<PAGE>
THIS DOCUMENT IS A COPY OF THE FORM 10-QSB FILED ON MAY 15, 1996 PURSUANT
TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
- --- OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996.
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________.
Commission File number: 0-18248
JUDGE IMAGING SYSTEMS, INC.
-------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 06-1184427
- --------------------------------- --------------
(State or other jurisdiction of (I.R.S. Employer ID)
incorporation or organization)
Two Bala Plaza, Bala Cynwyd, Pennsylvania 19004
- ----------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
(610) 667-1190
--------------------------------------------
(Issuer's telephone number)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes X No
--- ---
Applicable only to issuers involved in bankruptcy proceedings during the
preceding five years.
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes ___ No ___
Applicable only to corporate issuers
The number of shares outstanding of the issuer's common stock as of March 31,
1996 was 3,980,141
Transitional small business disclosure format. Yes No X
--- ---
<PAGE>
JUDGE IMAGING SYSTEMS, INC.
FORM 10-QSB INDEX
<TABLE>
<CAPTION>
Number Page
- ------ ----
<S> <C> <C>
PART I. FINANCIAL INFORMATION 3
Item 1. Financial Statements:
Condensed Balance Sheets as of
March 31, 1996 (unaudited) and December 31, 1995 3
Condensed Statements of Operations (unaudited)
for the three months ended March 31, 1996 and 1995 4
Condensed Statements of Cash Flows (unaudited)
for the three months ended March 31, 1996 and 1995 6
Notes to Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 14
PART II. OTHER INFORMATION 16
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security 18
Holders
Item 5. Other Information 18
Item 6. Exhibits and Reports 19
SIGNATURES 20
</TABLE>
2
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
JUDGE IMAGING SYSTEMS, INC.
CONDENSED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
ASSETS
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
--------------- ------------------
CURRENT ASSETS
<S> <C> <C>
Cash $ 614,823 $ 11,310
Accounts receivable, net of
allowance for doubtful accounts of
$27,000 in 1996 and $14,395 in 1995 1,786,759 1,471,916
Other receivables - 50,000
Inventories 1,309,954 515,099
Prepaid expenses and other 98,642 273,672
----------- -----------
Total current assets 3,810,178 2,321,997
PROPERTY AND EQUIPMENT, NET 418,872 194,870
OTHER ASSETS
Security deposits 19,603 14,063
----------- -----------
TOTAL ASSETS $ 4,248,653 $ 2,530,930
=========== ===========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
CURRENT LIABILITIES
<S> <C> <C>
Equipment note payable, current $ 15,150 $ 15,150
portion
Accounts payable and accrued expenses 1,725,905 891,829
Payroll and sales taxes payable 94,161 112,336
Advances from shareholders 126,457 139,906
Deferred revenue 379,001 46,111
Customer deposits 217,485 -
----------- -----------
Total current liabilities 2,558,159 1,205,332
----------- -----------
EQUIPMENT NOTE PAYABLE, NET OF CURRENT
PORTION 70,008 53,233
----------- -----------
NOTE PAYABLE, BANK 1,401,315 1,538,425
----------- -----------
DUE TO AFFILIATE - 1,450,450
----------- -----------
MANDATORILY REDEEMABLE PREFERRED STOCK
(1,500 shares issued and
outstanding, $1,000 stated value) 1,520,000 -
----------- -----------
SHAREHOLDERS' DEFICIENCY
Common stock (10,000,000 shares
authorized; 3,980,141 and 6,900,577
shares issued and outstanding,
$0.01 and $0.005 par value, 1996 39,801 34,503
and 1995, respectively)
Preferred stock (3,665,770 shares - 366,577
issued and outstanding, $0.10 par value)
Preferred stock - Series A
(5,000,000 shares 8,226 -
authorized, 822,628 shares issued and
outstanding, $0.01 par value)
Contributed capital 1,589,576 524,433
Accumulated deficit (2,938,432) (2,642,023)
----------- -----------
Total shareholders' deficiency (1,300,829) (1,716,510)
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' DEFICIENCY $ 4,248,653 $ 2,530,930
=========== ===========
</TABLE>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
3
<PAGE>
Item 1. Financial Statements
JUDGE IMAGING SYSTEMS, INC.
CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
NET REVENUES, INCLUDING RELATED PARTY
REVENUES OF $229,000 IN 1996 AND $205,000 IN 1995 $2,469,343 $1,978,799
COST OF REVENUES 1,965,859 1,398,330
---------- ----------
GROSS PROFIT 503,484 580,469
OPERATING EXPENSES
Selling, general and administrative 752,543 367,693
---------- ----------
OPERATING INCOME (LOSS) (249,059) 212,776
OTHER EXPENSES, principally interest (47,350) (57,062)
---------- ----------
NET INCOME (LOSS) BEFORE PREFERRED (296,409) 155,714
DIVIDENDS
PREFERRED DIVIDENDS EARNED (18,900) (4,582)
---------- ----------
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON ($315,309) $ 151,132
SHAREHOLDERS ========== ==========
NET INCOME (LOSS) PER SHARE AND FULLY
DILUTED NET INCOME (LOSS) PER SHARE
ATTRIBUTABLE TO COMMON SHAREHOLDERS ($0.11) $0.04
========== ==========
</TABLE>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
4
<PAGE>
JUDGE IMAGING SYSTEMS, INC.
CONDENSED STATEMENT OF SHAREHOLDERS' DEFICIENCY
THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
SERIES A ADDITIONAL
COMMON STOCK PREFERED STOCK PREFERRED STOCK PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ---------------- ------ ----------------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
DECEMBER 31, 1995 6,900,577 $34,503 3,665,770 $366,577 - - $524,433 ($2,642,023) ($1,716,510)
ISSUANCE OF SERIES A
PREFERRED STOCK - - - - 822,628 $8,226 1,088,611 - 1,096,837
CONVERSION OF PREFERRED
STOCK TO COMMON STOCK 3,665,770 366,577 (3,665,770) (366,577) - - -
MERGER TRANSACTIONS
(SEE NOTE 1) (6,586,206) (361,279) - - - - (23,468) - (384,747)
NET LOSS - - - - - - - (296,409) (296,409)
---------- --------- --------- -------- ------- ------ ---------- ----------- -----------
BALANCE, MARCH 31, 1996 3,980,141 $39,801 - - 822,628 $8,226 $1,589,576 ($2,938,432) ($1,300,829)
========== ========= ========= ======== ======= ====== ========== =========== ===========
</TABLE>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
5
<PAGE>
Item 1. Financial Statements
JUDGE IMAGING SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $(296,409) $ 155,714
Adjustments to reconcile net income (loss) to cash
used in operating activities:
Depreciation 12,301 9,829
Provision for doubtful accounts 4,000 -
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts and other receivables (214,716) (227,467)
Inventories (755,754) (1,863)
Prepaid expenses and other 180,270 (4,162)
(Decrease) increase in:
Accounts payable and accrued expenses 751,989 (330,036)
Payroll and sales tax payable (18,175) (88,371)
Deferred revenue 33,115 (10,213)
Customer deposits 155,223 -
--------- ----------
Net cash used in operating activities (148,156) (496,569)
--------- ----------
INVESTING ACTIVITIES
Net cash used in investing activities, purchases
of property & equipment (62,887) (12,676)
--------- ----------
FINANCING ACTIVITIES
Cash acquired in business combination 13,786 -
Repayments of advances to shareholders (13,449) (6,540)
Principal payments on equipment note borrowings (6,607) (1,210)
Advances from affiliates 69,550 326,000
Proceeds from (repayments of) notes payable, bank (137,110) 27,635
Issuance of Series A preferred stock, net 888,386 -
--------- ----------
Net cash provided by financing activities 814,556 345,885
--------- ----------
INCREASE (DECREASE) IN CASH 603,513 (163,360)
CASH, JANUARY 1 11,310 3,782
--------- ----------
CASH (OVERDRAFT), MARCH 31 $ 614,823 ($159,578)
========= ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the three months for interest $ 48,014 $ 42,854
</TABLE>
6
<PAGE>
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
- -----------------------
Judge Imaging Systems, Inc. (the "Company") derives its revenues from
computer sales, repairs, maintenance and providing system integration for
document management, imaging and workflow, principally in the mid-Atlantic and
northeastern region of the Country. The Company also develops and markets
standardized and custom software products and systems for the mass storage,
electronic management and retrieval of information. As a systems integrator, the
Company designs, assembles, installs and maintains image-processing systems. The
Company's standardized products are sold both through distribution channels and
directly to end-users.
Financial information with regard to the three months ended March 31, 1996
and 1995 is unaudited but in the opinion of management contains all adjustments
which are of a normal, recurring nature and necessary to present fairly the
Company's results of operations and cash flows. Certain information and footnote
disclosure normally included in annual financial statements have been condensed
or omitted in the financial information for the three months ended March 31,
1996 and 1995 pursuant to SEC rules and regulations. Management believes that
the disclosures which have been made are adequate to make the information not
misleading.
The results of operation for the three months ended March 31, 1996 and 1995
are not necessarily indicative of the results to be expected for the full year.
The financial information with regard to the three months ended March 31,
1995 and the December 31, 1995 balance sheet are that of Judge Computer
Corporation ("Judge") (considered the acquiring corporation for accounting
purposes, as described in "business combination"). The statement of operations
for the three months ended March 31, 1996 includes three months of Judge
operations and one month (from February 29, 1996, the effective date of the
merger) of DataImage, Inc.'s operations.
At March 31, 1996, the Company is a 26% owned subsidiary of Judge Inc., a
company who, along with its 100% owned subsidiaries, provides engineers and
other technical professionals on a temporary and permanent basis. An additional
49% of the Company's voting stock is owned by individuals who are also
shareholders of Judge, Inc.
Business Combination
- --------------------
On September 13, 1995, Judge Imaging Systems, formerly known as DataImage,
Inc. (the "Registrant" and sometimes the "Surviving Corporation") entered into a
Letter of Intent with respect to a proposed merger transaction between the
Registrant and Judge.
On December 1, 1995, the Registrant and Judge executed the Agreement and
Plan of Merger (the "Merger Agreement") with respect to the merger transaction
proposed by the Letter of Intent. The Merger Agreement was amended effective
December 20, 1995 and February 26, 1996.
During 1996 and prior to the consummation of the Merger, Judge had the
following equity transactions:
. 366,577 shares of Company preferred stock were converted into Company
common stock;
. The Company's Board of Directors resolved to increase the authorized
preferred stock by 1,150,000 shares and divide such shares into 1,125,000
shares of Series A Convertible Preferred Stock, par value of $.01 and
25,000 shares of Series B Preferred Stock, par value $.01;
. $1,520,000 of advances from Judge, Inc./Judge Technical Services, Inc. were
converted into 1,500 shares of Company Series B Preferred Stock;
7
<PAGE>
JUDGE IMAGING SYSTEMS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
. The Company raised approximately $888,000 (net of related costs of
approximately $208,000) in a private placement offering of Series A
Convertible Preferred Stock. 822,628 shares were issued in the offering at
a price per share of $1.33. The Preferred A Stock is convertible at the
holder's option, and conversion is mandatory at the time of a subsequent
public offering of common stock in excess of $5 million dollars. The
Preferred Stock carries a cumulative dividend of 7% per year and holders
will have a liquidation preference prior to the common stock shareholders
and all other existing classes. In the event Judge Imaging Systems, Inc.
(the surviving company) has not closed on a subsequent public offering by
the eighth anniversary of the merger, then the Company will have the right
to redeem the stock.
The merger transaction was consummated effective February 29, 1996. A
brief summary of the merger transaction follows:
. In the merger, Judge, a privately owned corporation, was merged into
DataImage, with DataImage as the surviving entity in the merger. Following
the merger, the separate existence of Judge ceased, and DataImage continued
as the surviving corporation under Delaware law using the name "Judge
Imaging Systems, Inc.," (the "Surviving Corporation") with all of the
rights, powers, and privileges, and subject to all of the duties and
liabilities of DataImage and Judge combined. Following the merger, the
Surviving Corporation continued to be a public reporting company
. At the effective time of the merger, the Certificate of Incorporation of
DataImage as the Surviving Corporation was amended to: change its name to
Judge Imaging Systems, Inc., and to authorize a class of 5,000,000 shares
of preferred stock (the "Preferred Stock") in addition to the 10,000,000
shares of common stock previously authorized ("Common Stock"). The
5,000,000 shares of Preferred Stock are divided into 1,125,000 shares of
Series A Convertible Preferred Stock and 1,500 shares of Series B
Convertible Preferred Stock; the remaining shares of Preferred Stock are
"blank check" shares issuable at the discretion of the board of directors
of the Surviving Corporation. The Series A Convertible Preferred Stock and
the Series B Convertible Preferred Stock of the Surviving Corporation have
essentially the same rights and privileges as the Series A Convertible
Preferred Stock and the Series B Preferred Stock of Judge existing
immediately prior to the merger. The Series A Convertible Preferred Stock
is convertible into Common Stock at a 1 to 1 ratio, has a preference in
liquidation, and bears a 7% cumulative dividend. The Series B Preferred
Stock is non-voting, not convertible, has no liquidation preference, and
bears a 10% cumulative dividend;
. At the effective time of the merger, each DataImage shareholder
automatically received one share of Surviving Corporation Common Stock in
exchange for every 31.960868 shares of issued and outstanding DataImage
Common Stock owned by such shareholder as of the effective time of the
merger;
. At the effective time of the merger, each holder of Judge Common Stock
automatically received shares of Surviving Corporation Common Stock. The
number of shares received was calculated as one share of Surviving
Corporation Common Stock for every 2.832693723 shares of Judge Common Stock
held;
. At the effective time of the merger, each Judge shareholder received one
share of Surviving Corporation Series A Convertible Preferred Stock for
each share of Judge Series A Convertible Preferred Stock held, and one
share of Surviving Corporation Series B Preferred Stock for each share of
Judge Series B Preferred Stock held;
. The conversion ratios were calculated so that, after giving effect to
certain Reserved Shares for issuance to employees following the merger and
assuming the conversion of all Series A Convertible Preferred Stock to
Common Stock, there are approximately 5,000,000 shares of Common Stock of
the
8
<PAGE>
JUDGE IMAGING SYSTEMS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
Surviving Corporation outstanding immediately following the merger, of
which holders of DataImage Common Stock immediately prior to the merger
will receive in the aggregate approximately 5% (approximately 250,000
shares) and the holder of Judge Common Stock and Series A Convertible
Preferred Stock immediately prior to the merger will receive in the
aggregate approximately 95% (approximately 4,750,000 shares). The Series B
Preferred Stock is not included in the foregoing percentage calculations.
As a result, the business combination was accounted for as a "reverse
acquisition" whereby Judge, in substance, was to acquire DataImage,
allocating the fair value of Judge stock exchanged over the relative fair
value of assets and liabilities of DataImage (assumed to equal its book
value) prior to Judge being merged into DataImage (surviving corporation).
No value was to be ascribed to DataImage's net los carryforwards as a
result of limitations on these carryforwards subsequent to the change in
control. DataImage was to remain a registrant under the Securities and
Exchange Commission Rules.
As a consequence, a change in control of the Registrant has occurred
effective upon the consummation of the merger. The consideration given for such
change in control is the exchange of certificates described in the Merger
Agreement and previously described above. The basis of the change in control
includes a change in the directors of the Registrant and ad change in the share
ownership of the Registrant.
The persons from whom control of the Registrant was acquired upon the
merger pursuant to the exchange of securities described above were Canaan
Capital Limited Partnership and Canaan Capital Offshore Limited Partnership C.V.
(collectively the "Partnerships"). The Partnerships acquired control of the
Registrant pursuant to an agreement with the Registrant dated November 20, 1995
(the "Agreement"). As a result of the Agreement, the Partnerships immediately
acquired an aggregate of 1,700,000 shares of DataImage Common Stock in addition
to the 362,499 shares previously held, resulting in the ownership by the
Partnerships as of the record date of the Special Meeting of Shareholders of
approximately 51.4% of the issued and outstanding shares of DataImage Common
Stock, and effective voting control of the Registrant as of such date. As a
further result of the Agreement, immediately prior to the closing of the merger,
the Partnerships acquired in the aggregate an additional 3,980,214 shares of
DataImage Common Stock, resulting in the ownership as of the closing of the
proposed merger transaction by the Partnerships of 6,042,713 of the 7,990,217
shares issued and outstanding at that time, representing approximately 75.6% of
such issued and outstanding shares of DataImage Common Stock.
Judge and DataImage anticipate that the proposed merger transaction will
qualify as a "reorganization" pursuant to Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and that Judge and DataImage will each be
a party to the reorganization within the meaning of Section 368(b) of the Code.
Judge and DataImage further anticipate that no gain or loss will be recognized
by Judge or DataImage by reason of the merger.
At March 31, 1996, the capital structure of the Company is as follows:
Common Stock - 10,000,000 shares authorized; 3,980,141 shares issued and
outstanding; $.01 par value.
Preferred Stock - 5,000,000 shares authorized divided into 1,125,000 shares
of Series A, 1,500 shares of Series B with the remainder "blank check"
shares; 822,628 shares of Series A issued and outstanding and 1,500 shares
of Series B issued and outstanding.
9
<PAGE>
JUDGE IMAGING SYSTEMS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
Revenue Recognition and Deferred Revenues
- -----------------------------------------
Revenues are recorded as income in the period in which the merchandise is
shipped or the services are rendered. Revenues billed in advance for warranties
and maintenance contracts are deferred and recorded as income in the period in
which the services are rendered.
Revenue from sales of the Company's image-processing systems is recognized
at the date of shipment of the system, provided that any work to complete
installation of the systems is routine in nature and costs are not significant.
The system components are assembled and tested with the developed software in
the Company's facilities prior to delivery. Where installation is significant
to the completion of the contract revenue is recognized when the installation is
completed and accepted by the customer.
Software incorporated into the systems is licensed under a perpetual, non-
exclusive, non-transferable license, and revenue is recognized as part of the
completed system. Service contract revenue is recorded ratably over the term of
the contract. Substantially all service contracts expire within the year ending
December 31, 1996.
At March 31, 1996, $379,000 of warranty, maintenance and service contract
revenue has been deferred.
Inventories
- -----------
Inventories of computer and related supplies and equipment held for resale
are valued at the lower of cost (first-in, first-out) or market.
Management's Estimates
- ----------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumption that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Income Taxes
- ------------
Deferred taxes are accounted for in accordance with Statement of Financial
Accounting Standards ("Statement") No. 109, "Accounting for Income Taxes". The
Statement requires the use of the liability method to account for income taxes.
Deferred income taxes are provided for the difference between the tax basis of
an asset or liability and its reported amount in the financial statements at the
currently enacted tax rates that are expected to be in effect when the taxes are
actually paid or recovered.
Deferred income taxes arise principally from temporary differences between
financial and income tax reporting, including differences relating to
depreciation methods used, amounts recorded for inventory capitalization, the
availability of net operating loss carryforwards and certain other differences.
Deferred income tax assets are reduced by a valuation allowance when, based on
the weight of evidence available, it is more likely than not that some portion
or all of the deferred tax assets will not be realized.
Deferred income taxes are primarily the result of net operating loss
carryforwards and are completely reduced by a valuation allowance at March 31,
1996.
10
<PAGE>
JUDGE IMAGING SYSTEMS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
Net Income (Loss) Per Share
- ---------------------------
Net income (loss) per share and fully diluted net income (loss) per share
attributable to common shareholders is based on the weighted average number of
shares of common stock outstanding during the periods. The assumed conversion
of certain convertible preferred stock has not been considered in the
calculations of loss per share in 1996, since the effect of such
conversions/exercise would be antidilutive. The weighted average number of
shares outstanding during the three months ended March 31, 1996 and 1995 were
2,950,739 and 3,698,361 respectively.
NOTE 2. PRO-FORMA RESULTS OF OPERATIONS
The following sets forth the combined results of operation for both Judge
and DataImage for the three months ended March 31, 1996 and 1995 as if the
business combination occurred at January 1, 1996 and 1995, respectively:
<TABLE>
<CAPTION>
Three months Ended March 31
----------------------------
1996 1995
---- ----
<S> <C> <C>
Net Revenues $2,592,035 $2,387,709
Cost of Revenues 2,026,309 1,670,216
---------- ----------
Gross Profit 565,726 717,493
Operating Expenses:
Selling, general and administrative 837,689 557,237
---------- ----------
Operating Profit (loss) (271,963) 160,256
Other Income (Expenses), net (47,367) (59,065)
---------- ----------
Net Income (loss) ($319,330) $ 101,191
========== ==========
</TABLE>
Notes to Pro-Forma results of Operations:
(1) Interest expense adjusted due to the conversion of DataImage, Inc.'s
Canaan Capital stockholders' notes payable to common stock.
(2) Primary and fully-diluted net income (loss) per share of common stock
is calculated as follows (the assumed conversion of certain convertible
preferred stock has not been considered in the 1996 calculation since the effect
of such conversion would be antidilutive):
11
<PAGE>
JUDGE IMAGING SYSTEMS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net income (loss) ($319,330) $ 101,191
7% cumulative dividend on Series A Preferred Stock (19,200) (19,200)
Less 10% cumulative dividends on Series B Preferred
Stock (37,500) (37,500)
--------- ----------
Net income (loss) attributable to common ($376,030) ($44,491)
shareholders-primary ========= ==========
Net income (loss) attributable to common ($376,030) $ 63,691
shareholders-fully-dilutive ========= ==========
Weighted average number of shares:
Primary 3,980,141 3,980,141
========= ==========
Fully-dilutive 3,980,141 4,802,769
========= ==========
Net income (loss) per share and fully diluted net
income (loss) per share attributable to common ($.09) $.01
shareholders ========= ==========
</TABLE>
NOTE 3. NOTE PAYABLE, BANK
During 1995, the Company consolidated its line of credit along with certain
affiliated entities' lines into a $5,500,000 line of credit. Outstanding
borrowings relating to Judge Computer Corporation at March 31, 1996 were
$1,401,315. Interest on the line is prime plus 1% (9.5% at December 31, 1995).
Maximum borrowings under the new facility are limited to 80% of qualified
accounts receivable, as defined. The line of credit is due in full on May 31,
1997, is collateralized by substantially all of the Company's assets as well as
substantially all of Judge, Inc.'s and Judge Technical Services, Inc.'s assets,
is personally guaranteed by certain shareholders and certain affiliated
companies and is subject to certain financial covenants. In addition, the
Company as well as each of its affiliates is jointly and severally responsible
for all of the debt outstanding under the line. Subsequent to March 31, 1996,
the Bank line of credit was increased by $500,000 to $6,000,000.
NOTE 4. RELATED PARTY TRANSACTIONS
The Company had advances from Judge, Inc. and Judge Technical Services,
Inc. amounting to $1,450,450 at December 31, 1995. These advances increased to
$1,520,000 during the first quarter of 1996. At the effective time of the
Merger, these advances were converted into 1,500 shares of Company Series B
Preferred Stock (the "shares"). The shares are not convertible, nor do they
have any liquidation preference and carry a 10% cumulative annual dividend.
Dividend payments are permitted, contingent upon certain profit goals set forth
by the Company. Partial and fully redemption of the $1,500,000 face amount is
permitted, contingent upon the dollar value of proceeds raised in a subsequent
public offering. Subsequent to the closing of the Merger, such shares were
converted into 1,500 shares of Series B Preferred Stock of the surviving
corporation from the merger. The surviving corporation shares have the same
rights and privileges as the predecessor shares, and is mandatorily redeemable
automatically upon the tenth anniversary of issuance or upon a subsequent public
offering of at least $6,000,000.
During 1996 and 1995, the Company billed a subsidiary of Judge, Inc. for
consulting and related technical advisory services in the amount of $45,000 and
$120,000, respectively. Such amount is included in net revenues in the
accompanying statement of operations. During 1996 and 1995, the Company sold
approximately $184,000 and $85,000, respectively, of computer related equipment
to Judge, Inc. and/or its subsidiaries.
12
<PAGE>
JUDGE IMAGING SYSTEMS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
NOTE 5. PREFERRED STOCK
Holders of preferred stock at December 31, 1995 were entitled to vote as a
single class with the holders of the Company's common stock. In addition,
holders of preferred stock were entitled to receive cumulative dividends at the
annual rate of $.005 per share. Cumulative dividends in arrears at December 31,
1995 were approximately $74,000. No dividends were declared or paid in 1995.
During 1996, preferred stockholders waived such dividends due and converted
their preferred stock into common stock (see Note 1).
NOTE 6. SIGNIFICANT CUSTOMERS
During the three months ended March 31, 1995, sales to one customer
amounted to approximately $800,000 (41% of total sales).
NOTE 7. STATEMENT OF CASH FLOWS
Supplemental Disclosure of Noncash Financing transactions:
During 1996, $1,520,000 of advances from affiliates were converted to
mandatorily redeemable preferred stock.
During 1996, $366,577 of preferred stock was converted to common stock.
During 1996, a $50,000 note receivable was forgiven due to the business
combination.
Supplemental Disclosure of Noncash Investing Activities:
During 1996, the Company entered into certain financing arrangements for the
purchase of property and equipment in the amount of approximately $23,000.
Supplemental Disclosure of Noncash Investing and Financing Activities:
Effective February 29, 1996, Judge Computer Corporation and DataImage, effected
a business combination:
<TABLE>
<CAPTION>
Acquisition of Business:
<S> <C>
Inventories $ 39,101
Accounts receivable 104,127
Property and Equipment 150,034
Other assets 10,780
-----------
304,042
Accounts payable and accrued expenses ( 82,087)
Due to Judge ( 100,000)
Deferred revenue and customer deposits ( 362,037)
-----------
( 544,124)
-----------
Net liabilities assumed in business combination ($ 240,082)
===========
</TABLE>
13
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation as of and for the Three Months Ended March 31, 1996
Results of Operation
- --------------------
First quarter 1996 compared to first quarter 1995
- -------------------------------------------------
Highlights of the first quarter 1996 for Judge Imaging Systems, Inc., (the
"Company") included the successful acquisition of DataImage Inc. ("DataImage")
as of February 29, 1996, proceeds of $888,386 received form a private placement
of Series A Preferred Stock on January 16, 1996, and the strengthening of the
Company's sales organization.
Due primarily to the merger with DataImage, major first quarter Northeast snow
storms and an 18% increase in payroll and related benefit expenses attributable
to hiring additional strategic personnel, in the first quarter of 1996 the
Company experienced a net loss of $296,409, or $0.11 per share, compared to the
first quarter profit of $155,714, or $0.04 per share, in 1995.
Revenues for the quarter ended March 31, 1996 were up by 25% compared to the
quarter ended March 31, 1995, although the Company's profit margins decreased to
20% for the quarter ended March 31, 1996, versus a profit margin of 29% for the
same period in 1995. The decrease by 9% in gross profit margin in the first
quarter of 1996 compared to the first quarter of 1995 is directly attributable
to low margin hardware computer sales. Operating expenses increased from
$367,693 in the first quarter of 1995 to $752,543 for the first quarter of 1996,
or 104%, due to operational inefficiencies caused by the merger and expected
increases in costs and expenses related to increases in staffing levels. The
anticipated growth in revenues did not materialize to offset the additional
costs previously discussed.
Liquidity and Capital Resources
- -------------------------------
The Company's traditional sources of capital have been funds provided by its
bank, shareholders, and Judge Inc., an affiliated company. Although the first
quarter (which includes the merger) resulted in a loss of $296,409, the Company
believes it will generate sufficient funds on an annual basis, along with its
existing cash balances, to support it present level of operations and capital
expenditures. Subsequent to March 31, 1996, the Company increased its bank line
of credit by $500,000 for Judge Imaging and its affiliated companies. Cash as
of March 31, 1996, increased to $614,823 primarily due to the proceeds of the
private placement.
First Quarter 1996 Balance Sheet Compared to December 1995 Balance Sheet
- ------------------------------------------------------------------------
Current assets increased by $1,489,000 or 64% from December 31, 1995 to March
31, 1996. This increase was due primarily to the increase in cash from the
proceeds of private placement, the increase in accounts receivable due to
increased sales, and the increase in inventory related to equipment purchases
for the second quarter delivery.
14
<PAGE>
Current liabilities increased by $1,352,827 from December 31, 1995 to March 31,
1996. This increase was due to the increase in accounts payable which was a
direct result of inventory purchases. Additionally, deferred revenue and
customer deposits increased primarily as a result of the DataImage acquisition.
Property and Equipment increased from $194,870 on December 31, 1995 to $418,872
on March 31, 1996, or 115%. This increase was primarily the result of the
DataImage acquisition and purchases of equipment for new employees for
development, workflow capabilities and consulting.
Notes payable to the bank decreased in the first quarter ($137,000) from
December 31, 1995, due to the utilization of a portio of the private placement
proceeds. Due to Affiliate (Judge Inc.) at December 31, 1995, was converted in
1996 to mandatory redeemable preferred stock. Preferred Series "A" stock was
issued on February 29, 1996 to infuse approximately $888,000 of cash into the
organization which provided working capital to position the Company to sustain
the growth expected in 1996.
Prospective Information
- -----------------------
1996 is the year that most experts expect the Document Imaging and Paper
Conversion marketplace to experience rapid growth. Specifically two articles
confirm these beliefs. One, dated January 24, 1996 in IDOM research Note (M620-
158) from Jamie Potkin at the Gartner Group, talks about "The Avalanche Effect"
primarily geared for growth from 1996 through the year 2000. The other article
was published on the front page of the Wall Street Journal, on February 29,
-------------------
1996. This article presented by the American Institute of Certified Public
Accountants ranks Imaging Processing at the top of its list of fifteen
technologies that will have the largest effect on business and accounting firms
in 1996. The Company believes it is well positioned as a public corporation to
benefit from "The Avalanche Effect".
The Company believes it should offer the Fortune 1000 clients a solutions
approach to document management, work flow and corporate re-engineering. The
Company therefore has developed new complimentary divisions to its Document
Imaging Solutions approach. The new developments included the addition of four
new programmers for the development team. In addition, the Company has hired a
manager to head the Business Consulting Group dedicated to work process redesign
and information technology planning. Also, the Company has expanded its
management team, including the hiring of personnel to direct sales and marketing
and the Document Management Services Division (paper conversion). As part of
the reorganization, Chief Operating Officer, Raymond Sozzi, former Chief
Executive Officer and President of DataImage and Lynn Handel, Chief Financial
Officer have left the Company. The Company has also hired an experienced Chief
Financial Officer with twenty-three years of combined public and financial
accounting experience. In 1995 Judge Imaging Systems, Inc. revenues were in
excess of $9,000,000. Based on its acquisition of DataImage, the Company's
backlog at March 31, 1996, and the expected growth in the industry, management
believes opportunities exist for increased revenues in 1996.
15
<PAGE>
PART II
--------
OTHER INFORMATION
Item 1. Legal Proceedings.
- --------------------------
None.
Item 2. Changes in Securities.
- ------------------------------
Effective February 26, 1996, the instruments defining the rights of
the holders of common stock of the registrant were changed as a result of the
merger of the registrant with Judge Computer Corporation.
On September 13, 1995, Judge Imaging Systems, formerly known as
DataImage, Inc. (the "Registrant" and sometimes the "Surviving Corporation")
entered into a Letter of Intent with respect to a proposed merger transaction
between the Registrant and Judge Computer Corporation ("Judge"). A copy of this
Letter of Intent was filed as an exhibit to a report on Form 8-K dated September
15, 1995. On December 1, 1995, the Registrant and Judge executed the Agreement
and Plan of Merger (the "Merger Agreement") with respect to the merger
transaction proposed by the Letter of Intent. A copy of this Merger Agreement
was filed as an Exhibit to a report on Form 8-K dated December 1, 1995. The
Merger Agreement was amended effective December 20, 1995 and February 26, 1996,
copies of which amendments are were filed as Exhibits A and B, respectively to a
report on Form 8-K dated March 15, 1996.
The merger transaction was consummated effective February 29, 1996. A
brief summary of the merger transaction and the changes in the rights of the
holders of the registrant's common stock follows:
. In the merger, Judge, a privately owned corporation, was merged into
DataImage, with DataImage as the surviving entity in the merger.
Following the merger, the separate existence of Judge ceased, and
DataImage continued as the surviving corporation under Delaware law
using the name "Judge Imaging Systems, Inc.," (the "Surviving
Corporation") with all of the rights, powers, and privileges, and
subject to all of the duties and liabilities of DataImage and Judge
combined. Following the merger, the Surviving Corporation continued
to be a public reporting company.
. At the effective time of the merger, the Certificate of Incorporation
of DataImage as the Surviving Corporation was amended to: change its
name to Judge Imaging Systems, Inc., and to authorize a class of
5,000,000 shares of preferred stock (the "Preferred Stock") in
addition to the 10,000,000 shares of common stock previously
authorized ("Common Stock"). The 5,000,000 shares of Preferred Stock
are divided into 1,125,000 shares of Series A Convertible Preferred
Stock and 1,500 shares of Series B Preferred Stock; the
16
<PAGE>
remaining shares of Preferred Stock are "blank check" shares issuable
at the discretion of the board of directors of the Surviving
Corporation. The Series A Convertible Preferred Stock and the Series B
Preferred Stock of the Surviving Corporation have essentially the same
rights and privileges as the Series A Convertible Preferred Stock and
the Series B Preferred Stock of Judge existing immediately prior to
the merger. The Series A Convertible Preferred Stock is convertible
into Common Stock at a 1 to 1 ratio, has a preference in liquidation,
and bears a 7% cumulative dividend. The Series B Preferred Stock is
non-voting, not convertible, has no liquidation preference, and bears
a 10% cumulative dividend.
. At the effective time of the merger, each DataImage shareholder
automatically received one share of Surviving Corporation Common Stock
in exchange for every 31.960868 shares of issued and outstanding
DataImage Common Stock owned by such shareholder as of the effective
time of the merger.
. At the effective time of the merger, each holder of Judge Common Stock
automatically received shares of Surviving Corporation Common Stock.
The number of shares received was calculated as one share of Surviving
Corporation Common Stock for every 2.832693723 shares of Judge Common
Stock held.
. At the effective time of the merger, each Judge shareholder received
one share of Surviving Corporation Series A Convertible Preferred
Stock for each share of Judge Series A Convertible Preferred Stock
held, and one share of Surviving Corporation Series B Preferred Stock
for each share of Judge Series B Preferred Stock held.
. The conversion ratios were calculated so that, after giving effect to
certain Reserved Shares for issuance to employees following the merger
and assuming the conversion of all Series A Convertible Preferred
Stock to Common Stock, there are approximately 5,000,000 shares of
Common Stock of the Surviving Corporation outstanding immediately
following the merger, of which holders of DataImage Common Stock
immediately prior to the merger received in the aggregate
approximately 5% (approximately 250,000 shares), and the holders of
Judge Common Stock and Series A Convertible Preferred Stock
immediately prior to the merger received in the aggregate
approximately 95% (approximately 4,750,000 shares). The Series B
Preferred Stock is not included in the foregoing percentage
calculations.
. No fractional shares of Surviving Corporation Common Stock or
Preferred Stock will issue in connection with the merger. DataImage
and Judge stockholders who would otherwise be entitled to a fractional
share of Surviving Corporation Common Stock or Preferred Stock will,
upon due surrender of their certificates, be paid the cash value of
such fractional share interest, based on the market value of the
Surviving Corporation Common Stock or Preferred Stock (as applicable)
as of the effective date of the merger.
17
<PAGE>
As a result of the merger transaction, holders of DataImage Common
Stock experienced the 32.960868 reverse stock split described above and received
shares of Surviving Corporation Common Stock having essentially similar rights
and preferences to the DataImage Common Stock. The rights of such holders of
DataImage Common Stock will, however, be limited and qualified to the extent
that the Surviving Corporation has authorized the preferred stock described
above, and has issued the shares of Series A Convertible Preferred Stock and
Series B Preferred Stock, also as described above.
Item 3. Defaults Upon Senior Securities.
- ----------------------------------------
(a) There has been no material default in the payment of principal,
interest, a sinking or purchase fund installment, or any other material default
not cured within thirty (30) days with respect to any indebtedness of the
registrant.
(b) There has been no material arrearage in the payment of dividends and
there has been no material delinquency not cured within thirty (30) days, with
respect to any class of preferred stock of the registrant or with respect to any
class of preferred of any significant subsidiary of the registrant.
Item 4. Submission of Matters to a Vote of Security Holders.
- ------------------------------------------------------------
On February 13, 1996 a Special Meeting of Shareholders of the
registrant was held pursuant to a Notice of Meeting dated January 24, 1996. At
such meeting, the shareholders of the registrant were asked to vote upon the
proposed merger between the registrant and Judge Computer Corporation. A
further description of the merger transaction is contained in Item 2, above.
At the meeting a total of 2,062,499 shares of Common Stock were voted
in favor of the proposed merger, representing 51.4% of the issued and
outstanding Common Stock of the registrant, no shares were voted against, and
there were no abstentions.
Item 5. Other Information.
- --------------------------
As reported in Registrant's 1995 10-K, at the effective time of the
merger, the following individuals were elected as officers of the Company:
Martin E. Judge, Jr., Chief Executive Officer, Wendy Greenberg, President,
Margaret E. Sulpazo, Treasurer, Lynn Handel, Chief Financial Officer, Katherine
A. Wiercinski, Secretary, Michael A. Dunn, Vice President and Raymond Sozzi,
Chief Operating Officer.
The employment of Raymond Sozzi as Chief Operating Officer and Lynn
Handel as Chief Financial Officer terminated on April 18, 1996 and April 23,
1996, respectively. On April 23, 1996, the Registrant entered into a separation
agreement with Raymond Sozzi relating to his termination, a copy of which is
attached hereto as Exhibit 10(l). On May 1, 1996, the Registrant employed
Jeffrey Andrews as its Chief Financial Officer. Mr. Sozzi's duties as Chief
Operating Officer have been reassigned to other executives.
18
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
- -----------------------------------------
LIST OF EXHIBITS
Page Exhibit
Number Number Exhibit Name
- ------ ------ ------------
21 4(d) Specimen of Common Stock Certificate of Judge
Imaging Systems, Inc.
22 4(e) Specimen of Series A Convertible Preferred Stock
Certificate of Judge Imaging Systems, Inc.
23 4(f) Specimen of Series B Preferred Stock Certificate
of Judge Imaging Systems, Inc.
24 10(b) Agreement and Plan of Merger dated as of
December 1, 1995.
94 10(c) Amendment Agreement to the December 1, 1995
Agreement and Plan of Merger dated as of December
20, 1995.
123 10(d) Second Amendment Agreement to the December 1, 1995
Agreement and Plan of Merger dated as of February
26, 1996.
142 10(l) Judge Imaging Systems, Inc. Separation Agreement
with Raymond V. Sozzi
On March 15, 1996, the registrant filed a Report on Form 8-K,
reporting the closing of the merger transaction between the registrant and Judge
Computer Corporation on February 29, 1996. On May 14, 1996, the registrant
filed Amendment No. 1 to Form 8-K on Form 8-K/A. Included in the Report on
Form 8-K were the Financial Statements of Judge Computer Corporation for the
years ended December 31, 1994 and 1993 and the Report of Messrs. Rudolph, Palitz
LLP thereon and Financial Statements of Judge Computer Corporation for the nine
months ended September 30, 1995 (unaudited). Also included in such Report on
Form 8-K, as amended, were the Pro-Forma Financial Statements (unaudited) for
the year ended December 31, 1994 and for the nine months ended September 30,
1995. Included in the Report on Form 8-K/A were Financial Statements of Judge
Imaging Systems, Inc. (formerly Judge Computer Corporation) for the years ended
December 31, 1995 and 1994 and the Report of Messrs. Rudolph, Palitz LLP thereon
and Pro-Forma Financial Statements (unaudited) for the year ended December 31,
1995.
19
<PAGE>
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
JUDGE IMAGING SYSTEMS, INC.
Date: May 14, 1996 By: /s/ Martin E. Judge, Jr.
------------ ------------------------
Martin E. Judge, Jr.
Chief Executive Officer
Date: May 14, 1996 By: /s/ Jeffrey J. Andrews
------------ ----------------------
Jeffrey J. Andrews
Chief Financial Officer
20
<PAGE>
EXHIBIT INDEX
-------------
LIST OF EXHIBITS
Exhibit
Number Exhibit Name
- ------ ------------
4(d) P Specimen of Common Stock Certificate of Judge
Imaging Systems, Inc.
4(e) P Specimen of Series A Convertible Preferred Stock
Certificate of Judge Imaging Systems, Inc.
4(f) P Specimen of Series B Preferred Stock Certificate
of Judge Imaging Systems, Inc.
10(b) P Agreement and Plan of Merger dated as of
December 1, 1995.
10(c) P Amendment Agreement to the December 1, 1995
Agreement and Plan of Merger dated as of December
20, 1995.
10(d) P Second Amendment Agreement to the December 1, 1995
Agreement and Plan of Merger dated as of February
26, 1996.
10(l) P Judge Imaging Systems, Inc. Separation Agreement
with Raymond V. Sozzi
27 Financial Data Schedule
<PAGE>
EXHIBIT 4(d)
------------
Specimen of Common Stock Certificate of Judge Imaging Systems, Inc.
-------------------------------------------------------------------
NUMBER [GRAPHIC IMAGE OF AN AMERICAN EAGLE APPEARS HERE] SHARES
JUDGE IMAGING SYSTEMS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
10,000,000 SHARES COMMON STOCK
COMMON
This STOCK
Certifies SEE REVERSE FOR
that CERTAIN DEFINITIONS
is the
owner
of
FULLY PAID AND NON-ASSESSABLE SHARES, PAR VALUE $.01 PER SHARE,
OF THE COMMON STOCK OF
JUDGE IMAGING SYSTEMS, INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed.
This Certificate and the shares represented hereby are issued and shall be
held subject to all of the provisions of the Certificate of Incorporation, as
amended, of the Corporation (a copy of which is on file at the office of the
Corporation) to all of which the holder of this certificate, by acceptance
hereof, assents. This Certificate is not valid unless countersigned and
registered by the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated
SECRETARY [Corporate Seal] CHIEF EXECUTIVE OFFICER
[1996]
[The following is printed horizontally on the right side of the certificate:]
COUNTERSIGNED AND REGISTERED
REGISTRAR & TRANSFER COMPANY
(CRANFORD NJ)
TRANSFER AGENT AND REGISTRAR
BY AUTHORIZED SIGNATURE
<PAGE>
EXHIBIT 4(e)
------------
Specimen of Series A Convertible Preferred Stock Certificate of
---------------------------------------------------------------
Judge Imaging Systems, Inc.
---------------------------
NUMBER [GRAPHIC IMAGE OF AN AMERICAN EAGLE APPEARS HERE] SHARES
JUDGE IMAGING SYSTEMS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
1,125,000 SHARES SERIES A CONVERTIBLE PREFERRED STOCK
SERIES A
This CONVERTIBLE
Certifies PREFERRED STOCK
that SEE REVERSE FOR
CERTAIN DEFINITIONS
is the
owner
of
FULLY PAID AND NON-ASSESSABLE SHARES, PAR VALUE $.01 PER SHARE,
OF THE SERIES A CONVERTIBLE PREFERRED STOCK OF
JUDGE IMAGING SYSTEMS, INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed.
This Certificate and the shares represented hereby are issued and shall be
held subject to all of the provisions of the Certificate of Incorporation, as
amended, of the Corporation (a copy of which is on file at the office of the
Corporation) to all of which the holder of this certificate, by acceptance
hereof, assents. This Certificate is not valid unless countersigned and
registered by the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated
SECRETARY [Corporate Seal] CHIEF EXECUTIVE OFFICER
[1996]
[The following is printed horizontally on the right side of the certificate:]
COUNTERSIGNED AND REGISTERED
REGISTRAR & TRANSFER COMPANY
(CRANFORD NJ)
TRANSFER AGENT AND REGISTRAR
BY AUTHORIZED SIGNATURE
<PAGE>
EXHIBIT 4(f)
------------
Specimen of Series B Preferred Stock Certificate of Judge Imaging Systems, Inc.
-------------------------------------------------------------------------------
NUMBER [GRAPHIC IMAGE OF AN AMERICAN EAGLE] SHARES
JUDGE IMAGING SYSTEMS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
1,500 SHARES SERIES B PREFERRED STOCK
SERIES B
PREFERRED
STOCK
This
Certifies SEE REVERSE FOR
that CERTAIN DEFINITIONS
is the
owner
of
FULLY PAID AND NON-ASSESSABLE SHARES, PAR VALUE $.01 PER SHARE, STATED VALUE
$1,000 PER SHARE OF THE SERIES B PREFERRED OF THE COMMON STOCK OF
JUDGE IMAGING SYSTEMS, INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed.
This Certificate and the shares represented hereby are issued and shall be
held subject to all of the provisions of the Certificate of Incorporation, as
amended, of the Corporation (a copy of which is on file at the office of the
Corporation) to all of which the holder of this certificate, by acceptance
hereof, assents. This Certificate is not valid unless countersigned and
registered by the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated
SECRETARY [Corporate Seal] CHIEF EXECUTIVE OFFICER
[1996]
[The following is printed horizontally on the right side of the certificate:]
COUNTERSIGNED AND REGISTERED
REGISTRAR & TRANSFER COMPANY
(CRANFORD NJ)
TRANSFER AGENT AND REGISTRAR
BY AUTHORIZED SIGNATURE
<PAGE>
EXHIBIT 10(b)
-------------
AGREEMENT AND PLAN OF MERGER
----------------------------
by and between
JUDGE COMPUTER CORPORATION
and
DATAIMAGE, INC.
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER (hereinafter "Agreement") is dated as of
December 1, 1995, by and between JUDGE COMPUTER CORPORATION, a New Jersey
corporation ("Judge") and DATAIMAGE, INC., a Delaware corporation ("DataImage").
WHEREAS, the respective Boards of Directors of Judge and DataImage have
approved and deem it advisable, and in the best interests of their respective
stockholders to consummate the merger of Judge with and into DataImage (the
"Merger") pursuant to the terms and subject to the conditions set forth in this
Agreement; and
WHEREAS, for federal income tax purposes, it is intended that the Merger
qualify as a reorganization under Section 368 of the Internal Revenue Code of
1986, as amended (the "Code"); and
WHEREAS, the parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby.
NOW THEREFORE, in consideration of the premises and mutual promises
hereinafter set forth, and of other good and valuable consideration the receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
TERMS
ARTICLE I. THE MERGER
1.1 Merger, Transfer of Property and Liabilities. In accordance with the
--------------------------------------------
provisions of this Agreement, the General Corporation Law of the State of
Delaware ("GCL") and the New Jersey Business Corporation Act ("BCA") at the
Effective Time (as such term is defined in Section 1.5 hereof), Judge shall be
merged with and into DataImage and DataImage shall be the surviving corporation
(hereinafter sometimes called the "Surviving Corporation") and shall continue
its corporate existence under the laws of the State of Delaware. At the
Effective Time: (i) the separate existence of Judge shall cease; (ii) all of the
outstanding shares of stock of Judge and DataImage shall be exchanged for and
converted into Common Stock of the Surviving Corporation as hereinafter
provided; and (iii) by virtue of the Merger without further act or deed, the
Surviving Corporation shall upon the Effective Time and thereafter possess all
of the rights, privileges, powers and franchises of a public as well as of a
private nature, and being subject to all the restrictions, disabilities and
duties of DataImage and Judge; and all and singular, the rights, privileges,
powers and franchises of each of said corporations, and all property, real,
personal and mixed, and all debts due to any of said corporations on whatever
account, as well for stock subscriptions as all other things in action or
belonging to each of such corporations shall be vested in the Surviving
Corporation, and all property, rights, privileges, powers and franchises, and
all and every other interest shall be thereafter as effectually the property of
the Surviving Corporation as they were of the said Judge and DataImage, and the
title to any real estate vested by deed or otherwise, under the laws of any
applicable state or jurisdiction, in any of the said Judge and DataImage, shall
not revert or be in any way impaired by reason of this chapter, but all rights
of creditors and all liens upon any property of any of said constituent
corporations shall be preserved unimpaired, and all debts, liabilities and
duties of the said Judge and DataImage shall thenceforth attach to the Surviving
Corporation, and may be enforced against it to the same extent as if said debts,
liabilities and duties had been incurred or contracted by it.
<PAGE>
1.2 Surviving Corporation. Following the Merger, the existence of the
---------------------
Surviving Corporation shall continue unaffected and unimpaired by the Merger
with all rights, powers, privileges and immunities and subject to all duties and
liabilities of a corporation authorized under the laws of the State of Delaware.
At the Effective Time, the Certificate of Incorporation and By-Laws of
DataImage, as in effect immediately prior thereto, copies of which are attached
hereto as Exhibits "A" and "B" respectively, shall be the Certificate of
Incorporation and By-Laws of the Surviving Corporation until altered or amended
as provided therein or by law. Notwithstanding the foregoing, the Certificate
of Incorporation shall be amended to change the name of the Surviving
Corporation as set forth in Section 1.3, and as otherwise provided in this
Agreement.
1.3 Name. The name of the Surviving Corporation as of the Effective Time
----
shall be changed to Judge Imaging Systems, Inc.
1.4 Directors and Officers. At the Closing, DataImage shall cause to be
----------------------
delivered the resignation of each officer and director of DataImage from their
position(s) as such; each such resignation shall specify that it will be
effective as of the Effective Time. At the Closing, DataImage shall cause to be
delivered a consent of the directors of DataImage made pursuant to the GCL,
dated as of the date immediately preceding the date of Closing, and resolving
that Martin E. Judge, Jr., Michael A. Dunn, and Wendy Greenberg shall serve as
directors of the Surviving Corporation following the Effective Time in
accordance with the Certificate of Incorporation and By-Laws of the Surviving
Corporation and the GCL, provided only that each of the proposed directors fill
out and deliver to DataImage standard director and officers questionnaires with
responses which do not require the Board of Directors of DataImage to reject
such candidates in the reasonable exercise of their judgment as directors of a
publicly owned corporation. The officer of the Surviving Corporation following
the Effective Time shall be as follows: Martin E. Judge, Jr., Chief Executive
Officer; Wendy Greenberg, President; Raymond A. Sozzi, Chief Operating Officer;
Katherine A. Wiercinski, Secretary; and Margaret E. Sulpazo, Treasurer.
1.5 Effective Time. The Merger shall become effective at the time and
--------------
date that the later of the following two events has occurred: (i) the
acceptance for filing of the certificate of merger (the "BCA Certificate") by
the appropriate department of the State of New Jersey and (ii) the acceptance
for filing of the certificate of merger (the "GCL Certificate") by the
appropriate department of the State of Delaware in accordance with the GCL. The
BCA Certificate and the GCL Certificate shall be delivered to the appropriate
department of the States of New Jersey and Delaware respectively, for filing, as
stated above, at the Closing provided for in Section 1.19. The date and time
when the Merger shall become effective are referred to herein as the "Effective
Date" or "Effective Time."
1.6 Conversion of Judge Common Stock and Preferred Stock. By virtue of
----------------------------------------------------
the Merger, automatically and without any action on the part of the holder
thereof at the Effective Time, all of the issued and outstanding shares of
common stock, par value $.005 per share, of Judge ("Judge Common Stock") and all
of the issued and outstanding shares of preferred stock, par value $.01 per
share, of Judge ("Judge Preferred Stock"), unless previously converted into
Judge Common Stock, shall be converted into shares of common stock, par value
$.01 per share, of the Surviving Corporation ("Surviving Corporation Common
Stock"), as described below. Notwithstanding the foregoing, the Judge Series A
Convertible Preferred Stock described in Section 1.8 shall not be converted into
Surviving Corporation Common Stock, but shall be converted as set forth in
Section 1.8 and the Judge Series B Preferred Stock described in Section 1.9
shall not be converted into Surviving Corporation Common Stock, but shall be
converted as set forth in Section 1.9.
2
<PAGE>
(a) Judge Options, Warrants, Convertible Securities, and Other Rights.
------------------------------------------------------------------
Prior to Closing, Judge shall take all necessary action to convert into Judge
Common Stock, extinguish, or otherwise terminate all outstanding options,
warrants, convertible securities, and any other stock rights for Judge Common
Stock or Judge Preferred Stock.
(b) Issuance of Surviving Corporation Common Stock. In the Merger,
----------------------------------------------
the Surviving Corporation shall issue a cumulative total of 4,375,000 shares of
the Surviving Corporation Common Stock and Surviving Corporation Series A
Convertible Preferred Stock (collectively the "Surviving Corporation Stock") to
the then current shareholders of Judge. The Surviving Corporation Series A
Convertible Preferred Stock will be converted as set forth in Section 1.8. In
the Merger, the Surviving Corporation will hold in reserve 375,000 shares of the
Surviving Corporation Common Stock for certain employee stock grants and
employee stock options. The shares issued to the then current Judge
Shareholders, together with the shares reserved by the Surviving Corporation for
employee options and grants upon issuance, will constitute 95% of the issued and
outstanding voting shares of the Surviving Corporation. In the Merger, the
Surviving Corporation will issue to the holders of Judge Common Stock one share
of Surviving Corporation Common Stock for every X shares of Judge Common Stock
and, if not previously converted, one share of Surviving Corporation Common
Stock for every X shares of Judge Preferred Stock. For purposes of the
foregoing, the variable "X" shall be the equivalent of 10,566,347 divided by the
remainder of 4,375,000 less the number of Judge Series A Convertible Preferred
Stock shares sold in the private placement described in Section 1.8.
(c) Deposit of Judge Common, Preferred and Series A Convertible
-----------------------------------------------------------
Preferred Stock and Exchange Procedures.
- ---------------------------------------
i. After the Effective Time, holders of certificates
theretofore evidencing outstanding shares of Judge Common Stock and, if not
previously converted, Judge Preferred Stock that are converted into shares of
the Surviving Corporation Common Stock pursuant to the Merger and Judge Series A
Convertible Preferred Stock ("Certificates"), upon surrender of such
Certificates to such exchange agent as may be designated by Judge (the
"Exchange Agent"), together with a duly executed letter of transmittal and such
other documents as the Exchange Agent may require, shall be entitled to receive
certificates representing the number of whole shares of Surviving Corporation
Stock into which shares of Judge Common Stock and Judge Preferred Stock or Judge
Series A Convertible Preferred Stock theretofore represented by the Certificates
so surrendered shall have been converted, as provided in this Section, and cash
payments in lieu of fractional shares, if any, as provided in this Section, and
upon such due surrender the Certificates shall be canceled.
ii. In the event that any Certificate or Certificates shall have
been lost, stolen or destroyed, then the Exchange Agent shall be authorized to
request the person claiming such Certificate or Certificates to furnish an
affidavit of lost, stolen or destroyed stock certificate and indemnification
agreement and to take such other steps as would be customarily taken under
similar circumstances by the Exchange Agent if it were acting as a transfer
agent and upon receipt of such executed affidavit and agreement and upon
completion of such other steps, including, when and to the extent appropriate in
the reasonable judgment of the Exchange Agent, the posting of an irrevocable
bond, to issue in exchange for such lost, stolen or destroyed Certificate or
Certificates shares of the Surviving Corporation Stock, and make the fractional
share payment, if any, to such holder as promptly as possible in accordance with
this Section.
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iii. The Surviving Corporation shall be entitled to treat each
Certificate, until surrendered as provided in this Section, as evidence of
ownership of the number of whole shares of the Surviving Corporation Stock into
which the shares of Judge Common Stock or Judge Preferred Stock or Judge Series
A Convertible Preferred Stock formerly represented thereby were converted.
However, until such Certificates are so surrendered, no dividend payable to
holders of record of the Surviving Corporation Stock shall be paid to any holder
of such Certificates, and no payment for fractional shares may be made, but upon
surrender of such Certificates by such holder there shall be paid to such holder
the amount of any dividends, without interest, theretofore paid with respect to
such whole shares of the Surviving Corporation Stock, but not paid to such
holder, and which dividends had a record date occurring on or subsequent to the
Effective Date and the amount of any cash, without interest, payable to such
holder in lieu of fractional shares pursuant to this Section. After the
Effective Date, there shall be no further registration of transfers on the
records of the Surviving Corporation of Certificates and, if a Certificate is
presented to DataImage or Judge, it shall be canceled and exchanged for
certificates representing whole shares of the Surviving Corporation Stock and a
payment for fractional shares, if any, as herein provided.
iv. If any certificate for the Surviving Corporation Stock or
payment for fractional shares is to be issued or made to a person other than one
in whose name the certificate surrendered in exchange therefore is registered,
it shall be a condition of the issuance or payment thereof that the Certificate
surrendered in exchange shall be properly endorsed (with signatures guaranteed
as may be required by the Exchange Agent) and otherwise in proper form for
transfer and that the person requesting such issuance or payment either (A) pay
to the Exchange Agent any transfer or other taxes required by reason of the
issuance of a new certificate for shares of the Surviving Corporation Stock or
the payment of cash in lieu of fractional shares to the person, other than the
registered holder of the Certificate surrendered, or (B) establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
(d) No Fractional Shares. Notwithstanding any term or provision
--------------------
hereof, no fractional shares of the Surviving Corporation Stock, and no
certificates or scrip therefor, or other evidence of ownership thereof, shall be
issued in the Merger in exchange for any shares of Judge Common Stock, Judge
Preferred Stock, or Judge Series A Convertible Preferred Stock; no dividend or
distribution with respect to the Surviving Corporation Stock shall be payable on
or with respect to any fractional share interests; and no such fractional share
interest shall entitle the owner thereof to vote or to any other rights of a
stockholder of Judge. In lieu of such fractional share interests, any holder of
Judge Common Stock or Judge Preferred Stock or Judge Series A Convertible
Preferred Stock, who would otherwise be entitled to a fractional share of the
Surviving Corporation Stock will, upon due surrender of his Certificate or
Certificates, be paid the cash value of such fractional share interest, which
shall be equal to the product of the fraction multiplied by the fair market
value at the Effective Date of a share of the Surviving Corporation Stock. For
the purposes of determining any such fractional share interests, all shares of
Judge Common Stock and Judge Preferred Stock and Judge Series A Convertible
Preferred Stock owned by a Judge stockholder shall be combined so as to
calculate the maximum number of whole shares of the Surviving Corporation Stock
issuable to such Judge stockholder.
1.7 Conversion of DataImage Common Stock. By virtue of the Merger,
------------------------------------
automatically and without any action on the part of the holder thereof at the
Effective Time, all of the issued and outstanding shares of common stock, par
value $.01 per share, of DataImage ("DataImage Common Stock") shall be converted
into Surviving Corporation Common Stock as described below.
4
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(a) DataImage Options, Warrants, Convertible Securities, and Other
--------------------------------------------------------------
Rights. Prior to Closing, DataImage shall take all necessary action to convert
- ------
into DataImage Common Stock, extinguish, or otherwise terminate all outstanding
options, warrants, convertible securities, and any other stock rights for
DataImage Common Stock.
(b) Issuance of Surviving Corporation Common Stock. It is anticipated
----------------------------------------------
that immediately prior to the Effective Time, DataImage will have issued and
outstanding 7,990,217 shares of DataImage Common Stock. In the Merger, the
Surviving Corporation will issue to the DataImage shareholders one share of
Surviving Corporation Common Stock for every 31.960868 shares of DataImage
Common Stock held by the then-current shareholders of DataImage for a total of
250,000 shares. The foregoing exchange ratio is subject to adjustment if the
number of issued and outstanding shares of DataImage Common Stock differs from
that which is anticipated in order to ensure that DataImage shareholders own
five (5%) percent of the issued and outstanding shares of the Surviving
Corporation Common Stock.
(c) Deposit of DataImage Common Stock and Exchange Procedures.
---------------------------------------------------------
i. After the Effective Date, holders of certificates
theretofore evidencing outstanding shares of DataImage Common Stock that are
converted into shares of the Surviving Corporation Common Stock pursuant to the
Merger ("Certificates"), upon surrender of such Certificates to the Exchange
Agent, together with a duly executed letter of transmittal and such other
documents as the Exchange Agent may require, shall be entitled to receive
certificates representing the number of whole shares of the stock of the
Surviving Corporation into which shares of DataImage Common Stock theretofore
represented by the Certificates so surrendered shall have been converted, as
provided in this Section, and cash payments in lieu of fractional shares, if
any, as provided in this Section, and upon such due surrender the Certificates
shall be canceled.
ii. In the event that any Certificate or Certificates shall have
been lost, stolen or destroyed, then the Exchange Agent shall be authorized to
request the person claiming such Certificate or Certificates to furnish an
affidavit of lost, stolen or destroyed stock certificate and indemnification
agreement and to take such other steps as would be customarily taken under
similar circumstances by the Exchange Agent if it were acting as a transfer
agent and upon receipt of such executed affidavit and agreement and upon
completion of such other steps, including, when and to the extent appropriate in
the reasonable judgment of the Exchange Agent, the posting of an irrevocable
bond, to issue in exchange for such lost, stolen or destroyed Certificate or
Certificates shares of the Surviving Corporation Common Stock, and make the
fractional share payment, if any, to such holder as promptly as possible in
accordance with this Section.
iii. The Surviving Corporation shall be entitled to treat each
Certificate, until surrendered as provided in this Section, as evidence of
ownership of the number of whole shares of the Surviving Corporation Common
Stock into which the shares of DataImage Common Stock formerly represented
thereby were converted. However, until such Certificates are so surrendered, no
dividend payable to holders of record of the Surviving Corporation Common Stock
shall be paid to any holder of such Certificates, and no payment for fractional
shares may be made, but upon surrender of such Certificates by such holder there
shall be paid to such holder the amount of any dividends, without interest,
theretofore paid with respect to such whole shares of the Surviving Corporation
Common Stock, but not paid to such holder, and which dividends had a record date
occurring on or subsequent to the Effective Date and the amount of any cash,
without interest, payable to such holder in lieu of fractional shares
5
<PAGE>
pursuant to this Section. After the Effective Date, there shall be no further
registration of transfers on the records of the Surviving Corporation of
Certificates and, if a Certificate is presented to DataImage or Judge, it shall
be canceled and exchanged for certificates representing whole shares of the
Surviving Corporation Common Stock and a payment for fractional shares, if any,
as herein provided.
iv. If any certificate for the Surviving Corporation Common
Stock or payment for fractional shares is to be issued or made to a person other
than one in whose name the certificate surrendered in exchange therefore is
registered, it shall be a condition of the issuance or payment thereof that the
Certificate surrendered in exchange shall be properly endorsed (with signatures
guaranteed as may be required by the Exchange Agent) and otherwise in proper
form for transfer and that the person requesting such issuance or payment either
(A) pay to the Exchange Agent any transfer or other taxes required by reason of
the issuance of a new certificate for shares of the Surviving Corporation Common
Stock or the payment of cash in lieu of fractional shares to the person, other
than the registered holder of the Certificate surrendered, or (B) establish to
the satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
(d) No Fractional Shares. Notwithstanding any term or provision
--------------------
hereof, no fractional shares of the Surviving Corporation Common Stock, and no
certificates or scrip therefor, or other evidence of ownership thereof, shall be
issued in the Merger in exchange for any shares of DataImage Common Stock; no
dividend or distribution with respect to the Surviving Corporation Common Stock
shall be payable on or with respect to any fractional share interests; and no
such fractional share interest shall entitle the owner thereof to vote or to any
other rights of a stockholder of DataImage. In lieu of such fractional share
interests, any holder of DataImage Common Stock, who would otherwise be entitled
to a fractional share of the Surviving Corporation Common Stock will, upon due
surrender of his Certificate or Certificates, be paid the cash value of such
fractional share interest, which shall be equal to the product of the fraction
multiplied by the fair market value at the Effective Date of a share of the
Surviving Corporation Common Stock. For the purposes of determining any such
fractional share interests, all shares of DataImage Common Stock owned by a
DataImage stockholder shall be combined so as to calculate the maximum number of
whole shares of the Surviving Corporation Common Stock issuable to such
DataImage stockholder.
1.8 Private Placement of Judge Preferred Stock. Prior to the Merger,
------------------------------------------
Judge will use its best efforts to complete a private placement of Judge Series
A Convertible Preferred Stock, at its sole cost and expense. The preferences
and rights of this stock are set forth in Schedule 1.8. The private placement
will seek to raise a minimum of $600,000 at a sales price of $1.333333 per
share. This sales price is subject to adjustment by Judge. As of the Effective
Time, the Surviving Corporation shall authorize a class of preferred stock
identical in preferences and rights to those set forth in Schedule 1.8 (the
"Surviving Corporation Series A Convertible Preferred Stock"). In the Merger,
the Surviving Corporation shall issue one share of Surviving Corporation Series
A Convertible Preferred Stock for every one share of Judge Series A Convertible
Preferred Stock pursuant to the exchange procedures set forth in Section 1.6(c).
1.9 Conversion of Certain Debt into Equity. Judge currently has certain
--------------------------------------
outstanding debt on its balance sheet which shall be converted immediately prior
to the Merger into a class of preferred stock in Judge (the "Judge Series B
Preferred Stock"). As of the Effective Time, the Surviving Corporation shall
authorize a class of preferred stock identical in preferences and rights to
those set forth in Schedule 1.9.As of the Effective Time, the Surviving
Corporation shall issue one share of Surviving Corporation Series B Preferred
Stock for every one share of Judge Series B Preferred Stock pursuant to the
exchange procedure set forth in Section 1.6(c). The face value of the stock
shall be $1,000 per share. The conversion of
6
<PAGE>
this debt and creation of the Judge Series B Preferred Stock shall not effect
the percentage of ownership in the Surviving Corporation as set forth in this
Agreement and shall not adversely effect the balance sheets of either Judge or
the Surviving Corporation. This class of preferred stock shall have no voting
rights nor shall it be convertible into other classes of stock of the Surviving
Corporation. The preferences and rights of this class of preferred stock is set
forth in Schedule 1.9.
1.10 Dissenting Stockholders. In the event that any stockholder of
-----------------------
DataImage or Judge shall send notice, in compliance with the GCL or the BCA,
that such stockholder intends to exercise any rights as a dissenting
shareholder, or with respect to any appraisal rights, or shall otherwise qualify
or be entitled to receive rights, benefits, payments or special consideration
pursuant to the GCL or the BCA as a result of the Merger, the Surviving
Corporation shall comply with the provisions of the GCL and the BCA, with
respect to such shareholders. Nothing contained in this Section 1.10 shall be
construed as to create or enhance any rights of shareholders, nor as a waiver of
any rights that DataImage, Judge, or the Surviving Corporation may have to
contest, defend or compromise the right of any shareholder in this context.
1.11 Stockholders' Meeting. Judge and DataImage shall, as soon as
---------------------
practicable, secure the required stockholder approval of this Agreement and the
Merger contemplated hereby. Subject to the fiduciary duties of their respective
directors, Judge's directors and DataImage's directors shall recommend to their
respective stockholders approval of this Agreement and the Merger. The
respective meetings shall be conducted in accordance with the BCA and GCL.
Approval by the stockholders of this Agreement and the Merger contemplated
thereby shall be in accordance with the BCA and GCL and any applicable federal
law.
1.12 Proxy Statement.
---------------
(a) As soon as practicable after the execution of this Agreement,
DataImage shall, at its sole cost and expense (subject to certain reimbursement
provisions set forth in Section 1.15) cause to be prepared and filed with the
appropriate regulatory authorities and distributed to its stockholders a proxy
statement or, if proxies are not required to be solicited to complete Closing, a
Schedule 14C Information Statement (hereinafter either or both of which may be
referred to as "Proxy Statement"), in order to consummate the transactions
contemplated by this Agreement as soon as reasonably practicable and to satisfy
all applicable requirements under the Securities Act and the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated thereunder
(collectively referred to as the "Securities Act").
(b) Judge will furnish such information concerning Judge as is
necessary in order to cause the Proxy Statement, insofar as it relates to such
corporation, to comply with Section 1.12(a). Judge agrees promptly to advise
DataImage if at any time prior to the Effective Time any information provided by
it in the Proxy Statement becomes incorrect or incomplete in any material
respect and to provide DataImage with the information needed to correct such
inaccuracy or omission. Judge will also furnish DataImage with such
supplemental information as may be necessary in order to cause such Proxy
Statement, insofar as it relates to Judge, to comply with Section 1.12(a) after
the mailing thereof to DataImage stockholders.
7
<PAGE>
(c) DataImage will incorporate within the Proxy Statement such
information concerning DataImage as is necessary in order to cause the Proxy
Statement, insofar as it relates to such corporation, to comply with Section
1.12(a). DataImage agrees promptly to advise Judge if at any time any
information provided by DataImage in the Proxy Statement becomes incorrect or
incomplete in any material respect and to provide the relevant agency or parties
with the information needed to correct such inaccuracy or omission. DataImage
will furnish the relevant agency or parties with such supplemental information
as may be necessary in order to cause the Proxy Statement, insofar as it relates
to DataImage, to comply with Section 1.12(a) after the mailing thereof to
DataImage stockholders.
(d) DataImage, Judge and the Surviving Corporation will comply with
the Securities Act and all applicable state securities laws and regulations as
pertain to the activities of the applicable corporation contemplated or required
by this Agreement and shall secure at their respective expense all necessary
federal and state securities law approvals in connection with the respective
activities of each.
1.13 Cooperation, Regulatory Approvals. The parties shall cooperate fully
---------------------------------
in the preparation and submission by them, as promptly as reasonably
practicable, of such notices, applications, petitions, and other documents and
materials as any of them may reasonably deem necessary (or desirable) to the
SEC, other regulatory authorities, holders of the voting shares of capital stock
of DataImage and Judge, and any other persons for the purpose of obtaining any
approvals or consents necessary to consummate the transactions contemplated by
this Agreement. Prior to the making of any such filings with any regulatory
authority or the making of any written disclosures with respect to the
transactions contemplated hereby to stockholders or any third person (such as
mailings to stockholders or press releases), the parties shall submit to each
other the materials to be filed, mailed or released. Any such materials must be
acceptable to both Judge and DataImage (such acceptance not to be unreasonably
withheld) prior to the filings with any regulatory authorities or the
disclosures to stockholders or any third person, except to the extent that any
party is legally required to proceed prior to obtaining the acceptances of the
other parties.
1.14 Finders Fee. Upon completion of the Closing, the Surviving
-----------
Corporation shall pay any commission due to Ronald Smith, which amount shall not
exceed $30,000.00.
1.15 Certain Expenses. No later than five (5) days prior to the Closing,
----------------
DataImage shall provide Judge with copies of invoices for all of DataImage's
legal, accounting, printing and other costs associated with the preparation and
filing of the Proxy Statement (the "Invoices"). If the total amount due pursuant
to the Invoices is in excess of $20,000.00, then DataImage shall make such
payments or obtain written releases such that the amount of the Invoices shall
not be in excess of $20,000.00. DataImage shall provide Judge copies evidencing
such payment or waivers at the time the Invoices are provided. Upon completing
of the Closing, the Surviving Corporation will pay on behalf of DataImage up to
$20,000.00 for DataImage's legal, accounting, printing and other costs
associated with the preparation and filing of the Proxy Statement.
1.16 Payment to Certain Creditors. No later than ten (10) days before
----------------------------
Closing, DataImage shall provide Judge with a written listing of all
liabilities and the amounts owed as liabilities. At Closing, DataImage shall
provide in a form acceptable to Judge, written waivers or evidence of payment,
such that the amounts owed for all liabilities does not exceed $ 80,000. Upon
the completion of Closing, the Surviving Corporation shall pay the Listed
Creditors the discounted amounts, the total of which is not to exceed $ 80,000.
8
<PAGE>
1.17 Employees.
---------
(a) The parties contemplate that subsequent to Closing, all current
employees of DataImage will be retained by the Surviving Corporation.
Notwithstanding the foregoing, current employees of DataImage are not obligated
to accept or continue their employment by the Surviving Corporation or for the
Surviving Corporation to continue their employment for any period of time.
(b) Prior to Closing, DataImage will secure or furnish written
confidentiality and non-solicitation agreements from all current employees of
DataImage and any who are hired by DataImage subsequent hereto, in a form
acceptable to Judge.
(c) All existing employment agreements (including any severance
benefits) of DataImage shall be terminated as of the Closing Date.
Notwithstanding the foregoing, accrued vacation time, to the extent it does not
exceed a value of $7,000.00, shall not be terminated. Raymond V. Sozzi shall
waive any accrued vacation time prior to Closing. DataImage agrees to use its
best efforts to persuade its employees to utilize their accrued vacation time
prior to the Closing Date. Within fifteen (15) days after the execution of this
Agreement, DataImage shall provide in a form acceptable to Judge, written
releases effectuating the foregoing.
(d) DataImage shall have satisfied or secured the forgiveness or
waiver of all accrued payroll, deferred compensation arrangements all payroll
taxes, and associated payroll expenses through the last complete bi-weekly pay
period immediately prior to the Closing Date.
1.18 Employment of Raymond V. Sozzi. The Surviving Corporation shall enter
------------------------------
into an Employment Agreement with Raymond V. Sozzi at the Closing. The
pertinent and essential terms of the Employment Agreement are attached as
Schedule 1.18. Subsequent to the execution of this Agreement, Judge and Sozzi
shall in good faith execute an Employment Agreement reflecting the terms set
forth in Schedule 1.18, and which shall contain the standard and usual
provisions of an executive employment agreement.
1.19 Closing. All transactions contemplated by this Agreement shall be
-------
effected and consummated at a closing to be held at the offices of Judge
immediately prior (to the extent practicable) to the Effective Time. At such
closing (the "Closing"), the transactions contemplated by this Agreement, and
all other transactions intended to be concluded and actions taken at the Closing
in connection herewith, shall be deemed to have occurred simultaneously, and
that each execution, delivery, witnessing or other action contemplated to be
taken at the Closing shall each be deemed to be a condition to the effectiveness
of every other execution, delivery, witnessing or other action to be taken at
such Closing. All such executions, deliveries, witnessing or other actions
contemplated to be taken at the Closing and the transactions represented thereby
shall be collectively called the "Merger." Following completion of the
activities contemplated at Closing as aforesaid, all transactions effected as
aforesaid shall be deemed to be held in escrow until the Effective Time. Closing
may be held at any time after the filing of the Proxy Statement in the event the
only material conditions to Closing which has not been satisfied or waived is
the mailing of the Proxy Statement to the stockholders of DataImage and the
filing of the BCA Certificate and the GCL Certificate.
9
<PAGE>
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Judge. Judge represents and
---------------------------------------
warrants to DataImage as follows:
(a) Organization, Good Standing, Authority, Insurance, Etc. Judge is
------------------------------------------------------
a corporation duly organized, validly existing and in good standing under the
laws of the State of New Jersey. Judge has all requisite corporate power and
authority to conduct its business as it is now conducted, to own and operate its
properties and assets and to lease properties used in its business. Judge has
all requisite corporate power and authority to enter into this Agreement and
subject to obtaining any required regulatory and shareholder approvals, to carry
out the provisions of this Agreement. Judge is qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which
qualification is necessary under applicable law, except to the extent that any
failure to so qualify would not, in the aggregate, have a material adverse
effect on the business, financial condition, prospects or results of operations
of Judge taken as a whole.
(b) Capitalization, Investments. The authorized capital stock of
---------------------------
Judge consists of 15,000,000 shares of common stock, par value $.005 per share,
of which 6,489,250 shares are duly issued and outstanding, fully paid and non-
assessable as of October 15, 1995, and 10,000,000 shares of preferred stock, par
value $.10, of which 3,665,770 shares are duly issued and outstanding fully paid
and non-assessable as of October 15, 1995. Except as set forth in Schedule
2.1(b) hereto, there are outstanding no options, convertible securities,
warrants or other rights to purchase or acquire any of Judge's capital stock
from Judge, there is no commitment of Judge to issue the same, and other than by
operation of law, there are no outstanding agreements, restrictions, contracts,
commitments or demands of any character to which Judge is a party, which relate
to the transfer or restrict the transfer of any shares of Judge's capital stock.
(c) Financial Statements. Judge has furnished DataImage with its
--------------------
unaudited financial statements for Judge as of the end of Judge's last three
fiscal years, and prior to Closing, will furnish DataImage with an audited
financial statement of financial condition as at the end of its last fiscal year
and an audited statement of (i) operations, (ii) stockholders' equity, and (iii)
cash flows for each of the last two fiscal years, together with the reports of
Judge's independent certified public accountants, pertaining to said audited
financial statements. Said unaudited statements do and such audited statements
will present fairly in all material respects the financial condition and results
of operations of Judge at and for the dates thereof, in accordance with
generally accepted accounting principles consistently applied. Except as and to
the extent reflected or reserved against in the described financial statements,
or as otherwise disclosed pursuant to this Agreement, Judge did not have, at the
date thereof, any material liabilities or obligations, or any other liabilities
or obligations which in the aggregate would be material, secured or unsecured
(whether accrued, absolute, contingent or otherwise), including, without
limitation, any tax liabilities, which should be reflected in the described
financial statements in accordance with generally accepted accounting principles
consistently applied. The books and records of Judge are maintained in
accordance with generally accepted accounting principles consistently applied.
(d) Absence of Certain Developments. Since June 30, 1995, except as
-------------------------------
set forth on Schedule 2.1(d) hereto, there has been no material adverse change
in the financial condition, business, prospects or results of operations of
Judge taken as a whole.
10
<PAGE>
(e) Taxes. Except as set forth on Schedule 2.1(e): (i) Judge has
-----
filed all tax returns (as described below) it is required to file, and all taxes
(as described below), now known by the executive officers of Judge to be due
from Judge have been duly paid, other than taxes or charges which are not as yet
delinquent or are being contested in good faith or have not been finally
determined, and no extensions for the time of payment have been requested; (ii)
no additional assessments of tax by any governmental authority for which there
is not adequate provision in Judge's financial statements of June 30, 1995 are
known by an executive officer of Judge to be proposed, pending or threatened,
other than taxes for periods for which returns are not yet required to be filed;
and (iii) no unexpired waivers of the statute of limitations executed by Judge
with respect to federal income taxes are in effect as of the date hereof.
Except as set forth on Schedule 2.1(e), the accruals and reserves for tax
liabilities reflected in Judge's financial statement of June 30, 1995 are
adequate for the payment of all of Judge's federal, state, local and foreign tax
liabilities, including interest and penalties, whether proposed, pending,
threatened or disputed, for all periods ended on or prior to June 30, 1995, and
for which Judge may, at said date, have been liable, other than tax liabilities
imposed as a result of the transactions contemplated by this Agreement. The
Internal Revenue Service has never audited Judge. Copies of all material
correspondence and documents relating to federal, state or local franchise,
income or similar taxes in respect to the five most recently completed tax years
have been made available to DataImage. Except as set forth on Schedule 2.1(e),
Judge has not executed or filed with the Internal Revenue Service any agreement
extending the period for assessment and collection of any federal tax.
For purposes of this Section 2.1(e), "tax returns" shall mean all federal,
state, local and foreign income and franchise tax returns including, without
limitation, consolidated federal income tax returns of the Judge, declarations
of estimated tax and tax reports required to be filed on or before the Closing
with respect to income, properties or operations, and "taxes" shall mean all
federal, state, local or foreign income, gross receipts, windfall profits,
severance, property, production, sales, use, license, excise, franchise,
employment, withholding or similar taxes, together with any interest, additions
or penalties with respect thereto and any interest in respect of such additions
and penalties.
(f) Litigation. Except as set forth on Schedule 2.1(f) hereto, no
----------
material action, suit, counterclaim or other litigation, investigation or
proceeding is pending, or is known by the executive officers of Judge to be
threatened, against Judge before any court or governmental or administrative
agency, domestic or foreign, which, is likely to have a material adverse effect
on the financial condition, business, prospects or results of operations of
Judge taken as a whole.
(g) Brokerage. Except as to the commission due Ronald Smith at
---------
Closing (which is not to exceed $30,000.00) to be paid by the Surviving
Corporation as set forth in Section 1.14, and any commission due Genesis
Securities as a result of the private placement referred to below which shall be
paid by Judge, there are no claims for brokerage commissions, finder's fees or
similar compensation arising out of or due to any act of Judge in connection
with the transactions contemplated by this Agreement or based on any agreement
or arrangement made by or on behalf of Judge.
(h) Properties. Judge has good and marketable title, free and clear
----------
of any mortgage, pledge, lien, charge or other encumbrance, to all of its real
or personal property and other assets reflected on its balance sheet of June 30,
1995 ("Balance Sheet"), or acquired by it subsequent to the date thereof, except
for (i) liens or encumbrances on such property or assets described or referred
to in the Judge financial statements listed in Section 2.1(c) hereof; (ii) liens
for current taxes not yet due and payable or for taxes being contested in good
faith; (iii) such imperfections of title and other liens or encumbrances, if
any, as would not in the aggregate have a material adverse effect on the
financial condition, business,
11
<PAGE>
prospects or operating results of Judge taken as a whole; and (iv) dispositions
of such property or assets in the ordinary course of business since the date of
such Balance Sheet. All material leases pursuant to which Judge, as lessee,
leases real or personal property are valid and in effect in accordance with
their respective terms, and there is not, under any of such leases, on the part
of the lessee any material existing default or any event which with notice or
lapse of time, or both, would constitute such a default, other than defaults
which would not in the aggregate have a material adverse effect on the financial
condition, business, prospects or operating results of Judge taken as a whole.
(i) Compliance With Applicable Law. Judge, in the conduct of its
------------------------------
business, is in all material respects, in compliance with applicable federal,
state and local laws, statutes, ordinances and regulations, except where the
failure to so comply would not in the aggregate have a material adverse effect
on the financial condition, business, prospects or operating results of Judge.
(j) Contracts and Commitments, Etc. Except for this Agreement and as
------------------------------
set forth on Schedule 2.1(j), Judge has in all material respects performed all
material obligations as to all material contracts required to be performed by
it to date and is not in default under, and no event has occurred which, with
the lapse of time or notice by a third party, or both, could result in a default
by Judge under any outstanding indenture, mortgage, or material contract lease
or other agreement to which Judge is a party or by which Judge is bound or under
any provision of the charter or by-laws of Judge, except for any default or
event which would not result in, and would not have consequences which would
result in, a material adverse change in the financial condition, business,
prospects or operating results of Judge.
(k) Insurance. Judge has in effect insurance coverage with reputable
---------
insurers, which in respect of amounts, types and risks insured is customary with
industry practices for the business conducted by Judge.
(l) No Guarantees. Except as disclosed in Schedule 2.1(l), Judge is
-------------
not obligated as guarantor, co-signor or surety (or otherwise in a secondary
liability capacity) for any obligation of any kind of any other person or entity
(other than Judge).
(m) Agreement, Authority, Absence of Conflicts. The execution,
-------------------------------------------
delivery and performance of this Agreement have been duly authorized by the
board of directors of Judge and does not and, subject to obtaining all required
authorizations and approvals, and certain consents to the assignment to, and
assumption by, the Surviving Corporation of ongoing liabilities, contracts and
leases, will not violate any of the provisions of, or constitute a default under
or give any person or party the right to accelerate payment or performance under
the Articles of Incorporation or By-Laws of Judge or any other agreement or
instrument to which Judge is a party or by which it or any of its properties or
assets is bound other than (i) violations, defaults or accelerations which in
the aggregate would not have a material adverse effect on the financial
condition, business, prospects or operating results of Judge taken as a whole or
(ii) violations, defaults or accelerations that in the aggregate would not
materially impair the ability of Judge to consummate the transactions
contemplated hereby. To the knowledge of the management of Judge, subject to
obtaining all required authorizations and approvals, the execution, delivery and
performance of this Agreement by Judge will not violate any provision of law or
regulation applicable to Judge other than (i) violations which in the aggregate
would not have a material adverse effect on the financial condition, business,
prospects or operating results of Judge taken as a whole or (ii) violations that
in the aggregate would not materially impair the ability of Judge to consummate
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by Judge and, assuming the due authorization,
12
<PAGE>
execution and delivery hereof by DataImage, constitutes a valid and binding
obligation of Judge enforceable in accordance with its terms.
(n) Full Disclosure. None of the information with respect to Judge
---------------
which has been furnished to DataImage or will be included by DataImage in the
Proxy Statement, or any application to, or filing with, any regulatory agency
made in connection with the transactions contemplated hereby will, at the
respective time it is furnished, distributed, mailed or filed, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements therein not misleading in light of the
circumstances in which they were made.
(o) Employee Benefit Plans. Judge has not incurred any material
----------------------
accumulated funding deficiency within the meaning of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), nor has incurred any material
liability to the Pension Benefit Guaranty Corporation established under ERISA
(or any other successor thereto) in connection with any profit sharing, group
insurance, bonus, deferred compensation, percentage compensation, stock option,
severance pay, insurance, pension or retirement plan or oral or written
agreement or commitment relating to employment or fringe benefits or perquisites
for employees, officers or directors of Judge (an "Employee Benefit Plan"), and
no Employee Benefit Plan which is subject to ERISA had, as of its latest
valuation date, accrued benefits (whether or not vested) the present value of
which exceeded the value of the assets of such Employee Benefit Plan, based upon
actuarial assumptions utilized for such Plan.
(p) Labor Matters. Judge is not a party to, or is bound by, any
-------------
collective bargaining agreement, contract, or other agreement or understanding
with a labor union or labor organization, nor is Judge the subject of a
proceeding asserting that Judge has committed an unfair labor practice or
seeking to compel Judge to bargain with any labor organization as to wages and
conditions of employment, nor is there any strike or other labor dispute
involving Judge pending or threatened.
(q) Permits, Etc. Judge has all permits, licenses, certificates of
------------
authority, orders and approvals of, and has made all filings, applications, and
registrations with, federal, state, local and foreign governmental or regulatory
bodies that are required in order to permit it to carry on its business as it is
presently conducted, the absence of which in the aggregate would have a material
adverse effect on the financial condition, business, prospects or operating
results of Judge taken as a whole.
(r) Undisclosed Liabilities. Since the date of Judge's Balance Sheet,
-----------------------
Judge has not incurred any liabilities or obligations (whether absolute,
accrued, contingent or otherwise) of any nature, except liabilities or
obligations incurred in the ordinary course of business or which would not in
the aggregate have a material adverse effect on the financial condition,
business, prospects or operating results of Judge taken as a whole.
(s) Proceedings. On the date of this Agreement, there is no pending
-----------
or, to the knowledge of Judge, threatened legal or governmental proceeding
against it and Judge is not aware of any fact or circumstance that which would
adversely affect Judge's ability to obtain any of the required regulatory
approvals or satisfy any of the other conditions required to be satisfied in
order to consummate the transactions contemplated by this Agreement. Judge will
promptly notify DataImage if any of the representations contained in this
Section ceases to be true and correct.
13
<PAGE>
(t) Environmental. For purposes of this Section and Section 2.2(r),
-------------
the following terms shall have the indicated meaning:
"Environmental Law" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree, injunction or agreement with
any governmental entity relating to (1) the protection, preservation or
restoration of the environment (including, without limitation, air, water
vapor, surface water, groundwater, drinking water supply, surface soil,
subsurface soil, plant and animal life or any other natural resource),
and/or (2) the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or
disposal of Hazardous Substances. The term Environmental Law includes
without limitation (1) the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C. (S)9601, et seq.; the
-------
Resource Conservation and Recovery Act, as amended, 42 U.S.C. (S)6901, et
--
seq.; the Clean Air Act, as amended, 42 U.S.C. (S)7401, et seq.; the
---- ------
Federal Water Pollution Control Act, as amended, 33 U.S.C. (S)1251, et
--
seq.; the Toxic Substances Control Act, as amended, 15 U.S.C. (S)9601, et
--
seq.; the Emergency Planning and Community Right to Know Act, 42 U.S.C.
----
(S)11001, et seq.; the Safe Drinking Water Act, 42 U.S.C. (S)300f, et seq.;
------- -------
and all comparable state and local laws, and (2) any common law (including
without limitation common law that may impose strict liability) that may
impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of or exposure to any Hazardous
Substance.
"Hazardous Substance" means any substance presently listed, defined,
designated or classified hazardous, toxic, radioactive or dangerous, or
otherwise regulated, under any Environmental Law, whether by type or by
quantity, including any material containing any such substance as a
component. Hazardous Substances include without limitation petroleum or
any derivative or by-product thereof, asbestos, radioactive material, and
polychlorinated biphenyls.
"Material Adverse Effect" means any condition, event, change or
occurrence that, individually or collectively, is reasonably likely to have
a material adverse effect upon (x) the condition, financial or otherwise,
properties, business or results of operations of such person or entity and
its subsidiaries, taken as a whole, or (y) the ability of such person or
entity to perform its obligations under and to consummate the transactions
contemplated by this Agreement.
i. To the best knowledge of Judge, Judge has neither been nor
is in violation of or liable under any Environmental Law, except any such
violations or liabilities which would not reasonably be expected to singly or in
the aggregate have a Material Adverse Effect;
ii. To the best knowledge of Judge, there are no actions, suits,
demands, notices, claims, investigations or proceedings pending or threatened
relating to the liability of Judge under any Environmental Law, including
without limitation any notices, demand letters or requests for information from
any federal or state environmental agency relating to any such liabilities under
or violations of Environmental Law, except such which will not result in or
relate to a Material Adverse Effect.
14
<PAGE>
iii. To the best knowledge of Judge, there has been no
releasing, spilling, leaking, discharging, disposing, discarding, storing or
dumping of any Hazardous Substances for which Judge is or may be liable.
(u) Accredited Investors. Each shareholder of Judge, and every holder
--------------------
of an option, warrant, call or similar right to acquire or receive shares of
Judge Common Stock or Judge Preferred Stock, shall be an "Accredited Investor"
as that term is defined in Rule 501(a) of Regulation D promulgated pursuant to
the Securities Act, and each such person or entity shall, prior to Closing,
execute and deliver to DataImage or its counsel written confirmation of the
status of each such shareholder as an Accredited Investor to the reasonable
satisfaction of DataImage and its counsel.
2.2 Representations and Warranties of DataImage. DataImage represents and
-------------------------------------------
warrants to Judge as follows:
(a) Organization, Good Standing, Authority, Insurance, Etc. DataImage
------------------------------------------------------
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. DataImage has all requisite corporate power and
authority to conduct its business as it is now conducted, to own and operate its
properties and assets and to lease properties used in its business. DataImage
has all requisite corporate power and authority to enter into this Agreement
and, subject to obtaining any required regulatory and stockholder approvals, to
carry out the provisions of this Agreement. DataImage is qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which qualification is necessary under applicable law, except to the extent
that any failure to so qualify would not, in the aggregate, have a material
adverse effect on the business, prospects, financial condition or results of
operations of DataImage, taken as a whole.
(b) Capitalization, Investments. As of the date hereof, the
---------------------------
authorized capital stock of DataImage consists of 10,000,000 shares of common
stock, par value $.01 per share, of which 4,010,003 shares are duly issued and
outstanding, fully paid and non-assessable. Except as set forth in Schedule
2.2(b) hereto, there are outstanding no options, convertible securities,
warrants or other rights to purchase or acquire any of DataImage's capital stock
from DataImage, there is no commitment of DataImage to issue the same, and other
than by operation of law, there are no outstanding agreements, restrictions,
contracts, commitments or demands of any character to which DataImage is a
party, which relate to the transfer or restrict the transfer of any shares of
DataImage's capital stock.
(c) Financial Statements. DataImage has furnished Judge with its
--------------------
audited financial statements for DataImage as of the end of DataImage's last
three fiscal years, and audited financial statements of (i) operations, (ii)
stockholders' equity, and (iii) cash flows for each of the last three fiscal
years, including the notes to said audited financial statements, together with
the reports of DataImage's independent certified public accountants, pertaining
to said audited financial statements (all of which are collectively referred to
as the "DataImage Financial Statements"). Said DataImage Financial Statements
present fairly the financial condition of DataImage at the dates thereof, and
the results of the operations of DataImage for the periods indicated, in
accordance with generally accepted accounting principles consistently applied.
Except as and to the extent reflected or reserved against in the DataImage
Financial Statements, or as otherwise disclosed pursuant to this Agreement,
DataImage did not have, at the date thereof, any material liabilities or
obligations, or any other liabilities or obligations which in the aggregate
would be material, secured or unsecured (whether accrued, absolute, contingent
or otherwise), including, without limitation, any tax liabilities, which should
be reflected in audited financial statements, in
15
<PAGE>
accordance with generally accepted accounting principles consistently applied.
The books and records of DataImage are maintained in accordance with generally
accepted accounting principles consistently applied.
(d) Absence of Certain Developments. Since September 30, 1995, except
-------------------------------
as set forth on Schedule 2.2(d) hereto, there has been (i) no material adverse
change in the financial condition, business or results of operations of
DataImage taken as a whole; (ii) no declaration, setting aside or payment of any
dividend or other distribution with respect to DataImage's Common Stock; (iii)
no material loss, destruction or damage to the properties of DataImage taken as
a whole, which loss, destruction, or damage is not adequately covered by
insurance; (iv) no agreement, contract or commitment entered into or agreed to
be entered into except for those in the ordinary course of business (none of
which, individually or in the aggregate, materially adversely affects the assets
of DataImage taken as a whole, or its businesses, financial condition, prospects
or results of operations taken as a whole); (v) no amendment or termination of
any contract, lease, license, or other agreement to which DataImage is a party
except in the ordinary course of business (none of which, individually or in the
aggregate, materially adversely affects the assets, businesses, financial
condition, prospects or results of operations of DataImage taken as a whole);
and (vi) no change in any of the accounting methods or practices or revaluation
of any of the assets of DataImage, except as provided for herein or as required
by changes in generally accepted accounting principles. Since such date,
DataImage has conducted its business only in the ordinary course and is in
compliance in all material respects with all laws which govern the ownership of
its property and the conduct of its business.
(e) Taxes. Except as set forth on Schedule 2.2(e): (i) DataImage has
-----
filed all tax returns (as described below) it is required to file, and all taxes
(as described below), now known by the executive officers of DataImage to be due
from DataImage have been duly paid, other than taxes or charges which are not as
yet delinquent or are being contested in good faith or have not been finally
determined, and no extensions for the time of payment have been requested; (ii)
no additional assessments of tax by any governmental authority for which there
is not adequate provision in the DataImage Financial Statements are known by an
executive officer of DataImage to be proposed, pending or threatened, other than
taxes for periods for which returns are not yet required to be filed; and (iii)
no unexpired waivers of the statute of limitations executed by DataImage with
respect to federal income taxes are in effect as of the date hereof. Except as
set forth on Schedule 2.2(e), the accruals and reserves for tax liabilities
reflected in the DataImage Financial Statement of September 30, 1995 are
adequate for the payment of all of DataImage's federal, state, local and foreign
tax liabilities, including interest and penalties, whether proposed, pending,
threatened or disputed, for all periods ended on or prior to September 30, 1995,
and for which DataImage may, at said date, have been liable, other than tax
liabilities imposed as a result of the transactions contemplated by this
Agreement. Internal Revenue Service audits of DataImage have been completed
through the year ended 1994, and all deficiencies, if any, resulting from
completed audits have been paid. Copies of all material correspondence and
documents relating to federal, state or local franchise, income or other similar
taxes in respect of the five most recently completed tax years have been made
available to Judge. Copies of all material, correspondence and documents
relating to federal, state or local franchise, income or similar taxes in
respect to the five most recently completed tax years have been made available
to Judge. Except as set forth on Schedule 2.2(e), DataImage has not executed or
filed with the Internal Revenue Service any agreement extending the period for
assessment and collection of any federal tax.
16
<PAGE>
For purposes of this Section 2.2(e), "tax returns" shall mean all federal,
state, local and foreign income and franchise tax returns including, without
limitation, consolidated federal income tax returns of the DataImage,
declarations of estimated tax and tax reports required to be filed on or before
the Closing with respect to income, properties or operations, and "taxes" shall
mean all federal, state, local or foreign income, gross receipts, windfall
profits, severance, property, production, sales, use, license, excise,
franchise, employment, withholding or similar taxes, together with any interest,
additions or penalties with respect thereto and any interest in respect of such
additions and penalties.
(f) Litigation. Except as set forth on Schedule 2.2(f), hereto or on
----------
DataImage's Annual Report form 10-K for the fiscal year ended December 31, 1994
("DataImage 10-K"), no material action, suit, counterclaim or other litigation,
investigation or proceeding is pending, or is known by the executive officers of
DataImage to be threatened, against DataImage before any court or governmental
or administrative agency, domestic or foreign, which, is likely to have a
material adverse effect on the financial condition, business, prospects or
results of operations of DataImage taken as a whole.
(g) Brokerage. Except as to the commission due Ronald Smith at
---------
Closing (which is not to exceed $30,000.00) to be paid by the Surviving
Corporation as set forth in Section 1.14, there are no claims for brokerage
commissions, finder's fees or similar compensation arising out of or due to any
act of DataImage in connection with the transactions contemplated by this
Agreement or based on any agreement or arrangement made by or on behalf of
DataImage.
(h) Properties. DataImage has good and marketable title, free and
----------
clear of any mortgage, pledge, lien, charge or other encumbrance, to all of its
real or personal property and other assets reflected on its balance sheet of
September 30, 1995 (the "Balance Sheet") and incorporated by reference in
DataImage's 10-K, or acquired by it subsequent to the date thereof, except for
(i) liens or encumbrances on such property or assets described or referred to in
the DataImage financial statements listed in Section 2.2(c), hereof; (ii) liens
for current taxes not yet due and payable or for taxes being contested in good
faith; (iii) such imperfections of title and other liens or encumbrances, if
any, as would not in the aggregate have a material adverse effect on the
financial condition, business, prospects or operating results of DataImage taken
as a whole; and (iv) dispositions of such property or assets in the ordinary
course of business since the date of such Balance Sheet. All material leases
pursuant to which DataImage, as lessee, leases real or personal property are
valid and in effect in accordance with their respective terms, and there is not,
under any of such leases, on the part of the lessee any material existing
default or any event which with notice or lapse of time, or both, would
constitute such a default, other than defaults which would not in the aggregate
have a material adverse effect on the financial condition, business, prospects
or operating results of DataImage taken as a whole.
(i) Compliance With Applicable Laws. DataImage, in the conduct of its
-------------------------------
business, is in all material respects, in compliance with applicable federal,
state and local laws, statutes, ordinances and regulations, except where the
failure to so comply would not in the aggregate have a material adverse effect
on the financial condition, business, prospects or operating results of
DataImage.
(j) Contracts and Commitments, Etc. Except for this Agreement and as
------------------------------
set forth on Schedule 2.2(j), or as disclosed in DataImage's 10-KSB, DataImage
is not a party to or bound by any contract (as such term is defined in item
601(b)(10)(i) and (ii) of Regulation S-K) to be performed after the date hereof
that has not been filed with or incorporated by reference in DataImage's 10-K,
or in any other document filed subsequent thereto under the Securities Act,
(collectively, the "Reports"). Except as set forth on Schedule 2.2(j), or as
disclosed in the Reports, DataImage has in all material respects
17
<PAGE>
performed all material obligations as to the foregoing contracts required to be
performed by it to date and is not in default under, and no event has occurred
which, with the lapse of time or notice by a third party, or both, could result
in a default by DataImage under any outstanding indenture, mortgage, or material
contract, lease or other agreement to which DataImage is a party or by which
DataImage is bound or under any provision of the certificate of incorporation or
by-laws of DataImage, except for any default or event which would not result in,
and would not have consequences which would result in, a material adverse change
in the financial condition, business, prospects or operating results of
DataImage. True and correct copies of all such contracts have been delivered to
Judge.
(k) Insurance. DataImage has in effect insurance coverage with
---------
reputable insurers, which in respect of amounts, types and risks insured is
customary with industry practices for the businesses conducted by DataImage.
(l) No Guarantees. Except as disclosed in Schedule 2.2(l), DataImage
-------------
is not obligated as guarantor, co-signor or surety (or otherwise in a secondary
liability capacity) for any obligation of any kind of any other person or entity
(other than DataImage).
(m) Agreement, Authority, Absence of Conflicts. The execution,
------------------------------------------
delivery and performance of this Agreement have been duly authorized by the
board of directors of DataImage and does not and, subject to obtaining all
required authorizations and approvals, will not violate any of the provisions
of, or constitute a default under or give any person or party the right to
accelerate payment or performance under the Articles of Incorporation or By-Laws
of DataImage or any other agreement or instrument to which DataImage is a party
or by which it or any of its properties or assets is bound other than (i)
violations, defaults or accelerations which in the aggregate would not have a
material adverse effect on the financial condition, business, prospects or
operating results of DataImage taken as a whole or (ii) violations, defaults or
accelerations that in the aggregate would not materially impair the ability of
DataImage to consummate the transactions contemplated hereby. To the knowledge
of the management of DataImage, subject to obtaining all required authorizations
and approvals, the execution, delivery and performance of this Agreement by
DataImage will not violate any provision of law or regulation applicable to
DataImage other than (i) violations which in the aggregate would not have a
material adverse effect on the financial condition, business, prospects or
operating results of DataImage taken as a whole or (ii) violations that in the
aggregate would not materially impair the ability of DataImage to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by DataImage and, assuming the due authorization, execution and
delivery hereof by Judge, constitutes a valid and binding obligation of
DataImage enforceable in accordance with its terms.
(n) Reporting. DataImage has timely filed all reports and forms
---------
required to be filed by it pursuant to the Securities Act and the rules and
regulations promulgated thereunder, and all such reports and forms are complete
and correct in all material respects.
(o) Full Disclosure. None of the information with respect to
---------------
DataImage which has been furnished to Judge or has been or will be included by
DataImage in the Proxy Statement, or any application to, or filing with, any
regulatory agency made in connection with the transactions contemplated hereby
will, at the respective time it is furnished, distributed, mailed or filed, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements therein not misleading
in light of the circumstances in which they were made.
18
<PAGE>
(p) Employee Benefit Plans. Each "employee benefit plan," as defined
----------------------
in Section 3(3) of ERISA, that now covers or has ever covered any of DataImage's
employees, complies in all material respects with all applicable requirements of
ERISA, the Code and other applicable laws; DataImage has not engaged in a
"prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of
the Code) or any breach of fiduciary responsibility under Part 4 of Title I of
ERISA, with respect to any such plan which is likely to result in any material
penalties or taxes under Section 502 of ERISA or Section 4975 of the Code, or
any material liability to any participant or beneficiary of such plan; no
material liability to the Pension Benefit Guaranty Corporation has been or is
expected by DataImage to be incurred with respect to any such plan which is
subject to Title IV of ERISA, or with respect to any "single-employer plan" (as
defined in Section 4001(a)(15) of ERISA) currently or formerly maintained by
DataImage or any entity which is considered one employer with DataImage, under
Section 4001 of ERISA or Section 414 of the Code; no such plan had an
"accumulated funding deficiency" (as defined in Section 302 of ERISA) (whether
or not waived) as of the last day of the end of the most recent plan year ending
prior to the date hereof; the fair market value of the assets of each plan
subject to Title IV of ERISA exceeds the present value of the "benefit
liabilities" (as defined in Section 4001(a)(16) of ERISA) under such plan as of
the end of the most recent plan year with respect to the respective plan ending
prior to the date hereof, calculated on the basis of the actuarial assumptions
used in the most recent actuarial valuation for such plan as of the date hereof;
no notice of a "reportable event" (as defined in Section 4043 of ERISA) for
which the 30-day reporting requirement has not been waived has been required to
be filed for any plan within the 12-month period ending on the date hereof;
DataImage has not provided, or is required to provide, security to any plan
pursuant to Section 401(a)(29) of the Code; DataImage has never contributed to a
"multi-employer plan," as defined in Section 3(37) of ERISA; DataImage does not
have any obligations for retiree health and life benefits under any benefit
plan, contract or arrangement that cannot be amended or terminated without
incurring or retaining any liability thereunder; all actuarial valuations and
other documents and information delivered or made available to any party with
respect to any plan is true and correct as of the date(s) shown thereon, and all
actuarial methods and assumptions are appropriate for such plans, and consistent
with the methods and assumptions permitted by the Code and ERISA, and all such
valuations, documents and information may be relied upon in determining the
"Exchange Ratio" pursuant to Section 1(b) hereof.
(q) Labor Matters. DataImage is not a party to, or is bound by, any
-------------
collective bargaining agreement, contract, or other agreement or understanding
with a labor union or labor organization, nor, to the knowledge of the
management of DataImage, is DataImage the subject of a proceeding asserting that
DataImage has committed an unfair labor practice or seeking to compel DataImage
to bargain with any labor organization as to wages and conditions of employment,
nor is there any strike or other labor dispute involving DataImage pending or
threatened.
(r) Environmental.
-------------
i. To the best knowledge of DataImage, DataImage has neither
been nor is in violation of or liable under any Environmental Law, except any
such violations or liabilities which would not reasonably be expected to singly
or in the aggregate have a Material Adverse Effect;
ii. To the best knowledge of DataImage, there are no actions,
suits, demands, notices, claims, investigations or proceedings pending or
threatened relating to the liability of DataImage under any Environmental Law,
including without limitation any notices, demand letters or requests for
information from any federal or state environmental agency relating to any such
liabilities under or
19
<PAGE>
violations of Environmental Law, except such which will not result in or relate
to a Material Adverse Effect.
iii. To the best knowledge of DataImage, there has been no
releasing, spilling, leaking, discharging, disposing, discarding, storing or
dumping of any Hazardous Substances for which DataImage is or may be liable.
(s) Proceedings. On the date of this Agreement, there is no pending
-----------
or, to the knowledge of DataImage, threatened legal or governmental proceeding
against it and DataImage is not aware of any fact or circumstance that which
would adversely affect DataImage's ability to obtain any of the required
regulatory approvals or satisfy any of the other conditions required to be
satisfied in order to consummate the transactions contemplated by this
Agreement. DataImage will promptly notify Judge if any of the representations
contained in this Section ceases to be true and correct.
(t) Permits, Etc. DataImage has all permits, licenses, certificates
------------
of authority, orders, and approvals of, and has made all filings, applications,
and registrations with, federal, state, local, and foreign governmental or
regulatory bodies that are required in order to permit it to carry on its
business as it is presently conducted, the absence of which in the aggregate
would have a material adverse effect on the financial condition, business,
prospects or operating results of DataImage taken as a whole.
(u) Undisclosed Liabilities. Since November 15, 1995, DataImage has
-----------------------
not incurred any liabilities or obligations (whether absolute, accrued,
contingent or otherwise) of any nature, except liabilities or obligations
incurred in the ordinary course of business or which would not in the aggregate
have a material adverse effect on the financial condition, business, prospects
or operating results of DataImage taken as a whole.
(v) Options, Warrants, Etc. There shall be no outstanding options,
-----------------------
rights, warrants or other agreements with respect to DataImage Common Stock as
of the date of Closing.
ARTICLE III. ACCESS TO AND INFORMATION CONCERNING PROPERTIES, RECORDS, ETC.
3.1 Access. Each of Judge and DataImage shall, to the extent permitted by
------
law, give to the other party, its counsel, accountants, financial advisors and
other representatives full access, at reasonable times and upon reasonable
notice (so as not to interfere unreasonably with the ordinary course and conduct
of business of Judge or DataImage), throughout the period prior to the Closing,
to all of their respective properties, books, contracts, commitments and
records, including, but not limited to, minute books, charters and by-laws, and
each shall furnish to the other party during such period all such information
concerning each of them and their respective subsidiaries and their respective
affairs as the other party may reasonably request. In addition, each of Judge
and DataImage shall make their respective officers available at reasonable times
and upon reasonable notice to discuss with the other party's designated,
appropriate representatives the substance of all documents, financial statements
and other information provided by Judge and DataImage, as the case may be, to
the other party, and such other matters as the respective parties shall
reasonably deem pertinent to the transactions contemplated under this Agreement.
All information disclosed by any party hereto, to another party pursuant to this
Section shall be subject to Article 9 hereof (regarding confidential treatment
of confidential or non-public information). No investigation pursuant to this
Section shall affect any representations or warranties made herein.
20
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ARTICLE IV. AFFIRMATIVE COVENANTS
4.1 Affirmative Covenants of Judge. Judge covenants that, throughout the
------------------------------
period commencing on the date hereof and ending at the Effective Time, except
for specific proposed actions or inaction as shall be consented to by DataImage
in writing, Judge will for its own part:
(a) Conduct of Business. Conduct its business in a manner that will
-------------------
not adversely affect Judge's ability to obtain all necessary regulatory
approvals for the transactions contemplated hereby or Judge's ability to perform
its obligations under this Agreement and conduct its business in the ordinary
course; provided that Judge may undertake activities which are not in the
ordinary course on the condition that such activities will not result in a
material adverse change in the financial condition, business, prospects or
operating results of Judge taken as a whole;
(b) Preservation of Business. Use its best efforts to maintain and
------------------------
preserve its business, its good will and its relationships with its customers;
(c) Properties. Maintain and keep its material properties in as good
----------
repair and condition in all material respects as they presently exist, except
for depreciation due to ordinary wear and tear and damage due to casualty;
(d) Insurance. Maintain in full force and effect insurance customary
---------
with industry practices for the businesses conducted by Judge;
(e) Contracts, Etc. Perform all its material obligations under
--------------
material contracts, leases and documents relating to or affecting its material
assets, properties and businesses;
(f) Financial Statements. Furnish to DataImage:
--------------------
i. As soon as practicable and in any event within forty-five
(45) days after the end of each quarterly period (other than the last quarterly
period) in each fiscal year, statements of operations of Judge for such period
and for the period beginning at the commencement of the fiscal year and ending
at the end of such quarterly period, and a statement of financial condition of
Judge as at the end of such quarterly period, setting forth in each case in
comparative form figures for the corresponding periods ending in the preceding
fiscal year, subject to changes resulting from year-end adjustments;
ii. Promptly upon receipt thereof, copies of all audit reports
submitted to Judge by independent accountants in connection with each annual,
interim or special audit of the books of Judge made by such accountants;
iii. Promptly upon any executive officer of Judge obtaining
knowledge of any condition or event which would constitute a material violation
of the terms and conditions of this Agreement or which would constitute a
material default under any material indenture, mortgage, agreement or other
instrument securing or relating to any indebtedness of Judge for borrowed money,
a certificate of the Chief Financial Officer of Judge, specifying the nature of
such material violation or default and what action Judge has taken or is taking
or proposes to take with respect thereto;
21
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iv. Promptly upon becoming aware that any person has given
notice to Judge or taken any other action with respect to a claimed violation or
default of the type referred to in subsection (iii) of this Subsection (f), a
written notice describing the notice given or action taken by such person, the
nature of such violation or default and what action Judge has taken or is taking
or proposes to take with respect thereto; and
v. With reasonable promptness, such additional financial data
as DataImage may reasonably request.
(g) Laws, Rules, Etc. Comply with and perform all material
----------------
obligations and duties imposed upon it by all federal and state laws and all
rules, regulations and orders imposed by federal or state governmental
authorities, except in respects not materially adverse to the financial
condition, prospects, business or results of operations of Judge taken as a
whole or which would not materially impair the ability of Judge to consummate
the transactions contemplated hereby;
(h) Corporate Existence. Maintain its existence, in the case of
-------------------
Judge, as a corporation validly existing in good standing under the laws of the
State of New Jersey.
(i) Notices. Notify DataImage of (i) any fact or circumstance of
-------
which the executive officers of Judge have knowledge which would, absent
disclosure by Judge to DataImage and DataImage's subsequent consents to such
fact or circumstance, not permit Judge to satisfy the condition set forth in
Section 6.2(a)(i) of this Agreement, (ii) any material breach of any of its
covenants contained herein, and (iii) any material adverse change in its
financial condition, business, prospects or operating results;
(j) No Control of DataImage by Judge. Until the Effective Date, the
--------------------------------
management of DataImage and the authority to establish and implement its
business policies shall continue to reside solely in DataImage's officers and
Board of Directors; and
(k) Best Efforts. Use its best efforts to assure, to the extent
------------
reasonably within its control, as soon as it is reasonably practicable, the
satisfaction of the conditions to the effectiveness of the transactions
contemplated under Article I. hereof and the transactions contemplated by this
Agreement;
(l) Dividends and Other Distributions. Not declare or pay any
---------------------------------
dividends or otherwise make distributions on any shares of its capital stock and
not sell, transfer or otherwise dispose of, or enter into any agreement to sell,
transfer or otherwise dispose of, any of its assets other than in the ordinary
course of business; and
(m) Liabilities. Not create, incur, assume, guarantee or otherwise
-----------
become directly or indirectly obligated with respect to any liabilities or
obligations outside the ordinary course of business nor become obligated under
any agreement to lend or borrow funds or purchase or supply goods or services
other than agreements that are not material and which are in the ordinary course
of business.
4.2 Affirmative Covenants of DataImage. DataImage covenants that,
----------------------------------
throughout the period commencing on the date hereof and ending at the Effective
Time, except for specific proposed actions or inaction as shall otherwise be
consented to by Judge in writing, DataImage will for its own part:
22
<PAGE>
(a) Conduct of Business. Conduct its business in a manner that will
-------------------
not adversely affect DataImage's ability to obtain all necessary regulatory
approvals for the transactions contemplated hereby or DataImage's ability to
perform its obligations under this Agreement and conduct its business in the
ordinary course;
(b) Preservation of Business. Use its best efforts to maintain and
------------------------
preserve its businesses, its good will and its relationships with its customers;
(c) Assets. Maintain and keep its assets in as good repair and
------
condition in all material respects as they presently exist, except for
depreciation due to ordinary wear and tear and damage due to casualty;
(d) Insurance. Maintain in full force and effect insurance customary
---------
with industry practices for the businesses conducted by DataImage.
(e) Contracts, Etc. Perform all its material obligations under
--------------
material contracts, leases and documents relating to or affecting its material
assets, properties and businesses;
(f) Financial Statements. Furnish to Judge:
--------------------
i. As soon as practicable and in any event within forty-five
(45) days after the end of each quarterly period (other than the last quarterly
period) in each fiscal year, statements of operations of DataImage for such
period and for the period beginning at the commencement of the fiscal year and
ending at the end of such quarterly period, and a balance sheet of DataImage as
at the end of such quarterly period, setting forth in each case in comparative
form figures for the corresponding periods ending in the preceding fiscal year,
subject to changes resulting from year-end adjustments;
ii. Promptly upon receipt thereof, copies of all audit reports
submitted to DataImage by independent auditors in connection with each annual,
interim or special audit of the books of DataImage made by such accountants;
iii. As soon as practicable, copies of all such financial
statements and reports as it shall send to its stockholders and of such regular
and periodic reports as DataImage may file with the SEC, or any other regulatory
authority;
iv. Promptly upon any executive officer of DataImage obtaining
knowledge of any condition or event which would constitute a material violation
of the terms and conditions of this Agreement or which would constitute a
material default under any material indenture, mortgage, agreement or other
instrument securing or relating to any indebtedness of DataImage for borrowed
money, a certificate of the President of DataImage specifying the nature of such
material violation or default and what action DataImage has taken or is taking
or proposes to take with respect thereto;
v. Promptly upon becoming aware that any person has given
notice to DataImage or taken any other action with respect to a claimed
violation or default of the type referred to in subsection (iv) of this
Subsection, a written notice describing the notice given or action taken by such
person, the nature of such violation or default and what action DataImage has
taken or is taking or proposes to take with respect thereto; and
23
<PAGE>
vi. With reasonable promptness, such additional financial data
as Judge may reasonably request;
(g) Laws, Rules, Etc. Prepare and timely file all reports required by
----------------
the Securities Law and comply with and perform all material obligations and
duties imposed upon it by all federal and state laws and all rules, regulations
and orders imposed by federal or state governmental authorities, except in
respects not materially adverse to the financial condition, business, prospects
or results of operations of DataImage taken as a whole, or which would not
materially impair the ability of DataImage to consummate the transactions
contemplated hereby;
(h) Corporate Existence. Maintain its existence, in the case of
-------------------
DataImage, as a corporation validly existing in good standing under the laws of
the State of Delaware.
(i) Notices. Notify Judge of (i) any fact or circumstance of which
-------
the executive officers of DataImage have knowledge which would, absent
disclosure by DataImage to Judge and Judge's subsequent consent to such fact or
circumstance, not permit DataImage to satisfy the condition set forth in Section
6.3(a)(i) of this Agreement, (ii) any material breach of any of its covenants
contained herein, and (iii) any material adverse change in its financial
condition, business, prospects or operating results;
(j) Best Efforts. Use its best efforts to assure, to the extent
------------
reasonably within its control, and subject to its fiduciary duties, as soon as
it is reasonably practicable, the satisfaction of the conditions to the
effectiveness of the transactions contemplated by this Agreement.
(k) DataImage Stock. Not issue any additional shares of capital stock
---------------
or any options, warrants or other securities or instrument convertible into
shares of capital stock without the prior consent of Judge;
(l) Dividends and Other Distributions. Not declare or pay any
---------------------------------
dividends or otherwise make distributions on any shares of its capital stock and
not sell, transfer or otherwise dispose of, or enter into any agreement to sell,
transfer or otherwise dispose of, any of its assets other than in the ordinary
course of business; and
(m) Liabilities. Not create, incur, assume, guarantee or otherwise
-----------
become directly or indirectly obligated with respect to any liabilities or
obligations outside the ordinary course of business nor become obligated under
any agreement to lend or borrow funds or purchase or supply goods or services
other than agreements that are not material and which are in the ordinary course
of business.
ARTICLE V. NEGATIVE COVENANTS
5.1 Negative Covenants of Judge. Judge covenants that, throughout the
---------------------------
period commencing on the date hereof and ending on the date of Closing, except
for proposed specific actions as shall otherwise be consented to in writing by
DataImage, Judge will not:
(a) Merge into, consolidate with, affiliate with, or be purchased or
acquired by, any other corporation, entity or person (or agree to any such
merger, consolidation, affiliation, purchase or acquisition) provided, however,
that DataImage shall consent to such a transaction or agreement upon receipt of
a legal opinion satisfactory to DataImage and its counsel to the effect that
such a transaction or agreement is necessary to satisfy the fiduciary duties of
the Board of Directors of Judge;
24
<PAGE>
(b) Amend its charter or by-laws, except that Judge shall amend the
foregoing to the extent necessary to effect the transactions contemplated
hereby;
(c) Issue, sell or otherwise dispose of (or agree to issue, sell or
dispose of) any shares of its capital stock or any of its securities convertible
into or representing a right or option to purchase any such shares or enter into
other agreements to issue or sell any shares of its capital stock or change
presently outstanding shares of its capital stock into a greater or lesser
number of shares either by way of a recapitalization, reorganization,
consolidation of shares or the like, or by way of a merger or consolidation,
except as contemplated in connection with the private placement set forth in
Section 1.8, the conversion of certain debt into equity set forth in Section
1.9, and as necessary to satisfy existing warrants, options, conversion rights
or other rights;
(d) Purchase, redeem, retire or otherwise acquire, or hypothecate,
pledge or otherwise encumber, any shares of capital stock;
(e) Make, declare or pay any dividend on Judge Common Stock or Judge
Preferred Stock, or declare or make any distribution on any shares of its
capital stock;
(f) Except for indebtedness and contingent liabilities incurred in the
ordinary course of business of Judge (any indebtedness incurred to reputable
lenders being considered as in the ordinary course), incur any indebtedness or
liability for borrowed money evidenced by notes, bonds, debentures or other
similar obligations;
(g) Solicit or encourage inquiries or proposals with respect to, or,
furnish any information relating to or participate in any negotiations or
discussions concerning, any acquisition or purchase or all or a material portion
of its assets whether owned by it directly or of a substantial equity interest
in, it or any business combination with it and Judge shall notify DataImage
immediately if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated with, Judge, and Judge shall instruct its officers,
directors, agents, advisors and affiliates to comply with the above; or
(h) Directly or indirectly agree to take any of the foregoing actions
specified in Section 5.1.
5.2 Negative Covenants of DataImage. DataImage covenants that, throughout
-------------------------------
the period commencing on the date hereof and ending on the date of Closing,
except for proposed specific actions as shall otherwise be consented to in
writing by Judge, DataImage will not:
(a) Amend its charter or by-laws, except that DataImage shall amend
the foregoing to the extent necessary to effect the transactions contemplated
hereby;
(b) Except as set forth in a conversion agreement between DataImage
and Canaan, dated November 20, 1995(the "Canaan Conversion Agreement"), or as
necessary to satisfy existing warrants, options, conversion rights or other
rights, issue, sell or otherwise dispose of (or agree to issue, sell or dispose
of) any shares of its capital stock or any of its securities convertible into or
representing a right or option to purchase any such shares or enter into other
agreements to issue or sell any shares of its capital stock or change the
presently outstanding shares of its capital stock into a greater or lesser
number of shares either by way of a recapitalization, reorganization,
consolidation of shares or the like,
25
<PAGE>
or by way of a merger or consolidation, except for issuances necessary to effect
the transactions contemplated hereby.
(c) Purchase, redeem, retire or otherwise acquire, or hypothecate,
pledge or otherwise encumber, any shares of capital stock;
(d) Merge into, consolidate with, or be purchased or acquired by, any
other corporation, entity or person (or agree to any such merger, consolidation,
affiliation, purchase or acquisition), or permit (or agree to permit) any other
corporation, entity or person to be merged, consolidated or affiliated with it
or be purchased or acquired by it, or, acquire (or agree to acquire) all or
substantially all of the assets of any other corporation, entity or person or
sell (or agree to sell) all or any substantial part of its assets;
(e) Make, declare or pay any dividend on DataImage Common Stock or
declare or make any distribution on any shares of its capital stock.
(f) Enter into any employment contracts with, or, except in the
ordinary course of business consistent with past practice or pursuant to
existing plans or contracts, pay any bonus to, or increase the rate of
compensation of, any of its directors, officers or employees;
(g) Enter into or modify (except as may be required by applicable law
or to effect the transaction contemplated by this Agreement), any pension,
retirement, stock option, stock purchase, savings, profit sharing, deferred
compensation, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
related thereto, in respect of any of its current or former directors, officers
or other employees;
(h) Except for indebtedness and contingent liabilities incurred in the
ordinary course of business of DataImage incur any indebtedness or liability for
borrowed money evidenced by notes, bonds, debentures or other similar
obligations;
(i) Solicit or encourage inquiries or proposals with respect to, or,
furnish any information relating to or participate in any negotiations or
discussions concerning, any acquisition or purchase of all or a material portion
of its assets whether owned by it directly or of a substantial equity interest
in, it or any business combination with it and DataImage shall notify Judge
immediately if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated with, DataImage; and DataImage shall instruct its
officers, directors, agents, advisors and affiliates to comply with the above;
or
(j) Directly or indirectly agree to take any of the foregoing actions
specified in Section 5.2.
ARTICLE VI. CONDITIONS
6.1 Conditions to the Obligations of Judge, DataImage. The Closing shall
-------------------------------------------------
be expressly conditioned upon the following:
26
<PAGE>
(a) Approval of Stockholders. Approval of this Agreement by the
------------------------
affirmative vote of such number of the stockholders of DataImage, as is required
by applicable law, shall have been obtained. Approval of this Agreement by the
affirmative vote of such number of the stockholders of Judge, as is required by
applicable law, shall have been obtained.
(b) Agreement of Certain Stockholders. Simultaneously with the
---------------------------------
execution of this Agreement, DataImage shall have obtained from Canaan Capital
Limited Partnership, Canaan Capital Off-Shore Limited Partnership, C.V. and
their affiliates (collectively "Canaan"), an irrevocable proxy, valid through
the date of Closing, designating such person acceptable to Judge, directing the
affirmative vote of all stock held or controlled by Canaan in DataImage, in
favor of the execution of this Agreement by DataImage and of the transactions
and actions contemplated by this Agreement, and the waiver of their rights as
dissenting shareholders under the GCL.
(c) Approval of Regulatory Agencies. All required consents and
-------------------------------
approvals of all regulatory agencies and other authorities having jurisdiction
over the transactions contemplated by this Agreement, including without
limitation the SEC, shall have been obtained, and all applicable waiting periods
shall have expired, it being understood that the terms of any regulatory
approvals which (1) impose restrictions on the activities of the Surviving
Corporation (other than restrictions, conditions or requirements which could not
have been known or reasonably anticipated and which would reduce the benefits of
the transactions contemplated hereby to such a degree that Judge or DataImage
would not have entered into this Agreement had such conditions or requirements
been known at the date hereof - "Burdensome Conditions"), or (2) impose
conditions of the type normally included in transactions similar to that
contemplated hereby, except to the extent that such conditions are Burdensome
Conditions, shall be deemed reasonably satisfactory to the parties and shall not
be grounds for the termination of this Agreement. In the event that Burdensome
Conditions are imposed, the party upon whom the Burdensome Conditions are
imposed shall have the option to terminate this Agreement.
(d) Tax Ruling or Opinion. Judge and DataImage shall have received at
---------------------
the Closing, the opinion of Wisler, Pearlstine, Talone, Craig, Garrity & Potash
with respect to federal income tax consequences of the Merger substantially to
the effect that, on the basis of facts, representations and assumptions set
forth in such opinion which are consistent with the state of facts on the
Effective Date:
i. The Merger of Judge with and into DataImage will qualify as a
"reorganization" under Section 368(a) of the Code and Judge and DataImage will
each be a party to a reorganization within the meaning of Section 368(b) of the
Code.
ii. No gain or loss will be recognized by DataImage or Judge by
reason of the Merger.
(e) Suits, Actions. No party hereto shall be subject to any order,
--------------
decree or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits the consummation of the Merger.
(f) Statutes, Orders. No statute, rule, regulation, order, injunction
----------------
or decree shall have been enacted, entered, promulgated or enforced by any
governmental authority which prohibits, restricts or makes illegal the
consummation of the Merger.
27
<PAGE>
6.2 Conditions to the Obligations of Judge. Consummation by Judge of the
--------------------------------------
transactions contemplated hereby is subject to the following conditions
precedent, any of which, however, may be waived, to the extent permitted by
applicable law or regulation, by the consent in writing of Judge.
(a) Representations, Warranties and Covenants.
-----------------------------------------
i. The representations and warranties of DataImage contained
herein (A) shall have been true and correct in all material respects on the date
hereof, and (B) other than as disclosed by DataImage to, and approved by, Judge
in writing prior to or at the Closing, shall be true and correct in all material
respects as of the Closing, except as otherwise provided or permitted by this
Agreement.
ii. DataImage shall have duly performed in all material respects
all covenants, not otherwise waived by Judge in writing, required by this
Agreement to be performed by DataImage prior to or at the Closing.
iii. Judge shall have received a certificate of DataImage dated
as of the Closing, signed by the President and the Chief Financial Officer of
DataImage and certifying in such detail as Judge may reasonably request the
fulfillment of the conditions set forth in Section 6.2(a).
(b) Material Adverse Changes.
------------------------
i. Since the date of this Agreement there shall have been no
material adverse change in the overall financial condition, asset value,
earnings, businesses, prospects or results of operations of DataImage.
ii. Judge shall have received a certificate of DataImage dated
as of the date of the Closing, signed by the President and the Chief Financial
Officer of DataImage and certifying in such detail as Judge may reasonably
request the fulfillment of the conditions set forth in Section 6.2(b).
(c) Opinion of Counsel. All proceedings and legal details incident to
------------------
this Agreement shall be satisfactory to Wisler, Pearlstine, Talone, Craig,
Garrity & Potash, as counsel for Judge, and Judge shall have received an opinion
reasonably satisfactory to them from Don Josephson, Esquire, as counsel for
DataImage, dated as of the date of the Closing and addressed to Judge, to the
effect that:
i. DataImage is a Delaware corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the power and authority to execute, deliver and perform all transactions
contemplated by this Agreement.
ii. The authorized capital stock of DataImage consists of
10,000,000 shares of common stock, par value $.01 per share, of which the number
of shares of DataImage Common Stock specified in the opinion are issued and
outstanding on the Effective Date. Each of such outstanding shares of DataImage
Common Stock has been validly issued and is fully paid and non-assessable. None
of such outstanding shares of DataImage Common Stock have been issued in
violation of any preemptive rights. To such counsel's knowledge, no unissued
shares of DataImage Common Stock or any other securities of DataImage are
subject to any warrants, options, commitments, preemptive or other rights of any
kind or nature, and DataImage is not obligated to issue any additional shares of
capital stock or any other securities of any kind or nature.
28
<PAGE>
iii. The execution, delivery and performance as of the date of
such opinion of all transactions contemplated by this Agreement have been duly
authorized by the board of directors of DataImage and do not and will not
violate any of the provisions of, or constitute a default under or give any
person or party the right to accelerate payment or performance under the
certificate of incorporation or by-laws of DataImage or to such counsel's
knowledge any other material agreement or instrument to which DataImage is a
party or by which it or any of its properties or assets is bound other than (i)
violations, defaults or accelerations which in the aggregate would not have a
material adverse effect on the financial condition, business, prospects or
operating results of DataImage taken as a whole or (ii) violations, defaults or
accelerations that in the aggregate would not materially impair the ability of
DataImage to consummate the transactions contemplated hereby.
iv. This Agreement has been duly authorized, executed and
delivered by DataImage and constitutes valid and binding obligations of
DataImage, enforceable against DataImage in accordance with its terms except as
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
laws affecting creditors' rights and except as may be limited by the exercise of
judicial discretion in applying general principles of equity (regardless of
whether such agreements or documents are considered in a proceeding in equity or
at law).
v. To the actual knowledge of such counsel, the execution,
delivery and performance of the Agreement by DataImage will not violate any
provision of law or regulation applicable to DataImage other than (1) violations
which in the aggregate would not have a material adverse effect on the financial
condition, business, prospects or operating results of DataImage taken as a
whole, or (2) violations which in the aggregate would not materially impair the
ability of DataImage to consummate the transactions contemplated by the
Agreement.
(d) Suit, Action, Etc. No suit, action or other proceeding shall be
-----------------
pending or directly threatened by any federal, state or other governmental
agency, commission or authority having jurisdiction or authority over DataImage
or Judge or by any other person, in which it is sought to restrain or prohibit
consummation of the transactions contemplated by this Agreement and which in the
reasonable judgment of the management of Judge is meritorious and materially
adversely affects the prospects of such consummation.
(e) Accountants' Letter. Judge shall have received "comfort" letters
-------------------
from DataImage's independent certified public accountants dated (i) the date of
mailing of the Proxy Statement and (ii) the Effective Date, in each case
substantially to the effect that:
i. it is a firm of independent public accountants with respect
to DataImage within the rules and regulations of the SEC;
ii. in its opinion the audited financial statements of
DataImage examined by it and included in the Proxy Statement comply as to form
in all material respects with the applicable rules and regulations of the SEC
with respect to the form employed; and
iii. on the basis of generally accepted auditing standards),
nothing has come to its attention which causes it to believe; (i) that the
audited financial statements, of DataImage included in such Proxy Statement do
not comply in all material respects with the applicable accounting requirements
and of the rules and regulations of the SEC (ii) that any such audited financial
statements of DataImage from which unaudited quarterly financial information set
forth in such Proxy Statement has been derived,
29
<PAGE>
are not fairly presented in conformity with generally accepted accounting
principles applied on a basis consistent with that of the audited financial
statements; and (iii) as of a designated date not more than five (5) days prior
to the Effective Date, except as specified in such letter, there has been any
change in DataImage's Common Stock or any decrease in the total stockholders'
equity or retained earnings of DataImage, as compared with the amounts shown for
each of the foregoing items in the then most recent Annual or Quarterly Report
of DataImage.
(f) Stockholder Equity Value. The stockholders equity value on the
------------------------
pro forma balance sheet of DataImage effective as of, but immediately prior to,
the Closing Date, shall have a value of not less than negative $60,000.00 as
calculated in accordance with generally accepted accounting principles. The
Board of Directors and stockholders of DataImage shall take whatever steps are
necessary, including the forgiveness of debt, to ensure the foregoing.
Notwithstanding the foregoing, provided that Judge is reasonably satisfied that
DataImage has utilized its best efforts to maintain a shareholder equity value
of not less than negative $60,000.00, this dollar figure shall be amended to a
negative equity value of up to $80,000.00. To the extent creditors discount any
debt pursuant to DataImage's obligation under this Section, DataImage shall
provide, in a form acceptable to Judge, a written waiver or release regarding
such discount or forgiveness.
(g) Delivery of Financial Statements. DataImage shall have delivered
--------------------------------
to Judge satisfactory financial statements of DataImage for its last three (3)
fiscal years, the current fiscal year, and satisfactory interim statements of
DataImage for the period subsequent to the current fiscal year and through the
date of Closing.
(h) Completion of Private Placement. Judge shall have successfully
-------------------------------
completed, prior to the Closing of this Agreement, a private placement to new
investors of a minimum of $600,000.00 and a maximum of $1,500,000.00 for Judge
Series A Convertible Preferred Stock, at a minimum price per share of $1.333333.
(i) Net Operating Loss Carry-Forward. Judge shall have received
--------------------------------
"comfort" letters from Judge's independent accountants prior to the Closing Date
that the transactions required by this Agreement will be appropriately treated
for financial accounting purposes and will not result in a material diminution
of Judge's net operating loss carry-forward.
(j) DataImage Customer Base. As of the Closing Date, there shall have
-----------------------
been no material adverse change in the revenues from the current customer base
of DataImage which was not described in the May 1, 1995 forecast delivered to
Judge by DataImage.
(k) Approval by Lenders. Judge shall have obtained, prior to Closing,
-------------------
the approval of the transactions required by this Agreement by the lenders of
Judge and certain subordinated Note holders of an affiliated corporation.
(l) DataImage Lease Agreement. The Lease Agreement between DataImage
-------------------------
and its Landlord for the real estate and improvements thereon at 1010
Wethersfield Avenue, Hartford, CT shall have been renegotiated with the Landlord
on terms satisfactory to Judge.
(m) Satisfaction of Canaan Notes. DataImage shall have fully and
----------------------------
completely satisfied the promissory notes between itself and Canaan Capital
Offshore Limited Partnership and Canaan Capital Limited Partnership, dated
November 15, 1993 in the amounts of $446,500 and $53,500, as well as any
30
<PAGE>
recorded security interest. Simultaneous with the execution of this Agreement,
DataImage shall obtain and provide to Judge the Canaan Conversion Agreement
which will fully and completely satisfy the foregoing Notes and any related
security interest.
(n) Ronald Smith Commission. Ronald Smith shall have acknowledged, in
-----------------------
a written document acceptable to Judge, that any commission due him arising from
all aspects of this transaction, shall not exceed $30,000.00.
(o) Waivers/Satisfaction of Outstanding Obligations. DataImage shall
-----------------------------------------------
have provided, to the extent necessary, the written waivers required by Sections
1.15, 1.16, and 1.17(c). DataImage shall have provided evidence of payment, to
the extent necessary, required by Sections 1.15 and 1.16.
(p) Employees. DataImage shall have provided Judge with the written
---------
confidentiality and non-solicitation agreements required by Section 1.17(b).
DataImage shall have provided Judge with the necessary documents and
certificates indicating that all accrued payroll, payroll taxes, associates
payroll expenses and deferred compensation arrangements have been satisfied or
forgiven prior to Closing as required by Section 1.17(d).
(q) Retirement Plans. DataImage shall have fully funded all
----------------
retirement plans for its officers and other employees prior to Closing and there
shall be no existing or potential violation of applicable laws or regulations
with regard to said retirement plans.
(r) DataImage Filings. DataImage shall have timely filed all reports
-----------------
and documents required by all applicable federal and state law, to maintain its
status as a publicly-owned corporation.
(s) Tax Ruling or Opinion. Judge shall have received at the Closing,
---------------------
the opinion of Wisler, Pearlstine, Talone, Craig, Garrity & Potash with respect
to federal income tax consequences of the Merger substantially to the effect
that, on the basis of facts, representations and assumptions set forth in such
opinion which are consistent with the state of facts on the Effective Date:
i. The basis of the Surviving Corporation Common Stock received
by Judge stockholders who exchange Judge Common Stock or Judge Preferred Stock
for the Surviving Corporation Common Stock will be the same as the basis of the
Judge Common Stock or Judge Preferred Stock surrendered in exchange therefor.
6.3 Conditions to the Obligations of DataImage. Consummation by DataImage
------------------------------------------
of the transactions contemplated hereby is subject to the following conditions
precedent, any of which, however, may be waived, to the extent permitted by
applicable law or regulation, by the consent in writing of DataImage.
(a) Representations and Warranties.
------------------------------
i. The representations and warranties of Judge contained herein
(A) shall have been true and correct in all material respects on the date made,
and (B) other than as disclosed by Judge to, and approved by, DataImage in
writing prior to or at the Closing, shall be true and correct in all material
respects as of the Closing, except as otherwise permitted by this Agreement.
31
<PAGE>
ii. Judge shall have duly performed in all material respects all
covenants, not otherwise waived by DataImage in writing, required by this
Agreement to be performed by Judge prior to or at the Closing.
iii. DataImage shall have received a certificate of Judge
dated as of the Closing, signed by the President and the Chief Financial Officer
of Judge and certifying in such detail as DataImage may reasonably request the
fulfillment of the conditions set forth in Section 6.3(a).
(b) Material Adverse Changes.
------------------------
i. Since the date of this Agreement there shall have been no
material adverse change in the overall financial condition, asset value,
earnings, businesses, prospects or results of operations of Judge.
ii. DataImage shall have received a certificate of Judge dated
as of the date of the Closing, signed by the Chairman and the Chief Financial
Officer of Judge and certifying in such detail as DataImage may reasonably
request the fulfillment of the conditions set forth in Section 6.3(b).
(c) Opinion of Counsel. All proceedings and legal details incident to
------------------
this Agreement shall be satisfactory to Don Josephson, Esquire, as counsel for
DataImage, and DataImage shall have received an opinion reasonably satisfactory
to them from Wisler, Pearlstine, Talone, Craig, Garrity & Potash, dated as of
the date of the Closing and addressed to DataImage, to the effect that:
i. Judge is a New Jersey corporation duly organized, validly
existing and in good standing under the laws of the State of New Jersey and has
the power and authority to execute, deliver and perform all transactions
contemplated by this Agreement.
ii. The authorized capital stock of Judge consists of 10,000,000
shares of common stock, par value $.005 per share, and 10,000,000 shares of non-
voting preferred stock, par value $.01, of which the number of shares of Judge
Common Stock or Judge Preferred Stock specified in the opinion are issued and
outstanding on the Effective Date. Each of such outstanding shares of Judge
Common Stock or Judge Preferred Stock has been validly issued and is fully paid
and non-assessable. None of such outstanding shares of Judge Common Stock or
Judge Preferred Stock have been issued in violation of any preemptive rights.
To such counsel's knowledge, no unissued shares of DataImage Common Stock or any
other securities of DataImage are subject to any warrants, options, commitments,
preemptive or other rights of any kind or nature, and DataImage is not obligated
to issue any additional shares of capital stock or any other securities of any
kind or nature except for options granted pursuant to the DataImage Stock Option
Plan outstanding as of the date of this Agreement.
iii. The execution, delivery and performance as of the date of
such opinion of all transactions contemplated by this Agreement have been duly
authorized by the board of directors of Judge and do not and will not violate
any of the provisions of, or constitute a default under or give any person or
party the right to accelerate payment or performance under the certificate of
incorporation or by-laws of Judge.
32
<PAGE>
iv. This Agreement has been duly authorized, executed and
delivered by Judge and constitutes valid and binding obligations of DataImage,
enforceable against Judge in accordance with its terms except as may be limited
by bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights and except as may be limited by the exercise of judicial
discretion in applying general principles of equity (regardless of whether such
agreements or documents are considered in a proceeding in equity or at law).
v. To the actual knowledge of such counsel, the execution,
delivery and performance of the Agreement by Judge will not violate any
provision of law or regulation applicable to Judge other than (1) violations
which in the aggregate would not have a material adverse effect on the financial
condition, business, prospects or operating results of Judge taken as a whole,
or (2) violations which in the aggregate would not materially impair the ability
of Judge to consummate the transactions contemplated by the Agreement.
(d) Suit, Action, Etc. No suit, action or other proceeding shall be
-----------------
pending or directly threatened by any federal, state or other governmental
agency, commission or authority having jurisdiction or authority over DataImage
or Judge or by any other person, in which it is sought to restrain or prohibit
consummation of the transactions contemplated by this Agreement and which in the
reasonable judgment of the management of DataImage is meritorious and materially
adversely affects the prospects of such consummation.
(e) Judge Private Placement. Judge shall have successfully completed,
-----------------------
prior to the Closing Date, the private placement of certain Judge stock as set
forth in Section 1.8, such that when the price per share of the Judge stock
being offered is multiplied by the total issued and outstanding shares of stock
issued by the Surviving Corporation in this Merger (including the stock held in
reserve by the Surviving Corporation for employee stock grants and options) the
resultant figure is not less than $5,000,000.
ARTICLE VII. TERMINATION OF AGREEMENT
7.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Effective Time, whether before or after its approval by the stockholders of
DataImage, only if one or more of the following events shall occur:
(a) If the Closing shall not have occurred on or before January 31,
1996, unless the failure to so consummate by such time is due to the breach of
this Agreement by the party seeking to terminate, or such later date as shall
have been agreed to by the parties hereto (the "Termination Date").
(b) At any time by the mutual agreement of the parties hereto.
(c) Immediately upon the expiration of ten (10) days from the date
that Judge has given notice to DataImage of DataImage's material
misrepresentation or breach of any warranty or representation or breach in any
material respect, individually or collectively, of any covenant or agreement
herein; provided, however, that no such termination shall take effect unless it
is reasonably evident that DataImage cannot or will not fully and completely
correct the grounds for termination as specified in the aforementioned notice on
or before the date of Closing.
33
<PAGE>
(d) Immediately upon the expiration of ten (10) days from the date
that DataImage has given notice to Judge of material misrepresentation or breach
of any warranty or representation or breach in any material respect,
individually or collectively, of any covenant or agreement contained herein;
provided, however, that no such termination shall take effect unless it is
reasonably evident that Judge cannot or will not fully and completely correct
the grounds for termination as specified in the aforementioned notice on or
before the date of Closing.
ARTICLE VIII. EXPENSES
8.1 Expenses.
--------
(a) Each party hereto will bear all expenses incurred by it in
connection with this Agreement and the transactions contemplated hereby, except
as provided in Section 1.15.
(b) In the event that this Agreement is terminated, the obligations of
DataImage under the secured promissory note dated September 13, 1995 shall
continue and be governed by the terms of the parties' agreement set forth in the
Letter of Intent executed on September 13, 1995 by DataImage.
(c) In the event any party shall default in its obligations hereunder,
any non-defaulting party may pursue any remedy available at law or in equity to
enforce its rights and shall be paid by the defaulting party for all damages ,
costs and expenses, including legal, accounting, investment banking, printing
and mailing expenses, incurred or suffered by the non-defaulting party in
connection herewith or in the enforcement of its rights hereunder.
Notwithstanding the foregoing, the defaulting party shall under no circumstances
be liable for consequential damages. Any negligent misrepresentation or
negligent omission of information which is not material to this Agreement is not
grounds for default or rescission of this Agreement.
ARTICLE IX. CONFIDENTIALITY
9.1 Confidentiality. Any non-public or confidential information disclosed
---------------
by either DataImage or Judge to the other party pursuant to this Agreement or as
a result of the discussions and negotiations leading to this Agreement, or
otherwise disclosed, or to which any other party has acquired or may acquire
access, and indicated (either expressly, in writing or orally, or by the context
of the disclosure or access) by the disclosing party to be non-public or
confidential, or which by the content thereof reasonably appears to be non-
public or confidential, shall be kept strictly confidential and shall not be
used in any manner by the recipient except in connection with the transactions
contemplated by this Agreement. To that end, the parties hereto will each, to
the maximum extent practicable, restrict knowledge of and access to non-public
or confidential information of the other party to its officers, directors,
employees and professional advisors who are directly involved in the
transactions contemplated hereby and reasonably need to know such information.
Further to that end, all non-public or confidential documents (including all
copies thereof) obtained hereunder by any party shall be returned as soon as
practicable after any termination of this Agreement and all electronic data that
constitutes non-public confidential information which is not physically returned
shall be destroyed. The obligation of the parties to maintain the
confidentiality of such information shall survive the termination of this
Agreement.
34
<PAGE>
ARTICLE X. MISCELLANEOUS PROVISIONS
10.1 Entire Agreement. This Agreement, and all Exhibits and Schedules
----------------
attached hereto, as well as any other document if signed or initialed by the
parties hereto and specifically providing that it is an exception to the
limitations contained in this Section, embody the entire agreement between the
parties hereto with respect to the matters agreed to herein, and, except as
expressly provided herein, this Agreement shall not be affected by reference to
any other document except for any such document signed or initialed by the duly
authorized representatives of the parties hereto and specifically providing that
it is an exception to the limitations contained in this Section. Except as
specifically provided herein, all prior negotiations, discussions agreements by
and between the parties hereto with respect of such matters agreed to herein
which are not reflected or set forth in this Agreement, or in the Exhibits or
Schedules, or in such other document, shall have no further force or effect.
Each representation, warranty, covenant or agreement contained in this Agreement
made by any of the parties hereto shall have independent force and effect and
shall not be affected by any other representation except by specific reference.
10.2 Publicity. The content and timing of all publicity and announcements
---------
concerning this Agreement, and all transactions contemplated by this Agreement,
shall be subject to joint consultation and approval of the parties hereto,
subject, however, to the legal obligations applicable to public companies.
10.3 Public Company. Judge and Judge's stockholders acknowledge that they
--------------
have been advised by DataImage that the occurrence of this Merger is, and any
information about DataImage obtained during the course of this Merger may be,
material, inside information and that Judge and the Judge stockholders may not
trade in DataImage's stock while the possession of such material, inside
information or disclose such information to anyone other than their attorneys,
accountants and financial advisors advising them with respect to this Merger.
Each party agrees that it will take appropriate steps to prevent such party, or
any director, officer, employee, agent or affiliate of such party to trade in
DataImage stock following the execution of this Agreement and for a period of
not less than six (6) months following the expiration of negotiations between
the parties in the event that the merger contemplated by this Agreement does not
occur.
10.4 Amendment and Waiver. Neither this Agreement nor any term, covenant,
--------------------
condition or other provision hereof may be amended, modified, supplemented,
waived, discharged or terminated except by an instrument in writing signed by
responsible officers duly authorized by the respective boards of directors of
the parties hereto; provided, however, that after approval of this Agreement by
the stockholders of DataImage, no amendment, modification or supplement shall
reduce the amount or change the form of consideration to be delivered to
stockholders of DataImage as contemplated by this Agreement, or in any way
materially adversely effecting the rights of the DataImage stockholders, except
in each case to the extent that the DataImage stockholders consent to such
amendment, modification or supplement.
10.5 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the States of New Jersey and Delaware except to the
extent that federal law may be applicable.
35
<PAGE>
10.6 Communications. All notices, requests, demands, consents and other
--------------
communications hereunder shall be in writing and shall be deemed to have been
duly given if hand delivered, sent by recognized overnight delivery service,
sent by certified or registered mail, postage prepaid, return receipt requested,
or by confirmed telecopy as follows:
(a) If to Judge, to:
P.O. Box 1083
Bala Cynwyd, PA 19004
Attention: Katy Wiercinski
or to such other person or place as shall be designated to DataImage in writing,
and with a copy to:
Wisler, Pearlstine, Talone, Craig, Garrity & Potash
484 Norristown Road
Blue Bell, PA 19422
Attention: Michael J. O'Donoghue, Esquire
(b) If to DataImage, to:
1010 Wethersfield Avenue
Hartford, CT 06114
Attention: Raymond V. Sozzi
or to such other person or place as shall be designated to Judge in writing, and
with a copy to:
Don Josephson, Esquire
1484 New Britain Avenue
P.O. Box 613
Farmington, CT 06034
Any such notice or other communication so addressed shall be deemed to have been
received by the addressee (i) if hand-delivered or sent by overnight delivery,
on the next business day following the date so delivered or sent, (ii) if sent
by registered or certified mail, five (5) business days following the date sent,
or (iii) if sent by telecopy, upon verbal telephone confirmation of receipt
thereof by an individual authorized to accept telecopy communications at the
above-specified telecopy number as of the date of such receipt of confirmation.
10.7 Successors and Assigns. The rights and obligations of the parties
----------------------
hereto shall inure to the benefit of and shall be binding upon the successors
and assigns of each of them; provided, however, that neither this Agreement nor
any of the rights, interest or obligations hereunder shall be assigned by any
party hereto without the prior written consent of the other party.
36
<PAGE>
10.8 Headings, Etc. The headings of the Sections and Subsections of this
-------------
Agreement have been inserted for convenience only and shall not be deemed to be
a part of this Agreement.
10.9 Severability. In the event that any one or more provisions of this
------------
Agreement shall for any reason be held invalid, illegal or unenforceable in any
respect, by any court of competent jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement and the
parties shall use their best efforts to substitute a valid, legal and
enforceable provision which, insofar as practicable, implements the purposes and
intents of this Agreement.
10.10 No Third Party Beneficiary. Except as expressly provided for herein,
--------------------------
nothing in this Agreement is intended to confer upon any person who is not a
party hereto any rights or remedies of any nature whatsoever under or by reason
of this Agreement.
10.11 Counterparts. To facilitate execution, this Agreement may be
------------
executed in as many counterparts as may be required; and it shall not be
necessary that the signatures of, or on behalf of, each party, or that the
signatures of all persons required to bind any party, appear on each
counterpart; but it shall be sufficient that the signature of, or on behalf of,
each party, or that the signatures of the persons required to bind any party,
appear on one or more of the counterparts. All counterparts shall collectively
constitute a single agreement. It shall not be necessary in making proof of this
Agreement to produce or account for more than a number of counterparts
containing the respective signatures of, or on behalf of, all of the parties
hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the date set forth above.
JUDGE COMPUTER CORPORATION
By: /s/ Martin E. Judge, Jr.
-------------------------------------
Martin E. Judge, Jr., CEO/President
DATAIMAGE, INC.
By:
--------------------------------------
Raymond V. Sozzi, President
37
<PAGE>
10.8 Headings, Etc. The headings of the Sections and Subsections of this
-------------
Agreement have been inserted for convenience only and shall not be deemed to be
a part of this Agreement.
10.9 Severability. In the event that any one or more provisions of this
------------
Agreement shall for any reason be held invalid, illegal or unenforceable in any
respect, by any court of competent jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement and the
parties shall use their best efforts to substitute a valid, legal and
enforceable provision which, insofar as practicable, implements the purposes and
intents of this Agreement.
10.10 No Third Party Beneficiary. Except as expressly provided for herein,
--------------------------
nothing in this Agreement is intended to confer upon any person who is not a
party hereto any rights or remedies of any nature whatsoever under or by reason
of this Agreement.
10.11 Counterparts. To facilitate execution, this Agreement may be
------------
executed in as many counterparts as may be required; and it shall not be
necessary that the signatures of, or on behalf of, each party, or that the
signatures of all persons required to bind any party, appear on each
counterpart; but it shall be sufficient that the signature of, or on behalf of,
each party, or that the signatures of the persons required to bind any party,
appear on one or more of the counterparts. All counterparts shall collectively
constitute a single agreement. It shall not be necessary in making proof of this
Agreement to produce or account for more than a number of counterparts
containing the respective signatures of, or on behalf of, all of the parties
hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the date set forth above.
JUDGE COMPUTER CORPORATION
By:
---------------------------------------------
Martin E. Judge, Jr., CEO/President
DATAIMAGE, INC.
By: /s/ Raymond V. Sozzi
----------------------------------------------
Raymond V. Sozzi, President
37
<PAGE>
PREFERENCES AND RIGHTS OF JUDGE SERIES A
CONVERTIBLE PREFERRED STOCK
Dividend
The Judge Series A Convertible Preferred carries no dividend. The
Preferred will share pari passu on an as-converted basis in any dividends
declared on Common Stock or any other series of preferred stock, excluding
the Series B Preferred Stock.
Liquidation Preference
The Preferred will have a liquidation preference prior to Common Stock and
all Other existing classes or series of preferred stock, in an amount equal
to the original purchase price per share plus all accrued, unpaid dividends
(if any). The Preferred holders may elect to treat a consolidation or
merger of the Surviving Corporation or sale of all or substantially all of
its assets as a liquidation or winding up for purposes of the liquidation
preference.
Optional Conversion
The Preferred will be convertible into Common Stock at the Purchasers'
option at any time. The conversion ratio and price will be subject to
adjustment as provided in the paragraph entitled "Antidilution and
Adjustment Provisions" below.
Mandatory Conversion
Conversion will be mandatory (i) at the time of a public offering of Common
Stock by the Surviving Corporation in excess of $5 million, (ii) upon sale
of the Surviving Corporation, or (iii) the vote of Purchasers of a majority
of the Preferred.
Antidilution and Adjustment Provisions
The conversion price and ratio of the Preferred will be subject to weighted
average antidilution adjustment in the event that the Surviving Corporation
issues additional shares (other than under the Employee Option Pool
described below) at a purchase price less than the then applicable
conversion price. The conversion price and ratio will also be adjusted for
Common Stock splits, stock dividends and other Common Stock
recapitalizations.
Voting Rights
Except with respect to election of Directors and the protective provisions
in the paragraph entitled "Protective Provisions" below, the Preferred will
vote with the Common Stock as a single class, and a holder of Preferred
will have the right to that number of votes equal to the number of shares
of Common Stock issuable upon conversion of its Preferred.
SCHEDULE 1.8
<PAGE>
Protective Provisions
Consent of the holders of at least a majority of the Preferred will be
required for any action which (i) [materially and adversely] alters or
changes the rights, preferences or privileges of the Preferred, (ii)
increases the authorized number of shares of Preferred, (iii) creates any
new class of shares having preference over or being on a parity with the
Preferred, (iv) amends the Surviving Corporation's certificate of
incorporation, (v) involves a sale by the Surviving Corporation's of a
substantial portion of its assets, a merger of the Surviving Corporation
with another entity, or a liquidation or dissolution of the Surviving
Corporation.
Demand and Piggyback Registration Rights
(1) Demand Rights: Up to two demand registrations at any time after the
Registration Rights earlier of six months after the Surviving
Corporation's initial public offering and the date eighteen months
from the purchase of Preferred (but not within six months of the
effective date of a registration). Holders of at least a majority of
the Preferred must submit the demand for registration of at least
[50%] of the Preferred. The Surviving Corporation will not be
obligated to effect more than two registrations (other than on
Form S-3) under these demand right provisions.
[(2) Form S-3 Registration Rights: Up to one registration per year on
Form S-3 (or any equivalent successor form) for offerings of not
less than $500,000.]
(3) Piggy-Back Registration Rights: Unlimited number of "Piggy-back"
registrations, subject to underwriters cutbacks, provided that
any other selling stockholders are cut back before the Preferred
holders are cut back.
(4) Registration Expenses and Priority.- The registration expenses
(exclusive of underwriting discounts and special counsel fees of
a selling shareholder) of up to two demand registration, all
piggy-backs and up to one S-3 registration per year will be
borne by the Surviving Corporation. The registration rights of
the Preferred holders will have priority over registration
rights granted previously or in the future to any other class of
investors.
Employee Option Pool
The Surviving Corporation may grant to employees, officers, directors
and consultants options for up to 7.5% of the Surviving Corporation's
Common Stock. All option grants must be approved by the Board.
[Common Stock purchased upon exercise of Employee stock options must
be subject to a right of the Surviving Corporation to repurchase the
shares at fair market value upon termination of employment prior to an
IPO.]
Legal Expenses
The Surviving Corporation will prepare the documentation and will bear
the costs of all legal fees for counsel retained by it. Purchasers
shall be responsible for their own counsel fees for review of the
documents.
SCHEDULE 1.8
<PAGE>
1. Dividends.
The Holders of the outstanding shares of Surviving Corporation Series B
Preferred Stock shall be entitled to receive, out of funds legally available
therefore, cumulative dividends at the annual rate of ten (10%) percent of the
face value of the share. Cumulative dividends on the Series B Preferred Stock
shall be payable if, as and when declared. Dividends shall accrue on each share
from the date of original issuance of such share whether or not earned or
declared, and shall accrue until paid.
All numbers relating to the calculation of cumulative dividends shall be
subject to equitable adjustment in the event of any stock dividend, stock split,
combination, reorganization, recapitalization, reclassification or other similar
event involving the change in the capital structure of the Series B Preferred
Stock.
2. Redemption.
The Series B Preferred Stock must be redeemed upon the occurrence of any
secondary offering of securities by the Surviving Corporation. This redemption
may be waived by the Holder at the Holder's sole discretion. If such
requirement is waived, the Series B Preferred Stock must be redeemed upon the
occurrence of any subsequent offering of securities by the Surviving
Corporation. The Series B Preferred Stock may be redeemed at any time prior to
an offering of securities, upon thirty (30) days' written notice to the Holder
thereof. If the Series B Preferred Stock is not fully redeemed as set forth
above, it must be fully redeemed within five (5) years of the date of issuance.
Notwithstanding the foregoing, the Board of Directors shall utilize its best
efforts to redeem the stock at such time as it deems to be financially prudent.
The purchase price per share to be paid for such stock shall be the face
value thereof plus all accrued but unpaid dividends to the date set for
redemption. Upon the date set for redemption, all stock shall be surrendered to
the Corporation and the purchase price shall be paid to the Holders thereof.
SCHEDULE 1.9
<PAGE>
ESSENTIAL TERMS OF EMPLOYMENT AGREEMENT
BETWEEN
RAYMOND V. SOZZI AND JUDGE IMAGING SYSTEMS, INC.
1. Term.
Commences first business day after the Effective Date of the Merger, and
will continue for a period of one year from commencement, renewable
annually by mutual agreement of employee and employer. Performance review
to be conducted prior to expiration of one year term with equitable
compensation increase for renewal.
2. Compensation.
Annual salary of $150,000. Upon completion of secondary offering, annual
salary to increase to $200,000.
3. Benefits.
Three weeks paid vacation per year. Will participate in annual company
trips taken by the executives of Judge Imaging Systems, Inc. Car allowance
of $500.00 per month, to be paid directly to employee. In addition,
employee will be reimbursed for reasonable car expenses for fuel and
repairs. Judge Imaging Systems, Inc. will reimburse employee in an amount
equal to 100% of the standard medical and disability premiums for coverage
generally provided to Judge's executives.
4. Stock Options.
Employee will receive options to acquire common stock equivalent to 1% of
the issued and outstanding capital stock of Judge Imaging Systems, Inc.,
computed on a fully converted and diluted basis, which shall include the
7.5% of stock reserved for employee options and grants and Series A
Convertible Preferred determined immediately post-closing of the merger
(currently expected to represent 50,000 shares). Of these options, .5%
will vest at the time of the merger, and .5% will vest at the time of the
secondary offering. Options are subject to approval of a stock option plan
by the Shareholders of Judge Imaging Systems, Inc.; management will agree
to use their best efforts to obtain such approval. The exercise price will
be the price paid for Series A Convertible Preferred pursuant to Section
1.8.
5. Position.
Chief Operating Office
6. Severance.
One month after first year in the event that employment is terminated by
employer.
SCHEDULE 1.18
<PAGE>
7. Non-solicitation.
Upon expiration or termination of employment by employer or employee,
Employee will be restricted from soliciting customers or employees of Judge
Imaging Systems, Inc., irrespective of the reason for termination, for a
period of three years following termination. For purposes of the
foregoing, customers and employees shall include those current customers
and employees at the time of termination or expiration and for the one year
immediately proceeding termination or expiration.
8. Non-competition.
Upon expiration termination of employment by employer or employee,
irrespective of the reason for termination, Judge Imaging Systems, Inc. may
elect (at its option) to require employee to refrain from competing with
its business for a period of six months following termination in
consideration of payment of 50% of employee's compensation (its computed as
of the date of termination), during the six month non-competition period.
SCHEDULE 1.18
<PAGE>
Schedule 2.1(b):
Wendy Greenberg Employment Agreement
The Gemstone Group, Inc. Warrants
Schedule 2.1(d): None.
Schedule 2.1(e): None.
Schedule 2.1(f):
Erit v. Judge Computer Corporation, EEOC Charge No. 170941734
(Cross-filed with New Jersey Department of Civil Rights)
Erit v. Judge Computer Corporation, VRR No. 02-NJ-95-00020-10-R
Schedule 2.1(j): None.
Schedule 2.1(l):
General Security Agreement with Midlantic Bank, N.A. dated June 2, 1995,
for $5,000,000.
SCHEDULE 2.1
<PAGE>
Schedule 2.2(b): None.
Schedule 2.2(d): None.
Schedule 2.2(e): None.
Schedule 2.2(f): None.
Schedule 2.2(j): The Software Distribution Agreement between DataImage and
Microbank, dated June 22, 1994, and disclosed as an exhibit
to the Company's Report on Form 10-KSB for the year 1994,
calls for payment of certain prepaid license fees to
Microbank. Pursuant to the Agreement, Microbank was paid a
total of $25,000 in prepaid license fees; an additional
$25,000, due to be paid in September, 1995, was not paid.
Pursuant to discussions between Mr. Sozzi and Microbank, it
is understood that these additional prepaid license fees will
not be paid. This understanding has not been reduced to
writing.
Schedule 2.2(l): None.
SCHEDULE 2.2
<PAGE>
EXHIBIT "A"
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
DATAIMAGE, INC.
DataImage, Inc., a corporation organized and existing under the laws of
the State of Delaware, hereby certifies as follows:
1. The name of the corporation is DataImage, Inc.
The date of filing its original Certificate of Incorporation with the
Secretary of State was October 23, 1986.
2. This Restated Certificate of Incorporation restates and integrates and
further amends the Certificate of Incorporation of this corporation by changing
Article 5 to Article 6 and adding a new Article 5; by deleting Article 7 and
changing Article 8 to Article 7; by the addition of Articles 8 through 14.
3. The text of the Certificate of Incorporation, as amended or
supplemented heretofore, is further amended hereby to read as herein set forth
in full:
1. The name of the corporation is:
DataImage, Inc.
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the city of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted
is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
4. The total number of shares of stock which the Corporation shall
have authority to issue is Ten Million (10,000,000) and the par value of each of
such shares is One Cent ($.01), amounting in the aggregate to One Hundred
Thousand Dollars ($100,000).
5. The number of directors which shall constitute the board of
directors shall be established by the board of directors, but shall not be less
than 6, or more than 9. The directors of the corporation shall be divided into
three classes: Classes One, Two and Three. Class One directors shall initially
serve
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<PAGE>
until the 1990 annual meeting of shareholders. Class Two directors shall
initially serve until the 1991 annual meeting of shareholders. Class Three
directors shall initially serve until the 1992 annual meeting of shareholders.
At each annual meeting of shareholders, the successors to members of the class
of directors whose terms shall then expire shall be elected to serve three year
terms and until their successors are elected and qualified. When the number of
directorships is changed, any newly-created directorships or any decrease in
directorships shall be so apportioned by the board of directors between the
three classes so as to make all classes as nearly equal in number as is
possible.
6. The board of directors is authorized to make, alter or repeal the
by-laws of the corporation.
7. To the fullest extent permitted by the Delaware General Corporation
Law as the same exists or may hereafter be amended, a director of this
corporation shall not be liable to the corporation or its stockholders for
monetary damages for breach of fiducuary duty as a director.
8. To the fullest permitted by the Delaware General Corporation Law as
the same exists or may hereafter by amended, the corporation shall indemnify any
of its officers, directors, employees or agents who was or is made a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than as action by or in the right of the corporation) by reason if the
fact that he (or she) is or was a director, officer, employee or agent of the
corporation, or was serving at the reguest of the corporation in any such
capacity with another corporation, partnership, joint venture, trust or other
enterprise.
9. In addition to the vote of stockholders otherwise required by law,
including, without limitation, the provisions of Section 203 of the General
Corporation Law of Delaware, or by the terms of any other article of this
certificate of incorporation, whether now or hereafter authorized, the
affirmative vote or consent of either: (i) seventy-five per cent (75%) of the
members of the Board of Directors or (ii) the holders of eighty-five per cent
(85%) or more of all shares of stock of the corporation entitled to vote in
elections of directors, considered for the purposes hereof as one class, shall
be required for the adoption
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<PAGE>
or authorization of a business combination (as hereinafter defined) with any
other entity (as hereinafter defined) if, as of the record date for the
determination of stockholders entitled to notice thereof and to vote thereon or
consent thereto, such other entity is the beneficial owner, directly or
indirectly, of more than fifteen per cent (15%) of the outstanding shares of
stock of the corporation entitled to vote in elections of directors considered
for the purposes of this Article as one class; provided that such eighty-five
per cent (85%) voting requirement shall not be applicable if:
(a) The cash, or fair market value of other consideration,
to be received per share by common stockholders of the
corporation in such business combination bears the same
or a greater percentage relationship to the market price
of the corporation's common stock immediately prior to
the announcement of such business combination as the highest
per share price (including brokerage commissions and/or
soliciting dealer's fees and transfer taxes) which such
other entity has theretofore paid for any of the shares of
the corporation's common stock already owned by it bears to
the market price of the common stock of the corporation
immediately preceding the initial acquisition of the
corporation's common stock by such other entity; and
(b) The cash, or fair market value of other consideration, to be
received per share by common stockholders of the corporation in such
business combination (i) is not less than the highest per share price
(including brokerage commissions and/or soliciting dealer's fees and
transfer taxes) paid by such other entity in acquiring any of its
holdings of the corporation's common stock, and (ii) is not less than
the earnings per share of common stock of the corporation for
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<PAGE>
the four full consecutive fiscal quarters, or the last fiscal year
reported, whichever is higher, immediately preceding the record date for
solicitation of votes on such business combination, multiplied by the
then price/earnings multiple (if any) of such other entity as
customarily computed and reported in the financial community; and
(c) The price offered must also include an additional premium equal to the
per share equivalent of fifty per cent (50%) of the highest consolidated
balance of domestic and foreign cash, cash equivalents and marketable
securities held by the corporation at any time during the period
commencing on the date such other entity first acquired any shares of
the corporation's common stock and terminating on the fifteenth day
prior to the date on which the proxy statement referred to in (f) below
is scheduled to be mailed to public stockholders of the corporation; and
(d) After such other entity has acquired a fifteen per cent (15%) interest
and prior to the consummation of such business combinations (i) such
other entity shall have taken steps to ensure that the corporation's
Board of Directors included at all times representation by continuing
director(s) (as hereinafter defined) proportionate to the stockholdings
of the corporation's public common stockholders not affiliated with such
other entity (with a continuing director to occupy any resulting
fractional board position) (ii) there shall have been no change in the
amount per share payable or paid as dividends on the corporation's
common stock except as may have been approved by a vote of seventy-
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<PAGE>
five per cent (75%) of the directors; (iii) such other entity shall
not have acquired any newly issued shares of stock, directly or
indirectly, from the corporation (except upon conversion of
convertible securities acquired by it prior to obtaining a fifteen
per cent (15%) interest or as a result of a pro rata stock dividend
or stock split), and (iv) such other entity shall not have acquired
any additional shares of the corporation's outstanding common stock
or securities convertible into common stock except as a part of the
transaction which results in such other entity acquiring its
fifteenth per cent (15%) interest; and
(e) Such other entity shall not have (i) received the benefit, directly
or indirectly (except proportionately as a shareholder), of any
loans, advances, guarantees, pledges or other financial assistance or
tax credits provided by the corporation, or (ii) made any major
change in the corporation's business or equity capital structure
without the approval of seventy-five per cent (75%) of the directors,
in either case prior to the consummation of such business
combination; and
(f) A proxy statement complying with the requirements of the Securities
Exchange Act of 1934 shall be mailed to public stockholders of the
corporation for the purpose of soliciting stockholder approval of
such business combination and shall contain at the front thereof, in
a prominent place, any recommendations as to the advisability (or
inadvisability) of the business combination which the continuing
directors, or any of them, may choose to state and, if deemed
advisable by a majority of
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<PAGE>
the continuing directors, an opinion of a reputable investment
banking firm as to the fairness (or lack of fairness) of the terms of
such business combination, from the point of view of the remaining
public stockholders of the corporation (such investment banking firm
to be selected by a majority of the continuing directors and to be
paid a reasonable fee for their services by the corporation upon
receipt of such opinion).
The provision hereof shall also apply to a business combination with any
other entity which at any time has been the beneficial owner, directly or
indirectly, of more than fifteen per cent (15%) of the outstanding shares of
stock of the corporation entitled to vote in elections of directors considered
for the purposes hereof as one class, notwithstanding the fact that such other
entity has reduced its shareholdings below fifteen per cent (15%) if, as of the
record date for the determination of stockholders entitled to notice of and to
vote on or consent to the business combination, such other entity is an
"affiliate" of the corporation (as hereinafter defined).
10. As used in Sections 9 through 13 hereof, (a) the term "other entity"
shall include any corporation, person or other entity and any other entity with
which it or its "affiliate" or "associate" (as defined below) has any agreement,
arrangement or understanding, directly or indirectly, for the purpose of
acquiring, holding, voting or disposing of stock of the corporation, or which is
its "affiliate" or "associate" as those terms are defined in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of 1934,
together with the successors and assigns of such persons in any transaction or
series of transactions not involving a public offering of the corporation's
stock within the meaning of the Securities Act of 1933, (b) an other entity
shall be deemed to be the beneficial owner of any shares of stock of the
corporation which the other entity (as defined above) has the right to acquire
pursuant to an agreement, or upon exercise of conversion rights, warrants or
options or otherwise, (c) the outstanding shares of any class of stock of the
corporation shall include shares deemed owned through application of clause
(b) above but shall not include any other shares
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<PAGE>
which may be issuable pursuant to any agreement, or upon exercise of con-
version rights, warrants or options, or otherwise; (d) the term "business
combination" shall include any merger or consolidation of the corporation
with or into any other corporation, or the sale or lease of all or any
substantial part of the assets of the corporation to, or any sale or lease
to the corporation or any subsidiary thereof in exchange for securities of
the corporation of any assets (except assets having a aggregate fair market
value of less than $1,000,000) of any other entity; (e) the term "continuing
director" shall mean a person who was a member of the Board of Directors of the
corporation elected by the public stockholders prior to the time that such
other entity acquired in excess of ten per cent (10%) of the stock of the
corporation entitled to vote in the election of directors, or a person
recommended to succeed a continuing director by a majority of continuing
directors; and (f) for the purposes of subparagraphs I(a) and (b) hereof the
term "other consideration to be received" shall include common stock of the
corporation retained by its existing public stockholders in the event of a
business combination with such other entity in which the corporation is the
surviving corporation.
11. A majority of the continuing directors shall have the power and
duty to determine for the purposes hereof on the basis of information known
to them whether (a) such other entity beneficially owns more than fifteen per
cent (15%) of the outstanding shares of stock of the corporation entitled to
vote in election of directors (b) any entity is an "affiliate" or "associate"
(as defined above) or another, (c) any other entity has an agreement,
arrangement or understanding with another, or (d) the assets being acquired by
the corporation, or any subsidiary thereof, have an aggregate fair market value
of less than $1,000,000.
12. No amendment to this certificate of incorporation shall amend,
alter, change or repeal any of the provisions of Sections 9 through 12 hereof,
unless the amendment effecting such amendment, alteration, change or repeal
shall receive the affirmative vote or consent of the holders of eighty-five per
cent (85%) or more of all shares of stock of the corporation entitled to vote at
an election of directors considered for these purposes as one class; provided
that this Section 12 shall not apply to, and such eighty-five per cent (85%)
vote or consent shall not be required for, any amendment, alteration, change
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<PAGE>
or repeal recommended to the stockholders by eighty-five per
cent (85%) of such directors who would be eligible to serve as
"continuing directors" within the meaning of Section 10 hereof.
13. Nothing herein shall be construed to relieve any
other entity from any fiduciary obligation imposed by law.
14. Unless otherwise restricted by law, any director may
be removed, with or without cause, only by a vote of the holders
of at least eighty-five per cent (85%) of the shares entitled to
vote at an election of directors, or by the vote of seventy-five
per cent (75%) of the other directors then in office."
4. This Restated Certificate of Incorporation was duly adopted
by vote of the stockholders in accordance with Sections 242 and 245 of
the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said DataImage, Inc. has caused this
certificate to be signed by Robert L. Brasher, its President and
attested by Carolyne I. Gatesy, its Secretary, this 26th day of July,
1989. ----
DataImage, Inc.
By /s/ Robert L. Brasher
---------------------
Robert L. Brasher
Its President
ATTEST:
By /s/ Carolyne I. Gatesy
----------------------
Carolyne I. Gatesy
Secretary
-8-
<PAGE>
State of Delaware Page 1
[SEAL OF STATE OF DELAWARE APPEARS HERE]
Office of Secretary of State
----------------------
I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF
DELAWARE DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY
OF THE CERTIFICATE OF RESTATED CERTIFICATE OF INCORPORATION OF DATAIMAGE,
INC. FILED IN THIS OFFICE ON THE TWENTY-SIXTH DAY OF JULY, A.D. 1989, AT
10 O'CLOCK A.M.
[SEAL OF DEPARTMENT OF STATE
OF DELAWARE APPEARS HERE) /S/ Michael Harkins
-----------------------------------
Michael Harkins, Secretary of State
AUTHENTICATION: 12275488
DATE: 07/26/1989
<PAGE>
EXHIBIT "B"
<PAGE>
DATAIMAGE, INC.
* * * * *
BYLAWS
* * * * *
AMENDED AND RESTATED
AS OF MARCH 17, 1992
<PAGE>
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
---------
County of New Castle and State of Delaware.
Section 2. The corporation may also have offices at such other places
---------
both within and without the State of Delaware as the board of directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
---------
directors shall be held in the City of Glastonbury, State of Connecticut, at
such place as may be fixed from time to time by the board of directors, or at
such other place either within or without the State of Delaware as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, within or without the State of Delaware, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders shall be held during the
---------
fourth week of April or in such other week in the months of March, April, May or
June, and on a date and at a time as may be chosen by the board of directors and
stated in the notice of the meeting, at which they shall elect by a plurality
vote those directors which are standing for election in such year and transact
such other business as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place, date
---------
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten nor more than sixty days before the date of the
meeting.
Section 4. The officer who has charge of the stock ledger of the
---------
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, of, if not so specified, at the place where the meeting is to be held.
The list shall also be produced
<PAGE>
and kept at the time and place of the meeting during the whole time thereof, and
may be inspected by any stockholder who is present.
Section 5. Special meetings of the stockholders, for any purpose or
---------
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the board of
directors, or at the request in writing of stockholders owning a majority of the
entire capital stock of the corporation issued and outstanding and entitled to
vote. Such request shall state the purpose or purposes of the proposed meeting.
Section 6. Written notice of a special meeting stating the place, date and
---------
hour of the meeting and the purpose or purposes for which the meeting is called,
shall be given not less than ten nor more than sixty days before the date of the
meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders
---------
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and outstanding
---------
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be presented or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
---------
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
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<PAGE>
Section 10. Unless otherwise provided in the certificate of incorporation
----------
each stockholder shall at every meeting of the stockholders be entitled to one
vote in person or by proxy for each share of capital stock having voting power
by such stockholder, but no proxy shall be voted on after three years from its
date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of incorporation,
----------
any action required to be taken at any annual or special meeting of stockholders
of the corporation, or any action which may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The provisions of this Article III shall be subject to the
---------
applicable provisions of the Purchase Agreement and the Voting Agreement, as
described in Article VIII, Section 2 of these by-laws.
Section 2. The number of directors which shall constitute the whole board
---------
shall be subject to the limitations set forth in the corporation's Certificate
of Incorporation. Within the limits specified, the number of directors shall be
determined by resolution of the board of directors or by the stockholders at the
annual meeting. Directors need not be stockholders.
Section 3. Vacancies and newly created directorships resulting from any
---------
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until their
predecessor's term shall expire, and until their successors are duly elected and
shall qualify. If there are no directors in office, then an election of
directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly-created directorship, the directors then in
office shall constitute less than a majority of the whole board (as constituted
immediately prior to any such increase), the Court of
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<PAGE>
Chancery may, upon application of any stockholder or stockholders holding at
least ten percent of the total number of shares at the time outstanding having
the right to vote for such directors, summarily order an election to be held to
fill any such vacancies or newly-created directorships, or to replace the
directors chosen by the directors then in office.
Section 4. Only persons who are nominated in accordance with the
---------
procedures set forth in this paragraph shall be eligible for election as
directors. Nominations of persons for election to the board of directors may be
made at a meeting of shareholders by or at the direction of the board or by any
shareholder of the Corporation entitled to vote for the election of directors at
such meeting. Such nominations by a shareholder may be made only if written
notice of such shareholder's intent to make such nomination or nominations has
been given to the secretary of the Corporation, delivered to or mailed and
received at the principal executive offices of the Corporation not less than 20
days nor more than 130 days prior to the meeting. Such shareholder's notice
shall set forth (1) as to each person whom the shareholder proposes to nominate
for election as a director, (a) the name, age, business address and residence
address of such person, (b) the principal occupation or employment of such
person, (c) the class and number of shares of the Corporation which are
beneficially owned by such person, and (d) any other information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
applicable law and regulations (including without limitation such person's
written consent to being named in the proxy statement as a nominee and to
serving as director if election); and (2) as to the shareholder giving the
notice, (a) the name and address of such shareholder as they appear on the
Corporation's stock transfer books, (b) the class and number of shares of the
Corporation which are beneficially owned by such shareholder, (c) a
representation that the shareholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or persons specified in the
notice, and (d) a description of all arrangements or understandings between the
shareholder and each nominee and any other person or person (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the shareholders. At the requirement of the board, any person nominated by the
board for election as a director shall furnish to the secretary such information
which would be required to be set forth in a shareholder's notice of nomination
which pertains to the nominee. The presiding officer of the meeting shall
-----
refuse to acknowledge the nomination of any person not made in compliance with
this paragraph and the defective nomination shall be disregarded.
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<PAGE>
Section 5. The business of the corporation shall be managed by or under
---------
the direction of its board of directors which may exercise all such powers of
the corporation and do all such lawful acts and things as are not by statute or
by the certificate of incorporation or by these bylaws directed or required to
be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 6. The board of directors of the corporation may hold meetings,
---------
both regular and special, either within or without the State of Delaware.
Section 7. The first meeting of each newly-created board of directors
---------
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly-created directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly-created
board of directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 8. Regular meetings of the board of directors may be held, upon
---------
twenty (20) days prior notice, at such time and at such place as shall from time
to time be determined by the board.
Section 9. Special meetings of the board may be called by the president
---------
upon three (3) days prior notice to each director, either personally, by
telephone, by mail or by telegram or facsimile transmission. Special meetings
will be called by the president or secretary in like manner and on like notice
upon the written request of two directors unless the board consists of only one
director in which case special meetings will be called by the president or
secretary in like manner and on like notice on the written request of the sole
director.
Section 10. At all meetings of the board a majority of the directors shall
----------
constitute a quorum for the transactions of business and the act of a majority
of the directors present at any meeting at which there is a quorum shall be the
act of the board of directors, except as may be otherwise specifically provided
by statute or by the certification of incorporation. If a quorum shall not be
present at any meeting of the board of directors the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
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<PAGE>
Section 11. Unless otherwise restricted by the certificate
-----------
of incorporation or these bylaws, any action required or permitted to be taken
at any meeting of the board or directors or of any committee thereof may be
taken without a meeting, if all members of the board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the board or committee.
Section 12. Unless otherwise restricted by the certificate of
-----------
incorporation or these bylaws, members of the board of directors, or any
committee designated by the board of directors, may participate in a meeting
of the board of directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating
in the meeting can hear each other, and such participation in a meeting
shall constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 13. The board of directors may designate one or more committees,
-----------
each committee to consist of one or more of the directors of the corporation.
The board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. Any such committee, to the extent provided in the resolution of
the board of directors, shall have and may exercise all the powers and authority
of the board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, (except
that a committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the board of directors
as provided in Section 151(a) of the Delaware Corporation Law fix any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
corporation) adopting an agreement of merger or consolidation, recommending
to the stockholders the sale, lease or exchange of all or substantially all of
the corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
by-laws of the corporation; and, unless the resolution or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock or to
adopt a certificate of ownership and merger. Such committee or committees shall
have
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<PAGE>
such name or names as may be determined from time to time by resolution adopted
by the board of directors.
Section 14. Each committee shall keep regular minutes of its meetings and
----------
report the same to the board of directors when required.
COMPENSATION OF DIRECTORS
Section 15. Unless otherwise restricted by the certificate of
----------
incorporation or these by-laws, the board of directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the board of directors and may be paid
a fixed sum for attendance at each meeting of the board of directors or a stated
salary as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
REMOVAL OF DIRECTORS
Section 16. Unless otherwise restricted by the certificate of
----------
incorporation or by law, any director may be removed, with or without cause, by
a vote of the holders of at least 85% of the shares entitled to vote at an
election of directors, or by the unanimous vote of the other directors then in
office.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
---------
certificate of incorporation or of these by-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram or facsimile transmission.
Section 2. Whenever any notice is required to be given under the provisions
---------
of the statutes or of the certificate of incorporation or of these by-laws, a
waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
- 8 -
<PAGE>
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board
----------
of directors and shall be a chairman of the board, a president, a vice-
president, a secretary and a treasurer. The board of directors may also choose
additional vice-presidents, and one or more assistant secretaries and assistant
treasurers. Any number of officers may be held by the same person, unless the
certificate of incorporation or these by-laws otherwise provide.
Section 2. The board of directors at its first meeting after each annual
----------
meeting of stockholders shall choose a chairman of the board, a president, one
or more vice-presidents, a secretary and a treasurer.
Section 3. The board of directors may appoint such other officers and
----------
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation
----------
shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until their
----------
successors are chosen and qualify. Any officer elected or appointed by the board
of directors may be removed at any time by the affirmative vote of a majority of
the board of directors. Any vacancy occurring in any office of the corporation
shall be filled by the board of directors.
CHAIRMAN OF THE BOARD
Section 6. The chairman of the board shall preside at all meetings of
----------
stockholders and at all meetings of the board of directors and shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.
THE PRESIDENT
Section 7. The president shall be the chief executive officer of the
----------
corporation and, in the absence of the chairman of the board, shall preside at
all meetings of the stockholders and the board of directors, shall have general
and active management of the business of the corporation and shall see that all
orders and resolutions of the board of directors are carried into effect.
- 9 -
<PAGE>
Section 8. The president shall execute bonds, mortgages and other
---------- contracts requiring a seal, under the seal of the corporation,
except where required or permitted by law to be otherwise signed and executed
and except where the signing and execution thereof shall be expressly delegated
by the board of directors to some other officer or agent of the corporation.
THE VICE-PRESIDENTS
Section 9. In the absence of the president or in the event of his
---------- inability or refusal to act, the executive vice-president (or
in the event of the inability or refusal to act of the executive vice-president,
then the senior vice-president), shall perform the duties of the president, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the president. The vice-presidents shall perform such other
duties and have such other powers as the board of directors may from time to
time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 10. The secretary shall attend all meetings of the board of
----------- directors and all meetings of the stockholders and record all
the proceedings of the meetings of the corporation and of the board of directors
in a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the board of
directors, and shall perform such other duties as may be prescribed by the board
of directors or president, under whose supervision he shall be. He shall have
custody of the corporate seal of the corporation and he, or an assistant
secretary, shall have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such assistant secretary. The board of directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing by his signature.
Section 11. The assistant secretary, or if there be more than one, the
----------- assistant secretaries in the order determined by the board of
directors (of if there be no such determination, then in the order of their
election) shall, in the absence of the secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
secretary and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
- 10 -
<PAGE>
Section 12. The treasurer shall have the custody of the corporate funds and
----------
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
Section 13. He shall disburse the funds of the corporation as may be
----------
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 14. If required by the board of directors, he shall give the
----------
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 15. The assistant treasurer, or if there shall be more than one,
----------
the assistant treasurers in the order determined by the board of directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the treasurer or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the treasurer and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
ARTICLE VI
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be represented by
---------
certificates. Certificates shall be signed by, or in the name of the corporation
by, the chairman or vice-chairman of the board of directors, or the president or
a vice-president and the treasurer or an assistant treasurer, or the secretary
or an assistant secretary of the corporation.
Within a reasonable time after the issuance or transfer of stock, the
corporation shall send to the registered owner thereof a written notice
containing the information required to be set forth or stated on certificates
pursuant to Sections 151, 156, 202(a) or 218(a) of the Delaware Corporation Law
(unless such information shall be contained on said certificates) or a
- 11 -
<PAGE>
statement that the corporation will furnish without charge to each stockholder
who so requests the powers, designations, preferences and relative
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions or such preferences
and/or rights.
Section 2. Any of or all the signatures on a certificate may be facsimile.
---------- In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the corporation with the same effect as if he
were such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or
---------- certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of
---------- the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue or cause the transfer
agent to issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the stockholders
---------- entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or
-12-
<PAGE>
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than sixty nor less than ten days before the date of such meeting,
nor more than sixty days prior to any other action. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the board of directors may fix a new record date for the adjourned meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize a person
---------
registered on its books as the exclusive owner of shares entitled to receive
dividends, and to vote as such owner, and shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends on the capital stock of the corporation, subject to
---------
the provisions of the certificate of incorporation, if any, may be declared by
the board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
---------
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for repairing or maintaining any
property of the corporation, or for such other purpose as the directors shall
think conducive to the interest of the corporation, and the directors may modify
or abolish any such reserve in the manner in which it was created.
ANNUAL STATEMENT
Section 3. The board of directors shall present at each annual meeting, and
---------
at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
- 13 -
<PAGE>
CHECKS
Section 4. All checks or demands for money and notes of the corporation
----------
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed by resolution
----------
of the board of directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of the
----------
corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE VIII
AMENDMENTS AND CONFLICTS
Section 1. These by-laws may be altered, amended or repealed or new
----------
by-laws may be adopted by the stockholders at any regular meeting of the
stockholders or at any special meeting of the stockholders if notice of such
alteration, amendment, repeal or adoption of new by-laws shall be contained in
the notice of such special meeting. If the certificate of incorporation confers
the power to alter, amend or repeal these by-laws and/or adopt new by-laws, such
action may be taken by action of the board of directors in any manner permitted
by Article III. If the power to adopt, amend or repeal by-laws is conferred upon
the board of directors by the certificate of incorporation it shall not divest
or limit the power of the stockholders to adopt, amend or repeal by-laws.
Section 2. These by-laws shall be subject to and limited by the applicable
----------
provisions of that certain Common Stock and Warrant Purchase Agreement dated
March 17, 1992 among the corporation and the other parties thereto (the
"Purchase Agreement"), and that certain Voting, Co-Sale and Right of First
Refusal Agreement dated March 17, 1992 (the "Voting Agreement"). In the event
of a conflict between the provisions of the Purchase Agreement or the Voting
Agreement and these by-laws, the applicable provisions of such agreements shall
govern, so long as the applicable provisions shall remain in effect.
-14-
<PAGE>
Exhibit 10(c)
AMENDMENT AGREEMENT
-------------------
THIS AMENDMENT AGREEMENT (hereinafter "Agreement") being made effective
December 20, 1995, by and between JUDGE COMPUTER CORPORATION, a New Jersey
corporation ("Judge") and DATAIMAGE, INC., a Delaware corporation ("DataImage").
WHEREAS, Judge and DataImage entered into an Agreement and Plan of Merger
dated December 1, 1995 ("Merger Agreement") providing for the merger of Judge
with and into DataImage pursuant to the terms and conditions set forth in that
Merger Agreement; and
WHEREAS, pursuant to Section 10.4 of the Merger Agreement, the parties may
amend the Merger Agreement by a writing signed by responsible officers duly
authorized by the respective Boards of Directors; and
WHEREAS, the Board of Directors of both parties have agreed to and
authorized certain amendments to that Merger Agreement as more fully described
below.
NOW THEREFORE, in consideration of the premises and mutual promises
hereinafter set forth, and of other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
5. Amendments.
----------
(a) Section 1.2 of the Merger Agreement shall be modified to read as
follows:
1.2 Surviving Corporation. Following the Merger, the existence
---------------------
of the Surviving Corporation shall continue unaffected and
unimpaired by the Merger with all rights,
<PAGE>
powers, privileges and immunities and subject to all duties and
liabilities of a corporation authorized under the laws of the
State of Delaware. At the Effective Time, the Certificate of
Incorporation and By-Laws of DataImage, as in effect immediately
prior thereto, copies of which are attached hereto as Exhibits
"A" and "B" respectively, shall be the Certificate of
Incorporation and By-Laws of the Surviving Corporation until
altered or amended as provided therein or by law. Notwithstanding
the foregoing, the Certificate of Incorporation shall be amended
by filing with the appropriate department of the State of
Delaware an Amended and Restated Certificate of Incorporation as
set forth in Exhibit "C".
The Amended and Restated Certificate of Incorporation is as set forth in Exhibit
"A" to this Agreement.
(b) Section 1.6(b) of the Merger Agreement shall be modified to read
as follows:
1.6 (b) Issuance of Surviving Corporation Common and Series A
-----------------------------------------------------
Convertible Preferred Stock. In the Merger, the Surviving
---------------------------
Corporation shall issue a cumulative total of 4,750,000 shares of
the Surviving Corporation Common Stock and Surviving Corporation
Series A Convertible Preferred Stock (collectively the "Surviving
Corporation Stock") to the then current shareholders of Judge,
less certain reserve shares. The Surviving Corporation Series A
Convertible Preferred Stock will be converted as set forth in
Section 1.8. In the Merger, the Surviving Corporation will hold
in reserve X shares of the Surviving Corporation Common Stock for
certain stock grants and stock options. For purposes of the
foregoing, the variable "X" shall be the equivalent of 82,500
plus 325,000 divided by the conversion ratio Y (defined below).
The shares issued to
-2-
<PAGE>
the then current Judge Shareholders, together with the shares
reserved by the Surviving Corporation for the
aforementionedoptions and grants upon issuance, will constitute
95% of the issued and outstanding voting shares of the Surviving
Corporation. In the Merger, the Surviving Corporation will issue
to the holders of Judge Common Stock one share of Surviving
Corporation Common Stock for every Y shares of Judge Common Stock
and, if not previously converted, one share of Surviving
Corporation Common Stock for every Y shares of Judge Preferred
Stock. For purposes of the foregoing, the variable "Y" shall be
the equivalent of 10,891,347 divided by the remainder of
4,667,500 less the number of Judge Series A Convertible Preferred
Stock shares sold in the private placement described in Section
1.8. Subsequent to the merger, the Board, in its discretion, will
formulate and implement an employee stock grant and option plan,
separate from the reserve shares described above, which will
equally dilute all voting shareholders.
(c) Section 7.1(a) of the Merger Agreement is modified to read as
follows:
(a) If the Closing shall not have occurred on or before February
29, 1996, unless the failure to so consummate by such time is due
to the breach of this Agreement by the party seeking to
terminate, or such later date as shall have been agreed to by the
parties hereto (the "Termination Date").
(d) Schedule 1.8 is amended as set forth in Exhibit "B" attached
hereto.
(e) Schedule 1.9 is amended as set forth in Exhibit "C" attached
hereto.
-3-
<PAGE>
(f) Schedule 1.18 is amended as set forth in Exhibit "D" attached
hereto.
(g) Schedule 2.2(f) is amended to read as follows:
FTM Consulting, Inc. v. DataImage,
Inc., No. PJR CV 470816
6. Exception. Judge and DataImage agree and acknowledge that the
---------
amendments set forth in Section 1 above are an exception to the limitation set
forth in Section 10.1 of the Merger Agreement.
7. Authority. Both Judge and DataImage represent and warrant that
---------
each of them have all requisite corporate power and authority to enter into this
Agreement.
8. Counterparts. To facilitate execution, this Agreement may be
------------
executed in as many counterparts as may be required; and it shall not be
necessary that the signatures of, or on behalf of, each party, or that the
signatures of all persons required to bind any party, appear on each
counterpart; but it shall be sufficient that the signature of, or on behalf of,
each party, or that the signatures of the persons required to bind any party,
appear on one or more of the counterparts. All counterparts shall collectively
constitute a single agreement. It shall not be necessary in making proof of
this Agreement to produce or account for more than a number of counterparts
containing the respective signatures of, or on behalf of, all of the parties
hereto.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the date set forth above.
JUDGE COMPUTER CORPORATION
By: /s/ Martin E. Judge, Jr.
-------------------------------------
Martin E. Judge, Jr., CEO/President
DATAIMAGE, INC.
By: /s/ Raymond V. Sozzi
----------------------------------
Raymond V. Sozzi, President
-5-
<PAGE>
EXHIBIT "A"
<PAGE>
SECOND
RESTATED CERTIFICATE OF INCORPORATION
OF
DATAIMAGE, INC.
DataImage, Inc., a corporation organized and existing under the laws of the
State of Delaware, hereby certifies as follows:
1. The name of the corporation is DataImage, Inc.
The date of filing its original Certificate of Incorporation with the
Secretary of State was October 23, 1986. The date of filing its first Restated
Certificate of Incorporation with the Secretary of State was July 26, 1989.
2. This Restated Certificate of Incorporation restates and integrates and
further amends the Certificate of Incorporation of this corporation by changing
Articles 1 and 4, adding new Articles 5 and 6, and renumbering Articles 5
through 14 as Articles 7 through 16 respectively.
3. The text of the Certificate of Incorporation, as amended or
supplemented heretofore, is further amended hereby to read as herein set forth
in full:
"1. The name of the corporation is:
Judge Imaging Systems, Inc.
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name of its registered agent at such address is
The Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted
is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
4. The total number of shares of stock which the Corporation shall
have authority to issue is Ten Million (10,000,000) common shares having a
par value of One Cent ($.01), and five million (5,000,000) preferred shares
having a par value of One Cent ($.01). The preferred shares shall consist
of a series of one million one hundred twenty-five thousand (1,125,000)
shares of Series A Convertible Preferred Stock, with the rights, prefer-
<PAGE>
ences and designations set forth in Paragraph 5, below; a series of
one thousand five hundred (1,500) shares of Series B Preferred Stock, with
the rights, preferences and designations set forth in Paragraph 6, below;
and such additional series as may be issued by the Board of Directors from
time to time in one or more classes or series. The Board of Directors of
the Corporation shall have full authority to determine for any such class
or series its voting powers, designations, preferences, limitations,
special rights, and restrictions thereon which it deems appropriate.
5. Series A Convertible Preferred Stock
(a) Dividend. Holders of Series A Preferred Stock ("Preferred
--------
A") of the Corporation shall be entitled to receive, out of funds legally
available therefor, cumulative dividends at an annual rate of seven percent
(7%), provided that such dividend shall be payable only if a minimum of
$1,000,000 is raised pursuant to a private placement of the Preferred A as
described in the Private Placement Memorandum of Judge Computer Corporation
dated January 16, 1996; and (x) the Corporation initiates and closes upon a
subsequent public offering for its benefit; or (y) the Corporation redeems
the Preferred A pursuant to Paragraph 5(c). Upon the occurrence of the
subsequent public offering, the accrued dividend shall be due and payable
for the period extending through the date of closing on the subsequent
public offering and the Preferred A shall carry no further dividend
thereafter except as set forth below. The Preferred A will share pari
passu, on an as converted basis, in any dividends declared on common stock
or any other series of preferred stock, excluding the Series B Preferred
Stock.
(b) Liquidation Preference. The Preferred A will have a
----------------------
liquidation preference prior to the common stock and all other existing
classes or series of preferred stock, in an amount equal to $1.3333333 per
share plus all accrued, unpaid dividends (if any are payable as provided
above). The holders of the Preferred A may elect to treat a consolidation
or merger of the Corporation, resulting in a change of control of the
Corporation, or the sale of all or substantially all of the Corporation's
assets, as a liquidation or winding up for purposes of this liquidation
preference. For purposes of the foregoing, a change of control is deemed
to occur when more than 51% of the issued and outstanding shares of the
Corporation are held by individuals or
-2-
<PAGE>
entities who are not shareholders as of the date of filing of this Second
Restated Certificate of Incorporation.
(c) Optional Redemption. In the event the Corporation has not
-------------------
closed on a subsequent public offering for its benefit by the eighth
anniversary of the filing of this Second Restated Certificate of
Incorporation, the Corporation shall have the right, but not the
obligation, to redeem the Preferred A. The Corporation must give thirty
days prior written notice of its intent to exercise its option to redeem.
Prior to the running of that time period, the holder may give the
Corporation written notice of his intent to convert the Preferred A
pursuant to Paragraph 5(d) below. If the holder does not exercise such
right to convert within such thirty day period, upon the date set for
redemption in the notice by the Corporation, the Preferred A shall be
surrendered to the Corporation and the purchase price shall be paid to the
holder thereof. The purchase price shall be $1.3333333 per share plus all
accrued, unpaid dividends to the date of redemption. In the event of the
failure of any holder to deliver such shares on the date set therefore,
such shares shall nevertheless be immediately deemed cancelled and upon
surrender of the Certificates, the purchase price and accrued dividends
shall be paid to the holder.
(d) Optional Conversion. The Preferred A may be converted into
-------------------
Common Stock at the holders' option at any time upon written notice to the
Corporation. The holder shall be entitled to receive one share of common
stock for each share of Preferred A, subject to adjustment as provided in
Paragraph 5(f). If less than all of the holder's Preferred A shares are
being converted, then they shall be converted in lots not less than the
greater of 10,000 shares or 20% of the total number of the holder's
Preferred A shares.
(e) Mandatory Conversion. Conversion of the Preferred A will
--------------------
occur automatically (i) at the time of Closing upon a subsequent public
offering of Common Stock by the Corporation in excess of $5 million, (ii)
upon sale of all or substantially all of the assets of the Corporation, or
(iii) upon the vote by holders of a majority of the then-outstanding shares
of the Preferred A. In the event of a conversion pursuant to Paragraph
5(e)(i), accrued dividends shall also be paid at the time of the
conversion.
-3-
<PAGE>
(f) Antidilution and Adjustment Provisions. The conversion ratio
--------------------------------------
of the Preferred A to Common Stock, set forth in subparagraph (d) above, is
based upon the initial conversion price of $1.333333. The conversion ratio
and conversion price will be subject to the customary weighted average
antidilution adjustment in the event that the Corporation issues shares
(other than "Excluded Shares" as defined immediately below) at a purchase
price less than the then-applicable conversion price, which is determined
as the initial conversion price subject to previous adjustments (if any)
made pursuant to this subparagraph. "Excluded Shares" shall mean shares
issued to directors, officers, employees or consultants of the Corporation
pursuant to stock option or stock grant plan or plans authorized by the
Board of Directors from time to time. The conversion ratio will also be
equitably adjusted for Common Stock splits, Common Stock dividends and
other Common Stock recapitalizations.
(g) Voting Rights. Except with respect to the protective
-------------
provisions set forth in Paragraph 5(h), the Preferred A will vote with the
Common Stock as a single class, and a holder of Preferred A will have the
right to that number of votes equal to the number of shares of Common Stock
issuable upon conversion of his Preferred A.
(h) Protective Provisions. Consent of the holders of at least a
---------------------
majority of the Preferred A will be required for any action which (i)
materially and adversely alters or changes the rights, preferences or
privileges of the Preferred A, (ii) increases the authorized number of
shares of Preferred A, (iii) creates any new class or series of shares
having preference over or being on a parity with the Preferred A, (iv)
involves a sale by the Corporation's of all or substantially all of its
assets, a merger of the Corporation with another entity resulting in a
change of control of the Corporation (as previously defined), or a
liquidation or dissolution of the Corporation.
(i) Registration Rights. The Preferred A shall also have certain
-------------------
demand and piggyback registration rights upon conversion of the Preferred A
into the Common Stock of the Corporation as more fully described in a Stock
Registration Rights Agreement which has been entered into by Judge Computer
Corporation and the holders of the Preferred A, with an effective date as
of the filing of this Second Restated Certificate of Incorporation.
-4-
<PAGE>
6. Series B Preferred Stock
(a) Voting. Holders of the outstanding shares of Series B
------
Preferred Stock ("Preferred B") shall have no voting rights, except as
otherwise required by law.
(b) Liquidation Preference. The Preferred B shall have no
----------------------
liquidation preference and any distribution upon liquidation shall be
shared ratably on a per-share basis between the Preferred B and Common
Stock, subject to the rights of such other series and classes as the Board
of Directors may determine.
(c) Dividends. The holders of the outstanding shares of the
---------
Preferred B shall be entitled to receive, out of funds legally available
therefore, cumulative dividends at the annual rate of ten percent (10%) of
the stated value of the shares. The stated value of the Preferred B is
$1,000.00. Cumulative dividends on the Preferred B shall be payable if, as
and when declared. Dividends shall accrue on each share from the date of
original issuance of such share whether or not earned or declared, and
shall accrue until paid.
(d) Redemption. The Preferred B must be redeemed upon the
----------
closing of any subsequent public offering by the Corporation. This
redemption may be waived by the holders of the Preferred B at the holders'
sole discretion. If such requirement is waived, the Preferred B must be
redeemed upon the occurrence of any subsequent public offering by the
Corporation. The Preferred B may be redeemed at any time prior to a
subsequent public offering, upon thirty (30) days' written notice to the
holders thereof. Notwithstanding the foregoing, the Board of Directors
shall utilize its best efforts to redeem the stock at such time as it deems
it to be financially prudent. If, and to the extent all shares of the
Preferred B are not fully redeemed earlier as set forth above, they shall
be fully redeemed upon the fifth anniversary of the date of issuance.
The purchase price per share to be paid upon redemption of the
Preferred B shall be the stated value thereof plus all accrued but unpaid
dividends to the date set for redemption. Upon the date set for
redemption, all shares of the Preferred B shall be surrendered to the
Corporation and the purchase price shall be paid to the holders thereof.
-5-
<PAGE>
(e) No Right of Conversion. The Preferred B may not be converted
----------------------
into any other shares of Stock of the Corporation.
7. The number of directors which shall constitute the Board of
Directors shall be established by the Board of Directors, but shall not be
less than 3, or more than 9. The directors of the corporation shall be
divided into three classes: Classes One, Two and Three. Class One directors
shall initially serve until the 1990 annual meeting of shareholders. Class
Two directors shall initially serve until the 1991 annual meeting of
shareholders. Class Three directors shall initially serve until the 1992
annual meeting of shareholders. At each annual meeting of shareholders, the
successors to members of the class of directors whose terms shall then
expire shall be elected to serve three year terms and until their
successors are elected and qualified. When the number of directorships is
changed, any newly-created directorships or any decrease in directorships
shall be so apportioned by the Board of Directors between the three classes
so as to make all classes as nearly equal in number as is possible.
8. The Board of Directors is authorized to make, alter or repeal the
by-laws of the corporation.
9. To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or may hereafter be amended, a director
of this corporation shall not be liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a
director.
10. To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or may hereafter be amended, the
corporation shall indemnify any of its officers, directors, employees or
agents who was or is made a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative by reason of the fact that
he (or she) is or was a director, officer, employee or agent of the
corporation, or was serving at the request of the corporation in any such
capacity with another corporation, partnership, joint venture, trust or
other enterprise.
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<PAGE>
11. In addition to the vote of stockholders otherwise required by
law, including, without limitation, the provisions of Section 203 of the
General Corporation Law of Delaware, or by the terms of any other article
of this Certificate of Incorporation, whether now or hereafter authorized,
the affirmative vote or consent of either: (i) seventy-five percent (75%)
of the members of the Board of Directors or (ii) the holders of eighty-five
percent (85%) or more of all shares of stock of the corporation entitled to
vote in elections of directors, considered for the purposes hereof as one
class, shall be required for the adoption or authorization of a business
combination (as hereinafter defined) with any other entity (as hereinafter
defined) if, as of the record date for the determination of stockholders
entitled to notice thereof and to vote thereon or consent thereto, such
other entity is the beneficial owner, directly or indirectly, of more than
fifteen percent (15%) of the outstanding shares of stock of the corporation
entitled to vote in elections of directors considered for the purposes of
this Article as one class; provided that such eighty-five percent (85%)
voting requirement shall not be applicable if:
(a) The cash, or fair market value of other consideration to be
received per share by common stockholders of the corporation in
such business combination bears the same or a greater percentage
relationship to the market price of the corporation's common
stock immediately prior to the announcement of such business
combination as the highest per share price (including brokerage
commissions and/or soliciting dealers' fees and transfer taxes)
which such other entity has theretofore paid for any of the
shares of the corporation's common stock already owned by its
bears to the market price of the common stock of the corporation
immediately preceding the initial acquisition of the
corporation's common stock by such other entity; and
(b) The cash, or fair market value of other consideration to be
received per share by common stockholders of the corporation in
such business combination (i) is not less than the highest per
share price (including brokerage commissions and/or soliciting
dealers' fees and transfer taxes) paid by such other entity in
acquiring any of its holdings of the
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<PAGE>
corporation's common stock, and (ii) is not less than the
earnings per share of common stock of the corporation for the
four full consecutive fiscal quarters, or the last fiscal year
reported, whichever is higher, immediately preceding the record
date for solicitation of votes on such business combination,
multiplied by the then price/earnings multiple (if any) of such
other entity as customarily computed and reported in the
financial community; and
(c) The price offered must also include an additional premium equal
to the per share equivalent of fifty percent (50%) of the highest
consolidated balance of domestic and foreign cash, cash
equivalents and marketable securities held by the corporation at
any time during the period commencing on the date such other
entity first acquired any shares of the corporation's common
stock and terminating on the fifteenth day prior to the date on
which the proxy statement referred to in (f) below is scheduled
to be mailed to public stockholders of the corporation; and
(d) After such other entity has acquired a fifteen percent (15%)
interest and prior to the consummation of such business
combination: (i) such other entity shall have taken steps to
ensure that the corporation's Board of Directors included at all
times representation by continuing director(s) (as hereinafter
defined) proportionate to the stockholdings of the corporation's
public common stockholders not affiliated with such other entity
(with a continuing director to occupy any resulting fractional
board position); (ii) there shall have been no change in the
amount per share payable or paid as dividends on the
corporation's common stock except as may have been approved by a
vote of seventy-five percent (75%) of the directors; (iii) such
other entity shall not have acquired any newly issued shares of
stock, directly or indirectly, from the corporation (except upon
conversion of convertible securities acquired by it prior to
obtaining a fifteen percent (15%) interest or as a result of a
pro rata stock dividend or stock split); and (iv) such other
-8-
<PAGE>
entity shall not have acquired any additional shares of the
corporation's outstanding common stock or securities convertible
into common stock except as a part of the transaction
which results in such other entity acquiring its fifteen percent
(15%) interest; and
(e) Such other entity shall not have (i) received the benefit,
directly or indirectly (except proportionately as a shareholder),
of any loans, advances, guarantees, pledges or other financial
assistance or tax credits provided by the corporation, or (ii)
made any major change in the corporation's business or equity
capital structure without the approval of seventy-five percent
(75%) of the directors, in either case prior to the consummation
of such business combination; and
(f) A proxy statement complying with the requirements of the
Securities Exchange Act of 1934 shall be mailed to public
stockholders of the corporation for the purpose of soliciting
stockholder approval of such business combination and shall
contain at the front thereof, in a prominent place, any
recommendations as to the advisability (or inadvisability) of the
business combination which the continuing directors, or any of
them, may choose to state and, if deemed advisable by a majority
of the continuing directors, an opinion of a reputable investment
banking firm as to the fairness (or lack of fairness) of the
terms of such business combination, from the point of view of the
remaining public stockholders of the corporation (such investment
banking firm to be selected by a majority of the continuing
directors and to be paid a reasonable fee for their services by
the corporation upon receipt of such opinion).
The provision hereof shall also apply to a business combination with
any other entity which at any time has been the beneficial owner, directly
or indirectly, of more than fifteen percent (15%) of the outstanding shares
of stock of the corporation entitled to vote in elections of directors
considered for the purposes hereof as one class, notwithstanding the fact
that such other entity has reduced its shareholdings below fifteen percent
(15%) if, as of the record date for the determination of
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<PAGE>
stockholders entitled to notice of and to vote on or consent to the
business combination, such other entity is an "affiliate" of the
corporation (as hereinafter defined).
12. As used in Sections 11 through 15 hereof, (a) the term "other
entity" shall include any corporation, person or other entity and any other
entity with which it or its "affiliate" or "associate" (as defined below)
has any agreement, arrangement or understanding, directly or indirectly,
for the purpose of acquiring, holding, voting or disposing of stock of the
corporation, or which is its "affiliate" or "associate" as those terms are
defined in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, together with the successors and assigns
of such persons in any transaction or series of transactions not involving
a public offering of the corporation's stock within the meaning of the
Securities Act of 1933, (b) an other entity shall be deemed to be the
beneficial owner of any shares of stock of the corporation which the other
entity (as defined above) has the right to acquire pursuant to an
agreement, or upon exercise of conversion rights, warrants or options or
otherwise, (c) the outstanding shares of any class of stock of the
corporation shall include shares deemed owned through application of clause
(b) above but shall not include any other shares which may be issuable
pursuant to any agreement, or upon exercise of conversion rights, warrants
or options, or otherwise; (d) the term "business combination" shall include
any merger or consolidation of the corporation with or into any other
corporation, or the sale or lease of all or any substantial part of the
assets of the corporation to, or any sale or lease to the corporation or
any subsidiary thereof in exchange for securities of the corporation of any
assets (except assets having an aggregate fair market value of less than
$1,000,000) of any other entity; (e) the term "continuing director" shall
mean a person who was a member of the Board of Directors of the corporation
elected by the public stockholders prior to the time that such other entity
acquired in excess of ten percent (10%) of the stock of the corporation
entitled to vote in the election of directors, or a person recommended to
succeed a continuing director by a majority of continuing directors; and
(f) for the purposes of subparagraphs 1(a) and (b) hereof the term "other
consideration to be received" shall include common stock of the corporation
retained by its existing public stockholders in the event of a business
combination with such other entity in which the corporation is the
surviving corporation.
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<PAGE>
13. A majority of the continuing directors shall have the power and
duty to determine for the purposes hereof on the basis of information known
to them whether (a) such other entity beneficially owns more than fifteen
percent (15%) of the outstanding shares of stock of the corporation
entitled to vote in election of directors (b) any entity is an "affiliate"
or "associate" (as defined above) of another, (c) any other entity has an
agreement, arrangement or understanding with another, or (d) the assets
being acquired by the corporation, or any subsidiary thereof, have an
aggregate fair market value of less than $1,000,000.
14. No amendment to this Certificate of Incorporation shall amend,
alter, change or repeal any of the provisions of Sections 11 through 14
hereof, unless the amendment effecting such amendment, alteration, change
or repeal shall receive the affirmative vote or consent of the holders of
eighty-five percent (85%) or more of all shares of stock of the corporation
entitled to vote at an election of directors, considered for these purposes
as one class; provided that this Section 14 shall not apply to, and such
eighty-five percent (85%) vote or consent shall not be required for, any
amendment, alteration, change or repeal recommended to the stockholders by
eighty-five percent (85%) of such directors who would be eligible to serve
as "continuing directors" within the meaning of Section 12 hereof.
15. Nothing herein shall be construed to relieve any other entity
from any fiduciary obligation imposed by law.
16. Unless otherwise restricted by law, any director may be removed,
with or without cause, only by a vote of the holders of at least eighty-
five percent (85%) of the shares entitled to vote at an election of
directors, or by the vote of seventy-five percent (75%) of the other
directors then in office.
4. This Second Restated Certificate of Incorporation was duly adopted by
vote of the stockholders in accordance with Sections 245 and 252 of the General
Corporation Law of the State of Delaware.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
duly executed, as of the date set forth above.
JUDGE COMPUTER CORPORATION
By: /s/ Martin E. Judge, Jr.
-------------------------------------------
Martin E. Judge, Jr. CEO/President
DATAIMAGE, INC.
By: /s/ Raymond V. Sozzi
-------------------------------------------
Raymond V. Sozzi, President
-3-
<PAGE>
EXHIBIT "B"
<PAGE>
PREFERENCES AND RIGHTS OF SERIES A
CONVERTIBLE PREFERRED STOCK
1. Dividend. Holders of Series A Preferred Stock ("Preferred") of Judge
--------
Computer Corporation (the "Corporation") shall be entitled to receive, out of
funds legally available therefore, cumulative dividends at an annual rate of
seven percent (7%), provided that a minimum of $1,000,000 is raised pursuant to
a private placement of the Preferred as described in the Private Placement
Memorandum dated January 16, 1996; and (x) Judge Imaging Systems, Inc., (the
surviving corporation (hereinafter the "Surviving Corporation") of the merger
between the Corporation and DataImage, Inc. pursuant to an Agreement and Plan of
Merger (the "Merger Agreement") dated December 1, 1995), initiates and closes
upon a subsequent public offering for its benefit; or (y) the Surviving
Corporation redeems the Preferred pursuant to Paragraph 3. Upon the occurrence
of the subsequent public offering, the accrued dividend shall be due and payable
for the period extending through the date of closing on the subsequent public
offering and the Preferred shall carry no further dividend thereafter except as
set forth below. The Preferred will share pari passu, on an as converted basis,
in any dividends declared on common stock or any other series of preferred
stock, excluding the Series B Preferred Stock.
SCHEDULE 1.8
<PAGE>
2. Liquidation Preference. The Preferred will have a liquidation
----------------------
preference prior to the common stock and all other existing classes or series of
preferred stock, in an amount equal to $1.3333333 per share plus all accrued,
unpaid dividends (if any are payable as provided above). The holders of the
Preferred may elect to treat a consolidation or merger of the Surviving
Corporation resulting in a change of control of the Surviving Corporation, or
sale of all or substantially all of its assets as a liquidation or winding up
for purposes of this liquidation preference. For purposes of the foregoing, a
change of control is deemed to occur when more than 51% of the issued and
outstanding shares of the Corporation are held by individuals or entities who
are not shareholders as of the date of Closing on the private placement referred
to in Paragraph 1.
3. Optional Redemption. In the event the Surviving Corporation has not
-------------------
closed on a subsequent public offering for its benefit by the eighth anniversary
of the filing of the Second Restated Certificate of Incorporation of the
Surviving Corporation, the Surviving Corporation shall have the right, but not
the obligation, to redeem the Preferred. The Surviving Corporation must give
thirty days prior written notice of its intent to exercise its option to redeem.
Prior to the running of that time period, the holder may give the Surviving
Corporation written notice of his intent to convert the Preferred pursuant to
Paragraph 4 below. If the holder does not exercise such right to convert
-2-
<PAGE>
within such thirty day period, upon the date set for redemption in the notice by
the Surviving Corporation, the Preferred shall be surrendered to the Surviving
Corporation and the purchase price shall be paid to the holder thereof. The
purchase price shall be $1.3333333 per share plus all accrued, unpaid dividends
to the date of redemption. In the event of the failure of any holder to deliver
such shares on the date set therefore, such shares shall nevertheless be
immediately deemed cancelled and upon surrender of the Certificate, the purchase
price and all accrued dividends shall be paid to the Holder.
4. Optional Conversion. The Preferred will be convertible into Common
-------------------
Stock at the holder's option at any time upon written notice to the Surviving
Corporation. The holder shall be entitled to receive one share of common stock
for each share of Preferred, subject to adjustment as provided in Paragraph 6.
If less than all of the holder's Preferred shares are being converted, then they
shall be converted in lots not less than the greater of 10,000 shares or 20% of
the total number of the Holder's Preferred shares.
5. Mandatory Conversion. Conversion of the Preferred will be mandatory
--------------------
(i) at the time of a subsequent public offering of common stock by the Surviving
Corporation in excess of $5 million, (ii) upon sale of all or substantially all
of the assets of the Surviving Corporation, or (iii) upon the vote by holders of
a majority of the then-outstanding shares of the Preferred. In the
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<PAGE>
event of a conversion pursuant to Paragraph 5(i), accrued dividends shall also
be paid at the time of the conversion.
6. Antidilution and Adjustment Provisions. The conversion price and
--------------------------------------
ratio of the Preferred will be subject to a customary weighted average
antidilution adjustment in the event that the Surviving Corporation issues
additional shares (over and above the 5 million shares issued or reserved for
issuance as of the date of the Closing on the Merger described in Paragraph 1,
the Series B shares described below and stock options and/or stock grants
subsequently authorized by the Board of Directors for award to employees of the
Surviving Corporation) at a purchase price less than the then applicable
conversion price. The conversion price and ratio will also be equitably
adjusted for Common Stock splits, Common Stock dividends and other Common Stock
recapitalizations.
7. Voting Rights. Except with respect to the protective provisions set
-------------
forth in Paragraph 8, the Preferred will vote with the Common Stock as a single
class, and a holder of Preferred will have the right to that number of votes
equal to the number of shares of Common Stock issuable upon conversion of its
Preferred.
8. Protective Provisions. Consent of the holders of at least a majority
---------------------
of the Preferred will be required for any action which (i) materially and
adversely alters or changes the rights, preferences or privileges of the
Preferred, (ii) increases the authorized number of shares of Preferred, (iii)
creates any new class of shares having preference over or being on a parity with
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<PAGE>
the Preferred, (iv) involves a sale by the Surviving Corporations of all or
substantially all of its assets, a merger of the Surviving Corporation with
another entity resulting in a change of control of the Corporation (as
previously defined), or a liquidation or dissolution of the Surviving
Corporation.
9. Registration Rights. The Preferred shall also have certain demand and
-------------------
piggyback registration rights upon conversion of the Preferred into the Common
Stock of the Surviving Corporation as more fully described in a Stock
Registration Rights Agreement between the Corporation and the holders of the
Preferred to be executed immediately prior to and effective as of the filing of
the date of Closing of the Merger described in Paragraph 1.
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<PAGE>
EXHIBIT "C"
<PAGE>
PREFERENCES AND RIGHTS OF
SERIES B PREFERRED STOCK
1. Voting. Holders of the outstanding shares of Series B Preferred Stock
------
("Preferred B") shall have no voting rights, except as otherwise required by
law.
2. Liquidation Preference. The Preferred B shall have no liquidation
----------------------
preference and any distribution upon liquidation shall be shared ratably on a
per-share basis between the Preferred B and Common Stock, subject to the rights
of such other series and classes as the Board of Directors may determine.
3. Dividends. The Holders of the outstanding shares of the Preferred
---------
shall be entitled to receive, out of funds legally available therefore,
cumulative dividends at the annual rate of ten percent (10%) of the stated value
of the shares. The stated value of the Preferred B is $1,000.00 Cumulative
dividends on the Preferred B shall be payable if, as and when declared.
Dividends shall accrue on each share from the date of original issuance of such
share whether or not earned or declared, and shall accrue until paid.
4. Redemption. The Preferred B must be redeemed upon the closing of any
----------
subsequent public offering by the Corporation. This redemption may be waived by
the holders of the Preferred B at the holders' sole discretion. If such
requirement is waived, the
SCHEDULE 1.9
<PAGE>
Preferred B must be redeemed upon the occurrence of any subsequent public
offering by the Corporation. The Preferred B may be redeemed at any time prior
to a subsequent public offering, upon thirty (30) days written notice to the
holders thereof. Notwithstanding the foregoing, the Board of Directors shall
utilize its best efforts to redeem the stock at such time as it deems it to be
financially prudent. If and to the extent all shares of the Preferred B are not
fully redeemed earlier or set forth above, they shall be fully redeemed upon the
fifth anniversary of the date of issuance.
The purchase price per share to be paid upon redemption of the
Preferred B shall be the stated value thereof plus all accrued but unpaid
dividends to the date set for redemption. Upon the date set for redemption, all
shares of the Preferred B shall be surrendered to the Corporation and the
purchase price shall be paid to the holders thereof.
5. No Right of Conversion. The Preferred B may not be converted into any
----------------------
other shares of Stock of the Corporation.
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<PAGE>
EXHIBIT "D"
<PAGE>
ESSENTIAL TERMS OF EMPLOYMENT AGREEMENT
BETWEEN
RAYMOND V. SOZZI AND JUDGE IMAGING SYSTEMS, INC.
1. Term.
Commences first business day after the Effective Date of the Merger, and
will continue for a period of one year from commencement, renewable annually
by mutual agreement of employee and employer. Performance review to be
conducted prior to expiration of one year term with equitable compensation
increase for renewal.
2. Compensation.
Annual salary of $150,000. Upon completion of secondary offering, annual
salary to increase to $200,000.
3. Benefits.
Three weeks paid vacation per year. Will participate in annual company
trips taken by the executives of Judge Imaging Systems, Inc. Car allowance
of $500.00 per month, to be paid directly to employee. In addition,
employee will be reimbursed for reasonable car expenses for fuel and
repairs. Judge Imaging Systems, Inc. will reimburse employee in an amount
equal to 100% of the standard medical and disability premiums for coverage
generally provided to Judge's executives.
4. Stock Options.
Employee will receive options to acquire common stock equivalent to 1% of
the issued and outstanding capital stock of Judge Imaging Systems, Inc.,
computed on a fully converted and diluted basis, which shall include the
stock reserved for employee options and grants and Series A Convertible
Preferred determined immediately post-closing of the merger (currently
expected to represent 50,000 shares). Of these options, .5% will vest at
the time of the merger, and .5% will vest at the time of the secondary
offering. Options are subject to approval of a stock option plan by the
Shareholders of Judge Imaging Systems, Inc.; management will agree to use
their best efforts to obtain such approval. The exercise price will be the
price paid for Series A Convertible Preferred pursuant to Section 1.8.
5. Position.
Chief Operating Officer
SCHEDULE 1.18
<PAGE>
6. Severance.
One month after first year in the event that employment is terminated by
employer.
7. Non-solicitation.
Upon expiration or termination of employment by employer or employee,
Employee will be restricted from soliciting customers or employees of Judge
Imaging Systems, Inc., irrespective of the reason for termination, for a
period of three years following termination. For purposes of the
foregoing, customers and employees shall include those current customers
and employees at the time of termination or expiration and for the one year
immediately proceeding termination or expiration.
8. Non-competition.
Upon expiration termination of employment by employer or employee,
irrespective of the reason for termination, Judge Imaging Systems, Inc. may
elect (at its option) to require employee to refrain from competing with
its business for a period of six months following termination in
consideration of payment of 50% of employee's compensation (its computed as
of the date of termination), during the six month non-competition period.
<PAGE>
EXHIBIT 10(d)
-------------
SECOND AMENDMENT AGREEMENT
--------------------------
THIS SECOND AMENDMENT AGREEMENT (hereinafter "Agreement") being made
effective February 26, 1996, by and between JUDGE COMPUTER CORPORATION, a New
Jersey corporation ("Judge") and DATAIMAGE, INC., a Delaware corporation
("DataImage").
WHEREAS, Judge and DataImage entered into an Agreement and Plan of Merger
dated December 1, 1995, as amended December 20, 1995 ("Merger Agreement")
providing for the merger of Judge with and into DataImage pursuant to the terms
and conditions set forth in that Merger Agreement; and
WHEREAS, pursuant to Section 10.4 of the Merger Agreement, the parties may
amend the Merger Agreement by a writing signed by responsible officers duly
authorized by the respective Boards of Directors; and
WHEREAS, the Board of Directors of both parties have agreed to and
authorized certain amendments to that Merger Agreement as more fully described
below.
NOW THEREFORE, in consideration of the premises and mutual promises
hereinafter set forth, and of other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
<PAGE>
1. Amendments.
----------
(a) Schedule 1.9 of the Merger Agreement is amended as set forth in
Exhibit "A" attached hereto.
(b) Exhibit "C" of the Merger Agreement is amended as set forth in
Exhibit "B" attached hereto.
2. Exception. Judge and DataImage agree and acknowledge that the
---------
amendments set forth in Section 1 above are an exception to the limitation set
forth in Section 10.1 of the Merger Agreement.
3. Authority. Both Judge and DataImage represent and warrant that
---------
each of them have all requisite corporate power and authority to enter into this
Agreement.
4. Counterparts. To facilitate execution, this Agreement may be
------------
executed in as many counterparts as may be required; and it shall not be
necessary that the signatures of, or on behalf of, each party, or that the
signatures of all persons required to bind any party, appear on each
counterpart; but it shall be sufficient that the signature of, or on behalf of,
each party, or that the signatures of the persons required to bind any party,
appear on one or more of the counterparts. All counterparts shall collectively
constitute a single agreement. It shall not be necessary in making proof of
this Agreement to produce or account for more than a number of counterparts
containing the respective signatures of, or on behalf of, all of the parties
hereto.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
duly executed, as of the date set forth above.
JUDGE COMPUTER CORPORATION
By: /s/ Martin E. Judge, Jr.
-------------------------------------------
Martin E. Judge, Jr. CEO/President
DATAIMAGE, INC.
By: /s/ Raymond V. Sozzi
-------------------------------------------
Raymond V. Sozzi, President
-3-
<PAGE>
EXHIBIT "A"
<PAGE>
PREFERENCES AND RIGHTS OF SERIES B
PREFERRED STOCK
1. Voting. Holders of the outstanding shares of Series B Preferred Stock
------
("Preferred B") shall have no voting rights, except as otherwise required by
law.
2. Liquidation Preference. The Preferred B shall have no liquidation
----------------------
preference and any distribution upon liquidation shall be shared ratably on a
per-share basis between the Preferred B and Common Stock, subject to the rights
of such other series and classes as the Board of Directors may determine.
3. Dividends. The holders of the outstanding shares of the Preferred
---------
shall be entitled to receive, out of funds legally available therefore,
cumulative dividends at the annual rate of ten percent (10%) of the stated value
of the shares. The stated value of the Preferred is $1,000.00. Dividends shall
accrue on each share from the date of original issuance of such share whether or
not earned or declared, and shall accrue until paid. If the Corporation achieves
a minimum cumulative pre-tax operating profit over any four (4) consecutive
calendar quarters of $2,500,000.00, the Board of Directors shall declare all
dividends which accrued in the four calendar quarters immediately preceding the
quarter in which the goal is attained, as payable. No dividend shall be again
paid on the Preferred until at least four calendar quarters have elapsed since
the payment of a dividend.
SCHEDULE 1.9
<PAGE>
4. Redemption.
----------
(a) Subsequent Public Offering. If Judge Imaging Systems, Inc., (the
--------------------------
surviving corporation (the "Surviving Corporation") of the merger between the
Corporation and DataImage, Inc. pursuant to an Agreement and Plan of Merger
dated December 1, 1995, as amended (the "Merger Agreement") closes upon a
subsequent public offering ("Offering"), the Board of Directors of the Surviving
Corporation shall redeem shares of the Preferred equal to ten percent (10%) of
the total number of issued and outstanding shares of Preferred provided the
proceeds to the Surviving Corporation from the Offering total at least
$6,000,000.00. For each additional $1,000,000.00 in proceeds to the Surviving
Corporation from the Offering, an additional ten percent (10%) of the issued and
outstanding shares of the Preferred shall be redeemed. Such redemption is
subject only to underwriter cutbacks. If more than one Offering occurs, this
redemption provision shall apply to each Offering.
(b) Mandatory Redemption. If, and to the extent the Preferred are
--------------------
not fully redeemed earlier as set forth above, they shall be fully redeemed upon
the tenth anniversary of the date of issuance.
(c) Redemption Procedure. The Surviving Corporation shall provide
--------------------
thirty (30) days' written notice of the redemption to the Holders of the
Preferred. The notice shall set forth the date set for redemption. Upon or prior
to the date set for redemption,
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<PAGE>
all shares of the Preferred shall be surrendered
to the Corporation or its transfer agent and the purchase price shall be paid
upon surrender to the Holders thereof. The purchase price per share to be paid
upon redemption of the Preferred shall be the stated value thereof plus all
accrued but unpaid dividends to the date set for redemption.
5. No Right of Conversion. The Preferred may not be converted into any
----------------------
other series of Stock of the Surviving Corporation.
-3-
<PAGE>
EXHIBIT "B"
<PAGE>
SECOND
RESTATED CERTIFICATE OF INCORPORATION
OF
DATAIMAGE, INC.
DataImage, Inc., a corporation organized and existing under the laws of the
State of Delaware, hereby certifies as follows:
1. The name of the corporation is DataImage, Inc.
The date of filing its original Certificate of Incorporation with the
Secretary of State was October 23, 1986. The date of filing its first Restated
Certificate of Incorporation with the Secretary of State was July 26, 1989.
2. This Restated Certificate of Incorporation restates and integrates and
further amends the Certificate of Incorporation of this corporation by changing
Articles 1 and 4, adding new Articles 5 and 6, and renumbering Articles 5
through 14 as Articles 7 through 16 respectively.
3. The text of the Certificate of Incorporation, as amended or
supplemented heretofore, is further amended hereby to read as herein set forth
in full:
"1. The name of the corporation is:
Judge Imaging Systems, Inc.
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name of its registered agent at such address is
The Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted
is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
4. The total number of shares of stock which the Corporation shall
have authority to issue is Ten Million (10,000,000) common shares having a
par value of One Cent ($.01), and five million (5,000,000) preferred shares
having a par value of One Cent ($.01). The preferred shares shall consist
of a series of one million one hundred twenty-five thousand (1,125,000)
shares of Series A Convertible Preferred Stock, with the rights,
preferences
<PAGE>
and designations set forth in Paragraph 5, below; a series of
one thousand five hundred (1,500) shares of Series B Preferred Stock, with
the rights, preferences and designations set forth in Paragraph 6, below;
and such additional series as may be issued by the Board of Directors from
time to time in one or more classes or series. The Board of Directors of
the Corporation shall have full authority to determine for any such class
or series its voting powers, designations, preferences, limitations,
special rights, and restrictions thereon which it deems appropriate.
5. Series A Convertible Preferred Stock
(a) Dividend. Holders of Series A Preferred Stock ("Preferred
--------
A") of the Corporation shall be entitled to receive, out of funds legally
available therefor, cumulative dividends at an annual rate of seven percent
(7%), provided that such dividend shall be payable only if a minimum of
$1,000,000 is raised pursuant to a private placement of the Preferred A as
described in the Private Placement Memorandum of Judge Computer Corporation
dated January 16, 1996; and (x) the Corporation initiates and closes upon a
subsequent public offering for its benefit; or (y) the Corporation redeems
the Preferred A pursuant to Paragraph 5(c). Upon the occurrence of the
subsequent public offering, the accrued dividend shall be due and payable
for the period extending through the date of closing on the subsequent
public offering and the Preferred A shall carry no further dividend
thereafter except as set forth below. The Preferred A will share pari
passu, on an as converted basis, in any dividends declared on common stock
or any other series of preferred stock, excluding the Series B Preferred
Stock.
(b) Liquidation Preference. The Preferred A will have a
----------------------
liquidation preference prior to the common stock and all other existing
classes or series of preferred stock, in an amount equal to $1.3333333 per
share plus all accrued, unpaid dividends (if any are payable as provided
above). The holders of the Preferred A may elect to treat a consolidation
or merger of the Corporation, resulting in a change of control of the
Corporation, or the sale of all or substantially all of the Corporation's
assets, as a liquidation or winding up for purposes of this liquidation
preference. For purposes of the foregoing, a change of control is deemed
to occur when more than 51% of the issued and outstanding shares of the
Corporation are held by individuals or entities who are not shareholders as
of the date of filing of this Second Restated Certificate of Incorporation.
-2-
<PAGE>
(c) Optional Redemption. In the event the Corporation has not
-------------------
closed on a subsequent public offering for its benefit by the eighth
anniversary of the filing of this Second Restated Certificate of
Incorporation, the Corporation shall have the right, but not the
obligation, to redeem the Preferred A. The Corporation must give thirty
days prior written notice of its intent to exercise its option to redeem.
Prior to the running of that time period, the holder may give the
Corporation written notice of his intent to convert the Preferred A
pursuant to Paragraph 5(d) below. If the holder does not exercise such
right to convert within such thirty day period, upon the date set for
redemption in the notice by the Corporation, the Preferred A shall be
surrendered to the Corporation and the purchase price shall be paid to the
holder thereof. The purchase price shall be $1.3333333 per share plus all
accrued, unpaid dividends to the date of redemption. In the event of the
failure of any holder to deliver such shares on the date set therefore,
such shares shall nevertheless be immediately deemed cancelled and upon
surrender of the Certificates, the purchase price and accrued dividends
shall be paid to the holder.
(d) Optional Conversion. The Preferred A may be converted into
-------------------
Common Stock at the holders' option at any time upon written notice to the
Corporation. The holder shall be entitled to receive one share of common
stock for each share of Preferred A, subject to adjustment as provided in
Paragraph 5(f). If less than all of the holder's Preferred A shares are
being converted, then they shall be converted in lots not less than the
greater of 10,000 shares or 20% of the total number of the holder's
Preferred A shares.
(e) Mandatory Conversion. Conversion of the Preferred A will
--------------------
occur automatically (i) at the time of Closing upon a subsequent public
offering of Common Stock by the Corporation in excess of $5 million, (ii)
upon sale of all or substantially all of the assets of the Corporation, or
(iii) upon the vote by holders of a majority of the then-outstanding shares
of the Preferred A. In the event of a conversion pursuant to Paragraph
5(e)(i), accrued dividends shall also be paid at the time of the
conversion.
(f) Antidilution and Adjustment Provisions. The conversion ratio
--------------------------------------
of the Preferred A to Common Stock, set forth in subparagraph (d) above, is
based upon the initial conversion price of $1.333333. The conversion ratio
and conversion price will be subject to the customary weighted average
antidilution adjustment in the event that the Corporation issues shares
(other than
-3-
<PAGE>
"Excluded Shares" as defined immediately below) at a purchase price less
than the then-applicable conversion price, which is determined as the
initial conversion price subject to previous adjustments (if any) made
pursuant to this subparagraph. "Excluded Shares" shall mean shares issued
to directors, officers, employees or consultants of the Corporation
pursuant to stock option or stock grant plan or plans authorized by the
Board of Directors from time to time. The conversion ratio will also be
equitably adjusted for Common Stock splits, Common Stock dividends and
other Common Stock recapitalizations.
(g) Voting Rights. Except with respect to the protective
-------------
provisions set forth in Paragraph 5(h), the Preferred A will vote with the
Common Stock as a single class, and a holder of Preferred A will have the
right to that number of votes equal to the number of shares of Common Stock
issuable upon conversion of his Preferred A.
(h) Protective Provisions. Consent of the holders of at least a
---------------------
majority of the Preferred A will be required for any action which (i)
materially and adversely alters or changes the rights, preferences or
privileges of the Preferred A, (ii) increases the authorized number of
shares of Preferred A, (iii) creates any new class or series of shares
having preference over or being on a parity with the Preferred A, (iv)
involves a sale by the Corporation's of all or substantially all of its
assets, a merger of the Corporation with another entity resulting in a
change of control of the Corporation (as previously defined), or a
liquidation or dissolution of the Corporation.
(i) Registration Rights. The Preferred A shall also have certain
-------------------
demand and piggyback registration rights upon conversion of the Preferred A
into the Common Stock of the Corporation as more fully described in a Stock
Registration Rights Agreement which has been entered into by Judge Computer
Corporation and the holders of the Preferred A, with an effective date as
of the filing of this Second Restated Certificate of Incorporation.
6. Series B Preferred Stock
(a) Voting. Holders of the outstanding shares of Series B
------
Preferred Stock ("Preferred B") shall have no voting rights, except as
otherwise required by law.
(b) Liquidation Preference. The Preferred B shall have no
----------------------
liquidation preference and any distribution upon liquidation shall be
shared ratably on a per-share
-4-
<PAGE>
basis between the Preferred B and Common Stock, subject to the rights of
such other series and classes as the Board of Directors may determine.
(c) Dividends. The holders of the outstanding shares of the
---------
Preferred B shall be entitled to receive, out of funds legally available
therefore, cumulative dividends at the annual rate of ten percent (10%) of
the stated value of the shares. The stated value of the Preferred B is
$1,000.00 per share. Dividends shall accrue on each share from the date of
original issuance of such share whether or not earned or declared, and
shall accrue until paid. If the Corporation achieves a minimum cumulative
pre-tax operating profit over any four (4) or fewer consecutive calendar
quarters of $2,500,000.00, the Board of Directors shall declare all
dividends which accrued in the four calendar quarters immediately preceding
the quarter in which this goal is attained, as payable. No dividend shall
be again paid on the Preferred B until at least four calendar quarters have
elapsed since the payment of a dividend.
(d) Redemption.
----------
(i) Subsequent Public Offering.
--------------------------
If the Corporation closes upon a subsequent public offering
("Offering"), the Board of Directors shall redeem shares of
the Preferred B equal to ten percent (10%) of the total
number of issued and outstanding shares of Preferred B
provided the proceeds to the Corporation from the Offering
total at least $6,000,000.00 For each additional
$1,000,000.00 in proceeds to the Corporation from the
Offering, an additional ten percent (10%) of the issued
and outstanding shares of the Preferred B shall be redeemed.
Such redemption is subject only to underwriter cutbacks. If
more than on Offering occurs, this redemption provision
shall apply to each Offering.
(ii) Mandatory Redemption.
--------------------
If, and to the extent all shares of the Preferred B are not
fully redeemed earlier as set forth above, they shall be
fully redeemed upon the tenth anniversary of the date of
issuance.
-5-
<PAGE>
(iii) Redemption Procedure.
--------------------
The Corporation shall provide thirty (30) days written
notice of the redemption to the holders of the Preferred
B. The notice shall set forth the date set for redemption.
Upon or prior to the date set for redemption, all shares
of the Preferred B shall be surrendered to the Corporation
or its transfer agent and the purchase price shall be paid
upon surrender to the holders thereof. The purchase price
per share to be paid upon redemption of the Preferred B
shall be the stated value thereof plus all accrued but
unpaid dividends to the date set for redemption.
(e) No Right of Conversion. The Preferred B may not be
----------------------
converted into any other shares of Stock of the Corporation.
7. The number of directors which shall constitute the Board of
Directors shall be established by the Board of Directors, but shall not be
less than 3, or more than 9. The directors of the corporation shall be
divided into three classes: Classes One, Two and Three. Class One
directors shall initially serve until the 1990 annual meeting of
shareholders. Class Two directors shall initially serve until the 1991
annual meeting of shareholders. Class Three directors shall initially
serve until the 1992 annual meeting of shareholders. At each annual
meeting of shareholders, the successors to members of the class of
directors whose terms shall then expire shall be elected to serve three
year terms and until their successors are elected and qualified. When the
number of directorships is changed, any newly-created directorships or any
decrease in directorships shall be so apportioned by the Board of Directors
between the three classes so as to make all classes as nearly equal in
number as is possible.
8. The Board of Directors is authorized to make, alter or repeal the
by-laws of the corporation.
9. To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or may hereafter be amended, a director
of this corporation shall not be liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a
director.
-6-
<PAGE>
10. To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or may hereafter be amended, the
corporation shall indemnify any of its officers, directors, employees or
agents who was or is made a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative by reason of the fact that
he (or she) is or was a director, officer, employee or agent of the
corporation, or was serving at the request of the corporation in any such
capacity with another corporation, partnership, joint venture, trust or
other enterprise.
11. In addition to the vote of stockholders otherwise required by
law, including, without limitation, the provisions of Section 203 of the
General Corporation Law of Delaware, or by the terms of any other article
of this Certificate of Incorporation, whether now or hereafter authorized,
the affirmative vote or consent of either: (i) seventy-five percent (75%)
of the members of the Board of Directors or (ii) the holders of eighty-five
percent (85%) or more of all shares of stock of the corporation entitled to
vote in elections of directors, considered for the purposes hereof as one
class, shall be required for the adoption or authorization of a business
combination (as hereinafter defined) with any other entity (as hereinafter
defined) if, as of the record date for the determination of stockholders
entitled to notice thereof and to vote thereon or consent thereto, such
other entity is the beneficial owner, directly or indirectly, of more than
fifteen percent (15%) of the outstanding shares of stock of the corporation
entitled to vote in elections of directors considered for the purposes of
this Article as one class; provided that such eighty-five percent (85%)
voting requirement shall not be applicable if:
(a) The cash, or fair market value of other consideration to be
received per share by common stockholders of the corporation in
such business combination bears the same or a greater percentage
relationship to the market price of the corporation's common
stock immediately prior to the announcement of such business
combination as the highest per share price (including brokerage
commissions and/or soliciting dealers' fees and transfer taxes)
which such other entity has theretofore paid for any of the
shares of the corporation's common stock already owned by its
bears to the market price of the common stock of the corporation
immediately preceding the initial
-7-
<PAGE>
acquisition of the corporation's common stock by such other
entity; and
(b) The cash, or fair market value of other consideration to be
received per share by common stockholders of the corporation in
such business combination (i) is not less than the highest per
share price (including brokerage commissions and/or soliciting
dealers' fees and transfer taxes) paid by such other entity in
acquiring any of its holdings of the corporation's common stock,
and (ii) is not less than the earnings per share of common
stock of the corporation for the four full consecutive fiscal
quarters, or the last fiscal year reported, whichever is higher,
immediately preceding the record date for solicitation of votes
on such business combination, multiplied by the then
price/earnings multiple (if any) of such other entity as
customarily computed and reported in the financial community; and
(c) The price offered must also include an additional premium equal
to the per share equivalent of fifty percent (50%) of the highest
consolidated balance of domestic and foreign cash, cash
equivalents and marketable securities held by the corporation at
any time during the period commencing on the date such other
entity first acquired any shares of the corporation's common
stock and terminating on the fifteenth day prior to the date on
which the proxy statement referred to in (f) below is scheduled
to be mailed to public stockholders of the corporation; and
(d) After such other entity has acquired a fifteen percent (15%)
interest and prior to the consummation of such business
combination: (i) such other entity shall have taken steps to
ensure that the corporation's Board of Directors included at all
times representation by continuing director(s) (as hereinafter
defined) proportionate to the stockholdings of the corporation's
public common stockholders not affiliated with such other entity
(with a continuing director to occupy any resulting fractional
board position); (ii) there shall have been no change in the
amount per share payable or paid as dividends on the
corporation's common stock except as may have been approved by a
vote of seventy-five percent
-8-
<PAGE>
(75%) of the directors; (iii) such
other entity shall not have acquired any newly issued shares of
stock, directly or indirectly, from the corporation (except upon
conversion of convertible securities acquired by it prior to
obtaining a fifteen percent (15%) interest or as a result of a
pro rata stock dividend or stock split); and (iv) such other
entity shall not have acquired any additional shares of the
corporation's outstanding common stock or securities convertible
into common stock except as a part of the transaction which
results in such other entity acquiring its fifteen percent (15%)
interest; and
(e) Such other entity shall not have (i) received the benefit,
directly or indirectly (except proportionately as a shareholder),
of any loans, advances, guarantees, pledges or other financial
assistance or tax credits provided by the corporation, or (ii)
made any major change in the corporation's business or equity
capital structure without the approval of seventy-five percent
(75%) of the directors, in either case prior to the consummation
of such business combination; and
(f) A proxy statement complying with the requirements of the
Securities Exchange Act of 1934 shall be mailed to public
stockholders of the corporation for the purpose of soliciting
stockholder approval of such business combination and shall
contain at the front thereof, in a prominent place, any
recommendations as to the advisability (or inadvisability) of the
business combination which the continuing directors, or any of
them, may choose to state and, if deemed advisable by a majority
of the continuing directors, an opinion of a reputable investment
banking firm as to the fairness (or lack of fairness) of the
terms of such business combination, from the point of view of the
remaining public stockholders of the corporation (such investment
banking firm to be selected by a majority of the continuing
directors and to be paid a reasonable fee for their services by
the corporation upon receipt of such opinion).
The provision hereof shall also apply to a business combination with
any other entity which at any time has been the beneficial owner, directly
or indirectly, of more than fifteen percent (15%) of the outstanding shares
-9-
<PAGE>
of stock of the corporation entitled to vote in elections of directors
considered for the purposes hereof as one class, notwithstanding the fact
that such other entity has reduced its shareholdings below fifteen percent
(15%) if, as of the record date for the determination of stockholders
entitled to notice of and to vote on or consent to the business
combination, such other entity is an "affiliate" of the corporation (as
hereinafter defined).
12. As used in Sections 11 through 15 hereof, (a) the term "other
entity" shall include any corporation, person or other entity and any other
entity with which it or its "affiliate" or "associate" (as defined below)
has any agreement, arrangement or understanding, directly or indirectly,
for the purpose of acquiring, holding, voting or disposing of stock of the
corporation, or which is its "affiliate" or "associate" as those terms are
defined in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, together with the successors and assigns
of such persons in any transaction or series of transactions not involving
a public offering of the corporation's stock within the meaning of the
Securities Act of 1933, (b) an other entity shall be deemed to be the
beneficial owner of any shares of stock of the corporation which the other
entity (as defined above) has the right to acquire pursuant to an
agreement, or upon exercise of conversion rights, warrants or options or
otherwise, (c) the outstanding shares of any class of stock of the
corporation shall include shares deemed owned through application of clause
(b) above but shall not include any other shares which may be issuable
pursuant to any agreement, or upon exercise of conversion rights, warrants
or options, or otherwise; (d) the term "business combination" shall include
any merger or consolidation of the corporation with or into any other
corporation, or the sale or lease of all or any substantial part of the
assets of the corporation to, or any sale or lease to the corporation or
any subsidiary thereof in exchange for securities of the corporation of any
assets (except assets having an aggregate fair market value of less than
$1,000,000) of any other entity; (e) the term "continuing director" shall
mean a person who was a member of the Board of Directors of the corporation
elected by the public stockholders prior to the time that such other entity
acquired in excess of ten percent (10%) of the stock of the corporation
entitled to vote in the election of directors, or a person recommended to
succeed a continuing director by a majority of continuing directors; and
(f) for the purposes of subparagraphs 1(a) and (b) hereof the term "other
consideration to be received" shall include common stock of the corporation
retained by its existing public stockholders in the event
-10-
<PAGE>
of a business combination with such other entity in which the corporation
is the surviving corporation.
13. A majority of the continuing directors shall have the power and
duty to determine for the purposes hereof on the basis of information known
to them whether (a) such other entity beneficially owns more than fifteen
percent (15%) of the outstanding shares of stock of the corporation
entitled to vote in election of directors (b) any entity is an "affiliate"
or "associate" (as defined above) of another, (c) any other entity has an
agreement, arrangement or understanding with another, or (d) the assets
being acquired by the corporation, or any subsidiary thereof, have an
aggregate fair market value of less than $1,000,000.
14. No amendment to this Certificate of Incorporation shall amend,
alter, change or repeal any of the provisions of Sections 11 through 14
hereof, unless the amendment effecting such amendment, alteration, change
or repeal shall receive the affirmative vote or consent of the holders of
eighty-five percent (85%) or more of all shares of stock of the corporation
entitled to vote at an election of directors, considered for these purposes
as one class; provided that this Section 14 shall not apply to, and such
eighty-five percent (85%) vote or consent shall not be required for, any
amendment, alteration, change or repeal recommended to the stockholders by
eighty-five percent (85%) of such directors who would be eligible to serve
as "continuing directors" within the meaning of Section 12 hereof.
15. Nothing herein shall be construed to relieve any other entity
from any fiduciary obligation imposed by law.
16. Unless otherwise restricted by law, any director may be removed,
with or without cause, only by a vote of the holders of at least eighty-
five percent (85%) of the shares entitled to vote at an election of
directors, or by the vote of seventy-five percent (75%) of the other
directors then in office.
4. This Second Restated Certificate of Incorporation was duly adopted by
vote of the stockholders in accordance with Sections 245 and 252 of the General
Corporation Law of the State of Delaware.
- 11 -
<PAGE>
IN WITNESS WHEREOF, said DataImage, Inc. has caused this Certificate to be
signed by Raymond V. Sozzi, its President, and attested by Carolyne I. Gatesy,
its Secretary, this 26th day of February, 1996.
------ --------
DATAIMAGE, INC.
By: /s/ Raymond V. Sozzi
----------------------------------
Raymond V. Sozzi, President
Attest: /s/ Carolyne I. Gatesy
---------------------------------------
Carolyne I. Gatesy, Secretary
- 12 -
KOS:slp
020996
<PAGE>
EXHIBIT 10(l)
-------------
JUDGE IMAGING SYSTEMS, INC.
---------------------------
SEPARATION AGREEMENT
--------------------
THIS SEPARATION AGREEMENT is made and executed this 23rd day of April,
1996, by and between JUDGE IMAGING SYSTEMS, INC. (hereinafter referred to as
"JIS"), and RAYMOND V. SOZZI (hereinafter referred to as "Employee").
BACKGROUND
----------
A. Employee was employed by JIS as Chief Operating Officer pursuant to an
Employment Agreement ("Employment Agreement") effective February 28, 1996.
B. The parties hereto desire to amicably terminate Employee's employment
with JIS.
NOW THEREFORE, in consideration of the mutual promises and agreements set
forth in this Agreement, the parties hereto, intending to be legally bound
hereby, agree as follows:
TERMS
-----
1. RELEASE BY EMPLOYEE.
(a). Employee, for and in consideration of the undertakings of
JIS set forth herein, hereby remises, releases and forever discharges JIS, its
past and present officers, directors, shareholders, employees, agents (including
its outside advisors, accountants and attorneys), affiliates, successors, and
assigns (collectively the "Released Parties"), of and from all, manners of
actions and causes of actions, suits, debts, dues, accounts, bonds, covenants,
contracts, agreements, judgments, claims and demands
<PAGE>
whatsoever, and specifically any claims arising from or relating in any way to
his Employment Agreement and his employment relationship or the termination of
his relationship and affiliation with JIS, including any and all claims arising
under any federal, state or local statutory or common laws including, but not
limited to Title VII of the Civil Rights Act of 1964, the Pennsylvania Human
Relations Act or any other claims arising out of his employment at JIS, which
against the Released Parties, Employee, his heirs, executors, or assigns, ever
had or now has.
(b). Employee agrees and covenants that neither he nor any person,
organization or other entity on his behalf, will file, charge, claim, sue or
cause of permit to be filed, charged or claimed any actions for damages for
injunctive, declaratory, monetary or other relief involving any matter relating
in any way to his Employment Agreement or the termination of his relationship
and affiliation with JIS. Employee recognizes and acknowledges that the
severance payment by JIS is expressly contingent upon the fulfillment and
satisfaction of the obligations set forth in this Agreement.
2. LIMITATION OF THE RELEASE BY EMPLOYEE. The Release set forth in
Paragraph 1 is not intended by the parties to apply to any pension rights
Employee may have or to any rights Employee may have under the Consolidated
Omnibus Budget Reconciliation Act (COBRA).
3. RELEASE BY JIS. JIS, for and in consideration of the undertakings
of Employee set forth herein, hereby remises, releases and forever discharges
Employee, of and from all, manners
-2-
<PAGE>
of actions and causes of actions, suits, debts, dues, accounts, bonds,
covenants, contracts, agreements, judgments, claims and demands whatsoever, and
specifically any claims arising from or relating in any way to his Employment
Agreement and his employment relationship or the termination of his relationship
and affiliation with JIS, including any and all claims arising under any
federal, state or local statutory or common laws, which against the Employee JIS
ever had or now has.
4. SEVERANCE PAY. As severance pay, Employee shall receive from JIS one
month's salary in the amount of $12,500. The severance pay, less usual
deductions, shall be paid to Employee on the execution of this Agreement.
5. SEVERANCE DATE. Employee's last work day shall be April 18, 1996.
His termination of employment with JIS shall be effective that date. Employee
acknowledges that JIS is not obligated to hire, re-hire, or re-employ Employee
in the future.
6. TERMINATION OF EMPLOYMENT AGREEMENT.
(a). Notice. Employee waives and releases JIS from any notice
------
obligation under Paragraph 4.3(c) of his Employment Agreement.
(b). Compensation. Employee waives and releases JIS from any
------------
payments for salary, expense reimbursement, bonuses or any other payments or
benefits set forth in Paragraph 5.3 of the Employment Agreement, other than
those set forth in this Agreement.
(c). Stock Options. Employee acknowledges that he holds options for
-------------
only 25,000 common shares of JIS. Employee acknowledges that he has not, and
will not, vest any additional
-3-
<PAGE>
options as set forth in paragraph 3.3(b) of the Employment Agreement.
(d). Continuing Obligations. The parties agree that Employee's
----------------------
obligations set forth in Section 4.3 and Article VI shall continue pursuant to
their terms.
7. PROPERTY. Employee agrees that all information, documentation,
software and printed materials including, but not limited to all financial
information, whether recorded by computer, printed material or other medium,
created by or provided to him during the course of his employment are the
property of JIS. Employee represents that he does not have any such JIS
property in his possession or that all such property will be returned to JIS no
later than April 18, 1996.
8. COMMUNICATIONS. Employee covenants and agrees that he shall not
engage in any communications which shall disparage JIS or unlawfully interfere
with its existing or prospective business relationships. Employee further
agrees to treat all information received as a result of his relationship with
JIS as confidential and the property of JIS. Employee will not provide such
information to any third party without the prior written consent of JIS.
9. NO ADMISSION. The parties hereto acknowledge that this Separation
Agreement shall not be construed as an admission by any party of any liability
or wrongdoing whatsoever and that the agreements set forth herein is made by the
parties solely in an effort to amicably terminate the employment relationship.
-4-
<PAGE>
10. ENTIRE AGREEMENT. This Agreement sets forth the entire understanding
and agreement of the parties hereto with regard to the subject matter referred
to in this Agreement and supersedes all prior oral negotiations, understandings
and agreements with regard to the subject matter of this Agreement.
11. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
12. CONTROLLING LAW. This Agreement shall be interpreted and enforced
in accordance with the laws of the Commonwealth of Pennsylvania.
13. SEVERABILITY. All of the provisions of this Agreement are distinct
and severable, and if any provisions should, for any reason, be held to be
invalid or unenforceable, then the valid and enforceable provisions hereof shall
continue in full force and effect.
14. COUNTERPARTS. To facilitate execution, this Agreement may be executed
in as may counterparts as may be required; and it shall not be necessary that
the signatures of, or on behalf of, each party, or that the signatures of all
persons required to bind any party, appear on each counterpart; but it shall be
sufficient that the signatures of, or on behalf of, each party, or that the
signatures of the persons required to bind any party, appear on more of the
counterparts. All counterparts shall collectively constitute a single Agreement.
It shall not be necessary in making proof of this Agreement to produce or
account
-5-
<PAGE>
for more than a number of counterparts containing the respective signatures of,
or on behalf of, all the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed the day and year first above written.
JUDGE IMAGING SYSTEMS, INC.
By:/s/ Martin E. Judge, Jr.
---------------------------
MARTIN E. JUDGE, JR., CEO
By:/s/ Raymond V. Zozzie
---------------------
RAYMOND V. SOZZI
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JUDGE
IMAGING SYSTEMS, INC. FORM 10-QSB FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 614,823
<SECURITIES> 0
<RECEIVABLES> 1,786,759
<ALLOWANCES> 27,000
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1,520,000
8,226
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</TABLE>
