<PAGE>
As filed with the Securities and Exchange Commission on November 13, 1998
Registration No. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
DOCUCORP INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2690838
(State of incorporation) (I.R.S. employer identification no.)
5910 North Central Expressway, Suite 800
Dallas, Texas 75206
(214) 891-6500
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
---------------------
Todd A. Rognes
Senior Vice President and Chief Financial Officer
DocuCorp International, Inc.
5910 North Central Expressway, Suite 800
Dallas, Texas 75206
(214) 891-6500
(Name, address including zip code, and telephone number, including area
code, of agents for service)
---------------------
COPY TO:
Bruce H. Hallett
Crouch & Hallett, L.L.P.
717 N. Harwood St., Suite 1400
Dallas, Texas 75201
(214) 953-0053
---------------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration
Statement.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box. / /
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box.
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Proposed Proposed
Maximum Maximum
Title of Each Amount Offering Aggregate Amount of
Class of Securities Being Price Offering Registration
Being Registered Registered Per Share(1) Price Fee
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share 720,000 shares $4.125 $2,970,000 $876.15
- --------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purposes of calculating the amount of the
registration fee pursuant to the provisions of Rule 457(c).
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
<PAGE>
The information in this prospectus is not complete and may be changed. WE
may not sell these securities until the registration statement is effective.
This prospectus is not an offer to sell these securities and we are not
soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.
<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER 13, 1998
720,000 SHARES
DOCUCORP INTERNATIONAL, INC.
COMMON STOCK
---------------------
Certain of the stockholders of DocuCorp International, Inc., a Delaware
corporation, are offering 720,000 shares of the Company's Common Stock. See
"Selling Stockholders." The Company will not receive any of the proceeds
from the stockholders' sale of their shares.
The selling stockholders may offer the shares from time to time in open
market transactions (which may include block transactions) or otherwise in
the over-the-counter market through the Nasdaq National Market, or in private
transactions at prices relating to prevailing market prices or at negotiated
prices. The selling stockholders may effect such transactions by selling the
shares to or through broker-dealers, and such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
selling stockholders and/or purchasers of the shares for whom such
broker-dealers may act as agent or to whom they sell as principal or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions). The selling stockholders and any broker-dealer
acting in connection with the sale of the shares offered hereby may be deemed
to be "underwriters" within the meaning of the Securities Act of 1933, as
amended, in which event any discounts, concessions or commissions received by
them, which are not expected to exceed those customary in the types of
transactions involved, or any profit on resales of the shares by them, may be
deemed to be underwriting commissions or discounts under the 1933 Act. The
offering of the shares will terminate upon the earlier to occur of the sale
of all the shares and March 31, 2000. The selling stockholders acquired
their shares pursuant to the Company's acquisition in March 1998 of EZPower
Systems, Inc. and Maitland Software, Inc. See "Selling Stockholders."
The Company will pay the costs, expenses and fees incurred in connection
with the registration of the shares, which are estimated to be $23,000
(excluding selling commissions and brokerage fees incurred by the selling
stockholders). The Company has also agreed to indemnify certain of the
selling stockholders against certain liabilities, including liabilities under
the 1933 Act.
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS SET FORTH HEREIN. SEE
"RISK FACTORS BEGINNING ON PAGE 3 OF THIS PROSPECTUS."
The last reported sale price of the Common Stock (trading symbol DOCC) on
the Nasdaq National Market on November 12, 1998 was $4.313 per share.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY
STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE
SECURITIES, OR DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
The date of this Prospectus is November 13, 1998.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Available Information. . . . . . . . . . . . . . . . . . . . . . . . . . 7
Documents Incorporated by Reference. . . . . . . . . . . . . . . . . . . 7
Explanatory Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Selling Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
2
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RISK FACTORS
WE WISH TO CAUTION YOU THAT THE FOLLOWING IMPORTANT FACTORS, AMONG
OTHERS, COULD CAUSE THE ACTUAL RESULTS OF DOCUCORP INTERNATIONAL TO DIFFER
MATERIALLY FROM THOSE INDICATED BY FORWARD-LOOKING STATEMENTS MADE FROM TIME
TO TIME IN NEWS RELEASES, REPORTS, PROXY STATEMENTS, REGISTRATION STATEMENTS
AND OTHER WRITTEN COMMUNICATIONS, AS WELL AS ORAL FORWARD-LOOKING STATEMENTS
MADE FROM TIME TO TIME BY REPRESENTATIVES OF THE COMPANY. EXCEPT FOR
HISTORICAL INFORMATION, THE MATTERS DISCUSSED IN SUCH ORAL AND WRITTEN
COMMUNICATIONS ARE FORWARD- LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES, INCLUDING BUT NOT LIMITED TO GENERAL BUSINESS CONDITIONS AND
THE IMPACT OF COMPETITION AND OTHER RISKS DETAILED BELOW.
SIGNIFICANT REVENUES FROM TWO INDUSTRIES
Approximately 73% of our total revenues for the year ended July 31, 1998
and 70% of our pro forma total revenues for the year ended July 31, 1997 were
derived from the insurance industry. Of these revenues, 13% and 21% of total
revenues in fiscal 1998 and 1997 (on a pro forma basis), respectively, were
derived from one customer, Prudential Insurance Company of America.
Additionally, approximately 20% and 9% of our total revenues for the year
ended July 31, 1998 and 1997 (on a pro forma basis), respectively, were
derived from the utilities industry. Our continued financial performance and
our future growth will depend upon our ability to continue to market our
products successfully in the insurance and utilities industries and to
enhance and market technologies for distribution in other markets. This will
require us to make substantial product development and distribution channel
investments. We cannot assure you that the Company will be able to continue
marketing its products successfully in the insurance and utilities industries
or will be able to introduce successfully new or existing products in markets
other than the insurance and utilities industries. In addition, we cannot
assure you that the Company will continue to sell products and services to
Prudential Insurance Company of America at historical levels. Any significant
decline in revenues derived from Prudential Insurance Company of America
could have a material adverse effect on the Company's results of operations.
TECHNOLOGICAL ADVANCES
The document automation industry has experienced and will continue to
experience rapid technological advances, changes in customer requirements and
frequent new product introductions and enhancements. Development in both
software technology and hardware capability will require the Company to make
substantial product development investments. Any failure by the Company to
anticipate or respond adequately to technological developments and customer
requirements, or any significant delays in product development or
introduction, could have a material adverse effect on the Company's results
of operations. We cannot assure you that the Company's new products or
product enhancements intended to respond to technological change or evolving
customer requirements will achieve acceptance.
SIGNIFICANT THIRD-PARTY DISTRIBUTOR RELATIONSHIP
FormMaker Software, Inc., which was acquired by the Company in
connection with the merger, historically distributed its line of Document
Automation Platform software products to the insurance industry in North
America through a marketing agreement with Policy Management Systems
Corporation. A substantial portion of the subsidiary's revenues have
historically been generated pursuant to this agreement. Additionally, the
subsidiary had granted Policy Management Systems Corporation the exclusive
right to market the Document Automation Platform software in the
property/casualty and life insurance industries. Revenues from Policy
Management Systems Corporation under this agreement for the year ended July
31, 1998 and 1997 (on a pro forma basis) were $5.5 million and $10.3 million,
respectively. Subsequent to year end, both parties agreed to terminate the
exclusive marketing agreement and enter into a new non-exclusive
3
<PAGE>
marketing agreement. The new marketing agreement between us and Policy
Management Systems Corporation allows Policy Management Systems Corporation
to market all of our software products to insurance and financial services
companies worldwide.
Policy Management Systems Corporation has provided notice of termination
of a print outsourcing agreement, effective May 1998. Revenues from Policy
Management Systems Corporation under the print outsourcing agreement for the
year ended July 31, 1998 and 1997 (on a pro forma basis) were $4.4 million
and $5.3 million, respectively. Accordingly, print outsourcing revenues are
expected to decline from fiscal year 1998 levels until we are able to replace
this business with new business.
Policy Management Systems Corporation also had a non-exclusive,
perpetual, royalty-free, worldwide license to use, execute, copy or license
the Document Automation Platform software (and derivations thereof) to
third-parties. This license was terminated upon execution of the new
non-exclusive marketing agreement.
ATTRACTION AND RETENTION OF TECHNICAL EMPLOYEES
We believe that our future success will depend in large part upon our
ability to attract, retain and motivate highly skilled employees,
particularly technical employees. The employees that are in highest demand
are software programmers, software developers, application integrators and
information technology consultants. These employees are likely to remain a
limited resource for the foreseeable future. We cannot assure you that the
Company will be able to attract and retain sufficient numbers of highly
skilled technical employees. The loss of a significant number of our
technical employees could have a material adverse effect on the Company.
YEAR 2000 COMPLIANCE
We recognize the need to ensure that our operations will not be
adversely impacted by Year 2000 software failures. Accordingly, we have been
evaluating the impact of the Year 2000 on our product line and services
offerings, as well as our internal systems and hardware. Relative to our
product line, all current versions of our products are designed to be "Year
2000" compliant. Customers using pre-Year 2000 compliant versions of our
software products are entitled to receive upgraded Year 2000 compliant
software as part of their software support agreements with us, as long as the
customer support agreements remain in force. We are in the process of
determining the extent to which our services implementations are Year 2000
compliant. To the extent we are directly involved in resolving any
non-compliant services implementations, generally the customer will be
responsible for the fees associated with such services. Accordingly, we do
not currently believe that the effects of any Year 2000 non-compliance in our
installed base of products or services offerings will result in any material
adverse impact on our business or financial condition. We cannot assure you
that the Company will not be exposed to potential claims resulting from
system problems associated with the century change.
As to our own internal software systems and hardware, the Company has
identified and is currently reviewing all key areas. We believe there is no
significant exposure to us related to the Year 2000 issue and that the
majority of identified non-compliant systems are planned to be upgraded as
part of our normal upgrade process within the next 12 months. The cost of
upgrading or replacing other non-compliant hardware and software is not
expected to be material.
COMPETITION
The market for our document automation products is intensely
competitive. We face competition from a broad range of competitors, many of
whom have greater financial, technical and marketing resources than the
Company. The Company's principal competition currently comes from systems
developed in-house by the internal MIS departments of large organizations and
direct
4
<PAGE>
competition from numerous software vendors, including Cincom Systems, Inc.,
Document Sciences Corporation (which is majority owned by Xerox Corporation),
Group 1 Software, Inc., Mobius Management Systems, Inc., and M&I Data
Services. We cannot assure you that the Company will be able to compete
effectively with such entities.
FLUCTUATIONS IN OPERATING RESULTS
We have experienced and may in the future continue to experience
fluctuations in our quarterly operating results due to the fact that sales
cycles, from initial evaluation to purchase, vary substantially from customer
to customer. Delays in the sales cycle frequently occur as a result of
competition, changes in customer personnel, overall budgets and spending
priorities. We have typically operated with little backlog for license
revenues because software products generally are shipped soon after orders
are received. As a result, license revenues in any quarter are substantially
dependent on orders booked and shipped in that quarter. The delay of customer
orders for a small number of licenses could adversely affect our license
revenues for a given fiscal quarter. We have historically earned a
substantial portion of our license revenues in the last weeks of any
particular quarter, and have historically experienced our highest license
revenues in the fourth quarter of our fiscal year. The failure to achieve
such revenues in accordance with such trends could have a material adverse
effect on the Company's financial results for each such interim period.
RISK OF SOFTWARE DEFECTS
Complex software products such as those offered by us can contain
undetected errors or performance problems. Such defects are most frequently
found during the period immediately following introduction of new products or
enhancements to existing products. Our products have from time to time
contained software errors that were discovered after commercial introduction.
We cannot assure you that performance problems or errors will not be
discovered in the Company's products in the future. Any future software
defects discovered after shipment of our products, if material, could result
in loss of revenues, delays in customer acceptance or potential product
liability.
LIMITED PROTECTION OF INTELLECTUAL PROPERTY RIGHTS
We rely on a combination of copyright and trademark laws, employee and
third-party nondisclosure agreements, and other methods to protect our
proprietary rights. Despite these precautions, it may be possible for
unauthorized third-parties to copy certain portions of our products or to
obtain and use information that we regard as proprietary. We cannot assure
you that the Company's efforts will provide meaningful protection for our
proprietary technology against others who independently develop or otherwise
acquire substantially equivalent techniques or gain access to, misappropriate
or disclose our proprietary technology.
DEPENDENCE ON SINGLE FACILITY FOR CERTAIN SERVICES
Our print outsourcing operations are performed at our facility in
Atlanta, Georgia. Since the Company only has the capability to perform this
function at a single location, a fire, flood, earthquake, power loss or other
event affecting the Company's Atlanta processing and print facility could
cause a significant interruption in our operations. We cannot assure you
that the Company's contingency plans in the event of such interruption will
prove to be adequate. Any interruption in the operations at the Company's
Atlanta processing and print facility could have a material adverse effect on
the Company's business, financial condition or results of operations.
5
<PAGE>
INTEGRATION OF OPERATING SUBSIDIARIES
FormMaker Software, Inc. and Image Sciences, Inc. completed the merger
whereby the Company came to be formed in fiscal 1997 and the Company
completed the acquisitions of EZPower Systems, Inc. and Maitland Software,
Inc. in March 1998 and subsequently commenced the integration of the
operations, facilities and management. We expect to continue substantial
integration of the respective products and services of the aforementioned
entities throughout fiscal 1999. We may not be able to complete this
integration successfully. Additionally, the merger and recent acquisitions
could have a material adverse effect on our relationships with customers,
distributors or suppliers. The operating history of our subsidiaries on a
stand-alone basis cannot necessarily be regarded as indicative of our
prospects on a consolidated basis. Accordingly, we cannot assure you that the
Company will achieve growth in revenues, or sustain revenues at a level
consistent with the historical results of its subsidiaries on a stand-alone
basis.
DEPENDENCE ON KEY MANAGEMENT PERSONNEL
We believe that our continued success depends to a significant extent
upon the efforts and abilities of our senior management. In particular, the
loss of Michael D. Andereck, the Company's President and Chief Executive
Officer, or any of our other executive officers or senior managers could have
a material adverse effect on the Company.
6
<PAGE>
AVAILABLE INFORMATION
DocuCorp International is subject to the informational requirements of
the Securities Exchange Act of 1934 and in accordance therewith files reports
and other information with the Securities and Exchange Commission. You may
inspect and copy reports, proxy statements and other information concerning
the Company at the public reference facilities maintained by the SEC at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549; 7 World Trade Center,
Suite 1300, New York, New York 10048; and 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. You may obtain copies of such material from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. You may also obtain certain
reports, proxy statements and other information filed by the Company at the
Commission's World Wide Web site, located at http://www.sec.gov. In
addition, you can inspect such material at the offices of the Nasdaq Stock
Market, Inc., 1735 K Street, N.W., Washington, D.C. 20006. Additionally, you
may access all of the Company's filings with the SEC online at the Company's
web site located at www.docucorp.com.
DOCUMENTS INCORPORATED BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended July
31, 1998, filed with the SEC, is incorporated in this Prospectus by
reference. All documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the 1934 Act prior to the termination
of the offering of the shares hereunder shall be deemed to be incorporated
herein by reference and shall be a part hereof from the date of the filing of
such documents. Any statements contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified
or replaced for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or
is deemed to be incorporated by reference herein modifies or replaces such
statement. Any such statement so modified or replaced shall not be deemed,
except as so modified or replaced, to constitute a part of this Prospectus.
We will provide you without charge upon your written or oral request, a
copy of the documents incorporated by reference herein, other than exhibits
to such documents not specifically incorporated by reference. Please direct
such requests to DocuCorp International, Inc., 5910 N. Central Expressway,
Suite 800, Dallas, Texas 75206, Attention: Todd A. Rognes (telephone
214-891-6500).
EXPLANATORY NOTE
Statements and information presented within this Prospectus contain
"forward-looking statements" within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking
statements can be identified by the use of predictive, future-tense or
forward-looking terminology, such as "believes," "anticipates," "expects,"
"estimates," "may," "will" or similar terms. Forward-looking statements also
include projections of financial performance, statements regarding
management's plans and objectives and statements concerning any assumptions
relating to the foregoing. Certain important factors which may cause actual
results to vary materially from these forward-looking statements accompany
such statements and appear elsewhere in this Prospectus under "Risk Factors".
All subsequent written or oral forward-looking statements attributable to
the Company or persons acting on its behalf are expressly qualified by these
factors.
7
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THE COMPANY
DocuCorp International, Inc. develops, markets and supports a portfolio
of open-architecture, enterprise-wide document automation software products
that enable its customers to produce complex, high volume, individualized
documents. In addition, the Company provides document automation consulting,
systems integration and document processing and printing services through a
170-person service organization. Document processing and printing services
utilize the Company's software to provide solutions for handling high volume,
complex print, finish and mailing for customers who outsource this activity.
DocuCorp software products support leading hardware platforms, operating
systems, printers and imaging systems. These products are designed to create,
publish and store documents such as insurance policies, utility statements,
telephone bills, bank and mutual fund statements, invoices, direct mail
correspondence, bills of lading and other customer oriented documents. The
Company currently has an installed base of approximately 800 customers. We
believe that we are the leading provider of document automation software and
services for the insurance industry. Our key customers include Prudential
Insurance Company of America, Continental National Assurance and American
International Group. More than half of the 200 largest insurance companies
in North America use our software products and services, including seven of
the ten largest life and health insurance companies and nine of the ten
largest property and casualty insurance companies. We believe that we have
also become a leading provider of document automation software and services
for companies in the utilities industry, and that most of the recent
adoptions of automated customer billing software were licenses of the
Company's products. Our key utilities customers include Southern Company
Services, Inc. and Consolidated Edison of New York, Inc. We also have
customers in the financial services, higher education, telecommunications and
transportation industries, including Royal Bank Financial Group, The
University of Texas, Polkomtel S.A. and Yellow Technology Services, Inc.
Document automation is becoming increasingly important to corporations
as they endeavor to grow revenue, improve customer service and reduce costs.
Furthermore, certain current trends such as deregulation and consolidation in
industries such as insurance, utilities and financial services and increased
computing power have accelerated the growth of the document automation
industry.
DocuCorp was organized and incorporated in Delaware in January 1997 in
connection with the merger of FormMaker Software, Inc. and Image Sciences,
Inc., which was consummated on May 15, 1997. Prior to the merger, Image
Sciences and FormMaker had been engaged in the document automation software
and services industry since 1982 and 1983, respectively. Our principal
executive offices are located at 5910 North Central Expressway, Suite 800,
Dallas, Texas 75206, and our telephone number is 214-891-6500.
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SELLING STOCKHOLDERS
The table below sets forth the beneficial ownership of the Company's
Common Stock by the selling stockholders at November 12, 1998, and after
giving effect to the sale of the shares of Common Stock offered hereby. All
of the selling stockholders acquired the shares of Common Stock owned by them
pursuant to the Company's acquisition of EZPower Systems or Maitland
Software. Except as indicated otherwise, each of the persons named below has
sole voting and investment power with respect to the shares of Common Stock
beneficially owned by him or her. Unless otherwise indicated, the share
numbers in the table below represent 1% or less of the outstanding Common
Stock of the Company.
<TABLE>
<CAPTION>
Shares Owned Shares Owned
Before the Shares Being After the
Name Offering Offered Offering (1)
- ---- ------------ ------------ ------------
<S> <C> <C> <C>
Sashidhar P. Reddi(2) 179,465 179,465 ---
Subinder Khurana(3) 87,901 87,901 ---
Michael C. Row(4) 60,711 60,711 ---
Dr. G. V. Reddy 38,457 38,457 ---
Dr. Swarna Kirshnasamy 3,663 3,663 ---
Prasanth G. Reddy 3,663 3,663 ---
Neel G. Reddy 5,494 5,494 ---
Anam Anish Reddy 458 458 ---
P. Ashok Reddy 549 549 ---
Saranya Reddy 549 549 ---
Ashwin Ashok 732 732 ---
Sheena Ashok 732 732 ---
Shankar Bhatta 1,099 1,099 ---
Syed Manzur Elahi 9,106 9,106 ---
Munize Manzur 8,013 8,013 ---
Dikran Hovamigian 1,831 1,831 ---
John Iwasz 366 366 ---
Sandipan Sharma 769 769 ---
John Smith 3,663 3,663 ---
Matt Timmins 440 440 ---
Michael Weiss 610 610 ---
Digistar Investments(5) 238,066 238,066 ---
Zingero Establishment 3,663 3,663 ---
James S. Gentsch 85,000 35,000 50,000
David T. Rourke 85,000 35,000 50,000
</TABLE>
9
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- -----------------
(1) Assumes that all of the shares offered hereby are sold.
(2) Subsequent to the acquisition of EZPower Systems, Mr. Reddi has served as
Senior Vice President, Business Development of the Company. Mr. Reddi has
contractually agreed not to sell more than 119,644 of his shares prior to
February 1, 2000. Mr. Reddi's shares owned before the Offering constitute
1.1% of the outstanding Common Stock.
(3) Mr. Khurana has contractually agreed not to sell more than 58,600 of his
shares prior to February 1, 2000.
(4) Mr. Row has contractually agreed not to sell more than 40,474 of his shares
prior to February 1, 2000.
(5) Digistar Investments' shares owned before the Offering constitute 1.5% of
the outstanding Common Stock.
The Company is registering the shares of the selling stockholders
pursuant to certain registration rights granted to them pursuant to
agreements entered in connection with the EZPower Systems and Maitland
Software acquisitions. The offering of the shares contemplated hereby will
terminate on March 31, 2000.
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue 58,000,000 shares consisting of
50,000,000 shares of Common Stock, par value $0.01 per share, 7,000,000
shares of Class B common stock, par value $0.01 per share, and 1,000,000
shares of Preferred Stock, par value $0.10 per share. As of the close of
business on November 12, 1998, approximately 16,179,958 shares of Common
Stock were outstanding and no shares of Class B common stock or Preferred
Stock were outstanding. The Company does not intend to issue any more Class
B common stock.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on any matter
submitted to the vote of stockholders, and cumulative voting is prohibited in
the election of directors. Amendments to the Company's Certificate of
Incorporation require the approval of the holders of a majority of the Common
Stock. Except as otherwise required by law and as may be required by the
terms of the Preferred Stock, all other matters are determined by a majority
of the votes cast. The holders of Common Stock are entitled to receive
dividends when, as and if declared by the Company's Board of Directors out of
funds legally available for the payment thereof, subject to any preferential
dividend rights of outstanding Preferred Stock. The shares of Common Stock
that will be outstanding upon the consummation of the offering will be, when
issued and paid for, fully paid and nonassessable. The rights, preferences
and privileges of holders of Common Stock are subject to, and may be
adversely affected by, the rights of the holders of shares of any series of
Preferred Stock which the Company may designate and issue in the future.
Holders of Common Stock do not have any preemptive or subscription rights or
any redemption or conversion rights.
PREFERRED STOCK
DocuCorp has authorized 1,000,000 shares of Preferred Stock which the
Company's Board has discretion to issue in such series and with such
preferences and rights as it may designate without the approval of the
holders of Common Stock. Such preferences and rights may be superior to
those of the holders of Common Stock. For example, the holders of Preferred
Stock may be given a preference in payment upon liquidation of DocuCorp, or
for the payment or accumulation of dividends before any distributions are
made to the holders of Common Stock. As of the date of this Prospectus, no
Preferred Stock has been designated or issued by the Company, and the Company
has no plans, agreements or understandings for the issuance of Preferred
Stock.
The Transfer Agent and Registrar for the Common Stock is Securities
Transfer Corporation, 16910 Dallas Parkway, Suite 100, Dallas, Texas 75248.
10
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LEGAL OPINIONS
Crouch & Hallett, L.L.P., Dallas, Texas has opined as to the validity of
the shares of Common Stock being offered hereby.
EXPERTS
The audited historical financial statements incorporated in this
Prospectus by reference to the Annual Report on Form 10-K of DocuCorp
International, Inc. for the year ended July 31, 1998 have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
11
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following expenses will be paid by the Company:
<TABLE>
<CAPTION>
Item Amount (1)
- ---- ----------
<S> <C>
SEC registration fee $ 876
Nasdaq listing fee 14,400
Legal fees and expenses 2,500
Accounting fees 3,500
Miscellaneous 1,724
-------
Total $23,000
</TABLE>
- --------------
(1) All items other than SEC registration fee and Nasdaq listing fee are
estimated.
Item 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Certificate of Incorporation of the Company limits or eliminates the
liability of the Company's directors or officers to the Company or its
stockholders for monetary damages to the fullest extent permitted by the
Delaware General Corporation Law, as amended (the "DGCL"). The DGCL provides
that a director of DocuCorp shall not be personally liable to DocuCorp or its
stockholders for monetary damages for a breach of fiduciary duty as a
director, except for liability: (i) for any breach of such person's duty of
loyalty; (ii) for acts or omissions not in good faith or involving
intentional misconduct or a knowing violation of law; (iii) for the payment
of unlawful dividends and certain other actions prohibited by Delaware
corporate law; and (iv) for any transaction resulting in receipt by such
person of an improper personal benefit.
DocuCorp has directors' and officers' liability insurance to provide its
directors and officers and the directors and officers of FormMaker and Image
Sciences with insurance coverage for losses arising from claims based on
breaches of duty, negligence, error and other wrongful acts.
Item 16. EXHIBITS.
<TABLE>
<S> <C>
2.1 --- Agreement and Plan of Merger, among the registrant, DocuCorp
International, Inc., EZPS Acquisition Corp., EZPower Systems, Inc.,
and the stockholders of EZPower Systems, Inc. (1)
2.2 --- Stock Purchase Agreement, among the registrant, DocuCorp
International, Inc., Maitland Software, Inc., David T. Rourke, and
James S. Gentsch. (1)
3.1 --- Certificate of Incorporation of the registrant. (2)
5.1 --- Opinion of Crouch & Hallett, L.L.P. (1)
23.1 --- Consent of PricewaterhouseCoopers LLP, independent accountants. (1)
23.2 --- Consent of Crouch & Hallett, L.L.P. (included in opinion filed as
Exhibit 5.1).
24 --- Power of Attorney (included on p. II-3).
</TABLE>
- --------------
(1) Filed herewith.
(2) Filed as an exhibit to Registration Statement No. 333-22225 on Form S-4
and incorporated herein by reference.
II-1
<PAGE>
Item 17. UNDERTAKINGS.
(a) RULE 415 OFFERING
The registrant hereby undertakes (1) to file, during any period in
which offers or sales are being made of the shares registered hereby, a
post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not
previously disclosed in this Registration Statement or any material change
to such information in this Registration Statement; (2) that, for the
purpose of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new Registration
Statement relating to the securities offered herein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof; and (3) to remove from registration by means of a
post-effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
(b) FILINGS INCORPORATING SUBSEQUENT EXCHANGE ACT DOCUMENTS BY REFERENCE
The registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Company's
annual report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the Registration
Statement shall be deemed to be a new Registration Statement relating to
the securities offered herein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(c) INDEMNIFICATION FOR LIABILITY UNDER THE SECURITIES ACT OF 1934
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of the
registrant in the successful defense of any action, suit, or proceeding)
is asserted by such director, officer, or controlling person in
connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of
such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused
this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Dallas and State
of Texas on the 13th day of November, 1998.
DOCUCORP INTERNATIONAL, INC.
By /s/ Todd A. Rognes
-----------------------------------------
Todd A. Rognes, Senior Vice President
and Chief Financial Officer
POWER OF ATTORNEY
Each of the undersigned hereby appoints Michael D. Andereck and Todd A.
Rognes and each of them (with full power to act alone), as attorneys and
agents for the undersigned, with full power of substitution, for and in the
name, place and stead of the undersigned, to sign and file with the
Securities and Exchange Commission under the Securities Act of 1933 any and
all amendments and exhibits to this Registration Statement and any and all
applications, instruments and other documents to be filed with the Securities
and Exchange Commission pertaining to the registration of the securities
covered hereby, with full power and authority to do and perform any and all
acts and things whatsoever requisite or desirable.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below by the following persons in
the capacities and on November 13, 1998.
<TABLE>
<CAPTION>
Signature Title
- --------- -----
<S> <C>
/s/ Michael D. Andereck President and Chief Executive Officer
- ------------------------ and Director
Michael D. Andereck (PRINCIPAL EXECUTIVE OFFICER)
/s/ Todd A. Rognes Senior Vice President, Finance
- ------------------------ (PRINCIPAL FINANCIAL OFFICER AND ACCOUNTING OFFICER)
Todd A. Rognes
/s/ Milledge A. Hart, III Chairman of the Board
- ------------------------
Milledge A. Hart, III
/s/ Anshoo S. Gupta Director
- ------------------------
Anshoo S. Gupta
Director
- ------------------------
John D. Loewenberg
II-3
<PAGE>
/s/ Warren V. Musser Director
- ------------------------
Warren V. Musser
/s/ George F. Raymond Director
- ------------------------
George F. Raymond
/s/ Arthur R. Spector Director
- ------------------------
Arthur R. Spector
</TABLE>
II-4
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of the
12th day of February, 1998, is by and among DocuCorp International, Inc., a
Delaware corporation ("DocuCorp"), EZPS Acquisition Corp., a Delaware
corporation ("Acquisition Co"), EZPower Systems, Inc., a Delaware
corporation (the "Company"), and the stockholders of the Company listed on
Schedule I hereto (each such person referred to individually herein as the
"Stockholder" and collectively herein as the "Stockholders").
W I T N E S S E T H:
WHEREAS, Acquisition Co is a wholly-owned subsidiary of DocuCorp newly
formed for the purpose of the transactions contemplated hereby; and
WHEREAS, the Stockholders collectively own, directly or indirectly, all
of the outstanding capital stock (collectively, the "Shares") of the Company;
and
WHEREAS, DocuCorp desires to acquire the Company through the merger
transaction contemplated hereby;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the parties hereto agree as follows:
I. THE MERGER
1.1 THE MERGER. In accordance with the provisions of the business
corporation laws of the State of Delaware at the Effective Date (as
hereinafter defined), the Company shall be merged (the "Merger") with and
into Acquisition Co., and Acquisition Co. shall be the surviving corporation
(the "Surviving Corporation") and as such shall continue to be governed by
the laws of the State of Delaware.
1.1 CONTINUATION OF CORPORATE EXISTENCE. Except as may otherwise
be set forth herein, the corporate existence and identity of Acquisition Co.,
with all its purposes, powers, franchises, privileges, rights and immunities,
shall continue unaffected and unimpaired by the Merger, and the corporate
existence and identity of the Company, with all its purposes, powers,
franchises, privileges, rights and immunities, at the Effective Date shall be
merged with and into that of Acquisition Co. and the Surviving Corporation
shall be vested fully therewith and the separate corporate existence and
identity of the Company shall thereafter cease except to the extent continued
by statute.
1.1 EFFECTIVE DATE. The Merger shall become effective upon the
filing on the Closing Date (as defined herein) of the Certificate of Merger
with the Secretary of State of the State
<PAGE>
of Delaware pursuant to the provisions of the Delaware General Corporation
Laws. The date and time when the Merger shall become effective is
hereinafter referred to as the "Effective Date."
1.2 CORPORATE GOVERNMENT. The Certificate of Incorporation of
Acquisition Co., as in effect on the Effective Date, shall continue in full
force and effect and shall be the Certificate of Incorporation of the
Surviving Corporation, except that the name of Acquisition Co. shall be
changed to "EZPower Systems, Inc." The Bylaws of Acquisition Co., as in
effect as of the Effective Date, shall continue in full force and effect and
shall be the Bylaws of the Surviving Corporation. The member(s) of the Board
of Directors of the Surviving Corporation shall be the person(s) holding such
office(s) in Acquisition Co. as of the Effective Date.
1.1 RIGHTS OF THE SURVIVING CORPORATION. The Surviving Corporation
shall have the following rights and obligations:
(a) The Surviving Corporation shall have all the rights, privileges
immunities and powers and shall be subject to all the duties and
liabilities of a corporation organized under the laws of the State of
Delaware.
(b) The Surviving Corporation shall possess all of the rights,
privileges immunities and franchises, of either a public or private
nature, of the Company and Acquisition Co. and all property, real,
personal and mixed, and all debts due on whatever account, including
subscription to shares, and all other choses in action, and every other
interest of or belonging or due to the Company and Acquisition Co. shall
be taken and deemed to be transferred or invested in the Surviving
Corporation without further act or deed.
(c) At the Effective Date, the Surviving Corporation shall
thenceforth be responsible and liable for all liabilities and obligations
of the Company and Acquisition Co., and any claim existing or action or
proceeding pending by or against Acquisition Co. or the Company may be
prosecuted as if the Merger had not occurred, or the Surviving Corporation
may be substituted in its place. Neither the rights of creditors nor any
liens upon the property of Acquisition Co. or the Company shall be
impaired by the Merger.
1.1 RELATED TRANSACTIONS. At the Closing, the following related
transactions shall be completed:
(a) DocuCorp and each of Sashidhar P. Reddi, Subinder Khurana and
Michael C. Row (collectively the "Management Stockholders") shall enter
into an employment agreement in the form of Exhibit A hereto
(collectively, the "Employment Agreements");
(b) DocuCorp shall retire all of the indebtedness of the Company
listed on Schedule II hereto; and
(c) To the extent granted by third parties, any and all of the
guarantees executed and delivered by a Stockholder personally guaranteeing
obligations of the Company (set forth on Schedule II hereto) will be
terminated and released (it being understood that DocuCorp will provide a
guaranty of such obligations in order to induce the third parties to
terminate the guaranty of such Stockholder).
2
<PAGE>
1.1 TAX CONSEQUENCES. It is intended that the Merger shall
constitute a reorganization within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code"), and that this Agreement shall
constitute a "plan of reorganization" for the purposes of Section 368 of the
Code.
1 CONVERSION OF SHARES; CLOSING
1.1 CONVERSION OF SHARES; MERGER CONSIDERATION. At the Effective
Date, by virtue of the Merger and without any action on the part of the
holder thereof:
(a) The Shares, in the aggregate and on a fully diluted basis
(assuming the exercise of the "Convertible Securities" (defined
hereinafter)) immediately prior to the Effective Date, shall at the
Effective Date, by virtue of the Merger and without any action on the part
of the holders thereof, be converted into (i) 650,000 shares of common
stock, $.01 par value, of DocuCorp ("DocuCorp Shares") and (ii) such
portion of the "Contingent Purchase Price" as set forth below. The
foregoing DocuCorp Shares and Contingent Purchase Price shall be referred
to hereinafter collectively as the "Merger Consideration."
(b) The Stockholders owning Convertible Securities will exercise the
same prior to the Effective Date. As set forth in paragraph (a) above,
the Shares to be issued upon the exercise of the Convertible Securities
shall be included in the Shares that are to be converted into DocuCorp
Shares as set forth herein. The term "Convertible Securities" shall mean
all outstanding options, warrants or other securities of the Company
convertible into Common Stock immediately prior to the Effective Date.
(c) Each share of common stock of Acquisition Co. which shall be
outstanding immediately prior to the Effective Date, shall at the
Effective Date, by virtue of the Merger and without any action on the part
of the holder thereof, remain unchanged and thereafter represent one share
of the Surviving Corporation
(d) The Merger Consideration shall be allocated among the
Stockholders in the manner set forth in Schedule I to this Agreement. No
scrip or fractional shares of DocuCorp Shares shall be issued in the
Merger. All fractional shares to which a Stockholder of the Company would
otherwise be entitled shall be aggregated. If a fractional share results
from such aggregation, such fraction shall be rounded to the nearest whole
DocuCorp Share.
1.1 CONTINGENT PURCHASE PRICE.
(a) The "Contingent Purchase Price" shall be a maximum amount of
$2.0 million and shall be calculated based upon "EZPower Revenues" and
"EZPower Income" (each as defined herein) as follows:
(i) If EZPower Revenues for the 12 months ending
January 31, 1999 equal or exceed $4.5 million, then
DocuCorp shall pay to the Stockholders the sum of $250,000;
or if EZPower Revenues for the 12 months ending January 31,
1999 exceed $2.5 million but are less than $4.5 million,
then DocuCorp shall pay to the Stockholders such
3
<PAGE>
percentage of $250,000 as is equal to the percentage which
(i) the amount of EZPower Revenues for such period in excess
of $2.5 million bears to (ii) $2.0 million;
(ii) If EZPower Income for the 12 months ending
January 31, 1999 equals or exceeds $600,000, then DocuCorp
shall pay to the Stockholders the sum of $250,000; or if
EZPower Income for the 12 months ending January 31, 1999
exceeds $0 but is less than $600,000, then DocuCorp shall
pay to the Stockholders such percentage of $250,000 as is
equal to the percentage which (i) the amount of EZPower
Income for such period in excess of $0 bears to (ii)
$600,000;
(iii) If EZPower Revenues for the 24 months
ending January 31, 2000 equal or exceed $14.0 million, then
DocuCorp shall pay to the Stockholders the sum of $750,000;
or if EZPower Revenues for the 24 months ending January 31,
2000 exceed $8.0 million but are less than $14.0 million,
then DocuCorp shall pay to the Stockholders such percentage
of $750,000 as is equal to the percentage which (i) the
amount of EZPower Revenues for such period in excess of
$8.0 million bears to (ii) $6.0 million; and
(iv) If EZPower Income for the 24 months ending
January 31, 2000 equals or exceeds $3.0 million, then
DocuCorp shall pay to the Stockholders the sum of $750,000;
or if EZPower Income for the 24 months ending January 31,
2000 exceeds $1.0 million but is less than $3.0 million,
then DocuCorp shall pay to the Stockholders such percentage
of $750,000 as is equal to the percentage which (i) the
amount of EZPower Income for such period in excess of $1.0
bears to (ii) $2.0 million.
DocuCorp's obligation to pay Contingent Purchase Price to the Stockholders
pursuant to each of the preceding subsections (i) through (iv) is independent
of its obligation to pay Contingent Purchase Price pursuant to each of the
other subsections. That is, payment will be made pursuant to each subsection
that is applicable.
(b) The amount of EZPower Revenues and EZPower Income for each of
the above referenced periods shall be set forth on a written statement
prepared by DocuCorp and delivered to the Stockholders within 30 days of
the end of the applicable computation period, together with the applicable
payment of the Contingent Purchase Price. The Stockholders (acting as a
group through Sashidhar P. Reddi and Michael C. Row for purposes of this
Section 2.2(b)) shall have the right to contest the statement at any time
within 30 days after their receipt thereof by delivering their objection
in writing to DocuCorp. The parties shall use their best efforts to
resolve any contest promptly, and the Stockholders shall be entitled to
examine the accounting records of DocuCorp for such purpose. If DocuCorp
and the Stockholders are unable to resolve such dispute within 30 days
after notification of such objection, the parties shall submit such
dispute to KPMG Peat Marwick (the "Independent Auditors") to make the
final determination. The decision of the Independent Auditors shall be
4
<PAGE>
final and binding on the parties. The Stockholders shall bear the cost of
the Independent Auditors unless the decision of such Independent Auditors
results in an adjustment in favor of the Stockholders of at least 10%, in
which case DocuCorp will bear the cost of the Independent Auditors. All
payments of the Contingent Purchase Price shall be made on or before the
later of (i) 10 days after the determination of EZPower Revenues and/or
EZPower Income, as the case may be, in accordance with the provisions of
this subsection or (ii) 45 days after the end of each computation period.
(c) As used herein for any computation period, "EZPower Revenues"
shall mean licensing and maintenance revenues of the Surviving Corporation
for such period, computed in accordance with generally accepted accounting
principles consistently applied; and "EZPower Income" shall mean the
income before taxes of the Surviving Corporation for such period, computed
in accordance with generally accepted accounting principles consistently
applied and adjusted for the following items:
(i) to exclude any gains or losses associated with changes
to conform to DocuCorp accounting policies;
(ii) to exclude any capitalized software, net of the
amortization of such capitalized software for such period;
(iii) to exclude general and administrative overhead
charges of DocuCorp and its subsidiaries other than the
Surviving Corporation which are not in the ordinary course of
business or which are not consistent with the historical general
and administrative overhead charges of the Company;
(iv) to include interest expenses (at an annual rate of
12%) on all advances of funds to, or on behalf of, the Surviving
Corporation made by DocuCorp after the Closing;
(v) to exclude any items of revenue and expense allocable
to the Surviving Corporation under generally accepted accounting
principles but which do not relate to the software products
historically sold by the Company or any derivative product or
new product incorporating the design features, properties or
uses of such historic products;
(vi) to exclude items of revenue and expense relating to
professional consulting, implementation or similar services;
(vii) to exclude fees and expenses paid by the Company
pursuant to Section 16.1 hereof;
(viii) to exclude any payments of Contingent Purchase
Price; and
(ix) to exclude any charge or deduction with respect to
goodwill that may arise as a result of the transactions
contemplated by this Agreement.
5
<PAGE>
DocuCorp intends that the operations of the Surviving Corporation be
maintained in a separate corporation for all periods through January 31,
2000, that the revenues and expenses of the Surviving Corporation will be
separately identifiable and that DocuCorp will use generally accepted cost
accounting principles to allocate to the Surviving Corporation any direct
costs and expenses (including services performed by DocuCorp on behalf of
the Surviving Corporation) that are related to the operations of the
Surviving Corporation; provided, however, that to the extent the products
or their proprietary technology or design features of the Surviving
Corporation are incorporated, bundled or otherwise sold in conjunction
with other products of DocuCorp, a fair and equitable allocation of the
revenues and related expenses (based upon the relative prices which the
products had been sold separately) shall be made between the Surviving
Corporation's product and such other products, whether such products are
sold by the Surviving Corporation or by DocuCorp or any affiliate of
DocuCorp. At all times through January 31, 2000, DocuCorp will use its
reasonable best efforts to encourage the development and sale of the
Surviving Corporation's products. To this end, for such period and so
long as the Surviving Corporation's products retain their present
functionality and customer acceptance, DocuCorp will incorporate such
products into the DocuCorp product line as one of its featured document
management products.
1.1 TIME OF CLOSING. Consummation of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of DocuCorp
in Dallas, Texas, on February 18, 1998, or as soon thereafter as possible after
the execution of this Agreement when each of the other conditions set forth in
Articles 6 and 7 have been satisfied or waived, and shall proceed promptly to
conclusion, or at such other place, time and date as shall be fixed by mutual
agreement between DocuCorp and the Company. The day on which the Closing shall
occur is referred to herein as the "Closing Date." Each party will cause to be
prepared, executed and delivered Articles of Merger to be filed with the
Secretary of State of Delaware and all other appropriate and customary
documents as any party or its counsel may reasonably request for the purpose of
consummating the transactions contemplated by this Agreement. All actions
taken at the Closing shall be deemed to have been taken simultaneously at the
time the last of any such actions is taken or completed.
1.1 CLOSING PROCEDURE. At the Closing, (i) each party will cause to
be prepared, executed and delivered a Certificate of Merger to be filed with
the Secretary of State of Delaware, (ii) DocuCorp shall issue the DocuCorp
Shares representing the Merger Consideration to the Stockholders in exchange
for certificates representing 100% of the Company Common Stock and the
documents evidencing the Convertible Securities, and (iii) each party will
cause to be prepared, executed and delivered all documents required to be
delivered by such party pursuant to Article 8 hereof and all other appropriate
and customary documents as another party or its counsel may reasonably request
for the purpose of consummating the transactions contemplated by this
Agreement. Notwithstanding clause (ii) above, DocuCorp and the Controlling
Stockholders shall jointly deposit 85,000 of the DocuCorp Shares with an escrow
agent (the "Post-Closing Escrow Agent") to be held pursuant to the terms of the
Post-Closing Escrow Agreement of even date herewith in the form of Exhibit B
hereto (the "Post-Closing Escrow Agreement"). The Post-Closing Escrow Agent
shall hold 50% of such escrowed DocuCorp Shares for a period of 12 months and
50% of such escrowed DocuCorp Shares for a period of 20 months, after which
such shares shall be delivered to the Controlling Stockholders, subject to
earlier claims in favor of DocuCorp as set forth in the Post-Closing Escrow
Agreement.
6
<PAGE>
1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS.
The stockholders of the Company indicated on Schedule I hereto as
Controlling Stockholders (collectively, the "Controlling Stockholders") and
the Company, jointly and severally, except with respect to the representation
set forth in Section 3.12(b) below which is made by each Controlling
Stockholder severally, represent and warrant to DocuCorp that, except as
qualified by the Sellers' Disclosure Schedule attached hereto (the "Sellers'
Disclosure Schedule"):
1.1 ORGANIZATION; GOOD STANDING. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of
Delaware and has all requisite corporate power and authority to own and lease
its properties and assets and to carry on its business as currently
conducted. The Company has no subsidiaries and no equity, profit sharing,
participation or other ownership interest (including any general partnership
interest) in any corporation, partnership, limited partnership or other
entity. The Company is duly qualified and licensed to do business and is in
good standing in all jurisdictions where such qualification is required, a
list of which is set forth on the Sellers' Disclosure Schedule.
1.1 DUE AUTHORIZATION. The Stockholders have full power and
authority to enter into and perform this Agreement and, to the extent
applicable, the Employment Agreements and to carry out the transactions
contemplated hereby and thereby. The Company has full corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Company.
1.1 EXECUTION AND DELIVERY. This Agreement has been duly executed
and delivered by the Company and the Stockholders and constitutes their
legal, valid and binding obligation, enforceable against each of them in
accordance with its terms, except as may be limited by the availability of
equitable remedies or by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally. The execution
and delivery by the Company and the Stockholders of this Agreement, the
execution and delivery by certain of the Stockholders of the Employment
Agreements and the consummation of the transactions contemplated hereby and
thereby will not: (i) conflict with or result in a breach of the certificate
of incorporation or bylaws of the Company, (ii) violate any law, statute,
rule or regulation or any order, writ, injunction or decree of any court or
governmental authority, or (iii) violate or conflict with or constitute a
default under (or give rise to any right of termination, cancellation or
acceleration under) any indenture, mortgage, lease, contract or other
instrument to which the Company or any Stockholder is a party or by which
they are bound or affected.
1.1 GOVERNMENTAL CONSENTS. Other than the filing of the
Certificate of Merger with the Secretary of State of Delaware, no approval,
authorization, consent, order or other action of, or filing with, any
governmental authority or administrative agency is required in connection
with the execution and delivery by the Company and the Stockholders of this
Agreement or the consummation of the transactions contemplated hereby. No
approval, authorization or consent of any other third party is required in
connection with the execution and delivery by the Company and the
Stockholders of this Agreement and the consummation of the transactions
contemplated hereby.
7
<PAGE>
1.1 TRANSACTIONS WITH AFFILIATES. At the time of the Closing,
none of the Company's Stockholders, officers, employees or directors or any
of foregoing persons' Affiliates (as defined herein) will have any interest
in or will own any property or right used principally in the conduct of the
Company's business. The term "Affiliate" shall mean any Stockholder or any
of the Company's officers, employees and directors, any partner of any such
person, or any member of the immediate family (including brother, sister,
descendant, ancestor or in-law) of any such person, or any corporation,
partnership, trust or other entity in which any such person or any such
family member has a substantial interest or is a director, officer, partner
or trustee.
1.1 TITLE TO ASSETS. The Company is the sole and exclusive legal
owner of all right, title and interest in, and has good and marketable title
to, all of the assets of the Company's business that it purports to own, free
and clear of liens, claims and encumbrances except (i) liens, claims and
encumbrances to be released at Closing and (ii) liens for taxes not yet
payable.
1.1 CONDITION OF ASSETS. The fixed assets of the Company
(considered as a whole and not on an item by item basis) are in good
condition and working order, ordinary wear and tear excepted, and are
suitable in all material respects for the uses for which they are intended,
free from any known material defects that would substantially interfere with
the continued use thereof.
1.1 INTELLECTUAL PROPERTY. The Seller's Disclosure Schedule
contains a list, complete and accurate in all material respects, of
copyrights, trademarks, tradenames and license rights (collectively the
"Intellectual Property") which are material to the business of the Company.
To the Controlling Stockholders' knowledge, the Company's use of the
Intellectual Property does not infringe upon the rights of, nor otherwise
require the consent or approval of, any third parties.
1.1 TAXES. All tax reports and returns relating to the Company's
assets and operations (including sales, use, income, property, franchise and
employment taxes) that are due have been filed with the appropriate federal,
state and local governmental agencies, and the Company has paid all taxes,
penalties, interest, deficiencies, assessments or other charges due as
reflected on the filed returns or claimed to be due by such federal, state or
local taxing authorities (other than taxes, deficiencies, assessments or
claims which are being contested in good faith and which in the aggregate are
not material). There are no examinations or audits pending or unresolved
examinations or audit issues with respect to the Company's federal, state or
local tax returns. All additional taxes, if any, assessed as a result of
such examinations or audits have been paid. There are no pending claims or
proceedings relating to, or asserted for, taxes, penalties, interest,
deficiencies or assessments against the Company.
1.1 LITIGATION. There is no order of any court, governmental
agency or authority and no action, suit, proceeding or investigation,
judicial, administrative or otherwise, of which the Company or the
Controlling Stockholders have actual knowledge that is pending or threatened
against or affecting the Company which, if adversely determined, might
materially and adversely affect the business, operations, properties, assets
or conditions (financial or otherwise) of the Company or which challenges the
validity or propriety of any of the transactions contemplated by this
Agreement.
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1.1 EMPLOYEE BENEFIT PLANS. The Company has no liabilities under
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
similar laws with respect to employee benefit plans. No liability under
Title IV of ERISA has been incurred by the Company or an Affiliate thereof
that has not been satisfied in full, and no condition exists that presents a
material risk to the Company or its Affiliates of incurring liability under
such Title. The Company has complied in all material respects with all laws
relating to the employment of labor, including any provisions thereof
relating to wages, hours, collective bargaining and the payment of social
security and other taxes, and is not liable for any material arrearages of
wages or any taxes or penalties for failure to comply with any of the
foregoing.
1.1 CAPITALIZATION; OWNERSHIP OF SHARES.
(a) The Company has authorized 20,000,000 shares of its Common
Stock, of which 17,747,167 shares will be issued and outstanding
immediately prior to the Closing (giving effect to the exercise of all
Convertible Securities). All of the Shares have been duly authorized and
validly issued and are fully paid and nonassessable. Except as set forth
herein, there is no outstanding subscription, contract, option, warrant,
call or other right obligating the Company to issue, sell, exchange or
otherwise dispose of, or to purchase, redeem or otherwise acquire, shares
of, or securities convertible into or exchangeable for, capital stock or
other equity interests of any type of the Company.
(b) All of the Shares indicated on Schedule I hereto as owned by a
Controlling Stockholder are owned of record and beneficially by such
Controlling Stockholder free and clear of all liens, claims, charges and
encumbrances of every kind.
1.1 FINANCIAL STATEMENTS AND RECORDS OF THE COMPANY.
1.1.1 The Company has delivered to DocuCorp true, correct and
complete copies of the balance sheet of the Company as of December 31, 1997,
and the related statement of operations for the year then ended (the "Company
Financial Statements").
1.1.1 The Company Financial Statements present fairly the
assets, liabilities and financial position of the Company as of the dates
thereof and the results of operations thereof for the period then ended and
have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis with prior periods, except as
disclosed therein. The books and records of the Company have been and are
being maintained in accordance with good business practice, reflect only
valid transactions, are complete and correct in all material respects and
present fairly in all material respects the basis for the financial position
and results of operations of the Company set forth in the Company Financial
Statements.
(c) As of the Closing Date, (i) the working capital of the Company
(after giving effect to the accrual of expenses pursuant to Section 16.1
hereof) will be no less than a negative $1.7 million, (ii) the Company's
total indebtedness for borrowed money will not exceed $2.45 million, and
(iii) the Company's stockholder's equity will be no less than a negative
$2.4 million.
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1.1 ABSENCE OF CERTAIN CHANGES. Since December 31, 1997, the
Company has not (i) suffered any change in its financial condition or results
of operations other than changes in the ordinary course of business that,
individually or in the aggregate, have had a material adverse effect on the
Company, (ii) acquired or disposed of any asset, or incurred, assumed,
guaranteed or endorsed any liability or obligation, or subjected or permitted
to be subjected any material amount of assets to any lien, claim or
encumbrance of any kind, except in the ordinary course of business, (iii)
entered into or terminated any Material Contract (as hereinafter defined), or
agreed or made any material changes in any Material Contract, other than
renewals and extensions thereof in the ordinary course of business, (iv)
declared, paid or set aside for payment any dividend or distribution with
respect to its capital stock , entered into any collective bargaining,
employment, consulting, compensation or similar agreement with any person or
group, (vi) entered into, adopted or amended any employee benefit plan or
(viii) taken any action that would be prohibited under Section 5.4.
1.1 UNDISCLOSED LIABILITIES. Other than as set forth on the
Company Financial Statements, there are no liabilities or obligations of the
Company of a nature required to be disclosed on financial statements prepared
in accordance with generally accepted accounting principles.
1.1 CONTRACTS AND AGREEMENTS. The Sellers' Disclosure Schedule
contains a list, complete and accurate in all material respects, of all of
the following categories of contracts and agreements to which the Company is
bound at the date hereof: (i) employee benefit plans, employment, consulting
or similar contracts, (ii) contracts relating to leasehold interests, (iii)
contracts that involve remaining aggregate payments by the Company in excess
of $10,000 or which have a remaining term in excess of one year, (iv)
insurance policies, (v) licenses of software by the Company, (vi) agreements
of the Company with resellers or other third party distributors of its
products and (vii) any contracts, other than as listed above, which are not
made in the ordinary course of business (collectively the "Material
Contracts"). The Company is not in default with respect to any of the
Material Contracts.
1.1 RECEIPT OF DOCUCORP SHARES. In connection with the receipt of
DocuCorp Shares pursuant to the transactions contemplated hereby, each of the
Stockholders understand and acknowledge the following:
(a) Such Stockholder understands the merits and risks involved in an
investment in DocuCorp. DocuCorp has afforded such Stockholder the
opportunity to ask questions and receive answers concerning the terms and
conditions of the issuance of the DocuCorp Shares and to obtain any
additional information regarding DocuCorp that such Stockholder deems
necessary;
(b) Such Stockholder understands that the DocuCorp Shares to be
issued hereunder have not been registered under the Securities Act of
1933, as amended, or under the securities laws of any state and,
therefore, cannot be sold unless they are subsequently so registered or an
exemption from such registration is available; and
(c) Such Stockholder is acquiring the DocuCorp Shares to be issued
hereunder for his own account and without any intention of reselling or
distributing them. Such Stockholder has not offered for sale or agreed to
sell any portion of the foregoing shares.
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1.1 FINDERS AND BROKERS. All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried on by
the Stockholders directly with DocuCorp. No person has as a result of any
agreement or action of the Company or the Stockholders any valid claim
against any of the parties hereto for a brokerage commission, finder's fee or
other like payment.
1 REPRESENTATIONS AND WARRANTIES OF DOCUCORP AND ACQUISITION CO.
Each of DocuCorp and Acquisition Co., jointly and severally, hereby
represents and warrants to the Stockholders as follows:
1.1 ORGANIZATION AND GOOD STANDING. Each of DocuCorp and
Acquisition Co. is a corporation, duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to own and lease its properties and carry on
its business as currently conducted.
1.1 DUE AUTHORIZATION. Each of DocuCorp and Acquisition Co. has
full corporate power and authority to enter into this Agreement and to carry
out its obligations hereunder. The execution and delivery of this Agreement
and the Employment Agreements, and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of DocuCorp.
1.1 EXECUTION AND DELIVERY. This Agreement has been duly executed
and delivered by each of DocuCorp and Acquisition Co. and constitutes the
legal, valid and binding obligation of each, enforceable against each of them
in accordance with its terms, except as may be limited by the availability of
equitable remedies or by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally. The
execution and delivery by DocuCorp of this Agreement and the Employment
Agreements and the consummation of the transactions contemplated hereby and
thereby will not: (i) conflict with or result in a breach of the certificate
of incorporation or bylaws of DocuCorp, (ii) violate any law, statute, rule
or regulation or any order, writ, injunction or decree of any court or
governmental authority, or (iii) violate or conflict with or constitute a
default under (or give rise to any right of termination, cancellation or
acceleration under) any indenture, mortgage, lease, contract or other
instrument to which DocuCorp is a party or by which it is bound or affected.
1.1 DOCUCORP SHARES. The DocuCorp Shares to be issued to the
Stockholders will, upon issuance be duly and validly issued, fully paid and
nonassessable.
1.1 SEC REPORTS. DocuCorp has furnished to the Stockholders true
and complete copies of (i) DocuCorp's Annual Report on Form 10-K for the year
ended July 31, 1997, (ii) the DocuCorp's Quarterly Report on Form 10-Q for
the first quarter of fiscal 1998 and (iii) DocuCorp's Registration Statement
on Form S-1 filed on January 16, 1998 (collectively the "SEC Reports"). The
SEC Reports did not, on their respective dates of filing, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. DocuCorp has filed
on a timely basis all documents required to be filed by it with the
Securities and Exchange Commission (the "SEC") and all such documents
complied as to form with the applicable
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requirements of law. All financial statements included in such documents,
including without limitation, the SEC Reports, (i) complied as to form in all
material respects with the applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, (ii) were
prepared in accordance with generally accepted accounting principles applied
on a consistent basis throughout the periods covered thereby (except as may
be indicated therein), (iii) fairly present the financial position, results
of operations and cash flows of DocuCorp as of the respective dates thereof
and for the periods referred to therein, and (iv) are consistent with the
books and records of DocuCorp. Since the date of the most recent SEC
Reports, there has not been any material adverse change in the assets,
business, financial condition or results of operations of DocuCorp.
1.1 FINDERS AND BROKERS. All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried on by
DocuCorp directly with the Stockholders and the Company. No person has as a
result of any agreement or action of DocuCorp any valid claim against any of
the parties hereto for a brokerage commission, finder's fee or other like
payment.
1 CERTAIN COVENANTS AND AGREEMENTS
The Company and the Stockholders, jointly and severally (subject to the
provisions of Section 15.10 hereof), covenant and agree that, from and after
the execution and delivery of this Agreement to and including the Closing
Date (and thereafter as reflected below), they shall cause the Company to
comply with the covenants set forth below, and DocuCorp covenants and agrees
that it shall similarly comply with said covenants to the extent applicable
to it.
1.1 ACCESS. Upon reasonable notice, the Company and the
Stockholders will give to DocuCorp and its counsel, accountants and other
authorized representatives, full access during reasonable business hours to
all of the Company's properties, books, contracts, documents and records and
shall furnish DocuCorp with all such information concerning their affairs,
including financial statements, as DocuCorp may reasonably request in order
that DocuCorp may have full opportunity to make such reasonable
investigations as it shall desire for the purpose of verifying the
performance of and compliance with the representations, warranties, covenants
and the conditions contained herein or for other purposes reasonably related
to the transactions contemplated hereby. The Company and the Stockholders
will take all action necessary to enable DocuCorp, its counsel, accountants
and other representatives to discuss the affairs, properties, business,
operations and records of the Company at such times and as often as DocuCorp
may reasonably request with executives, independent accountants and counsel
of the Company and the Stockholders. In the event that the Closing does not
occur and this Agreement is terminated, the Company and the Stockholders, on
the one hand, and DocuCorp, on the other, shall (i) maintain the
confidentiality of all information obtained from the other party in
connection herewith, except for such information as is in the public domain,
(ii) not use any such information so obtained for its own benefit or to the
detriment or competitive disadvantage of the other party, and (iii) promptly
return copies of all books, records, contracts and any other documentation of
the other delivered to such party pursuant to the transactions contemplated
hereby.
1.1 BEST EFFORTS. The Company, the Stockholders and DocuCorp shall
take all reasonable actions necessary to consummate the transactions
contemplated by this Agreement and will use all means that are both necessary
and reasonable means at their disposal to obtain all necessary consents and
approvals of other persons and governmental authorities required to enable it
to
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consummate the transactions contemplated by this Agreement. Each party shall
make all filings, applications, statements and reports to all governmental
agencies or entities which are required to be made prior to the Closing Date
by or on its behalf pursuant to any statute, rule or regulation in order to
consummate the transactions contemplated by this Agreement, and copies of all
such filings, applications, statements and reports shall be provided to the
other.
1.1 PUBLIC ANNOUNCEMENTS. Prior to the Closing Date, all notices
to third parties and other publicity relating to the transaction contemplated
by this Agreement shall be jointly planned and agreed to by the Company and
DocuCorp.
1.1 ORDINARY COURSE OF BUSINESS. Except as contemplated by this
Agreement, during the period from the execution and delivery of this
Agreement through the Closing Date, the Company shall (i) conduct its
operations in the ordinary course of business consistent with past and
current practices, (ii) use reasonable best efforts to maintain and preserve
intact its goodwill and business relationships, (iii) not enter into any
agreement which involves the payment by the Company of an aggregate amount
exceeding $10,000, or which has a term exceeding one year, (iv) not increase,
or agree to increase, the level of compensation payable to any of its
employees or the Stockholders, or pay any bonuses to Stockholders, or (v)
take any action which would cause any representation contained in Article 3
to be untrue as of the Closing Date.
5.5 REGISTRATION OF DOCUCORP SHARES.
(a) As soon as practicable after the written request of a
majority in interest of the Stockholders (which request may be made
on and after the later of (i) May 15, 1998 or (ii) the expiration of
the lock-up period applicable to DocuCorp's initial public offering
of its common stock), DocuCorp shall prepare and file with the SEC a
Registration Statement on Form S-3 (the "Registration Statement")
registering the DocuCorp Shares for resale to the public. DocuCorp
shall cause the Registration Statement (i) to become effective as
soon as practicable after the filing thereof and (ii) to remain
effective so that such DocuCorp Shares may be offered and sold on a
continuous or delayed basis in accordance with Rule 415 under the
1933 Act, until the earlier of two years after the Closing Date or
such time as all of the DocuCorp Shares have been sold by the
Stockholders.
(b) Based upon the written opinion of DocuCorp's securities law
counsel, DocuCorp may, by written notice to the Stockholders, for a
period not to exceed 30 days, suspend or withdraw the Registration
Statement and require that the Stockholders cease sales of the
DocuCorp Shares thereunder, if (i) DocuCorp is engaged in
negotiations or preparations for any transaction that DocuCorp
desires to keep confidential for valid business reasons, and (ii)
DocuCorp determines in good faith that the public disclosure
requirements imposed on DocuCorp as a result of the Registration
Statement would require public disclosure of such negotiations or
preparations; provided, however, that DocuCorp may not exercise this
right on more than one occasion.
(c) DocuCorp agrees to indemnify and hold harmless the
Stockholders, and any broker or agent selling the DocuCorp Shares on
behalf of the Stockholders, against
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any losses, claims, damages or liabilities to which any such person may
become subject under the 1933 Act, or otherwise, insofar as such losses,
claims, damages or liabilities arise from any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
or prospectus included therein, or any supplemental filings, or other
documents, incident to the Registration Statement, or arise out of or are
based upon the omission to state therein a fact required to be stated
therein or necessary to make the statements therein not misleading (except
insofar as such losses, claims, damages or liabilities arise out of or are
based upon information furnished in writing to DocuCorp by or on behalf of
the Stockholders specifically for use in such Registration Statement or
prospectus).
(d) DocuCorp shall bear all expenses of the Registration
Statement filed hereunder, which shall include, without limitation,
all registration and filing fees and the reasonable fees and
disbursements of counsel and accountants for DocuCorp; but which
shall not include any selling commissions or underwriting discounts
or stock transfer taxes for the Stockholders or their brokers or
underwriters or of any counsel or accountants retained by the
Stockholders.
5.6 RESALE OF DOCUCORP SHARES. Notwithstanding the registration for
resale of the DocuCorp Shares, as contemplated by Section 5.5 above, the
Management Stockholders will not, unless the prior written consent of
DocuCorp is given, (i) transfer, sell, offer for sale, solicit an offer to
buy, grant any option to purchase, contract to sell or otherwise dispose
(except as contemplated by Section 12(a) hereof) of any shares of or any
interest in the DocuCorp Shares owned by the Management Stockholders or with
respect to which the Management Stockholders have the power of disposition,
(ii) enter into any swap or other agreement that transfers, in whole or in
part, any of the economic consequences of ownership of the DocuCorp Shares
(whether any such transaction described in clause (i) above or clause (ii)
herein is to be settled by delivery of DocuCorp Shares or other securities,
in cash or otherwise), or (iii) announce an intention to do any of the
foregoing, until February 1, 2001 (the "Lockup Period") without the prior
written consent of DocuCorp; provided, however, that the foregoing shall not
preclude any disposition by gift of any DocuCorp Shares, or any interest
therein to or for the benefit of any Immediate Family Member (as defined
below) so long as any such proposed transferee, prior to such disposition,
agrees in writing, in form and substance satisfactory to DocuCorp, to be
bound by the terms of this Section 5.6. For purposes of this Lockup
Agreement, "Immediate Family Member" means a spouse and each of his natural
or adopted children. Notwithstanding the foregoing, (i) the provisions of
this Section 5.6 shall not be applicable to 1/3 of the DocuCorp Shares
received by the Management Stockholders as the Merger Consideration, (ii) the
restrictions set forth in this Section 5.6 shall lapse on February 1, 2000 as
to an additional 1/3 of the DocuCorp Shares received by the Management
Stockholders (other than Michael C. Row, as to whom the restrictions shall
lapse as to all of his DocuCorp Shares received as Merger Consideration) as
the Merger Consideration and (iii) a Management Stockholder may at any time
pledge DocuCorp Shares in connection with a bona fide loan.
1 CONDITIONS TO DOCUCORP'S CLOSING
All obligations of DocuCorp under this Agreement shall be subject to the
fulfillment at or prior to the Closing of the following conditions, it being
understood that DocuCorp may, in its sole discretion, waive any or all of
such conditions in whole or in part:
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1.1 REPRESENTATIONS, ETC. The Company and the Stockholders shall
have performed in all material respects the covenants and agreements
contained in this Agreement that are to be performed by each of them at or
prior to the Closing, and the representations and warranties of the Company
and the Stockholders contained in this Agreement shall be true and correct as
of the Closing Date with the same effect as though made at such time (except
as contemplated or permitted by this Agreement).
1.1 CONSENTS. All consents and approvals from any third parties
required to consummate the transactions contemplated by this Agreement shall
have been obtained without material cost or other materially adverse
consequence to DocuCorp.
1.1 NO ADVERSE LITIGATION. No order or preliminary or permanent
injunction shall have been entered and no action, suit or other legal or
administrative proceeding by any court or governmental authority, agency or
other person shall be pending or threatened on the Closing Date which may
have the effect of (i) making any of the transactions contemplated hereby
illegal, (ii) materially adversely affecting the value of the assets or
business of the Company or (iii) making DocuCorp or the Company liable for
the payment of a material amount of damages to any person.
1.1 BOARD OF DIRECTOR APPROVAL. DocuCorp's board of directors
shall have approved the execution, delivery and performance of this Agreement
by DocuCorp.
1.1 CLOSING DELIVERIES. DocuCorp shall have received each of the
documents or items required to be delivered to it pursuant to Section 8.1
hereof.
1 CONDITIONS TO STOCKHOLDERS' AND COMPANY'S CLOSING
All obligations of the Company and the Stockholders under this Agreement
shall be subject to the fulfillment at or prior to the Closing of the
following conditions, it being understood that the Company and the
Stockholders may, in their sole discretion, waive any or all of such
conditions in whole or in part:
1.1 REPRESENTATIONS, ETC. DocuCorp shall have performed in all
material respects the covenants and agreements contained in this Agreement
that are to be performed by it at or prior to the Closing, and the
representations and warranties of DocuCorp contained in this Agreement shall
be true and correct as of the Closing Date with the same effect as though
made at such time (except as contemplated or permitted by this Agreement).
1.1 NO ADVERSE LITIGATION. No order or preliminary or permanent
injunction shall have been entered and no action, suit or other legal or
administrative proceeding by any court or governmental authority, agency or
other person shall be pending or threatened on the Closing Date which may
have the effect of (i) making any of the transactions contemplated hereby
illegal or (ii) making the Stockholders liable for the payment of a material
amount of damages to any person.
1.1 CLOSING DELIVERIES. The Company and the Stockholders shall
have received each of the documents or items required to be delivered to them
pursuant to Section 8.2 hereof.
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1 DOCUMENTS TO BE DELIVERED AT CLOSING
1.1 TO DOCUCORP. At the Closing, there shall be delivered to
DocuCorp:
1.1.1 the Shares, in form satisfactory to DocuCorp and its
counsel;
1.1.1 the Employment Agreements and the Post-Closing Escrow
Agreement;
1.1.1 a copy of all consents and approvals referred to in
Section 6.2 hereof;
(d) resignations of all the officers and directors of the Company
from such positions and from their employment with the Company;
(e) the corporate minute books and stock books of the Company; and
(f) all other items reasonably requested by DocuCorp.
1.1 TO THE STOCKHOLDERS. At the Closing, there shall be delivered
to the Stockholders (or, as applicable, to the Post-Closing Escrow Agent):
1.1.1 650,000 DocuCorp Shares as contemplated by Section 2.1
hereof;
1.1.1 the Post-Closing Escrow Agreement; and
1.1.1 all other items reasonably requested by the Stockholders.
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1 SURVIVAL; RIGHT TO PROCEED
9.1 SURVIVAL. All representations, warranties, covenants and
agreements made by any party to this Agreement or pursuant hereto shall be
deemed to be material and to have been relied upon by the parties hereto and
shall survive the Closing for a period of 12 months; provided, however, that
(i) the representations contained in Section 3.13 and 3.15 shall survive the
Closing for a period of 20 months, (ii) the representations contained in
Section 3.9 shall survive until the statute of limitations with respect to
tax matters expires and (iii) the representations contained in Section 3.12
shall survive indefinitely. The representations and warranties hereunder
shall not be affected or diminished by any investigation at any time by or on
behalf of the party for whose benefit such representations and warranties
were made.
9.2 RIGHT TO PROCEED. Anything in this Agreement to the contrary
notwithstanding, if any of the conditions specified in Section 6 hereof have
not been satisfied, DocuCorp shall have the right to proceed with the
transactions contemplated hereby, and if any of the conditions specified in
Section 7 hereof have not been satisfied, the Company and the Stockholders
shall have the right to proceed with the transactions contemplated hereby.
If any right to proceed is exercised, the party exercising such right shall
be deemed to have waived such unsatisfied condition as to which it has
written notice and any claim for damages or loss for any breach of such
conditions not so satisfied, but such waiver shall not affect the survival of
representations, warranties, covenants and agreements as provided herein,
except as to specific representations, warranties, covenants and agreements
included in the condition or conditions so waived.
1 INDEMNIFICATION OF THE STOCKHOLDERS
DocuCorp shall indemnify and hold the Stockholders harmless from,
against, for and in respect of:
1.1.1 any and all damages, losses, settlement payments,
obligations, liabilities, claims, actions or causes of action and
encumbrances suffered, sustained, incurred or required to be paid by the
Stockholders because of the breach of any written representation, warranty,
agreement or covenant of DocuCorp contained in or made in connection with
this Agreement;
1.1.1 any and all liabilities, obligations, claims and demands
arising out of the ownership and operation of the Company on and after the
Closing Date, except to the extent the same arises from a breach of any
written representation, warranty, agreement or covenant of the Company or any
Stockholder contained in or made in connection with this Agreement; and
1.1.1 all reasonable costs and expenses (including, without
limitation, attorneys' fees, interest and penalties) incurred by the
Stockholders in connection with any action, suit, proceeding, demand,
assessment or judgment incident to any of the matters indemnified against in
this Section 10.
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1 INDEMNIFICATION OF DOCUCORP
The Controlling Stockholders (jointly and severally) shall indemnify and
hold DocuCorp harmless from, against, for and in respect of:
1.1.1 any and all damages, losses, settlement payments,
obligations, liabilities, claims, actions or causes of action and
encumbrances suffered, sustained, incurred or required to be paid by DocuCorp
because of the breach of any written representation, warranty, agreement or
covenant of the Company or any Controlling Stockholder contained in or made
in connection with this Agreement; and
1.1.1 all reasonable costs and expenses (including, without
limitation, attorneys' fees, interest and penalties) incurred by DocuCorp in
connection with any action, suit, proceeding, demand, assessment or judgment
incident to any of the matters indemnified against in this Section 11.
In order to secure the foregoing indemnification obligations of the
Controlling Stockholders, the Controlling Stockholders have entered into the
Post-Closing Escrow Agreement.
1 GENERAL RULES REGARDING INDEMNIFICATION
1.1.1 The obligations and liabilities of each indemnifying
party hereunder with respect to claims resulting from the assertion of
liability by the other party shall be subject to the following terms and
conditions:
1.1.1.1 The indemnified party shall give prompt written notice
(which in no event shall exceed 30 days from the date on which the
indemnified party first became aware of such claim or assertion) to the
indemnifying party of any claim which might give rise to a claim by the
indemnified party against the indemnifying party based on the indemnity
agreements contained in Section 10 or 11 hereof, stating the nature and basis
of said claims and the amounts thereof, to the extent known;
1.1.1.1 If any action, suit or proceeding is brought against the
indemnified party with respect to which the indemnifying party may have
liability under the indemnity agreements contained in Section 10 or 11
hereof, the action, suit or proceeding shall, upon the written acknowledgment
by the indemnifying party that is obligated to indemnify under such indemnity
agreement, be defended (including all proceedings on appeal or for review
which counsel for the indemnified party shall deem appropriate) by the
indemnifying party. The indemnified party shall have the right to employ its
own counsel in any such case, but the fees and expenses of such counsel shall
be at the indemnified party's own expense unless the employment of such
counsel and the payment of such fees and expenses both shall have been
specifically authorized in writing by the indemnifying party in connection
with the defense of such action, suit or proceeding, in which event the
indemnifying party shall not have the right to direct the defense of such
action, suit or proceeding on behalf of the indemnified party. The
indemnified party shall be kept fully informed of such action, suit or
proceeding at all stages thereof whether or not it is represented by separate
counsel.
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1.1.1.1 The indemnified party shall make available to the
indemnifying party and its attorneys and accountants all books and records of
the indemnified party relating to such proceedings or litigation and the
parties hereto agree to render to each other such assistance as they may
reasonably require of each other in order to ensure the proper and adequate
defense of any such action, suit or proceeding.
1.1.1.1 The indemnified party shall not make any settlement of
any claims without the written consent of the indemnifying party, which
consent shall not be unreasonably withheld or delayed.
1.1.1.1 If any claims are made by third parties against an
indemnified party for which an indemnifying party would be liable, and it
appears likely that such claims might also be covered by the indemnified
party's insurance policies, the indemnified party shall make a timely claim
under such policies and to the extent that such party obtains any recovery
from such insurance, such recovery shall be offset against any sums due from
an indemnifying party (or shall be repaid by the indemnified party to the
extent that an indemnifying party has already paid any such amounts). The
parties acknowledge, however, that if an indemnified party is self-insured as
to any matters, either directly or through an insurer which assesses
retroactive premiums based on loss experience, then to the extent that the
indemnified party bears the economic burden of any claims through
self-insurance or retroactive premiums or insurance ratings, the indemnifying
party's obligation shall only be reduced by any insurance recovery in excess
of the amount paid or to be paid by the indemnified party in insurance
premiums.
(vi) An indemnified party shall not make any claim
hereunder unless and until it has incurred damages and expenses
of a cumulative aggregate of $25,000 (the "Floor") and shall
thereafter be entitled to make a claim only for amounts incurred
in excess of such Floor.
(vii) The Controlling Stockholders shall be entitled to
satisfy any claim for indemnification hereunder by surrendering
DocuCorp Shares to DocuCorp, which shares shall for such
purposes be valued at a price per share which is equal to the
closing price of DocuCorp Common Stock on the Nasdaq National
Market (or if the shares are not then trading on such market,
using such other market as will best approximate the fair market
value of DocuCorp Common Stock) on the date (the "Valuation
Date") that the notice pursuant to Section 12(a)(i) is delivered
to the Controlling Stockholders; provided, however, that such
value shall not be less than the value of the DocuCorp Shares on
the Effective Date, or $5.00 per share, adjusted for future
stock splits, dividends and the like (the "Effective Date
Price").
(viii) The aggregate obligation of the Controlling
Stockholders to indemnify DocuCorp under this Agreement shall be
limited to aggregate payments in an amount (the "Indemnity Cap")
equal to the sum of (i) 604,600 multiplied by the Effective Date
Price plus (ii) the total amount of Contingent Purchase Price
paid to the Controlling Stockholders hereunder. No Controlling
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<PAGE>
Stockholder shall be liable hereunder in an amount which exceeds
the pro rata portion of the Indemnity Cap Amount paid to such
Controlling Stockholder.
(ix) DocuCorp shall be entitled to assert a claim against
the DocuCorp Shares escrowed pursuant to the Post-Closing Escrow
Agreement in respect of any amounts to which it is entitled to
receive by virtue of the indemnification provisions of this
Agreement.
1.1.1 DocuCorp acknowledges and agrees that its sole and
exclusive remedy with respect to any and all claims relating to the subject
matter of this Agreement shall be pursuant to the indemnification provisions
set forth in Sections 11 and 12 of this Agreement.
1 FAILURE TO CLOSE BECAUSE OF DEFAULT
In the event that the Closing is not consummated by virtue of a material
default made by a party in the observance or in the due and timely
performance of any of its covenants or agreements herein contained
("Default"), the parties shall have and retain all of the rights afforded
them at law or in equity by reason of that Default. In addition, the Company
and the Stockholders, on the one hand, and DocuCorp, on the other,
acknowledge that the Shares and the transactions contemplated hereby are
unique, that a failure by any of them to complete such transactions will
cause irreparable injury to the other, and that actual damages for any such
failure may be difficult to ascertain and may be inadequate. Consequently,
DocuCorp, the Company and the Stockholders agree that each shall be entitled,
in the event of a Default by the other, to specific performance of any of the
provisions of this Agreement in addition to any other legal or equitable
remedies to which the non-defaulting party may otherwise be entitled. In the
event any action is brought, the prevailing party shall be entitled to
recover court costs, arbitration expenses and reasonable attorneys' fees.
1 TERMINATION RIGHTS
This Agreement may be terminated by either DocuCorp or the Company, if
either such party is not then in Default, upon written notice to the other
upon the occurrence of any of the following:
1.1.1 If the Closing has not occurred on or before February 20,
1998;
1.1.1 If either party Defaults and such Default has not been
cured within 30 days of written notice of such Default by the other party;
1.1.1 Subject to the provisions of Sections 6 and 7 hereof, by
the Company or DocuCorp, if on the Closing Date any of the conditions
precedent to the obligations of the Company or DocuCorp, respectively, set
forth in this Agreement have not been satisfied or waived by such party; or
1.1.1 By mutual consent of the Company and DocuCorp.
1 DISPUTE RESOLUTION
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(a) Any dispute, controversy or claim arising out of or in
connection with this Agreement shall be resolved in accordance with the
provisions of this Section. DocuCorp or the Controlling Stockholders may
demand, by written notice to the other party, that the dispute be
submitted to arbitration. The arbitration shall be conducted in
Wilmington, Delaware according to the provisions of this Section. If the
parties mutually agree upon one or more individuals to arbitrate the
dispute, such individuals shall arbitrate the dispute. If the parties
mutually agree upon the rules for conducting the arbitration, such rules
shall govern the arbitration. If, however, the parties cannot agree upon
the identity of the arbitrators and/or the rules for conducting the
arbitration within seven days after the notice demanding arbitration,
either party may request the American Arbitration Association (the "AAA")
to appoint, on an expedited basis, one arbitrator who shall have
substantial experience as an arbitrator, be experienced in the subject
matter of the dispute and be able to commence the arbitration proceedings
(with at least an initial hearing), according to the requirements of this
Section and other complementary rules of the American Arbitration
Association, within 14 days after the appointment. The parties shall
exchange demands for relief and responses thereto, and may serve their
requests for production of documents pursuant to the Uniform Arbitration
Act, prior to the initial hearing.
(b) The arbitration proceedings shall be completed within 30 days
after the initial hearing and the arbitrator's decision shall be provided
to the parties within seven days thereafter. The decision of the
arbitrator shall be final and binding provided such decision is set forth
in a writing by the arbitrator which recites the decision and all findings
and orders relative to the implementation thereof including, without
limitation, the amount and/or nature of any awards and the allocation of
responsibility among the parties to pay the AAA fees and the fees of the
attorneys and other professionals incurred by the parties, in accordance
with this Section. The arbitrator's decision may be enforced by a court
of competent jurisdiction.
(c) Except where clearly inconsistent with the subject matter of the
dispute, the parties agree to continue performing their respective
obligations under this Agreement while the dispute is being resolved.
Prior to receipt of the arbitrator's decision, each of the parties shall
pay their own expenses in connection with the mediation and/or arbitration
and shall share the costs of any mediator and/or arbitrator. The
arbitrator shall order that either of the parties that is entitled to an
award on the merits of the dispute shall have its costs (including AAA
fees and attorney and other professional fees), paid by the other party;
provided, however, that the arbitrator shall have discretion to apportion
the responsibility for the costs of the parties in the event that the
arbitrator's decision is not solely in favor of one of the parties.
(d) Notwithstanding the foregoing requirement to arbitrate any
dispute, in the event either of the parties determines it necessary to
seek injunctive relief against another, the party seeking the injunction
may seek such injunction without complying with the prerequisite of
mediation and arbitration. The parties hereto agree that any
arbitrator(s) utilized hereunder shall have the authority to issue
injunctive orders for specific enforcement.
1 MISCELLANEOUS PROVISIONS
1.1 EXPENSES. DocuCorp shall pay the fees and expenses incurred
by it and the Company shall pay the fees and expenses incurred by it and by
the Stockholders in connection with the transactions contemplated by this
Agreement.
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1.1 AMENDMENT. This Agreement may be amended at any time but only
by an instrument in writing signed by the parties hereto.
1.1 NOTICES; ATTORNEY-IN-FACT. All notices and other
communications delivered hereunder shall be in writing and shall be deemed
given if delivered personally or upon actual receipt if mailed by certified
mail, return receipt requested or delivered by nationally recognized
"next-day" delivery service, to the parties at the addresses set forth below:
If to the Stockholders and (prior to the Closing) the Company:
1818 Market Street
36th Floor
Philadelphia, Pennsylvania 19103
Attention: President
Telephone: (215) 496-1700
Telecopy: (215) 496-1701
If to DocuCorp or Acquisition Co:
5910 N. Central Expressway, Suite 800
Dallas, Texas 75206
Attention: President
Telephone: (214) 891-6500
Telecopy: (214) 891-6678
or such other address or addresses as any party shall have designated by
notice to each other party in accordance with this Section 16.3. The
Stockholders hereby appoint Sashidhar P. Reddi as the Attorney-in-Fact to
receive notices hereunder and to deliver to DocuCorp all notices required to
be made hereunder.
1.1 ASSIGNMENT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, heirs and
permitted assigns. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto
without the prior written consent of the others.
1.1 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
1.1 HEADINGS. The headings of the Sections of this Agreement are
inserted for convenience only and shall not constitute a part hereof.
1.1 ENTIRE AGREEMENT. This Agreement and the documents referred
to herein contain the entire understanding of the parties hereto in respect
of the subject matter contained herein. There are no restrictions, promises,
warranties, conveyances or undertaking other than those
22
<PAGE>
expressly set forth herein. This Agreement supersedes any prior agreements
and understandings between the parties with respect to the subject matter.
1.1 WAIVER. Except as provided in Section 9.2 hereof, no
attempted waiver of compliance with any provision or condition hereof, or
consent pursuant to this Agreement, will be effective unless evidenced by an
instrument in writing by the party against whom the enforcement of any such
waiver or consent is sought.
1.1 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
1.1 ASSERTION OF CLAIMS AGAINST THE COMPANY. In any proceeding by
DocuCorp to assert or prosecute any claims under, or to otherwise enforce,
the Agreement, the Stockholders agree that they shall not assert as a defense
or bar to recovery, and hereby waive any right to so assert such defense or
bar such recovery, that (a) prior to Closing the Company shall have had
knowledge of the circumstances giving rise to the claim being pursued by it;
(b) prior to Closing, the Company engaged in conduct or took action that
caused or brought about the circumstances giving rise to its claim, or
otherwise contributed thereto; or (c) the Stockholders have a right of
contribution from the Surviving Corporation to the extent that there is any
recovery against the Stockholders.
1.1 FRANCHISE TAXES OF THE COMPANY. Liability for state corporate
franchise taxes assessed on the Shares payable with respect to the tax year
in which the Closing Date falls shall be prorated as between the Stockholders
and DocuCorp on the basis of the number of days of the tax year elapsed to
and including such date. To the extent possible, such proration shall be
made on the Closing Date based upon estimates of such franchise tax (without
giving effect to any changes in the tax rate or amount due as a result of
actions by the Company or DocuCorp at or after the Closing).
1.1 SEVERABILITY. The event that any of the provisions contained
in this Agreement is held to be invalid, illegal or unenforceable shall not
affect any other provision hereof, and this Agreement shall be construed as
if such invalid, illegal or unenforceable provisions had not been contained
herein.
1.1 INTENDED BENEFICIARIES. The rights and obligations contained
in this Agreement are hereby declared by the parties hereto to have been
provided expressly for the exclusive benefit of such entities as set forth
herein and shall not benefit, and do not benefit, any unrelated third parties.
1.1 MUTUAL CONTRIBUTION. The parties to this Agreement and their
counsel have mutually contributed to its drafting. Consequently, no
provision of this Agreement shall be construed against any party on the
ground that such party drafted the provision or caused it to be drafted or
the provision contains a covenant of such party.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
DocuCorp International, Inc.
By: /s/ Michael D. Andereck
--------------------------
Michael D. Andereck
President and Chief Executive Officer
EZPS Acquisition Corp.
By: /s/ Michael D. Andereck
--------------------------
Michael D. Andereck
President and Chief Executive Officer
EZPower Systems, Inc.
By: /s/ Sashidhar P. Reddi
--------------------------
Sashidhar P. Reddi
President
Stockholders:
/s/ Sashidhar P. Reddi
-----------------------
Sashidhar P. Reddi
/s/ Subinder Khurana
-----------------------
Subinder Khurana
/s/ Michael C. Row
-----------------------
Michael C. Row
/s/ Dr. G. V. Reddy
-----------------------
Dr. G. V. Reddy
/s/ Dr. G. V. Reddy
-----------------------
Dr. Swarna Krishnasamy
/s/ Dr. G. V. Reddy
-----------------------
Prasanth G. Reddy
24
<PAGE>
/s/ Dr. G. V. Reddy
-----------------------
Neel G. Reddy
/s/ Dr. G. V. Reddy
-----------------------
Anam Anish Reddy
/s/ Dr. G. V. Reddy
-----------------------
P. Ashok Reddy
/s/ Dr. G. V. Reddy
-----------------------
Neel G. Reddy
/s/ Dr. G. V. Reddy
-----------------------
Anam Anish Reddy
/s/ Dr. G. V. Reddy
-----------------------
Saranya Reddy
/s/ Dr. G. V. Reddy
-----------------------
Ashwin Ashok
/s/ Dr. G. V. Reddy
-----------------------
Sheena Ashok
/s/ Dr. G. V. Reddy
-----------------------
Shanka Bhatta
/s/ Dr. G. V. Reddy
-----------------------
Syed Manzur Elahi
/s/ Dr. G. V. Reddy
-----------------------
Munize Manzur
/s/ Michael C. Row
-----------------------
Dikran Hovamigian
/s/ Michael C. Row
-----------------------
John Iwasz
/s/ Michael C. Row
-----------------------
Sandipan Sharma
/s/ Michael C. Row
-----------------------
John Smith
/s/ Michael C. Row
-----------------------
Matt Timmins
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<PAGE>
/s/ Michael C. Row
-----------------------
Michael Weiss
Digistar Investments
By: /s/ Dr. G. V. Reddy
-----------------------
Zingero Establishment
By: /s/ Dr. G. V. Reddy
-----------------------
26
<PAGE>
EXHIBIT 2.2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of the 18th
day of February, 1998, is by and among DocuCorp International, Inc., a
Delaware corporation ("DocuCorp"), Maitland Software, Inc., a Maine
corporation (the "Company"), David T. Rourke ("Rourke"), and James S. Gentsch
("Gentsch"). Each of Rourke and Gentsch shall be referred to individually
herein as the "Shareholder" and collectively herein as the "Shareholders".
W I T N E S S E T H:
WHEREAS, the Shareholders collectively own, directly or indirectly, all
of the outstanding capital stock (collectively, the "Shares") of the Company;
and
WHEREAS, the Shareholders desire to sell to DocuCorp, and DocuCorp
desires to purchase from the Shareholders, the Shares; and
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the parties hereto agree as follows:
I. SALE AND PURCHASE OF SHARES
1.1 PURCHASE AND SALE OF SHARES. Upon the terms and subject to
the conditions set forth in this Agreement, at the Closing (as defined in
Section 2.2 hereof), the Shareholders shall assign, transfer, convey and
deliver to DocuCorp, and DocuCorp shall purchase from the Shareholders, all
right, title and interest in and to all of the Shares, free and clear of all
liens, security interests, charges, encumbrances and rights of others.
1.1 EMPLOYMENT AGREEMENTS. At the Closing, DocuCorp and each
Shareholder shall enter into an employment agreement substantially in the
form of Exhibit A hereto (collectively, the "Employment Agreements").
1 CONSIDERATION; CLOSING
1.1 PURCHASE PRICE. The consideration to be received by the
Shareholders in exchange for the Shares, which consideration shall be
apportioned between them equally, shall be 170,000 shares (the "DocuCorp
Shares") of common stock, $.01 par value, of DocuCorp ("DocuCorp Common
Stock").
1.1 TIME OF CLOSING. A closing (the "Closing") for the sale and
purchase of the Shares shall be held at 9:00 a.m., Dallas, Texas time, no
later than March 31, 1998 (the "Closing
<PAGE>
Date"), at the executive offices of DocuCorp in Dallas, Texas, or at such
other place or places and/or time as may be agreed upon by DocuCorp and the
Shareholders.
1.2 CLOSING PROCEDURE. At the Closing, the Shareholders shall
deliver to DocuCorp stock certificates or other evidence of the Shares
suitable to DocuCorp, duly endorsed to DocuCorp, in form sufficient to vest
record and beneficial title fully in DocuCorp to the Shares. DocuCorp shall
issue and deliver to the Shareholders the 170,000 shares of DocuCorp Common
Stock as described in Section 2.1 above. Each party will cause to be
prepared, executed and delivered all documents required to be delivered by
such party pursuant to Article 8 hereof and all other appropriate and
customary documents as another party or its counsel may reasonably request
for the purpose of consummating the transactions contemplated by this
Agreement. All actions taken at the Closing shall be deemed to have been
taken simultaneously at 12:01 a.m., Dallas, Texas time, on the Closing Date.
1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS.
The Shareholders and the Company, jointly and severally, represent and
warrant to DocuCorp that, except as qualified by the Sellers' Disclosure
Schedule attached hereto (the "Sellers' Disclosure Schedule"):
1.1 ORGANIZATION; GOOD STANDING. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of
Maine and has all requisite corporate power and authority to own and lease
its properties and assets and to carry on its business as currently
conducted. The Company has no subsidiaries and no equity, profit sharing,
participation or other ownership interest (including any general partnership
interest) in any corporation, partnership, limited partnership or other
entity. The Company is duly qualified and licensed to do business and is in
good standing in all jurisdictions where such qualification is required, a
list of which is set forth on the Sellers' Disclosure Schedule.
1.1 DUE AUTHORIZATION. The Shareholders have full power and
authority to enter into and perform this Agreement and the Employment
Agreements and to carry out the transactions contemplated hereby and thereby.
The Company has full corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of the Company.
1.1 EXECUTION AND DELIVERY. This Agreement has been duly executed
and delivered by the Company and the Shareholders and constitutes their
legal, valid and binding obligation, enforceable against each of them in
accordance with its terms, except as may be limited by the availability of
equitable remedies or by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally. The execution
and delivery by the Company and the Shareholders of this Agreement, the
execution and delivery by the Shareholders of the Employment Agreements and
the consummation of the transactions contemplated hereby and thereby will
not: (i) conflict with or result in a breach of the articles of incorporation
or bylaws of the Company, (ii) violate any law, statute, rule or regulation
or any order, writ, injunction or decree of any court or governmental
authority, or (iii) violate or conflict with or constitute a default under
(or give rise to any right of termination, cancellation or acceleration
under) any indenture, mortgage,
2
<PAGE>
lease, contract or other instrument to which the Company or either
Shareholder is a party or by which they are bound or affected.
1.1 GOVERNMENTAL CONSENTS. No approval, authorization, consent,
order or other action of, or filing with, any governmental authority or
administrative agency is required in connection with the execution and
delivery by the Company and the Shareholders of this Agreement or the
consummation of the transactions contemplated hereby. No approval,
authorization or consent of any other third party is required in connection
with the execution and delivery by the Company and the Shareholders of this
Agreement and the consummation of the transactions contemplated hereby.
1.1 TRANSACTIONS WITH AFFILIATES. At the time of the Closing,
none of the Company's Affiliates (as defined herein) will have any interest
in or will own any property or right used principally in the conduct of the
Company's business. The term "Affiliate" shall mean any Shareholder or any
of the Company's officers, employees and directors, any partner of any such
person, or any member of the immediate family (including brother, sister,
descendant, ancestor or in-law) of any such person, or any corporation,
partnership, trust or other entity in which any such person or any such
family member has a substantial interest or is a director, officer, partner
or trustee.
1.1 TITLE TO ASSETS. The Company is the sole and exclusive legal
owner of all right, title and interest in, and has good and marketable title
to, all of the assets of the Company's business that it purports to own, free
and clear of liens, claims and encumbrances except (i) liens, claims and
encumbrances to be released at Closing and (ii) liens for taxes not yet
payable.
1.1 CONDITION OF ASSETS. All of the fixed assets of the Company
(considered as a whole and not on an item by item basis) are in good
condition and working order, ordinary wear and tear excepted, and are
suitable in all material respects for the uses for which they are intended,
free from any known material defects that would substantially interfere with
the continued use thereof.
1.1 INTELLECTUAL PROPERTY. The Seller's Disclosure Schedule
contains a list, complete and accurate in all material respects, of
copyrights, trademarks, tradenames and license rights (collectively the
"Intellectual Property") which are material to the business of the Company.
To the knowledge of the Company and the Shareholders, the Company's use of
the Intellectual Property does not infringe upon the rights of, nor otherwise
require the consent or approval of, any third parties.
1.1 TAXES. All tax reports and returns relating to the Company's
assets and operations (including sales, use, income, property, franchise and
employment taxes) that are due have been filed with the appropriate federal,
state and local governmental agencies, and the Company has paid all taxes,
penalties, interest, deficiencies, assessments or other charges due as
reflected on the filed returns or claimed to be due by such federal, state or
local taxing authorities (other than taxes, deficiencies, assessments or
claims which are being contested in good faith and which in the aggregate are
not material). There are no examinations or audits pending or unresolved
examinations or audit issues with respect to the Company's federal, state or
local tax returns. All additional taxes, if any, assessed as a result of
such examinations or audits have been paid. There are no pending claims or
proceedings relating to, or asserted for, taxes, penalties, interest,
deficiencies or assessments against the Company.
3
<PAGE>
1.1 LITIGATION. There is no order of any court, governmental
agency or authority and no action, suit, proceeding or investigation,
judicial, administrative or otherwise, of which the Company or the
Shareholders have actual knowledge that is pending or threatened against or
affecting the Company or a Shareholder which, if adversely determined, might
materially and adversely affect the business, operations, properties, assets
or conditions (financial or otherwise) of the Company or which challenges the
validity or propriety of any of the transactions contemplated by this
Agreement.
1.1 EMPLOYEE BENEFIT PLANS. The Company has no liabilities under
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
similar laws with respect to employee benefit plans. No liability under
Title IV of ERISA has been incurred by the Company or an Affiliate thereof
that has not been satisfied in full, and no condition exists that presents a
material risk to the Company or its Affiliates of incurring liability under
such Title IV. The Company has complied in all material respects with all
laws relating to the employment of labor, including any provisions thereof
relating to wages, hours, collective bargaining and the payment of social
security and other taxes, and is not liable for any material arrearages of
wages or any taxes or penalties for failure to comply with any of the
foregoing.
1.1 CAPITALIZATION. All of the issued and outstanding Shares have
been duly authorized and validly issued and are fully paid and nonassessable,
and are owned of record and beneficially by the Shareholders. There is no
outstanding subscription, contract, option, warrant, call or other right
obligating the Company to issue, sell, exchange or otherwise dispose of, or
to purchase, redeem or otherwise acquire, shares of, or securities
convertible into or exchangeable for, equity interests of any type of the
Company. The Shareholders are the lawful, sole and beneficial owner of the
Shares, free and clear of all liens, claims and encumbrances of every kind,
and, at the Closing, the Shareholders will convey to DocuCorp good and
indefeasible title to the Shares.
1.1 FINANCIAL STATEMENTS AND RECORDS OF THE COMPANY.
1.1.1 The Company has delivered to DocuCorp true, correct and
complete copies of the balance sheet of the Company as of December 31, 1997,
and the related statement of operations for the year then ended (the "Company
Financial Statements").
1.1.1 The Company Financial Statements present fairly the
assets, liabilities and financial position of the Company as of the dates
thereof and the results of operations thereof for the period then ended and
have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis with prior periods. The books and
records of the Company have been and are being maintained in accordance with
good business practice, reflect only valid transactions, are complete and
correct in all material respects and present fairly in all material respects
the basis for the financial position and results of operations of the Company
set forth in the Company Financial Statements.
(c) As of the Closing Date, (i) the working capital of the Company
will be no less than $7,500 and (ii) the Company will have no indebtedness
for borrowed money.
1.1 ABSENCE OF CERTAIN CHANGES. Since December 31, 1997, the
Company has not (i) suffered any change in its financial condition or results
of operations other than changes in the
4
<PAGE>
ordinary course of business that, individually or in the aggregate, have had
a material adverse effect on the Company, (ii) acquired or disposed of any
asset, or incurred, assumed, guaranteed or endorsed any liability or
obligation, or subjected or permitted to be subjected any material amount of
assets to any lien, claim or encumbrance of any kind, except in the ordinary
course of business, (iii) entered into or terminated any Material Contract
(as hereinafter defined), or agreed or made any material changes in any
Material Contract, other than renewals and extensions thereof in the ordinary
course of business or as described in the Sellers' Disclosure Schedule, (iv)
declared, paid or set aside for payment any dividend or distribution in
excess of a cumulative aggregate of $40,000 with respect to its capital
stock, entered into any collective bargaining, employment, consulting,
compensation or similar agreement with any person or group, (vi) entered
into, adopted or amended any employee benefit plan or (viii) taken any action
that would be prohibited under Section 5.4.
1.1 UNDISCLOSED LIABILITIES. Other than as set forth on the
Company Financial Statements, there are no liabilities or obligations of the
Company of a nature required to be disclosed on financial statements prepared
in accordance with generally accepted accounting principles.
1.1 CONTRACTS AND AGREEMENTS. The Sellers' Disclosure Schedule
contains a list, complete and accurate in all material respects, of all of
the following categories of contracts and agreements to which the Company is
bound at the date hereof: (i) employee benefit plans, employment, consulting
or similar contracts, (ii) contracts relating to leasehold interests, (iii)
contracts that involve remaining aggregate payments by the Company in excess
of $10,000 or which have a remaining term in excess of one year, (iv)
insurance policies, (v) licenses of software by the Company, (vi) agreements
of the Company with resellers or other third party distributors of its
products and (vii) any contracts, other than as listed above, which are not
made in the ordinary course of business (collectively the "Material
Contracts"). The Company is not in default with respect to any of the
Material Contracts.
1.1 RECEIPT OF DOCUCORP SHARES. In connection with the receipt of
DocuCorp Shares pursuant to the transactions contemplated hereby, each of the
Shareholders understand and acknowledge the following:
(a) Such Shareholder understands the merits and risks involved in an
investment in DocuCorp. DocuCorp has afforded such Shareholder the
opportunity to ask questions and receive answers concerning the terms and
conditions of the issuance of the DocuCorp Shares and to obtain any
additional information regarding DocuCorp that such Shareholder deems
necessary;
(b) Such Shareholder understands that the DocuCorp Shares to be
issued hereunder have not been registered under the Securities Act of
1933, as amended, or under the securities laws of any state and,
therefore, cannot be sold unless they are subsequently so registered or an
exemption from such registration is available.
(c) Such Shareholder is acquiring the DocuCorp Shares to be issued
hereunder for his own account and without any intention of reselling or
distributing them. Such Shareholder has not offered for sale or agreed to
sell any portion of the foregoing shares.
5
<PAGE>
Nothing contained in the foregoing representation is intended to limit the
rights of the Shareholders to registration of the resale of the DocuCorp
Shares, as described in Section 5.6 herein.
1.1 FINDERS AND BROKERS. All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried on by
the Shareholders directly with DocuCorp. No person has as a result of any
agreement or action of the Company or the Shareholders any valid claim
against any of the parties hereto for a brokerage commission, finder's fee or
other like payment.
1 REPRESENTATIONS AND WARRANTIES OF DOCUCORP
DocuCorp hereby represents and warrants to the Shareholders as follows:
1.1 ORGANIZATION AND GOOD STANDING. DocuCorp is a corporation,
duly incorporated, validly existing and in good standing under the laws of
the State of Delaware and has all requisite corporate power and authority to
own and lease its properties and carry on its business as currently conducted.
1.1 DUE AUTHORIZATION. DocuCorp has full corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the Employment
Agreements, and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the
part of DocuCorp.
1.1 EXECUTION AND DELIVERY. This Agreement has been duly executed
and delivered by DocuCorp and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms, except as
may be limited by the availability of equitable remedies or by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally. The execution and delivery by DocuCorp of this
Agreement and the Employment Agreements and the consummation of the
transactions contemplated hereby and thereby will not: (i) conflict with or
result in a breach of the certificate of incorporation or bylaws of DocuCorp,
(ii) violate any law, statute, rule or regulation or any order, writ,
injunction or decree of any court or governmental authority, or (iii) violate
or conflict with or constitute a default under (or give rise to any right of
termination, cancellation or acceleration under) any indenture, mortgage,
lease, contract or other instrument to which DocuCorp is a party or by which
it is bound or affected.
1.1 DOCUCORP SHARES. The DocuCorp Shares to be issued to the
Shareholders will, upon issuance be duly and validly issued, fully paid and
nonassessable.
1.1 SEC REPORTS. DocuCorp has furnished to the Shareholders true
and complete copies of (i) DocuCorp's Annual Report on Form 10-K for the year
ended July 31, 1997, (ii) the DocuCorp's Quarterly Report on Form 10-Q for
the first quarter of fiscal 1998 and (iii) DocuCorp's Registration Statement
on Form S-1 filed on January 16, 1998 (collectively the "SEC Reports"). The
SEC Reports did not, on their respective dates of filing, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. DocuCorp has filed
on a timely basis all documents required to be filed by it with the
Securities and Exchange Commission (the "SEC") and all such documents
complied as to form with the applicable
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requirements of law. All financial statements included in such documents,
including without limitation, the SEC Reports, (i) complied as to form in all
material respects with the applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, (ii) were
prepared in accordance with generally accepted accounting principles applied
on a consistent basis throughout the periods covered thereby (except as may
be indicated therein), (iii) fairly present the financial position, results
of operations and cash flows of DocuCorp as of the respective dates thereof
and for the periods referred to therein, and (iv) are consistent with the
books and records of DocuCorp. Since the date of the most recent SEC
Reports, there has not been any material adverse change in the assets,
business, financial condition or results of operations of DocuCorp.
1.1 FINDERS AND BROKERS. All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried on by
DocuCorp directly with the Shareholders and the Company. No person has as a
result of any agreement or action of DocuCorp any valid claim against any of
the parties hereto for a brokerage commission, finder's fee or other like
payment.
1 CERTAIN COVENANTS AND AGREEMENTS
The Company and the Shareholders, jointly and severally (subject to the
provisions of Section 15.10 hereof), covenant and agree that, from and after
the execution and delivery of this Agreement to and including the Closing
Date (and thereafter as reflected below), they shall cause the Company to
comply with the covenants set forth below, and DocuCorp covenants and agrees
that it shall similarly comply with said covenants to the extent applicable
to it.
1.1 ACCESS. Upon reasonable notice, the Company and the
Shareholders will give to DocuCorp and its counsel, accountants and other
authorized representatives, full access during reasonable business hours to
all of the Company's properties, books, contracts, documents and records and
shall furnish DocuCorp with all such information concerning their affairs,
including financial statements, as the other may reasonably request in order
that DocuCorp may have full opportunity to make such reasonable
investigations as it shall desire for the purpose of verifying the
performance of and compliance with the representations, warranties, covenants
and the conditions contained herein or for other purposes reasonably related
to the transactions contemplated hereby. The Company and the Shareholders
will take all action necessary to enable DocuCorp, its counsel, accountants
and other representatives to discuss the affairs, properties, business,
operations and records of the Company at such times and as often as DocuCorp
may reasonably request with executives, independent accountants and counsel
of the Company and the Shareholders. In the event that the Closing does not
occur and this Agreement is terminated, the Company and the Shareholders, on
the one hand, and DocuCorp, on the other, shall (i) maintain the
confidentiality of all information obtained from the other party in
connection herewith, except for such information as is in the public domain,
(ii) not use any such information so obtained to the detriment or competitive
disadvantage of the other party, and (iii) promptly return copies of all
books, records, contracts and any other documentation of the other delivered
to such party pursuant to the transactions contemplated hereby.
1.1 BEST EFFORTS. The Company, the Shareholders and DocuCorp
shall take all reasonable actions necessary to consummate the transactions
contemplated by this Agreement and will use all necessary and reasonable
means at their disposal to obtain all necessary consents and approvals of
other persons and governmental authorities required to enable it to
consummate the transactions contemplated by this Agreement. Each party shall
make all filings, applications, statements and
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reports to all governmental agencies or entities which are required to be
made prior to the Closing Date by or on its behalf pursuant to any statute,
rule or regulation in order to consummate the transactions contemplated by
this Agreement, and copies of all such filings, applications, statements and
reports shall be provided to the other.
1.1 PUBLIC ANNOUNCEMENTS. Prior to the Closing Date, all notices
to third parties and other publicity relating to the transaction contemplated
by this Agreement shall be jointly planned and agreed to by the Shareholders
and DocuCorp.
1.1 ORDINARY COURSE OF BUSINESS. Except as contemplated by this
Agreement, during the period from the execution and delivery of this
Agreement through the Closing Date, the Company shall (i) conduct its
operations in the ordinary course of business consistent with past and
current practices, (ii) use good faith efforts to maintain and preserve
intact its goodwill and business relationships, (iii) not enter into any
agreement which involves the payment by the Company of an aggregate amount
exceeding $10,000, or which has a term exceeding one year, (iv) not increase,
or agree to increase, the level of compensation payable to any of its
employees or the Shareholders, or pay any bonuses to Shareholders, or (v)
take any action which would cause any representation contained in Article 3
to be untrue as of the Closing Date.
5.5 EMPLOYMENT OF GARY BROOKMAN. Upon the occurrence of the Closing,
DocuCorp will offer employment to Gary Brookman, at an initial annual salary
of $65,000, for such individual to continue to serve in his present function
with the Company, as set forth in DocuCorp's standard employee employment
agreement.
5.6 REGISTRATION OF DOCUCORP SHARES.
(a) As soon as practicable after the written request of the
Shareholders (which request may be made on and after the later of (i) May
15, 1998 or (ii) the expiration of the lock-up period applicable to
DocuCorp's initial public offering of its common stock, such expiration to
be no later than October 31, 1998), DocuCorp shall prepare and file with
the SEC a Registration Statement on Form S-3 (the "Registration
Statement") registering the DocuCorp Shares for resale to the public.
DocuCorp shall cause the Registration Statement (i) to become effective as
soon as practicable after the filing thereof and (ii) to remain effective
so that the DocuCorp Shares may be offered and sold on a continuous or
delayed basis in accordance with Rule 415 under the 1933 Act, until such
time as all of the DocuCorp Shares have been either sold by the
Shareholders or are legally entitled to be sold without registration under
the 1933 Act.
(b) Based upon the written opinion of DocuCorp's securities law
counsel, DocuCorp may, by written notice to the Shareholders, for a period
not to exceed 30 days, suspend or withdraw the Registration Statement and
require that the Shareholders cease sales of the DocuCorp Shares
thereunder, if (i) DocuCorp is engaged in negotiations or preparations for
any transaction that DocuCorp desires to keep confidential for valid
business reasons, and (ii) DocuCorp determines in good faith that the
public disclosure requirements imposed on DocuCorp as a result of the
Registration Statement would require public disclosure of such
negotiations or preparations; provided, however, that DocuCorp may not
exercise this right on more than one occasion.
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(c) DocuCorp agrees to indemnify and hold harmless the Shareholders,
and any broker or agent selling the DocuCorp Shares on behalf of the
Shareholders, against any losses, claims, damages or liabilities to which
any such person may become subject under the 1933 Act, or otherwise,
insofar as such losses, claims, damages or liabilities arise from any
untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement or prospectus included therein, or any
supplemental filings, or other documents, incident to the Registration
Statement, or arise out of or are based upon the omission to state therein
a fact required to be stated therein or necessary to make the statements
therein not misleading (except insofar as such losses, claims, damages or
liabilities arise out of or are based upon information furnished in
writing to DocuCorp by or on behalf of the Shareholders specifically for
use in such Registration Statement or prospectus).
(d) DocuCorp shall bear all expenses of the Registration Statement
filed hereunder, which shall include, without limitation, all registration
and filing fees and the reasonable fees and disbursements of counsel and
accountants for DocuCorp; but which shall not include any selling
commissions or underwriting discounts or stock transfer taxes for the
Shareholders or their brokers or underwriters or of any counsel or
accountants retained by the Shareholders.
5.7 REPURCHASE OF CERTAIN DOCUCORP SHARES.
(a) The Shareholders hereby grant to DocuCorp the right and option
(the "Call Option") to repurchase 100,000 of the DocuCorp Shares (the
"Callable Shares") upon the terms and conditions set forth in this Section
5.7. DocuCorp may exercise the Call Option if Transit Revenues (as
defined herein) for the 42 months ending July 31, 2001 are $6.0 million or
less. DocuCorp may exercise the Call Option by giving written notice to
the Shareholders of its exercise of the Call Option during the 30 day
period which is the first full month after the completion of DocuCorp's
audit report for the year ending July 31, 2001 (such exercise month
expected to be the month of October 2001). Upon DocuCorp's exercise of
the Call Option, the Shareholders shall be required to sell the Callable
Shares to DocuCorp, and DocuCorp shall be required to repurchase the
Callable Shares. A closing for the repurchase of the Callable Shares
shall be held on the date specified by DocuCorp, which shall be no later
than the 30th day after the exercise of the Call Option. At such closing,
the Shareholders shall deliver to DocuCorp stock certificates representing
the Callable Shares, duly endorsed to DocuCorp, against payment by
DocuCorp to the Shareholders (apportioned equally between them) of the
exercise price set forth in subsection (b) below.
(b) The exercise price for the Callable Shares shall be (i) if
Transit Revenues for the 42 months ending July 31, 2001 are $3.0 million
or less, $3.00 per Callable Share, (ii) if Transit Revenues for the 42
months ending July 31, 2001 exceed $3.0 million but are $6.0 million or
less, $5.00 per Callable Share, and (iii) if Transit Revenues for the 42
months ending July 31, 2001 exceed $6.0 million, $15.00 per Callable
Share.
(c) The amount of Transit Revenues for the 42 months ending July 31,
2001 shall be set forth on a written statement prepared by DocuCorp and
delivered to the Shareholders. The Shareholders shall have the right to
contest the statement at any time within 30 days after their receipt
thereof by delivering their objection in writing to DocuCorp. The parties
shall
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use their best efforts to resolve any contest promptly, and the
Shareholders shall be entitled to examine the accounting records of
DocuCorp for such purpose. If DocuCorp and the Shareholders are unable to
resolve such dispute within 30 days after notification of such objection,
the parties shall submit such dispute to KPMG Peat Marwick (the
"Independent Auditors") to make the final determination. The decision of
the Independent Auditors shall be final and binding on the parties. The
Shareholders shall bear the cost of the Independent Auditors unless the
decision of such Independent Auditors results in an adjustment of the
exercise price in favor of the Shareholders or results in the Call Option
becoming non-exercisable. As used herein, "Transit Revenues" shall mean
licensing and maintenance revenues of the "Transit" software products sold
by the Company, as determined in accordance with generally accepted
accounting principles. In the event that the Transit product is bundled
or otherwise sold in conjunction with other products of DocuCorp, a fair
and equitable allocation (based upon the relative prices which the
products had been sold separately) shall be made between the Transit
product and such other products.
(d) The Shareholders hereby acknowledge that DocuCorp will place
restrictive legends on the Callable Shares referencing DocuCorp's Call
Option and the existence of this Agreement.
(e) At all times prior to July 31, 2001, DocuCorp will use its
reasonable best efforts to encourage the development and sale of the
Transit product. To this end, for such period and so long as the Transit
product retains its present functionality and customer acceptance,
DocuCorp will (i) incorporate Transit into its product line as the
featured data acquisition product (it being recognized, however, that
DocuCorp will not disband traditional DocuCorp legacy methods of acquiring
data) and (ii) allow Transit to be sold on a stand-alone basis and allow
the continued development of the Maitland customer base.
5.8 TAX-FREE REORGANIZATION. The parties will use their reasonable
best efforts to ensure that the sale of the Shares to DocuCorp under this
Agreement will not result in the recognition of income for federal income tax
purposes.
1 CONDITIONS TO DOCUCORP'S CLOSING
All obligations of DocuCorp under this Agreement shall be subject to the
fulfillment at or prior to the Closing of the following conditions, it being
understood that DocuCorp may, in its sole discretion, waive any or all of
such conditions in whole or in part:
1.1 REPRESENTATIONS, ETC. The Company and the Shareholders shall
have performed in all material respects the covenants and agreements
contained in this Agreement that are to be performed by each of them at or
prior to the Closing, and the representations and warranties of the Company
and the Shareholders contained in this Agreement shall be true and correct as
of the Closing Date with the same effect as though made at such time (except
as contemplated or permitted by this Agreement).
1.1 CONSENTS. All consents and approvals from any third parties
required to consummate the transactions contemplated by this Agreement shall
have been obtained without material cost or other materially adverse
consequence to DocuCorp.
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1.1 NO ADVERSE LITIGATION. No order or preliminary or permanent
injunction shall have been entered and no action, suit or other legal or
administrative proceeding by any court or governmental authority, agency or
other person shall be pending or threatened on the Closing Date which may
have the effect of (i) making any of the transactions contemplated hereby
illegal, (ii) materially adversely affecting the value of the assets or
business of the Company or (iii) making DocuCorp or the Company liable for
the payment of a material amount of damages to any person.
1.2 INTELLECTUAL PROPERTY DUE DILIGENCE. DocuCorp shall have
received documentation satisfactory to it confirming the title of, and
ownership by, the Company of the intellectual property associated with the
"Transit" software product.
1.1 CLOSING DELIVERIES. DocuCorp shall have received each of the
documents or items required to be delivered to it pursuant to Section 8.1
hereof.
1 CONDITIONS TO SHAREHOLDERS' AND COMPANY'S CLOSING
All obligations of the Company and the Shareholders under this Agreement
shall be subject to the fulfillment at or prior to the Closing of the
following conditions, it being understood that the Company and the
Shareholders may, in their sole discretion, waive any or all of such
conditions in whole or in part:
1.1 REPRESENTATIONS, ETC. DocuCorp shall have performed in all
material respects the covenants and agreements contained in this Agreement
that are to be performed by it at or prior to the Closing, and the
representations and warranties of DocuCorp contained in this Agreement shall
be true and correct as of the Closing Date with the same effect as though
made at such time (except as contemplated or permitted by this Agreement).
1.1 NO ADVERSE LITIGATION. No order or preliminary or permanent
injunction shall have been entered and no action, suit or other legal or
administrative proceeding by any court or governmental authority, agency or
other person shall be pending or threatened on the Closing Date which may
have the effect of (i) making any of the transactions contemplated hereby
illegal or (ii) making the Shareholders liable for the payment of a material
amount of damages to any person.
1.1 CLOSING DELIVERIES. The Company and the Shareholders shall
have received each of the documents or items required to be delivered to them
pursuant to Section 8.2 hereof.
1 DOCUMENTS TO BE DELIVERED AT CLOSING
1.1 TO DOCUCORP. At the Closing, there shall be delivered to
DocuCorp:
1.1.1 the Shares, in form satisfactory to DocuCorp and its
counsel;
1.1.1 the Employment Agreements;
1.1.1 a copy of all consents and approvals referred to in Section
6.2 hereof;
(d) the corporate records of the Company; and
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(e) all other items reasonably requested by DocuCorp.
1.1 TO THE SHAREHOLDERS. At the Closing, there shall be delivered
to the Shareholders:
1.1.1 170,000 shares of DocuCorp Common Stock as contemplated
by Section 2.1 hereof;
(b) the Employment Agreements; and
(c) all other items reasonably requested by the Shareholders.
1 SURVIVAL
All representations, warranties, covenants and agreements made by any
party to this Agreement or pursuant hereto shall be deemed to be material and
to have been relied upon by the parties hereto and shall survive the Closing
for a period of 12 months; provided, however, that (i) the representations
contained in Section 3.9 shall survive until the statute of limitations with
respect to tax matters expires; (ii) the covenants contained in Sections 5.6
and 5.7 shall survive for the periods referenced therein, and (iii) the
representations contained in Section 3.12 shall survive indefinitely. The
representations and warranties hereunder shall not be affected or diminished
by any investigation at any time by or on behalf of the party for whose
benefit such representations and warranties were made. All statements
contained herein or in any certificate, exhibit, list or other document
delivered pursuant hereto or in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties.
1 INDEMNIFICATION OF THE SHAREHOLDERS
DocuCorp shall indemnify and hold the Shareholders harmless from,
against, for and in respect of:
1.1.1 any and all damages, losses, settlement payments,
obligations, liabilities, claims, actions or causes of action and
encumbrances suffered, sustained, incurred or required to be paid by the
Shareholders because of the breach of any written representation, warranty,
agreement or covenant of DocuCorp contained in or made in connection with
this Agreement;
1.1.1 any and all liabilities, obligations, claims and demands
arising out of the ownership and operation of the Company on and after the
Closing Date, except to the extent the same arises from a breach of any
written representation, warranty, agreement or covenant of any Company or any
Shareholder contained in or made in connection with this Agreement; and
1.1.1 all reasonable costs and expenses (including, without
limitation, attorneys' fees, interest and penalties) incurred by the
Shareholders in connection with any action, suit, proceeding, demand,
assessment or judgment incident to any of the matters indemnified against in
this Section 10.
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2 INDEMNIFICATION OF DOCUCORP
The Shareholders (jointly and severally) shall indemnify and hold DocuCorp
harmless from, against, for and in respect of:
1.1.1 any and all damages, losses, settlement payments,
obligations, liabilities, claims, actions or causes of action and
encumbrances suffered, sustained, incurred or required to be paid by DocuCorp
because of the breach of any written representation, warranty, agreement or
covenant of the Company or any Shareholder contained in or made in connection
with this Agreement; and
1.1.1 all reasonable costs and expenses (including, without
limitation, attorneys' fees, interest and penalties) incurred by DocuCorp in
connection with any action, suit, proceeding, demand, assessment or judgment
incident to any of the matters indemnified against in this Section 11.
1 GENERAL RULES REGARDING INDEMNIFICATION
1.1.1 The obligations and liabilities of each indemnifying
party hereunder with respect to claims resulting from the assertion of
liability by the other party shall be subject to the following terms and
conditions:
1.1.1.1 The indemnified party shall give prompt written notice
(which in no event shall exceed 30 days from the date on which the
indemnified party first became aware of such claim or assertion) to the
indemnifying party of any claim which might give rise to a claim by the
indemnified party against the indemnifying party based on the indemnity
agreements contained in Section 10 or 11 hereof, stating the nature and basis
of said claims and the amounts thereof, to the extent known;
1.1.1.1 If any action, suit or proceeding is brought against the
indemnified party with respect to which the indemnifying party may have
liability under the indemnity agreements contained in Section 10 or 11
hereof, the action, suit or proceeding shall, upon the written acknowledgment
by the indemnifying party that is obligated to indemnify under such indemnity
agreement, be defended (including all proceedings on appeal or for review
which counsel for the indemnified party shall deem appropriate) by the
indemnifying party. The indemnified party shall have the right to employ its
own counsel in any such case, but the fees and expenses of such counsel shall
be at the indemnified party's own expense unless the employment of such
counsel and the payment of such fees and expenses both shall have been
specifically authorized in writing by the indemnifying party in connection
with the defense of such action, suit or proceeding, in which event the
indemnifying party shall not have the right to direct the defense of such
action, suit or proceeding on behalf of the indemnified party. The
indemnified party shall be kept fully informed of such action, suit or
proceeding at all stages thereof whether or not it is represented by separate
counsel.
1.1.1.1 The indemnified party shall make available to the
indemnifying party and its attorneys and accountants all books and records of
the indemnified party relating to such proceedings or litigation and the
parties hereto agree to render to each other such
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assistance as they may reasonably require of each other in order to ensure
the proper and adequate defense of any such action, suit or proceeding.
1.1.1.1 The indemnified party shall not make any settlement of
any claims without the written consent of the indemnifying party, which
consent shall not be unreasonably withheld or delayed.
1.1.1.1 If any claims are made by third parties against an
indemnified party for which an indemnifying party would be liable, and it
appears likely that such claims might also be covered by the indemnified
party's insurance policies, the indemnified party shall make a timely claim
under such policies and to the extent that such party obtains any recovery
from such insurance, such recovery shall be offset against any sums due from
an indemnifying party (or shall be repaid by the indemnified party to the
extent that an indemnifying party has already paid any such amounts). The
parties acknowledge, however, that if an indemnified party is self-insured as
to any matters, either directly or through an insurer which assesses
retroactive premiums based on loss experience, then to the extent that the
indemnified party bears the economic burden of any claims through
self-insurance or retroactive premiums or insurance ratings, the indemnifying
party's obligation shall only be reduced by any insurance recovery in excess
of the amount paid or to be paid by the indemnified party in insurance
premiums.
(vi) An indemnified party shall not make any claim
hereunder unless and until it has incurred damages and expenses
of a cumulative aggregate of $10,000 (the "Floor") and shall
thereafter be entitled to make a claim only for amounts incurred
in excess of such Floor.
(vii) The Shareholders shall be entitled to satisfy all
claims for indemnification hereunder by surrendering shares of
DocuCorp Common Stock to DocuCorp, which shares shall for such
purposes be valued at a price per share which is equal to the
average closing price of DocuCorp Common Stock on the Nasdaq
National Market (or if the shares are not then trading on such
market, using such other market as will best approximate the
fair market value of DocuCorp Common Stock) for the 30 trading
days ending 10 days prior to the date on which the Shareholders
have satisfied such claim.
1.1.1 Except as herein expressly provided, the remedies
provided in Sections 10 through 12 hereof shall be cumulative and shall not
preclude assertion by any party of any other rights or the seeking of any
other rights or remedies against any other party hereto.
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1 FAILURE TO CLOSE BECAUSE OF DEFAULT
In the event that the Closing is not consummated by virtue of a material
default made by a party in the observance or in the due and timely
performance of any of its covenants or agreements herein contained
("Default"), the parties shall have and retain all of the rights afforded
them at law or in equity by reason of that Default. In addition, the Company
and the Shareholders, on the one hand, and DocuCorp, on the other,
acknowledge that the Shares and the transactions contemplated hereby are
unique, that a failure by any of them to complete such transactions will
cause irreparable injury to the other, and that actual damages for any such
failure may be difficult to ascertain and may be inadequate. Consequently,
DocuCorp, the Company and the Shareholders agree that each shall be entitled,
in the event of a Default by the other, to specific performance of any of the
provisions of this Agreement in addition to any other legal or equitable
remedies to which the non-defaulting party may otherwise be entitled. In the
event any action is brought, the prevailing party shall be entitled to
recover court costs, arbitration expenses and reasonable attorneys' fees.
1 TERMINATION RIGHTS
This Agreement may be terminated by either DocuCorp or the Company, if
either such party is not then in Default, upon written notice to the other
upon the occurrence of any of the following:
1.1.1 If the Closing has not occurred on or before March 31,
1998;
1.1.1 If either party Defaults and such Default has not been
cured within 30 days of written notice of such Default by the other party;
1.1.1 Subject to the provisions of Sections 6 and 7 hereof, by
the Company or DocuCorp, if on the Closing Date any of the conditions
precedent to the obligations of the Company or DocuCorp, respectively, set
forth in this Agreement have not been satisfied or waived by such party; or
1.1.1 By mutual consent of the Company and DocuCorp.
1 MISCELLANEOUS PROVISIONS
1.1 EXPENSES. DocuCorp shall pay the fees and expenses incurred
by it in connection with the transactions contemplated by this Agreement and
the Shareholders shall pay the fees and expenses incurred by them and the
Company in connection with the transactions contemplated by this Agreement.
If any action is brought for breach of this Agreement or to enforce any
provision of this Agreement, the prevailing party shall be entitled to
recover court costs, arbitration expenses and reasonable attorneys' fees
incurred in enforcing such provision as a result of the breach.
1.1 AMENDMENT. This Agreement may be amended at any time but only
by an instrument in writing signed by the parties hereto.
1.1 NOTICES. All notices and other communications delivered
hereunder shall be in writing and shall be deemed given if delivered
personally or upon actual receipt if mailed by certified
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mail, return receipt requested or delivered by nationally recognized
"next-day" delivery service, to the parties at the addresses set forth below:
If to the Shareholders and (prior to the Closing) the Company:
P.O. Box 7927
Portland, Maine 04112
Telephone: (207) 772-6806
Telecopy: (207) 772-1496
If to DocuCorp:
5910 N. Central Expressway, Suite 800
Dallas, Texas 75206
Attention: President
Telephone: (214) 891-6500
Telecopy: (214) 891-6678
or such other address or addresses as any party shall have designated by
notice to each other party in accordance with this Section 15.3.
1.1 ASSIGNMENT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, heirs and
permitted assigns. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto
without the prior written consent of the others.
1.1 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
1.1 HEADINGS. The headings of the Sections of this Agreement are
inserted for convenience only and shall not constitute a part hereof.
1.1 ENTIRE AGREEMENT. This Agreement and the documents referred
to herein contain the entire understanding of the parties hereto in respect
of the subject matter contained herein. There are no restrictions, promises,
warranties, conveyances or undertaking other than those expressly set forth
herein. This Agreement supersedes any prior agreements and understandings
between the parties with respect to the subject matter.
1.1 WAIVER. No attempted waiver of compliance with any provision
or condition hereof, or consent pursuant to this Agreement, will be effective
unless evidenced by an instrument in writing by the party against whom the
enforcement of any such waiver or consent is sought.
1.1 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
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1.1 ASSERTION OF CLAIMS AGAINST THE COMPANY. In any proceeding by
DocuCorp to assert or prosecute any claims under, or to otherwise enforce,
the Agreement, the Shareholders agree that they shall not assert as a defense
or bar to recovery, and hereby waive any right to so assert such defense or
bar such recovery, that (a) prior to Closing the Company shall have had
knowledge of the circumstances giving rise to the claim being pursued by it;
(b) prior to Closing, the Company engaged in conduct or took action that
caused or brought about the circumstances giving rise to its claim, or
otherwise contributed thereto; or (c) the Shareholders have a right of
contribution from the Company to the extent that there is any recovery
against the Shareholders.
1.1 FRANCHISE TAXES OF THE COMPANY. Liability for state corporate
franchise taxes assessed on the Shares by the state of Maine, if any, payable
with respect to the tax year in which the Closing Date falls shall be
prorated as between the Shareholders and DocuCorp on the basis of the number
of days of the tax year elapsed to and including such date. To the extent
possible, such proration shall be made on the Closing Date based upon
estimates of such franchise tax (without giving effect to any changes in the
tax rate or amount due as a result of actions by the Company or DocuCorp
after the Closing).
1.1 SEVERABILITY. The event that any of the provisions contained
in this Agreement is held to be invalid, illegal or unenforceable shall not
affect any other provision hereof, and this Agreement shall be construed as
if such invalid, illegal or unenforceable provisions had not been contained
herein.
1.1 INTENDED BENEFICIARIES. The rights and obligations contained
in this Agreement are hereby declared by the parties hereto to have been
provided expressly for the exclusive benefit of such entities as set forth
herein and shall not benefit, and do not benefit, any unrelated third parties.
1.1 MUTUAL CONTRIBUTION. The parties to this Agreement and their
counsel have mutually contributed to its drafting. Consequently, no
provision of this Agreement shall be construed against any party on the
ground that such party drafted the provision or caused it to be drafted or
the provision contains a covenant of such party.
[signature page to follow]
17
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
DocuCorp International, Inc.
By: /s/ Michael D. Andereck
------------------------
Michael D. Andereck
President
Maitland Software, Inc.
By: /s/ James S. Gentsch
-------------------------
James S. Gentsch
President
Shareholders:
/s/ David T. Rourke
------------------------
David T. Rourke
/s/ James S. Gentsch
------------------------
James S. Gentsch
18
<PAGE>
EXHIBIT 5.1
[CROUCH & HALLETT LETTERHEAD]
November 13, 1998
DocuCorp International, Inc.
5910 North Central Expressway, Suite 800
Dallas, Texas 75206
Gentlemen:
We have served as counsel for DocuCorp International, Inc., a Delaware
corporation (the "Company"), in connection with the Registration Statement on
Form S-3 covering the sale of a maximum of 720,000 shares (the "Shares") of
Common Stock, $.01 par value, of the Company. The Shares are to be sold from
time to time by stockholders of the Company as described in the Registration
Statement.
We have examined such documents and questions of law as we have deemed
necessary to render the opinion expressed below. Based upon the foregoing,
we are of the opinion that the Shares are duly and validly issued, fully paid
and non-assessable.
We consent to the use of this opinion as Exhibit 5.1 to the Registration
Statement.
Very truly yours,
/s/ Crouch & Hallett, LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report
dated September 9, 1998 which appears on page 21 of the 1998 Annual Report to
Shareholders of DocuCorp International, Inc., which is incorporated by
reference in DocuCorp International, Inc.'s Annual Report on Form 10-K for
the year ended July 31, 1998. We also consent to the incorporation by
reference of our report on the Financial Statement Schedule, which appears in
Form 10-K. We also consent to the references to us under the heading
"Experts" in such Prospectus.
/s/ PricewaterhouseCoopers LLP
November 12, 1998
