EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
among
DOCUCORP, INC.
(a Delaware corporation),
ISI MERGER CORP.
(a Texas corporation),
FORMMAKER ACQUISITION CORP.
(a Georgia corporation),
IMAGE SCIENCES, INC.
(a Texas corporation)
and
FORMMAKER SOFTWARE, INC.
(a Georgia corporation)
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TABLE OF CONTENTS
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Section Page
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1. Definitions............................................................ 2
2. Plan of Merger........................................................ 12
2.1 Surviving Corporation........................................... 12
2.2 Effective Time.................................................. 13
2.3 Effects of the Merger........................................... 13
2.4 Name of the Surviving Texas Corporation and the Surviving
Georgia Corporation; Articles of Incorporation and Bylaws....... 13
2.5 Directors and Officers.......................................... 13
2.6 Conversion of Image Sciences Securities......................... 13
2.7 Conversion of FormMaker Securities.............................. 14
2.8 Capital Stock of Texas Sub and Georgia Sub...................... 16
2.9 Approval by Shareholders........................................ 16
2.10 Merger Closing.................................................. 16
2.11 Dissenting Shares............................................... 16
2.12 Exchange of Converted Shares, Image Sciences Options, FormMaker
Options and FormMaker Warrants.................................. 17
2.13 No Further Transfer of Shares................................... 18
3. Closing............................................................... 19
3.1 Location, Date.................................................. 19
3.2 Deliveries...................................................... 19
4. Representations and Warranties of Image Sciences...................... 19
4.1 Corporate Status................................................ 19
4.2 Authorization................................................... 19
4.3 Consents and Approvals.......................................... 20
4.4 Capitalization and Stock Ownership.............................. 20
4.5 Financial Statements............................................ 20
4.6 Title to Assets and Related Matters............................. 21
4.7 Real Property................................................... 21
4.8 Certain Personal Property....................................... 22
4.9 Non-Real Estate Leases.......................................... 22
4.10 Accounts Receivable............................................. 22
4.11 Inventory....................................................... 22
4.12 Liabilities..................................................... 23
4.13 Taxes........................................................... 23
4.14 Subsidiaries.................................................... 23
4.15 Legal Proceedings and Compliance with Law....................... 23
4.16 Contracts....................................................... 24
4.17 Insurance....................................................... 25
4.18 Intellectual Property and Software Products..................... 25
4.19 Employee Relations.............................................. 27
4.20 ERISA........................................................... 27
4.21 Corporate Records............................................... 29
4.22 Absence of Certain Changes...................................... 29
4.23 Previous Sales; Warranties...................................... 30
4.24 Customers....................................................... 30
4.25 Finder's Fees................................................... 30
4.26 Additional Information.......................................... 30
4.27 Accuracy of Information......................................... 31
4.28 Xxxx-Xxxxx-Xxxxxx Act........................................... 31
5. Representations and Warranties of FormMaker........................... 31
5.1 Corporate Status................................................ 31
5.2 Authorization................................................... 31
5.3 Consents and Approvals.......................................... 32
5.4 Capitalization and Stock Ownership.............................. 32
5.5 Financial Statements............................................ 33
5.6 No Company, Texas Sub or Georgia Sub Assets, Liabilities or
Business........................................................ 34
5.7 Title to Assets and Related Matters............................. 34
5.8 Real Property................................................... 35
5.9 Certain Personal Property....................................... 35
5.10 Non-Real Estate Leases.......................................... 35
5.11 Accounts Receivable............................................. 36
5.12 Inventory....................................................... 36
5.13 Liabilities..................................................... 36
5.14 Taxes........................................................... 36
5.15 Subsidiaries.................................................... 36
5.16 Legal Proceedings and Compliance with Law....................... 37
5.18 Insurance....................................................... 39
5.19 Intellectual Property and Software Products..................... 39
5.20 Employee Relations.............................................. 40
5.21 ERISA........................................................... 41
5.22 Corporate Records............................................... 43
5.23 Absence of Certain Changes...................................... 43
5.24 Previous Sales; Warranties...................................... 44
5.25 Customers....................................................... 44
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5.26 Finder's Fees................................................... 44
5.27 Additional Information.......................................... 44
5.28 Accuracy of Information......................................... 44
5.29 Xxxx-Xxxxx-Xxxxxx Act........................................... 45
6. Joint Covenants....................................................... 45
6.1 Registration Statement.......................................... 45
6.2 Financial Statements............................................ 46
6.3 Due Diligence................................................... 46
7. Covenants of FormMaker and the Company................................ 46
7.1 Fulfillment of Closing Conditions............................... 46
7.2 Conduct of the Business......................................... 47
7.3 Access to Information........................................... 47
7.4 No Solicitation................................................. 47
7.5 The FormMaker Special Meeting................................... 48
7.6 Rule 145 Affiliates............................................. 48
7.7 Stock Option Plan............................................... 48
7.8 Expenses........................................................ 48
7.9 Indemnification................................................. 48
7.10 New Bank Loan................................................... 49
7.11 Related Parties................................................. 49
8. Covenants of Image Sciences........................................... 49
8.1 Fulfillment of Closing Conditions................................ 49
8.2 Conduct of the Business.......................................... 49
8.3 Access to Information............................................ 50
8.4 No Solicitation.................................................. 50
8.5 Image Sciences Special Meeting................................... 50
8.6 Rule 145 Affiliates.............................................. 50
8.7 Expenses......................................................... 51
8.8 Image Sciences Closing Transactions.............................. 51
9. Conditions Precedent to Obligations of All Parties.................... 51
9.1 Legality......................................................... 51
9.2 Registration Statement........................................... 51
9.3 Merger........................................................... 51
9.4 Approval by Shareholders......................................... 51
9.5 Appointment of Directors and Officers............................ 52
9.6 Administrative Services Agreements............................... 52
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10. Conditions Precedent to Obligations of Image Sciences................. 52
10.1 Representations and Warranties.................................. 52
10.2 Agreements, Conditions and Covenants............................ 52
10.3 Certificates.................................................... 52
10.4 Financial Performance........................................... 52
10.5 Required Consents............................................... 52
10.6 Ancillary Documents............................................. 53
10.7 Legal Opinion................................................... 53
11. Conditions Precedent to Obligations of FormMaker...................... 53
11.1 Representations and Warranties.................................. 53
11.2 Agreements, Conditions and Covenants............................ 53
11.3 Certificates.................................................... 53
11.4 Financial Performance........................................... 53
11.5 Required Consents............................................... 53
11.6 Ancillary Documents............................................. 53
11.7 Legal Opinion................................................... 54
12. Termination........................................................... 54
13. Survival of Representations, Warranties and Covenants................. 56
14. Public Announcements.................................................. 56
15. Contents of Agreement................................................. 56
16. Amendment, Parties in Interest, Assignment, Etc....................... 56
17. Interpretation........................................................ 56
18. Notices............................................................... 57
19. Governing Law; Venue.................................................. 58
20. Counterparts.......................................................... 58
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made as of January 15, 1997 by and
among DocuCorp, Inc., a Delaware corporation (the "Company"), ISI Merger Corp.,
a Texas corporation and a wholly-owned subsidiary of the Company (the "Texas
Sub"), FormMaker Acquisition Corp., a Georgia corporation and a wholly-owned
subsidiary of the Company (the "Georgia Sub"), Image Sciences, Inc., a Texas
corporation ("Image Sciences"), and FormMaker Software, Inc., a Georgia
corporation ("FormMaker"). Certain other terms are used herein as defined below
in Section 1 or elsewhere in this Agreement.
Background
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This Agreement sets forth the terms and conditions under which (a) the
Texas Sub will merge with and into Image Sciences and (b) the Georgia Sub will
merge with and into FormMaker (collectively, the "Merger").
The Parties intend that, upon completion of the Transactions (defined
below), (a) Image Sciences will be a wholly-owned subsidiary of the Company, (b)
FormMaker will be a wholly-owned subsidiary of the Company and (c) for federal
income tax purposes, the Merger shall constitute a tax-free transaction under
the Internal Revenue Code of 1986, as amended (the "Code"), with respect to the
conversion of shares of capital stock of FormMaker and Image Sciences into
shares of stock of the Company.
Contemporaneously with the execution of this Agreement, Xerox Corporation,
a New York corporation ("Xerox"), Xxxxxxx X. Xxxxxxxx, an individual, Xxx X.
Xxxx, an individual, Xxxxxx X. Xxxxxx, an individual, Xxxxxx X. Xxxxxxx, an
individual, Safeguard Scientifics (Delaware), Inc., a Delaware corporation
("Safeguard Delaware"), Technology Leaders II L.P., a Delaware limited
partnership ("XX XX"), and Technology Leaders II Offshore C.V., a Netherlands
Antilles limited partnership ("TL Offshore," and together with Safeguard
Delaware and XX XX, the "SG/TL Stockholders"), shall have entered into Voting
and Lockup Agreements with respect to shares they hold in Image Sciences or
FormMaker, as the case may be, providing for, among other things, the voting of
such shares in favor of the Merger (the "Voting Agreements").
Contemporaneously with the execution of this Agreement, Safeguard
Scientifics, Inc., a Pennsylvania corporation ("Safeguard"), the SG/TL
Stockholders and the Company are entering into an agreement (the "Liquidity
Agreement") in which (i) Safeguard covenants to use commercially reasonable
efforts to conduct a Qualified Rights Offering (defined below) by September 30,
1997, (ii) the SG/TL Stockholders agree to purchase a certain number of shares
of Company Class A Common Stock (defined below) and to guarantee the New Bank
Loan of the Company or to continue to guarantee an existing line of credit of
FormMaker and (iii) the Company grants to the SG/TL
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Stockholders certain warrants to purchase securities of the Company. A
"Qualified Rights Offering" means a bona fide, stand-by commitment for an
underwritten public offering by XX Xxxxxx & Co. or Xxxxxxxxx & Xxxxx LLC, or a
nationally recognized investment bank of similar stature, or Xxxxxx Xxxxxxx
Incorporated if such first named investment banks are not available, of Company
Rights (defined below) in which the managing underwriter values the equity of
the Company immediately prior to the offering, at $62.1 million or more (subject
to increase based upon equity issuances by the Company other than as
contemplated hereby or by the Liquidity Agreement).
Contemporaneously with the execution of this Agreement, the Company has
entered into employment agreements with Xxxxxxx X. Xxxxxxxx and Xxxxxx X. Xxxxxx
(the "Employment Agreements").
Witnesseth
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NOW, THEREFORE, in consideration of the respective covenants contained
herein and intending to be legally bound hereby, the Parties hereto agree as
follows:
1. Definitions
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For convenience, certain terms used in more than one part of this
Agreement are listed in alphabetical order and defined or referred to below
(such terms as well as any other terms defined elsewhere in this Agreement shall
be equally applicable to both the singular and plural forms of the terms
defined).
"Accounts Receivable" mean as of any date any trade accounts receivable,
notes receivable, bid or performance deposits, employee advances and other
miscellaneous receivables included in the Assets of Image Sciences or FormMaker,
as indicated by the context in which used.
"Affiliates" means, with respect to a particular Party, persons or entities
controlling, controlled by or under common control with that Party, as well as
any officers, directors and majority-owned entities of that Party and of its
other Affiliates. For the purposes of the foregoing, ownership, directly or
indirectly, of 20% or more of the voting stock or other equity interest shall be
deemed to constitute control.
"Agreement" means this Agreement and the Exhibits and Disclosure Schedules
hereto.
"Acquisition Proposal" is defined in Section 7.4.
"Articles of Merger" is defined in Section 2.2.
"Assets" means with respect to a particular Party all of the assets,
properties, goodwill and rights of every kind and description, real and
personal, tangible and intangible, wherever situated
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and whether or not reflected in such Party's most recent Financial Statements,
that are owned or possessed by such Party.
"Balance Sheet Date" is defined in Section 4.5.
"Benefit Plan" means (i) as to employees employed in the US, any (y)
"employee benefit plan" as defined in Section 3(3) of ERISA, and (z)
supplemental retirement, bonus, deferred compensation, severance, incentive
plan, program or arrangement or other employee fringe benefit plan, program or
arrangement; and (ii) as to employees employed outside the US, all employee
benefit, health, welfare, supplemental unemployment benefit, bonus, pension,
profit sharing, deferred compensation, stock compensation, stock purchase,
retirement, hospitalization insurance, medical, dental, legal, disability and
similar plans or arrangements or practices, but any such plan, program or
arrangement specified in clauses (i) or (ii) shall be included in this
definition only to the extent that it shall have existed, or any employee shall
have had any rights thereunder, within the three years immediately prior to the
date hereof.
"Business" means with respect to a particular Party its entire business,
operations and facilities.
"Certificates" is defined in Section 2.12.
"Charter Documents" means an entity's certificate or articles of
incorporation, certificate defining the rights and preferences of securities,
articles of organization, general or limited partnership agreement, certificate
of limited partnership, joint venture agreement or similar document governing
the entity.
"Closing" is defined in Section 3.1.
"Closing Common Shares" means the shares of Company Class A Common Stock to
be issued pursuant to Section 2 to the FormMaker Shareholders and the shares of
Company Class B Common Stock to be issued pursuant to Section 2 to the Image
Sciences Shareholders.
"Closing Date" is defined in Section 3.1.
"Code" is defined above in the Background.
"Common Controlled Entity" is defined in Section 4.20(d).
"Common Stock Dividend" means the cash dividend to holders of Image
Sciences Common Stock as part of the Image Sciences Closing Transactions.
"Company" is defined above in the preamble.
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"Company Certificate of Incorporation" means the certificate of
incorporation of DocuCorp, Inc.
"Company Class A Common Stock" means the Class A Common Stock, par value
$0.01 per share, of the Company.
"Company Class B Common Stock" means the Class B Common Stock, par value
$0.01 per share, of the Company.
"Company Options" means options to purchase Company Class A Common Stock or
Company Class B Common Stock, as the case may be.
"Company Rights" means rights to purchase not more than 3,000,000 but
not less than 2,000,000 shares of Company Class A Common Stock pursuant to a
Qualified Rights Offering.
"Company Securities" means the Company Class A Common Stock, the
Company Class B Common Stock, the Company Warrants and the Company Options.
"Company Warrants" means warrants to purchase Company Class A Common Stock.
"Confidential Information" means any confidential information or trade
secrets of Image Sciences or FormMaker, as indicated by the context in which
used, including personnel information, know-how and other technical information,
customer lists, customer information and supplier information.
"Confidentiality Agreement" is defined in Section 4.18(e).
"Contract" means any written or oral contract, agreement, lease,
instrument, or other commitment that is binding on any person or its property
under applicable law.
"Converted Shares" is defined in Section 2.6(a).
"Copyrights" means registered copyrights, copyright applications and
unregistered copyrights.
"Corporate Party" is defined in Section 6.1(a).
"Court Order" means any judgment, decree, injunction, order or ruling
of any federal, state, local or foreign court or governmental or regulatory body
or authority that is binding on any person or its property under applicable law.
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"Default" means (a) a breach, default or violation, (b) the occurrence
of an event that with or without the passage of time or the giving of notice, or
both, would constitute a breach, default or violation or (c) with respect to any
Contract, the occurrence of an event that with or without the passage of time or
the giving of notice, or both, would give rise to a right of termination,
renegotiation or acceleration or a payment obligation for material damages,
penalties or otherwise.
"Disclosure Schedules" means the Image Sciences Disclosure Schedule and the
FormMaker Disclosure Schedule, as indicated by the context in which used.
"Dissenting Shares" is defined in Section 2.11.
"Distributor Licenses" is defined in Section 4.18.
"Effective Time" is defined in Section 2.2.
"Employment Agreements" is defined above in the Background.
"Encumbrances" means any lien, mortgage, security interest, pledge,
restriction on transferability, defect of title or other claim, charge or
encumbrance of any nature whatsoever on any property or property interest,
except for Permitted Encumbrances.
"End-User Licenses" is defined in Section 4.18.
"Environmental Law" means all Laws and Court Orders relating to
Hazardous Substances, pollution or protection of the environment as well as any
principles of common law under which a Party may be held liable for the release
or discharge of any materials into the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"FormMaker" is defined above in the preamble.
"FormMaker Balance Sheet" is defined in Section 5.5.
"FormMaker Common Stock" means the common stock, par value $0.01 per share,
of FormMaker.
"FormMaker Companies" means FormMaker and MicroDynamics.
"FormMaker Companies Assets" means the Assets of FormMaker and
MicroDynamics.
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"FormMaker Companies Business" means the Business of FormMaker and
MicroDynamics.
"FormMaker Companies Environmental Condition" is defined in Section
5.16(b).
"FormMaker Companies Non-Real Estate Leases" is defined in Section 5.10.
"FormMaker Companies Real Estate Leases" is defined in Section 5.8.
"FormMaker Companies Real Property" is defined in Section 5.8.
"FormMaker Companies Software Products" is defined in Section 5.19.
"FormMaker Disclosure Schedule" means the Disclosure Schedule containing
information relating to FormMaker pursuant to Section 5 and other provisions
hereof that has been provided to the other Parties on the date hereof.
"FormMaker Financial Statements" is defined in Section 5.5.
"FormMaker's knowledge" or "knowledge of FormMaker" means the actual
knowledge of any director or officer of FormMaker.
"FormMaker Optionholder" means a holder of FormMaker Options.
"FormMaker Options" means any options to acquire shares of FormMaker
Common Stock that are outstanding, whether or not then exercisable, immediately
prior to the Closing.
"FormMaker Representative" is defined in Section 8.3.
"FormMaker Required Consents" is defined in Section 5.3.
"FormMaker Securities" means the FormMaker Common Stock, the FormMaker
Options and the FormMaker Warrants.
"FormMaker Shareholder" means a holder of FormMaker Common Stock.
"FormMaker Special Meeting" is defined in Section 2.9(b).
"FormMaker Warrants" means any warrants to purchase FormMaker Common
Stock that are outstanding and exercisable immediately prior to the Closing.
"Form S-4 Registration Statement" is defined in Section 6.1(a).
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"GAAP" means U.S. generally accepted accounting principles.
"GBCC" means the Georgia Business Corporation Code, as amended.
"Georgia Sub" is defined above in the preamble.
"Governmental Permits" means all governmental permits, licenses,
registrations, certificates of occupancy, approvals and other governmental
authorizations.
"Hazardous Substances" means any gaseous, liquid or solid material or
waste that may or could pose a hazard to the environment or human health or
safety including (i) any "hazardous substances" as defined by the federal
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
(S)(S) 9601 et seq., (ii) any "extremely hazardous substance," "hazardous
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chemical," or "toxic chemical" as those terms are defined by the federal
Emergency Planning and Community Right-to-Know Act, 42 U.S.C. (S)(S) 11001 et
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seq., (iii) any "hazardous waste," as defined under the federal Solid Waste
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Disposal Act, as amended by the Resource Conservation and Recovery Act, 42
U.S.C. (S)(S) 6901 et seq., (iv) any "pollutant," as defined under the federal
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Water Pollution Control Act, 33 U.S.C. (S)(S) 1251 et seq., as any of such laws
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in clauses (i) through (iv) may be amended from time to time, and (v) any
regulated substance or waste under any Laws or Court Orders that currently exist
or that may be enacted, promulgated or issued in the future by any federal,
state or local governmental authorities concerning protection of the
environment.
"Holders" is defined in Section 2.12(a).
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended.
"Image Sciences" is defined above in the preamble.
"Image Sciences Assets" means the Assets of Image Sciences.
"Image Sciences Balance Sheet" is defined in Section 4.5.
"Image Sciences Business" means the Business of Image Sciences.
"Image Sciences Closing Transactions" means the Tender Offer, the
Preferred Stock Dividend and the Common Stock Dividend.
"Image Sciences Common Stock" means the common stock, par value $0.01 per
share, of Image Sciences.
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"Image Sciences Disclosure Schedule" means the Disclosure Schedule
containing information relating to Image Sciences pursuant to Section 4 and
other provisions hereof that has been provided to the other Parties on the date
hereof.
"Image Sciences Environmental Condition" is defined in Section 4.15(b).
"Image Sciences Financial Statements" is defined in Section 4.5.
"Image Sciences' knowledge" or "knowledge of Image Sciences" means the
actual knowledge of any director or officer of Image Sciences.
"Image Sciences Non-Real Estate Leases" is defined in Section 4.9.
"Image Sciences Optionholder" means a holder of Image Sciences Options.
"Image Sciences Options" means any options to acquire shares of Image
Sciences Common Stock that are outstanding, whether or not then exercisable,
immediately prior to the Closing.
"Image Sciences Preferred Stock" means the convertible preferred stock, par
value $0.10 per share, of Image Sciences.
"Image Sciences Real Estate Leases" is defined in Section 4.7.
"Image Sciences Real Property" is defined in Section 4.7.
"Image Sciences Representative" is defined in Section 7.3.
"Image Sciences Required Consents" is defined in Section 4.3.
"Image Sciences Securities" means the Image Sciences Common Stock, the
Image Sciences Preferred Stock and the Image Sciences Options.
"Image Sciences Shareholder" means a holder of Image Sciences Common Stock
or Image Sciences Preferred Stock.
"Image Sciences Software Products" is defined in Section 4.18.
"Image Sciences Special Meeting" is defined in Section 2.9(a).
"Immaterial Lease" is defined in Section 4.9.
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"Intellectual Property" means any Copyrights, Patents, Trademarks,
technology rights and licenses, any Software Products (including any related
source or object codes therefore or documentation relating thereto), trade
secrets, franchises, know-how, inventions and other intellectual property.
"Inventory" means all inventory, including raw materials, supplies, work in
process and finished goods.
"Law" means any statute, law, ordinance, regulation, order or rule of
any federal, state, local, foreign or other governmental agency or body or of
any other type of regulatory body, including those covering environmental,
energy, safety, health, transportation, bribery, recordkeeping, zoning,
antidiscrimination, antitrust, wage and hour, and price and wage control
matters.
"Letter of Transmittal" is defined in Section 2.12(a).
"Liability" means any direct or indirect liability, indebtedness,
obligation, expense, claim, loss, damage, deficiency, guaranty or endorsement of
or by any person, absolute or contingent, accrued or unaccrued, due or to become
due, liquidated or unliquidated.
"Liquidity Agreement" is defined above in the Background.
"Litigation" means any lawsuit, action, arbitration, administrative or
other proceeding, criminal prosecution or governmental investigation or inquiry.
"Material Adverse Effect" means a material adverse effect on the Business
of Image Sciences, FormMaker or the Company, as indicated by the context in
which used, including the Assets, financial condition, results of operations,
liquidity, products, competitive position, customers and customer relations
thereof, and when used with respect to representations, warranties or
conditions, means the individual effect of the situation to which it relates and
also the aggregate effect of all similar situations unless the context indicates
otherwise.
"Merger" is defined above in Background.
"Merger Consideration" is defined in Section 2.6(a).
"MicroDynamics" means MicroDynamics, Ltd., a Delaware corporation and
majority-owned subsidiary of FormMaker.
"MicroDynamics Financial Statements" is defined in Section 5.5.
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"Minor Contract" means any Contract that has terminated or is
terminable by a party on not more than 30 days' notice without any Liability and
any Contract under which the executory obligation of a party involves an amount
of less than $10,000.
"Nasdaq National Market" means the Nasdaq National Market of The Nasdaq
Stock Market, Inc.
"New Bank Loan" is defined in Section 7.10.
"New Companies" means the Company, the Texas Sub and the Georgia Sub.
"New Option Plan" is defined in Section 7.7.
"Ordinary course" or "ordinary course of business" means the ordinary
course of business that is consistent with past practices.
"Party" means each of FormMaker, Image Sciences, the Company, the Texas Sub
and the Georgia Sub.
"Patents" means all patents and patent applications.
"PBGC" is defined in Section 4.20(e).
"Permitted Encumbrance" means, with respect to tangible or intangible
property other than capital stock or other securities of FormMaker or Image
Sciences, (i) any Encumbrance for Taxes not yet due or delinquent or being
contested in good faith by appropriate proceedings for which adequate reserves
have been established in accordance with GAAP, (ii) any statutory Encumbrance
arising in the ordinary course of business by operation of Law with respect to a
Liability that is not yet due or delinquent and (iii) any minor imperfection of
title or similar Encumbrance that individually or in the aggregate with other
such Encumbrances could not reasonably be expected to materially adversely
affect the Business of the applicable Party.
"Person" means any natural person, corporation, partnership,
proprietorship, association, trust or other legal entity.
"Plan of Merger" is defined in Section 2.1.
"Preferred Stock Dividend" means the cash dividend by Image Sciences
to the holder of Image Sciences Preferred Stock as part of the Image Sciences
Closing Transactions.
"Prime Rate" means the prime lending rate as announced from time to time in
The Wall Street Journal.
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"Qualified Rights Offering" is defined above in the Background.
"Registered Securities" is defined in Section 6.1.
"Registration Statement" is defined in Section 6.1(a).
"Safeguard" is defined above in the Background.
"Safeguard Delaware" is defined above in the Background.
"SEC" means the Securities and Exchange Commission.
"Second Stage Due Diligence Materials" is defined in Section 6.3.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Act Affiliates" is defined in Section 7.6.
"Securityholder Documents" is defined in Section 2.12(a).
"SG/TL Stockholders" is defined above in the Background.
"Software Products" means the Image Sciences Software Products or the
FormMaker Software Products, as indicated by the context in which used.
"Stockholders' Agreement" means the Stockholders' Agreement among the
Company, the SG/TL Stockholders and Xerox, in the form agreed to by such parties
as of the date hereof.
"Surviving Georgia Corporation" is defined in Section 2.1.
"Surviving Texas Corporation" is defined in Section 2.1.
"Taxes" means all taxes, duties, charges, fees, levies or other
assessments imposed by any taxing authority including, without limitation,
income, gross receipts, value-added, excise, withholding, personal property,
real estate, sale, use, ad valorem, license, lease, service, severance, stamp,
transfer, payroll, employment, customs, duties, alternative, add-on minimum,
estimated and franchise taxes (including any interest, penalties or additions
attributable to or imposed on or with respect to any such assessment).
"TBCA" means the Texas Business Corporation Act, as amended.
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"Tender Offer" means the offer to purchase by Image Sciences to holders of
Image Sciences Common Stock and Image Sciences Options as part of the Image
Sciences Closing Transactions.
"Termination Date" is defined in Section 12.1.
"Texas Sub" is defined above in the preamble.
"XX XX" is defined above in the Background.
"XX XX Offshore" is defined above in the Background.
"Trademarks" means registered trademarks, registered service marks,
trademark and service xxxx applications and unregistered trademarks and service
marks.
"Transaction Documents" means this Agreement, the Employment Agreements,
the Voting Agreements, the Liquidity Agreement and the Stockholders' Agreement.
"Transactions" means the Merger, the exchange of the Image Sciences
Options for Company Options, the exchange of FormMaker Warrants and FormMaker
Options for Company Warrants and Company Options, respectively, and the other
transactions contemplated by the Transaction Documents.
"US" means the United States of America.
"Voting Agreements" is defined above in the Background.
"Welfare Plan" is defined in Section 4.20(g).
2. Plan of Merger.
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2.1 Surviving Corporation. Upon the terms and subject to the conditions
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hereof, and in accordance with the relevant provisions of the TBCA and the GBCC,
the Texas Sub shall be merged with and into Image Sciences and the Georgia Sub
shall be merged with and into FormMaker in accordance with the Plan of Merger
set forth in this Section 2 (the "Plan of Merger") as soon as practicable, but
in any event within three business days following the satisfaction or waiver of
the conditions set forth in Sections 9, 10 and 11. Following the Merger, Image
Sciences shall continue as the surviving Texas corporation (the "Surviving Texas
Corporation") and shall continue its existence under the laws of the State of
Texas, and the separate corporate existence of the Texas Sub shall cease, and
FormMaker shall continue as the surviving Georgia Corporation (the "Surviving
Georgia Corporation") and shall continue its existence under the laws of the
State of Georgia, and the separate corporate existence of the Georgia Sub shall
cease.
-12-
2.2 Effective Time. The Merger shall be consummated by filing with the
--------------
Secretary of State of the State of Georgia and with the Secretary of State of
the State of Texas articles of merger (the "Articles of Merger") that set forth
the Plan of Merger and are otherwise in such form as may be required under, and
are executed in accordance with, the relevant provisions of the TBCA and the
GBCC. The Merger shall be effective at the time of such filing in the State of
Georgia and as of the issuance of a certificate of merger by the Secretary of
State of the State of Texas (but in no event prior to the Image Sciences Closing
Transactions), the later of which times is referred to herein as the "Effective
Time."
2.3 Effects of the Merger. The Merger shall have the effects set forth
---------------------
in Section 5.06 of the TBCA and Section 14-2-1106 of the GBCC.
2.4 Name of the Surviving Texas Corporation and the Surviving Georgia
-----------------------------------------------------------------
Corporation; Articles of Incorporation and Bylaws. At the Effective Time, the
-------------------------------------------------
name of the Surviving Texas Corporation shall remain Image Sciences, Inc. and
the name of the Surviving Georgia Corporation shall remain FormMaker Software,
Inc. The Articles of Incorporation of Image Sciences and FormMaker shall be the
Articles of Incorporation of the Surviving Texas Corporation and the Surviving
Georgia Corporation, respectively. The Bylaws of Image Sciences and FormMaker
shall be the Bylaws of the Surviving Texas Corporation and the Surviving Georgia
Corporation, respectively.
2.5 Directors and Officers. Schedule 2.5 sets forth the names of the
----------------------
Persons who shall be the directors and officers of the Surviving Texas
Corporation and the Surviving Georgia Corporation at the Effective Time.
2.6 Conversion of Image Sciences Securities.
---------------------------------------
(a) Each share of Image Sciences Common Stock issued and
outstanding immediately prior to the Effective Time (but after giving effect to
the Tender Offer) shall, by virtue of the Merger and without any action on the
part of the Holder thereof, be converted into the right to receive that number
of shares of Company Class B Common Stock (rounded to the nearest whole share)
determined in accordance with Section 2.6(d). Any shares of Image Sciences
Common Stock held in the treasury of Image Sciences shall be cancelled. The
securities to be issued pursuant to this Section 2.6 and Section 2.7 are
referred to as the "Merger Consideration," and shares of Image Sciences Common
Stock, Image Sciences Preferred Stock and FormMaker Common Stock that are issued
and outstanding immediately prior to the Effective Time (other than Dissenting
Shares, as defined in Section 2.11) are referred to herein collectively as the
"Converted Shares."
(b) Each share of Image Sciences Preferred Stock issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the Holder thereof, be converted
into the right to receive 1.029 shares of Company Class B
-13-
Common Stock (rounded to the nearest whole share). Any shares of Image Sciences
Preferred Stock held in the treasury of Image Sciences shall be cancelled.
(c) Each vested Image Sciences Option that is outstanding
immediately prior to the Effective Time (but after giving effect to the Tender
Offer and the acceleration of a portion of the vesting schedule for certain
Image Sciences Options) shall, by virtue of the Merger and with the consent of
the Holder thereof, be converted into a Company Option under which the Holder
will have the right to purchase that number of shares of Company Class B Common
Stock (rounded to the nearest whole share) determined in accordance with
Section 2.6(d) for each share of Image Sciences Common Stock issuable under the
Image Sciences Option being converted at an exercise price that is
proportionally equivalent to the exercise price under the related Image Sciences
Option. Each unvested Image Sciences Option that is outstanding immediately
prior to the Effective Time shall, by virtue of the Merger and with the consent
of the Holder thereof, be converted into a Company Option under which the Holder
will have the right to purchase that number of shares of Company Class A Common
Stock (rounded to the nearest whole share) determined in accordance with Section
2.6(d) at an exercise price that is proportionally equivalent to the exercise
price under the related Image Sciences Option.
(d) The number of shares of Company Class B Common Stock or
Company Class A Common Stock, as the case may be, to be issued under this
Section 2.6 for each share of Image Sciences Common Stock, and the number of
shares of Company Class B Common Stock or Company Class A Common Stock, as the
case may be, to be issued under this Section 2.6 for each share of Image
Sciences Common Stock issuable upon exercise of an Image Sciences Option, shall
be equal to the quotient obtained by dividing (i) 4,350,943 by (ii) the total
number of shares of Image Sciences Common Stock issued and outstanding
immediately prior to the Effective Time (but after giving effect to the Tender
Offer) plus the total number of shares of Image Sciences Common Stock issuable
upon exercise of all the Image Sciences Options (but after giving effect to the
Tender Offer) issued and outstanding immediately prior to the Effective Time.
(e) The Surviving Texas Corporation shall deliver the Merger
Consideration specified in this Section 2.6 upon the surrender of the
certificates and other documentation specified in Section 2.12.
(f) The Company shall take all steps necessary to provide the
Surviving Texas Corporation with the Company Securities, as of the Effective
Time, in an amount sufficient to issue all of the securities contemplated by
this Section 2.6 at the Effective Time in accordance with Section 2.12.
2.7 Conversion of FormMaker Securities.
----------------------------------
(a) Each share of FormMaker Common Stock issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the
-14-
part of the Holder thereof, be converted into the right to receive that number
of shares of Company Class A Common Stock (rounded to the nearest whole share)
determined in accordance with Section 2.7(d). Any shares of FormMaker Common
Stock held in the treasury of FormMaker shall be cancelled.
(b) Each FormMaker Warrant that is outstanding immediately prior
to the Effective Time shall, by virtue of the Merger and pursuant to the terms
thereof, be converted into a Company Warrant under which the holder will have
the right to purchase that number of shares of Company Class A Common Stock
(rounded to the nearest whole share) determined in accordance with
Section 2.7(d) for each share of FormMaker Common Stock issuable under the
FormMaker Warrant being converted at an exercise price that is proportionally
equivalent to the exercise price under the related FormMaker Warrant.
(c) Each FormMaker Option that is outstanding immediately prior
to the Effective Time shall, by virtue of the Merger and pursuant to the terms
thereof, be converted into a Company Option under which the holder will have the
right to purchase that number of shares of Company Class A Common Stock (rounded
to the nearest whole share) determined in accordance with Section 2.7(d) for
each share of FormMaker Common Stock issuable under the FormMaker Option being
converted at an exercise price that is proportionally equivalent to the exercise
price under the related FormMaker Option.
(d) The number of shares of Company Class A Common Stock to be
issued under this Section 2.7 for each share of FormMaker Common Stock, and the
number of shares of Company Class A Common Stock to be issued under this
Section 2.7 for each share of FormMaker Common Stock issuable upon exercise of a
FormMaker Option or a FormMaker Warrant, shall be equal to the quotient obtained
by dividing (i) 5,598,684 shares of Company Class A Common Stock by (ii) the
total number of shares of FormMaker Common Stock issued and outstanding
immediately prior to the Effective Time plus the total number of shares of
FormMaker Common Stock issuable upon (A) the exercise of all the FormMaker
Options issued and outstanding immediately prior to the Effective Time and
(B) the exercise of all the FormMaker Warrants issued and outstanding
immediately prior to the Effective Time.
(e) The Surviving Georgia Corporation shall deliver the Merger
Consideration specified in this Section 2.7 upon the surrender of the
certificates and other documentation specified in Section 2.12.
(f) The Company shall take all steps necessary to provide the
Surviving Georgia Corporation with the Company Securities as of the Effective
Time, in an amount sufficient to issue all of the securities contemplated by
this Section 2.7 at the Effective Time in accordance with Section 2.12.
-15-
2.8 Capital Stock of Texas Sub and Georgia Sub. Each share of capital
------------------------------------------
stock of the Texas Sub and Georgia Sub issued and outstanding immediately prior
to the Effective Time shall be converted into a share of Image Sciences Common
Stock and FormMaker Common Stock, respectively.
2.9 Approval by Shareholders.
------------------------
(a) Consistent with applicable law, Image Sciences shall cause a
meeting of its shareholders to be duly called and held as soon as reasonably
practicable for the purpose of considering and taking action upon the Merger
(the "Image Sciences Special Meeting"). If the Board of Directors of Image
Sciences so desires, it may present the Merger to its shareholders for
consideration by soliciting their written consent in accordance with applicable
requirements of the TBCA. If such a consent is solicited, the references herein
to the "Image Sciences Special Meeting" shall be deemed to be the process of
soliciting such consent unless the context indicates otherwise. The Board of
Directors of Image Sciences will recommend that its shareholders approve the
Merger.
(b) Consistent with applicable law, FormMaker shall cause a
meeting of its shareholders to be duly called and held as soon as reasonably
practicable for the purpose of considering and taking action upon the Merger
(the "FormMaker Special Meeting"). If the Board of Directors of FormMaker so
desires, it may present the Merger to its shareholders for consideration by
soliciting their written consent in accordance with applicable requirements of
the GBCC. If such a consent is solicited, the references herein to the
"FormMaker Special Meeting" shall be deemed to be the process of soliciting such
consent unless the context indicates otherwise. The Board of Directors of
FormMaker will recommend that its shareholders approve the Merger.
(c) The shareholder vote required for the adoption of this
Agreement and the Merger by Image Sciences and the Texas Sub shall be the vote
required by the TBCA, and the vote required for the adoption of this Agreement
and the Merger by FormMaker and the Georgia Sub shall be the vote required by
the GBCC.
2.10 Merger Closing. At the Closing, (a) the Texas Sub, the Georgia Sub,
--------------
Image Sciences and FormMaker shall deliver to the Secretary of State of each of
the State of Texas and the State of Georgia a duly executed and verified copy of
the Articles of Merger, as required by the TBCA and the GBCC, and (b) the
Parties shall take all such other and further actions as may be required by the
TBCA and the GBCC and any other applicable Law to make the Merger effective upon
the terms and subject to the conditions hereof. In addition, at the Closing, the
Surviving Texas Corporation or the Surviving Georgia Corporation shall deliver
the Merger Consideration to those Holders who shall have delivered the
appropriate documents under Section 2.12.
2.11 Dissenting Shares. Notwithstanding anything in this Agreement to the
-----------------
contrary, shares of Image Sciences Common Stock, Image Sciences Preferred Stock
or FormMaker Common Stock as the case may be, that are issued and outstanding
immediately prior to the Effective Time
-16-
and that are held by a shareholder who did not vote in favor of the Merger and
who complies with all of the relevant provisions of Section 5.12 of the TBCA or
Sections 14-2-1321 and 14-2-1323 of the GBCC, respectively (the "Dissenting
Shares"), shall not be converted into the right to receive the Merger
Consideration, unless and until such Holder shall have failed to perfect or
shall have effectively withdrawn or lost such Holder's rights to appraisal under
the TBCA or the GBCC; and any such Holder shall have only such rights in respect
of the Dissenting Shares owned by such Holder as are provided by Sections 5.11
and 5.12 of the TBCA or Sections 14-2-1321 and 14-2-1323 of the GBCC, as the
case may be. If any such Holder shall have failed to perfect or shall have
effectively withdrawn or lost such rights, such Holder's Dissenting Shares shall
thereupon be deemed to have been converted into and to have become exchangeable,
as of the Effective Time, for the right to receive the Merger Consideration
without any interest thereon, pursuant to the terms of Section 2.6 or
Section 2.7, as the case may be.
2.12 Exchange of Converted Shares, Image Sciences Options, FormMaker
---------------------------------------------------------------
Options and FormMaker Warrants.
------------------------------
(a) At and after the Effective Time, the Surviving Texas
Corporation or the Surviving Georgia Corporation shall issue to each record
holder (a "Holder"), as of the Effective Time, of (i) an outstanding certificate
or certificates that immediately prior to the Effective Time represented
Converted Shares (the "Certificates"), (ii) a FormMaker Warrant, (iii) a
FormMaker Option or (iv) an Image Sciences Option, upon the Holder's delivery of
the Securityholder Documents, the respective Merger Consideration specified for
such Holder under Section 2.6 or Section 2.7. The documents to be delivered by
Holders of Converted Shares, Image Sciences Options, FormMaker Options or
FormMaker Warrants by and after the Effective Time (the "Securityholder
Documents") shall be (x) in the case of Converted Shares, the Certificates
representing the Converted Shares and a duly executed Letter of Transmittal in
the form provided by the Company (the "Letter of Transmittal"), (y) in the case
of the FormMaker Options and Image Sciences Options, the document constituting
the FormMaker Option and the Image Sciences Option and the Letter of
Transmittal, and (z) in the case of the FormMaker Warrants, the document
constituting FormMaker Warrants and the Letter of Transmittal. Image Sciences
and FormMaker shall respectively send the Letter of Transmittal to the owners of
the Image Sciences Securities or the FormMaker Securities along with the notice
of the Image Sciences or FormMaker Special Meeting and shall request the return
of an executed Letter of Transmittal from each such securityholder at the time
of the Image Sciences Special Meeting or FormMaker Special Meeting. All
surrendered Certificates, Image Sciences Options, FormMaker Options, and
FormMaker Warrants shall be cancelled upon their delivery. Except as provided in
Section 2.12(c), the Surviving Texas Corporation and the Surviving Georgia
Corporation shall pay any applicable transfer or similar taxes required by
reason of the exchange of Converted Shares, Image Sciences Options, FormMaker
Options and FormMaker Warrants.
(b) With respect to each Certificate not so surrendered at the
Closing, the Surviving Texas Corporation with respect to Holders of Image
Sciences Securities, or the Surviving
-17-
Georgia Corporation with respect to Holders of FormMaker Securities, shall
promptly thereafter mail to the Holder thereof a Letter of Transmittal (which
shall specify that delivery shall be effected, and risk of loss of title to such
Certificate shall pass, only upon proper delivery of the Certificate and such
Letter of Transmittal to the Surviving Texas Corporation or the Surviving
Georgia Corporation, as the case may be) and instructions for delivering such
Certificate in exchange for delivery of the Merger Consideration. Upon delivery
to the Surviving Texas Corporation or the Surviving Georgia Corporation of such
Certificate, together with such Letter of Transmittal, the Company, the
Surviving Texas Corporation or the Surviving Georgia Corporation shall deliver
to the Holder of the Certificate in exchange therefor the Merger Consideration
to which such Holder is entitled hereunder, and such Certificate shall then be
cancelled. The Company, the Surviving Texas Corporation and the Surviving
Georgia Corporation shall follow a similar procedure with respect to any Image
Sciences Option, FormMaker Option or FormMaker Warrants to the extent that the
respective Securityholder Documents shall not have been delivered at the
Effective Time.
(c) No interest will be paid or accrued on the Merger
Consideration to be delivered upon the surrender of the Securityholder
Documents. If delivery is to be made to a Person other than the Person in whose
name a Certificate, FormMaker Warrant, Image Sciences Option or FormMaker Option
surrendered is registered, it shall be a condition of payment that the
Certificate, Image Sciences Option, FormMaker Option or FormMaker Warrant so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the Person requesting such payment shall pay any transfer or similar
taxes required by reason of the payment to a Person other than the Holder of the
Certificate, Image Sciences Option, FormMaker Option or FormMaker Warrant
surrendered or shall establish to the satisfaction of the Surviving Texas
Corporation or the Surviving Georgia Corporation, as the case may be, that such
tax has been paid or is not applicable. Until surrendered in accordance with the
provisions of this Section 2.12, each Certificate (other than Certificates
evidencing Dissenting Shares), Image Sciences Option, FormMaker Option and
FormMaker Warrant shall represent for all purposes solely the right to receive
the respective Merger Consideration specified in Section 2.6 or Section 2.7 with
respect to such Converted Shares, Image Sciences Options, FormMaker Options or
FormMaker Warrants.
(d) The Company, the Surviving Texas Corporation or the Surviving
Georgia Corporation, as the case may be, shall not be liable to any Holder of
Converted Shares, Image Sciences Options, FormMaker Options or FormMaker
Warrants for any Merger Consideration delivered by the Company, the Surviving
Texas Corporation or the Surviving Georgia Corporation in good faith to a public
official pursuant to an applicable abandoned property, escheat or similar law.
2.13 No Further Transfer of Shares. After the Effective Time, there shall
-----------------------------
be no transfers of Converted Shares that were outstanding immediately prior to
the Effective Time on the stock transfer books of the Surviving Texas
Corporation or the Surviving Georgia Corporation. If, after the Effective Time,
Certificates are presented to the Surviving Texas Corporation or the Surviving
Georgia Corporation for transfer, they shall be cancelled and exchanged for the
respective Merger
-18-
Consideration specified in Section 2.6 or Section 2.7. At the Effective Time,
the stock ledgers of Image Sciences and FormMaker shall be closed.
3. Closing.
-------
3.1 Location, Date. The closing for the Transactions (the "Closing")
--------------
shall be held at Xxxxxx, Xxxxx & Bockius LLP in Philadelphia as promptly as
practicable (and in any event within three business days) after satisfaction or
waiver of the conditions to the consummation of the Transactions set forth in
Sections 9, 10 and 11 hereof, unless the Parties hereto agree in writing to
another date or place. The date on which the Closing occurs is referred to
herein as the "Closing Date."
3.2 Deliveries. At the Closing,
----------
(a) the Surviving Texas Corporation and the Surviving Georgia
Corporation shall deliver or mail the respective Merger Consideration to
the Holders who have complied with Section 2.12, with such Merger
Consideration all registered in the names of the respective Holders or
their designees, and in due and proper form;
(b) the Texas Sub, the Georgia Sub, Image Sciences and FormMaker
shall consummate the Merger as provided in Section 2.10; and
(c) the Parties shall also deliver to each other the respective
agreements, legal opinions and other documents and instruments specified
with respect to them in Sections 9, 10 and 11 and such other items as may
be reasonably requested.
4. Representations and Warranties of Image Sciences
------------------------------------------------
Image Sciences hereby represents and warrants to FormMaker, except as
otherwise set forth in the Image Sciences Disclosure Schedule or the updated
Image Sciences Disclosure Schedule to be delivered pursuant to Section 6.3, as
follows:
4.1 Corporate Status. Image Sciences is a corporation duly organized,
----------------
validly existing and in good standing under the Laws under which it was
organized and is qualified to do business as a foreign corporation in any
jurisdiction where it is required to be so qualified except where the failure to
so qualify would not have a Material Adverse Effect. The Charter Documents and
bylaws of Image Sciences that have been delivered to FormMaker as of the date
hereof are effective under applicable Laws and are current, correct and
complete.
4.2 Authorization. Image Sciences has the requisite power and authority
-------------
to own its Assets and to carry on its Business. Image Sciences has the requisite
power and authority to execute and deliver the Transaction Documents to which it
is a party and to perform the Transactions
-19-
performed or to be performed by it. Such execution, delivery and performance by
Image Sciences has been duly authorized by all necessary corporate action, other
than approval by the shareholders of Image Sciences. Each Transaction Document
executed and delivered by Image Sciences has been duly executed and delivered
by, and constitutes a valid and binding obligation of Image Sciences,
enforceable against Image Sciences in accordance with its terms.
4.3 Consents and Approvals. Except for (a) any consents specified in the
----------------------
Image Sciences Disclosure Schedule (the "Image Sciences Required Consents"),
(b) the approval of the Merger by the shareholders of Image Sciences, (c) the
filing of the Articles of Merger in accordance with Section 2 and (d) any
approvals or filings required by the SEC and by state securities law agencies in
connection with the Registration Statement, neither the execution and delivery
by Image Sciences of the Transaction Documents to which it is a party, nor the
performance of the Transactions performed or to be performed by Image Sciences,
require any filing, consent or approval or constitute a Default under (i) any
Law or Court Order to which Image Sciences is subject, (ii) the Charter
Documents or bylaws of Image Sciences or (iii) any Contract, Governmental Permit
or other document to which Image Sciences is a party or by which the properties
or other assets of Image Sciences may be subject.
4.4 Capitalization and Stock Ownership. The total authorized capital
----------------------------------
stock of Image Sciences consists of (a) 20,000,000 shares of Image Sciences
Common Stock, of which (i) 2,335,082 shares are issued and outstanding and
(ii) 3,687,433 shares of Image Sciences Common Stock are reserved for issuance
upon conversion of the issued and outstanding shares of Image Sciences Preferred
Stock and upon exercise of the issued and outstanding Image Sciences Options,
and (b) 3,000,000 shares of Image Sciences Preferred Stock, of which 1,963,433
shares are issued and outstanding. Except for the rights under the Image
Sciences Preferred Stock and the Image Sciences Options listed in the Image
Sciences Disclosure Schedule, there are no existing options, warrants, calls,
commitments or other rights of any character (including conversion or preemptive
rights) relating to the acquisition of any issued or unissued capital stock or
other securities of Image Sciences. All of the shares of Image Sciences Common
Stock and Image Sciences Preferred Stock are, and all of the shares of Image
Sciences Common Stock issuable upon conversion or exercise of the Image Sciences
Preferred Stock and the Image Sciences Options in accordance with the terms
thereof will be, duly and validly authorized and issued, fully paid and non-
assessable. The Image Sciences Disclosure Schedule lists all of the record
owners of the Image Sciences Common Stock, the Image Sciences Preferred Stock
and the Image Sciences Options. Image Sciences has delivered to FormMaker
correct and complete copies of the forms of the Image Sciences Option
agreements.
4.5 Financial Statements. Image Sciences has delivered to FormMaker
--------------------
correct and complete copies of unaudited monthly financial statements for Image
Sciences consisting of a balance sheet as of the end of each month from August
1996 through November 30, 1996 and the related statements of income, changes to
shareholders' equity and cash flows for the periods then ended. Image Sciences
has also delivered to FormMaker correct and complete copies of financial
statements consisting of a balance sheet of Image Sciences as of July 31, 1994,
1995 and 1996 and
-20-
the related statements of income for the fiscal years then ended, which were
audited by the firm of Price Waterhouse LLP. All such unaudited and audited
financial statements are referred to herein collectively as the "Image Sciences
Pre-Signing Financial Statements." The unaudited financial statements of Image
Sciences to be delivered in connection with the Registration Statements are
referred to herein as the "Image Sciences Post-Signing Financial Statements,"
and, together with the Image Sciences Pre-Signing Financial Statements, as the
"Image Sciences Financial Statements." The Image Sciences Pre-Signing Financial
Statements are, and the Image Sciences Post-Signing Financial Statements will
be, consistent in all material respects with the books and records of Image
Sciences, and there have not been and will not be any material transactions that
have not been or will not be recorded in the accounting records underlying such
Financial Statements. Except as disclosed in the Image Sciences Disclosure
Schedule, the Image Sciences Pre-Signing Financial Statements have been, and the
Image Sciences Post-Signing Financial Statements will be, prepared in accordance
with GAAP consistently applied, and the Image Sciences Pre-Signing Financial
Statements present, and the Image Sciences Post-Signing Financial Statements
will present, fairly the financial position and assets and liabilities of Image
Sciences as of the dates thereof, and the results of its operations for the
periods then ended, subject to normal recurring year-end adjustments and the
absence of notes in the case of unaudited Financial Statements. The balance
sheet of Image Sciences as of November 30, 1996 that is included in the
Financial Statements is referred to herein as the "Image Sciences Balance
Sheet," and the date thereof is referred to as the "Balance Sheet Date."
4.6 Title to Assets and Related Matters. Image Sciences has good and
-----------------------------------
marketable title to, valid leasehold interests in or valid licenses to use, all
of the material Image Sciences Assets, free from any Encumbrances except those
specified in the Image Sciences Disclosure Schedule. The use of the Image
Sciences Assets is not subject to any Encumbrances (other than those specified
in the preceding sentence), and such use does not materially encroach on the
property or rights of anyone else. All Image Sciences Real Property and tangible
personal property (other than Inventory) included in the Image Sciences Assets
are suitable for the purposes for which they are used, in good working
condition, reasonable wear and tear excepted, and are free from any known
defects, except such minor defects that would not have a Material Adverse
Effect.
4.7 Real Property. The Image Sciences Disclosure Schedule describes all
-------------
real estate used in the operation of the Image Sciences Business as well as any
other real estate that is in the possession of or leased by Image Sciences and
the improvements (including buildings and other structures) located on such real
estate (collectively, the "Image Sciences Real Property"), and lists any leases
under which any such Image Sciences Real Property is possessed (the "Image
Sciences Real Estate Leases"). Image Sciences does not have any ownership
interest in any real property. The Image Sciences Disclosure Schedule also
describes any other real estate previously owned, leased or otherwise operated
by Image Sciences or any predecessor thereof and the time periods of any such
ownership, lease or operation. All of the Image Sciences Real Property (a) is
usable in the ordinary course of business and (b) conforms in all material
respects with any applicable Laws relating to its construction, use and
operation. The Image Sciences Real Property complies with
-21-
applicable zoning Laws. To the knowledge of Image Sciences, Image Sciences or
the landlord of any Image Sciences Real Property leased by Image Sciences has
obtained all licenses and rights-of-way from governmental entities or private
parties that are necessary to ensure vehicular and pedestrian ingress and egress
to and from the Image Sciences Real Property.
4.8 Certain Personal Property. The Image Sciences Disclosure Schedule
-------------------------
describes all items of tangible personal property that were included in the
Image Sciences Balance Sheet at a carrying value of at least $50,000. Except as
specified in the Image Sciences Disclosure Schedule, since the Balance Sheet
Date, Image Sciences has not acquired any items of tangible personal property
that have a carrying value in excess of $50,000, or an aggregate carrying value
of $300,000. All of such personal property included in the Image Sciences
Disclosure Schedule is, and any such personal property acquired after the date
hereof in accordance with Section 8.2 will be, usable in the ordinary course of
business, and all such personal property included in the Image Sciences
Disclosure Schedule conforms, and all of such personal property acquired after
the date hereof will conform, in all material respects with any applicable Laws
relating to its construction, use and operation. Except for those items subject
to the Image Sciences Non-Real Estate Leases or the Immaterial Leases or those
items listed in the Image Sciences Disclosure Schedule, no Person other than
Image Sciences owns any vehicles, equipment or other tangible assets located on
the Image Sciences Real Property that have been used in the Image Sciences
Business or that are necessary for the operation of the Image Sciences Business.
4.9 Non-Real Estate Leases. The Image Sciences Disclosure Schedule lists
----------------------
all assets and property (other than Image Sciences Real Property) that are
possessed by Image Sciences under an existing lease, including all trucks,
automobiles, forklifts, machinery, equipment, furniture and computers, except
for any lease under which the aggregate annual payments are less than $25,000
(each, an "Immaterial Lease"). The Image Sciences Disclosure Schedule also lists
the leases under which such assets and property listed in the Image Sciences
Disclosure Schedule are possessed. All of such leases (excluding Immaterial
Leases) are referred to herein as the "Image Sciences Non-Real Estate Leases."
4.10 Accounts Receivable. The Accounts Receivable included in the Image
-------------------
Sciences Assets are bona fide Accounts Receivable created in the ordinary course
of business. Except for Accounts Receivable for which reserves have been
established, all of the Accounts Receivable included in the Image Sciences
Assets are collectible in the ordinary course of business. Image Sciences does
not know of any facts or circumstances (other than general economic conditions)
that are likely to result in any material increase in the uncollectability of
such Accounts Receivable in excess of any reserves therefor set forth in the
Image Sciences Balance Sheet.
4.11 Inventory. The Inventory included in the Image Sciences Assets
---------
consists of items of good, usable and merchantable quality in all material
respects and does not include obsolete or discontinued items. Such Inventory is
recorded in the Image Sciences Financial Statements at the lower of average cost
or market value determined in accordance with GAAP.
-22-
4.12 Liabilities. Image Sciences does not have any Liabilities, except
-----------
(a) as specified in the Image Sciences Disclosure Schedule, (b) as contemplated
by the Image Sciences Balance Sheet (except as heretofore paid or discharged),
(c) Liabilities incurred in the ordinary course since the Balance Sheet Date, or
(d) Liabilities under any Contracts included in the Image Sciences Assets that
are specifically disclosed in the Image Sciences Disclosure Schedule (or not
required to be disclosed because of the term or amount involved) that were not
required under GAAP to have been specifically disclosed or reserved for on the
Image Sciences Balance Sheet.
4.13 Taxes. Except as set forth in the Image Sciences Disclosure
-----
Schedule, Image Sciences has duly filed all returns for Taxes that are required
to be filed and has paid all material Taxes shown as being due pursuant to such
returns or pursuant to any assessment received. All Taxes that Image Sciences
has been required by Law to withhold or to collect have been duly withheld and
collected and have been paid over to the proper governmental authorities or are
properly held by Image Sciences for such payment. There are no proceedings or
other actions, nor is there any basis for any proceedings or other actions, for
the assessment and collection of additional Taxes of any kind with respect to
Image Sciences for any period for which returns have or should have been filed.
4.14 Subsidiaries. Image Sciences does not own, directly or indirectly,
------------
any interest or investment (whether equity or debt) in any corporation,
partnership, limited liability company, trust, joint venture or other legal
entity.
4.15 Legal Proceedings and Compliance with Law.
-----------------------------------------
(a) Except as set forth in the Image Sciences Disclosure Schedule, there
is no Litigation that is pending or, to Image Sciences's knowledge, threatened
against Image Sciences. There has been no Default under any Laws applicable to
Image Sciences, including Laws relating to pollution or protection of the
environment, except for any Defaults that would not have a Material Adverse
Effect, and Image Sciences has not received any notices from any governmental
entity regarding any alleged Defaults under any Laws. There has been no Default
with respect to any Court Order applicable to Image Sciences.
(b) Without limiting the generality of Section 4.15(a), there has not
been any Image Sciences Environmental Condition (i) at the premises at which the
Image Sciences Business has been conducted, (ii) at any property owned, leased
or operated at any time by Image Sciences, any Person controlled by Image
Sciences or any predecessor of any of them, or (iii) at any property at which
wastes have been released, deposited or disposed by or at the behest or
direction of any of the foregoing, nor has Image Sciences received written
notice of any such Image Sciences Environmental Condition. "Image Sciences
Environmental Condition" means any condition or circumstance, including the
presence or release of Hazardous Substances, whether created by Image Sciences
or any third party, at or relating to any such property or premises that
(i) requires investigation, monitoring, abatement or correction under an
Environmental Law, (ii) gives rise to
-23-
any civil or criminal liability on the part of Image Sciences under an
Environmental Law, or (iii) has created a public or private nuisance.
(c) Image Sciences has delivered to FormMaker complete copies of any
written reports, studies or assessments in the possession or control of Image
Sciences that relate to any Image Sciences Environmental Condition and to the
Image Sciences Business or any Image Sciences Assets.
(d) Except in those cases where the failure would not have a Material
Adverse Effect, (i) Image Sciences has obtained and is in full compliance with
all Governmental Permits, all of which are listed in the Image Sciences
Disclosure Schedule along with their respective expiration dates, that are
required for the complete operation of the Image Sciences Business as currently
operated, (ii) all of such Governmental Permits are currently valid and in full
force and (iii) Image Sciences has filed such timely and complete renewal
applications as may be required with respect to its Governmental Permits. To
Image Sciences' knowledge, no revocation, cancellation or withdrawal thereof has
been threatened.
4.16 Contracts.
---------
(a) The Image Sciences Disclosure Schedule lists all Contracts of the
following types to which Image Sciences is a party or by which it is bound,
except for Minor Contracts:
(i) Contracts with any present or former shareholder,
director, officer, employee, partner or consultant of Image Sciences
or any Affiliate thereof.
(ii) Contracts for the future purchase of, or payment for,
supplies or products, or for the lease of any Asset from or the
performance of services by a third party, in excess of $150,000 in
any individual case, or any Contracts for the sale of products that
involve an amount in excess of $25,000 with respect to any one
supplier or other party;
(iii) Contracts to sell or supply products or to perform
services that involve an amount in excess of $250,000 in any
individual case;
(iv) Contracts to lease to or to operate for any other
party any asset that involve an amount in excess of $150,000 in any
individual case;
(v) Any notes, debentures, bonds, conditional sale
agreements, equipment trust agreements, letter of credit agreements,
reimbursement agreements, loan agreements or other Contracts for the
borrowing or lending of money (including loans to or from officers,
directors, partners,
-24-
shareholders or Affiliates of Image Sciences or any members of their
immediate families), agreements or arrangements for a line of credit
or for a guarantee of, or other undertaking in connection with, the
indebtedness of any other Person;
(vi) Any Contracts under which any Encumbrances exist; and
(vii) Any other Contracts (other than Minor Contracts and
those described in any of (i) through (vi) above) not made in the
ordinary course of business.
(b) The Contracts listed in the Image Sciences Disclosure Schedule and
the Contracts excluded from the Image Sciences Disclosure Schedule based on the
term or amount thereof are referred to herein as the "Image Sciences Contracts."
Image Sciences is not in Default under any Image Sciences Contracts (including
any Image Sciences Real Estate Leases and Image Sciences Non-Real Estate
Leases), which Default could result in a Liability on the part of Image Sciences
in excess of $25,000 in any individual case, and the aggregate Liabilities that
could result from all such Defaults do not exceed $50,000. Image Sciences has
not received any communication from, or given any communication to, any other
party indicating that Image Sciences or such other party, as the case may be, is
in Default under any Image Sciences Contract where such Default could have a
Material Adverse Effect. To the knowledge of Image Sciences, none of the other
parties in any such Image Sciences Contract is in Default thereunder.
4.17 Insurance. The Image Sciences Disclosure Schedule lists all
---------
policies or binders of insurance held by or on behalf of Image Sciences,
specifying with respect to each policy the insurer, the amount of the coverage,
the type of insurance, the risks insured, the expiration date, the policy number
and any pending claims thereunder. There is no Default with respect to any such
policy or binder, nor has there been any failure to give any notice or present
any claim under any such policy or binder in a timely fashion or in the manner
or detail required by the policy or binder, except for any of the foregoing that
would not have a Material Adverse Effect. There is no notice of non renewal or
cancellation with respect to, or disallowance of any claim under, any such
policy or binder that has been received by Image Sciences, except for any of the
foregoing that would not have a Material Adverse Effect.
4.18 Intellectual Property and Software Products.
-------------------------------------------
(a) Image Sciences does not currently use nor has it previously used in
the development, production or marketing of its products and services any
Copyrights, Patents or Trademarks except for those listed in the Image Sciences
Disclosure Schedule. Image Sciences owns or has the lawful right to use all
material Intellectual Property that is used in the operation of the Business in
the ordinary course or otherwise. All of the Intellectual Property listed in the
Image Sciences Disclosure Schedule is owned by Image Sciences free and clear of
any Encumbrances, or used pursuant to an
-25-
agreement that is described in the Image Sciences Disclosure Schedule. Except
in such cases that would not have a Material Adverse Effect, Image Sciences does
not infringe upon or unlawfully or wrongfully use any Intellectual Property
rights owned or claimed by another Person, and Image Sciences is not in Default,
and has not received any notice of any claim of infringement or any other claim
or proceeding, with respect to any such Intellectual Property. Except for any
rights under written licenses or other written Contracts, no current or former
employee of Image Sciences and no other Person owns or has any proprietary,
financial or other interest, direct or indirect, in whole or in part, and
including any right to royalties or other compensation, in any of the
Intellectual Property, or in any application therefor.
(b) The Image Sciences Disclosure Schedule contains a complete list of all
of the computer software products sold, licensed, distributed, marketed, used or
under development by Image Sciences (the "Image Sciences Software Products").
Each of the Image Sciences Software Products performs substantially in
accordance with the specifications, documentation and other written material
used in connection with the sale, license, distribution, marketing or use
thereof and is free of defects in programming and operation except such defects
as would not materially and adversely affect the use of the respective Image
Sciences Software Products for their intended purposes.
(c) Except as specified in the Image Sciences Disclosure Schedule, all
right, title and interest in and to the Image Sciences Software Products is
owned by Image Sciences, free and clear of all Encumbrances. No government
funding was utilized in the development of any of the Image Sciences Software
Products. Except for such violations that would not have a Material Adverse
Effect, the sale, license, distribution, marketing or use of the Image Sciences
Software Products by Image Sciences does not violate any rights of any other
Person, and Image Sciences has not received any communication alleging such a
violation. Except as specified in the Image Sciences Disclosure Schedule, Image
Sciences does not have any obligation to compensate any Person for the sale,
license, distribution, marketing or use of the Image Sciences Software Products.
Other than as set forth in the Image Sciences Disclosure Schedule, Image
Sciences has not granted to any other Person any license, option or other right
in or to any of the Image Sciences Software Products, except for non-exclusive,
royalty-bearing, end-user licenses (the "End-User Licenses") and distributor
licenses under which the distributor has a right to relicense ("Distributor
Licenses") granted by Image Sciences pursuant to license agreements.
(d) Except as specified in the Image Sciences Disclosure Schedule, Image
Sciences does not have any obligation owing to any Person to maintain, modify,
improve or upgrade any of the Image Sciences Software Products, except for any
such obligation set forth in an End-User License, a Distributor License or under
a customer-specific services agreement and such other obligations as would not
have a Material Adverse Effect.
(e) All employees and consultants of Image Sciences who are involved in the
design, review, evaluation or development of Intellectual Property have executed
a nondisclosure and
-26-
assignment of inventions agreement (a "Confidentiality Agreement"). To Image
Sciences' knowledge, (i) none of the Confidential Information has been used,
divulged or appropriated (A) for the benefit of any Person other than Image
Sciences or a customer thereof or (B) otherwise to the detriment of Image
Sciences, (ii) except as specified in the Image Sciences Disclosure Schedule,
none of such employees or consultants of Image Sciences is subject to any
contractual or legal restrictions that might interfere with the use of his or
her best efforts to promote the interests of Image Sciences, (iii) no employee
or consultant of Image Sciences has used any other Persons' trade secrets or
other information that is confidential in the course of his or her work for
Image Sciences, and (iv) no employee or consultant of Image Sciences is, or is
currently expected to be, in Default under any term of any employment contract,
agreement or arrangement relating to the Intellectual Property, or any
Confidentiality Agreement or any other Contract or any restrictive covenant
relating to the Intellectual Property, or the development or exploitation
thereof.
(f) Image Sciences has kept secret and has not disclosed the source codes
for the Image Sciences Software Products to any Person other than to those
Persons identified in the Image Sciences Disclosure Schedule and to certain
employees of Image Sciences.
4.19 Employee Relations. Image Sciences is not (a) except as
------------------
specified in the Image Sciences Disclosure Schedule, a party to, involved in or,
to Image Sciences's knowledge, threatened by, any labor dispute or unfair labor
practice charge, or (b) currently negotiating any collective bargaining
agreement. Image Sciences has not experienced during the last three years any
work stoppage. Image Sciences has delivered to FormMaker a complete and correct
list of the names and salaries, bonus and other cash compensation of all
employees (including officers) of Image Sciences whose cash compensation was for
1995 or is expected to be for 1996 at least $80,000.
4.20 ERISA.
-----
(a) The Image Sciences Disclosure Schedule contains a complete list of all
Benefit Plans sponsored or maintained by Image Sciences or under which Image
Sciences is obligated. Image Sciences has delivered to FormMaker (i) accurate
and complete copies of all such Benefit Plan documents and all other material
documents relating thereto, including (if applicable) all summary plan
descriptions, summary annual reports and insurance contracts, (ii) accurate and
complete detailed summaries of all unwritten Benefit Plans, (iii) accurate and
complete copies of the most recent financial statements and actuarial reports
with respect to all such Benefit Plans for which financial statements or
actuarial reports are required or have been prepared and (iv) accurate and
complete copies of all annual reports for all such Benefit Plans (for which
annual reports are required) prepared within the last three years. Each such
Benefit Plan providing benefits that are funded through a policy of insurance is
indicated by the word "insured" placed by the listing of the Benefit Plan in the
Image Sciences Disclosure Schedule.
(b) All such Benefit Plans conform (and at all times have conformed) in
all material respects to, and are being administered and operated (and have at
all times been administered and
-27-
operated) in material compliance with, the requirements of ERISA, the Code and
all other applicable Laws. All returns, reports and disclosure statements
required to be made under ERISA and the Code with respect to all such Benefit
Plans have been timely filed or delivered. There have not been any "prohibited
transactions," as such term is defined in Section 4975 of the Code or Section
406 of ERISA involving any of the Benefit Plans, that could subject Image
Sciences to any material penalty or tax imposed under the Code or ERISA.
(c) Except as is set forth in the Image Sciences Disclosure Schedule, any
such Benefit Plan that is intended to be qualified under Section 401(a) of the
Code and exempt from tax under Section 501(a) of the Code has been determined by
the Internal Revenue Service to be so qualified or an application for such
determination is pending. Any such determination that has been obtained remains
in effect and has not been revoked, and with respect to any application that is
pending, Image Sciences has no reason to suspect that such application for
determination will be denied. Nothing has occurred since the date of any such
determination, or if there has been no such determination, there is no
occurrence that is reasonably likely to affect adversely the qualification or
the tax exempt status of the plan and the related trust, or result in the
imposition of excise taxes or income taxes on unrelated business income under
the Code or ERISA with respect to any such Benefit Plan.
(d) Neither Image Sciences nor any person or entity that, together with
Image Sciences, is treated as a single employer under Section 414(b), (c), (m)
or (o) of the Code or Section 4001(a)(14) or 4001(b) of ERISA (a "Common
Controlled Entity"), sponsors a defined benefit plan subject to Title IV of
ERISA, or has a current or contingent obligation to contribute to any multi
employer plan (as defined in Section 3(37) of ERISA) and neither they nor their
predecessor have ever contributed to a multiemployer plan. Image Sciences does
not have any liability with respect to any employee benefit plan (as defined in
Section 3(3) of ERISA) other than with respect to such Benefit Plans.
(e) There are no pending or, to the knowledge of Image Sciences, threatened
claims by or on behalf of any such Benefit Plans, or by or on behalf of any
individual participants or beneficiaries of any such Benefit Plans, alleging any
breach of fiduciary duty on the part of Image Sciences or any of its officers,
directors or employees under ERISA or any other applicable regulations, or
claiming benefit payments (other than those made in the ordinary operation of
such plans), nor is there, to the knowledge of Image Sciences, any basis for
such claim. The Benefit Plans are not the subject of any pending (or to the
knowledge of Image Sciences, any threatened) investigation or audit by the
Internal Revenue Service, the Department of Labor or the Pension Benefit
Guaranty Corporation ("PBGC").
(f) Image Sciences has timely made all required contributions under such
Benefit Plans including the payment of any premiums payable to the PBGC and
other insurance premiums.
-28-
(g) With respect to any such Benefit Plan that is an employee welfare
benefit plan (within the meaning of Section 3(1) of ERISA) (a "Welfare Plan")
and except as specified in the Image Sciences Disclosure Schedule, (i) each
Welfare Plan for which contributions are claimed by Image Sciences as deductions
under any provision of the Code is in material compliance with all applicable
requirements pertaining to such deduction, (ii) with respect to any welfare
benefit fund (within the meaning of Section 419 of the Code) related to a
Welfare Plan, there is no disqualified benefit (within the meaning of Section
4976(b) of the Code) that would result in the imposition of a tax under Section
4976(a) of the Code, (iii) any Benefit Plan that is a group health plan (within
the meaning of Section 4980B(g)(2) of the Code) complies, and in each and every
case has complied, with all of the applicable material requirements of Section
4980B of the Code, ERISA, Title XXII of the Public Health Service Act and the
Social Security Act, and (iv) all Welfare Plans may be amended or terminated at
any time on or after the Closing Date. Except as specified in the Image
Sciences Disclosure Schedule, no Benefit Plan provides any health, life or other
welfare coverage to employees of Image Sciences beyond termination of their
employment with Image Sciences by reason of retirement or otherwise, other than
coverage as may be required under Section 4980B of the Code or Part 6 of ERISA,
or under the continuation of coverage provisions of the laws of any state or
locality.
(h) Except as otherwise set forth in the Image Sciences Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment to be made by Image Sciences or a Common Controlled Entity (including,
without limitation, severance, unemployment compensation, golden parachute (as
defined in Code Section 280G or otherwise)) becoming due to any employee or
former employee, officer or director, or (ii) increase or vest any benefits
payable under any Benefit Plan.
(i) Except as otherwise set forth in the Image Sciences Disclosure
Schedule, any amount that could be received (whether in cash or property or the
vesting of property) as a result of any of the transactions contemplated by this
Agreement by any employee, officer or director of Image Sciences or any of its
subsidiaries who is a "disqualified individual" (as such term is defined in
proposed Treasury Regulation Section 1.280G-1) under any employment, severance
or termination agreement, other compensation arrangement or Benefit Plan
currently in effect would not be characterized as an "excess parachute payment"
(as such term is defined in Section 280(b)(1) of the Code).
4.21 Corporate Records. The minute books of Image Sciences contain
-----------------
complete, correct and current copies of its Charter Documents and bylaws and of
all minutes of meetings, resolutions and other proceedings of its Board of
Directors and shareholders. The stock record books of Image Sciences are
complete, correct and current.
4.22 Absence of Certain Changes. Except as contemplated by this
--------------------------
Agreement, since the Balance Sheet Date, Image Sciences has conducted the Image
Sciences Business in the ordinary course and there has not been with respect to
the Image Sciences Business:
-29-
(a) any change that has had or is reasonably likely to have a Material
Adverse Effect;
(b) any distribution or payment declared or made in respect of its
capital stock by way of dividends, purchase or redemption of shares or
otherwise except for the Image Sciences Closing Transactions;
(c) any increase in the compensation payable or to become payable to
any director, officer, employee or agent, except for increases for non-
officer employees made in the ordinary course of business, nor any other
change in any employment or consulting arrangement;
(d) any sale, assignment or transfer of material Assets, or any
additions to or transactions involving any Assets, other than those made in
the ordinary course of business;
(e) other than in the ordinary course of business, any waiver or
release of any claim or right or cancellation of any debt held; or
(f) any payments to any Affiliate of Image Sciences, except as
specified in the Image Sciences Disclosure Schedule.
4.23 Previous Sales; Warranties. Image Sciences has not breached any
--------------------------
express or implied warranties in connection with the sale or distribution of
goods or the performance of services, except for breaches that would not have a
Material Adverse Effect.
4.24 Customers. Image Sciences has used its reasonable business efforts
---------
to maintain and currently maintains, good working relationships with all
of its customers. The Image Sciences Disclosure Schedule contains with respect
to each of the fiscal years ended July 31, 1994, 1995, 1996 and the four month
period ended November 30, 1996, a list of the ten customers (with names omitted)
that were the largest dollar volume customers of products or services, or both,
sold by Image Sciences for each such fiscal year. Except as specified in the
Image Sciences Disclosure Schedule, none of such customers has given Image
Sciences notice terminating, canceling or threatening to terminate or cancel any
Contract or relationship with Image Sciences.
4.25 Finder's Fees. No Person retained by Image Sciences is or will be
-------------
entitled to any commission or finder's or similar fee in connection with the
Transactions.
4.26 Additional Information. The Image Sciences Disclosure Schedule
----------------------
accurately lists the following:
(a) the names of all officers and directors of Image Sciences;
-30-
(b) the names and addresses of every bank or other financial
institution in which Image Sciences maintains an account (whether checking,
saving or otherwise), lock box or safe deposit box, and the account numbers
and names of Persons having signing authority or other access thereto;
(c) the names of all Persons authorized to borrow money or incur or
guarantee indebtedness on behalf of Image Sciences;
(d) the names of any Persons holding powers of attorney from Image
Sciences and a summary statement of the terms thereof; and
(e) all names under which Image Sciences has conducted any part of its
Business or which it has otherwise used at any time during the past five
years.
4.27 Accuracy of Information. No representation or warranty by Image
-----------------------
Sciences in any Transaction Document, and no information contained herein or
therein or otherwise delivered by or on behalf of Image Sciences to FormMaker in
connection with the Transactions, including the Image Sciences Financial
Statements, contains any untrue statement of a material fact or omits to state
any material fact necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances under which such statements
were made.
4.28 Xxxx-Xxxxx-Xxxxxx Act. Neither (i) Image Sciences nor (ii) any
---------------------
Person that may be considered an "ultimate parent" of Image Sciences has (x)
annual net sales exceeding $100 million as of the last annual statement of
income and expense, or (y) total assets exceeding $100 million in value as
stated on the last regularly prepared balance sheet.
5. Representations and Warranties of FormMaker.
-------------------------------------------
FormMaker hereby represents and warrants to Image Sciences, except as set
forth in the FormMaker Disclosure Schedule or the updated FormMaker Disclosure
Schedule to be delivered pursuant to Section 6.3, as follows:
5.1 Corporate Status. Each of the FormMaker Companies and the New
----------------
Companies is a corporation duly organized, validly existing and in good standing
under the Laws of the jurisdiction of its organization, and is qualified to do
business as a foreign corporation in any jurisdiction where it is required to be
so qualified except where the failure to so qualify would not have a Material
Adverse Effect. The Charter Documents and bylaws of each of the FormMaker
Companies and each of the New Companies that have been delivered to Image
Sciences as of the date hereof are effective under applicable Laws and are
current, correct and complete.
5.2 Authorization. Each of the FormMaker Companies and the New Companies
-------------
has the requisite power and authority to own its Assets and to carry on its
Business. Each of FormMaker
-31-
and the New Companies has the requisite power and authority to execute and
deliver the Transaction Documents to which it is a party and to perform the
Transactions performed or to be performed by it. Such execution, delivery and
performance by FormMaker or any New Company has been duly authorized by all
necessary corporate action, other than approval by the shareholders of
FormMaker. Each Transaction Document executed and delivered by FormMaker and any
New Company has been duly executed and delivered by such Party and constitutes a
valid and binding obligation of such Party, enforceable against such Party in
accordance with its terms.
5.3 Consents and Approvals. Except for (a) any consents specified in the
----------------------
FormMaker Disclosure Schedule (the "FormMaker Required Consents"), (b) the
approval of the Merger by the FormMaker shareholders, (c) the filing of the
Articles of Merger in accordance with Section 2 and (d) any approvals or filings
required by the SEC and by state securities laws or agencies in connection with
the Registration Statement, neither the execution and delivery by FormMaker or
any New Company of the Transaction Documents to which it is a party, nor the
performance of the Transactions performed or to be performed by it, require any
filing, consent or approval or constitute a Default under (i) any Law or Court
Order to which the FormMaker Companies or any new Company is subject, (ii) the
Charter Documents or bylaws of FormMaker or MicroDynamics or (iii) any Contract,
Governmental Permit or other document to which FormMaker or any New Company is a
party or by which the properties or other assets of such Party may be subject.
5.4 Capitalization and Stock Ownership.
----------------------------------
(a) The total authorized capital stock of FormMaker consists of
20,000,000 shares of FormMaker Common Stock, of which (i) 6,229,511 shares are
issued and outstanding and (ii) 1,602,157 shares of FormMaker Common Stock are
reserved for issuance upon exercise of the issued and outstanding FormMaker
Options and FormMaker Warrants. Except for the rights under the FormMaker
Options and FormMaker Warrants listed in the FormMaker Disclosure Schedule,
there are no existing options, warrants, calls, commitments or other rights of
any character (including conversion or preemptive rights) relating to the
acquisition of any issued or unissued capital stock or other securities of
FormMaker. All of the shares of FormMaker Common Stock are, and all of the
shares of FormMaker Common Stock issuable upon exercise of the FormMaker Options
and the FormMaker Warrants in accordance with the terms thereof will be, duly
and validly authorized and issued, fully paid and non-assessable. The FormMaker
Disclosure Schedule lists all of the record owners of the FormMaker Common
Stock, the FormMaker Options and the FormMaker Warrants. FormMaker has delivered
to Image Sciences correct and complete copies of the forms of the FormMaker
Option agreements and the FormMaker Warrant agreements.
(b) The total authorized capital stock of the Company consists of (i)
20,000,000 shares of Company Class A Common Stock, 7,000,000 shares of Company
Class B Common Stock and 1,000,000 shares of Company Preferred Stock, par value
$0.01 per share, of which (a) no shares are issued and outstanding on the date
hereof and also as of immediately prior to the Effective Time and (b) as of the
consummation of the Closing and the issuance of the Closing Common Shares, the
-32-
total number of shares issued and outstanding plus the total number of shares
issuable upon the exercise of issued and outstanding Company Options and Company
Warrants shall not exceed 12,580,000 shares of Company Class A Common Stock and
Company Class B Common Stock. Except for the rights under the Company Options
and the Company Warrants to be issued at the Closing, there are no existing
options, warrants, calls, commitments or other rights of any character
(including conversion or preemptive rights) relating to the acquisition of any
issued or unissued capital stock or other securities of the Company. All of the
Closing Common Shares that will be issued and outstanding immediately following
consummation of the Merger, and all of the shares of Company Class A Common
Stock or Company Class B Common Stock issuable upon exercise of the Company
Options and the Company Warrants upon issuance in accordance with the terms
thereof, will be duly and validly authorized and issued, fully paid and non-
assessable. As of the Effective Time, the Form S-4 Registration Statement will
be effective in accordance with the Securities Act with respect to the Closing
Common Shares, and such securities will be issued in compliance with the
Securities Act and the rules and regulations thereunder.
(c) The total authorized capital stock of the Texas Sub consists of
1,000 shares of Common Stock, par value $0.01 per share, of which 100 shares are
issued and outstanding on the date hereof and will be issued and outstanding as
of the Closing. There are no existing options, warrants, calls, commitments or
other rights of any character (including conversion or preemptive rights)
relating to the acquisition of any issued or unissued capital stock or other
securities of the Texas Sub. All of such shares are duly and validly authorized
and issued, fully paid and non-assessable. The Company owns all of such shares
of the Texas Sub.
(d) The total authorized capital stock of the Georgia Sub consists of
1,000 shares of Common Stock, par value $0.01 per share, of which 100 shares are
issued and outstanding on the date hereof and will be issued and outstanding as
of the Closing. There are no existing options, warrants, calls, commitments or
other rights of any character (including conversion or preemptive rights)
relating to the acquisition of any issued or unissued capital stock or other
securities of the Georgia Sub. All of such shares are duly and validly
authorized and issued, fully paid and non-assessable. The Company owns all of
such shares of the Georgia Sub.
(e) The total authorized capital stock of MicroDynamics consists of
8,000,000 shares of Common Stock, par value $0.01 per share, of which 6,051,305
shares are issued and outstanding on the date hereof, and 1,600,000 shares of
Preferred Stock, par value $0.01 per share, of which no shares are issued and
outstanding on the date hereof. All shares of MicroDynamics Common Stock are
duly and validly authorized and issued, fully paid and non-assessable.
FormMaker owns 6,044,805 shares of MicroDynamics Common Stock free and clear of
all Encumbrances.
5.5 Financial Statements. FormMaker has delivered to Image Sciences
--------------------
correct and complete copies of unaudited monthly financial statements for
FormMaker consisting of a balance sheet as of the end of each month from January
1996 through November 30, 1996 and the related statements of income, changes to
shareholders' equity and cash flows for the periods then ended.
-33-
FormMaker has also delivered to Image Sciences correct and complete copies of
financial statements consisting of a balance sheet of FormMaker as of December
31, 1993, 1994 and 1995 and the related statements of income for the years then
ended, the financial statements for the two most recent years were audited by
the firm of Coopers & Xxxxxxx LLP. All such unaudited and audited financial
statements are referred to herein collectively as the "FormMaker Pre-Signing
Financial Statements." The unaudited financial statements of FormMaker to be
delivered in connection with the Registration Statements are referred to herein
as the "FormMaker Post-Signing Financial Statements," and, together with the
Pre-Signing Financial Statements, as the "FormMaker Financial Statements." The
FormMaker Pre-Signing Financial Statements are, and the FormMaker Post-Signing
Financial Statements will be, consistent in all material respects with the books
and records of FormMaker, and there have not been and will not be any material
transactions that have not been or will not be recorded in the accounting
records underlying such Financial Statements. The FormMaker Pre-Signing
Financial Statements have been, and the FormMaker Post-Signing Financial
Statements will be, prepared in accordance with GAAP consistently applied, and
the FormMaker Pre-Signing Financial Statements present, and the FormMaker Post-
Signing Financial Statements will present, fairly the financial position and
assets and liabilities of FormMaker as of the dates thereof, and the results of
its operations for the periods then ended, subject to normal recurring year-end
adjustments and the absence of notes in the case of unaudited Financial
Statements. The balance sheet of FormMaker as of November 30, 1996 that is
included in the Financial Statements is referred to herein as the "FormMaker
Balance Sheet." FormMaker has also delivered to Image Sciences correct and
complete copies of financial statements consisting of a balance sheet of
MicroDynamics as of December 1993, 1994 and 1995 and the related statements of
income for the years then ended and unaudited monthly financial statements for
MicroDynamics consisting of a balance sheet as of the end of each month from
January 1996 through November 30, 1996 and the related statements of income,
changes to shareholders equity and cash flow for the periods then ended (the
"MicroDynamics Financial Statements"). The MicroDynamics Financial Statements
are consistent in all material respects with the books and records of
MicroDynamics, and there have not been and will not be any material transaction
that have not been recorded in the accounting records underlying such
MicroDynamics Financial Statements.
5.6 No Company, Texas Sub or Georgia Sub Assets, Liabilities or Business.
--------------------------------------------------------------------
Except for any rights and Liabilities that the Company, the Texas Sub and the
Georgia Sub may have with respect to this Agreement and the Company's ownership
of the capital stock of the Texas Sub and the Georgia Sub, neither the Company,
the Texas Sub or the Georgia Sub has any Assets or Liabilities, nor has either
the Company, the Texas Sub or the Georgia Sub conducted any Business other than
in connection with the Transactions.
5.7 Title to Assets and Related Matters. Each of the FormMaker
-----------------------------------
Companies has good and marketable title to, valid leasehold interests in or
valid licenses to use, all of its material FormMaker Companies Assets, free from
any Encumbrances except those specified in the FormMaker Disclosure Schedule.
The use of the FormMaker Companies Assets are not subject to any Encumbrances
(other than those specified in the preceding sentence), and such use does not
-34-
materially encroach on the property or rights of anyone else. All FormMaker
Companies Real Property and tangible personal property (other than Inventory)
included in the FormMaker Companies Assets are suitable for the purposes for
which they are used, in good working condition, reasonable wear and tear
excepted, and are free from any known defects, except such minor defects that
would not have a Material Adverse Effect.
5.8 Real Property. The FormMaker Disclosure Schedule describes all real
-------------
estate used in the operation of the FormMaker Companies Business as well as any
other real estate that is in the possession of or leased by the FormMaker
Companies and the improvements (including buildings and other structures)
located on such real estate (collectively, the "FormMaker Companies Real
Property"), and lists any leases under which any such FormMaker Companies Real
Property is possessed (the "FormMaker Companies Real Estate Leases"). FormMaker
does not have any ownership interest in any real property. The FormMaker
Disclosure Schedule also describes any other real estate previously owned,
leased or otherwise operated by the FormMaker Companies or any predecessor
thereof and the time periods of any such ownership, lease or operation. All of
the FormMaker Companies Real Property (a) is usable in the ordinary course of
business and (b) conforms in all material respects with any applicable Laws
relating to its construction, use and operation. The FormMaker Companies Real
Property complies with applicable zoning Laws. To the knowledge of FormMaker,
the FormMaker Companies or the landlord of any FormMaker Companies Real Property
leased by the FormMaker Companies has obtained all licenses and rights-of-way
from governmental entities or private parties that are necessary to ensure
vehicular and pedestrian ingress and egress to and from the FormMaker Companies
Real Property.
5.9 Certain Personal Property. The FormMaker Disclosure Schedule
-------------------------
describes all items of tangible personal property that were included in the
FormMaker Balance Sheet at a carrying value of at least $50,000. Except as
specified in the FormMaker Disclosure Schedule, since the Balance Sheet Date,
FormMaker has not acquired any items of tangible personal property that have a
carrying value in excess of $50,000, or an aggregate carrying value of $300,000.
All of such personal property included in the FormMaker Disclosure Schedule is,
and any such personal property acquired after the date hereof in accordance with
Section 7.2 will be, usable in the ordinary course of business, and all such
personal property included in the FormMaker Disclosure Schedule conforms, and
all of such personal property acquired after the date hereof will conform, in
all material respects with any applicable Laws relating to its construction, use
and operation. Except for those items subject to the FormMaker Companies Non-
Real Estate Leases or the Immaterial Leases or those items listed in the
FormMaker Disclosure Schedule, no Person other than the FormMaker Companies owns
any vehicles, equipment or other tangible assets located on the FormMaker Real
Property that have been used in the FormMaker Companies Business or that are
necessary for the operation of the FormMaker Companies Business.
5.10 Non-Real Estate Leases. The FormMaker Disclosure Schedule lists
----------------------
all assets and property (other than FormMaker Real Property) that are possessed
by the FormMaker Companies under an existing lease, including all trucks,
automobiles, forklifts, machinery, equipment, furniture
-35-
and computers, except for Immaterial Leases. The FormMaker Disclosure Schedule
also lists the leases under which such assets and property listed in the
FormMaker Disclosure Schedule are possessed. All of such leases (excluding
Immaterial Leases) are referred to herein as the "FormMaker Companies Non-Real
Estate Leases."
5.11 Accounts Receivable. The Accounts Receivable included in the
-------------------
FormMaker Companies Assets are bona fide Accounts Receivable created in the
ordinary course of business. Except for Accounts Receivable for which reserves
have been established, all of the Accounts Receivable included in the FormMaker
Companies Assets are collectible in the ordinary course of business. FormMaker
does not know of any facts or circumstances (other than general economic
conditions) that are likely to result in any material increase in the
uncollectability of such Accounts Receivable in excess of any reserves therefor
set forth in the FormMaker Balance Sheet.
5.12 Inventory. The Inventory included in the FormMaker Companies
---------
Assets consists of items of good, usable and merchantable quality in all
material respects and does not include obsolete or discontinued items. Such
Inventory is recorded in the FormMaker Financial Statements at the lower of cost
or market value determined in accordance with GAAP.
5.13 Liabilities. The FormMaker Companies do not have any
-----------
Liabilities, except (a) as specified in the FormMaker Disclosure Schedule, (b)
as contemplated by the FormMaker Balance Sheet (except as heretofore paid or
discharged), (c) Liabilities incurred in the ordinary course since the Balance
Sheet Date, or (d) Liabilities under any Contracts included in the FormMaker
Companies Assets that are specifically disclosed in the FormMaker Disclosure
Schedule (or not required to be disclosed because of the term or amount
involved) that were not required under GAAP to have been specifically disclosed
or reserved for on the FormMaker Balance Sheet.
5.14 Taxes. The FormMaker Companies have duly filed all returns for
-----
Taxes that are required to be filed and has paid all material Taxes shown as
being due pursuant to such returns or pursuant to any assessment received. All
Taxes that the FormMaker Companies have been required by Law to withhold or to
collect have been duly withheld and collected and have been paid over to the
proper governmental authorities or are properly held by the FormMaker Companies
for such payment. There are no proceedings or other actions, nor is there any
basis for any proceedings or other actions, for the assessment and collection of
additional Taxes of any kind with respect to the FormMaker Companies for any
period for which returns have or should have been filed.
5.15 Subsidiaries. FormMaker does not own, directly or indirectly,
------------
any interest or investment (whether equity or debt) in any corporation,
partnership, limited liability company, trust, joint venture or other legal
entity, except for its investment in MicroDynamics and the New Companies.
-36-
5.16 Legal Proceedings and Compliance with Law.
-----------------------------------------
(a) Except as set forth in the FormMaker Disclosure Schedule, there is no
Litigation that is pending or, to FormMaker's knowledge, threatened against the
FormMaker Companies. There has been no Default under any Laws applicable to the
FormMaker Companies, including Laws relating to pollution or protection of the
environment, except for any Defaults that would not have a Material Adverse
Effect, and the FormMaker Companies have not received any notices from any
governmental entity regarding any alleged Defaults under any Laws. There has
been no Default with respect to any Court Order applicable to the FormMaker
Companies.
(b) Without limiting the generality of Section 5.16(a), there has not been
any FormMaker Environmental Condition (i) at the premises at which the FormMaker
Companies Business has been conducted, (ii) at any property owned, leased or
operated at any time by the FormMaker Companies, any Person controlled by the
FormMaker Companies or any predecessor of any of them, or (iii) at any property
at which wastes have been released, deposited or disposed by or at the behest or
direction of any of the foregoing, nor have the FormMaker Companies received
written notice of any such FormMaker Companies Environmental Condition.
"FormMaker Environmental Condition" means any condition or circumstance,
including the presence or release of Hazardous Substances, whether created by
the FormMaker Companies or any third party, at or relating to any such property
or premises that (i) requires investigation, monitoring, abatement or correction
under an Environmental Law, (ii) gives rise to any civil or criminal liability
on the part of the FormMaker Companies under an Environmental Law, or (iii) has
created a public or private nuisance.
(c) FormMaker has delivered to Image Sciences complete copies of any
written reports, studies or assessments in the possession or control of the
FormMaker Companies that relate to any the FormMaker Companies Environmental
Condition and to the FormMaker Business or any FormMaker Assets.
(d) Except in those cases where the failure would not have a Material
Adverse Effect, (i) the FormMaker Companies have obtained and are in full
compliance with all Governmental Permits, all of which are listed in the
FormMaker Disclosure Schedule along with their respective expiration dates, that
are required for the complete operation of the FormMaker Companies Business as
currently operated, (ii) all of such Governmental Permits are currently valid
and in full force and (iii) the FormMaker Companies have filed such timely and
complete renewal applications as may be required with respect to its
Governmental Permits. To FormMaker's knowledge, no revocation, cancellation or
withdrawal thereof has been threatened.
5.17 Contracts.
---------
(a) The FormMaker Disclosure Schedule lists all Contracts of the following
types to which the FormMaker Companies are a party or by which it is bound,
except for Minor Contracts:
-37-
(i) Contracts with any present or former shareholder, director,
officer, employee, partner or consultant of FormMaker or any Affiliate
thereof.
(ii) Contracts for the future purchase of, or payment for, supplies
or products, or for the lease of any Asset from or the performance of
services by a third party, in excess of $150,000 in any individual case, or
any Contracts for the sale of products that involve an amount in excess of
$25,000 with respect to any one supplier or other party;
(iii) Contracts to sell or supply products or to perform services
that involve an amount in excess of $250,000 in any individual case;
(iv) Contracts to lease to or to operate for any other party any
asset that involve an amount in excess of $150,000 in any individual case;
(v) Any notes, debentures, bonds, conditional sale agreements,
equipment trust agreements, letter of credit agreements, reimbursement
agreements, loan agreements or other Contracts for the borrowing or lending
of money (including loans to or from officers, directors, partners,
shareholders or Affiliates of FormMaker or any members of their immediate
families), agreements or arrangements for a line of credit or for a
guarantee of, or other undertaking in connection with, the indebtedness of
any other Person;
(vi) Any Contracts under which any Encumbrances exist; and
(vii) Any other Contracts (other than Minor Contracts and those
described in any of (i) through (vi) above) not made in the ordinary course
of business.
(b) The Contracts listed in the FormMaker Disclosure Schedule and the
Contracts excluded from the FormMaker Disclosure Schedule based on the term or
amount thereof are referred to herein as the "FormMaker Companies Contracts."
FormMaker Companies are not in Default under any FormMaker Companies Contracts
(including any FormMaker Companies Real Estate Leases and FormMaker Companies
Non-Real Estate Leases), which Default could result in a Liability on the part
of the FormMaker Companies in excess of $25,000 in any individual case, and the
aggregate Liabilities that could result from all such Defaults do not exceed
$50,000. The FormMaker Companies have not received any communication from, or
given any communication to, any other party indicating that the FormMaker
Companies or such other party, as the case may be, is in Default under any the
FormMaker Companies Contract where such Default could have a Material Adverse
Effect. To the knowledge of FormMaker, none of the other parties in any such
-38-
FormMaker Companies Contract is in Default thereunder.
5.18 Insurance. The FormMaker Disclosure Schedule lists all policies
---------
or binders of insurance held by or on behalf of the FormMaker Companies,
specifying with respect to each policy the insurer, the amount of the coverage,
the type of insurance, the risks insured, the expiration date, the policy number
and any pending claims thereunder. There is no Default with respect to any such
policy or binder, nor has there been any failure to give any notice or present
any claim under any such policy or binder in a timely fashion or in the manner
or detail required by the policy or binder, except for any of the foregoing that
would not have a Material Adverse Effect. There is no notice of nonrenewal or
cancellation with respect to, or disallowance of any claim under, any such
policy or binder that has been received by the FormMaker Companies, except for
any of the foregoing that would not have a Material Adverse Effect.
5.19 Intellectual Property and Software Products.
-------------------------------------------
(a) The FormMaker Companies do not currently use nor have they previously
used in the development, production or marketing of their products and services
any Copyrights, Patents or Trademarks except for those listed in the FormMaker
Disclosure Schedule. The FormMaker Companies own or have the lawful right to
use all material Intellectual Property that is used in the operation of the
Business in the ordinary course or otherwise. All of the Intellectual Property
listed in the FormMaker Disclosure Schedule is owned by the FormMaker Companies
free and clear of any Encumbrances, or used pursuant to an agreement that is
described in the FormMaker Disclosure Schedule. Except in such cases that would
not have a Material Adverse Effect, the FormMaker Companies do not infringe upon
or unlawfully or wrongfully use any Intellectual Property rights owned or
claimed by another Person, and the FormMaker Companies are not in Default, and
have not received any notice of any claim of infringement or any other claim or
proceeding, with respect to any such Intellectual Property. Except for any
rights under written licenses or other written Contracts, no current or former
employee of the FormMaker Companies and no other Person owns or has any
proprietary, financial or other interest, direct or indirect, in whole or in
part, and including any right to royalties or other compensation, in any of the
Intellectual Property, or in any application therefor.
(b) The FormMaker Disclosure Schedule contains a complete list of all of
the computer software products sold, licensed, distributed, marketed, used or
under development by the FormMaker Companies (the "FormMaker Companies Software
Products"). Each of the FormMaker Companies Software Products performs
substantially in accordance with the specifications, documentation and other
written material used in connection with the sale, license, distribution,
marketing or use thereof and is free of defects in programming and operation
except such defects as would not materially and adversely affect the use of the
respective FormMaker Companies Software Products for their intended purposes.
(c) Except as specified in the FormMaker Disclosure Schedule, all right,
title and
-39-
interest in and to the FormMaker Companies Software Products is owned by the
FormMaker Companies, free and clear of all Encumbrances. No government funding
was utilized in the development of any of the FormMaker Companies Software
Products. Except for such violations that would not have a Material Adverse
Effect, the sale, license, distribution, marketing or use of the FormMaker
Companies Software Products by the FormMaker Companies do not violate any rights
of any other Person, and the FormMaker Companies have not received any
communication alleging such a violation. Except as specified in the FormMaker
Disclosure Schedule, the FormMaker Companies do not have any obligation to
compensate any Person for the sale, license, distribution, marketing or use of
the FormMaker Companies Software Products. Other than as set forth in the
FormMaker Disclosure Schedule, the FormMaker Companies have not granted to any
other Person any license, option or other right in or to any of the FormMaker
Companies Software Products, except for End-User Licenses and Distributor
Licenses granted by the FormMaker Companies pursuant to license agreements.
Correct and complete copies of such Distributor Licenses have been or will be
delivered to Image Sciences in Second Stage Due Diligence.
(d) Except as specified in the FormMaker Disclosure Schedule, the FormMaker
Companies do not have any obligation owing to any Person to maintain, modify,
improve or upgrade any of the FormMaker Software Products, except for any such
obligation set forth in an End-User License, a Distributor License or under a
customer-specific services agreement and such other obligations as would not
have a Material Adverse Effect.
(e) All employees and consultants of the FormMaker Companies who are
involved in the design, review, evaluation or development of Intellectual
Property have executed a Confidentiality Agreement. To FormMaker's knowledge,
(i) none of the Confidential Information has been used, divulged or appropriated
(A) for the benefit of any Person other than the FormMaker Companies or a
customer thereof or (B) otherwise to the detriment of the FormMaker Companies,
(ii) except as specified in the FormMaker Disclosure Schedule, none of such
employees or consultants of the FormMaker Companies are subject to any
contractual or legal restrictions that might interfere with the use of his or
her best efforts to promote the interests of the FormMaker Companies, (iii) no
employee or consultant of FormMaker has used any other Persons' trade secrets or
other information that is confidential in the course of his or her work for
FormMaker, and (iv) no employee or consultant of the FormMaker Companies are, or
are currently expected to be, in Default under any term of any employment
contract, agreement or arrangement relating to the Intellectual Property, or any
Confidentiality Agreement or any other Contract or any restrictive covenant
relating to the Intellectual Property, or the development or exploitation
thereof.
(f) The FormMaker Companies have kept secret and has not disclosed the
source codes for the FormMaker Companies Software Products to any Person other
than to those Persons identified in the FormMaker Disclosure Schedule and to
certain employees of the FormMaker Companies.
5.20 Employee Relations. The FormMaker Companies are not (a) except
------------------
as specified in
-40-
the FormMaker Disclosure Schedule, a party to, involved in or, to FormMaker's
knowledge, threatened by, any labor dispute or unfair labor practice charge, or
(b) currently negotiating any collective bargaining agreement. The FormMaker
Companies have not experienced during the last three years any work stoppage.
FormMaker has delivered to Image Sciences a complete and correct list of the
names and salaries, bonus and other cash compensation of all employees
(including officers) of the FormMaker Companies whose cash compensation was for
1995 or is expected to be for 1996 at least $80,000.
5.21 ERISA.
-----
(a) The FormMaker Disclosure Schedule contains a complete list of
all Benefit Plans sponsored or maintained by the FormMaker Companies or under
which the FormMaker Companies are obligated. FormMaker has delivered to Image
Sciences (i) accurate and complete copies of all such Benefit Plan documents and
all other material documents relating thereto, including (if applicable) all
summary plan descriptions, summary annual reports and insurance contracts, (ii)
accurate and complete detailed summaries of all unwritten Benefit Plans, (iii)
accurate and complete copies of the most recent financial statements and
actuarial reports with respect to all such Benefit Plans for which financial
statements or actuarial reports are required or have been prepared and (iv)
accurate and complete copies of all annual reports for all such Benefit Plans
(for which annual reports are required) prepared within the last three years.
Each such Benefit Plan providing benefits that are funded through a policy of
insurance is indicated by the word "insured" placed by the listing of the
Benefit Plan in the FormMaker Disclosure Schedule.
(b) All such Benefit Plans conform (and at all times have conformed)
in all material respects to, and are being administered and operated (and have
at all times been administered and operated) in material compliance with, the
requirements of ERISA, the Code and all other applicable Laws. All returns,
reports and disclosure statements required to be made under ERISA and the Code
with respect to all such Benefit Plans have been timely filed or delivered.
There have not been any "prohibited transactions," as such term is defined in
Section 4975 of the Code or Section 406 of ERISA involving any of the Benefit
Plans, that could subject FormMaker to any material penalty or tax imposed under
the Code or ERISA .
(c) Except as is set forth in the FormMaker Disclosure Schedule, any
such Benefit Plan that is intended to be qualified under Section 401(a) of the
Code and exempt from tax under Section 501(a) of the Code has been determined by
the Internal Revenue Service to be so qualified or an application for such
determination is pending. Any such determination that has been obtained remains
in effect and has not been revoked, and with respect to any application that is
pending, the Company has no reason to suspect that such application for
determination will be denied. Nothing has occurred since the date of any such
determination, or if there has been no such determination, there is no
occurrence that is reasonably likely to affect adversely such qualification or
the tax exempt status of the plan and the related trust, or result in the
imposition of excise taxes or income taxes on unrelated business income under
the Code or ERISA with respect to any such Benefit Plan.
-41-
(d) Neither the FormMaker Companies nor any person or entity that,
together with the FormMaker Companies, is treated as a Common Controlled Entity,
sponsors a defined benefit plan subject to Title IV of ERISA, or has a current
or contingent obligation to contribute to any multiemployer plan (as defined in
Section 3(37) of ERISA) and neither they nor their predecessors have ever
contributed to a multiemployer plan. The FormMaker Companies do not have any
liability with respect to any employee benefit plan (as defined in Section 3(3)
of ERISA) other than with respect to such Benefit Plans.
(e) There are no pending or, to the knowledge of FormMaker,
threatened claims by or on behalf of any such Benefit Plans, or by or on behalf
of any individual participants or beneficiaries of any such Benefit Plans,
alleging any breach of fiduciary duty on the part of the FormMaker Companies or
any of their officers, directors or employees under ERISA or any other
applicable regulations, or claiming benefit payments (other than those made in
the ordinary operation of such plans), nor is there, to the knowledge of
FormMaker, any basis for such claim. The Benefit Plans are not the subject of
any pending (or to the knowledge of FormMaker, any threatened) investigation or
audit by the Internal Revenue Service, the Department of Labor or the PBGC.
(f) The FormMaker Companies have timely made all required
contributions under such Benefit Plans including the payment of any premiums
payable to the PBGC and other insurance premiums.
(g) With respect to any such Benefit Plan that is a Welfare Plan and
except as specified in the FormMaker Disclosure Schedule, (i) each Welfare Plan
for which contributions are claimed by the FormMaker Companies as deductions
under any provision of the Code is in material compliance with all applicable
requirements pertaining to such deduction, (ii) with respect to any welfare
benefit fund (within the meaning of Section 419 of the Code) related to a
Welfare Plan, there is no disqualified benefit (within the meaning of Section
4976(b) of the Code) that would result in the imposition of a tax under Section
4976(a) of the Code, (iii) any Benefit Plan that is a group health plan (within
the meaning of Section 4980B(g)(2) of the Code) complies, and in each and every
case has complied, with all of the applicable material requirements of Section
4980B of the Code, ERISA, Title XXII of the Public Health Service Act and the
Social Security Act, and (iv) all Welfare Plans may be amended or terminated at
any time on or after the Closing Date. Except as specified in the FormMaker
Disclosure Schedule, no Benefit Plan provides any health, life or other welfare
coverage to employees of the FormMaker Companies beyond termination of their
employment with the FormMaker Companies by reason of retirement or otherwise,
other than coverage as may be required under Section 4980B of the Code or Part 6
of ERISA, or under the continuation of coverage provisions of the laws of any
state or locality.
(h) Except as otherwise set forth in the FormMaker Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment to be made by the FormMaker Companies or a Common
-42-
Controlled Entity (including, without limitation, severance, unemployment
compensation, golden parachute (as defined in Code Section 280G or otherwise))
becoming due to any employee or former employee, officer or director, or (ii)
increase or vest any benefits payable under any Benefit Plan.
(i) Except as otherwise set forth in the FormMaker Disclosure
Schedule, any amount that could be received (whether in cash or property or the
vesting of property) as a result of any of the transactions contemplated by this
Agreement by any employee, officer or director of the FormMaker Companies or any
of its subsidiaries who is a "disqualified individual" (as such term is defined
in proposed Treasury Regulation Section 1.280G-1) under any employment,
severance or termination agreement, other compensation arrangement or Benefit
Plan currently in effect would not be characterized as an "excess parachute
payment" (as such term is defined in Section 280(b)(1) of the Code).
5.22 Corporate Records. The minute books of each of the FormMaker
-----------------
Companies contain complete, correct and current copies of its Charter Documents
and bylaws and of all minutes of meetings, resolutions and other proceedings of
its Board of Directors and shareholders. The stock record books of the FormMaker
Companies are complete, correct and current.
5.23 Absence of Certain Changes. Except as contemplated by this
--------------------------
Agreement, since the Balance Sheet Date, the FormMaker Companies have conducted
the FormMaker Companies Business in the ordinary course and there has not been
with respect to the FormMaker Companies Business:
(a) any change that has had or is reasonably likely to have a
Material Adverse Effect;
(b) any distribution or payment declared or made in respect of
its capital stock by way of dividends, purchase or redemption of shares
or otherwise;
(c) any increase in the compensation payable or to become
payable to any director, officer, employee or agent, except for increases
for non-officer employees made in the ordinary course of business, nor
any other change in any employment or consulting arrangement;
(d) any sale, assignment or transfer of material Assets, or
any additions to or transactions involving any Assets, other than those
made in the ordinary course of business;
(e) other than in the ordinary course of business, any waiver
or release of any claim or right or cancellation of any debt held; or
-43-
(f) any payments to any Affiliate of the FormMaker Companies,
except as specified in the FormMaker Disclosure Schedule.
5.24 Previous Sales; Warranties. The FormMaker Companies have not
--------------------------
breached any express or implied warranties in connection with the sale or
distribution of goods or the performance of services, except for breaches that,
individually and in the aggregate, would not have a Material Adverse Effect.
5.25 Customers. The FormMaker Companies have used their reasonable
---------
business efforts to maintain and currently maintains, good working relationships
with all of their customers. The FormMaker Disclosure Schedule contains with
respect to each of the years ended December 31, 1993, 1994, 1995 and the eleven
month period ended November 30, 1996 a list of the ten customers (with names
omitted) that were the largest dollar volume customers of products or services,
or both, sold by the FormMaker Companies for each such year. Except as specified
in the FormMaker Disclosure Schedule, none of such customers has given the
FormMaker Companies notice terminating, canceling or threatening to terminate or
cancel any Contract or relationship with the FormMaker Companies.
5.26 Finder's Fees. No Person retained by FormMaker is or will be
-------------
entitled to any commission or finder's or similar fee in connection with the
Transactions.
5.27 Additional Information. The FormMaker Disclosure Schedule
----------------------
accurately lists the following:
(a) the names of all officers and directors of FormMaker;
(b) the names and addresses of every bank or other financial
institution in which FormMaker maintains an account (whether checking,
saving or otherwise), lock box or safe deposit box, and the account
numbers and names of Persons having signing authority or other access
thereto;
(c) the names of all Persons authorized to borrow money or
incur or guarantee indebtedness on behalf of FormMaker;
(d) the names of any Persons holding powers of attorney from
FormMaker and a summary statement of the terms thereof; and
(e) all names under which FormMaker has conducted any part of
its Business or which it has otherwise used at any time during the past
five years.
5.28 Accuracy of Information. No representation or warranty by
-----------------------
FormMaker in any Transaction Document, and no information contained therein or
otherwise delivered by or on behalf
-44-
of FormMaker to Image Sciences in connection with the Transactions, including
the FormMaker Financial Statements, contains any untrue statement of a material
fact or omits to state any material fact necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances under which such statements were made.
5.29 Xxxx-Xxxxx-Xxxxxx Act. Neither (i) FormMaker nor (ii) any
---------------------
Person that may be considered an "ultimate parent" of FormMaker for purposes of
the HSR Act, has (x) annual net sales exceeding $100 million as of the last
annual statement of income and expense, or (y) total assets exceeding $100
million in value as stated on the last regularly prepared balance sheet.
6. Joint Covenants.
---------------
6.1 Registration Statement.
----------------------
(a) The Company shall prepare and file with the SEC as soon as
reasonably practicable after the date hereof (i) a registration statement on
Form S-4 under the Securities Act for purposes of registering the Closing Common
Shares and the shares of Company Class A Common Stock and Company Class B Common
Stock issuable upon exercise of the Company Options and the Company Warrants
received by Holders in the Merger (the "Registered Securities") and (ii) a joint
proxy statement to be distributed by Image Sciences and FormMaker in connection
with the Image Sciences Special Meeting and the FormMaker Special Meeting (the
"Joint Proxy Statement"). Such registration statement on Form S-4 and any
amendments or supplements thereto are referred to herein as the "Form S-4
Registration Statement" or the "Registration Statement." The Company will use
commercially reasonable efforts to have the Registration Statement declared
effective under the Securities Act as promptly as practicable after such filing,
and Image Sciences and FormMaker shall use commercially reasonable efforts to
cooperate with the Company to cause the Registration Statement to be declared
effective. The Company, FormMaker, Image Sciences, the Texas Sub, the Georgia
Sub and Image Sciences (the "Corporate Parties") shall also take such action as
may be reasonably required to cause the Registered Securities to be registered
or to obtain an exemption from registration under applicable state "blue sky" or
securities laws. In connection with the foregoing, Image Sciences and FormMaker
will furnish to the Company all information concerning Image Sciences and
FormMaker as the Company or its counsel may reasonably request for inclusion in
the Registration Statement.
(b) The Company covenants that the Registration Statement (i) will
comply in all material respects with the applicable provisions of the Securities
Act and the rules and regulations promulgated thereunder and (ii) will not at
the time such document is filed with the SEC and at all times after it becomes
effective under the Securities Act and until the Closing contain any untrue
statement of any material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, or necessary to
correct any statement in any earlier filing with the SEC of the Registration
Statement; provided, however, that no representation, covenant or agreement is
-45-
made by the Company with respect to information supplied by or on behalf of
Image Sciences for inclusion in the Registration Statement.
(c) Each of Image Sciences and FormMaker covenants that the
Registration Statement as it relates to them (i) will comply in all material
respects with the applicable provisions of the Securities Act and the rules and
regulations promulgated thereunder and (ii) will not at the time such document
is filed with the SEC and at all times after it becomes effective under the
Securities Act and until the Closing, contain any untrue statement of any
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, or necessary to
correct any statement in any earlier filing with the SEC of the Registration
Statement.
6.2 Financial Statements. Each of FormMaker and Image Sciences shall
--------------------
deliver to the other party financial statements prepared in accordance with GAAP
consistently applied for the twelve-month period ending December 31, 1996.
6.3 Due Diligence. Each of FormMaker and Image Sciences shall deliver
to the other party all the information listed in Schedule 6.3 not previously
provided to such other party (the "Second Stage Due Diligence Materials") on the
day following the date of this Agreement and shall deliver an updated Disclosure
Schedule incorporating information from such Second Stage Due Diligence
Materials. If either FormMaker or Image Sciences believes in good faith that any
information contained in such Second Stage Due Diligence Materials reveals
matters which could have a Material Adverse Effect on the combined entity
following the Merger, then such party shall have the right to terminate this
Agreement as provided in Section 12.1(d).
7. Covenants of FormMaker and the Company.
--------------------------------------
7.1 Fulfillment of Closing Conditions. At and prior to the Closing,
---------------------------------
FormMaker shall use commercially reasonable efforts to fulfill, and to cause the
Company to fulfill, the conditions specified in Sections 9 and 10 to the extent
that the fulfillment of such conditions is within its control, except that
FormMaker shall not be required to pay or expend any material amount of funds
that may be necessary to correct any Default under the representations and
warranties of the Company or FormMaker or to fulfill any of such conditions. In
connection with the foregoing, FormMaker will, and will cause the Company to,
(a) refrain from any actions that would cause any of its representations and
warranties to be inaccurate in any material respect as of the Closing, (b)
execute and deliver the agreements and other documents referred to in Section
10, (c) comply in all material respects with all applicable Laws in connection
with its execution, delivery and performance of this Agreement and the
Transactions, (d) use commercially reasonable efforts to obtain in a timely
manner all necessary waivers, consents and approvals required under any Laws,
Contracts or otherwise, including any FormMaker Required Consents, and (e) use
commercially reasonable efforts to take, or cause to be taken, all other actions
and to do, or cause to be done, all other things reasonably necessary, proper or
advisable to consummate and make effective as
-46-
promptly as practicable the Transactions. FormMaker shall give Image Sciences
prompt written notice of any event or development that occurs or fails to occur
(and that is known to FormMaker) that gives FormMaker reason to believe that the
conditions set forth in Sections 9 and 10 will not be satisfied prior to the
Termination Date.
7.2 Conduct of the Business. Except as disclosed in the FormMaker
-----------------------
Disclosure Schedule, FormMaker shall not, and shall cause the Company, not to,
do any of the following prior to the Closing unless waived by Image Sciences in
writing: amend its Charter Documents or bylaws; merge or consolidate with, or
purchase substantially all of the assets of, or otherwise acquire any business
of, any corporation, partnership or other business organization or business
division thereof; split, combine or reclassify its outstanding capital stock or
issue any additional capital stock (except for capital stock issuable upon
conversion or exercise of currently outstanding securities, or options, warrants
or other rights to purchase capital stock, or securities convertible into
capital stock; pay any dividends or redeem any of its outstanding capital stock;
enter into any Contract or otherwise incur any Liability outside the ordinary
course of business unless the executory obligation on the part of FormMaker in
any such individual case is less than $100,000; incur any additional
indebtedness for borrowed money outside the ordinary course of business;
discharge or satisfy any Encumbrance or pay or satisfy any material Liability
except pursuant to the terms thereof; compromise, settle or otherwise adjust any
material claim or litigation unless such compromise, settlement or adjustment
involves a sum of not more than $100,000 in excess of reserves; make capital
expenditures of more than $100,000 in the aggregate; or modify existing benefit
plans or enter into new employment agreements. Nothing contained in this
Agreement shall give Image Sciences, directly or indirectly, the right to
control or direct FormMaker's operations prior to the Effective Time.
7.3 Access to Information. FormMaker shall, and shall cause the
---------------------
Company to, give Image Sciences and its representatives (including Image
Sciences' accountants, counsel and employees, each, an "Image Sciences
Representative"), upon reasonable notice and during normal business hours, full
access to the properties, contracts, books, records and affairs of FormMaker and
the Company. FormMaker shall cause its officers and employees, and the officers
and employees of the Company, to furnish to Image Sciences all documents,
records and information as Image Sciences may reasonably request.
7.4 No Solicitation. From and after the date hereof, FormMaker,
---------------
without the prior written consent of Image Sciences, will not, and will not
authorize or permit any of the FormMaker Representatives to, directly or
indirectly, solicit, initiate or encourage (including by way of furnishing
information) or take any other action to facilitate knowingly any inquiries or
the making of any proposal that constitutes or may reasonably be expected to
lead to an Acquisition Proposal from any Person, or engage in any discussion or
negotiations relating thereto or accept any Acquisition Proposal. FormMaker
shall notify Image Sciences orally and in writing of any such inquiries, offers
or proposals (including the terms and conditions of any such proposal and the
identity of the person making it), within 24 hours of the receipt thereof, shall
keep Image Sciences informed of the status and details of any such inquiry,
offer or proposal. As used herein,
-47-
"Acquisition Proposal" means a proposal or offer (other than pursuant to this
Agreement) for a tender or exchange offer, merger, consolidation or other
business combination involving, or any proposal to acquire in any manner a
substantial equity interest in, or all or substantially all of the assets of,
(i) FormMaker, in the case of this Section 7.4, and (ii) Image Sciences, in the
case of Section 8.4.
7.5 The FormMaker Special Meeting. In connection with the FormMaker
-----------------------------
Special Meeting, FormMaker shall (a) deliver to its shareholders as promptly as
practicable the Joint Proxy Statement and all other materials for such meeting,
(b) use all reasonable efforts to obtain the necessary approvals of its
shareholders for the Merger and this Agreement and (c) otherwise comply with all
legal requirements applicable to such meeting.
7.6 Rule 145 Affiliates. Prior to the Closing, FormMaker shall
-------------------
identify in a letter to the Company all Persons who might, at the time of the
FormMaker Special Meeting, be deemed to be "affiliates" of the Company for the
purposes of Rule 145 under the Securities Act (the "Securities Act Affiliates").
FormMaker shall use commercially reasonable efforts to cause each Person who is
identified as a possible Securities Act Affiliate to enter into prior to the
Effective Time an agreement in form and substance reasonably acceptable to the
Company pursuant to which each such Person acknowledges such Person's
responsibilities as a Securities Act Affiliate.
7.7 Stock Option Plan. The Company will adopt an employee stock option
-----------------
plan (the "New Option Plan") substantially identical to the stock option plan
that was approved by the Parties on the date hereof covering 400,000 shares of
Company Class A Common Stock. The Company will file a Registration Statement on
Form S-8 under the Securities Act for purposes of registering shares of Company
Class A Common Stock issuable upon exercise of Company Options as promptly as
practicable following consummation of the Qualified Rights Offering.
7.8 Expenses. FormMaker (or the Company if the Merger becomes
--------
effective) shall pay all of the legal, accounting and other expenses incurred by
FormMaker and the New Companies in connection with the Transactions, including
the following: fees and other costs payable with respect to the Registration
Statement (including printing); fees and expenses of Price Waterhouse LLP for
work related to FormMaker and the New Companies; any fees and expenses of legal
counsel to FormMaker and the New Companies; and fees of the Company's transfer
agent (if any).
7.9 Indemnification. For a period of 5 years from the Effective Date,
---------------
the Company shall maintain in effect Image Sciences' and FormMaker's current
directors' and officers' liability insurance covering those officers and
directors who are currently covered on the date of this Agreement by such
policies; provided, however, that the Company may substitute, for such Image
-------- -------
Sciences or FormMaker policies, policies with at least the same coverage
containing terms and conditions which are no less advantageous to the officers
and directors and provided that said substitution does not result in any gaps or
lapses in coverage with respect to matters occurring prior to the Effective
Date. For a period of 5 years, the Company shall not amend any provision of
-48-
FormMaker's or Image Sciences' Charter Documents providing for indemnification
of officers of directors and shall also assume the indemnification obligations
of Image Sciences and FormMaker with respect to such matters. The provisions of
this Section 7.9 are intended to be for the benefit of, and shall be enforceable
by, each officer and director and his or her heirs and representatives.
7.10 New Bank Loan. The Company shall use commercially reasonable
-------------
efforts to obtain a line of credit from a bank for $10 million (the "New Bank
Loan") on terms substantially similar to the existing FormMaker line of credit
with NationsBank of Georgia, National Association. If the Company cannot obtain
the New Bank Loan on such terms, FormMaker shall use commercially reasonable
efforts to amend its line of credit, or obtain appropriate waivers, to permit
the Transactions and to allow the Company to draw on the entire line of credit
for working capital purposes.
7.11 Related Parties. FormMaker shall cause the Company to perform
---------------
its obligations hereunder and under any other Transaction Document.
8. Covenants of Image Sciences.
---------------------------
8.1 Fulfillment of Closing Conditions. At and prior to the Closing,
---------------------------------
Image Sciences shall use commercially reasonable efforts to fulfill the
conditions specified in Sections 9 and 11 to the extent that the fulfillment of
such conditions is within its control, except that Image Sciences shall not be
required to pay or expend any material amount of funds that may be necessary to
correct any Default under the representations and warranties of Image Sciences
or to fulfill any of such conditions. In connection with the foregoing, Image
Sciences will (a) refrain from any actions that would cause any of its
representations and warranties to be inaccurate in any material respect as of
the Closing, (b) execute and deliver the agreements and other documents referred
to in Section 11, (c) comply in all material respects with all applicable Laws
in connection with its execution, delivery and performance of this Agreement and
the Transactions, (d) use commercially reasonable efforts to obtain in a timely
manner all necessary waivers, consents and approvals required under any Laws,
Contracts or otherwise, including any Image Sciences Required Consents, and
(e) use commercially reasonable efforts to take, or cause to be taken, all other
actions and to do, or cause to be done, all other things reasonably necessary,
proper or advisable to consummate and make effective as promptly as practicable
the Transactions. Image Sciences shall give FormMaker prompt written notice of
any event or development that occurs or fails to occur (and that is known to
Image Sciences) that gives Image Sciences reason to believe that the conditions
set forth in Sections 9 and 11 will not be satisfied prior to the Termination
Date.
8.2 Conduct of the Business. Except as disclosed in the Image Sciences
-----------------------
Disclosure Schedule, Image Sciences shall not do any of the following prior to
the Closing unless waived by FormMaker in writing: amend its Charter Documents
or bylaws; merge or consolidate with, or purchase substantially all of the
assets of, or otherwise acquire any business of, any corporation, partnership or
other business organization or business division thereof; split, combine or
reclassify
-49-
its outstanding capital stock or issue any additional capital stock (except for
capital stock issuable upon conversion or exercise of currently outstanding
securities) or options, warrants or other rights to purchase capital stock or
securities convertible into capital stock; pay any dividends or redeem any of
its outstanding capital stock; enter into any Contract or otherwise incur any
Liability outside the ordinary course of business unless the executory
obligation on the part of Image Sciences in any such individual case is less
than $100,000; incur any additional indebtedness for borrowed money outside the
normal course of business; discharge or satisfy any Encumbrance or pay or
satisfy any material Liability except pursuant to the terms thereof; compromise,
settle or otherwise adjust any material claim or litigation unless such
compromise, settlement or adjustment involves a sum of not more than $100,000 in
excess of reserves; or make any capital expenditures of more than $100,000 in
the aggregate; or modify existing benefit plans or enter into new employment
agreements. Nothing contained in this Agreement shall give FormMaker, directly
or indirectly, the right to control or direct Image Sciences' operations prior
to the Effective Time.
8.3 Access to Information. Image Sciences shall give FormMaker and its
---------------------
representatives (including FormMaker's accountants, counsel and employees, each,
a "FormMaker Representative"), upon reasonable notice and during normal business
hours, full access to the properties, contracts, books, records and affairs of
Image Sciences. Image Sciences shall cause its officers and employees to
furnish to FormMaker all documents, records and information as FormMaker may
reasonably request.
8.4 No Solicitation. From and after the date hereof, Image Sciences,
---------------
without the prior written consent of FormMaker, will not, and will not authorize
or permit any of the Image Sciences Representatives to, directly or indirectly,
solicit, initiate or encourage (including by way of furnishing information) or
take any other action to facilitate knowingly any inquiries or the making of any
proposal that constitutes or may reasonably be expected to lead to an
Acquisition Proposal from any Person, or engage in any discussion or
negotiations relating thereto or accept any Acquisition Proposal. Image
Sciences shall notify FormMaker orally and in writing of any such inquiries,
offers or proposals (including the terms and conditions of any such proposal and
the identity of the person making it), within 24 hours of the receipt thereof,
shall keep FormMaker informed of the status and details of any such inquiry,
offer or proposal, and shall give FormMaker five days' advance notice of any
agreement to be entered into with, or any information to be supplied to, any
Person making such inquiry, offer or proposal.
8.5 Image Sciences Special Meeting. In connection with the Image
------------------------------
Sciences Special Meeting, Image Sciences shall (a) deliver to its shareholders
as promptly as practicable the Joint Proxy Statement and all other materials
required for such meeting, (b) use all reasonable efforts to obtain the
necessary approvals by its shareholders of the Merger and this Agreement and
(c) otherwise comply with all legal requirements applicable to such meeting.
8.6 Rule 145 Affiliates. Prior to the Closing, Image Sciences shall
-------------------
identify in a letter to the Company all Persons who might, at the time of the
Image Sciences Special Meeting, be deemed
-50-
to be Securities Act Affiliates. Image Sciences shall use its commercially
reasonable efforts to cause each Person who is identified as a possible
Securities Act Affiliate to enter into prior to the Effective Time an agreement
in form and substance reasonably acceptable to the Company pursuant to which
each such Person acknowledges such Person's responsibilities as a Securities Act
Affiliate.
8.7 Expenses. Image Sciences, or the Company if the Merger becomes
--------
effective, shall pay all of the legal, accounting and other expenses incurred by
Image Sciences in connection with the Transactions, including the following:
fees and other costs payable with respect to providing information for inclusion
in the Registration Statement; fees and expenses of Price Waterhouse LLP for
work related to Image Sciences; and fees and expenses of legal counsel to Image
Sciences.
8.8 Image Sciences Closing Transactions. Image Sciences shall not
-----------------------------------
distribute to its stockholders and option holders more than $8,000,000 in
connection with the Image Sciences Closing Transactions.
9. Conditions Precedent to Obligations of All Parties.
--------------------------------------------------
All obligations of the Parties to consummate the Transactions are subject
to the satisfaction of each of the following conditions:
9.1 Legality. No Law or Court Order shall have been enacted, entered,
--------
promulgated or enforced by any court or governmental authority that is in effect
and has the effect of (a) making the Merger illegal or otherwise prohibiting the
consummation of the Merger or (b) creating a Material Adverse Effect on Image
Sciences or FormMaker.
9.2 Registration Statement. The Registration Statement shall have become
----------------------
effective, no stop order suspending the effectiveness of the Registration
Statement shall then be in effect, and no proceedings for that purpose shall
then be threatened by the SEC or shall have been initiated by the SEC and not
concluded or withdrawn. All state securities or blue sky permits or approvals
required to carry out the Transactions shall have been received.
9.3 Merger. The Merger shall be effective in the States of Texas and
------
Georgia.
9.4 Approval by Shareholders.
------------------------
(a) The Merger shall have been approved by the Image Sciences Shareholders
in accordance with the TBCA and Dissenting Shares shall not represent more than
8% of the total Image Sciences Common Stock outstanding immediately prior to the
Effective Time.
(b) The Merger shall have been approved by the FormMaker Shareholders in
accordance with the GBCC and Dissenting Shares shall not represent more than 8%
of the total FormMaker Common Stock outstanding immediately prior to the
Effective Time.
-51-
9.5 Appointment of Directors and Officers. The Company, FormMaker and
-------------------------------------
Image Sciences shall each have (a) caused its Board of Directors to consist of a
total of seven members, (b) obtained any necessary resignations of incumbent
directors or officers, (c) elected the following persons to the respective
Boards of Directors of the Company, FormMaker and Image Sciences: three persons
designated by Image Sciences, three persons designated by the SG/TL
Stockholders, and one independent person designated mutually by Image Sciences
and the SG/TL Stockholders; and (d) appointed the following persons to the
following offices: Xxxxxxx X. Xxxxxxxx - President and Chief Executive Officer,
Xxxxxx X. Xxxxxxx - Chairman of the Board.
9.6 Administrative Services Agreements. The administrative services
----------------------------------
agreements between Safeguard and FormMaker and Safeguard and MicroDynamics shall
have been terminated.
10. Conditions Precedent to Obligations of Image Sciences.
-----------------------------------------------------
All obligations of Image Sciences to consummate the Transactions are
subject to the satisfaction (or waiver by Image Sciences) prior thereto of each
of the following conditions:
10.1 Representations and Warranties. The representations and
------------------------------
warranties of FormMaker contained in this Agreement shall be true and correct on
the date hereof and (except to the extent such representations and warranties
speak as of an earlier date) shall also be true and correct on and as of the
Closing Date, except for changes permitted under Section 7.2 hereof or otherwise
contemplated by this Agreement, with the same force and effect as if made on and
as of the Closing Date; provided, however, that for purposes of this Section
10.1 only, such representations and warranties shall be deemed to be true and
correct unless the failure or failures of such representations and warranties to
be so true and correct (without regard to materiality qualifiers contained
therein) results or would reasonably be expected to result in a Material Adverse
Effect on the Company.
10.2 Agreements, Conditions and Covenants. FormMaker shall have
------------------------------------
performed or complied in all material respects with all agreements, conditions
and covenants required by this Agreement to be performed or complied with by it
on or before the Effective Time.
10.3 Certificates. Image Sciences shall have received a certificate
------------
of an executive officer of FormMaker to the effect set forth in Sections 10.1
and 10.2.
10.4 Financial Performance. FormMaker shall have delivered to Image
---------------------
Sciences an income statement in accordance with Section 6.2 that shows for the
period covered thereby before income taxes a loss of not more than $1,251,000
and revenues of not less than $20,000,000.
10.5 Required Consents. FormMaker shall have obtained the FormMaker
-----------------
Required Consents unless the failure to have obtained any such consent would not
result or reasonably be expected to result in a Material Adverse Effect on the
Company.
-52-
10.6 Ancillary Documents. FormMaker and the New Companies shall have
-------------------
tendered executed copies of the respective Transaction Documents to which they
are intended to be parties. The Company and the SG/TL Stockholders shall have
tendered executed copies of the Stockholders' Agreement.
10.7 Legal Opinion. FormMaker shall have tendered a legal opinion of
-------------
Xxxxxx, Xxxxx & Xxxxxxx LLP, counsel to FormMaker, in the form of that agreed to
as of the date hereof.
11. Conditions Precedent to Obligations of FormMaker.
------------------------------------------------
All obligations of FormMaker to consummate the Transactions are subject to
the satisfaction (or waiver by FormMaker) prior thereto of each of the following
conditions:
11.1 Representations and Warranties. The representations and
------------------------------
warranties of Image Sciences contained in this Agreement shall be true and
correct on the date hereof and (except to the extent such representations and
warranties speak as of an earlier date) shall also be true and correct on and as
of the Closing Date, except for changes permitted under Section 8.2 hereof or
otherwise contemplated by this Agreement, with the same force and effect as if
made on and as of the Closing Date; provided, however, that for purposes of this
Section 11.1 only, such representations and warranties shall be deemed to be
true and correct unless the failure or failures of such representations and
warranties to be so true and correct (without regard to materiality qualifiers
contained therein) results or would reasonably be expected to result in a
Material Adverse Effect on the Company.
11.2 Agreements, Conditions and Covenants. Image Sciences shall have
------------------------------------
performed or complied in all material respects with all agreements, conditions
and covenants required by this Agreement to be performed or complied with by
them on or before the Effective Time.
11.3 Certificates. FormMaker shall have received a certificate of an
------------
executive officer of Image Sciences to the effect set forth in Sections 11.1 and
11.2 with respect to Image Sciences.
11.4 Financial Performance. Image Sciences shall have delivered to
---------------------
FormMaker an income statement in accordance with Section 6.2 that shows for the
period covered thereby before income taxes income of not less than $3,200,000
and revenues of not less than $11,000,000.
11.5 Required Consents. Image Sciences shall have obtained, without
-----------------
any modification that FormMaker deems unacceptable, the Image Sciences Required
Consents unless the failure to have obtained any such consent would not result
or reasonably be expected to result in a Material Adverse Change on the Company.
11.6 Ancillary Documents. Image Sciences shall have tendered executed
-------------------
copies of the Transaction Documents to which it is intended to be a party.
Xerox shall have tendered an executed copy of the Stockholders' Agreement.
-53-
11.7 Legal Opinion. Image Sciences shall have tendered a legal opinion
-------------
of Xxxxxx & Xxxxxxx, counsel to Image Sciences, in the form of that agreed to as
of the date hereof.
12. Termination.
-----------
12.1 Grounds for Termination. This Agreement may be terminated at any
-----------------------
time before the Effective Time, in each case as authorized by the respective
Board of Directors of Image Sciences and FormMaker:
(a) By mutual written consent of each of Image Sciences and
FormMaker;
(b) By either Image Sciences or FormMaker if the Merger shall not
have been consummated on or before June 30, 1997 (the "Termination Date");
provided, however, that the right to terminate this Agreement under this Section
12.1(b) shall not be available to any Party whose failure to fulfill any
obligation under this Agreement has been the substantial cause of, or
substantially resulted in, the failure of the Effective Time to occur on or
before the Termination Date;
(c) By either Image Sciences or FormMaker if a court of competent
jurisdiction or governmental, regulatory or administrative agency or commission
shall have issued a Court Order (which Court Order the Parties shall use
commercially reasonable efforts to lift) that permanently restrains, enjoins or
otherwise prohibits the Transactions, and such Court Order shall have become
final and nonappealable;
(d) By either Image Sciences or FormMaker upon notice in writing to
the other party prior to the tenth business day following delivery to such other
party of the Second Stage Due Diligence Materials that such materials have
revealed matters which could have a Material Adverse Effect on the combined
entity as provided in Section 6.3.
(e) By Image Sciences if FormMaker or any New Company shall have
breached, or failed to comply with, any of its obligations under this Agreement
or any representation or warranty made by FormMaker shall have been incorrect
when made, and such breach, failure or misrepresentation is not cured within 20
days after notice thereof, and in either case, any such breaches, failures or
misrepresentations result or would reasonably be expected to result in a
Material Adverse Effect on the Company;
(f) By FormMaker if Image Sciences shall have breached, or failed to
comply with, in any material respect, any of its obligations under this
Agreement or any representation or warranty made by it shall have been incorrect
in any material respect when made, and such breach, failure or misrepresentation
is not cured within 20 days after notice thereof, and in either case, any such
breaches, failures or misrepresentations result or would reasonably be expected
to result in a Material Adverse Effect on the Company.
-54-
12.2 Effect of Termination.
---------------------
(a) If this Agreement is terminated under Section 12.1 hereof, and
subject to the provisions of Section 12.1, this Agreement shall become void and
there shall be no Liability on the part of any of the Parties, except as set
forth in this Section 12.2.
(b) If this Agreement is terminated by Image Sciences under Section
12.1(e) as a result of any breach by FormMaker or any New Company, FormMaker
shall pay to Image Sciences an amount equal to all of the expenses incurred by
Image Sciences in connection with the Transactions up to a maximum of $100,000,
except in the case of a termination due to a wilful breach by FormMaker,
FormMaker shall pay to Image Sciences $500,000.
(c) If this Agreement is terminated by FormMaker under Section
12.1(f) as a result of any breach by Image Sciences, Image Sciences shall pay to
FormMaker an amount equal to all of the expenses incurred by FormMaker in
connection with the Transactions up to a maximum of $100,000, except in the case
of a termination due to a wilful breach by Image Sciences, Image Sciences shall
pay to FormMaker $500,000.
(d) If this Agreement is terminated by Image Sciences or FormMaker
under Section 12.1(b) as a result of the failure of Image Sciences to obtain all
required approvals for the Merger by its shareholders, Image Sciences shall pay
to FormMaker an amount equal to all of the expenses incurred by FormMaker in
connection with the Transactions up to a maximum of $100,000.
(e) If this Agreement is terminated by Image Sciences or FormMaker
under Section 12.1(b) as a result of the failure of FormMaker to obtain all
required approvals for the Merger by its shareholders, FormMaker shall pay to
Image Sciences an amount equal to all of the expenses incurred by Image Sciences
in connection with the Transactions up to a maximum of $100,000.
(f) The agreements contained in Sections 12.2(b), (c), (d) and (e)
are an integral part of the Transactions and constitute liquidated damages and
not a penalty. If one Party fails to promptly pay to the other any amounts due
under such Sections 12.2(b), (c), (d) and (e), the defaulting Party shall pay
the costs and expenses (including reasonable legal fees and expenses) in
connection with any action, including the filing of any lawsuit or other legal
action, taken to collect payment, together with interest on the amount of any
unpaid fee at the Prime Rate from the date such fee was required to be paid.
-55-
13. Survival of Representations, Warranties and Covenants.
-----------------------------------------------------
Except for any agreements to be performed at least in part after the
Effective Time, the representations, warranties, covenants and other agreements
contained herein and in any certificate delivered pursuant hereto shall not
survive the Effective Time.
14. Public Announcements.
--------------------
The Parties hereto will consult with each other before issuing any press
release or making any public statement with respect to this Agreement and the
Transactions and, except as may be required by applicable law or any stock
exchange regulations, no Party shall issue any such press release or make any
such public statement without the consent of the other parties hereto.
15. Contents of Agreement.
---------------------
This Agreement, together with the other Transaction Documents, sets forth
the entire understanding of the Parties hereto with respect to the Transactions
and supersedes all prior agreements or understandings among the Parties
regarding those matters.
16. Amendment, Parties in Interest, Assignment, Etc.
-----------------------------------------------
This Agreement may be amended, modified or supplemented only by a written
instrument duly executed by each of the Parties hereto. If any provision of
this Agreement shall for any reason be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision hereof, and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein. This Agreement shall be binding upon and inure to the benefit
of and be enforceable by the respective heirs, legal representatives, successors
and permitted assigns of the parties hereto. No Party hereto shall assign this
Agreement or any right, benefit or obligation hereunder. Any term or provision
of this Agreement may be waived at any time by the Party entitled to the benefit
thereof by a written instrument duly executed by such Party. The parties hereto
shall execute and deliver any and all documents and take any and all other
actions that may be deemed reasonably necessary by their respective counsel to
complete the Transactions.
17. Interpretation.
--------------
Unless the context of this Agreement clearly requires otherwise, (a)
references to the plural include the singular, the singular the plural, the part
the whole, (b) references to any gender include all genders, (c) "or" has the
inclusive meaning frequently identified with the phrase "and/or," (d)
"including" has the inclusive meaning frequently identified with the phrase "but
not limited to" and (e) references to "hereunder" or "herein" relate to this
Agreement. The section and other headings contained in this Agreement are for
reference purposes only and shall not control or affect the
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construction of this Agreement or the interpretation thereof in any respect.
Section, subsection, Schedule, Disclosure Schedule and Exhibit references are
to this Agreement unless otherwise specified. Each accounting term used herein
that is not specifically defined herein shall have the meaning given to it under
GAAP.
18. Notices.
-------
All notices that are required or permitted hereunder shall be in writing
and shall be sufficient if personally delivered or sent by mail, facsimile
message or Federal Express or other delivery service. Any notices shall be
deemed given upon the earlier of the date when received at, or the third day
after the date when sent by registered or certified mail or the day after the
date when sent by Federal Express to, the address or fax number set forth below,
unless such address or fax number is changed by notice to the other Party
hereto:
If to Image Sciences:
Image Sciences, Inc.
0000 Xxxxx Xxxxxxx Xxxxxxxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
FAX: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxx, President
with a required copy to:
Xxxxxx & Xxxxxxx
000 Xx. Xxxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
FAX: 000-000-0000
Attention: Xxxxx Xxxxxxx, Esquire
If to FormMaker:
0000 Xxxxx Xxxxx Xxxxxxx
Xxxxx 000 Xxxxx
Xxxxxxx, XX 00000
FAX: 000-000-0000
Attention: Xxxxxx Xxxxxxx, Chairman
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with a required copy to:
Xxxxxx, Xxxxx & Bockius LLP
0000 Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
FAX: 000-000-0000
Attention: Xxxxxx X. Xxxxxxxxx, Esquire
19. Governing Law; Venue. This Agreement shall be construed and interpreted
--------------------
in accordance with the laws of the State of Delaware without regard to its
provisions concerning conflict of laws. Each of the parties hereto irrevocably
submits to the exclusive jurisdiction of any court of competent jurisdiction in
the State of Delaware and the United States District Court for the District of
Delaware and any other court of the State of Delaware and the United States with
jurisdiction to hear appeals from any such courts.
20. Counterparts.
------------
This Agreement may be executed in two or more counterparts, each of which
shall be binding as of the date first written above, and all of which shall
constitute one and the same instrument. Each such copy shall be deemed an
original, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such counterpart.
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[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the day and year first written above.
DOCUCORP, INC.
By:
-------------------------------
Title:
ISI MERGER CORP.
By:
-------------------------------
Title:
FORMMAKER ACQUISITION CORP.
By:
-------------------------------
Title:
IMAGE SCIENCES, INC.
By:
-------------------------------
Title:
FORMMAKER SOFTWARE, INC.
By:
-------------------------------
Title:
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