EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of the
12th day of February, 1998, is by and among DocuCorp International, Inc., a
Delaware corporation ("DocuCorp"), EZPS Acquisition Corp., a Delaware
corporation ("Acquisition Co"), EZPower Systems, Inc., a Delaware
corporation (the "Company"), and the stockholders of the Company listed on
Schedule I hereto (each such person referred to individually herein as the
"Stockholder" and collectively herein as the "Stockholders").
W I T N E S S E T H:
WHEREAS, Acquisition Co is a wholly-owned subsidiary of DocuCorp newly
formed for the purpose of the transactions contemplated hereby; and
WHEREAS, the Stockholders collectively own, directly or indirectly, all
of the outstanding capital stock (collectively, the "Shares") of the Company;
and
WHEREAS, DocuCorp desires to acquire the Company through the merger
transaction contemplated hereby;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the parties hereto agree as follows:
I. THE MERGER
1.1 THE MERGER. In accordance with the provisions of the business
corporation laws of the State of Delaware at the Effective Date (as
hereinafter defined), the Company shall be merged (the "Merger") with and
into Acquisition Co., and Acquisition Co. shall be the surviving corporation
(the "Surviving Corporation") and as such shall continue to be governed by
the laws of the State of Delaware.
1.1 CONTINUATION OF CORPORATE EXISTENCE. Except as may otherwise
be set forth herein, the corporate existence and identity of Acquisition Co.,
with all its purposes, powers, franchises, privileges, rights and immunities,
shall continue unaffected and unimpaired by the Merger, and the corporate
existence and identity of the Company, with all its purposes, powers,
franchises, privileges, rights and immunities, at the Effective Date shall be
merged with and into that of Acquisition Co. and the Surviving Corporation
shall be vested fully therewith and the separate corporate existence and
identity of the Company shall thereafter cease except to the extent continued
by statute.
1.1 EFFECTIVE DATE. The Merger shall become effective upon the
filing on the Closing Date (as defined herein) of the Certificate of Merger
with the Secretary of State of the State
of Delaware pursuant to the provisions of the Delaware General Corporation
Laws. The date and time when the Merger shall become effective is
hereinafter referred to as the "Effective Date."
1.2 CORPORATE GOVERNMENT. The Certificate of Incorporation of
Acquisition Co., as in effect on the Effective Date, shall continue in full
force and effect and shall be the Certificate of Incorporation of the
Surviving Corporation, except that the name of Acquisition Co. shall be
changed to "EZPower Systems, Inc." The Bylaws of Acquisition Co., as in
effect as of the Effective Date, shall continue in full force and effect and
shall be the Bylaws of the Surviving Corporation. The member(s) of the Board
of Directors of the Surviving Corporation shall be the person(s) holding such
office(s) in Acquisition Co. as of the Effective Date.
1.1 RIGHTS OF THE SURVIVING CORPORATION. The Surviving Corporation
shall have the following rights and obligations:
(a) The Surviving Corporation shall have all the rights, privileges
immunities and powers and shall be subject to all the duties and
liabilities of a corporation organized under the laws of the State of
Delaware.
(b) The Surviving Corporation shall possess all of the rights,
privileges immunities and franchises, of either a public or private
nature, of the Company and Acquisition Co. and all property, real,
personal and mixed, and all debts due on whatever account, including
subscription to shares, and all other choses in action, and every other
interest of or belonging or due to the Company and Acquisition Co. shall
be taken and deemed to be transferred or invested in the Surviving
Corporation without further act or deed.
(c) At the Effective Date, the Surviving Corporation shall
thenceforth be responsible and liable for all liabilities and obligations
of the Company and Acquisition Co., and any claim existing or action or
proceeding pending by or against Acquisition Co. or the Company may be
prosecuted as if the Merger had not occurred, or the Surviving Corporation
may be substituted in its place. Neither the rights of creditors nor any
liens upon the property of Acquisition Co. or the Company shall be
impaired by the Merger.
1.1 RELATED TRANSACTIONS. At the Closing, the following related
transactions shall be completed:
(a) DocuCorp and each of Xxxxxxxxx X. Xxxxx, Xxxxxxxx Xxxxxxx and
Xxxxxxx X. Row (collectively the "Management Stockholders") shall enter
into an employment agreement in the form of Exhibit A hereto
(collectively, the "Employment Agreements");
(b) DocuCorp shall retire all of the indebtedness of the Company
listed on Schedule II hereto; and
(c) To the extent granted by third parties, any and all of the
guarantees executed and delivered by a Stockholder personally guaranteeing
obligations of the Company (set forth on Schedule II hereto) will be
terminated and released (it being understood that DocuCorp will provide a
guaranty of such obligations in order to induce the third parties to
terminate the guaranty of such Stockholder).
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1.1 TAX CONSEQUENCES. It is intended that the Merger shall
constitute a reorganization within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code"), and that this Agreement shall
constitute a "plan of reorganization" for the purposes of Section 368 of the
Code.
1 CONVERSION OF SHARES; CLOSING
1.1 CONVERSION OF SHARES; MERGER CONSIDERATION. At the Effective
Date, by virtue of the Merger and without any action on the part of the
holder thereof:
(a) The Shares, in the aggregate and on a fully diluted basis
(assuming the exercise of the "Convertible Securities" (defined
hereinafter)) immediately prior to the Effective Date, shall at the
Effective Date, by virtue of the Merger and without any action on the part
of the holders thereof, be converted into (i) 650,000 shares of common
stock, $.01 par value, of DocuCorp ("DocuCorp Shares") and (ii) such
portion of the "Contingent Purchase Price" as set forth below. The
foregoing DocuCorp Shares and Contingent Purchase Price shall be referred
to hereinafter collectively as the "Merger Consideration."
(b) The Stockholders owning Convertible Securities will exercise the
same prior to the Effective Date. As set forth in paragraph (a) above,
the Shares to be issued upon the exercise of the Convertible Securities
shall be included in the Shares that are to be converted into DocuCorp
Shares as set forth herein. The term "Convertible Securities" shall mean
all outstanding options, warrants or other securities of the Company
convertible into Common Stock immediately prior to the Effective Date.
(c) Each share of common stock of Acquisition Co. which shall be
outstanding immediately prior to the Effective Date, shall at the
Effective Date, by virtue of the Merger and without any action on the part
of the holder thereof, remain unchanged and thereafter represent one share
of the Surviving Corporation
(d) The Merger Consideration shall be allocated among the
Stockholders in the manner set forth in Schedule I to this Agreement. No
scrip or fractional shares of DocuCorp Shares shall be issued in the
Merger. All fractional shares to which a Stockholder of the Company would
otherwise be entitled shall be aggregated. If a fractional share results
from such aggregation, such fraction shall be rounded to the nearest whole
DocuCorp Share.
1.1 CONTINGENT PURCHASE PRICE.
(a) The "Contingent Purchase Price" shall be a maximum amount of
$2.0 million and shall be calculated based upon "EZPower Revenues" and
"EZPower Income" (each as defined herein) as follows:
(i) If EZPower Revenues for the 12 months ending
January 31, 1999 equal or exceed $4.5 million, then
DocuCorp shall pay to the Stockholders the sum of $250,000;
or if EZPower Revenues for the 12 months ending January 31,
1999 exceed $2.5 million but are less than $4.5 million,
then DocuCorp shall pay to the Stockholders such
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percentage of $250,000 as is equal to the percentage which
(i) the amount of EZPower Revenues for such period in excess
of $2.5 million bears to (ii) $2.0 million;
(ii) If EZPower Income for the 12 months ending
January 31, 1999 equals or exceeds $600,000, then DocuCorp
shall pay to the Stockholders the sum of $250,000; or if
EZPower Income for the 12 months ending January 31, 1999
exceeds $0 but is less than $600,000, then DocuCorp shall
pay to the Stockholders such percentage of $250,000 as is
equal to the percentage which (i) the amount of EZPower
Income for such period in excess of $0 bears to (ii)
$600,000;
(iii) If EZPower Revenues for the 24 months
ending January 31, 2000 equal or exceed $14.0 million, then
DocuCorp shall pay to the Stockholders the sum of $750,000;
or if EZPower Revenues for the 24 months ending January 31,
2000 exceed $8.0 million but are less than $14.0 million,
then DocuCorp shall pay to the Stockholders such percentage
of $750,000 as is equal to the percentage which (i) the
amount of EZPower Revenues for such period in excess of
$8.0 million bears to (ii) $6.0 million; and
(iv) If EZPower Income for the 24 months ending
January 31, 2000 equals or exceeds $3.0 million, then
DocuCorp shall pay to the Stockholders the sum of $750,000;
or if EZPower Income for the 24 months ending January 31,
2000 exceeds $1.0 million but is less than $3.0 million,
then DocuCorp shall pay to the Stockholders such percentage
of $750,000 as is equal to the percentage which (i) the
amount of EZPower Income for such period in excess of $1.0
bears to (ii) $2.0 million.
DocuCorp's obligation to pay Contingent Purchase Price to the Stockholders
pursuant to each of the preceding subsections (i) through (iv) is independent
of its obligation to pay Contingent Purchase Price pursuant to each of the
other subsections. That is, payment will be made pursuant to each subsection
that is applicable.
(b) The amount of EZPower Revenues and EZPower Income for each of
the above referenced periods shall be set forth on a written statement
prepared by DocuCorp and delivered to the Stockholders within 30 days of
the end of the applicable computation period, together with the applicable
payment of the Contingent Purchase Price. The Stockholders (acting as a
group through Xxxxxxxxx X. Xxxxx and Xxxxxxx X. Row for purposes of this
Section 2.2(b)) shall have the right to contest the statement at any time
within 30 days after their receipt thereof by delivering their objection
in writing to DocuCorp. The parties shall use their best efforts to
resolve any contest promptly, and the Stockholders shall be entitled to
examine the accounting records of DocuCorp for such purpose. If DocuCorp
and the Stockholders are unable to resolve such dispute within 30 days
after notification of such objection, the parties shall submit such
dispute to KPMG Peat Marwick (the "Independent Auditors") to make the
final determination. The decision of the Independent Auditors shall be
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final and binding on the parties. The Stockholders shall bear the cost of
the Independent Auditors unless the decision of such Independent Auditors
results in an adjustment in favor of the Stockholders of at least 10%, in
which case DocuCorp will bear the cost of the Independent Auditors. All
payments of the Contingent Purchase Price shall be made on or before the
later of (i) 10 days after the determination of EZPower Revenues and/or
EZPower Income, as the case may be, in accordance with the provisions of
this subsection or (ii) 45 days after the end of each computation period.
(c) As used herein for any computation period, "EZPower Revenues"
shall mean licensing and maintenance revenues of the Surviving Corporation
for such period, computed in accordance with generally accepted accounting
principles consistently applied; and "EZPower Income" shall mean the
income before taxes of the Surviving Corporation for such period, computed
in accordance with generally accepted accounting principles consistently
applied and adjusted for the following items:
(i) to exclude any gains or losses associated with changes
to conform to DocuCorp accounting policies;
(ii) to exclude any capitalized software, net of the
amortization of such capitalized software for such period;
(iii) to exclude general and administrative overhead
charges of DocuCorp and its subsidiaries other than the
Surviving Corporation which are not in the ordinary course of
business or which are not consistent with the historical general
and administrative overhead charges of the Company;
(iv) to include interest expenses (at an annual rate of
12%) on all advances of funds to, or on behalf of, the Surviving
Corporation made by DocuCorp after the Closing;
(v) to exclude any items of revenue and expense allocable
to the Surviving Corporation under generally accepted accounting
principles but which do not relate to the software products
historically sold by the Company or any derivative product or
new product incorporating the design features, properties or
uses of such historic products;
(vi) to exclude items of revenue and expense relating to
professional consulting, implementation or similar services;
(vii) to exclude fees and expenses paid by the Company
pursuant to Section 16.1 hereof;
(viii) to exclude any payments of Contingent Purchase
Price; and
(ix) to exclude any charge or deduction with respect to
goodwill that may arise as a result of the transactions
contemplated by this Agreement.
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DocuCorp intends that the operations of the Surviving Corporation be
maintained in a separate corporation for all periods through January 31,
2000, that the revenues and expenses of the Surviving Corporation will be
separately identifiable and that DocuCorp will use generally accepted cost
accounting principles to allocate to the Surviving Corporation any direct
costs and expenses (including services performed by DocuCorp on behalf of
the Surviving Corporation) that are related to the operations of the
Surviving Corporation; provided, however, that to the extent the products
or their proprietary technology or design features of the Surviving
Corporation are incorporated, bundled or otherwise sold in conjunction
with other products of DocuCorp, a fair and equitable allocation of the
revenues and related expenses (based upon the relative prices which the
products had been sold separately) shall be made between the Surviving
Corporation's product and such other products, whether such products are
sold by the Surviving Corporation or by DocuCorp or any affiliate of
DocuCorp. At all times through January 31, 2000, DocuCorp will use its
reasonable best efforts to encourage the development and sale of the
Surviving Corporation's products. To this end, for such period and so
long as the Surviving Corporation's products retain their present
functionality and customer acceptance, DocuCorp will incorporate such
products into the DocuCorp product line as one of its featured document
management products.
1.1 TIME OF CLOSING. Consummation of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of DocuCorp
in Dallas, Texas, on February 18, 1998, or as soon thereafter as possible after
the execution of this Agreement when each of the other conditions set forth in
Articles 6 and 7 have been satisfied or waived, and shall proceed promptly to
conclusion, or at such other place, time and date as shall be fixed by mutual
agreement between DocuCorp and the Company. The day on which the Closing shall
occur is referred to herein as the "Closing Date." Each party will cause to be
prepared, executed and delivered Articles of Merger to be filed with the
Secretary of State of Delaware and all other appropriate and customary
documents as any party or its counsel may reasonably request for the purpose of
consummating the transactions contemplated by this Agreement. All actions
taken at the Closing shall be deemed to have been taken simultaneously at the
time the last of any such actions is taken or completed.
1.1 CLOSING PROCEDURE. At the Closing, (i) each party will cause to
be prepared, executed and delivered a Certificate of Merger to be filed with
the Secretary of State of Delaware, (ii) DocuCorp shall issue the DocuCorp
Shares representing the Merger Consideration to the Stockholders in exchange
for certificates representing 100% of the Company Common Stock and the
documents evidencing the Convertible Securities, and (iii) each party will
cause to be prepared, executed and delivered all documents required to be
delivered by such party pursuant to Article 8 hereof and all other appropriate
and customary documents as another party or its counsel may reasonably request
for the purpose of consummating the transactions contemplated by this
Agreement. Notwithstanding clause (ii) above, DocuCorp and the Controlling
Stockholders shall jointly deposit 85,000 of the DocuCorp Shares with an escrow
agent (the "Post-Closing Escrow Agent") to be held pursuant to the terms of the
Post-Closing Escrow Agreement of even date herewith in the form of Exhibit B
hereto (the "Post-Closing Escrow Agreement"). The Post-Closing Escrow Agent
shall hold 50% of such escrowed DocuCorp Shares for a period of 12 months and
50% of such escrowed DocuCorp Shares for a period of 20 months, after which
such shares shall be delivered to the Controlling Stockholders, subject to
earlier claims in favor of DocuCorp as set forth in the Post-Closing Escrow
Agreement.
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1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS.
The stockholders of the Company indicated on Schedule I hereto as
Controlling Stockholders (collectively, the "Controlling Stockholders") and
the Company, jointly and severally, except with respect to the representation
set forth in Section 3.12(b) below which is made by each Controlling
Stockholder severally, represent and warrant to DocuCorp that, except as
qualified by the Sellers' Disclosure Schedule attached hereto (the "Sellers'
Disclosure Schedule"):
1.1 ORGANIZATION; GOOD STANDING. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of
Delaware and has all requisite corporate power and authority to own and lease
its properties and assets and to carry on its business as currently
conducted. The Company has no subsidiaries and no equity, profit sharing,
participation or other ownership interest (including any general partnership
interest) in any corporation, partnership, limited partnership or other
entity. The Company is duly qualified and licensed to do business and is in
good standing in all jurisdictions where such qualification is required, a
list of which is set forth on the Sellers' Disclosure Schedule.
1.1 DUE AUTHORIZATION. The Stockholders have full power and
authority to enter into and perform this Agreement and, to the extent
applicable, the Employment Agreements and to carry out the transactions
contemplated hereby and thereby. The Company has full corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Company.
1.1 EXECUTION AND DELIVERY. This Agreement has been duly executed
and delivered by the Company and the Stockholders and constitutes their
legal, valid and binding obligation, enforceable against each of them in
accordance with its terms, except as may be limited by the availability of
equitable remedies or by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally. The execution
and delivery by the Company and the Stockholders of this Agreement, the
execution and delivery by certain of the Stockholders of the Employment
Agreements and the consummation of the transactions contemplated hereby and
thereby will not: (i) conflict with or result in a breach of the certificate
of incorporation or bylaws of the Company, (ii) violate any law, statute,
rule or regulation or any order, writ, injunction or decree of any court or
governmental authority, or (iii) violate or conflict with or constitute a
default under (or give rise to any right of termination, cancellation or
acceleration under) any indenture, mortgage, lease, contract or other
instrument to which the Company or any Stockholder is a party or by which
they are bound or affected.
1.1 GOVERNMENTAL CONSENTS. Other than the filing of the
Certificate of Merger with the Secretary of State of Delaware, no approval,
authorization, consent, order or other action of, or filing with, any
governmental authority or administrative agency is required in connection
with the execution and delivery by the Company and the Stockholders of this
Agreement or the consummation of the transactions contemplated hereby. No
approval, authorization or consent of any other third party is required in
connection with the execution and delivery by the Company and the
Stockholders of this Agreement and the consummation of the transactions
contemplated hereby.
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1.1 TRANSACTIONS WITH AFFILIATES. At the time of the Closing,
none of the Company's Stockholders, officers, employees or directors or any
of foregoing persons' Affiliates (as defined herein) will have any interest
in or will own any property or right used principally in the conduct of the
Company's business. The term "Affiliate" shall mean any Stockholder or any
of the Company's officers, employees and directors, any partner of any such
person, or any member of the immediate family (including brother, sister,
descendant, ancestor or in-law) of any such person, or any corporation,
partnership, trust or other entity in which any such person or any such
family member has a substantial interest or is a director, officer, partner
or trustee.
1.1 TITLE TO ASSETS. The Company is the sole and exclusive legal
owner of all right, title and interest in, and has good and marketable title
to, all of the assets of the Company's business that it purports to own, free
and clear of liens, claims and encumbrances except (i) liens, claims and
encumbrances to be released at Closing and (ii) liens for taxes not yet
payable.
1.1 CONDITION OF ASSETS. The fixed assets of the Company
(considered as a whole and not on an item by item basis) are in good
condition and working order, ordinary wear and tear excepted, and are
suitable in all material respects for the uses for which they are intended,
free from any known material defects that would substantially interfere with
the continued use thereof.
1.1 INTELLECTUAL PROPERTY. The Seller's Disclosure Schedule
contains a list, complete and accurate in all material respects, of
copyrights, trademarks, tradenames and license rights (collectively the
"Intellectual Property") which are material to the business of the Company.
To the Controlling Stockholders' knowledge, the Company's use of the
Intellectual Property does not infringe upon the rights of, nor otherwise
require the consent or approval of, any third parties.
1.1 TAXES. All tax reports and returns relating to the Company's
assets and operations (including sales, use, income, property, franchise and
employment taxes) that are due have been filed with the appropriate federal,
state and local governmental agencies, and the Company has paid all taxes,
penalties, interest, deficiencies, assessments or other charges due as
reflected on the filed returns or claimed to be due by such federal, state or
local taxing authorities (other than taxes, deficiencies, assessments or
claims which are being contested in good faith and which in the aggregate are
not material). There are no examinations or audits pending or unresolved
examinations or audit issues with respect to the Company's federal, state or
local tax returns. All additional taxes, if any, assessed as a result of
such examinations or audits have been paid. There are no pending claims or
proceedings relating to, or asserted for, taxes, penalties, interest,
deficiencies or assessments against the Company.
1.1 LITIGATION. There is no order of any court, governmental
agency or authority and no action, suit, proceeding or investigation,
judicial, administrative or otherwise, of which the Company or the
Controlling Stockholders have actual knowledge that is pending or threatened
against or affecting the Company which, if adversely determined, might
materially and adversely affect the business, operations, properties, assets
or conditions (financial or otherwise) of the Company or which challenges the
validity or propriety of any of the transactions contemplated by this
Agreement.
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1.1 EMPLOYEE BENEFIT PLANS. The Company has no liabilities under
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
similar laws with respect to employee benefit plans. No liability under
Title IV of ERISA has been incurred by the Company or an Affiliate thereof
that has not been satisfied in full, and no condition exists that presents a
material risk to the Company or its Affiliates of incurring liability under
such Title. The Company has complied in all material respects with all laws
relating to the employment of labor, including any provisions thereof
relating to wages, hours, collective bargaining and the payment of social
security and other taxes, and is not liable for any material arrearages of
wages or any taxes or penalties for failure to comply with any of the
foregoing.
1.1 CAPITALIZATION; OWNERSHIP OF SHARES.
(a) The Company has authorized 20,000,000 shares of its Common
Stock, of which 17,747,167 shares will be issued and outstanding
immediately prior to the Closing (giving effect to the exercise of all
Convertible Securities). All of the Shares have been duly authorized and
validly issued and are fully paid and nonassessable. Except as set forth
herein, there is no outstanding subscription, contract, option, warrant,
call or other right obligating the Company to issue, sell, exchange or
otherwise dispose of, or to purchase, redeem or otherwise acquire, shares
of, or securities convertible into or exchangeable for, capital stock or
other equity interests of any type of the Company.
(b) All of the Shares indicated on Schedule I hereto as owned by a
Controlling Stockholder are owned of record and beneficially by such
Controlling Stockholder free and clear of all liens, claims, charges and
encumbrances of every kind.
1.1 FINANCIAL STATEMENTS AND RECORDS OF THE COMPANY.
1.1.1 The Company has delivered to DocuCorp true, correct and
complete copies of the balance sheet of the Company as of December 31, 1997,
and the related statement of operations for the year then ended (the "Company
Financial Statements").
1.1.1 The Company Financial Statements present fairly the
assets, liabilities and financial position of the Company as of the dates
thereof and the results of operations thereof for the period then ended and
have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis with prior periods, except as
disclosed therein. The books and records of the Company have been and are
being maintained in accordance with good business practice, reflect only
valid transactions, are complete and correct in all material respects and
present fairly in all material respects the basis for the financial position
and results of operations of the Company set forth in the Company Financial
Statements.
(c) As of the Closing Date, (i) the working capital of the Company
(after giving effect to the accrual of expenses pursuant to Section 16.1
hereof) will be no less than a negative $1.7 million, (ii) the Company's
total indebtedness for borrowed money will not exceed $2.45 million, and
(iii) the Company's stockholder's equity will be no less than a negative
$2.4 million.
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1.1 ABSENCE OF CERTAIN CHANGES. Since December 31, 1997, the
Company has not (i) suffered any change in its financial condition or results
of operations other than changes in the ordinary course of business that,
individually or in the aggregate, have had a material adverse effect on the
Company, (ii) acquired or disposed of any asset, or incurred, assumed,
guaranteed or endorsed any liability or obligation, or subjected or permitted
to be subjected any material amount of assets to any lien, claim or
encumbrance of any kind, except in the ordinary course of business, (iii)
entered into or terminated any Material Contract (as hereinafter defined), or
agreed or made any material changes in any Material Contract, other than
renewals and extensions thereof in the ordinary course of business, (iv)
declared, paid or set aside for payment any dividend or distribution with
respect to its capital stock , entered into any collective bargaining,
employment, consulting, compensation or similar agreement with any person or
group, (vi) entered into, adopted or amended any employee benefit plan or
(viii) taken any action that would be prohibited under Section 5.4.
1.1 UNDISCLOSED LIABILITIES. Other than as set forth on the
Company Financial Statements, there are no liabilities or obligations of the
Company of a nature required to be disclosed on financial statements prepared
in accordance with generally accepted accounting principles.
1.1 CONTRACTS AND AGREEMENTS. The Sellers' Disclosure Schedule
contains a list, complete and accurate in all material respects, of all of
the following categories of contracts and agreements to which the Company is
bound at the date hereof: (i) employee benefit plans, employment, consulting
or similar contracts, (ii) contracts relating to leasehold interests, (iii)
contracts that involve remaining aggregate payments by the Company in excess
of $10,000 or which have a remaining term in excess of one year, (iv)
insurance policies, (v) licenses of software by the Company, (vi) agreements
of the Company with resellers or other third party distributors of its
products and (vii) any contracts, other than as listed above, which are not
made in the ordinary course of business (collectively the "Material
Contracts"). The Company is not in default with respect to any of the
Material Contracts.
1.1 RECEIPT OF DOCUCORP SHARES. In connection with the receipt of
DocuCorp Shares pursuant to the transactions contemplated hereby, each of the
Stockholders understand and acknowledge the following:
(a) Such Stockholder understands the merits and risks involved in an
investment in DocuCorp. DocuCorp has afforded such Stockholder the
opportunity to ask questions and receive answers concerning the terms and
conditions of the issuance of the DocuCorp Shares and to obtain any
additional information regarding DocuCorp that such Stockholder deems
necessary;
(b) Such Stockholder understands that the DocuCorp Shares to be
issued hereunder have not been registered under the Securities Act of
1933, as amended, or under the securities laws of any state and,
therefore, cannot be sold unless they are subsequently so registered or an
exemption from such registration is available; and
(c) Such Stockholder is acquiring the DocuCorp Shares to be issued
hereunder for his own account and without any intention of reselling or
distributing them. Such Stockholder has not offered for sale or agreed to
sell any portion of the foregoing shares.
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1.1 FINDERS AND BROKERS. All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried on by
the Stockholders directly with DocuCorp. No person has as a result of any
agreement or action of the Company or the Stockholders any valid claim
against any of the parties hereto for a brokerage commission, finder's fee or
other like payment.
1 REPRESENTATIONS AND WARRANTIES OF DOCUCORP AND ACQUISITION CO.
Each of DocuCorp and Acquisition Co., jointly and severally, hereby
represents and warrants to the Stockholders as follows:
1.1 ORGANIZATION AND GOOD STANDING. Each of DocuCorp and
Acquisition Co. is a corporation, duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to own and lease its properties and carry on
its business as currently conducted.
1.1 DUE AUTHORIZATION. Each of DocuCorp and Acquisition Co. has
full corporate power and authority to enter into this Agreement and to carry
out its obligations hereunder. The execution and delivery of this Agreement
and the Employment Agreements, and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of DocuCorp.
1.1 EXECUTION AND DELIVERY. This Agreement has been duly executed
and delivered by each of DocuCorp and Acquisition Co. and constitutes the
legal, valid and binding obligation of each, enforceable against each of them
in accordance with its terms, except as may be limited by the availability of
equitable remedies or by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally. The
execution and delivery by DocuCorp of this Agreement and the Employment
Agreements and the consummation of the transactions contemplated hereby and
thereby will not: (i) conflict with or result in a breach of the certificate
of incorporation or bylaws of DocuCorp, (ii) violate any law, statute, rule
or regulation or any order, writ, injunction or decree of any court or
governmental authority, or (iii) violate or conflict with or constitute a
default under (or give rise to any right of termination, cancellation or
acceleration under) any indenture, mortgage, lease, contract or other
instrument to which DocuCorp is a party or by which it is bound or affected.
1.1 DOCUCORP SHARES. The DocuCorp Shares to be issued to the
Stockholders will, upon issuance be duly and validly issued, fully paid and
nonassessable.
1.1 SEC REPORTS. DocuCorp has furnished to the Stockholders true
and complete copies of (i) DocuCorp's Annual Report on Form 10-K for the year
ended July 31, 1997, (ii) the DocuCorp's Quarterly Report on Form 10-Q for
the first quarter of fiscal 1998 and (iii) DocuCorp's Registration Statement
on Form S-1 filed on January 16, 1998 (collectively the "SEC Reports"). The
SEC Reports did not, on their respective dates of filing, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. DocuCorp has filed
on a timely basis all documents required to be filed by it with the
Securities and Exchange Commission (the "SEC") and all such documents
complied as to form with the applicable
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requirements of law. All financial statements included in such documents,
including without limitation, the SEC Reports, (i) complied as to form in all
material respects with the applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, (ii) were
prepared in accordance with generally accepted accounting principles applied
on a consistent basis throughout the periods covered thereby (except as may
be indicated therein), (iii) fairly present the financial position, results
of operations and cash flows of DocuCorp as of the respective dates thereof
and for the periods referred to therein, and (iv) are consistent with the
books and records of DocuCorp. Since the date of the most recent SEC
Reports, there has not been any material adverse change in the assets,
business, financial condition or results of operations of DocuCorp.
1.1 FINDERS AND BROKERS. All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried on by
DocuCorp directly with the Stockholders and the Company. No person has as a
result of any agreement or action of DocuCorp any valid claim against any of
the parties hereto for a brokerage commission, finder's fee or other like
payment.
1 CERTAIN COVENANTS AND AGREEMENTS
The Company and the Stockholders, jointly and severally (subject to the
provisions of Section 15.10 hereof), covenant and agree that, from and after
the execution and delivery of this Agreement to and including the Closing
Date (and thereafter as reflected below), they shall cause the Company to
comply with the covenants set forth below, and DocuCorp covenants and agrees
that it shall similarly comply with said covenants to the extent applicable
to it.
1.1 ACCESS. Upon reasonable notice, the Company and the
Stockholders will give to DocuCorp and its counsel, accountants and other
authorized representatives, full access during reasonable business hours to
all of the Company's properties, books, contracts, documents and records and
shall furnish DocuCorp with all such information concerning their affairs,
including financial statements, as DocuCorp may reasonably request in order
that DocuCorp may have full opportunity to make such reasonable
investigations as it shall desire for the purpose of verifying the
performance of and compliance with the representations, warranties, covenants
and the conditions contained herein or for other purposes reasonably related
to the transactions contemplated hereby. The Company and the Stockholders
will take all action necessary to enable DocuCorp, its counsel, accountants
and other representatives to discuss the affairs, properties, business,
operations and records of the Company at such times and as often as DocuCorp
may reasonably request with executives, independent accountants and counsel
of the Company and the Stockholders. In the event that the Closing does not
occur and this Agreement is terminated, the Company and the Stockholders, on
the one hand, and DocuCorp, on the other, shall (i) maintain the
confidentiality of all information obtained from the other party in
connection herewith, except for such information as is in the public domain,
(ii) not use any such information so obtained for its own benefit or to the
detriment or competitive disadvantage of the other party, and (iii) promptly
return copies of all books, records, contracts and any other documentation of
the other delivered to such party pursuant to the transactions contemplated
hereby.
1.1 BEST EFFORTS. The Company, the Stockholders and DocuCorp shall
take all reasonable actions necessary to consummate the transactions
contemplated by this Agreement and will use all means that are both necessary
and reasonable means at their disposal to obtain all necessary consents and
approvals of other persons and governmental authorities required to enable it
to
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consummate the transactions contemplated by this Agreement. Each party shall
make all filings, applications, statements and reports to all governmental
agencies or entities which are required to be made prior to the Closing Date
by or on its behalf pursuant to any statute, rule or regulation in order to
consummate the transactions contemplated by this Agreement, and copies of all
such filings, applications, statements and reports shall be provided to the
other.
1.1 PUBLIC ANNOUNCEMENTS. Prior to the Closing Date, all notices
to third parties and other publicity relating to the transaction contemplated
by this Agreement shall be jointly planned and agreed to by the Company and
DocuCorp.
1.1 ORDINARY COURSE OF BUSINESS. Except as contemplated by this
Agreement, during the period from the execution and delivery of this
Agreement through the Closing Date, the Company shall (i) conduct its
operations in the ordinary course of business consistent with past and
current practices, (ii) use reasonable best efforts to maintain and preserve
intact its goodwill and business relationships, (iii) not enter into any
agreement which involves the payment by the Company of an aggregate amount
exceeding $10,000, or which has a term exceeding one year, (iv) not increase,
or agree to increase, the level of compensation payable to any of its
employees or the Stockholders, or pay any bonuses to Stockholders, or (v)
take any action which would cause any representation contained in Article 3
to be untrue as of the Closing Date.
5.5 REGISTRATION OF DOCUCORP SHARES.
(a) As soon as practicable after the written request of a
majority in interest of the Stockholders (which request may be made
on and after the later of (i) May 15, 1998 or (ii) the expiration of
the lock-up period applicable to DocuCorp's initial public offering
of its common stock), DocuCorp shall prepare and file with the SEC a
Registration Statement on Form S-3 (the "Registration Statement")
registering the DocuCorp Shares for resale to the public. DocuCorp
shall cause the Registration Statement (i) to become effective as
soon as practicable after the filing thereof and (ii) to remain
effective so that such DocuCorp Shares may be offered and sold on a
continuous or delayed basis in accordance with Rule 415 under the
1933 Act, until the earlier of two years after the Closing Date or
such time as all of the DocuCorp Shares have been sold by the
Stockholders.
(b) Based upon the written opinion of DocuCorp's securities law
counsel, DocuCorp may, by written notice to the Stockholders, for a
period not to exceed 30 days, suspend or withdraw the Registration
Statement and require that the Stockholders cease sales of the
DocuCorp Shares thereunder, if (i) DocuCorp is engaged in
negotiations or preparations for any transaction that DocuCorp
desires to keep confidential for valid business reasons, and (ii)
DocuCorp determines in good faith that the public disclosure
requirements imposed on DocuCorp as a result of the Registration
Statement would require public disclosure of such negotiations or
preparations; provided, however, that DocuCorp may not exercise this
right on more than one occasion.
(c) DocuCorp agrees to indemnify and hold harmless the
Stockholders, and any broker or agent selling the DocuCorp Shares on
behalf of the Stockholders, against
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any losses, claims, damages or liabilities to which any such person may
become subject under the 1933 Act, or otherwise, insofar as such losses,
claims, damages or liabilities arise from any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
or prospectus included therein, or any supplemental filings, or other
documents, incident to the Registration Statement, or arise out of or are
based upon the omission to state therein a fact required to be stated
therein or necessary to make the statements therein not misleading (except
insofar as such losses, claims, damages or liabilities arise out of or are
based upon information furnished in writing to DocuCorp by or on behalf of
the Stockholders specifically for use in such Registration Statement or
prospectus).
(d) DocuCorp shall bear all expenses of the Registration
Statement filed hereunder, which shall include, without limitation,
all registration and filing fees and the reasonable fees and
disbursements of counsel and accountants for DocuCorp; but which
shall not include any selling commissions or underwriting discounts
or stock transfer taxes for the Stockholders or their brokers or
underwriters or of any counsel or accountants retained by the
Stockholders.
5.6 RESALE OF DOCUCORP SHARES. Notwithstanding the registration for
resale of the DocuCorp Shares, as contemplated by Section 5.5 above, the
Management Stockholders will not, unless the prior written consent of
DocuCorp is given, (i) transfer, sell, offer for sale, solicit an offer to
buy, grant any option to purchase, contract to sell or otherwise dispose
(except as contemplated by Section 12(a) hereof) of any shares of or any
interest in the DocuCorp Shares owned by the Management Stockholders or with
respect to which the Management Stockholders have the power of disposition,
(ii) enter into any swap or other agreement that transfers, in whole or in
part, any of the economic consequences of ownership of the DocuCorp Shares
(whether any such transaction described in clause (i) above or clause (ii)
herein is to be settled by delivery of DocuCorp Shares or other securities,
in cash or otherwise), or (iii) announce an intention to do any of the
foregoing, until February 1, 2001 (the "Lockup Period") without the prior
written consent of DocuCorp; provided, however, that the foregoing shall not
preclude any disposition by gift of any DocuCorp Shares, or any interest
therein to or for the benefit of any Immediate Family Member (as defined
below) so long as any such proposed transferee, prior to such disposition,
agrees in writing, in form and substance satisfactory to DocuCorp, to be
bound by the terms of this Section 5.6. For purposes of this Lockup
Agreement, "Immediate Family Member" means a spouse and each of his natural
or adopted children. Notwithstanding the foregoing, (i) the provisions of
this Section 5.6 shall not be applicable to 1/3 of the DocuCorp Shares
received by the Management Stockholders as the Merger Consideration, (ii) the
restrictions set forth in this Section 5.6 shall lapse on February 1, 2000 as
to an additional 1/3 of the DocuCorp Shares received by the Management
Stockholders (other than Xxxxxxx X. Row, as to whom the restrictions shall
lapse as to all of his DocuCorp Shares received as Merger Consideration) as
the Merger Consideration and (iii) a Management Stockholder may at any time
pledge DocuCorp Shares in connection with a bona fide loan.
1 CONDITIONS TO DOCUCORP'S CLOSING
All obligations of DocuCorp under this Agreement shall be subject to the
fulfillment at or prior to the Closing of the following conditions, it being
understood that DocuCorp may, in its sole discretion, waive any or all of
such conditions in whole or in part:
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1.1 REPRESENTATIONS, ETC. The Company and the Stockholders shall
have performed in all material respects the covenants and agreements
contained in this Agreement that are to be performed by each of them at or
prior to the Closing, and the representations and warranties of the Company
and the Stockholders contained in this Agreement shall be true and correct as
of the Closing Date with the same effect as though made at such time (except
as contemplated or permitted by this Agreement).
1.1 CONSENTS. All consents and approvals from any third parties
required to consummate the transactions contemplated by this Agreement shall
have been obtained without material cost or other materially adverse
consequence to DocuCorp.
1.1 NO ADVERSE LITIGATION. No order or preliminary or permanent
injunction shall have been entered and no action, suit or other legal or
administrative proceeding by any court or governmental authority, agency or
other person shall be pending or threatened on the Closing Date which may
have the effect of (i) making any of the transactions contemplated hereby
illegal, (ii) materially adversely affecting the value of the assets or
business of the Company or (iii) making DocuCorp or the Company liable for
the payment of a material amount of damages to any person.
1.1 BOARD OF DIRECTOR APPROVAL. DocuCorp's board of directors
shall have approved the execution, delivery and performance of this Agreement
by DocuCorp.
1.1 CLOSING DELIVERIES. DocuCorp shall have received each of the
documents or items required to be delivered to it pursuant to Section 8.1
hereof.
1 CONDITIONS TO STOCKHOLDERS' AND COMPANY'S CLOSING
All obligations of the Company and the Stockholders under this Agreement
shall be subject to the fulfillment at or prior to the Closing of the
following conditions, it being understood that the Company and the
Stockholders may, in their sole discretion, waive any or all of such
conditions in whole or in part:
1.1 REPRESENTATIONS, ETC. DocuCorp shall have performed in all
material respects the covenants and agreements contained in this Agreement
that are to be performed by it at or prior to the Closing, and the
representations and warranties of DocuCorp contained in this Agreement shall
be true and correct as of the Closing Date with the same effect as though
made at such time (except as contemplated or permitted by this Agreement).
1.1 NO ADVERSE LITIGATION. No order or preliminary or permanent
injunction shall have been entered and no action, suit or other legal or
administrative proceeding by any court or governmental authority, agency or
other person shall be pending or threatened on the Closing Date which may
have the effect of (i) making any of the transactions contemplated hereby
illegal or (ii) making the Stockholders liable for the payment of a material
amount of damages to any person.
1.1 CLOSING DELIVERIES. The Company and the Stockholders shall
have received each of the documents or items required to be delivered to them
pursuant to Section 8.2 hereof.
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1 DOCUMENTS TO BE DELIVERED AT CLOSING
1.1 TO DOCUCORP. At the Closing, there shall be delivered to
DocuCorp:
1.1.1 the Shares, in form satisfactory to DocuCorp and its
counsel;
1.1.1 the Employment Agreements and the Post-Closing Escrow
Agreement;
1.1.1 a copy of all consents and approvals referred to in
Section 6.2 hereof;
(d) resignations of all the officers and directors of the Company
from such positions and from their employment with the Company;
(e) the corporate minute books and stock books of the Company; and
(f) all other items reasonably requested by DocuCorp.
1.1 TO THE STOCKHOLDERS. At the Closing, there shall be delivered
to the Stockholders (or, as applicable, to the Post-Closing Escrow Agent):
1.1.1 650,000 DocuCorp Shares as contemplated by Section 2.1
hereof;
1.1.1 the Post-Closing Escrow Agreement; and
1.1.1 all other items reasonably requested by the Stockholders.
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1 SURVIVAL; RIGHT TO PROCEED
9.1 SURVIVAL. All representations, warranties, covenants and
agreements made by any party to this Agreement or pursuant hereto shall be
deemed to be material and to have been relied upon by the parties hereto and
shall survive the Closing for a period of 12 months; provided, however, that
(i) the representations contained in Section 3.13 and 3.15 shall survive the
Closing for a period of 20 months, (ii) the representations contained in
Section 3.9 shall survive until the statute of limitations with respect to
tax matters expires and (iii) the representations contained in Section 3.12
shall survive indefinitely. The representations and warranties hereunder
shall not be affected or diminished by any investigation at any time by or on
behalf of the party for whose benefit such representations and warranties
were made.
9.2 RIGHT TO PROCEED. Anything in this Agreement to the contrary
notwithstanding, if any of the conditions specified in Section 6 hereof have
not been satisfied, DocuCorp shall have the right to proceed with the
transactions contemplated hereby, and if any of the conditions specified in
Section 7 hereof have not been satisfied, the Company and the Stockholders
shall have the right to proceed with the transactions contemplated hereby.
If any right to proceed is exercised, the party exercising such right shall
be deemed to have waived such unsatisfied condition as to which it has
written notice and any claim for damages or loss for any breach of such
conditions not so satisfied, but such waiver shall not affect the survival of
representations, warranties, covenants and agreements as provided herein,
except as to specific representations, warranties, covenants and agreements
included in the condition or conditions so waived.
1 INDEMNIFICATION OF THE STOCKHOLDERS
DocuCorp shall indemnify and hold the Stockholders harmless from,
against, for and in respect of:
1.1.1 any and all damages, losses, settlement payments,
obligations, liabilities, claims, actions or causes of action and
encumbrances suffered, sustained, incurred or required to be paid by the
Stockholders because of the breach of any written representation, warranty,
agreement or covenant of DocuCorp contained in or made in connection with
this Agreement;
1.1.1 any and all liabilities, obligations, claims and demands
arising out of the ownership and operation of the Company on and after the
Closing Date, except to the extent the same arises from a breach of any
written representation, warranty, agreement or covenant of the Company or any
Stockholder contained in or made in connection with this Agreement; and
1.1.1 all reasonable costs and expenses (including, without
limitation, attorneys' fees, interest and penalties) incurred by the
Stockholders in connection with any action, suit, proceeding, demand,
assessment or judgment incident to any of the matters indemnified against in
this Section 10.
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1 INDEMNIFICATION OF DOCUCORP
The Controlling Stockholders (jointly and severally) shall indemnify and
hold DocuCorp harmless from, against, for and in respect of:
1.1.1 any and all damages, losses, settlement payments,
obligations, liabilities, claims, actions or causes of action and
encumbrances suffered, sustained, incurred or required to be paid by DocuCorp
because of the breach of any written representation, warranty, agreement or
covenant of the Company or any Controlling Stockholder contained in or made
in connection with this Agreement; and
1.1.1 all reasonable costs and expenses (including, without
limitation, attorneys' fees, interest and penalties) incurred by DocuCorp in
connection with any action, suit, proceeding, demand, assessment or judgment
incident to any of the matters indemnified against in this Section 11.
In order to secure the foregoing indemnification obligations of the
Controlling Stockholders, the Controlling Stockholders have entered into the
Post-Closing Escrow Agreement.
1 GENERAL RULES REGARDING INDEMNIFICATION
1.1.1 The obligations and liabilities of each indemnifying
party hereunder with respect to claims resulting from the assertion of
liability by the other party shall be subject to the following terms and
conditions:
1.1.1.1 The indemnified party shall give prompt written notice
(which in no event shall exceed 30 days from the date on which the
indemnified party first became aware of such claim or assertion) to the
indemnifying party of any claim which might give rise to a claim by the
indemnified party against the indemnifying party based on the indemnity
agreements contained in Section 10 or 11 hereof, stating the nature and basis
of said claims and the amounts thereof, to the extent known;
1.1.1.1 If any action, suit or proceeding is brought against the
indemnified party with respect to which the indemnifying party may have
liability under the indemnity agreements contained in Section 10 or 11
hereof, the action, suit or proceeding shall, upon the written acknowledgment
by the indemnifying party that is obligated to indemnify under such indemnity
agreement, be defended (including all proceedings on appeal or for review
which counsel for the indemnified party shall deem appropriate) by the
indemnifying party. The indemnified party shall have the right to employ its
own counsel in any such case, but the fees and expenses of such counsel shall
be at the indemnified party's own expense unless the employment of such
counsel and the payment of such fees and expenses both shall have been
specifically authorized in writing by the indemnifying party in connection
with the defense of such action, suit or proceeding, in which event the
indemnifying party shall not have the right to direct the defense of such
action, suit or proceeding on behalf of the indemnified party. The
indemnified party shall be kept fully informed of such action, suit or
proceeding at all stages thereof whether or not it is represented by separate
counsel.
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1.1.1.1 The indemnified party shall make available to the
indemnifying party and its attorneys and accountants all books and records of
the indemnified party relating to such proceedings or litigation and the
parties hereto agree to render to each other such assistance as they may
reasonably require of each other in order to ensure the proper and adequate
defense of any such action, suit or proceeding.
1.1.1.1 The indemnified party shall not make any settlement of
any claims without the written consent of the indemnifying party, which
consent shall not be unreasonably withheld or delayed.
1.1.1.1 If any claims are made by third parties against an
indemnified party for which an indemnifying party would be liable, and it
appears likely that such claims might also be covered by the indemnified
party's insurance policies, the indemnified party shall make a timely claim
under such policies and to the extent that such party obtains any recovery
from such insurance, such recovery shall be offset against any sums due from
an indemnifying party (or shall be repaid by the indemnified party to the
extent that an indemnifying party has already paid any such amounts). The
parties acknowledge, however, that if an indemnified party is self-insured as
to any matters, either directly or through an insurer which assesses
retroactive premiums based on loss experience, then to the extent that the
indemnified party bears the economic burden of any claims through
self-insurance or retroactive premiums or insurance ratings, the indemnifying
party's obligation shall only be reduced by any insurance recovery in excess
of the amount paid or to be paid by the indemnified party in insurance
premiums.
(vi) An indemnified party shall not make any claim
hereunder unless and until it has incurred damages and expenses
of a cumulative aggregate of $25,000 (the "Floor") and shall
thereafter be entitled to make a claim only for amounts incurred
in excess of such Floor.
(vii) The Controlling Stockholders shall be entitled to
satisfy any claim for indemnification hereunder by surrendering
DocuCorp Shares to DocuCorp, which shares shall for such
purposes be valued at a price per share which is equal to the
closing price of DocuCorp Common Stock on the Nasdaq National
Market (or if the shares are not then trading on such market,
using such other market as will best approximate the fair market
value of DocuCorp Common Stock) on the date (the "Valuation
Date") that the notice pursuant to Section 12(a)(i) is delivered
to the Controlling Stockholders; provided, however, that such
value shall not be less than the value of the DocuCorp Shares on
the Effective Date, or $5.00 per share, adjusted for future
stock splits, dividends and the like (the "Effective Date
Price").
(viii) The aggregate obligation of the Controlling
Stockholders to indemnify DocuCorp under this Agreement shall be
limited to aggregate payments in an amount (the "Indemnity Cap")
equal to the sum of (i) 604,600 multiplied by the Effective Date
Price plus (ii) the total amount of Contingent Purchase Price
paid to the Controlling Stockholders hereunder. No Controlling
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Stockholder shall be liable hereunder in an amount which exceeds
the pro rata portion of the Indemnity Cap Amount paid to such
Controlling Stockholder.
(ix) DocuCorp shall be entitled to assert a claim against
the DocuCorp Shares escrowed pursuant to the Post-Closing Escrow
Agreement in respect of any amounts to which it is entitled to
receive by virtue of the indemnification provisions of this
Agreement.
1.1.1 DocuCorp acknowledges and agrees that its sole and
exclusive remedy with respect to any and all claims relating to the subject
matter of this Agreement shall be pursuant to the indemnification provisions
set forth in Sections 11 and 12 of this Agreement.
1 FAILURE TO CLOSE BECAUSE OF DEFAULT
In the event that the Closing is not consummated by virtue of a material
default made by a party in the observance or in the due and timely
performance of any of its covenants or agreements herein contained
("Default"), the parties shall have and retain all of the rights afforded
them at law or in equity by reason of that Default. In addition, the Company
and the Stockholders, on the one hand, and DocuCorp, on the other,
acknowledge that the Shares and the transactions contemplated hereby are
unique, that a failure by any of them to complete such transactions will
cause irreparable injury to the other, and that actual damages for any such
failure may be difficult to ascertain and may be inadequate. Consequently,
DocuCorp, the Company and the Stockholders agree that each shall be entitled,
in the event of a Default by the other, to specific performance of any of the
provisions of this Agreement in addition to any other legal or equitable
remedies to which the non-defaulting party may otherwise be entitled. In the
event any action is brought, the prevailing party shall be entitled to
recover court costs, arbitration expenses and reasonable attorneys' fees.
1 TERMINATION RIGHTS
This Agreement may be terminated by either DocuCorp or the Company, if
either such party is not then in Default, upon written notice to the other
upon the occurrence of any of the following:
1.1.1 If the Closing has not occurred on or before February 20,
1998;
1.1.1 If either party Defaults and such Default has not been
cured within 30 days of written notice of such Default by the other party;
1.1.1 Subject to the provisions of Sections 6 and 7 hereof, by
the Company or DocuCorp, if on the Closing Date any of the conditions
precedent to the obligations of the Company or DocuCorp, respectively, set
forth in this Agreement have not been satisfied or waived by such party; or
1.1.1 By mutual consent of the Company and DocuCorp.
1 DISPUTE RESOLUTION
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(a) Any dispute, controversy or claim arising out of or in
connection with this Agreement shall be resolved in accordance with the
provisions of this Section. DocuCorp or the Controlling Stockholders may
demand, by written notice to the other party, that the dispute be
submitted to arbitration. The arbitration shall be conducted in
Wilmington, Delaware according to the provisions of this Section. If the
parties mutually agree upon one or more individuals to arbitrate the
dispute, such individuals shall arbitrate the dispute. If the parties
mutually agree upon the rules for conducting the arbitration, such rules
shall govern the arbitration. If, however, the parties cannot agree upon
the identity of the arbitrators and/or the rules for conducting the
arbitration within seven days after the notice demanding arbitration,
either party may request the American Arbitration Association (the "AAA")
to appoint, on an expedited basis, one arbitrator who shall have
substantial experience as an arbitrator, be experienced in the subject
matter of the dispute and be able to commence the arbitration proceedings
(with at least an initial hearing), according to the requirements of this
Section and other complementary rules of the American Arbitration
Association, within 14 days after the appointment. The parties shall
exchange demands for relief and responses thereto, and may serve their
requests for production of documents pursuant to the Uniform Arbitration
Act, prior to the initial hearing.
(b) The arbitration proceedings shall be completed within 30 days
after the initial hearing and the arbitrator's decision shall be provided
to the parties within seven days thereafter. The decision of the
arbitrator shall be final and binding provided such decision is set forth
in a writing by the arbitrator which recites the decision and all findings
and orders relative to the implementation thereof including, without
limitation, the amount and/or nature of any awards and the allocation of
responsibility among the parties to pay the AAA fees and the fees of the
attorneys and other professionals incurred by the parties, in accordance
with this Section. The arbitrator's decision may be enforced by a court
of competent jurisdiction.
(c) Except where clearly inconsistent with the subject matter of the
dispute, the parties agree to continue performing their respective
obligations under this Agreement while the dispute is being resolved.
Prior to receipt of the arbitrator's decision, each of the parties shall
pay their own expenses in connection with the mediation and/or arbitration
and shall share the costs of any mediator and/or arbitrator. The
arbitrator shall order that either of the parties that is entitled to an
award on the merits of the dispute shall have its costs (including AAA
fees and attorney and other professional fees), paid by the other party;
provided, however, that the arbitrator shall have discretion to apportion
the responsibility for the costs of the parties in the event that the
arbitrator's decision is not solely in favor of one of the parties.
(d) Notwithstanding the foregoing requirement to arbitrate any
dispute, in the event either of the parties determines it necessary to
seek injunctive relief against another, the party seeking the injunction
may seek such injunction without complying with the prerequisite of
mediation and arbitration. The parties hereto agree that any
arbitrator(s) utilized hereunder shall have the authority to issue
injunctive orders for specific enforcement.
1 MISCELLANEOUS PROVISIONS
1.1 EXPENSES. DocuCorp shall pay the fees and expenses incurred
by it and the Company shall pay the fees and expenses incurred by it and by
the Stockholders in connection with the transactions contemplated by this
Agreement.
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1.1 AMENDMENT. This Agreement may be amended at any time but only
by an instrument in writing signed by the parties hereto.
1.1 NOTICES; ATTORNEY-IN-FACT. All notices and other
communications delivered hereunder shall be in writing and shall be deemed
given if delivered personally or upon actual receipt if mailed by certified
mail, return receipt requested or delivered by nationally recognized
"next-day" delivery service, to the parties at the addresses set forth below:
If to the Stockholders and (prior to the Closing) the Company:
0000 Xxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: President
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
If to DocuCorp or Acquisition Co:
0000 X. Xxxxxxx Xxxxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: President
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
or such other address or addresses as any party shall have designated by
notice to each other party in accordance with this Section 16.3. The
Stockholders hereby appoint Xxxxxxxxx X. Xxxxx as the Attorney-in-Fact to
receive notices hereunder and to deliver to DocuCorp all notices required to
be made hereunder.
1.1 ASSIGNMENT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, heirs and
permitted assigns. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto
without the prior written consent of the others.
1.1 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
1.1 HEADINGS. The headings of the Sections of this Agreement are
inserted for convenience only and shall not constitute a part hereof.
1.1 ENTIRE AGREEMENT. This Agreement and the documents referred
to herein contain the entire understanding of the parties hereto in respect
of the subject matter contained herein. There are no restrictions, promises,
warranties, conveyances or undertaking other than those
22
expressly set forth herein. This Agreement supersedes any prior agreements
and understandings between the parties with respect to the subject matter.
1.1 WAIVER. Except as provided in Section 9.2 hereof, no
attempted waiver of compliance with any provision or condition hereof, or
consent pursuant to this Agreement, will be effective unless evidenced by an
instrument in writing by the party against whom the enforcement of any such
waiver or consent is sought.
1.1 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
1.1 ASSERTION OF CLAIMS AGAINST THE COMPANY. In any proceeding by
DocuCorp to assert or prosecute any claims under, or to otherwise enforce,
the Agreement, the Stockholders agree that they shall not assert as a defense
or bar to recovery, and hereby waive any right to so assert such defense or
bar such recovery, that (a) prior to Closing the Company shall have had
knowledge of the circumstances giving rise to the claim being pursued by it;
(b) prior to Closing, the Company engaged in conduct or took action that
caused or brought about the circumstances giving rise to its claim, or
otherwise contributed thereto; or (c) the Stockholders have a right of
contribution from the Surviving Corporation to the extent that there is any
recovery against the Stockholders.
1.1 FRANCHISE TAXES OF THE COMPANY. Liability for state corporate
franchise taxes assessed on the Shares payable with respect to the tax year
in which the Closing Date falls shall be prorated as between the Stockholders
and DocuCorp on the basis of the number of days of the tax year elapsed to
and including such date. To the extent possible, such proration shall be
made on the Closing Date based upon estimates of such franchise tax (without
giving effect to any changes in the tax rate or amount due as a result of
actions by the Company or DocuCorp at or after the Closing).
1.1 SEVERABILITY. The event that any of the provisions contained
in this Agreement is held to be invalid, illegal or unenforceable shall not
affect any other provision hereof, and this Agreement shall be construed as
if such invalid, illegal or unenforceable provisions had not been contained
herein.
1.1 INTENDED BENEFICIARIES. The rights and obligations contained
in this Agreement are hereby declared by the parties hereto to have been
provided expressly for the exclusive benefit of such entities as set forth
herein and shall not benefit, and do not benefit, any unrelated third parties.
1.1 MUTUAL CONTRIBUTION. The parties to this Agreement and their
counsel have mutually contributed to its drafting. Consequently, no
provision of this Agreement shall be construed against any party on the
ground that such party drafted the provision or caused it to be drafted or
the provision contains a covenant of such party.
23
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
DocuCorp International, Inc.
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------
Xxxxxxx X. Xxxxxxxx
President and Chief Executive Officer
EZPS Acquisition Corp.
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------
Xxxxxxx X. Xxxxxxxx
President and Chief Executive Officer
EZPower Systems, Inc.
By: /s/ Xxxxxxxxx X. Xxxxx
--------------------------
Xxxxxxxxx X. Xxxxx
President
Stockholders:
/s/ Xxxxxxxxx X. Xxxxx
-----------------------
Xxxxxxxxx X. Xxxxx
/s/ Xxxxxxxx Xxxxxxx
-----------------------
Xxxxxxxx Xxxxxxx
/s/ Xxxxxxx X. Row
-----------------------
Xxxxxxx X. Row
/s/ Xx. X. X. Xxxxx
-----------------------
Xx. X. X. Xxxxx
/s/ Xx. X. X. Xxxxx
-----------------------
Xx. Xxxxxx Xxxxxxxxxxx
/s/ Xx. X. X. Xxxxx
-----------------------
Xxxxxxxx X. Xxxxx
24
/s/ Xx. X. X. Xxxxx
-----------------------
Xxxx X. Xxxxx
/s/ Xx. X. X. Xxxxx
-----------------------
Anam Xxxxx Xxxxx
/s/ Xx. X. X. Xxxxx
-----------------------
P. Xxxxx Xxxxx
/s/ Xx. X. X. Xxxxx
-----------------------
Xxxx X. Xxxxx
/s/ Xx. X. X. Xxxxx
-----------------------
Anam Xxxxx Xxxxx
/s/ Xx. X. X. Xxxxx
-----------------------
Xxxxxxx Xxxxx
/s/ Xx. X. X. Xxxxx
-----------------------
Ashwin Ashok
/s/ Xx. X. X. Xxxxx
-----------------------
Xxxxxx Ashok
/s/ Xx. X. X. Xxxxx
-----------------------
Xxxxxx Xxxxxx
/s/ Xx. X. X. Xxxxx
-----------------------
Xxxx Xxxxxx Xxxxx
/s/ Xx. X. X. Xxxxx
-----------------------
Xxxxxx Xxxxxx
/s/ Xxxxxxx X. Row
-----------------------
Xxxxxx Hovamigian
/s/ Xxxxxxx X. Row
-----------------------
Xxxx Xxxxx
/s/ Xxxxxxx X. Row
-----------------------
Xxxxxxxx Xxxxxx
/s/ Xxxxxxx X. Row
-----------------------
Xxxx Xxxxx
/s/ Xxxxxxx X. Row
-----------------------
Xxxx Xxxxxxx
25
/s/ Xxxxxxx X. Row
-----------------------
Xxxxxxx Xxxxx
Digistar Investments
By: /s/ Xx. X. X. Xxxxx
-----------------------
Zingero Establishment
By: /s/ Xx. X. X. Xxxxx
-----------------------
26
