or
independent contractor or former employee or independent contractor of Qualix or
any of its Subsidiaries that, individually or collectively, could give rise to
the payment of any amount that would not be deductible by reason of Section 280G
of the Code. Other than pursuant to this Agreement, neither Qualix nor any or
its subsidiaries is a party to or bound by (or will prior to the Effective Date
become a party to or bound by) any tax indemnity, tax sharing or tax allocation
agreement (whether written, unwritten or arising under operation of federal law
as a result of being a member of a group filing consolidated tax returns, under
operation of certain state laws as a result of being a member of a unitary
group, or under comparable laws of other states or foreign jurisdictions) which
includes a party other than Qualix and its Subsidiaries. None of the assets of
Qualix or any of its Subsidiaries (i) is property that Qualix or any of its
Subsidiaries is required to treat as owned by any other person pursuant to the
so-called "safe harbor lease" provisions of former Section 168(f)(8) of the
Code, (ii) directly or indirectly secures any debt the interest on which is tax
exempt under Section 103(a) of the Code or (iii) is "tax exempt use property"
within the meaning of Section 168(h) of the Code. Neither Qualix nor any of its
Subsidiaries has participated in (or will prior to the Effective Date
participate in) an international boycott within the meaning of Section 999 of
the Code. Qualix and its Subsidiaries have heretofore provided or made available
to Qualix true and correct copies of all material Tax Returns, and, as
reasonably requested by Qualix prior to or following the date hereof,
information statements, reports, work papers, Tax opinions and memoranda and
other Tax data and documents.
(e) The Qualix Disclosure Schedule lists (i) any intercompany transfer
pricing agreements or other arrangements that have been established by Qualix or
any of its Subsidiaries in any foreign jurisdiction, (ii) the date, if any, that
Qualix has made a "waters edge election" pursuant to California Revenue and
Taxation Code Section 25110 and (iii) the periods, if any, that Qualix has been
subject to the reporting requirements of Section 6038A of the Code.
3.23 Compliance with Instruments. Neither Qualix nor Subsidiary is in
---------------------------
violation of or conflict with, breach of or in default under (either with the
giving of notice or the passage of time or both) any term or provision of the
current Amended and Restated Certificate of Incorporation and Bylaws of Qualix
and the Certificate of Incorporation and Bylaws of Subsidiary, or any agreement,
arrangement, contract, lease or other instrument to which either entity or the
properties of either entity is or may be subject, which conflict, breach or
default is reasonably likely to cause a Qualix Material Adverse Effect.
29
ARTICLE IV
COVENANTS OF OCTOPUS AND QUALIX
Each of Octopus, and Qualix, as the case may be, covenants and agrees as
follows:
4.1 Maintenance of Business.
------------------------
(a) During the period from the date hereof to the Effective Time, each
of Qualix and Octopus shall carry on and use their best efforts to preserve
their respective businesses, goodwill, and relationships with customers,
suppliers, officers, employees, agents, and others in substantially the same
manner as such Company did prior to the date hereof. Each of Qualix and Octopus
will use their best efforts to keep and maintain the existing favorable business
relationship with each of their respective customers, suppliers, and officers,
employees, and agents. If either company becomes aware of a deterioration in a
relationship with any customer, supplier, or officer, employee, or agent which
is material to such company's business or prospects, it will promptly bring such
information to the attention of the other and will use its best efforts to
restore such relationship.
(b) Octopus and Qualix each agree to advise the other of any material
operating decisions (including, without limitation, proposed employee hiring,
layoff, and termination decisions). Notwithstanding the foregoing, each of
Octopus and Qualix acknowledges that such operating decisions shall be made
independently and the company making such decisions shall be solely responsible
for their implementation, consequences and liabilities, if any.
4.2 Absence of Certain Chances. Prior to the Closing, except as expressly
--------------------------
permitted or contemplated hereby, Octopus and Qualix shall not, without each
other's prior written consent (which consent shall not be unreasonably
withheld):
(a) incur any additional indebtedness for money borrowed or guarantee
any indebtedness or obligation of any other party;
(b) set aside or pay any dividend or distribution of assets to, or
repurchase (other than repurchases at the original purchase price of employee
shares pursuant to the terms of the purchase agreement under which such shares
were originally purchased) any of its stock from, any of its stockholders.
(c) issue or grant any capital stock (other than upon exercise of
outstanding stock options or warrants prior to their stated maturity or upon
conversion of any outstanding shares of preferred stock) or securities
convertible into capital stock, or grant or issue any options, warrants, or
rights to subscribe for capital stock or securities convertible into capital
stock, except the grant of options to purchase its Common Stock, consistent with
prior practice, under preexisting employee stock plans;
30
(d) enter into any employment or consulting agreement or arrangement
providing to any employee or consultant severance benefits or other post-
termination payments or benefits;
(e) increase the compensation payable or to become payable to any of
its officers, employees, or consultants above the amount payable as of the date
hereof, other than normal increases consistent with historical practice in the
ordinary course of business, or, other than as contemplated hereby, adopt or
amend any employee benefit plan or arrangement;
(f) acquire or dispose of any material properties or assets used in
its business except in the ordinary course of business;
(g) waive any statute of limitations so as to extend any tax or other
liability;
(h) permit any material change in the manner in which its books and
records are maintained;
(i) create or suffer to be imposed any lien, mortgage, security
interest, or other charge on or against its properties or assets;
(j) enter into, amend, or terminate any lease of real or personal
property otherwise than in the ordinary course of business;
(k) amend its Articles of Incorporation or Bylaws, except as may be
contemplated hereby;
(l) engage in any activities or transactions outside the ordinary
course of its business as conducted at the date hereof;
(m) make any material amendments or changes in any of such company's
Material Agreements; or
(n) accelerate the vesting of any employee stock benefit (including
vesting under stock purchase agreements or exercisability of stock options).
4.3 Actions Contrary to Stated Intent. No action will be taken by either
---------------------------------
Qualix or Octopus before or after the Merger that would, to the knowledge of
such party, prevent the Merger from qualifying (i) as a tax-free reorganization
under Section 368(a) of the Code or (ii) to the knowledge of such party,
for pooling-of-interests treatment under GAAP.
4.4 Access to Information; Confidentiality.
---------------------------------------
(a) Each of Qualix and Octopus will give to each other party and their
respective accountants, legal counsel, and other representatives full access,
during normal business hours throughout the period prior to the Closing, to all
of the properties, books, contracts, commitments and records relating to its
business, assets and liabilities, and each party
31
will furnish to the other party, their respective accountants, legal counsel and
other representatives during such period all such information concerning its
affairs as the other may reasonably request; provided, that any furnishing of
such information pursuant hereto or any investigation by each party hereto shall
not affect such party's right to rely on the representations, warranties,
agreements and covenants made by the other party in this Agreement.
(b) All information exchanged pursuant hereto shall be subject to the
terms of the Confidentiality Agreement by and between Qualix and Octopus dated
as of June 30, 1996, the terms of which are incorporated herein by reference. If
this Agreement is terminated pursuant to Article VII, upon written request, the
parties will return or destroy all writings, documents, and materials containing
information exchanged in connection with each party's evaluation of the Merger
and confirm in writing that such materials have in no way been reproduced or
copied.
4.5 No Solicitation. Each party agrees that during the term of this
---------------
Agreement it shall not, directly, or indirectly, through any officer, director,
agent or otherwise, (i) solicit, initiate or encourage submission of proposals
or offers from any person relating to (x) any acquisition or purchase of all or
substantially all of the assets of, or any equity interest in, such party or any
merger, consolidation, business combination or similar transaction with such
party, or (y) any other material transaction incompatible with the transactions
contemplated by this Agreement, or (ii) participate in any discussions or
negotiations regarding, furnish to any other person any confidential information
with respect to, or otherwise cooperate in any way with, or participate in,
facilitate or encourage, any effort or attempt by any other person to do or seek
any of the foregoing. In the event either party during the term of this
Agreement receives from any third party any offer or indication of interest
regarding any of the transactions referred to in the foregoing sentence, or any
request for information about such party with respect to any of the foregoing,
then the material terms of each such offer, indication of interest, or request
shall be communicated promptly to the other party.
4.6 Octopus Stockholder Approval. Octopus and its officers and directors
----------------------------
shall, at the earliest practicable date after the date hereof, submit this
Agreement and the Merger Agreement to the Octopus stockholders for their
approval, either at a meeting or by written consent in accordance with
Pennsylvania Law and the Octopus Articles. Such submission shall be accompanied
by a recommendation for such stockholder approval by the members of the Board of
Directors of Octopus without any vote by any Director against such
recommendation.
4.7 Qualix Stockholder Approval. Qualix and its officers and directors
---------------------------
shall, at the earliest practicable date after the date hereof, submit this
Agreement to the Qualix stockholders for their approval, either at a meeting or
by written consent in accordance with applicable Delaware Law and California Law
and the current Qualix Amended and Restated Certificate of Incorporation. Such
submission shall be accompanied by a recommendation for such stockholder
approval by the members of the Board of Directors of Qualix without any vote by
any Director against such recommendation.
32
4.8 Consents. Each of Octopus, Qualix and Subsidiary shall use its best
--------
efforts to obtain any consents and approvals of, or effect the notification of
or filing with, each person or authority, whether private or governmental, whose
consent or approval is required in order to permit the consummation of the
Merger and the transactions contemplated hereby and to enable the surviving
corporation to conduct and operate the businesses of Octopus and Qualix
substantially as presently conducted.
4.9 Efforts to Consummate. Subject to the terms and conditions herein
---------------------
provided, Octopus and Qualix shall each do or cause to be done all such acts and
things as may be necessary, proper, or advisable, consistent with all applicable
laws and regulations, to consummate and make effective the transactions
contemplated hereby as soon as reasonably practicable.
4.10 Public Announcements. Except as required by law, each party will
--------------------
consult in advance with the other concerning the timing and content of any
announcements, press releases and public statements concerning the transactions
contemplated by this Agreement and will not make any such announcement, release
or statement without the other's consent, such consent not to be unreasonably
withheld or delayed.
4.11 Employment Agreements. On or before the Closing, Qualix shall offer to
---------------------
enter into employment and non-competition agreements with each of the following
individuals: Xxxx Xxxxxxx, Xxxx Xxxxxxxxxx, Xxx Xxxxxxxx and Xxxxx Xxxxxxx (the
"Key Employees"). Such agreements shall be substantially in the form attached
hereto as Exhibit 4.11A (the "Employment and Non-Competition Agreements") with
-------------
the compensation terms set forth on Exhibit 4.11B.
-------------
4.12 Qualix Certificate. Qualix shall adopt and file with the Delaware
------------------
Secretary of State on or before the Closing the Qualix Certificate. Within three
(3) business days after the date hereof, Octopus shall furnish Qualix with any
changes it has on the Qualix Certificate. If Qualix does not agree to any such
requested changes within three (3) business days thereafter, either Octopus or
Qualix may terminate this Agreement.
4.13 Fairness Hearing
----------------
(a) Qualix has, or as promptly as practicable after execution hereof
will have to the extent required, filed (i) a permit application under Section
25121 of California Law with the California Commissioner of Corporations (the
"Commissioner") and (ii) a request for a hearing to be held by the Commissioner
to consider the terms, conditions and fairness of the transactions contemplated
by this Agreement and the Merger Agreement pursuant to Section 25142 of
California Law ("Fairness Hearing"). As soon as permitted by the Commissioner,
Qualix shall cause the mailing of the hearing notice to all holders of
securities entitled to receive such notice pursuant to the requirements of the
rules of the Commissioner and California Law. Octopus shall furnish to Qualix
such data and information as is reasonably necessary for Qualix's preparation
and filing of the permit application, the request for the hearing and the
hearing notice.
33
(b) Qualix will use commercially reasonable efforts to qualify the
Qualix Capital Stock to be issued pursuant to the Merger and the Exchange under
the securities or "blue sky" laws of every jurisdiction in which such
qualification is reasonably required.
4.14 Octopus Proprietary Information and Invention Agreements. Within five
--------------------------------------------------------
(5) business days after the date hereof, Octopus shall deliver to Qualix a list
of all current and former employees and consultants of Octopus, indicating the
period over which they worked for Octopus, and copies of all proprietary
information and invention agreements with such individuals that have executed
such agreements. Octopus shall use commercially reasonable efforts to obtain
proprietary information and invention agreements with any current and former
employees or consultants of Octopus who have not previously signed such
agreements with Octopus.
4.15 Disclosure Schedules. Octopus and Qualix shall furnish any comments
--------------------
they have on the other's Disclosure Schedules within two (2) business days after
the date hereof. Each of Octopus and Qualix may terminate this Agreement if they
are not satisfied with the other party's Disclosure Schedule within five (5)
business days after the date hereof.
ARTICLE V
CONDITIONS TO OBLIGATIONS OF
QUALIX, SUBSIDIARY AND OCTOPUS
The obligations of Qualix, Subsidiary, and Octopus to consummate the
transactions contemplated hereby are subject to satisfaction of each of the
following conditions prior to the Closing (unless expressly waived in writing by
each of Qualix and Octopus:
5.1 Consents and Approvals. The parties hereto shall have obtained all
----------------------
consents and approvals of stockholders and third parties (including governmental
authorities and under foreign state securities laws and including all required
consents from third parties relating to contracts, licenses, leases and other
instruments necessary to effect the assignment to the Surviving Corporation of
all Octopus Material Agreements, or to avoid the termination of such agreements
or loss of any rights thereunder) required to consummate the transactions
contemplated by this Agreement and the Articles of Merger.
5.2 No Actions. Consummation of the transactions contemplated by this
----------
Agreement and the Articles of Merger shall not violate any order, decree, or
judgment of any court or governmental body having jurisdiction.
5.3 Proceedings and Documents. All corporate and other proceedings in
-------------------------
connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be in form and substance
reasonably satisfactory to Qualix and Octopus and their respective counsel, and
each of Qualix and Octopus shall have received all such counterpart originals or
certified or other copies of such documents as each may reasonably request.
34
5.4 Pooling Treatment. Qualix shall have received from Deloitte & Touche an
-----------------
opinion that the Merger will be treated as a pooling-of-interests under GAAP.
5.5 Fairness Hearing. The Commissioner of Corporations for the State of
----------------
California shall have approved the terms and conditions of the transactions
contemplated by this Agreement and the Articles of Merger and the fairness of
such terms and conditions pursuant to Section 25142 of the California Statute
following a Fairness Hearing and shall have issued a Permit under Section 25121
of the California Statute for the issuance of (i) the Qualix Capital Stock to be
issued in the Merger, and (ii) the Qualix Capital Stock issuable on exercise of
the Octopus Options and Octopus Warrants to be assumed by Qualix.
5.6 Dissenters. The holders of not more than five percent (5%) (on an as-
----------
converted basis) of the Octopus Capital Stock shall have exercised and perfected
their rights of appraisal as dissenting stockholders pursuant to Pennsylvania
Law, California Law or Delaware Law, as the case may be.
5.7 Affiliate and Continuity of Interest Letters. Each Affiliate shall have
executed an Affiliate and Continuity of Interest Letter.
5.8 Qualix Certificate of Incorporation. Qualix shall have adopted and
-----------------------------------
filed with the Secretary of State of the State of Delaware the Qualix
Certificate.
5.9 Directors. Xxxxxxx X. Xxxxxx shall have been elected a director of
---------
Qualix.
5.10 FIRPTA Certificates. Octopus shall have delivered to Qualix FIRPTA
-------------------
Certificates in a form satisfactory to Qualix' counsel.
ARTICLE VI
ADDITIONAL CONDITIONS TO OBLIGATIONS OF QUALIX
The obligations of Qualix to consummate the transactions contemplated
hereby are subject to satisfaction of each of the following conditions prior to
the closing (unless expressly waived in writing by Qualix):
6.1 Representations, Warranties, and Agreements. All representations and
-------------------------------------------
warranties made herein by Octopus shall be true, accurate, and correct in all
material respects, subject to the Octopus Disclosure Schedule, as of the date
made and as if made as of the Closing, all obligations required to be performed
hereunder by Qualix shall have been performed in all material respects.
6.2 Certificate. Qualix shall have received at the Closing a certificate,
-----------
dated as of the Closing and executed by Octopus's President and Chief Financial
Officer, to the effect that the conditions set forth in Section 6.1 shall have
been satisfied.
35
6.3 Opinion of Counsel. Qualix shall have received at the Closing the
------------------
opinion of Xxxxx & Xxxxx counsel to Octopus, in substantially the form attached
hereto as Exhibit 6.3.
-----------
6.4 Proceedings and Documents. All corporate and other proceedings taken by
-------------------------
Octopus in connection with the transactions contemplated hereby and all
documents and instruments of Octopus incident to such transactions shall be in
form and substance reasonably satisfactory to Qualix and its counsel.
6.5 Employment and Non-Competition Agreements. Qualix shall have received a
-----------------------------------------
duly executed Employment and Non-Competition Agreement from each of the Key
Employees.
6.6 Escrow Agreement. The Escrow Agreement shall have been entered into by
----------------
each of Qualix, Octopus and the Octopus Representative (as such terms are
defined in the Escrow Agreement).
6.7 Opinion of Patent Counsel. Qualix shall have received an opinion from
-------------------------
Xxxxxx and Xxxxxxx regarding the non-infringement of certain technologies.
6.8 Capitalization. Qualix and its counsel shall have reviewed and be
--------------
satisfied with the capitalization records of Octopus.
6.9 Option Amendment Agreements. Qualix and its counsel shall have
---------------------------
reviewed, and Octopus shall have obtained, executed agreements of holders of
options to purchase Common Stock issued since January 1, 1996 which agreements
effectively amend such agreements to increase the exercise price therefor and
forever waive all rights to receive accelerated vesting as a result of this
acquisition.
6.10 Delivery of Financial Statements. Octopus shall have delivered to
--------------------------------
Qualix complete copies of its consolidated balance sheets as of December 31,
1994 and 1995 and the related statements of operations, statements of
stockholders' equity and statements of cash flows for the years ended on each of
December 31, 1994 and 1995 (collectively, the "Octopus Audited Financials")
accompanied by the auditors' report of its independent certified public
accountants. Octopus shall have delivered to Qualix an unaudited consolidated
balance sheet as of June 30, 1996 and the related unaudited statements of
operations, statements of stockholders' equity and statements of cash flows for
the six (6) months then ended (the "Octopus Interim Financials"). The Octopus
Financials shall be satisfactory to Qualix in the exercise of its sole
discretion.
6.11 Proprietary Information and Invention Agreements. Each current and
------------------------------------------------
former employee or consultant of Octopus shall have duly executed and delivered
an proprietary information and invention agreement in a form reasonably
satisfactory to Qualix to the extent Qualix reasonably determines as necessary
to protect the Octopus Intellectual Property.
36
ARTICLE VII
ADDITIONAL CONDITIONS TO OBLIGATIONS OF OCTOPUS
The obligations of Octopus to consummate the transactions contemplated
hereby are subject to satisfaction of each of the following conditions prior to
the Closing (unless expressly waived in writing by Octopus):
7.1 Representations, Warranties, and Agreements. All representations and
-------------------------------------------
warranties made herein by Qualix shall be true, accurate, and correct in all
material respects, subject to the Qualix Disclosure Schedule, as of the date
made and as if made as of the Closing, all obligations required to be performed
hereunder by Qualix shall have been performed in all material respects.
7.2 Certificate. Octopus shall have received at the Closing a certificate,
-----------
dated as of the Closing and executed by Qualix's President and Chief Financial
Officer, to the effect that the conditions set forth in Section 7.1 shall have
been satisfied.
7.3 Opinion of Counsel. Octopus shall have received at the Closing the
------------------
opinion of Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx Xxxxxxxx & Xxxxxxxxx, LLP,
counsel to Qualix, in substantially the form attached hereto as Exhibit 7.3.
7.4 Proceedings and Documents. All corporate and other proceedings taken by
-------------------------
Qualix in connection with the transactions contemplated hereby and all documents
and instruments of Qualix incident to such transactions shall be in form and
substance reasonably satisfactory to Octopus and its counsel.
7.5 Employment and Non-Competition Agreements. Qualix shall have offered to
-----------------------------------------
each Key Employee the opportunity to enter into an Employment and Non-
Competition Agreement pursuant to Section 4.11
ARTICLE VIII
SURVIVAL
8.1 Survival of Representations and Warranties. The representations and
------------------------------------------
warranties of Octopus contained in Sections 2.1, 2.2, 2.4, 2.5, 2.13(a) and
2.18, in this Agreement and of Qualix contained in Sections 3.1, 3.2, 3.4, 3.5
and 3.18 of this Agreement (including those in any related exhibit, schedule, or
certificate referred to herein) (the "Representations and Warranties") shall
survive the execution and delivery of this Agreement and the Closing until the
earlier of (i) the one year anniversary of the Effective Time, (ii) the closing
of Qualix's initial public offering of Qualix Common Stock, and (iii) the
issuance of an audit report by Qualix's independent auditors covering any
financial reporting period of Qualix ending after the Effective Time (the
"Survival Date"), and shall in no way be affected by any investigation of the
subject matter thereof made by or on behalf of any such party of the
37
Representations and Warranties of any party contained in or made pursuant to
this Agreement (including those of any related exhibit, schedule, or certificate
referred to herein) shall terminate and be of no further force or effect upon
the closing. The covenants and other agreements of the parties contained in this
Agreement shall survive the Effective Time until they are otherwise terminated,
whether by their terms or as a matter of applicable law.
8.2 Octopus Indemnification. Pursuant to the Escrow Agreement, and subject
-----------------------
to the terms and conditions thereof, Qualix shall be indemnified, defended, and
held harmless from and against, and shall be reimbursed against and in respect
of, any and all claims, demands, losses, costs, expenses, obligations,
liabilities, damages, remedies, and penalties, including interest, penalties,
and attorney's fees and expenses (collectively, "Losses") that Qualix shall
incur or suffer and which arise from or are attributable to or by reason of or
in connection with any breach or inaccuracy of any of the Representations and
Warranties of Octopus or the failure by Octopus to perform any covenants or
other agreements of Octopus contained in this Agreement. Notwithstanding
anything herein to the contrary: (a) Qualix shall not have the right to be
indemnified pursuant to Section 8 hereof unless and until it shall have incurred
on a cumulative basis since the date of this Agreement aggregate Losses (as
defined in the Escrow Agreement) in an amount not less than $50,000, whereupon
the stockholders of Octopus shall be obligated to indemnify against all Losses
in excess of such amount as provided herein; and (b) the remedies set forth in
this Agreement and the Escrow Agreement shall be the sole remedies available to
Qualix relating to the representations, warranties, agreements, or covenants
made by Octopus in this Agreement, except in the case of willful misconduct or
fraud. No investigation made by or on behalf of Qualix of Octopus, or any of its
attorneys, accountants, advisors, or agents with respect to Qualix shall be
deemed to affect such stockholder reliance on the representations, warranties,
covenants, and agreements (including the indemnity) made by Octopus in this
Agreement and shall not constitute or give rise to a waiver to such rights to
indemnity.
8.3 Qualix Indemnification. Pursuant to the Escrow Agreement, and subject
-----------------------
to the terms and conditions thereof, stockholders of Octopus shall be
indemnified, defended, and held harmless from and against, and shall be
reimbursed against and in respect of, any and all Losses that stockholders of
Octopus shall incur or suffer and which arise from or are attributable to or by
reason of or in connection with any breach or inaccuracy of any of the
Representations and Warranties of Qualix or the failure of Qualix to perform any
covenants or other agreements of Qualix contained in this Agreement.
Notwithstanding anything herein to the contrary: (a) the stockholders of Octopus
shall not have the right to be indemnified pursuant to Section 8 hereof unless
and until they shall have incurred on a cumulative basis since the date of this
Agreement aggregate Losses (as defined in the Escrow Agreement) in an amount not
less than $50,000, whereupon Qualix shall be obligated to indemnify against all
Losses in excess of such amount as provided herein; and (b) the remedies set
forth in this Agreement shall be the sole remedies available to the stockholders
of Octopus relating to the representations, warranties, agreements, or
covenants made by Qualix in this Agreement, except in the case of willful
misconduct or fraud. No investigation made by or on behalf of the stockholders
of Octopus, or any of its attorneys, accountants, advisors, or agents with
respect to Octopus or the stockholders of Octopus shall be deemed to affect such
stockholder reliance on the representations, warranties,
38
covenants, and agreements (including the indemnity) made by Octopus in this
Agreement and shall not constitute or give rise to a waiver to such rights to
indemnity.
ARTICLE IX
TERMINATION
9.1 Termination by Mutual Consent. At any time prior to the Closing, this
-----------------------------
Agreement and the Articles of Merger may be terminated by express written
consent of Qualix and Octopus, notwithstanding approval of the Merger by the
stockholders of Qualix or Octopus.
9.2 Termination by Octopus or Qualix. Octopus or Qualix shall each have
--------------------------------
the right to terminate this Agreement and the Articles of Merger at any time
prior to the Closing by delivery of written notice to the other if:
(a) there has been an Qualix or Octopus Material Adverse Change since
the date of the other party's Interim Financials in such other party's business,
assets, financial condition, or prospects;
(b) the other party has breached this Agreement in any material
respect and has failed to cure such breach or breaches within ten (10) days of
receiving written notice thereof from the nonbreaching party;
(c) any representation or warranty made by the other party in this
Agreement is false or inaccurate in any material respect or there is any
material misrepresentation or omission by such other party;
(d) the Closing has not occurred within 90 days of the date hereof.
9.3 Effect of Termination. In the event of termination as provided above,
----------------------
all parties hereto shall bear their own costs associated with this Agreement and
all transactions mentioned herein and there shall be no obligation on the part
of any party's officers, directors, or stockholders; provided, that (i) Sections
4.4(b), 4.10, 10.8, 10.9, and 10.10 shall survive such termination and continue
in full force and effect, and (ii) any party hereto may bring an action for
damages or enforcement against any other party hereto for breach of this
Agreement.
ARTICLE X
MISCELLANEOUS
10.1 Notices. Any notice given hereunder shall be in writing and shall be
--------
deemed effective upon the earlier of personal delivery (including personal
delivery by facsimile) or the third day after mailing by certified or registered
mail, postage prepaid, as follows:
(a) If to Qualix or Subsidiary:
39
Qualix Group, Inc.
0000 X. Xxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Attn: Xxxxxxx X. Xxxx
Facsimile: (000) 000-0000
With a copy to:
Xxxxxx Xxxxxx, Esq.
Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx Xxxxxxxx &
Xxxxxxxxx, LLP
000 Xxxxxx Xxx, 0xx Xxxxx
Xxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
(b) If to Octopus:
Octopus Technologies, Inc.
000 Xxxxxx Xxxxxx Xxxx, Xxxxx 000X
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Facsimile: (000) 000-0000
With a copy to:
Xxxxxxx X. Xxxxxx, Esq.
Xxxxx & Xxxxx
X.X. Xxx 0000
Xxxxxxxxx, XX 00000-0000
Facsimile: (000) 000-0000
or to such other address as any party may have furnished in writing to the other
parties in the manner provided above.
10.2 Entire Agreement; Modifications; Waiver. This Agreement constitutes
---------------------------------------
the final, exclusive, and complete understanding of the parties with respect to
the subject matter hereof and supersedes any and all prior agreements,
understandings and discussions with respect thereto. No variation or
modification of this Agreement or the Articles of Merger and no waiver of any
provision or condition hereof or thereof, or granting of any consent
contemplated hereby, shall be valid unless in writing and signed by the party
against whom enforcement of any such variation, modification, waiver, or consent
as sought.
10.3 Captions. The captions in this Agreement are for convenience only and
---------
shall not be considered a part of or affect the construction or interpretation
of any provision of this Agreement.
40
10.4 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when so executed shall constitute an original copy
hereof, but all of which together shall constitute one agreement.
10.5 Successors and Assigns. No party may, without the prior express
----------------------
written consent of each other party, assign this Agreement in whole or in part.
This Agreement shall be binding upon the inure to the benefit of the respective
successors and permitted assigns of the parties hereto.
10.6 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California as applied to contracts
between California residents made and to be performed entirely within the State
of California.
10.7 Further Assurances. At the request of any of the parties hereto, and
------------------
without further consideration, the other parties agree to execute such documents
and instruments and to do such further acts as may be necessary or desirable to
effectuate the Merger as provided hereby.
10.8 Each Party to Bear Own Costs. Subject to Article VI, each of the
----------------------------
parties shall pay all costs and expenses incurred by it in negotiating and
preparing this Agreement and the Articles of Merger and in closing and carrying
out the transactions contemplated by this Agreement and the Articles of Merger.
10.9 Attorneys' Fees. In the event of any suit or other proceeding to
---------------
construe or enforce any provision of this Agreement or any other agreement to be
entered into pursuant hereto, or otherwise in connection with this Agreement,
the prevailing party's or parties' reasonable attorneys' fees and costs (in
addition to all other amounts and relief to which such party or parties may be
entitled) shall be paid by the other party or parties.
10.10 Nonsolicitation. If the transaction contemplated herein is not
---------------
consummated, Qualix and Octopus each agrees not to solicit for employment any
personnel employed by the other prior to June 30, 1996, without the other
party's prior written consent.
10.11 Transfer of Octopus Books and Assets. Octopus agrees, at any time
------------------------------------
after the Closing, upon the request of Qualix, to do, execute, acknowledge, and
deliver or to cause to be done, executed, acknowledged, and delivered, all such
further acts, deeds, assignments, transfers, conveyances, powers of attorney,
and assurances as may be required for assigning, transferring, conveying, and
confirming to Qualix, or to its successors and assigns, or for the aiding,
assisting, collecting, and reducing to possession of any or all of the books,
records, and assets of Octopus.
41
IN WITNESS WHEREOF, each of the parties has executed this Agreement as
of the date first above written.
QUALIX GROUP, INC.
By: ______________________________________________
Xxxxxxx X. Xxxx, Chief Executive Officer
QUALIX SUBSIDIARY, INC.
By: ______________________________________________
Xxxxxxx X. Xxxx, Chief Executive Officer
OCTOPUS TECHNOLOGIES, INC.
By: ______________________________________________
Xxxxx Xxxxxxx, President
Exhibit 1.12A
-------------
List of Octopus Stockholders
----------------------------
Exhibit 1.12B
-------------
Stockholder Agreement
---------------------
Qualix Group, Inc.
0000 X. Xxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Attention: Xx. Xxxxxxx X. Xxxx, President
and Chief Executive Officer
The undersigned, a stockholder of Octopus Technologies, Inc., a
Pennsylvania corporation ("Company"), understands that the Company has entered
into an Agreement and Plan of Reorganization dated July 14, 1997 with Qualix
Group, Inc., a Delaware corporation ("Qualix") and a wholly-owned subsidiary of
Qualix ("Reorganization Agreement") with respect to a possible Merger of the
Company as provided therein ("Merger").
In order to induce Qualix to enter into the Agreement and to
consummate the Merger, the undersigned agrees as follows:
(1) The undersigned has reviewed and approves of the terms of
the Merger as set forth in the Agreement.
(2) The undersigned agrees not to directly or indirectly (i)
solicit, initiate or encourage submission of proposals or offers from any person
relating to (x) any acquisition or purchase of all or substantially all of the
assets of, or any equity interest in the Company, or any merger, consolidation,
business combination or similar transaction with the Company or (y) any other
transaction incompatible with the Acquisition (including, without limitation, a
joint venture or other similar transaction), (ii) participate in any discussions
or negotiations regarding, or furnish to any other person any confidential
information with respect to, or otherwise cooperate in any way with, or
participate in, facilitate or encourage, any effort or attempt by the
undersigned or any other person to do or seek any of the foregoing. The
undersigned will promptly notify Qualix if it shall receive any indications of
interest of offer or request for information with respect to any of the
foregoing.
(3) The undersigned agrees to vote all shares of the Company's
stock owned beneficially or of record by the undersigned ("Voting Shares"),
whether voting at a stockholder's meeting or by written consent, for approval of
the Merger, the Agreement and any related corporate actions on terms conforming
in all material respects to the Agreement and against any corporate act in
which, in the reasonable judgment of Qualix, would violate, frustrate the
purpose of, prevent or delay consummation of such Merger.
(4) The undersigned agrees to maintain in strictest confidence
information about the Merger and the Agreement, including information about the
existence of
this agreement and the Merger, and not to disclose any such information without
your prior written approval.
(5) If the undersigned is determined by the Company to be one of
its affiliates, the undersigned will not sell, either publicly or privately,
assign, transfer, convey, encumber or dispose of, directly or indirectly, or
otherwise reduce the undersigned's risk relative to, the shares of Qualix Common
Stock which the undersigned will receive in exchange for the undersigned's
shares of Common Stock or Preferred Stock of the Company, until such time as
Qualix has publicly announced financial results covering at least thirty (30)
days of post-closing combined operations of Qualix and the Company.
(6) The undersigned has no present intent or plan to engage in a
sale, exchange, transfer, reduction of risk of ownership or indirect disposition
of the shares of Qualix Common Stock which it will receive in connection with
the Merger and is not aware of other shareholders of the company who have such a
present intent to dispose of shares of Qualix aggregating greater than 50% of
the number of shares of Qualix to be issued in connection with the Merger.
(7) The undersigned understands that the Qualix Common Stock to
be issued in the Merger will not be registered under the Securities Act of 1933.
If the Merger is completed, the undersigned will acquire Qualix Common Stock in
the transaction for the undersigned's own account and without a view to the
distribution thereof.
(8) The undersigned will execute such other documents as are
ordinary and necessary in connection with the Merger, including confirmation of
any of the above agreements.
(9) The obligations of the undersigned hereunder shall attach to
and be binding upon any person or entity to whom legal or beneficial ownership
of the undersigned's Voting Shares shall pass by operation of law or otherwise.
This Letter Agreement shall terminate and be of no force and effect on
the date the Merger is consummated or the Reorganization Agreement is terminated
pursuant to its terms.
Very truly yours,
_____________________________________________
Print Name:
By: _________________________________________
Title: ______________________________________
Acknowledged and Agreed To:
QUALIX GROUP, INC.
By: ___________________________________________
Xxxxx X. Felt, Jr., Chief Financial Officer
Exhibit 4.11B
-------------
PROPOSED COMPENSATION PACKAGES
------------------------------
BONUS STOCK
BASE OPPORTUNITY* TOTAL OPTIONS**
-------- ----------- -------- ---------
Xxxx Xxxxxxx* $150,000 $150,000 $300,000 100,000
Xxxx Xxxxxxxxxx* $110,000 $ 65,000 $175,000 25,000
Xxx Xxxxxxxx* $150,000 $ 75,000 $225,000 25,000
Xxxxx Xxxxxxx* $100,000 $ 10,000 $110,000 25,000
Others 25,000
_________________________________
* Bonus plan to be approved by Qualix Board of Directors
** Standard terms and conditions under Qualix Option Plan. Exercise price equal
to fair market value on date of grant.
