EXHIBIT 2.1
AGREEMENT AND PLAN
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OF REORGANIZATION
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This Agreement and Plan of Reorganization (the "Agreement") is made and
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entered into as of November 11, 1997, by and among: JetFax, Inc., a Delaware
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corporation ("JetFax"); JF Acquisition Sub, Inc., a California corporation and
a
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wholly owned subsidiary of JetFax ("Merger Sub"); DocuMagix, Inc., a California
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corporation ("DocuMagix"); and the shareholders of DocuMagix listed on Exhibit
A hereto (the "Designated Shareholders"). Capitalized terms used herein and
not otherwise defined shall have the meaning ascribed thereto in Exhibit B.
Recitals
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A. JetFax, Merger Sub and DocuMagix intend to effect a merger of
Merger Sub with and into DocuMagix in accordance with this Agreement and the
California General Corporation Law (the "Merger"). Upon consummation of the
Merger, Merger Sub will cease to exist, and DocuMagix will become a wholly
owned subsidiary of JetFax.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). For accounting purposes, it is intended that the Merger
be treated as a "pooling of interests."
C. This Agreement, the Amendment to Restated Articles (as defined
below) and the Agreement of Merger has been adopted and approved by the
respective boards of directors of JetFax, Merger Sub and DocuMagix.
D. A portion of the shares of JetFax Common Stock otherwise issuable
by JetFax in connection with the Merger shall be placed in escrow by JetFax and
the release of such portion shall be contingent upon certain events and
conditions, all as set forth in the Escrow Agreement (as defined below).
E. Contemporaneously with the execution and delivery of this
Agreement, each Designated Shareholder is executing and delivering to JetFax a
Shareholder Agreement of even date herewith in the form attached hereto as
Exhibit C and a Release of even date herewith in the form attached hereto as
Exhibit I.
G. Contemporaneously with the execution and delivery of this Agreement,
each Person listed on Exhibit D-1 is executing and delivering to JetFax
an Affiliate Agreement in the form attached hereto as Exhibit D-2.
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Agreement
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The parties to this Agreement agree as follows:
1. Description of Transaction
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1.1 Merger of Merger Sub into DocuMagix. Upon the terms
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and subject to the conditions set forth in this Agreement, at the Effective
Time (as defined in Section 1.3), Merger Sub shall be merged with and into
DocuMagix, and the separate existence of Merger Sub shall cease. DocuMagix
will continue as the surviving corporation in the Merger (the "Surviving
Corporation").
1.2 Effect of the Merger. The Merger shall have the
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effects set forth in this Agreement and in the applicable provisions of
the California General Corporation Law.
1.3 Closing; Effective Time. Unless this Agreement is
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earlier terminated pursuant to Section 8.1, the closing (the "Closing")
of the Merger shall take place at the offices of Cooley Godward LLP, Five
Palo Alto Square, ▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ as
promptly as practicable on a date mutually agreed upon by JetFax and DocuMagix,
but not later than the fifth business day following satisfaction or waiver of
the conditions set forth in Sections 6 and 7 (the "Closing Date").
Contemporaneously with or as promptly as practicable after the Closing, (i)
a properly executed Amendment to Restated Articles of Incorporation of
DocuMagix in the form attached hereto as Exhibit E-1 (the "Amendment to
Restated Articles") shall be filed with Office of the Secretary of State of the
State of California, immediately after which a properly executed agreement of
merger in the form attached hereto as Exhibit E-2 shall be filed with the
Office of the Secretary of State of the State of California. The Merger shall
take effect at the time that the Agreement of Merger is filed with and
accepted by the Secretary of State of the State of California (the "Effective
Time").
1.4 Articles of Incorporation and Bylaws; Directors and
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Officers. Unless otherwise determined by JetFax at or prior to the Effective
Time:
(a) the Articles of Incorporation of the Surviving Corporation shall
be amended and restated as of the Effective Time as set forth in Exhibit 1 to
Exhibit E-2 hereto;
(b) the Bylaws of the Surviving Corporation shall be amended and
restated as of the Effective Time to conform to the Bylaws of Merger Sub as in
effect immediately prior to the Effective Time; and
(c) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the officers and directors of
Merger Sub.
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1.5 Conversion of Shares.
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(a) Subject to the terms and conditions of this Agreement, at
the Effective Time, by virtue of the Merger and without any
further action on the part of JetFax, Merger Sub, DocuMagix or
any shareholder of DocuMagix, the following shall occur:
(i) each share of DocuMagix Common Stock outstanding immediately
prior to the Effective Time shall be cancelled and converted into the right to
receive the fraction of a share of the common stock (par value $.01 per share)
of JetFax ("JetFax Common Stock") equal to (A) 0.0199 times the Consideration
(as defined in Section 1.5(c) below) divided by (B) the number of shares of
DocuMagix Common Stock outstanding immediately prior to the Effective Time;
(ii) each share of DocuMagix Series A Preferred Stock (if any)
outstanding immediately prior to the Effective Time shall be cancelled and
converted into the right to receive the fraction of
a share of JetFax Common Stock equal to (A) 0.0961 times the Consideration
divided by (B) the number of shares of DocuMagix Series A Preferred Stock
outstanding immediately prior to the Effective Time;
(iii) each share of DocuMagix Series B Preferred Stock (if any)
outstanding immediately prior to the Effective Time shall be cancelled and
converted into the right to receive the fraction of a share of JetFax Common
Stock equal to (A) 0.0620 times the Consideration divided by (B) the number of
shares of DocuMagix Series B Preferred Stock outstanding immediately prior to
the Effective Time;
(iv) each share of DocuMagix Series C Preferred Stock (if any)
outstanding immediately prior to the Effective Time shall be cancelled and
converted into the right to receive the fraction of a share of JetFax Common
Stock equal to (A) 0.2331 times the Consideration divided by (B) the number of
shares of DocuMagix Series C Preferred Stock outstanding immediately prior to
the Effective Time;
(v) each share of DocuMagix Series D Preferred Stock (if any)
outstanding immediately prior to the Effective Time shall be cancelled and
converted into the right to receive the fraction of
a share of JetFax Common Stock equal to (A) 0.3294 times the Consideration
divided by (B) the number of shares of DocuMagix Series D Preferred Stock
outstanding immediately prior to the Effective Time;
(vi) each share of DocuMagix Series E Preferred Stock (if any)
outstanding immediately prior to the Effective Time shall be cancelled and
converted into the right to receive the fraction of a share of JetFax Common
Stock equal to (A) 0.0325 times the
Consideration divided by (B) the number of shares of DocuMagix Series E
Preferred Stock outstanding immediately prior to the Effective Time;
(vii) each share of DocuMagix Series F Preferred Stock (if any)
outstanding immediately prior to the Effective Time shall be cancelled and
converted into the right to receive the fraction of a share of JetFax Common
Stock equal to (A) 0.2007 times the Consideration divided by (B) the number of
shares of DocuMagix Series F Preferred Stock outstanding immediately prior to
the Effective Time; and
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(viii) each share of DocuMagix Series G Preferred Stock (if any)
outstanding immediately prior to the Effective Time shall be cancelled and
converted into the right to receive the fraction of a share of JetFax Common
Stock equal to (A) 0.0263 times the Consideration divided by (B) the number of
shares of DocuMagix Series G Preferred Stock outstanding immediately prior to
the Effective Time.
(b) each share of the common stock (with no par value) of Merger
Sub outstanding immediately prior to the Effective Time shall be cancelled
and converted into one share of common stock of the Surviving Corporation.
(c) For purposes of this Agreement, the term "Consideration"
shall mean 793,957 shares of JetFax Common Stock (as adjusted as appropriate
to reflect any stock split, reverse stock split, stock dividend,
recapitalization or other similar transaction effected by JetFax between the
date of this Agreement and the Effective Time).
(d) If any shares of DocuMagix capital stock outstanding immediately
prior to the Effective Time are unvested or are subject to a repurchase
option, risk of forfeiture or other condition under any applicable
restricted stock purchase agreement or other agreement with DocuMagix,
then the shares of JetFax Common Stock issued in exchange for such
shares of DocuMagix capital stock will also be unvested and subject to the
same repurchase option, risk of forfeiture or other condition, and the
certificates representing such shares of JetFax Common Stock may accordingly
be marked with appropriate legends.
(e) Each share of capital stock of DocuMagix issued and outstanding
immediately prior to the Effective Time owned directly or indirectly
by JetFax, Merger Sub or any subsidiary thereof, shall automatically be
cancelled at the Effective Time
and no conversions shall be made in respect thereof.
1.6 Employee Stock Options. At the Effective Time, each
stock option that is then outstanding under the Option Plan, whether
vested or unvested (a "DocuMagix Option"), shall be assumed by JetFax in
accordance with the terms (as in effect as of the date of this Agreement) of
the Option Plan and the stock option agreement by which such DocuMagix
Option is evidenced. All rights with respect to DocuMagix Common Stock
under outstanding DocuMagix Options shall thereupon be converted into rights
with respect to JetFax Common Stock. Accordingly, from and after the
Effective Time, (a) each DocuMagix Option assumed by JetFax may be
exercised solely for shares of JetFax Common Stock, (b) the number of shares
of JetFax Common Stock subject to each such assumed DocuMagix Option shall be
equal to the number of shares of DocuMagix Common Stock that were subject
to such DocuMagix Option immediately prior to the Effective Time
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multiplied by the Option Conversion Factor, rounded down to the nearest
whole number of shares of JetFax Common Stock, (c) the per share exercise
price for the JetFax Common Stock issuable upon exercise of each such
assumed DocuMagix Option shall be determined by dividing the exercise price
per share of DocuMagix Common Stock subject to such DocuMagix Option, as
in effect immediately prior to the Effective Time, by the Option Conversion
Factor, and rounding the resulting exercise price up to the nearest
whole cent, and (d) all restrictions on the exercise of each such assumed
DocuMagix Option shall continue in full force and effect, and the term,
exercisability, vesting schedule and other provisions of such DocuMagix
Option shall otherwise remain unchanged; provided, however, that each such
assumed DocuMagix Option shall, in accordance with its terms, be subject to
further adjustment as appropriate to reflect any stock split, reverse stock
split, stock dividend, recapitalization or other similar transaction
effected by JetFax after the Effective Time. DocuMagix and JetFax shall
take all action that may be necessary (under the Option Plan and
otherwise) to effectuate the provisions of this Section 1.6. Following the
Closing, JetFax will send to each holder of an assumed DocuMagix Option a
written notice setting forth (i) the number of shares of JetFax Common Stock
subject to such assumed DocuMagix Option, and (ii) the exercise price per
share of JetFax Common Stock issuable upon exercise of such assumed
DocuMagix Option. For the purposes of this Section 1.6, the Option Conversion
Factor shall be 0.004572.
1.7 Cancellation of Bridge Warrants. Subject to the terms
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and conditions of this Agreement, at the Effective Time, without any further
action on the part of JetFax, Merger Sub, DocuMagix or any shareholder of
DocuMagix, the Bridge Warrants outstanding immediately prior to the Effective
Time shall be cancelled in exchange for an aggregate of sixty (60) shares
of JetFax Common Stock distributed on a pro-rata basis with respect to the
number of shares of DocuMagix capital stock issuable upon the exercise of
each Bridge Warrant. The provisions set forth in Section 1.10(c), 1.10(d)
and 1.10(e) with respect to the issuance of JetFax Common Stock in the
Merger shall also apply to the issuance of shares of JetFax Common
Stock pursuant to this Section 1.7. Each Bridge Holder hereby agrees not to
transfer, assign or exercise any Bridge Warrant held by such Bridge Holder and
further agrees to cancel and deliver such Bridge Warrant to JetFax at the
Closing in exchange for shares of JetFax Common Stock pursuant to this Section
1.7.
1.8 Cancellation of Bridge Notes. Subject to the terms and
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conditions of this Agreement, at the Effective Time, without any further
action on the part of JetFax, Merger Sub, DocuMagix or any shareholder of
DocuMagix, the aggregate principal amount of Bridge Notes outstanding
immediately prior to the Effective Time shall be cancelled and discharged in
full in exchange for that number of shares of JetFax Common Stock equal
to (A) the principal amount outstanding under the Bridge Notes on the
Closing Date divided by (B) the Designated JetFax Stock Price. The
provisions set forth in Section 1.10(c), 1.10(d) and 1.10(e)
respecting the issuance of JetFax Common Stock in the Merger shall also
apply to the issuance of shares of JetFax Common Stock pursuant to this
Section 1.8.
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Each Bridge Holder hereby agrees not to transfer, assign or convert any
Bridge Note held by such Bridge Holder and further agrees to cancel and
deliver such Bridge Note to JetFax at the Closing in exchange for shares of
JetFax Common Stock pursuant to this Section 1.8.
1.9 Closing of DocuMagix's Transfer Books. At the Effective Time,
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holders of certificates representing shares of DocuMagix's capital stock that
were outstanding immediately prior to the Effective Time shall cease to
have any rights as shareholders of DocuMagix, and the stock transfer
books of DocuMagix shall be closed. No further transfer of any such
shares of DocuMagix's capital stock shall be made on such stock transfer
books after the Effective Time. If, after the Effective Time, a valid
certificate previously representing any of such shares of DocuMagix's
capital stock (a "DocuMagix Stock Certificate") is presented to the
Surviving Corporation or JetFax, such DocuMagix Stock Certificate shall be
cancelled and shall be exchanged, if conversion of the stock represented
by such certificate is provided for in Section 1.5, in accordance with
Section 1.10.
1.10 Exchange of Certificates.
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(a) At or as soon as practicable after the Effective Time, JetFax
will send to the holders of DocuMagix Stock Certificates,
if conversion of the stock represented by such certificate is provided for
in Section 1.5, a letter of transmittal in customary form and containing
such provisions as JetFax may reasonably specify, and (ii) instructions for
use in effecting the surrender of DocuMagix Stock Certificates in exchange
for certificates representing JetFax Common Stock. Upon surrender of a
DocuMagix Stock Certificate to JetFax for exchange, together with a duly
executed letter of transmittal and such other documents as may be reasonably
required by JetFax, the holder of such DocuMagix Stock Certificate shall be
entitled to receive in exchange therefor a certificate representing the
number of whole shares of JetFax Common Stock that such holder has the
right to receive, if any, pursuant to the provisions of Section 1.5, and
each DocuMagix Stock Certificate so surrendered shall be cancelled.
Until surrendered as contemplated by this Section 1.10, each DocuMagix Stock
Certificate shall be deemed, from and after the Effective Time, to represent
only the right to receive shares of JetFax Common Stock (or cash in lieu of
any fractional share of JetFax Common Stock), if any, as contemplated by
Section 1.5 or Section 1.10(c). If any DocuMagix Stock Certificate shall
have been lost, stolen or destroyed, JetFax may, in its discretion and as a
condition precedent to the issuance of any certificate representing
JetFax Common Stock, require the owner of such lost, stolen or destroyed
DocuMagix Stock Certificate to provide an appropriate affidavit and to
deliver a bond (in such sum as JetFax may reasonably direct) as indemnity
against any claim that may be made against JetFax or the Surviving
Corporation with respect to such DocuMagix Stock Certificate.
(b) No dividends or other distributions declared or made
with respect to JetFax Common Stock with a record date after the Effective
Time shall be paid to the holder of any unsurrendered DocuMagix Stock
Certificate with respect to the shares of JetFax Common Stock represented
thereby, and no cash payment in lieu of any fractional share shall be paid to
any such holder, until such holder surrenders such DocuMagix Stock Certificate
in accordance with this Section 1.10 (at which time such holder shall be
entitled to receive all such dividends and distributions and such cash
payment).
(c) No fractional shares of JetFax Common Stock shall be
issued in connection with the Merger, and no certificates for any such
fractional shares shall be issued. In lieu of such fractional shares, any
holder of capital stock of DocuMagix who would otherwise be entitled to
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receive a fraction of a share of JetFax Common Stock (after aggregating all
fractional shares of JetFax Common Stock issuable to such holder) shall,
upon surrender of such holder's DocuMagix Stock Certificate(s), be paid in
cash the dollar amount (rounded to the nearest whole cent), without
interest, determined by multiplying such fraction by the Designated
JetFax Stock Price.
(d) The shares of JetFax Common Stock to be issued in the
Merger shall be characterized as "restricted securities" for purposes of
Rule 144 under the Securities Act, and each certificate representing
any of such shares shall bear a legend identical or similar in effect to the
following legend (together with any other legend or legends required by
applicable state securities laws or otherwise):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED
UNLESS REGISTERED UNDER THE ACT OR UNLESS AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE ACT IS AVAILABLE."
(e) JetFax and the Surviving Corporation shall be entitled
to deduct and withhold from any consideration payable or otherwise
deliverable to any holder or former holder of capital stock of DocuMagix
pursuant to this Agreement such amounts as JetFax or the Surviving
Corporation may be required to deduct or withhold therefrom under the Code
or under any provision of state, local or foreign tax law. To the extent
such amounts are so deducted or withheld, such amounts shall be treated for
all purposes under this Agreement as having been paid to the Person to whom
such amounts would otherwise have been paid.
(f) Neither JetFax nor the Surviving Corporation shall be
liable to any holder or former holder of capital stock of DocuMagix for
any shares of JetFax Common Stock (or dividends or distributions with respect
thereto), or for any cash amounts, delivered to any public official
pursuant to any applicable abandoned property, escheat or similar law.
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1.11 Escrow Agreement. At the Effective Time, the
Designated Shareholders will be deemed to have received and deposited
with the Escrow Agent (as defined below) ten percent (10%) of the aggregate
number of shares of JetFax Common Stock issuable to all Designated
Shareholders in accordance with Section 1.5 (rounded with respect to each
shareholder to the nearest whole number of shares). As soon as practicable
after the Effective Time, without any act of any shareholder, JetFax shall
deliver such shares in the aggregate (the "Escrow Shares") in the form of a
certificate to and in the name of the Escrow Agent identified in and
pursuant to an Escrow Agreement in the form attached as Exhibit F hereto.
The Escrow Shares shall be governed by and subject to the terms set forth
in the Escrow Agreement. The portion of the Escrow Shares deemed
contributed on behalf of each Designated Shareholder shall be in proportion
to the number of shares of JetFax Common Stock to which such holder would
otherwise be entitled to under Section 1.10.
1.12 Dissenting Shares.
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(a) Notwithstanding anything to the contrary contained in
this Agreement, any shares of capital stock of DocuMagix that, as
of the Effective Time, are or may become "dissenting shares" within the
meaning of Section 1300(b) of the California Corporations Code shall not
be converted into or represent the right to receive JetFax Common Stock in
accordance with Section 1.5 (or cash in lieu of fractional shares in
accordance with Section 1.10(c)), and the holder or holders of such shares
shall be entitled only to such rights as may be granted to such holder or
holders in Chapter 13 of the California General Corporation Law; provided,
however, that if the status of any such shares as "dissenting shares" shall
not be perfected, or if any such shares shall lose their status as "dissenting
shares," then, as of the later of the Effective Time or the time of the
failure to perfect such status or the loss of such status, such shares
shall automatically be converted into and shall represent only the right
to receive (upon the surrender of the certificate or certificates
representing such shares) JetFax Common Stock, if any, in accordance with
Section 1.5 (and cash in lieu of fractional shares, if any, in accordance
with Section 1.10(c)).
(b) DocuMagix shall give JetFax (i) prompt notice of any
written demand received by DocuMagix prior to the Effective Time
to require DocuMagix to purchase shares of capital stock of DocuMagix
pursuant to Chapter 13 of the California General Corporation Law and of
any other demand, notice or instrument delivered to DocuMagix prior to the
Effective Time pursuant to the California General Corporation Law, and (ii)
the opportunity to participate in all negotiations and proceedings with
respect to any such demand, notice or instrument. DocuMagix shall not make
any payment or settlement offer prior to the Effective Time with respect to
any such demand unless JetFax shall have consented in writing to such
payment or settlement offer.
1.13 Tax Consequences. For federal income tax purposes, the
Merger is intended to constitute a reorganization within the meaning of
Section 368 of the Code. The parties to this Agreement hereby adopt
this Agreement as a "plan of reorganization" within the meaning of Sections
1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations.
1.14 Accounting Treatment. For accounting purposes, the
Merger is intended to be treated as a "pooling of interests."
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1.15 Further Action. If, at any time after the Effective
Time, any further action is determined by JetFax to be necessary or desirable
to carry out the purposes of this Agreement or to vest the Surviving
Corporation or JetFax with full right, title and possession of and to all
rights and property of Merger Sub and DocuMagix, the officers and
directors of the Surviving Corporation and JetFax shall be fully authorized
(in the name of Merger Sub, in the name of DocuMagix and otherwise) to take
such action.
2. Representations and Warranties of DocuMagix and the
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Designated Shareholders
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DocuMagix and the Designated Shareholders jointly and severally
represent and warrant, to and for the benefit of the Indemnitees, subject to
such exceptions as are discussed in the correspondingly numbered section of
the Disclosure Schedule, as follows:
2.1 Due Organization; No Subsidiaries; Etc.
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(a) DocuMagix is a corporation duly organized, validly existing
and in good standing under the laws of the State of California and has all
necessary power and authority to conduct its business in the manner in which
its business is currently being conducted. DocuMagix is duly qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
in which the failure to be so qualified would have a Material Adverse
Effect on DocuMagix.
(b) Part 2.1 of the Disclosure Schedule accurately sets forth
(i) the names of the members of DocuMagix's board of directors, (ii)
the names of the members of each committee of DocuMagix's board of directors,
and (iii) the names and titles of DocuMagix's officers.
(c) DocuMagix does not have any subsidiaries and has no direct
or indirect interest of any nature in, any other Entity. DocuMagix has not
agreed and is not obligated to make any future investment in or capital
contribution to any Entity.
2.2 Articles of Incorporation and Bylaws; Records.
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DocuMagix has delivered to JetFax accurate and complete copies of DocuMagix's
restated articles of incorporation including all amendments thereto
through the date hereof (the "Restated Articles"), and bylaws, including
all amendments thereto through the date hereof. There has not been any
violation of any of the provisions of DocuMagix's articles of incorporation
or bylaws, and DocuMagix has not taken any action that is inconsistent in
any material respect with any resolution adopted by DocuMagix's shareholders,
DocuMagix's board of directors or any committee of DocuMagix's board of
directors. The stock records and minute books of DocuMagix provided to
JetFax are the only minute books and stock records of DocuMagix and contain a
reasonably accurate summary of all meetings of directors (or committees
thereof) and shareholders or actions by written consent since the time of
incorporation of DocuMagix. There have been no resolutions adopted or
actions of the shareholders of DocuMagix at a meeting of shareholders of
DocuMagix or by written consent, the board of directors of DocuMagix or any
committee of the board of directors of DocuMagix that are not fully reflected
in such minute books.
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2.3 Capitalization, Etc.
(a) The authorized capital stock of DocuMagix consists of: (i) 26,000,000
shares of Common Stock (with no par value) ("DocuMagix Common Stock"), of
which 3,455,879 shares have been issued and are outstanding as of the date of
this Agreement; and (ii) 18,552,182 shares of Preferred Stock (with no par
value) ("DocuMagix Preferred Stock"), (A) 3,300,000 of which have been
designated "Series A Preferred Stock," all of which have been issued and are
outstanding as of the date of this Agreement, (B) 1,521,000 of which have
been designated "Series B Preferred Stock," of which 1,519,019 shares have
been issued and are outstanding as of the date of this agreement, (C)
4,438,000 of which have been designated "Series C Preferred Stock," of which
4,432,978 shares have been issued and are outstanding as of the date of
this Agreement, (D) 6,600,000 of which have been designated "Series D
Preferred Stock," of which 6,567,951 shares have been issued and are
outstanding as of the date of this Agreement, (E) 568,182 of which have
been designated "Series E Preferred Stock," all of which have been
issued and are outstanding as of the date of this Agreement, (F) 1,375,000
of which have been designated "Series F Preferred Stock," all of which have
been issued and are outstanding as of the date of this Agreement, and (G)
750,000 of which have been designated "Series G Preferred Stock," of which
150,000 shares have been issued and are outstanding as of the date of this
Agreement. The rights, preferences, privileges and restrictions of the
DocuMagix Common Stock and the DocuMagix Preferred Stock (including each
series thereof) are as stated in the Restated Articles. Each
outstanding share of DocuMagix Preferred Stock other than DocuMagix
Series D Preferred Stock is convertible into one share of DocuMagix Common
Stock. Each outstanding shares of DocuMagix Series D Preferred Stock is
convertible into 1.016395022 shares of DocuMagix Common Stock. All of the
outstanding shares of DocuMagix Common Stock and DocuMagix Preferred Stock
have been duly authorized and validly issued, and are fully paid and
non-assessable. Except as set forth in Part 2.3(a) of the Disclosure
Schedule, there is no: (iii) outstanding subscription, option, call,
warrant or right (whether or not currently exercisable) to acquire any
shares of the capital stock or other securities of DocuMagix; (iv) repurchase
option which is held by DocuMagix to any outstanding shares of DocuMagix
capital stock; (v) outstanding security, instrument or obligation that is or
may become convertible into or exchangeable for any shares of the capital stock
or other securities of DocuMagix; (vi) Contract under which DocuMagix is or
may become obligated to sell or otherwise issue any shares of its capital
stock or any other securities; or (vii) written claim or demand
delivered to DocuMagix that would reasonably be expected to or will give rise
to or provide a basis for the assertion of a claim by any Person to the
effect that such Person is entitled to acquire or receive any shares of
capital stock or other securities of DocuMagix (including preemptive rights,
conversion rights and rights of first refusal). Part 2.3(a) of the
Disclosure Schedule sets forth the names of the DocuMagix's shareholders and
the number of shares of DocuMagix stock owned of record by each of such
shareholders.
(b) DocuMagix has reserved 3,011,139 shares of DocuMagix Common
Stock for issuance under the Option Plan, of which stock options to purchase
2,678,746 shares are outstanding as of the date of this Agreement. Part
2.3(b) of the Disclosure Schedule accurately sets forth, with respect to each
stock option and each warrant issued by DocuMagix (a "DocuMagix Warrant")
that is outstanding as of the date of this Agreement: (i) the name of the
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holder of such stock option or
warrant; (ii) the total number of shares and class of DocuMagix capital stock
that are subject to such stock option or warrant and the number of
shares of DocuMagix capital stock with respect to which such stock option or
warrant is immediately exercisable; (iii) the date on which such stock
option or warrant was granted and the term and expiration date of such
stock option or warrant; (iv) the vesting schedule for such stock option or
warrant; (v) the exercise price per share of DocuMagix capital stock
purchasable under such stock option or warrant and (vi) whether such stock
option or warrant has been designated an "incentive stock option" as
defined in Section 422 of the Code or is a non-qualified option. Part
2.3(b) of the Disclosure Schedule accurately identifies each Bridge
Warrant as such. All stock options of DocuMagix have been issued pursuant to
the Option Plan. The Bridge Warrants, that certain Warrant to Purchase Stock
issued to Silicon Valley Bank, dated July 14, 1996, exercisable for 36,585
shares of DocuMagix Series F Preferred Stock (the "SVB Warrant") and that
certain Warrant to Purchase Shares of Series G Preferred Stock issued to Open
Market, Inc., dated October 28, 1996, exercisable for 600,000 shares of
Series G Preferred Stock (the "OMI Warrant") comprise all of the DocuMagix
Warrants.
(c) All outstanding shares of DocuMagix Common Stock and
DocuMagix Preferred Stock and all outstanding DocuMagix Options
and DocuMagix Warrants, have been issued and granted in compliance
with all applicable state and federal securities laws.
(d) Except as set forth in Part 2.3 of the Disclosure Schedule,
DocuMagix has never repurchased, redeemed or otherwise reacquired any shares
of capital stock or other securities of DocuMagix. All securities so
reacquired by DocuMagix were reacquired in compliance with (i) the
applicable provisions of the California General Corporation Law and all
applicable state and federal securities laws, and (ii) all requirements set
forth in applicable restricted stock purchase agreements and other
applicable Contracts.
(e) To the best of knowledge of DocuMagix and the Designated
Shareholders, each Bridge Holder has good and valid title to the Bridge
Warrant identified on Part 2.3(b) of the Disclosure Schedule as being held by
such Bridge Holder, free and clear of all liens and other Encumbrances.
There is no legal action, suit, proceeding, claim or governmental
investigation pending or, to the best of the knowledge of DocuMagix and the
Designated Shareholders, threatened against any Bridge Holder that
questions the right of such holder to surrender such holder's Bridge
Warrant in exchange for the consideration
described in Section 1.7, nor is such holder aware that there is any basis for
any of the foregoing.
2.4 Financial Statements.
---------------------
(a) DocuMagix has delivered to JetFax the following financial
statements and notes (collectively, the "DocuMagix Financial Statements"):
(i) The audited balance sheets of DocuMagix at June 30,
1996 and at June 30, 1995, and the related audited income statements,
statements of shareholders' equity and statements of cash flows of DocuMagix
for the years then ended, together with the notes thereto and the unqualified
report and opinion of Price Waterhouse LLP relating thereto;
14 11
(ii) the unaudited balance sheet of DocuMagix at June 30,
1997, and the related unaudited income statement of DocuMagix for
the year then ended; and
(iii) the unaudited balance sheet of DocuMagix at September
30, 1997 (the "Unaudited Interim Balance Sheet"), and the related unaudited
income statement of DocuMagix for the three months then ended.
(b) The DocuMagix Financial Statements are in accordance
with the books and records of DocuMagix and present fairly in all material
respects the financial position of DocuMagix as of the respective dates
thereof and the results of operations and (in the case of the financial
statements referred to in Section 2.4(a)(i)) cash flows of DocuMagix for
the periods covered thereby. DocuMagix Financial Statements have been
prepared in accordance with generally accepted accounting principles applied
on a consistent basis throughout the periods covered (except that the financial
statements referred to in Section 2.4(a)(ii) do not contain footnotes and the
financial statements referred to in Section 2.4(a)(iii) do not contain
footnotes and are subject to
normal and recurring year-end adjustments, which will not, individually
or in the aggregate, be material in magnitude).
2.5 Absence of Changes. Except as set forth in Part 2.5 of
the Disclosure Schedule, since September 30, 1997:
(a) there has not been any change in DocuMagix's business,
condition, assets, liabilities, operations, financial performance or prospects
and no event has occurred that will, or could reasonably be expected to, have
a Material Adverse Effect on DocuMagix;
(b) there has not been any material loss, damage or
destruction to, or any material interruption in the use of, any of DocuMagix's
assets (whether or not covered by insurance);
(c) DocuMagix has not declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of capital
stock, and has not repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities;
(d) DocuMagix has not sold, issued or authorized the
issuance of (i) any capital stock or other security (except for DocuMagix
Common Stock issued upon the exercise of outstanding DocuMagix Options), (ii)
any option, call, warrant or right to acquire any capital stock or any other
security (except for DocuMagix Options described in Part 2.3 of the
Disclosure Schedule), or (iii) any instrument convertible into or
exchangeable for any capital stock or other security;
(e) DocuMagix has not amended or waived any of its rights under,
or permitted the acceleration of vesting with respect to any security under,
(i) any provision of its Option Plan, (ii) any provision of any agreement
evidencing any outstanding DocuMagix Option, or (iii) any restricted stock
purchase agreement;
12
15
(f) there has been no amendment to DocuMagix's articles of
incorporation or bylaws, and DocuMagix has not effected any recapitalization,
reclassification of shares, stock split,
reverse stock split or similar transaction;
(g) DocuMagix has not formed any subsidiary or acquired any
equity interest or other interest in any other Entity;
(h) DocuMagix has not made any capital expenditures the aggregate
amount of which exceeds $20,000;
(i) DocuMagix has not (i) acquired, leased or licensed any
right or other asset from any other Person (other than immaterial rights or
other immaterial assets acquired, leased or licensed by DocuMagix from other
Persons in the ordinary course of business and consistent with DocuMagix's past
practices), (ii) sold or otherwise disposed of, or leased or licensed, any
right or other asset to any other Person (other than immaterial rights or other
immaterial assets disposed of or leased or licensed by DocuMagix to other
Persons in the ordinary course of business and consistent with DocuMagix's
past practices), or (iii) waived or relinquished any right (other than
immaterial rights waived or relinquished in the ordinary course of business and
consistent with DocuMagix's past practices);
(j) DocuMagix has not written off as uncollectible, or
established any extraordinary reserve with respect to, any account receivable
or other indebtedness;
(k) DocuMagix has not made any pledge of any of its assets
or otherwise permitted any of its assets to become subject to any Encumbrance,
except for pledges of immaterial assets made in the ordinary course of business
and consistent with DocuMagix's past practices;
(l) DocuMagix has not (i) lent money to any Person (other than as
reasonably required pursuant to routine travel advances made to employees in
the ordinary course of business), or (ii) incurred or guaranteed any
indebtedness for borrowed money;
(m) DocuMagix has not (i) established or adopted, or amended any
Employee Benefit Plan, (ii) paid any bonus or made any profit-sharing or
similar payment to, or increased the amount of the wages, salary, commissions,
fringe benefits or other compensation or remuneration payable to, any of its
directors, officers or employees, or (iii) hired any new employee;
(n) DocuMagix has not changed any of its methods of accounting or
accounting practices in any respect;
(o) DocuMagix has not made any tax election that could
affect its status as a C corporation for federal income tax purposes;
13
16
(p) DocuMagix has not commenced or settled any Legal Proceeding;
(q) DocuMagix has not entered into any material transaction
or taken any other material action outside the ordinary course of business or
inconsistent with its past practices; and
(r) DocuMagix has not agreed or committed to take any of
the actions referred to in clauses "(c)" through "(q)" above.
2.6 Title to Assets
---------------
(a) Subject to Section 2.6(b) below, DocuMagix owns and has good,
valid and marketable title to: (i) all material assets reflected on the
Unaudited Interim Balance Sheet; (ii) all assets referred to in Part 2.9 of
the Disclosure Schedule; and (iii) all other material assets owned by
DocuMagix. Except as set forth in Part 2.6 of the Disclosure Schedule, all
of said assets are owned by DocuMagix free and clear of any liens or
other Encumbrances, except for (x) any lien for current taxes not yet due and
payable, and (y) minor liens that have arisen in the ordinary course of
business and that do not (in any case or in the aggregate) materially
detract from the value of the assets subject thereto or materially impair the
operations of DocuMagix.
(b) Part 2.6(b) of the Disclosure Schedule identifies all assets that
are being leased or licensed to DocuMagix, except for (i) any equipment being
leased to DocuMagix under a standard
operating lease requiring annual payments by DocuMagix of less than $5,000
in the aggregate, and (ii) any software being licensed to DocuMagix
under any third-party software license generally available to the public at
a total cost of less than $5,000 in the aggregate.
2.7 Bank Accounts; Receivables.
---------------------------
(a) Part 2.7(a) of the Disclosure Schedule provides accurate
information with respect to each account maintained by or for the benefit of
DocuMagix at any bank or other financial institution.
(b) Part 2.7(b) of the Disclosure Schedule provides an accurate and
complete breakdown and aging of all accounts receivable, notes
receivable and other receivables of DocuMagix as of September 30, 1997.
Except as set forth in Part 2.7(b) of the Disclosure Schedule, all existing
accounts receivable of DocuMagix (including those accounts receivable
reflected on the Unaudited Interim Balance Sheet that have not yet been
collected and those accounts receivable that have arisen since September 30,
1997 and have not yet been collected) (i) represent valid obligations of
customers of DocuMagix arising from bona fide transactions entered into in
the ordinary course of business and (ii) are collectible in full when due and
no counterclaim or set off presently exists (net of a reserve for bad debts as
set forth on the Unaudited Interim Balance Sheet).
(c) Part 2.7(c) of the Disclosure Schedule identifies the
twenty largest customers of DocuMagix based on revenue for the year ended
September 30, 1997. DocuMagix has not received any written notice or other
formal communication indicating, nor does DocuMagix have any
17 14
reason to believe, that any customer identified in Part 2.7(c) of the
Disclosure Schedule intends or expects to cease dealing with DocuMagix or to
effect a material reduction in the volume of business transacted by such
Person with DocuMagix below historical levels.
2.8 Equipment; Leasehold.
---------------------
(a) Part 2.8(a) of the Disclosure Schedule sets forth and
reasonably describes those material items of equipment, fixtures,
leasehold improvements and other tangible assets owned by or leased to
DocuMagix.
(b) DocuMagix does not own any real property or any interest
in real property, except for the leasehold interest created under the real
property lease identified in Part 2.10 of the Disclosure Schedule.
2.9 Proprietary Assets.
-------------------
(a) Part 2.9(a)(1) of the Disclosure Schedule sets forth,
with respect to each DocuMagix Proprietary Asset that has been registered,
recorded or filed with any Governmental Body or with respect to which an
application has been filed with any Governmental Body, (i) a brief
description of such DocuMagix Proprietary Asset, and (ii) the names of
the jurisdictions covered by the applicable registration, recordation,
filing or application. Part 2.9(a)(2) of the Disclosure Schedule identifies
and provides a brief description of all other DocuMagix Proprietary
Assets owned by DocuMagix. Part 2.9(a)(3) of the Disclosure Schedule
identifies and provides a brief description of each DocuMagix Proprietary
Asset that is owned by any other Person and that is licensed to or used by
DocuMagix and identifies the license agreement or other agreement under which
such DocuMagix Proprietary Asset is being licensed to or used by DocuMagix.
Except as set forth in Part 2.9(a)(4) of the Disclosure Schedule,
DocuMagix has good, valid and marketable title to all of the Proprietary
Assets identified in Parts 2.9(a)(1) and 2.9(a)(2) of the Disclosure
Schedule, free and clear of all liens and other Encumbrances, and has a
valid right to use all Proprietary Assets identified in Part 2.9(a)(3) of the
Disclosure Schedule. Except as set forth in Part 2.9(a)(5) of the
Disclosure Schedule, DocuMagix is not obligated to make any payment to any
Person for the use of any DocuMagix Proprietary Asset. Except as set forth
in Part 2.9(a)(6) of the Disclosure Schedule, DocuMagix is free to use,
modify, copy, distribute, sell, license or otherwise exploit each of
DocuMagix Proprietary Assets on an exclusive basis (other than DocuMagix
Proprietary Assets consisting of software licensed to DocuMagix under third
party licenses generally available to the public, with respect to which
DocuMagix's rights are not exclusive).
(b) DocuMagix has taken all reasonable measures and precautions
necessary to protect and maintain the confidentiality and secrecy of all
DocuMagix Proprietary Assets (except DocuMagix Proprietary Assets whose value
would be unimpaired by public disclosure) and otherwise to maintain and
protect the value of all DocuMagix Proprietary Assets. Except as set
forth in Part 2.9(b) of the Disclosure Schedule, DocuMagix has not
disclosed or delivered or permitted to be disclosed or delivered to any
Person, and no Person (other than DocuMagix) has access to or has any rights
with respect to, the source code, or any portion or aspect of the
source code, of any DocuMagix Proprietary Asset.
18 15
(c) To the best of the knowledge of DocuMagix and the Designated
Shareholders, none of DocuMagix Proprietary Assets infringes or conflicts
with any Proprietary Asset owned or used by any other Person. To the best
of the knowledge of DocuMagix and the Designated Shareholders, DocuMagix is
not infringing, misappropriating or making any unlawful use of, and DocuMagix
has not at any time infringed, misappropriated or made any unlawful use of,
or received any notice or other communication (in writing or otherwise) of
any actual, alleged, possible or potential infringement, misappropriation
or unlawful use of, any Proprietary Asset owned or used by any other
Person. To the best of the knowledge of DocuMagix and the Designated
Shareholders, no other Person is infringing, misappropriating or making
any unlawful use of, and no Proprietary Asset owned or used by any other
Person infringes or conflicts with, any DocuMagix
Proprietary Asset.
(d) Except as set forth in Part 2.9(d) of the Disclosure
Schedule, to the best of knowledge of DocuMagix and the Designated
Shareholders: (i) each DocuMagix Proprietary Asset conforms in all material
respects with any specification, documentation, performance standard,
representation or statement made or provided with respect thereto by or
on behalf of DocuMagix; and (ii) there has not been any material claim by
any customer or other Person alleging that any DocuMagix Proprietary Asset
(including each version thereof that has ever been licensed or otherwise made
available by DocuMagix to any Person) does not conform in all material
respects with any specification, documentation, performance standard,
representation or statement made or provided by or on behalf of DocuMagix,
and, to the best of the knowledge of DocuMagix and the Designated
Shareholders, there is no basis for any such claim. DocuMagix has established
adequate reserves on the Unaudited Interim Balance Sheet to cover all costs
associated with any obligations that DocuMagix may have with respect to the
correction or repair of programming errors or other defects in DocuMagix
Proprietary Assets.
(e) DocuMagix Proprietary Assets constitute all the
Proprietary Assets necessary to enable DocuMagix to conduct its business in
the manner in which such business has been and is being conducted.
Except as set forth in Part 2.9(e) of the Disclosure Schedule, (i) DocuMagix
has not licensed any of
DocuMagix Proprietary Assets to any Person on an exclusive basis, and (ii)
DocuMagix has not entered into any covenant not to compete or Contract
limiting its ability to exploit fully any of the DocuMagix Proprietary Assets
or to transact business in any market or geographical area or with any Person.
(f) Except as set forth in Part 2.9(f) of the
Disclosure Schedule, (i) all current and former employees of
DocuMagix have executed and delivered to DocuMagix an agreement (containing
no exceptions to or exclusions from the scope of its coverage) that is
substantially identical to the form of Confidential Information and
Invention Assignment Agreement attached to Part 2.9(f) of the Disclosure
Schedule, and (ii) all current and former consultants and independent
contractors to DocuMagix have executed and delivered to DocuMagix an
agreement (containing no exceptions to or exclusions from the scope of its
coverage) that is substantially identical to the form of Consultant
Confidential Information and Invention Assignment Agreement attached to
Part 2.9(f) of the Disclosure Schedule.
(g) Except as set forth in Part 2.9(g) of the Disclosure
Schedule, DocuMagix has not entered into and is not bound by any Contract
under which any Person has the right to distribute or license, on a
commercial basis, any DocuMagix Proprietary Asset including source code,
object
19 16
code, or any versions, modifications or derivative works of source code
or object code in any DocuMagix Proprietary Asset.
2.10 Contracts.
----------
(a) Part 2.10(a) of the Disclosure Schedule identifies each
DocuMagix Contract that constitutes a Material Contract.
(b) DocuMagix has delivered to JetFax true and complete
copies of all Contracts identified in Part 2.10(a) of the Disclosure
Schedule, including all amendments thereto. Each Contract identified in
Part 2.10(a) of the Disclosure Schedule is valid.
(c) Except as set forth in Part 2.10(c) of the Disclosure
Schedule:
(i) DocuMagix has not violated or breached in any
material respect, or committed any material default under, any Material
Contract of DocuMagix ("DocuMagix Material Contact"), and, to the
best of the knowledge of DocuMagix and the Designated Shareholders, no
other Person has materially violated or breached, or committed any material
default under, any DocuMagix Material Contract;
(ii) to the best of the knowledge of DocuMagix and the
Designated Shareholders, no event has occurred, and no circumstance or
condition exists, that (with or without notice or lapse of time) will, or
could reasonably be expected to, (A) result in a violation or breach of any
of the provisions of any DocuMagix Material Contract, (B) give any Person the
right to declare a default or exercise any remedy under any DocuMagix Material
Contract, (C) give any Person the right to accelerate the maturity or
performance of any DocuMagix Material Contract, or (D) give any Person the
right to cancel, terminate or modify any DocuMagix Material Contract;
(iii) since January 1, 1996, DocuMagix has not
received any notice or other communication regarding (i) any actual or possible
violation or breach of, or default under, any DocuMagix Material Contract, or
(ii) any actual or possible termination of any DocuMagix Material Contract; and
(iv) DocuMagix has not waived or relinquished any of
its material rights under any DocuMagix Material Contract.
(d) Except as set forth in Part 2.10(d) of the
Disclosure Schedule, no Person is renegotiating, or has the right to
renegotiate, any amount paid or payable to DocuMagix under any DocuMagix
Material Contract or any other term or provision of any DocuMagix Material
Contract.
(e) DocuMagix has not made any unexpired offer or proposal (to
any customer, prospective customer or other Person), except for any offer or
proposal that, if accepted, would not result in DocuMagix being bound by a
Contract that is less favorable to DocuMagix than the comparable terms and
conditions in the existing DocuMagix Material Contracts.
20 17
2.11 Liabilities.
-----------
(a) DocuMagix has no accrued, contingent or other liabilities
of any nature, either matured or unmatured (whether or not required to be
reflected in financial statements in accordance with generally accepted
accounting principles, and whether due or to become due), which,
individually or in the aggregate, have not been reflected in the
Unaudited Interim Balance Sheet, except for accounts payable or accrued
salaries that have been incurred by DocuMagix since September 30, 1997 in the
ordinary course of business consistent with DocuMagix's past practices.
(b) Part 2.11(b) of the Disclosure Schedule provides an
accurate and complete breakdown of (i) all accounts payable of DocuMagix at
September 30, 1997, and (ii) all notes payable of DocuMagix (including the
Bridge Notes) and all indebtedness of DocuMagix for borrowed money.
(c) Part 2.11(c) of the Disclosure Schedule accurately sets
forth, with respect to each Bridge Note: (i) the name of the holder of
such Bridge Note; (ii) the aggregate principal amount outstanding under such
Bridge Note as of the date of this Agreement; (iii) the interest rate
applicable to such Bridge Note; and (iv) the maturity date of such
Bridge Note. The aggregate principal amount of the Bridge Notes is
$1,000,000. The Bridge Notes are unsecured obligations of DocuMagix.
DocuMagix has delivered to JetFax a true and correct copy of each Bridge Note,
Bridge Warrant, and the Note and Warrant Purchase Agreement related thereto,
including all amendments or modifications thereto. DocuMagix is not in
default under the Note and Warrant Purchase Agreement or any Bridge Note and
does not claim any defenses to or rights of offset against the payments
due pursuant to the Bridge Notes. Each of the Bridge Notes and Bridge
Warrants was issued in accordance with all applicable state and federal
securities laws, the applicable provisions of the California General
Corporation Law and all other applicable Legal Requirements, and all
requirements set forth in the Note and Warrant Purchase Agreement and any
other applicable Contracts. Each Bridge Note and Bridge Warrant is a legal,
valid and binding obligation of DocuMagix enforceable in accordance with its
terms. The Bridge Notes are identified on the Unaudited Interim Balance
Sheet as a liability of DocuMagix.
(d) Each Bridge Holder has good and valid title to the
Bridge Note identified on Part 2.11(c) of the Disclosure Schedule
as being held by such Bridge Holder, free and clear of all liens and other
Encumbrances. There is no legal action, suit, proceeding, claim or
governmental investigation pending or, to the best of knowledge of
DocuMagix and the Designated Shareholders, threatened against any Bridge
Holder that questions the right of such holder to surrender such holder's
Bridge Note in exchange for the consideration described in Section 1.8, nor
is such holder aware that there is any basis for any of the foregoing.
2.12 Compliance with Legal Requirements. DocuMagix is, and has
since January 1, 1996 been, in compliance with all applicable Legal
Requirements, except where the failure to comply with such Legal Requirements
would not reasonably be expected to have a Material Adverse Effect on
DocuMagix. Except as set forth in Part 2.12 of the Disclosure Schedule,
since January 1,
21 18
1996, DocuMagix has not received any written notice from any
Governmental Body regarding any actual or possible violation of, or failure to
comply with, any material Legal Requirement.
2.13 Governmental Authorizations. Part 2.13 of the
Disclosure Schedule identifies each material Governmental Authorization held by
DocuMagix. The Governmental Authorizations identified in Part 2.13 of the
Disclosure Schedule are valid and in full force and effect, and
collectively constitute all Governmental Authorizations necessary to
enable DocuMagix to conduct its business in the manner in which its
business is currently being conducted other than such Governmental
Authorization the failure of which to obtain would not reasonably be expected
to have a Material Adverse Effect on DocuMagix. DocuMagix is in
compliance with the material terms and requirements of such Governmental
Authorizations.
2.14 Tax Matters.
------------
(a) Except as set forth in Part 2.14(a) of the
Disclosure Schedule, all Tax Returns required to be filed by or on behalf of
DocuMagix with any Governmental Body on or before the Closing Date (the
"DocuMagix Returns") have been or will be filed when due or an extension for
the filing thereof shall have been received by DocuMagix. All amounts
shown on DocuMagix Returns to be due on or before the Closing Date have been
or will be paid on or before the Closing Date. DocuMagix has delivered to
JetFax accurate and complete copies of all federal and California income
tax DocuMagix Returns filed since its inception.
(b) The DocuMagix Financial Statements fully accrue all
actual and contingent liabilities for Taxes with respect to all periods
through the dates thereof in accordance with generally accepted
accounting principles. DocuMagix will establish, in the ordinary course of
business and consistent with its past practices, reserves adequate for the
payment of all Taxes for the period from June 30, 1996 through the Closing
Date, and DocuMagix will disclose the dollar amount of such reserves to JetFax
on or prior to the Closing Date.
(c) There has been no examination or audit of any
DocuMagix Return, and no such examination or audit has been proposed or
scheduled by any Governmental Body. DocuMagix has delivered to JetFax
accurate and complete copies of all audit reports and similar documents (to
which DocuMagix has access) relating to DocuMagix Returns. No extension or
waiver of the limitation period applicable to any of DocuMagix Returns has
been granted (by DocuMagix or any other Person), and no such extension or
waiver has been requested from DocuMagix.
(d) No claim or Legal Proceeding is pending or, to the
best of the knowledge of DocuMagix, has been threatened against or with
respect to DocuMagix in respect of any Tax. There are no unsatisfied
liabilities for Taxes (including liabilities for interest, additions to
tax and penalties thereon and related expenses) with respect to any notice
of deficiency or similar document received by DocuMagix. There are no liens
for Taxes upon any of the assets of DocuMagix, except liens for current
Taxes not yet due and payable. DocuMagix has not entered into or become bound
by any agreement or consent pursuant to Section 341(f) of the Code.
DocuMagix has not been, and DocuMagix will not be, required to include
any adjustment in taxable income for any tax period (or portion thereof)
pursuant to Section 481 or 263A of the Code or any comparable provision
22 19
under state or foreign Tax laws as a result of transactions or events
occurring, or accounting methods employed, prior to the Closing.
(e) There is no agreement, plan, arrangement or other
Contract covering any employee or independent contractor or former
employee or independent contractor of DocuMagix that, considered
individually or considered collectively with any other such Contracts, will,
or could reasonably be expected to, give rise directly or indirectly to the
payment of any amount that would not be deductible pursuant to Section 280G
or Section 162 of the Code. DocuMagix is not, and has never been, a party to
or bound by any tax indemnity agreement, tax sharing agreement, tax allocation
agreement or similar Contract.
(f) Except as set forth in Part 2.14(f) of the
Disclosure Schedule, since January 1, 1996, (i) to the best knowledge of
DocuMagix and the Designated Shareholders, no Governmental Body has
asserted any claim or otherwise made any allegation that DocuMagix has
failed or may have failed to pay any sales tax, use tax or similar Tax, and
(ii) DocuMagix has not engaged in any discussions or negotiations with any
Governmental Body, and has not sent any written communication to or received
any written communication from any Governmental Body, in connection with
any possible failure on the part of DocuMagix to pay any sales tax, use tax or
similar Tax.
2.15 Employee and Labor Matters; Benefit Plans.
------------------------------------------
(a) Part 2.15(a) of the Disclosure Schedule contains a list of
all salaried employees of DocuMagix as of the date of this Agreement, and
correctly reflects their salaries, any other compensation payable to
them (including compensation payable pursuant to bonus, deferred
compensation or commission arrangements), their dates of employment and
their positions. DocuMagix is not a party to any collective bargaining
contract or other Contract with a labor union involving any of its employees.
(b) Part 2.15(b) of the Disclosure Schedule identifies each
salary, bonus, deferred compensation, incentive compensation, stock
purchase, stock option, severance pay, termination pay, hospitalization,
medical insurance, supplemental unemployment benefits, profit-sharing,
pension or retirement plan, program or agreement (individually referred to as
a "Benefit Plan" and collectively referred to as the "Benefit Plans")
sponsored, maintained, contributed to or required to be contributed to by
DocuMagix for the benefit of any current or former employee of DocuMagix.
(c) DocuMagix does not maintain, sponsor or contribute to,
and, to the best of the knowledge of DocuMagix and the Designated Shareholders,
DocuMagix has not at any time in the past maintained, sponsored or
contributed to, any employee pension benefit plan (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), whether or not excluded from coverage under specific
Titles or Merger Subtitles of ERISA) for the benefit of employees or former
employees of DocuMagix (a "Pension Plan").
(d) DocuMagix does not maintain, sponsor or contribute to
any employee welfare benefit plan (as defined in Section 3(1) of ERISA,
whether or not excluded from coverage
23 20
under specific Titles or Merger Subtitles of ERISA) for the benefit of
employees or former employees of DocuMagix (a "Welfare Plan").
(e) DocuMagix is not required to be, and, to the best of
the knowledge of DocuMagix and the Designated Shareholders, DocuMagix
has never been required to be, treated as a single employer with any other
Person under Section 4001(b)(1) of ERISA or Section 414(b), (c), (m) or (o)
of the Code. DocuMagix has never been a member of an "affiliated service
group" within the meaning of Section 414(m) of the Code. To the best of
the knowledge of DocuMagix and the Designated Shareholders, DocuMagix has
never made a complete or partial withdrawal from a "multiemployer
plan" (as defined in Section 3(37) of ERISA) resulting in "withdrawal
liability" (as defined in Section 4201 of ERISA), without regard to
subsequent reduction or waiver of such liability under either Section 4207 or
4208 of ERISA.
(f) DocuMagix does not have any plan or commitment to
create any additional Welfare Plan or any Pension Plan, or to modify or
change any existing Welfare Plan or Pension Plan (other than to comply with
applicable law).
(g) Except as set forth in Part 2.15(g) of the Disclosure
Schedule, neither the execution, delivery or performance of this Agreement,
nor the consummation of the Merger or any of the other transactions
contemplated by this Agreement, will result in any bonus payment, golden
parachute payment, severance payment or other payment to any current or
former employee or director of DocuMagix (whether or not under any Benefit
Plan), or materially increase the benefits payable under any Benefit Plan, or
result in any acceleration of the time of payment or vesting of any such
benefits, other than the consideration received pursuant to Sections 1.5,
1.6, 1.7 or 1.8 hereof.
(h) DocuMagix is in compliance in all material respects with all
applicable Legal Requirements and Contracts relating to employment,
employment practices, employee compensation, wages, bonuses and terms and
conditions of employment.
(i) Except as set forth in Part 2.15(i) of the Disclosure
Schedule, DocuMagix has good labor relations, and neither DocuMagix
nor any of the Designated Shareholders has any knowledge of any facts
indicating that (i) the consummation of the Merger or any of the other
transactions contemplated by this Agreement will have a material adverse
effect on DocuMagix's labor relations, or (ii) any of DocuMagix's employees
intends to terminate his or her employment with DocuMagix.
(j) DocuMagix has no obligations or accrued, contingent or other
liabilities of any nature, either matured or unmatured, arising out of its
relationship with Trinet Employer Group, Inc.
2.16 Environmental Matters. To the best knowledge of
----------------------
DocuMagix and the Designated Shareholders, DocuMagix is and has at all times
been in compliance, in all material respects, with all applicable
Environmental Laws. DocuMagix possesses all permits and other
Governmental Authorizations required under applicable Environmental Laws,
and DocuMagix is and has at all times been in compliance with the material
terms and requirements of all such Governmental Authorizations.
24 21
DocuMagix has not received any written notice (whether from a
Governmental Body, citizens group, employee or otherwise) that alleges
that
DocuMagix is not in compliance with any Environmental Law, and, to the best
of the knowledge of DocuMagix and the Designated Shareholders, there are no
circumstances that could reasonably be expected to prevent or interfere with
DocuMagix's compliance with any Environmental Law in the future. To the
best of the knowledge of DocuMagix and the Designated Shareholders, no
current or prior owner of any property leased or controlled by DocuMagix has
received any notice or other communication (whether from a Governmental Body,
citizens group, employee or otherwise) that alleges that such current or prior
owner or DocuMagix is not or was not in compliance with any Environmental
Law. All Governmental Authorizations currently held by DocuMagix pursuant to
Environmental Laws are identified in Part 2.16 of the Disclosure
Schedule. (For purposes of this Section 2.16: (i) "Environmental Law"
means any federal, state or local Legal Requirement relating to pollution
or protection of human health or the environment (including ambient air,
surface water, ground water, land surface or subsurface strata), including any
law or regulation relating to emissions, discharges, releases or
threatened releases of Materials of Environmental Concern, or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Materials of Environmental
Concern; and (ii) "Materials of Environmental Concern" include
chemicals, pollutants, contaminants, wastes, toxic substances, petroleum and
petroleum products and any other substance that is now or in the future
regulated by any Environmental Law or that is otherwise a danger to health,
reproduction or the environment.)
2.17 Product Warranty; Performance of Services. Except as
------------------------------------------
set forth in Part 2.17(b) of the Disclosure Schedule, no customer or other
Person has, at any time since January 1, 1996, asserted or threatened in
writing, or, to the best of the knowledge of DocuMagix, orally asserted any
claim against DocuMagix (other than claims that have been resolved
satisfactorily) under or based upon (i) any warranty provided by or
on behalf of DocuMagix, or (ii) any services performed by DocuMagix.
2.18 Insurance. Part 2.18 of the Disclosure Schedule
----------
provides accurate and complete information with respect to each insurance
policy maintained by, at the expense of or for the benefit of DocuMagix
and with respect to any claims made thereunder since January 1, 1996.
DocuMagix has delivered to JetFax true and complete copies of the
insurance policies identified in Part 2.18 of the Disclosure Schedule. Each
of the insurance policies identified in Part 2.18 of the Disclosure
Schedule is in full force and effect and has sufficient insurance coverage for
the operation of its business. Since January 1, 1996, DocuMagix has not
received any notice or other communication regarding any actual or
possible (a) cancellation or invalidation of any insurance policy, (b)
refusal of any coverage or rejection of any claim under any insurance policy,
or (c) material adjustment in the amount of the premiums payable with
respect to any insurance policy.
2.19 Related Party Transactions. Except as set forth in Part 2.19
---------------------------
of the Disclosure Schedule: (a) no Related Party has, and no Related Party
has at any time since January 1, 1996 had, any direct or indirect interest in
any material asset used in the business of DocuMagix; (b) no Related Party is,
or has at any time since January 1, 1996 been, indebted to DocuMagix; (c)
since January 1, 1996, no Related Party has entered into, or has had any
direct or indirect financial interest in, any Material Contract,
transaction or business dealing involving DocuMagix; (d) to the best
knowledge
25 22
of DocuMagix and the Designated Shareholders, no Related Party is
competing, or has at any time since January 1, 1996 competed, directly or
indirectly, with DocuMagix; and (e) no Related Party has any claim or
right against DocuMagix (other than rights to receive compensation for
services performed as an employee of DocuMagix). (For purposes of this
Section 2.19, each of the following shall be deemed to be a "Related Party":
(i) each of the Designated Shareholders; (ii) each individual who is, or who
has at any time since January 1, 1996 been, an officer or director of
DocuMagix; and (iii) any trust or other Entity (other than DocuMagix) in
which any one of the individuals referred to in clauses "(i)" and "(ii)"
above holds (or in which more than one of such individuals collectively hold),
beneficially or otherwise, a material voting, proprietary or equity interest.)
2.20 Legal Proceedings; Orders.
--------------------------
(a) There is no pending Legal Proceeding, and, to the best
of the knowledge of DocuMagix and the Designated Shareholders, since
January 1, 1996 no Person has threatened to commence any Legal Proceeding:
(i) that involves DocuMagix or any of the assets owned or used by
DocuMagix; or (ii) that challenges, or that may have the effect of preventing,
delaying, making illegal or otherwise interfering with, the Merger or any of
the other transactions contemplated by this Agreement. To the best of the
knowledge of DocuMagix and the Designated Shareholders, except as set forth in
Part 2.20(a) of the Disclosure Schedule, no event has occurred, and no
claim, dispute or other condition or circumstance exists, that will, or
that could reasonably be expected to, give rise to or serve as a basis
for the commencement of any such Legal Proceeding.
(b) There is no order, writ, injunction, judgment or decree
to which DocuMagix, or any of the assets owned or used by DocuMagix, is
subject. None of the Designated Shareholders is subject to any order, writ,
injunction, judgment or decree that relates to DocuMagix's business or to any
of the assets owned or used by DocuMagix. To the best of the knowledge of
DocuMagix and the Designated Shareholders, no officer or other employee of
DocuMagix is subject to any order, writ, injunction, judgment or decree that
prohibits such officer or other employee from engaging in or
continuing any conduct, activity or practice relating to DocuMagix's
business.
2.21 Authority; Binding Nature of Agreement. DocuMagix has the absolute
and
---------------------------------------
unrestricted right, power and authority to enter into and to perform its
obligations under this Agreement; and the execution, delivery and performance
by DocuMagix of this Agreement have been duly authorized by all necessary
action on the part of DocuMagix and its board of directors. Following the
DocuMagix Shareholders' Meeting (as defined in Section 5.3), the execution,
delivery and performance of this Agreement will have been duly authorized by
all necessary action on the part of DocuMagix's shareholders. This Agreement
constitutes the legal, valid and binding obligation of DocuMagix, enforceable
against DocuMagix in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
2.22 Non-Contravention; Consents. Except as set forth in Part 2.22 of
the
----------------------------
Disclosure Schedule, neither (1) the execution, delivery or performance of this
Agreement or any of the other agreements referred to in this Agreement, nor (2)
the consummation of the Merger or any of the
25 23
other transactions contemplated by this Agreement, will directly or indirectly
(with or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any of the
provisions of the Restated Articles as amended by the Amendment to Restated
Articles or of DocuMagix's bylaws, or (ii) any resolution adopted by
DocuMagix's shareholders or DocuMagix's board of directors;
(b) contravene, conflict with or result in a violation or breach of, or
result in a default under, any provision of any DocuMagix Contract, or give any
Person the right to (i) declare a default or exercise any remedy under any
DocuMagix Material Contract, (ii) accelerate the maturity or performance of any
DocuMagix Material Contract, or (iii) cancel, terminate or modify any DocuMagix
Material Contract; or
(c) result in the imposition or creation of any lien or other
Encumbrance
upon or with respect to any asset owned or used by DocuMagix (except for minor
liens that will not, in any case or in the aggregate, materially detract from
the value of the assets subject thereto or materially impair the operations of
DocuMagix).
Except as set forth in Part 2.22 of the Disclosure Schedule, DocuMagix is not
and will not be required to make any filing with or give any notice to, or to
obtain any Consent from, any Person in connection with (x) the execution,
delivery or performance of this Agreement or any of the other agreements
referred to in this Agreement, or (y) the consummation of the Merger or any of
the other transactions contemplated by this Agreement.
2.23 Full Disclosure.
----------------
(a) This Agreement (including the Disclosure Schedule) does not,
and the Designated Shareholders' Closing Certificate (as defined in Section
6.5(g)) will not, (i) contain any representation, warranty or information that
is false or misleading with respect to any material fact, or (ii) omit to state
any material fact necessary in order to make the representations, warranties
and information contained and to be contained herein and therein not false or
misleading; provided, that no representation or warranty is made with respect
to statements made or furnished by JetFax or Merger Sub for use in or in
connection with documents mailed or delivered to the shareholders of DocuMagix
in connection with soliciting their adoption and approval of this Agreement and
approval of the Merger.
(b) The information supplied by DocuMagix for inclusion in the
Information Statement (as defined in Section 5.2) will not, as of the date of
the Information Statement or (taking into account any amendments or supplements
thereto prior to the date of the DocuMagix Shareholder's Meeting) as of the
date of DocuMagix Shareholders' Meeting (as defined in Section 5.3), (i)
contain any statement that is inaccurate or misleading with respect to any
material fact, or (ii) omit to state any material fact necessary in order to
make such information not false or misleading.
27 24
3. Representations and Warranties of JetFax and Merger Sub
-------------------------------------------------------
JetFax and Merger Sub jointly and severally represent and warrant to
DocuMagix and the Designated Shareholders as follows:
3.1 Organization, Standing and Power. JetFax is a corporation duly
---------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware. Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of California. Each of JetFax and
Merger Sub has the corporate power to own its properties and to carry on its
business as now being conducted and is duly qualified to do business and is in
good standing in each jurisdiction in which the failure to be so qualified
would have a material adverse effect on the ability of JetFax and Merger Sub to
consummate the transactions contemplated hereby.
3.2 SEC Filings; Financial Statements.
----------------------------------
(a) JetFax has delivered to DocuMagix accurate and complete copies
(excluding copies of exhibits) of each report or registration statement filed
by JetFax with the SEC between March 21, 1997 and the date of this Agreement
(the "JetFax SEC Documents"). As of the time it was filed with the SEC (or, if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing): (i) each of the JetFax SEC Documents complied in all
material respects with the applicable requirements of the Securities Act or the
Exchange Act (as the case may be); and (ii) none of the JetFax SEC Documents
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(b) The consolidated financial statements contained in the JetFax SEC
Documents: (i) complied as to form in all material respects with the published
rules and regulations of the SEC applicable thereto; (ii) were prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods covered, except as may be indicated in
the notes to such financial statements and (in the case of unaudited
statements) as permitted by Form 10-Q of the SEC, and except that unaudited
financial statements may not contain footnotes and are subject to normal and
recurring year-end audit adjustments (which will not, individually or in the
aggregate, be material in magnitude); and (iii) fairly present the consolidated
financial position of JetFax and its subsidiaries as of the respective dates
thereof and the consolidated results of operations of JetFax and its
subsidiaries for the periods covered thereby.
3.3 Authority; Binding Nature of Agreement. JetFax and Merger Sub have
---------------------------------------
the absolute and unrestricted right, power and authority to perform their
obligations under this Agreement; and the execution, delivery and performance
by JetFax and Merger Sub of this Agreement (including the contemplated issuance
of JetFax Common Stock in the Merger in accordance with this Agreement) have
been duly authorized by all necessary action on the part of JetFax and Merger
Sub and their respective boards of directors. No vote of JetFax's stockholders
is
28 25
needed to approve the Merger. This Agreement constitutes the legal, valid and
binding obligation of JetFax and Merger Sub, enforceable against them in
accordance with its terms, subject to (i) laws of general application relating
to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
3.4 Valid Issuance. Subject to Section 1.5(d), the JetFax Common Stock
to
---------------
be issued in the Merger will, when issued in accordance with the provisions of
this Agreement, be validly issued, fully paid and nonassessable.
3.5 Absence of Certain Changes or Events. Between October 4, 1997
and the date of this Agreement, there has not been: (i) any event that had a
Material Adverse Effect on JetFax; or (ii) any material change by JetFax in its
accounting methods, principles or practices, except as required by changes in
generally accepted accounting principles.
3.6 Legal Proceedings. There is no pending Legal Proceeding and (to
------------------
the best of the knowledge of JetFax) no Person has threatened to commence any
Legal Proceeding that involves JetFax or any of the assets owned or used by
JetFax and that would have a Material Adverse Effect on JetFax or adversely
affect the ability of JetFax to consummate the Merger or the transactions
contemplated by this Agreement in connection therewith.
4. Certain Covenants of DocuMagix
------------------------------
4.1 Access and Investigation. During the period from the date of this
-------------------------
Agreement through the Effective Time (the "Pre-Closing Period"), DocuMagix
shall, and shall cause its Representatives to: (a) provide JetFax and JetFax's
Representatives with reasonable access to DocuMagix's Representatives,
personnel and assets and to all existing books, records, Tax Returns, work
papers and other documents and information relating to DocuMagix; and (b)
provide JetFax and JetFax's Representatives with copies of such existing books,
records, Tax Returns, work papers and other documents and information relating
to DocuMagix, and with such additional financial, operating and other data and
information regarding DocuMagix, as JetFax may reasonably request.
4.2 Operation of DocuMagix's Business. During the Pre-Closing Period:
---------------------------------
(a) DocuMagix shall conduct its business and operations in the ordinary
course and in substantially the same manner as such business and operations
have been conducted prior to the date of this Agreement;
(b) DocuMagix shall use reasonable efforts to preserve intact its
current business organization, keep available the services of its current
officers and employees and maintain its relations and goodwill with all
suppliers, customers, landlords, creditors, employees and other Persons having
business relationships with DocuMagix;
29 26
(c) DocuMagix shall keep in full force all insurance policies identified
in Part 2.17 of the Disclosure Schedule;
(d) DocuMagix shall (to the extent requested by JetFax) cause its
officers to report regularly to JetFax concerning the status of DocuMagix's
business;
(e) DocuMagix shall not declare, accrue, set aside or pay any dividend
or make any other distribution in respect of any shares of capital stock, and
shall not repurchase, redeem or otherwise reacquire any shares of capital stock
or other securities (except that DocuMagix may repurchase DocuMagix Common
Stock from former employees pursuant to the terms of existing restricted stock
purchase agreements);
(e) DocuMagix shall not sell, issue or authorize the issuance of (i) any
capital stock or other security, (ii) any option, call, warrant or right to
acquire any capital stock or other security, or (iii) any instrument
convertible into or exchangeable for any capital stock or other security
(except that DocuMagix shall be permitted (x) to issue DocuMagix Common Stock
to employees upon the exercise of outstanding DocuMagix Options and (y) to
issue shares of DocuMagix Common Stock upon the conversion of shares of
DocuMagix Preferred Stock);
(g) DocuMagix shall not amend or waive any of its rights under, or
permit the acceleration of vesting under, (i) any provision of its Option Plan,
(ii) any provision of any agreement evidencing any outstanding DocuMagix
Option, or (iii) any provision of any restricted stock purchase agreement;
(h) Except as hereby contemplated, DocuMagix shall not amend or permit
the adoption of any amendment to the Restated Articles or bylaws, or effect any
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction;
(i) DocuMagix shall not form any subsidiary or acquire any equity
interest or other interest in any other Entity;
(j) DocuMagix shall not make any capital expenditure, except for capital
expenditures that, when added to all other capital expenditures made on behalf
of DocuMagix during the Pre-Closing Period, do not exceed $25,000 per month;
(k) DocuMagix shall not (i) enter into or permit any of the assets owned
or used by it to become bound by any Contract that is or would constitute a
Material Contract, or (ii) amend or prematurely terminate, or waive any
material right or remedy under, any DocuMagix Material Contract;
(l) DocuMagix shall not (i) acquire, lease or license any right or other
asset from any other Person, (ii) sell or otherwise dispose of, or lease or
license, any right or other asset to any other Person, or (iii) waive or
relinquish any right, except for assets acquired, leased, licensed or disposed
of by DocuMagix pursuant to Contracts that are not DocuMagix Material
Contracts;
30 27
(m) DocuMagix shall not (i) lend money to any Person (except that
DocuMagix may make reasonable routine travel advances to employees in the
ordinary course of business and may, consistent with the terms of agreements
signed prior to the date of this Agreement), or (ii) incur or guarantee any
indebtedness for borrowed money (except that DocuMagix may make routine
borrowings in the ordinary course of business under its line of credit with
Silicon Valley Bank and except for any borrowings from JetFax);
(n) DocuMagix shall not (i) establish, adopt or amend any Employee
Benefit Plan, (ii) pay any bonus or make any profit-sharing payment, cash
incentive payment or similar payment to, or increase the amount of the wages,
salary, commissions, fringe benefits or other compensation or remuneration
payable to, any of its directors, officers or employees, or (iii) hire any new
employees;
(o) DocuMagix shall not change any of its methods of accounting or
accounting practices in any material respect;
(p) DocuMagix shall not make any tax election that could affect its
status as a C corporation for federal income tax purposes;
(q) DocuMagix shall not commence or settle any material Legal
Proceeding;
(r) DocuMagix shall not enter into any material transaction or take any
other material action outside the ordinary course of business or inconsistent
with its past practices; and
(s) DocuMagix shall not agree or commit to take any of the actions
described in clauses "(e)" through "(r)" above.
4.3 Notification; Updates to Disclosure Schedule.
---------------------------------------------
(a) During the Pre-Closing Period, DocuMagix shall promptly notify
JetFax in writing of:
(i) the discovery by DocuMagix of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this Agreement
and that caused or constitutes an inaccuracy in or breach of any representation
or warranty made by DocuMagix or any of the Designated Shareholders in this
Agreement;
(ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute an inaccuracy in or breach of any representation or warranty made by
DocuMagix or any of the Designated Shareholders in this Agreement if (A) such
representation or warranty
31 28
had been made as of the time of the occurrence, existence or discovery of such
event, condition, fact or circumstance, or (B) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the date of this
Agreement;
(iii) any breach of any covenant or obligation of DocuMagix;
and
(iv) any event, condition, fact or circumstance that would
make the timely satisfaction of any of the conditions set forth in Section 6 or
Section 7 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is required to be
disclosed pursuant to Section 4.3(a) requires any change in the Disclosure
Schedule, or if any such event, condition, fact or circumstance would require
such a change assuming the Disclosure Schedule were dated as of the date of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, then DocuMagix shall promptly deliver to JetFax an update to the
Disclosure Schedule specifying such change. No such update shall be deemed to
supplement or amend the Disclosure Schedule for the purpose of (i) determining
the accuracy of any of the representations and warranties made by DocuMagix or
any of the Designated Shareholders in this Agreement, or (ii) determining
whether any of the conditions set forth in Section 6 has been satisfied.
4.4 No Negotiation. During the Pre-Closing Period, neither DocuMagix,
---------------
subject to its and its directors fiduciary duty obligations to the shareholders
of DocuMagix under applicable law, nor any of the Designated Shareholders,
subject to their fiduciary duty obligations to DocuMagix under applicable law,
shall directly or indirectly:
(a) solicit or encourage the initiation of any inquiry, proposal or
offer from any Person (other than JetFax) relating to a possible Acquisition
Transaction;
(b) participate in any discussions or negotiations or enter into any
agreement with, or provide any non-public information to, any Person (other
than JetFax) relating to or in connection with a possible Acquisition
Transaction; or
(c) consider, entertain or accept any proposal or offer from any Person
(other than JetFax) relating to a possible Acquisition Transaction.
DocuMagix and the Designed Shareholders shall promptly notify JetFax in writing
of any inquiry, proposal or offer relating to a possible Acquisition
Transaction that is received during the Pre-Closing Period.
5. Additional Covenants of the Parties
-----------------------------------
5.1 Filings and Consents. As promptly as practicable after the
execution
---------------------
of this Agreement, each party to this Agreement (a) shall make all filings (if
any) and give all notices (if any) required to be made and given by such party
in connection with the Merger and the other
32 29
transactions contemplated by this Agreement, and (b) shall use all
commercially reasonable efforts to obtain all Consents (if any) required to be
obtained (pursuant to any applicable Legal Requirement or Contract, or
otherwise) by such party in connection with the Merger or any of the other
transactions contemplated by this Agreement. JetFax shall (upon request)
promptly deliver to DocuMagix a copy of each such filing made, each such notice
given and each such Consent obtained by JetFax or Merger Sub during the Pre-
Closing Period (except to the extent any such filing, notice or Consent
contains any non-public information); and DocuMagix shall (upon request)
promptly deliver to JetFax a copy of each such filing made, each such notice
given and each such Consent obtained by DocuMagix during the Pre-Closing
Period.
5.2 Information Statement. As promptly as practicable after the
execution
----------------------
of this Agreement, DocuMagix and JetFax shall jointly prepare an Information
Statement relating to the approval of the Merger by the shareholders of
DocuMagix (the "Information Statement"). DocuMagix shall provide and include
in the Information Statement such information relating to DocuMagix and its
shareholders as may be required pursuant to Rule 502 under the Securities Act.
The Information Statement shall include the recommendation of the board of
directors of DocuMagix in favor of the Merger, except as otherwise required by
such directors' fiduciary duties to the shareholders of DocuMagix.
5.3 DocuMagix Shareholders' Meeting. DocuMagix shall, in accordance
with
-------------------------------
its Restated Articles and bylaws and the applicable requirements of the
California General Corporation Law, call and hold a special meeting of its
shareholders as promptly as practicable for the purpose of permitting them to
consider and to vote upon and approve the Merger and the adoption and approval
of this Agreement (the "DocuMagix Shareholders' Meeting"). DocuMagix shall
cause a copy of the Information Statement to be delivered to each shareholder
of DocuMagix who is entitled to vote at the DocuMagix Shareholders' Meeting.
As promptly as practicable after the delivery of copies of the Information
Statement to all shareholders entitled to vote at the DocuMagix Shareholders'
Meeting, DocuMagix shall use its best efforts (i) to solicit from each of such
shareholders a proxy in favor of the approval of the Merger and the adoption
and approval of this Agreement, (ii) to cause each of such shareholders to
acknowledge in writing that ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ is his or her "purchaser
representative" (as defined in Rule 501 under the Securities Act) in connection
with evaluating the merits and risks of investing in JetFax Common Stock, and
(iii) to cause each of such shareholders to execute and deliver to JetFax a
Shareholder Investment Certification in the form of Exhibit M hereto. Without
limiting the generality or the effect of anything contained in the Shareholder
Agreements being executed and delivered to JetFax by the Designated
Shareholders contemporaneously with the execution and delivery of this
Agreement, each Designated Shareholder shall cause all shares of the capital
stock of DocuMagix that are owned, beneficially or of record, by such
Designated Shareholder on the record date for the DocuMagix Shareholders'
Meeting to be voted in favor of the Merger and the adoption and approval of
this Agreement at such meeting.
5.4 Public Announcements. During the Pre-Closing Period, (a) neither
---------------------
DocuMagix nor any of the Designated Shareholders shall (and DocuMagix shall not
permit any of its Representatives to) issue any press release or make any
public statement regarding this Agreement or the Merger, or regarding any of
the other transactions contemplated by this Agreement, unless such press
release
33 30
or public statement conforms to written guidelines to be developed jointly by
JetFax and DocuMagix and (b) JetFax will consult with DocuMagix prior to
issuing any press release or making any public statement regarding the Merger.
5.5 Pooling of Interests. During the Pre-Closing Period, neither
---------------------
DocuMagix nor any of the Designated Shareholders shall take any action that
could reasonably be expected to have an adverse effect on the ability of JetFax
to account for the Merger as a "pooling of interests."
5.6 Affiliate Agreements. Each Designated Shareholder listed on Exhibit
A
--------------------
shall and DocuMagix shall use its best efforts to cause each Person identified
on Exhibit D-1 (and any other Person that could reasonably be deemed to be an
"affiliate" of DocuMagix for purposes of the Securities Act) to execute and
deliver to JetFax, as promptly as practicable after the execution of this
Agreement, an Affiliate Agreement in the form of Exhibit D-2.
5.7 Best Efforts. During the Pre-Closing Period, (a) DocuMagix and the
-------------
Designated Shareholders shall use their best efforts to cause the conditions
set forth in Section 6 to be satisfied on a timely basis, and (b) JetFax and
Merger Sub shall use their best efforts to cause the conditions set forth in
Section 7 to be satisfied on a timely basis.
5.8 Employment and Noncompetition Agreements. At or prior to the
Closing,
-----------------------------------------
DocuMagix shall use its best efforts to cause (i) Maxon ▇▇▇▇▇▇▇ to execute and
deliver to DocuMagix and JetFax an Employment and Noncompetition Agreement in
the form of Exhibit G and (ii) ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ to execute and
deliver to DocuMagix and JetFax a Noncompetition Agreement in the form of
Exhibit H.
5.9 Release. At the Closing, (i) each Designated Shareholder shall
-------
execute and deliver to DocuMagix and JetFax a release in the form of Exhibit I
and (ii) DocuMagix shall use its best efforts to cause each holder of DocuMagix
Preferred Stock and holders of at least 90% of the DocuMagix Common Stock to
execute and deliver to DocuMagix and JetFax a Release in the form of Exhibit I.
6. Conditions Precedent to Obligations of JetFax
---------------------------------------------
and Merger Sub
--------------
The obligations of JetFax and Merger Sub to effect the Merger and
otherwise consummate the transactions contemplated by this Agreement are
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions:
6.1 Accuracy of Representations. Each of the representations and
---------------------------
warranties made by DocuMagix and the Designated Shareholders in this Agreement
and in each of the other agreements and instruments delivered to JetFax in
connection with the transactions contemplated by this Agreement shall have been
accurate in all material respects as of the date of this Agreement and shall be
accurate in all material respects as of the Closing Date as if made on the
Closing Date (without giving effect to any update to the Disclosure Schedule),
except for changes contemplated by
34 31
this Agreement and except for those representations and warranties which
address matters only as of a particular date.
6.2 Performance of Covenants. Each covenant or obligation that
DocuMagix
-------------------------
or any of the Designated Shareholders is required to comply with or to perform
at or prior to the Closing shall have been complied with and performed in all
material respects.
6.3 Shareholder Approval. The terms of the Merger shall have been duly
---------------------
approved under applicable law and DocuMagix's Articles of Incorporation and
Bylaws by the affirmative vote of (a) at least 90% of the shares of DocuMagix
Common Stock entitled to vote with respect thereto; (b) at least 82% of the
shares of DocuMagix Series A Preferred Stock entitled to vote with respect
thereto; and (c) all of the shares of DocuMagix Preferred Stock (excluding the
DocuMagix Series A Preferred Stock) entitled to vote with respect thereto.
6.4 Consents. All material Consents required to be obtained in
connection
---------
with the Merger and the other transactions contemplated by this Agreement
(including the Consents identified in Part 2.22 of the Disclosure Schedule)
shall have been obtained and shall be in full force and effect.
6.5 Agreements and Documents. JetFax and DocuMagix shall have received
-------------------------
the following agreements and documents, each of which shall be in full force
and effect:
(a) Affiliate Agreements in the form of Exhibit D-2, executed by
the Persons identified on Exhibit D-1 and by any other Person who could
reasonably be deemed to be an "affiliate" of DocuMagix for purposes of the
Securities Act;
(b) an Employment and Noncompetition Agreement in the form of
Exhibit G, executed by Maxon ▇▇▇▇▇▇▇;
(c) a Noncompetition Agreement in the form of Exhibit H, executed
by each of ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇▇▇▇;
(d) a legal opinion of Fenwick & West LLP, dated as of the Closing
Date, in the form of Exhibit J;
(e) a Release in the form of Exhibit I, executed by holders of (a)
at least 90% of the outstanding shares of DocuMagix Common Stock; (b) at least
82% of the outstanding shares of DocuMagix Series A Preferred Stock; and (c)
all of the outstanding shares of DocuMagix Preferred Stock, excluding the
DocuMagix Series A Preferred Stock;
(f) a letter from Price Waterhouse LLP, dated as of the Closing
Date, confirming that they are aware of no transaction entered into by
DocuMagix, and no other fact or circumstance relating to DocuMagix, that would
prevent JetFax from accounting for the Merger as a "pooling of interests" in
accordance with generally accepted principles,
35 32
Accounting Principles Board Opinion No. 16 and all published rules,
regulations and policies of the SEC;
(g) a certificate executed by the Designated Shareholders and
containing the representation and warranty of each Designated Shareholder that
each of the representations and warranties set forth in Section 2 is accurate
in all respects as of the Closing Date as if made on the Closing Date and that
the conditions set forth in Sections 6.1, 6.2, 6.3 and 6.4 have been duly
satisfied (the "Designated Shareholders' Closing Certificate");
(h) an Escrow Agreement in the form of Exhibit F, executed by
DocuMagix and the Designated Shareholders (the "Escrow Agreement"); and
(i)written resignations of all officers and directors of DocuMagix,
effective as of the Effective Time.
6.6 Rule 506. All applicable requirements of Rule 506 under the
---------
Securities Act shall have been satisfied.
6.7 No Restraints. No temporary restraining order, preliminary or
--------------
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
6.8 No Legal Proceedings. No Person (other than JetFax, any affiliate
--------------------
of JetFax or any shareholder of JetFax (related to their interest as a
shareholder of JetFax)) shall have commenced any Legal Proceeding challenging
or seeking the recovery of a material amount of damages in connection with the
Merger or seeking to prohibit or limit the exercise by JetFax of any material
right pertaining to its ownership of stock of the Surviving Corporation.
6.9 Employees. None of the individuals identified on Exhibit K as
----------
"Category I Employees" shall have ceased to be employed by, or submitted a
resignation in writing of his or her employment with, DocuMagix; and not more
than 20% of the individuals identified on Exhibit K as "Category II Employees"
shall have ceased to be employed by, or submitted a resignation in writing of
his or her employment with, DocuMagix.
6.10 No Material Adverse Change. There shall have been no change in
--------------------------
DocuMagix's business, condition, assets, liabilities, operations, financial
performance or prospects since the date of this Agreement which could
reasonably be expected to have an Material Adverse Effect on DocuMagix.
6.11 Confidentiality and Nondisclosure Agreements. Each employee of
--------------------------------------------
DocuMagix, and each consultant to DocuMagix, shall have executed and delivered
to DocuMagix a confidentiality and nondisclosure agreement in a form reasonably
satisfactory to JetFax.
35 33
6.12 Bridge Notes. JetFax shall have received an executed original of
-------------
each Bridge Note marked cancelled by the holder of the Bridge Note.
6.13 Bridge Warrants. JetFax shall have received from the Bridge
Holders
---------------
an executed original of each Bridge Warrant marked cancelled by the holder of
such Bridge Warrant.
6.14 DocuMagix Stock Options. The DocuMagix Stock Options outstanding
------------------------
immediately prior to the Closing shall have been assumed by JetFax in
accordance with Section 1.6 hereof.
7. Conditions Precedent to Obligations of DocuMagix
------------------------------------------------
The obligations of DocuMagix to effect the Merger and otherwise consummate
the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of the following conditions:
7.1 Accuracy of Representations. Each of the representations and
----------------------------
warranties made by JetFax and Merger Sub in this Agreement shall have been
accurate in all material respects as of the date of this Agreement, and shall
be accurate in all material respects as of the Closing Date as if made on the
Closing Date.
7.2 Performance of Covenants. All of the covenants and obligations that
------------------------
JetFax and Merger Sub are required to comply with or to perform at or prior to
the Closing shall have been complied with and performed in all respects.
7.3 Documents. DocuMagix shall have received a legal opinion of ▇▇▇▇▇▇
----------
Godward LLP, dated as of the Closing Date, in the form of Exhibit L.
7.4 Listing. The shares of JetFax Common Stock to be issued in the
Merger
--------
shall have been approved for listing (subject to notice of issuance) on the
Nasdaq National Market.
7.5 No Restraints. No temporary restraining order, preliminary or
-------------
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
7.6 No Material Adverse Change. There shall have been no change in
---------------------------
JetFax's business, condition, assets, liabilities, operations, financial
performance or prospects since the date of this Agreement which could
reasonably be expected to have a Material Adverse Effect on JetFax.
8. Termination
-----------
8.1 Termination Events. This Agreement may be terminated prior to the
Closing:
37 34
(a) by JetFax if JetFax reasonably determines that the timely
satisfaction of any condition set forth in Section 6 has become impossible
(other than as a result of any failure on the part of JetFax or Merger Sub to
comply with or perform any covenant or obligation of JetFax or Merger Sub set
forth in this Agreement);
(b) by DocuMagix if DocuMagix reasonably determines that the timely
satisfaction of any condition set forth in Section 7 has become impossible
(other than as a result of any failure on the part of DocuMagix or any of the
Designated Shareholders to comply with or perform any covenant or obligation
set forth in this Agreement or in any other agreement or instrument delivered
to JetFax or Merger Sub);
(c) by JetFax if the Closing has not taken place on or before
December 5, 1997 (other than as a result of any failure on the part of JetFax
to comply with or perform any covenant or obligation of JetFax set forth in
this Agreement);
(d) by DocuMagix if the Closing has not taken place on or before
December 5, 1997 (other than as a result of the failure on the part of
DocuMagix or any of the Designated Shareholders to comply with or perform any
covenant or obligation set forth in this Agreement or in any other agreement or
instrument delivered to JetFax or Merger Sub);
(e) by JetFax if DocuMagix shall have (A) withdrawn or modified in
a manner adverse to JetFax its approval or recommendation of this Agreement,
the Amendment to Restated Articles, the Agreement of Merger or the Merger,
including by the approval of any acquisition offer or Acquisition Transaction
by any other person or (B) taken any position inconsistent with such approval
or recommendation or failed to reconfirm such approval or recommendation within
ten business days of a request for such reconfirmation by JetFax; or if the
Board of Directors of DocuMagix shall have resolved to do any of the foregoing;
or
(f) by the mutual consent of JetFax and DocuMagix.
8.2 Termination Procedures. If JetFax wishes to terminate this
Agreement
----------------------
pursuant to Section 8.1(a), Section 8.1(c) or Section 8.1(e), JetFax shall
deliver to DocuMagix a written notice stating that JetFax is terminating this
Agreement and setting forth a brief description of the basis on which JetFax is
terminating this Agreement. If DocuMagix wishes to terminate this Agreement
pursuant to Section 8.1(b) or Section 8.1(d), DocuMagix shall deliver to JetFax
a written notice stating that DocuMagix is terminating this Agreement and
setting forth a brief description of the basis on which DocuMagix is
terminating this Agreement.
8.3 Effect of Termination.
----------------------
(a) If this Agreement is terminated pursuant to Section 8.1, except as
provided in Section 8.3(b), all further obligations of the parties under this
Agreement shall terminate; provided, however, that: (i) the parties shall, in
all events, remain bound by and continue to be subject to the provisions
38 35
set forth in Section 11; and (ii) DocuMagix and JetFax shall, in all events,
remain bound by and continue to be subject to Section 5.4.
(b) If JetFax shall have terminated this Agreement pursuant to Section
8.1(e), then DocuMagix shall promptly pay JetFax a cash cancellation fee (the
"Cancellation Fee") of $325,000 plus reimbursements for all out-of-pocket
expenses and fees incurred by it or on its behalf in connection with the Merger
and the transactions contemplated by this Agreement.
(c) Each of the parties acknowledges that the agreement contained in
this Section 8.3 is an integral part of the transactions contemplated in this
Agreement, and that, without the agreement contained in this Section 8.3,
neither JetFax nor DocuMagix would enter into this Agreement.
9. Indemnification, Etc.
---------------------
9.1 Survival of Representations, Etc.
---------------------------------
(a) The representations and warranties made by the Designated
Shareholders (including the representations and warranties set forth in Section
2 and the representations and warranties set forth in the Designated
Shareholders' Closing Certificate) shall survive the Closing and shall remain
in full force and effect and shall expire upon (i) the date the S-3
Registration Statement described in Section 10.2 is filed with the SEC or (ii)
the date 30 days after JetFax is first eligible to utilize a Form S-3
registration statement, whichever occurs first (the "Indemnification
Termination Date"). All representations and warranties made by JetFax and
Merger Sub shall terminate and expire as of the Effective Time; provided,
however, that the representations and warranties set forth in Sections 3.3 and
3.4 shall survive the Closing and shall expire on the first anniversary of the
Closing Date.
(b) The representations, warranties, covenants and obligations of
DocuMagix and the Designated Shareholders, and the rights and remedies that may
be exercised by the Indemnitees, shall not be limited or otherwise affected by
or as a result of any information furnished to, or any investigation made by or
knowledge of, any of the Indemnitees or any of their Representatives.
9.2 Indemnification by Designated Shareholders.
-------------------------------------------
(a) From and after the Effective Time (but subject to Section
9.1(a)), the Designated Shareholders, jointly and severally, shall hold
harmless and indemnify each of the Indemnitees from and against, and shall
compensate and reimburse each of the Indemnitees for, any Damages which are
directly or indirectly suffered or incurred by any of the Indemnitees or to
which any of the Indemnitees may otherwise become subject (regardless of
whether or not such Damages relate to any third-party claim) and which arise
from or as a result of, or are directly or indirectly connected with: (i) any
inaccuracy in or breach of any representation or warranty set forth in Section
2 or in the Designated Shareholders' Closing Certificate; (ii) any breach of
any covenant or obligation of DocuMagix or any of the Designated Shareholders
(including the covenants set forth in
39 36
Sections 4 and 5); or (iii) any Legal Proceeding relating to any inaccuracy or
breach of the type referred to in clause "(i)" or "(ii)" above (including any
Legal Proceeding commenced by any Indemnitee for the purpose of enforcing any
of its rights under this Section 9).
(b) The Designated Shareholders acknowledge and agree that, if the
Surviving Corporation suffers, incurs or otherwise becomes subject to any
Damages as a result of or in connection with any inaccuracy in or breach of any
representation, warranty, covenant or obligation, then (without limiting any of
the rights of the Surviving Corporation as an Indemnitee and to the extent such
Damages are not allocated by JetFax to the Surviving Corporation) JetFax shall
also be deemed, by virtue of its ownership of the stock of the Surviving
Corporation, to have incurred Damages as a result of and in connection with
such inaccuracy or breach.
9.3 Threshold; Ceiling.
-------------------
(a) The Designated Shareholders shall not be required to make any
indemnification payment pursuant to Section 9.2(a) for any inaccuracy in or
breach of any of their representations and warranties set forth in Section 2
until such time as the total amount of all Damages (including the Damages
arising from such inaccuracy or breach and all other Damages arising from any
other inaccuracies in or breaches of any representations or warranties) that
have been directly or indirectly suffered or incurred by any one or more of the
Indemnitees, or to which any one or more of the Indemnitees has or have
otherwise become subject, exceeds $100,000 in the aggregate, in which case such
indemnification shall be made from the first dollar.
(b) The maximum liability of each Designated Shareholder under
Section 9.2(a) shall be equal to (i) 40% of the value of the Consideration
received by each Designated Shareholder (determined at a value of $8.00 per
share of JetFax Common Stock and including the shares escrowed pursuant to
Escrow Agreement) until the earlier of (A) the date that JetFax files a report
on Form 8-K in connection with the Merger which includes the financial
statements described in Item 7 of Form 8-K and (B) the 75th day after the
Closing Date and (ii) 23% of such value thereafter until the Indemnification
Termination Date.
(c) The maximum aggregate liability of each Designated Shareholder
under Sections 9.6 and 9.7 shall be equal to 60% of the value of the
Consideration received by each Designated Shareholder (determined at a value of
$8.00 per share of JetFax Common Stock and including the shares escrowed
pursuant to Escrow Agreement) until the Indemnification Termination Date.
(e) Notwithstanding anything in Section 9.3(b), any decrease in the
maximum liability of the Designated Shareholders pursuant to Section 9.3(b)
shall not occur to the extent that the aggregate maximum liability of the
Designated Shareholders pursuant to Section 9.3(b) would be less than the
aggregate claims for indemnification outstanding at such time under Section
9.2(a).
(f) Notwithstanding anything in Section 9.3(c), any decrease in the
maximum liability of the Designated Shareholders pursuant to Section 9.3(c)
shall not occur to the extent that
40 37
the aggregate maximum liability of the Designated Shareholders pursuant to
Section 9.3(c) would be less than one-half the aggregate claims for
indemnification outstanding at such time under Section 9.2(a).
9.4 Satisfaction of Indemnification Claim. In the event any Designated
--------------------------------------
Shareholder shall have any liability (for indemnification or otherwise) to any
Indemnitee under this Section 9, satisfaction of such liability shall first
occur from the shares escrowed pursuant to the Escrow Agreement and, if any
liability remains after such shares have been exhausted, such Designated
Shareholder may satisfy such liability by delivering to such Indemnitee the
number of shares of JetFax Common Stock determined by dividing (a) the
aggregate dollar amount of such liability by (b) the closing price per share of
the JetFax Common Stock on the Nasdaq National Market on the date hereof.
9.5 No Contribution. Each Designated Shareholder waives, and
acknowledges
----------------
and agrees that he shall not have and shall not exercise or assert (or attempt
to exercise or assert), any right of contribution, right of indemnity or other
right or remedy against the Surviving Corporation in connection with any
indemnification obligation or any other liability to which he may become
subject under or in connection with this Agreement or the Designated
Shareholders' Closing Certificate.
9.6 Interest. Any Designated Shareholder who is required to hold
---------
harmless, indemnify, compensate or reimburse any Indemnitee pursuant to this
Section 9 with respect to any Damages shall also be liable to such Indemnitee
for interest on the amount of such Damages (for the period commencing as of the
date on which the Indemnitee incurred or suffered such Damages and ending on
the date on which the liability of such Designated Shareholder to such
Indemnitee is fully satisfied by such Designated Shareholder) at a floating
rate equal to the rate of interest publicly announced by Bank of America, N.T.
& S.A. from time to time as its prime, base or reference rate.
9.7 Defense of Third Party Claims. In the event of the assertion or
------------------------------
commencement by any Person of any claim or Legal Proceeding (whether against
the Surviving Corporation, against JetFax or against any other Person) with
respect to which any of the Designated Shareholders may become obligated to
hold harmless, indemnify, compensate or reimburse any Indemnitee pursuant to
this Section 9, JetFax shall have the right, at its election, to proceed with
the defense of such claim or Legal Proceeding on its own. If JetFax so
proceeds with the defense of any such claim or Legal Proceeding:
(a) all reasonable expenses relating to the defense of such claim
or Legal Proceeding shall be borne and paid exclusively by the Designated
Shareholders;
(b) each Designated Shareholder shall, subject to any contractual
obligations, make available to JetFax any documents and materials in his
possession or control that may be necessary to the defense of such claim or
Legal Proceeding; and
41 38
(c) JetFax shall have the right to settle, adjust or compromise
such claim or Legal Proceeding with the consent of the Designated Shareholders'
Agent; provided, however, that such consent shall not be unreasonably withheld.
JetFax shall give the Designated Shareholders' Agent prompt notice of the
commencement of any such Legal Proceeding against JetFax or the Surviving
Corporation; provided, however, that any failure on the part of JetFax to so
notify the Designated Shareholders' Agent shall not limit any of the
obligations of the Designated Shareholders under this Section 9 (except to the
extent such failure materially prejudices the defense of such Legal
Proceeding).
9.8 Exercise of Remedies by Indemnitees Other Than JetFax. No
Indemnitee
------------------------------------------------------
(other than JetFax or any successor thereto or assign thereof) shall be
permitted to assert any indemnification claim or exercise any other remedy
under this Agreement unless JetFax (or any successor thereto or assign thereof)
shall have consented to the assertion of such indemnification claim or the
exercise of such other remedy.
9.9 Exclusive Remedy. The indemnification provided in this Article 9
----------------
shall be the Indemnitees' exclusive remedy after the Closing for (i) any
inaccuracy in or breach of any representation or warranty set forth in Section
2 or in the Designated Shareholders' Closing Certificate; (ii) any breach of
any covenant or obligation of DocuMagix or any of the Designated Shareholders
(including the covenants set forth in Sections 4 and 5); and (iii) any Legal
Proceeding relating to any inaccuracy or breach of the type referred to in
clause "(i)" or "(ii)" above (including any Legal Proceeding commenced by any
Indemnitee for the purpose of enforcing any of its rights under this Section
9). Notwithstanding the foregoing, nothing contained herein shall limit a
party's rights or remedies with respect to claims resulting from or arising out
of fraud.
42 39
10. Registration Rights
-------------------
10.1 Piggyback Registration.
-----------------------
(a) Until the earlier to occur of (i) one year from the Closing
Date or (ii) the date the S-3 Registration Statement in Section 10.2 is filed
with the SEC, JetFax shall notify all recipients of the Consideration hereunder
(each, a "Holder") in writing at least 15 days prior to the filing of any
registration statement under the Securities Act for purposes of an underwritten
public offering of securities of JetFax (including, but not limited to,
registration statements relating to secondary offerings of securities of
JetFax, but excluding registration statements relating to employee benefit
plans or with respect to corporate reorganizations or other transactions under
Rule 145 of the Securities Act) and will afford each such Holder an opportunity
to include in such registration statement all or part of the Consideration held
by such Holder. Each Holder desiring to include in any such registration
statement all or any part of the Consideration held by it ("Registrable
Securities") shall, within ten (10) days after the above-described notice from
JetFax, so notify JetFax in writing. Such notice shall state the intended
method of disposition of the Consideration held by such Holder. If a Holder
decides not to include all of its Consideration in any registration statement
thereafter filed by JetFax, such Holder shall nevertheless continue to have the
right to include any Consideration in any subsequent registration statement or
registration statements as may be filed by JetFax with respect to offerings of
its securities, all upon the terms and conditions set forth herein.
(b) Underwriting. The right of any such Holder to be included in a
-------------
registration pursuant to this Section 10.1 shall be conditioned upon such
Holder's participation in the underwriting and the inclusion of such Holder's
Consideration in the underwriting to the extent provided herein. All Holders
proposing to distribute their Consideration through such underwriting shall
enter into an underwriting agreement and selling shareholder documents in
customary form with the underwriter or underwriters selected for such
underwriting by JetFax. Notwithstanding any other provision of this Section
10.1, if the underwriter determines in good faith that marketing factors
require a limitation of the number of shares to be underwritten, the number of
shares that may be included in the underwriting shall be allocated, first, to
JetFax; second, to those holders of JetFax registration rights existing prior
to the date of this Agreement; third, to the Holders on a pro rata basis based
on the total Consideration held by the Holders; and fourth, to any shareholder
of JetFax (other than a Holder) on a pro rata basis. No such reduction shall
reduce the securities being offered by JetFax for its own account to be
included in the registration and underwriting.
(c) Right To Terminate Registration. JetFax shall have the right
--------------------------------
to terminate or withdraw any registration initiated by it under this Section
10.1 prior to the effectiveness of such registration whether or not any Holder
has elected to include securities in such registration.
(d) Expenses. JetFax shall bear all expenses incurred by it
---------
pursuant to this Section 10.1 in connection with the preparation and filing
with the SEC of the registration statement and any amendments and supplements
thereto and the prospectuses therewith. All underwriting discounts and selling
commissions incurred in connection with such registration shall be borne by the
holders of the securities so registered pro rata on the basis of the number of
shares so registered.
43 40
10.2 Form S-3 Registration.
----------------------
(a) Within 30 days after JetFax is first eligible to utilize a Form
S-3 registration statement, JetFax shall file with the SEC a registration
statement on Form S-3 (or any successor form to Form S-3) (the "S-3
Registration Statement"), for a public resale offering of the Consideration,
and shall use all commercially reasonable efforts to cause the S-3 Registration
Statement to become and remain effective for the period ending on the first to
occur of (i) the date the shares are eligible for sale in their entirety within
a three month period under Rule 144 of the SEC (assuming compliance by the S-3
Participant (as defined below) with the provisions thereof), (ii) the date the
distribution described in the S-3 Registration Statement is complete or (iii)
the second anniversary of the Closing Date.
(b) In the case of any registration pursuant to this Section 10.2,
JetFax shall keep each person whose securities are to be registered thereunder
(a "S-3 Participant") advised of the initiation and completion of such
registrations. At its expense, JetFax will promptly:
(i) Prepare and file with the SEC such amendments and
supplements to the S-3 Registration Statement and the prospectuses used in
connection with the S-3 Registration Statement as may be necessary to comply
with the provisions of the Securities Act with respect to the disposition of
all securities covered by the S-3 Registration Statement;
(ii) Furnish to the S-3 Participants such numbers of copies
of a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of the securities
covered by the S-3 Registration Statement;
(iii) Use all commercially reasonable efforts to register and
qualify the securities covered by the S-3 Registration Statement under such
other securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the S-3 Participants, provided that JetFax shall not be required
in connection therewith or as a condition thereto to qualify to do business or
to file a general consent to service of process in any such states or
jurisdictions;
(iv) Notify each S-3 Participant covered by the S-3
Registration Statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in the S-3 Registration Statement,
as then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing; and
(v) Cause all such shares of JetFax Common Stock to be listed
on each securities exchange or market system on which similar securities issued
by JetFax are then listed.
44 41
10.3 Indemnification.
----------------
(a) JetFax agrees to indemnify, to the extent permitted by law,
each holder of JetFax Common Stock with rights under this
Section 10, against all Damages caused by any untrue or alleged untrue
statement of material fact contained in any registration statement filed
pursuant to Section 10.1 or 10.2, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as the same are caused
by or contained in any information furnished in writing to JetFax by such
holder expressly for use therein or by such holder's failure to deliver a
copy of the such registration statement or prospectus or any amendments
or supplements thereto after JetFax has furnished such holder with a
sufficient number of copies of the same.
(b) In connection with any registration statement in which a holder
of JetFax Common Stock with rights under this Section 10 is participating,
each such holder will furnish to JetFax in writing such information and
affidavits as JetFax reasonably requests for use in connection with such
registration statement or prospectus and, to the extent permitted by law, will
indemnify JetFax, its directors and officers and each Person who controls
JetFax (within the meaning of the Securities Act) against all Damages
resulting from any untrue or alleged untrue statement of material fact
contained in such registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only to the
extent that such untrue statement or omission is contained in any
information or affidavit so furnished in writing by such holder for
inclusion in such registration statement; provided that the obligation to
indemnify will be several, not joint and several, among such holders and the
liability of each such holder will be in proportion to and limited to the net
amount received by such holder from the sale of JetFax Common Stock with
rights under this Section 10, pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is
assumed, the indemnifying party will not be subject to any liability
for any consent to the entry of any judgment or any settlement made by the
indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or
elects not to, assume the defense of a claim will not be obligated to pay
the fees and expenses of more than one counsel for all parties indemnified
by such indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist
between such indemnified party and any other of such indemnified parties with
respect to such claim.
45 42
(d) The indemnification provided for under this Agreement
will remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party or any officer,
director or controlling person of such indemnified party and will survive the
transfer of securities and the Merger. JetFax also agrees to make such
provisions, as are reasonably requested by any indemnified party, for
contribution to such party in the event JetFax's indemnification is
unavailable for any reason.
10.4 Transferability of Registration Rights. The rights
under this Section 10 are not transferable except in connection with (a) a
transfer by will or intestacy and (b) estate planning transfers consisting of
gifts to the spouse or issue of the transferee and transfers to trusts for
the benefit of the spouse or issue of the transferee.
10.5 Amendment of Section 10. Notwithstanding anything to
the contrary contained in this Agreement, the provisions of this Section 10
may be amended by JetFax at any time with the consent of the holders of two-
thirds of the shares of JetFax Common Stock subject (or to be subject) to the
registration statement under this Section 10.
11. Miscellaneous Provisions
------------------------
11.1 Designated Shareholders' Agent. The Designated
Shareholders hereby irrevocably appoint ▇▇▇▇▇▇▇ ▇▇▇▇▇ as their agent for
purposes of Section 9 (the "Designated Shareholders' Agent"), and ▇▇▇▇▇▇▇
▇▇▇▇▇ hereby accepts his appointment as the Designated Shareholders' Agent.
JetFax shall be entitled to deal exclusively with the Designated
Shareholders' Agent on all matters relating to Section 9, and shall be
entitled to rely conclusively (without further evidence of any kind
whatsoever) on any document executed or purported to be executed on behalf
of any Designated Shareholder by the Designated Shareholders' Agent, and on
any other action taken or purported to be taken on behalf of any Designated
Shareholder by the Designated Shareholders' Agent, as fully binding upon such
Designated Shareholder. If the Designated Shareholders' Agent shall die,
become disabled or otherwise be unable to fulfill his responsibilities as
agent of the Designated Shareholders, then the Designated Shareholders
shall, within ten days after such death or disability, appoint a successor
agent and, promptly thereafter, shall notify JetFax of the identity of such
successor. Any such successor shall become the "Designated Shareholders'
Agent" for purposes of Section 9 and this Section 11.1. If for any reason
there is no Designated Shareholders' Agent at any time, all references herein
to the Designated Shareholders' Agent shall be deemed to refer to the
Designated Shareholders. The Designated Shareholders hereby release and
discharge ▇▇▇▇▇▇▇ ▇▇▇▇▇ from any claim, known or unknown, they may have
against him for any action taken by him in connection herewith and waive the
application of Section 1542 of the Civil Code of the State of
California in connection therewith.
11.2 Further Assurances. Each party hereto shall execute
and cause to be delivered to each other party hereto such instruments
and other documents, and shall take such other actions, as such other
party may reasonably request (prior to, at or after the Closing) for the
purpose of carrying out or evidencing any of the transactions
contemplated by this Agreement.
45 43
11.3 Fees and Expenses. Except as otherwise provided
herein, each party to this Agreement shall bear and pay all fees, costs and
expenses (including legal fees and accounting fees) that have been incurred
or that are incurred by such party in connection with the transactions
contemplated by this Agreement, including all fees, costs and expenses incurred
by such party in connection with or by virtue of (a) the investigation and
review conducted by JetFax and its Representatives with respect to
DocuMagix's business (and the furnishing of information to JetFax and its
Representatives in connection with such investigation and review), (b) the
negotiation, preparation and review of this Agreement (including the
Disclosure Schedule) and all agreements, certificates, opinions and other
instruments and documents delivered or to be delivered in connection with
the transactions contemplated by this Agreement, (c) the preparation and
submission of any filing or notice required to be made or given in
connection with any of the transactions contemplated by this Agreement, and
the obtaining of any Consent required to be obtained in connection with
any of such transactions, and (d) the consummation of the Merger; provided,
however, that, to the extent the total amount of all legal fees, costs
and expenses incurred by or for the benefit of DocuMagix (including all such
legal fees, costs and expenses incurred prior to the date of this Agreement)
exceeds $50,000 in the aggregate, such legal fees, costs and expenses
shall be borne and paid by the Designated Shareholders and not by DocuMagix.
11.4 Attorneys' Fees. If any action or proceeding relating
to this Agreement or the enforcement of any provision of this Agreement is
brought against any party hereto, the prevailing party shall be entitled to
recover reasonable attorneys' fees, costs and disbursements (in addition to
any other relief to which the prevailing party may be entitled).
11.5 Notices. Any notice or other communication required or
permitted to be delivered to any party under this Agreement shall be in
writing and shall be deemed properly delivered, given and received when
delivered (by hand, by registered mail, by courier or express delivery
service or by facsimile) to the address or facsimile telephone number set
forth beneath the name of such party below (or to such other address or
facsimile telephone number as such party shall have specified in a written
notice given to the other parties hereto):
if to JetFax:
-------------
JetFax, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ Godward LLP
Five Palo Alto Square
▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
47 44
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to DocuMagix:
----------------
DocuMagix, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
---------------
Fenwick & West LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to any of the Designated Shareholders:
-----------------------------------------
at the address provided on the signature page hereto
11.6 Time of the Essence. Time is of the essence of this
Agreement.
11.7 Headings. The bold-faced section headings contained in
this Agreement are for convenience of reference only, shall not be deemed
to be a part of this Agreement and shall not be referred to in connection
with the construction or interpretation of this Agreement.
11.8 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which,
when taken together, shall constitute one agreement.
11.9 Governing Law; Venue.
(a) This Agreement shall be construed in accordance with,
and governed in all respects by, the internal laws of the State of
California (without giving effect to principles of conflicts of laws).
(b) Any legal action or other legal proceeding relating to
this Agreement or the enforcement of any provision of this Agreement may
be brought or otherwise commenced in the courts of the State of California,
County of Santa ▇▇▇▇▇, or, if it has or can acquire jurisdiction, in the
United States District Court for the Northern District of California.
Each party to this Agreement:
(i) expressly and irrevocably consents and submits to the
jurisdiction of each state court located in the State of California, County
of Santa ▇▇▇▇▇ and federal court
48 45
located in the Northern District of California (and each appellate court
located in the State of California) in connection with any such legal
proceeding;
(ii) agrees that each state court located in the State of
California, County of Santa ▇▇▇▇▇ and federal court located in the Northern
District of California shall be deemed to be a convenient forum; and
(iii) agrees not to assert (by way of motion, as a defense or
otherwise), in any such legal proceeding commenced in any state court located
in the State of California, County of Santa ▇▇▇▇▇ or federal court located in
the Northern District of California, any claim that such party is not subject
personally to the jurisdiction of such court, that such legal proceeding has
been brought in an inconvenient forum, that the venue of such proceeding is
improper or that this Agreement or the subject matter of this Agreement may not
be enforced in or by such court.
(c) Nothing contained in Section 11.9(b) shall be deemed to
limit or otherwise affect the right of any Indemnitee to commence any legal
proceeding or otherwise proceed against DocuMagix or any of the Designated
Shareholders in any other forum or jurisdiction.
11.10 Successors and Assigns. This Agreement shall be
-----------------------
binding upon: DocuMagix and its successors and assigns (if any); the
Designated Shareholders and their respective personal representatives,
executors, administrators, estates, heirs, successors and assigns (if
any); JetFax and its successors and assigns (if any); and Merger Sub and its
successors and assigns (if any). This Agreement shall inure to the
benefit of: DocuMagix; the Designated Shareholders; JetFax; Merger Sub; the
other Indemnitees (subject to Section 9.8); and the respective successors
and assigns (if any) of the foregoing. No party hereto may assign any or
all of its rights under this Agreement (including its indemnification rights
under Section 9), in whole or in part, to any other Person without obtaining
the consent or approval of the other parties hereto.
11.11 Remedies Cumulative; Specific Performance. Except
------------------------------------------
as provided in Section 9.9, the rights and remedies of the parties
hereto shall be cumulative (and not alternative). The
parties to this Agreement agree that, in the event of any breach or
threatened breach by any party to this Agreement of any covenant,
obligation or other provision set forth in this Agreement for the
benefit of any other party to this Agreement, such other party shall be
entitled (in addition to any other remedy that may be available to it) to
(a) a decree or order of specific performance or mandamus to enforce the
observance and performance of such covenant, obligation or other provision,
and (b) an injunction restraining such breach or threatened breach.
11.12 Waiver.
-------
(a) No failure on the part of any Person to exercise any
power, right, privilege or remedy under this Agreement, and no
delay on the part of any Person in exercising any power, right, privilege or
49 46
remedy under this Agreement, shall operate as a waiver of such power,
right, privilege or remedy; and no single or partial exercise of any such
power, right, privilege or remedy shall preclude any other or further exercise
thereof or of any other power, right, privilege or remedy.
(b) No Person shall be deemed to have waived any claim
arising out of this Agreement, or any power, right, privilege or remedy under
this Agreement, unless the waiver of such claim, power, right, privilege or
remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such Person; and any such waiver shall not be
applicable or have any effect except in the specific instance in which it is
given.
11.13 Amendments. Subject to Section 10.5, this Agreement may not
be amended, modified, altered or supplemented other than by means of a
written instrument duly executed and delivered by each of JetFax,
DocuMagix, Merger Sub, and the Designated Shareholders holding, prior to the
Merger, a majority in interest of the shares of DocuMagix Common Stock held
by all the Designated Shareholders at such time (assuming the conversion of
all shares of DocuMagix Preferred Stock in accordance with the Articles of
Incorporation of DocuMagix existing prior to the Merger).
11.14 Severability. In the event that any provision of
this Agreement, or the application of any such provision to any Person or
set of circumstances, shall be determined to be invalid, unlawful, void
or unenforceable to any extent, the remainder of this Agreement, and
the application of such provision to Persons or circumstances other than
those as to which it is determined to be invalid, unlawful, void or
unenforceable, shall not be impaired or otherwise affected and shall
continue to be valid and enforceable to the fullest extent permitted by law.
11.15 Parties in Interest. Except for the provisions of
Section 9, none of the provisions of this Agreement is intended to provide
any rights or remedies to any Person other than the parties hereto and their
respective successors and assigns (if any).
11.16 Entire Agreement. This Agreement and the other
agreements referred to herein set forth the entire understanding of the
parties hereto relating to the subject matter hereof and thereof and
supersede all prior agreements and understandings among or between any of
the parties relating to the subject matter hereof and thereof.
11.17 Construction.
(a) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include the masculine and feminine genders.
(b) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
50 47
(c) Except as otherwise indicated, all references in this
Agreement to "Sections" and "Exhibits" are intended to refer to Sections of
this Agreement and Exhibits to this Agreement.
51 48
(d) The parties hereto have caused this Agreement and Plan of
Reorganization to be executed and delivered as of November 11, 1997.
JetFax Inc.,
a Delaware corporation
By:
-------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
Vice President of Finance,
Chief Financial Officer and Secretary
JF Acquisition Sub, Inc.,
a California corporation
By:
-------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
Chief Financial Officer and Secretary
DocuMagix, Inc.,
a California corporation
By:
-------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Chairman, President and Chief
Executive Officer
DESIGNATED SHAREHOLDERS:
U.S. Venture Partners III
By:
-------------------------------
Name:
Title:
Address:
Facsimile:
[Signature page to Agreement and Plan of Reorganization]
52 49
BancBoston Ventures
By:
-------------------------------
Name:
Title:
Address:
Facsimile:
U.S.V. Entrepreneur Partners
By:
-------------------------------
Name:
Title:
Address:
Facsimile:
Second Ventures Limited Partners
By:
-------------------------------
Name:
Title:
Address:
Facsimile:
▇▇▇ ▇▇▇▇▇▇
By:
-------------------------------
Name:
Title:
Address:
Facsimile:
55 52
▇▇▇▇▇▇ Living Trust dtd 8/30/92
By:
-------------------------------
Name:
Title:
Address:
Facsimile:
Ka-▇▇▇ ▇▇▇▇▇
By:
-------------------------------
Name:
Title:
Address:
Facsimile:
[Signature page to Agreement and Plan of Reorganization]
55 53
Exhibit A
LIST OF DESIGNATED SHAREHOLDERS
Designated Shareholders
-----------------------
BancBoston Ventures
U.S. Venture Partners III
U.S.V. Entrepreneur Partners
Second Ventures Limited Partners
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ Living Trust dtd 8/30/92
Ka-Lai (▇▇▇▇▇) ▇▇▇▇▇
57 A-1
EXHIBIT B
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
Acquisition Transaction. "Acquisition Transaction" shall
mean any transaction involving:
(d) the sale, license, disposition or acquisition
of all or a material portion of DocuMagix's business or assets;
(e) the issuance, disposition or acquisition of (i)
any capital stock or other equity security of DocuMagix (other than common
stock issued to employees of DocuMagix, upon exercise of DocuMagix Options or
otherwise, in routine transactions in accordance with DocuMagix's past
practices), (ii) any option, call, warrant or right (whether or not immediately
exercisable) to acquire, or otherwise relating to, any capital stock or other
equity security of DocuMagix (other than stock options granted to employees of
DocuMagix in routine transactions in accordance with DocuMagix's past
practices), or (iii) any security, instrument or obligation that is or may
become convertible into or exchangeable for any capital stock or other equity
security of DocuMagix; or
(f) any merger, consolidation, business
combination, share exchange, reorganization or similar transaction involving
DocuMagix.
Agreement. "Agreement" shall mean the Agreement and Plan of
Reorganization to which this Exhibit B is attached (including the Disclosure
Schedule), as it may be amended from time to time.
Agreement of Merger. "Agreement of Merger" shall mean the Agreement
of Merger to be filed with the California Secretary of State in order to
effect the merger in the form attached to the Agreement as Exhibit E-2.
Bridge Holders. "Bridge Holders" shall mean those
Designated Shareholders who are holders of the Bridge Notes, each such holder
being a "Bridge Holder."
Bridge Notes. "Bridge Notes" shall mean the aggregate
$1,000,000 principal amount of notes of DocuMagix as identified on Part
2.11(c) of the Disclosure Schedule, issued to the Bridge Holders, each such
note being a "Bridge Note."
Bridge Warrants. "Bridge Warrants" shall mean the warrants issued
by DocuMagix in connection with the Bridge Notes, all of which are
individually identified on Part 2.3(b) of the Disclosure Schedule, each
such warrant being a "Bridge Warrant."
Consent. "Consent" shall mean any approval, consent,
ratification, permission, waiver or authorization.
Contract. "Contract" shall mean any written, oral or other
agreement, contract, subcontract, lease, instrument, note, warranty,
insurance policy, benefit plan or legally binding commitment of any
nature.
58 B-1
Damages. "Damages" shall include any loss, damage, injury, decline
in value, lost opportunity, liability, claim, demand, settlement, judgment,
award, fine, penalty, Tax, fee (including reasonable attorneys' fees),
charge, cost (including costs of investigation) or expense of any nature.
Designated JetFax Stock Price. "Designated JetFax Stock Price"
shall mean $9.629 per share of JetFax Common Stock (as adjusted as
appropriate to reflect any stock split, reverse stock split, stock dividend,
recapitalization or other similar transaction effected by JetFax after the
date of this Agreement).
Disclosure Schedule. "Disclosure Schedule" shall mean the schedule
(dated as of the date of the Agreement) delivered to JetFax on behalf of
DocuMagix and the Designated Shareholders.
DocuMagix Common Stock. "DocuMagix Common Stock" shall have the
meaning set forth in Section 2.3(a) of the Agreement.
DocuMagix Contract. "DocuMagix Contract" shall mean any Contract:
(a) to which DocuMagix is a party; (b) by which DocuMagix or any of its
assets is or may become bound or under which DocuMagix has, or may become
subject to, any obligation; or (c) under which DocuMagix has or may
acquire any right or interest.
DocuMagix Option. "DocuMagix Option" shall have the meaning set
forth in Section 1.6 of the Agreement.
DocuMagix Preferred Stock. "DocuMagix Preferred Stock" shall
have the meaning set forth in Section 2.3(a) of the Agreement.
DocuMagix Proprietary Asset. "DocuMagix Proprietary Asset"
shall mean any Proprietary Asset owned by or licensed to DocuMagix or
otherwise used by DocuMagix.
DocuMagix Warrant. "DocuMagix Warrant" shall have the meaning
set forth in Section 1.7 of the Agreement.
Employee Benefit Plan. "Employee Benefit Plan" shall have the
meaning specified in Section 3(3) of ERISA.
Encumbrance. "Encumbrance" shall mean any lien, pledge,
hypothecation, charge, mortgage, security interest, encumbrance, claim,
infringement, interference, option, right of first refusal, preemptive
right, community property interest or restriction of any nature
(including any restriction on the voting of any security, any restriction
on the transfer of any security or other asset, any restriction on the
receipt of any income derived from any asset, any restriction on the use of
any asset and any restriction on the possession, exercise or transfer of any
other attribute of ownership of any asset).
Entity. "Entity" shall mean any corporation (including any non-
profit corporation), general partnership, limited partnership, limited
liability partnership, joint venture, estate, trust, company (including any
limited liability company or joint stock company), firm or other enterprise,
association, organization or entity.
Exchange Act. "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
59 B-2
Governmental Authorization. "Governmental Authorization" shall
mean any permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or
otherwise made available by or under the authority of any Governmental Body or
pursuant to any Legal Requirement.
1) nation, state, commonwealth, province, territory, county,
municipality, district or other jurisdiction of any nature; (b) federal,
state, local, municipal, foreign or other government; or (c) governmental
or quasi-governmental authority of any nature (including any governmental
division, department, agency, commission, instrumentality, official,
organization, unit, body or Entity and any court or other tribunal).
2) JetFax; (b) JetFax's current and future affiliates (including
the Surviving Corporation); (c) the respective officers, directors and
employees of the Persons referred to in clauses "(a)" and "(b)" above; and
(d) the respective successors and assigns of the Persons referred to in
clauses "(a)", "(b)" and "(c)" above; provided, however, that the
Designated Shareholders shall not be deemed to be "Indemnitees."
Legal Proceeding. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry,
audit, examination or investigation commenced, brought, conducted or heard by
or before, or otherwise involving, any court or other Governmental Body or
any arbitrator or arbitration panel.
Legal Requirement. "Legal Requirement" shall mean any federal,
state, local, municipal, foreign or other law, statute, constitution,
principle of common law, resolution, ordinance, code, edict, decree,
rule, regulation, ruling or requirement issued, enacted, adopted,
promulgated, implemented or otherwise put into effect by or under the
authority of any Governmental Body.
Material Adverse Effect. A violation or other matter will be
deemed to have a "Material Adverse Effect" on DocuMagix if such violation
or other matter (considered together with all other matters that would
constitute exceptions to the representations and warranties set forth in the
Agreement or in the Designated Shareholders' Closing Certificate but for
the presence of "Material Adverse Effect" or other materiality
qualifications, or any similar qualifications, in such representations and
warranties) would have a material adverse effect on DocuMagix's business,
intellectual property rights, condition, assets, liabilities, operations,
financial performance or prospects, taken as a whole excluding (i)
changes that occurred after the date of this Agreement in general business
conditions in the software industry and not specifically related to
DocuMagix, or (ii) as a result of the public announcement or the pendency of
the Merger. A violation or other matter will be deemed to have a "Material
Adverse Effect" on JetFax if such violation or other matter (considered
together with all other matters that would constitute exceptions to the
representations and warranties set forth in the Agreement but for the presence
of "Material Adverse Effect" or other materiality qualifications, or any
similar qualifications, in such representations and warranties) would
have a material adverse effect on JetFax's business, intellectual property
rights, condition, assets, liabilities, operations, financial performance
or prospects, taken as a whole excluding (i) changes that occurred after
the date of this Agreement in general business conditions in the software
industry and not specifically related to JetFax, or (ii) as a result of the
public announcement or the pendency of the Merger.
Material Contract. "Material Contact" shall mean:
60 B-3
(ii) those contracts identified in Part 2.10(a) of the
Disclosure Schedule;
(iii) any Contact pursuant to which the Surviving Corporation
directly or indirectly suffers, incurs or otherwise becomes subject to Damages
in excess of $25,000;
(iv) any Contract that contemplates or involves (A) the payment
or delivery of cash or other consideration in an amount or having a value in
excess of $25,000 in the aggregate, or (B) the performance of services having a
value in excess of $25,000 in the aggregate); and
(v) any other Contract material to DocuMagix's business,
condition, operations, financial performance or prospects.
Option Plan. "Option Plan" shall mean DocuMagix's 1993
Stock Option Plan.
Person. "Person" shall mean any individual, Entity or
Governmental Body.
Proprietary Asset. "Proprietary Asset" shall mean: (a) any patent,
patent application, trademark (whether registered or unregistered),
trademark application, trade name, service ▇▇▇▇ (whether registered or
unregistered), service ▇▇▇▇ application, copyright (whether registered or
unregistered), copyright application, maskwork, maskwork application, trade
secret, know-how, customer list, system, computer software, source code,
computer program, invention, design, proprietary product, technology,
proprietary right or other intellectual property right or intangible
asset; and (b) any right to use or exploit any of the foregoing.
Representatives. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and
Exchange Commission.
Securities Act. "Securities Act" shall mean the Securities Act of 1933,
as amended.
Tax. "Tax" shall mean any tax (including any income tax, franchise
tax, capital gains tax, gross receipts tax, value-added tax, surtax, excise
tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax, property
tax, business tax, withholding tax or payroll tax), levy, assessment,
tariff, duty (including any customs duty), deficiency or fee, and any
related charge or amount (including any fine, penalty or interest),
imposed, assessed or collected by or under the authority of any
Governmental Body.
Tax Return. "Tax Return" shall mean any return (including any
information return), report, statement, declaration, estimate, schedule,
notice, notification, form, election, certificate or other document or
information filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body in connection with the
determination, assessment, collection or payment of any Tax or in
connection with the administration, implementation or enforcement of or
compliance with any Legal Requirement relating to any Tax.
61 B-4
Exhibit C
FORM OF SHAREHOLDER AGREEMENT
This Shareholder Agreement ("Agreement") is being executed and delivered as of
November 11, 1997, by << 1>> ("Shareholder") in favor of and for the
benefit
of JetFax, Inc., a Delaware corporation ("Parent").
Recitals
--------
A. << 1>> owns the number of shares of voting preferred stock and of
voting common stock, both with no par value, of DocuMagix, Inc., a California
corporation (the "Company") as set forth in Exhibit A hereto. Said shares
(including shares issuable upon conversion thereof) are referred to in
this Agreement as the "Shares."
B. Parent, JF Acquisition Sub, Inc., a California corporation and
a wholly owned subsidiary of Parent ("Merger Sub"), the Company and
certain shareholders of the Company are entering into an Agreement and Plan
of Reorganization of even date herewith (the "Reorganization Agreement").
Capitalized terms referenced but not defined herein shall have the meaning
ascribed to them in the Reorganization Agreement. The
Reorganization Agreement provides for the merger of Merger Sub with and into
the Company (the "Merger").
C. Parent has required, as a condition to entering into the
Reorganization Agreement, that Shareholder execute and
deliver this Agreement.
Agreement
---------
In order to induce Parent to enter into the Reorganization Agreement, and
for other good and valuable consideration, Shareholder hereby agrees as
follows:
1. Representations and Warranties. Shareholder represents
and warrants to Parent as follows:
(a) Shareholder is the holder and beneficial owner of the
Shares and has good and valid title to the Shares as his separate property,
free and clear of any liens, pledges, security interests, adverse claims,
equities, options, proxies, community property interests, charges,
encumbrances or restrictions of any nature. The Shares are the only shares of
the capital stock of the Company held by Shareholder. Subject to Section 3
of this Agreement, Shareholder has (and at all times through the date of
consummation of the Merger will have) the ability to vote all of the Shares
in accordance with Section 2 of this Agreement. Except as provided in
Section 3 of this Agreement, Shareholder has not appointed or granted any
proxy or entered into any agreement, contract, commitment or understanding
with respect to any of the Shares.
(b) Shareholder has the absolute and unrestricted right,
power and capacity to execute, deliver and perform all of his obligations
under this Agreement, the Proxy (as defined below), the Reorganization
Agreement and all other agreements and documents executed and delivered
or to be executed and delivered by Shareholder in connection with the
transactions
62 C-1
contemplated by the Reorganization Agreement executed or to be executed by
Shareholder in connection with such transactions (this Agreement, the Proxy,
the Reorganization Agreement and such other agreements and documents being
referred to collectively in this Agreement as the "Transactional Agreements").
Each of the Transactional Agreements (i) has been (or will when executed by
Shareholder be) duly and validly executed by Shareholder, and (ii)
constitutes (or will when executed by Shareholder constitute) a valid and
binding obligation of Shareholder, enforceable against Shareholder in
accordance with its terms, subject to laws of general application relating
to bankruptcy, insolvency and the relief of debtors, and to rules of law
governing specific performance, injunctive relief and other equitable
remedies.
(c) Neither the execution, delivery or performance of any of
the Transactional Agreements, nor the consummation of the Merger or any
of the other transactions contemplated by the Reorganization Agreement,
will directly or indirectly: (i) result in any violation or breach of
any agreement or other instrument to which Shareholder is a party or
by which Shareholder or any of the Shares is bound; or (ii) result in a
violation of any law, rule, regulation, order, judgment or decree to which
Shareholder or any of the Shares is subject. No authorization, instruction,
consent or approval of any person or entity is required to be obtained by
Shareholder in connection with the execution, delivery or performance of
any of the Transactional Agreements.
(d) There is no action, suit, proceeding, dispute, litigation,
claim, complaint or investigation by or before any court, tribunal,
governmental body, governmental agency or arbitrator pending or, to the
best of the knowledge of Shareholder, threatened against Shareholder that
challenges or would challenge the execution and delivery of any of the
Transactional Agreements or the taking of any of the actions required to
be taken by Shareholder under any of the
Transactional Agreements.
(e) Shareholder is aware (i) that the common stock of Parent
("Parent Common Stock") to be issued in the Merger will not be registered
and will not be issued pursuant to a registration statement under the
Securities Act of 1933, as amended (the "Act"), but will instead be issued
in reliance on the exemption from registration set forth in Section 4(2) of
the Act and in Rule 506 under the Act, and (ii) that the neither the Merger
nor the issuance of such Parent Common Stock has been approved or reviewed
by the Securities and Exchange Commission or by any other governmental agency.
(f) Shareholder is aware that, because the Parent Common Stock
to be issued in the Merger will not be registered under the Act, such Parent
Common Stock must be held indefinitely and such Parent Common Stock can not be
resold unless such Parent Common Stock is registered under the Act or unless
an exemption from registration is available. Shareholder is also aware
that: (i) except as expressly provided in Section 10 of the Reorganization
Agreement, Parent is under no obligation to file a registration statement
with respect to such Parent Common Stock to be issued to him in the Merger;
and (ii) the provisions of Rule 144 under the Act will permit resale of the
Parent Common Stock to be issued to him in the Merger only under limited
circumstances and that such Parent Common Stock must be held by him at least
one year before it is eligible for resale pursuant to Rule 144.
Shareholder is further aware that any transfer of the Parent Common Stock
he is receiving in the Merger will also be subject to (1) the restrictions
contained in the Affiliate Agreement to be executed by Shareholder in favor
of the Company, and (2) the provisions of the Continuity of Interest
Certificate to be executed by Shareholder in favor of the Company.
63 C-2
(g) The Parent Common Stock to be issued Shareholder in the
Merger will be acquired by him for investment and for his own account, and
not with a view to, or for resale in connection with, any unregistered
distribution thereof.
(h) Shareholder has requested and received, reviewed and
considered all the information Shareholder considers necessary to enable him
to make an informed decision to invest in Parent Common Stock, including:
(i) copies of Parent's reports on Form 10-Q for the quarter ended July 5, 1997
and for the quarter ended September 30, 1997; (ii) a copy of the Parent's
report on Form 10Q for the quarter ended October 4, 1997 and (iii) a copy
of Parent's registration statement on Form S-1, as amended through June 9,
1997 and filed with the Securities and Exchange Commission (the documents
referred to in clauses "(i)," "(ii)" and "(iii)" of this Section 1(h) being
referred to collectively in this Agreement as the "Disclosure Documents").
(i) Shareholder confirms that he and his representatives
and advisors have been given the opportunity: (i) to ask questions of,
and to receive answers from, persons acting on behalf of the Company and
Parent concerning the terms and conditions of the Merger and the
contemplated issuance of Parent Common Stock in the Merger, and the
business, properties, prospects and financial condition of the Company and
Parent; and (ii) to obtain any additional information (to the extent the
Company or Parent possesses such information or is able to acquire it
without unreasonable effort or expense and without breach of confidentiality
obligations) necessary to verify the accuracy of the information set
forth in the Disclosure Documents.
(j) Shareholder is an "accredited investor" within the
meaning of Rule 501(a) under the Act.
(k) Shareholder is knowledgeable, sophisticated and experienced
in making, and is qualified to make, decisions with respect to investments
in securities presenting investment decisions like that involved in
Shareholder's contemplated investment in the Parent Common Stock to be issued
in the Merger. Shareholder understands and has fully considered the risks
of acquiring and owning Parent Common Stock and further understands that: (i)
an investment in Parent Common Stock is a speculative investment which
involves a high degree of risk and is suitable only for an investor who
is able to bear the economic consequences of losing his entire investment;
and (ii) there are substantial restrictions on the transferability of the
Parent Common Stock to be issued in the Merger, and, accordingly, it may not
be possible for Shareholder to liquidate his investment in such Parent
Common Stock (in whole or in part) in the case of emergency. Shareholder is
able: (1) to hold the Parent Common Stock for a substantial period of
time; and (2) to afford a complete loss of his investment in such Parent
Common Stock.
(l) Shareholder understands that stop transfer instructions
will be given to Parent's transfer agent with respect to the Parent
Common Stock to be issued to Shareholder in the Merger, and that there will be
placed on the certificate or certificates representing such Parent Common
Stock the following legend (together with any other legend or legends
required by applicable state securities laws or otherwise):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE
64 C-3
"ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED,
PLEDGED OR HYPOTHECATED UNLESS REGISTERED UNDER THE ACT OR UNLESS AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT IS AVAILABLE."
(m) The representations and warranties contained in this
Agreement are accurate in all respects as of the date of this Agreement,
will be accurate in all respects at all times through the consummation of
the Merger and will be accurate in all respects as of the date of the
consummation of the Merger as if made on that date.
2. Agreement to Vote Shares. Shareholder shall vote all of the
Shares (at every meeting of the shareholders of the Company (and every
adjournment or postponement of each such meeting), and (to the extent
requested by Parent) by executing a written consent in lieu of such a meeting
or otherwise), in favor of approval of the Reorganization Agreement, the
Merger, the Amendment of Articles, the Agreement of Merger and the other
transactions contemplated by the Reorganization Agreement. Shareholder
further agrees not to take any action, whether at a meeting of shareholders,
by written consent in lieu of a meeting or otherwise:
(i) to modify or rescind any prior action approving the
Reorganization Agreement, the Merger, the Amendment of Articles, the
Agreement of Merger or any of the other transactions contemplated by
the Reorganization Agreement;
(ii) that is inconsistent with the Reorganization Agreement or any
of the transactions contemplated thereby; or (iii) that could reasonably be
expected to result in the breach of any representation, warranty,
covenant or obligation of the Company or Shareholder under any of the
Transactional Agreements or that could reasonably be expected to result in any
of the conditions to the Company's or Parent's obligations under the
Reorganization Agreement not being satisfied.
3. Irrevocable Proxy. Concurrently with the execution of
this Agreement, Shareholder shall deliver to Parent a proxy in
the form attached hereto as Exhibit B hereto (the "Proxy"), which shall be
deemed to be coupled with an interest and shall be irrevocable to the
extent provided in Section 705(e) of the California Corporations Code.
Shareholder understands and agrees that such proxy shall be used by Parent
in the event that Shareholder fails or is unable to vote the Shares in
accordance with Section 2 of this Agreement.
4. Transfer and Encumbrance. Until such time, if ever,
as the Merger shall have occurred or the Reorganization Agreement shall have
been validly terminated in accordance with Section 8 thereof:
(i) Shareholder agrees not to pledge or otherwise encumber
any of the Shares or to make any offer or agreement relating thereto; and
(ii) Shareholder may transfer, sell or otherwise dispose of
the Shares or make any offer or agreement relating thereto, provided that
the acquiror of the Shares agrees in advance in writing to be bound by the
terms of this Agreement as they apply to Shareholder and to enter into an
Irrevocable Proxy in the form of Exhibit B hereto.
5. Additional Purchases. Shareholder agrees that any shares of the
capital stock of the Company acquired by Shareholder on or after the
date of this Agreement shall be subject to the terms of this Agreement
to the same extent as if they constituted Shares.
65 C-4
6. Specific Performance. Shareholder agrees that in the event of
any breach or threatened breach by Shareholder of any covenant, obligation
or other provision contained in this Agreement, Parent shall be entitled
(in addition to any other remedy that may be available to Parent) to (i) a
decree or order of specific performance or mandamus to enforce the observance
and performance of such covenant, obligation or other provision, and (ii) an
injunction restraining such breach or threatened breach.
7. Indemnification. Without in any way limiting any of
the rights or remedies otherwise available to Parent, Shareholder shall hold
harmless and indemnify Parent and Parent's affiliates from and against, and
shall compensate and reimburse Parent and Parent's affiliates for, any loss,
damage, injury, decline in value, lost opportunity, liability, exposure,
claim, demand, settlement, judgment, award, fine, penalty, tax, fee,
charge, cost or expense of any nature (whether or not relating to a third party
claim) which is suffered or incurred at any time by Parent or any of Parent's
affiliates or to which Parent or any of Parent's affiliates otherwise
becomes subject and that arises from any breach of any representation,
warranty, covenant or obligation contained in this Agreement.
8. Other Agreements. Nothing in this Agreement shall
limit Shareholder's obligations or the rights and remedies of Parent under
any of the other Transactional Agreements, and nothing in any of the other
Transactional Agreements shall limit Shareholder's obligations or the rights
and remedies of Parent under this Agreement.
9. Notices. Any notice or other communication required or
permitted to be delivered to Shareholder or Parent under this Agreement
shall be in writing and shall be deemed properly delivered, given and
received when delivered (by hand, by registered mail, by courier or
express delivery service or by facsimile) to the address or facsimile
telephone number set forth beneath the name of such party below (or to such
other address or facsimile telephone number as such party shall have specified
in a written notice given to the other party hereto):
if to Parent: JetFax, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Legal Department
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to Shareholder: << 1 >>
<< 2 >>
10. Severability. If any provision of this Agreement or any part
of any such provision is held under any circumstances to be invalid or
unenforceable in any jurisdiction, then (a) such provision or part
thereof shall, with respect to such circumstances and in such
jurisdiction, be deemed amended to conform to applicable laws so as to be
valid and enforceable to the fullest
66 C-5
possible extent, (b) the invalidity or unenforceability of such
provision or part thereof under such circumstances and in such
jurisdiction shall not affect the validity or enforceability of such
provision or part thereof under any other circumstances or in any other
jurisdiction, and (c) the invalidity or unenforceability of such provision or
part thereof shall not affect the validity or enforceability of the
remainder of such provision or the validity or enforceability of any other
provision of the Agreement. Each provision of the Agreement is separable
from every other provision of the
Agreement, and each part of each provision of the Agreement is separable
from every other part of such provision.
11. Governing Law. This Agreement shall be construed in
accordance with, and governed in all respects by, the laws of the State of
California (without giving effect to principles of conflicts of laws).
12. Waiver. No failure on the part of Parent to exercise any
power, right, privilege or remedy under this Agreement, and no delay on the
part of Parent in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or
remedy; and no single or partial exercise of any such power, right, privilege
or remedy shall preclude any other or further exercise thereof or of any
other power, right, privilege or remedy. Parent shall not be deemed to have
waived any claim arising out of this Agreement, or any power, right,
privilege or remedy under this Agreement, unless the waiver of such claim,
power, right, privilege or remedy is expressly set forth in a written
instrument duly executed and delivered on behalf of Parent; and any such
waiver shall not be applicable or have any effect except in the specific
instance in which it is given.
13. Captions. The captions contained in this Agreement are
for convenience of reference only, shall not be deemed to be a
part of this Agreement and shall not be referred to in connection with the
construction or interpretation of this Agreement.
14. Further Assurances. Shareholder shall execute and/or cause
to be delivered to Parent such instruments and other documents and shall
take such other actions as Parent may reasonably request to effectuate the
intent and purposes of this Agreement.
15. Entire Agreement. This Agreement and the other
Transactional Agreements set forth the entire understanding of Parent and
Shareholder relating to the subject matter hereof and thereof and supersede
all other prior agreements and understandings between
Parent and Shareholder relating to the subject matter hereof and thereof.
16. Amendments. This Agreement may not be amended, modified,
altered or supplemented other than by means of a written instrument duly
executed and delivered on behalf of Parent and Shareholder.
17. Assignment. This Agreement and all obligations hereunder
are personal to Shareholder and may not be transferred or delegated by
Shareholder at any time. Parent may freely assign any or all of its rights
under this Agreement (including its indemnification rights under Section 7),
in whole or in part, to any other person or entity without obtaining the
consent or approval of Shareholder.
67 C-6
18. Binding Nature. Subject to Section 17, this Agreement will
inure to the benefit of Parent and its successors and assigns and will be
binding upon Shareholder and his representatives, executors,
administrators, estate, heirs, successors and assigns. Without limiting the
generality of anything contained in Section 4, if any person or entity
shall acquire any of the Shares from Shareholder in any manner, whether by
operation of law or otherwise, such Shares shall be held subject to all
the terms and provisions of this Agreement, and by taking and holding such
Shares, such person or entity shall be conclusively deemed to have agreed to
be bound and to comply with all the terms and provisions of this Agreement.
Without limiting the generality of the foregoing, Shareholder agrees that
the obligations of Shareholder hereunder shall not be terminated by the
death or incapacity of Shareholder or otherwise by operation of law.
19. Attorneys' Fees and Expenses. If any legal action or other
legal proceeding relating to the enforcement of any provision of this
Agreement is brought against Shareholder, the prevailing party shall be
entitled to recover reasonable attorneys' fees, costs and disbursements
(in addition to any other relief to which the prevailing party may be
entitled).
20. Termination; Survival. This Agreement shall terminate at
such
time (if ever) as the Reorganization Agreement shall have been validly
terminated in accordance with its terms. Each of the representations,
warranties, covenants and obligations contained in this Agreement shall
survive the consummation of the Merger.
21. Construction.
(a) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice
versa.
(b) Shareholder agrees that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by
the words "without limitation."
(d) Except as otherwise indicated, all references in this
Agreement to "Sections" are intended to refer to Sections of this Agreement.
68 C-7
(e) Shareholder has executed and delivered this Agreement as of
the date first above written.
<< 1>>
By:
-------------------------------
Title:
----------------------------
69 C-8
[Signature Page to Shareholder Agreement]
EXHIBIT A
Schedule of Shares Owned By
<< 1>>
No. Shares
Series A Preferred Stock << 3>>
Series B Preferred Stock << 4>>
Series C Preferred Stock << 5>>
Series D Preferred Stock << 6>>
Series E Preferred Stock << 7>>
Series F Preferred Stock << 8>>
Series G Preferred Stock << 9>>
Common Stock << 10>>
70
EXHIBIT B
IRREVOCABLE PROXY
Pursuant to Section 705 of the California Corporations Code, << 1>>
("Shareholder"), a shareholder of DocuMagix, Inc., a California
corporation (the "Company"), hereby irrevocably appoints JetFax, Inc., a
Delaware corporation ("Parent"), and JF Acquisition Sub, Inc., a California
corporation and a wholly owned subsidiary of Parent ("Merger Sub"), and each
of them, the attorneys and proxies of the undersigned, with full power of
substitution and resubstitution, for the purposes of voting the number of
shares set forth in Exhibit A of voting stock of the Company owned of record
by Shareholder (including shares issuable upon the conversion thereof) (the
"Shares") with respect to the Reorganization Agreement (as herein defined),
the Merger (as herein defined), the Amendment to Articles, the Agreement
of Merger and the other transactions contemplated by the Reorganization
Agreement (the "Identified Matters"). Capitalized terms used but not defined
herein shall have the meaning ascribed to them in the Reorganization Agreement.
This Proxy shall terminate at such time (if ever) as that certain
Agreement and Plan of Reorganization dated as of November 11, 1997 (the
"Reorganization Agreement") among Parent, Merger Sub, the Company,
Shareholder and certain other shareholders of the Company, providing for the
merger of Merger Sub with and into the Company (the "Merger"), shall have been
validly terminated in accordance with its terms. Upon the execution hereof,
all prior proxies given by Shareholder with respect to the Shares are
hereby revoked, and no subsequent proxies will be given. This Proxy is
irrevocable and is coupled with an interest and is granted in connection
with that certain Shareholder Agreement dated as of November 11, 1997 executed
by Shareholder in favor of Parent, and is granted in consideration of Parent
entering into the Reorganization Agreement. The attorneys and proxies
appointed pursuant to this Proxy will be empowered (at all times prior to the
termination of the Reorganization Agreement) to exercise (in their discretion
and in such manner as they may deem appropriate) all voting and other rights
of Shareholder with respect to the Shares (including, without limitation,
the power to execute and deliver written consents with respect to the
Shares), with respect to the Identified Matters, at every meeting of the
shareholders of the Company (and every adjournment or postponement thereof)
or by written consent in lieu of such a meeting, or otherwise.
This Proxy shall be binding upon the Shareholder and his personal
representatives, executors, administrators, estates, heirs, successors and
assigns (if any). This Proxy shall inure to the benefit of Parent and
Merger Sub and their respective successors and assigns (if any).
Dated: November 11, 1997
--------------------------
<< 1>>
By:
-------------------------
Title:
-----------------------
71
Exhibit D-1
PERSONS TO EXECUTE AFFILIATE AGREEMENTS
Affiliates of DocuMagix, Inc.
-----------------------------
BancBoston Ventures
U.S. Venture Partners III
U.S.V. Entrepreneur Partners
Second Ventures Limited Partners
Ka-Lai (▇▇▇▇▇) ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ Living Trust dtd 8/30/92
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
72
Exhibit D-2
FORM OF AFFILIATE AGREEMENT
AFFILIATE AGREEMENT
This Affiliate Agreement ("Agreement") is being executed and delivered as
of November , 1997 by ("Affiliate") in favor of and for
--- ----------
the benefit of JetFax, Inc., a Delaware corporation ("Parent").
Recitals
--------
A. Affiliate is a shareholder [and an officer and
director] of DocuMagix, Inc., a California corporation (the "Company").
B. Parent, the Company, JF Acquisition Sub, Inc., a
California corporation and a wholly owned subsidiary of Parent ("Merger
Sub"), Affiliate and certain other shareholders of the Company have entered
into an Agreement and Plan of Reorganization dated as of November 11, 1997
(the "Reorganization Agreement"), providing for the merger of Merger Sub with
and into the Company (the "Merger"). The Reorganization Agreement
contemplates that, upon consummation of the Merger, (i) the Company's
shareholders will receive shares of common stock, par value $0.01 per share,
of Parent ("Parent Common Stock") in exchange for their shares of the voting
common stock, no par value, and voting preferred stock, no par value, of
the Company ("Company Stock"), and (ii) the Company will become a wholly owned
subsidiary of Parent. It is accordingly contemplated that Affiliate will
receive shares of Parent Common Stock in the Merger.
C. Affiliate may be deemed to be an "affiliate" of the
Company for purposes of: (i) the restrictions on resale imposed by the
Securities Act of 1933, as amended (the "Act"); and (ii) determining Parent's
eligibility to account for the Merger as a "pooling of interests" under
applicable "pooling of interests" accounting requirements (including
Accounting Principles Board Opinion No. 16 and Accounting Series Releases
130 and 135, as amended, of the Securities and Exchange Commission (the
"SEC")).
Agreement
---------
1. Representations and Warranties. Affiliate represents
and warrants to Parent as follows:
(a) Affiliate is the holder and beneficial owner of the
shares of Company Stock as set forth in Exhibit 1 hereto (the "Company
Shares"), and Affiliate has good and valid title to the Company Shares, free
and clear of any liens, pledges, security interests, adverse claims,
equities, options, proxies, charges, encumbrances or restrictions of any
nature.
73 1
(b) Affiliate has carefully read this Agreement, and has
discussed with counsel to the extent Affiliate felt necessary the limitations
imposed on Affiliate's ability to sell, transfer or otherwise dispose of the
Company Shares and the shares of Parent Common Stock that Affiliate is to
receive in the Merger (the "Parent Shares"). Affiliate fully understands
the limitations this Agreement places upon Affiliate's ability to sell,
transfer or otherwise dispose of the Company Shares and the Parent Shares.
(c) Affiliate understands that the representations, warranties
and covenants set forth in this Agreement will be relied upon by Parent
and its counsel and accountants for purposes of determining Parent's
eligibility to account for the Merger as a "pooling of interests," for
purposes of determining whether Parent should proceed with the Merger and
for various other purposes.
2. Prohibitions Against Transfer.
------------------------------
(a) Affiliate agrees that until such time as the Reorganization
Agreement is validly terminated in accordance with Section 8 thereof,
he shall not sell, transfer or otherwise dispose of, or reduce his interest
in or risk relating to, any capital stock of the Company (including the
Company Shares) except pursuant to and upon consummation of the Merger.
(b) Affiliate agrees that during the period from the date on which the
Merger is consummated through the date on which financial results covering
at least 30 days of post Merger combined operations of Parent and the
Company have been published by Parent (within the meaning of the applicable
"pooling of interests" accounting requirements), Affiliate agrees that he
shall not sell, transfer or otherwise dispose of, or reduce his interest in
or risk relating to, any shares of Parent Common Stock (including the Parent
Shares).
(c) Without limiting the generality of Section 2(b) of this
Agreement, Affiliate shall not effect any sale, transfer or other disposition
of any of the Parent Shares unless:
(i) such sale, transfer or other disposition has been
registered under the Act;
(ii) such sale, transfer or other disposition is made in
conformity with the requirements of Rule 144 under the Act, as evidenced by a
broker's letter and a representation letter executed by Affiliate (satisfactory
in form and content to Parent) stating that such requirements have been met;
(iii) counsel reasonably satisfactory to Parent shall
have advised Parent in a written opinion letter (satisfactory in form and
content to Parent), upon which Parent may rely, that
such sale, transfer or other disposition will be exempt from registration under
the Act; or
74 C-2
(iv) an authorized representative of the SEC shall have
rendered written advice to Affiliate to the effect that the SEC would take no
action, or that the staff of the SEC would not recommend that the SEC take
action, with respect to such sale, transfer or other disposition, and a copy of
such written advice and all other related communications with the SEC shall
have been delivered to Parent.
3. Stop Transfer Instructions; Legend.
-----------------------------------
Affiliate understands that the Parent Shares will be
characterized as "restricted securities" for purposes of Rule 144 under the
Act, and that therefore any sale, transfer or other disposition of any of
the Parent Shares must be made in conformity with the provisions of said
Rule or be registered under the Act. Affiliate acknowledges and agrees
that (i) stop transfer instructions will be given to Parent's transfer
agent with respect to the Parent Shares, and (ii) each certificate
representing any of such shares shall bear a legend identical or similar in
effect to the following legend (together with any other legend or legends
required by applicable state securities laws or otherwise):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS REGISTERED
UNDER THE ACT OR UNLESS AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT IS AVAILABLE. THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT DATED AS OF NOVEMBER 11, 1997, BETWEEN THE REGISTERED HOLDER
HEREOF AND JETFAX, INC., A COPY OF WHICH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICES OF JETFAX, INC."
4. Independence of Obligations. The covenants and
obligations of Affiliate set forth in this Agreement shall be construed as
independent of any other agreement or arrangement between Affiliate, on the
one hand, and the Company or Parent, on the other. The existence of any
claim or cause of action by Affiliate against the Company or Parent shall
not constitute a defense to the enforcement of any of such covenants
or obligations against Affiliate.
5. Specific Performance. Affiliate agrees that in the
event of any breach or threatened breach by Affiliate of any covenant,
obligation or other provision contained in this Agreement, Parent shall
be entitled (in addition to any other remedy that may be available to
Parent) to: (a) a decree or order of specific performance or mandamus
to enforce the observance and performance of such covenant, obligation or
other provision; and (b) an injunction restraining such breach or
threatened breach.
75 3
6. Other Agreements. Nothing in this Agreement shall
limit any of the rights or remedies of Parent under the
Reorganization Agreement or the Shareholder Agreement dated as of November 11,
1997 executed by Affiliate in favor of Parent and nothing in the
Reorganization Agreement or said Shareholder Agreement shall limit any of
the rights or remedies of Parent under this Agreement.
7. Notices. Any notice or other communication required or
permitted to be delivered to Affiliate or Parent under this Agreement
shall be in writing and shall be deemed properly delivered, given and
received when delivered (by hand, by registered mail, by courier or
express delivery service or by facsimile) to the address or facsimile
telephone number set forth beneath the name of such party below (or to such
other address or facsimile telephone number as such party shall have specified
in a written notice given to the other party hereto):
8.
if to Parent: JetFax, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Chief Financial Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to Affiliate:
76 4
8. Severability. If any provision of this Agreement or
any part of any such provision is held under any circumstances to be invalid
or unenforceable in any jurisdiction, then (a) such provision or
part thereof shall, with respect to such circumstances and in such
jurisdiction, be deemed amended to conform to applicable laws so as to be
valid and enforceable to the fullest possible extent, (b) the
invalidity or unenforceability of such provision or part thereof under such
circumstances and in such jurisdiction shall not affect the validity or
enforceability of such provision or part thereof under any other
circumstances or in any other jurisdiction, and (c) the invalidity or
unenforceability of such provision or part thereof shall not affect the
validity or enforceability of the remainder of such provision or the validity
or enforceability of any other provision of the Agreement. Each provision
of the Agreement is separable from every other provision of the
Agreement, and each part of each provision of the Agreement is separable
from every other part of such provision.
9. Governing Law. This Agreement shall be construed in
accordance with, and governed in all respects by, the laws of the State of
California (without giving effect to principles of conflicts of laws).
10. Waiver. No failure on the part of Parent to exercise
any power, right, privilege or remedy under this Agreement, and no delay on
the part of Parent in exercising any power, right, privilege or remedy under
this Agreement, shall operate as a waiver of such power, right, privilege
or remedy; and no single or partial exercise of any such power, right,
privilege or remedy shall preclude any other or further exercise thereof or
of any other power, right, privilege or remedy. Parent shall not be
deemed to have waived any claim arising out of this Agreement, or any power,
right, privilege or remedy under this Agreement, unless the waiver of
such claim, power, right, privilege or remedy is expressly set forth in
a written instrument duly executed and delivered on behalf of Parent; and
any such waiver shall not be applicable or have any effect except in the
specific instance in which it is given.
11. Captions. The captions contained in this Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection
with the construction or interpretation of this Agreement.
12. Further Assurances. Affiliate shall execute and/or
cause to be delivered to Parent such instruments and other documents
and shall take such other actions as Parent may reasonably request to
effectuate the intent and purposes of this Agreement.
77 5
13. Entire Agreement. This Agreement, the Reorganization
Agreement and the Shareholder Agreement referred to in Section 6 thereof, set
forth the entire understanding of Parent and Affiliate relating to the
subject matter hereof and thereof and supersede all other prior agreements
and understandings between Parent and Affiliate relating to the subject
matter hereof and thereof.
14. Non-Exclusivity. The rights and remedies of Parent hereunder
are not exclusive of or limited by any other rights or remedies which Parent
may have, whether at law, in equity, by contract or otherwise, all of which
shall be cumulative (and not alternative).
15. Amendments. This Agreement may not be amended,
modified, altered or supplemented other than by means of a written
instrument duly executed and delivered on behalf of Parent and Affiliate.
16. Assignment. This Agreement and all obligations of
Affiliate hereunder are personal to Affiliate and may not be transferred
or delegated by Affiliate at any time. Parent may freely assign any or all
of its rights under this Agreement, in whole or in part, to any other person
or entity without obtaining the consent or approval of Affiliate.
17. Binding Nature. Subject to Section 16 hereof, this
Agreement will inure to the benefit of Parent and its successors and assigns
and will be binding upon Affiliate and his representatives, executors,
administrators, estate, heirs, successors and assigns.
18. Attorneys' Fees and Expenses. If any legal action or
other legal proceeding relating to the enforcement of any provision of
this Agreement is brought by either party hereto, the prevailing party
shall be entitled to recover reasonable attorneys' fees, costs and
disbursements (in addition to any other relief to which the prevailing party
may be entitled).
19. Survival. Each of the representations, warranties,
covenants and obligations contained in this Agreement shall survive the
consummation of the Merger.
78 6
Affiliate has executed this Agreement on November __, 1997.
Signature:
------------------------
[Signature Page to Affiliate Agreement]
79
Exhibit E-1
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION OF
DOCUMAGIX, INC.
▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ certify that they are the President and the
Chief Financial Officer, respectively, of DocuMagix, Inc., a California
corporation (the "Corporation"), and further certify that:
1. The Articles of Incorporation of the Corporation shall
be amended as follows:
a. Article III, Section 3.3 is deleted in its entirety.
2. The foregoing amendment of Articles of Incorporation
has been duly approved by the Board of Directors of the Corporation.
3. The foregoing amendment of Articles of Incorporation has been duly
approved by the required vote of shareholders in accordance with Sections
902 and 903 of the California Corporations Code. The total number of
outstanding shares of the Corporation is _______ shares of Common Stock,
_______ shares of Series A Preferred Stock, _____ shares of Series B
Preferred Stock, ______ shares of Series C Preferred Stock, ____ shares of the
Series D Preferred Stock, _____ shares of the Series E Preferred Stock,
____ shares of the Series F Preferred Stock and ______ shares of the Series
G Preferred Stock. The number of shares voting in favor of the amendment
equaled or exceeded the vote required. The percentage vote required was (i)
more than 50% of the outstanding Common Stock, (ii) more than 50% of the
outstanding Series A Preferred Stock, (iii) more than 50% of the outstanding
Series B Preferred Stock, (iv) more than 50% of the outstanding Series C
Preferred Stock, (v) more than 50% of the outstanding Series D Preferred
Stock, (vi) more than 50% of the outstanding Series E Preferred Stock, (vii)
more than 50% of the outstanding Series F Prefered Stock and (viii) more than
50% of the outstanding shares of Series G Preferred Stock and (viii) more than
50% of the Common Stock, Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock, Series F Preferred Stock and Series G Preferred Stock voting together
as a separate class on an as-converted-to Common Stock basis.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and
correct of our own knowledge.
Dated: November __, 1997
-----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇, President
-----------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Chief Financial Officer
80
EXHIBIT E-2
-----------
FORM OF AGREEMENT OF MERGER
---------------------------
AGREEMENT OF MERGER
-------------------
THIS AGREEMENT OF MERGER, dated as of December 5, 1997 (the "Merger
Agreement"), is made and entered into by JF Acquisition Sub, Inc., a
California corporation ("Merger Sub"), and DocuMagix, Inc., a California
corporation ("DocuMagix" or "Surviving Corporation") (DocuMagix and Merger
Sub being hereinafter collectively referred to as the "Constituent
Corporations").
Recitals
--------
A. JetFax, Inc., a Delaware corporation ("Parent"),
DocuMagix, Merger Sub, and certain shareholders of DocuMagix have entered into
an Agreement and Plan of Reorganization dated November 11, 1997, as
amended (the "Reorganization Agreement"), providing, among other things, for
the execution and filing of this Merger Agreement and the merger of Merger
Sub with and into DocuMagix upon the terms set forth in the
Reorganization Agreement and this Merger Agreement (the "Merger").
B. The respective Boards of Directors of each of the Constituent
Corporations deem it advisable and in the best interests of each of
such corporations and their respective stockholders that Merger Sub be merged
with and into DocuMagix.
Agreement
---------
NOW, THEREFORE, in consideration of the promises and mutual agreements
contained in this Merger Agreement, the Constituent Corporations hereby
agree that Merger Sub shall be merged with and into DocuMagix in
accordance with the Reorganization Agreement and the provisions of the
laws of the State of California, upon the terms and subject to the
conditions set forth as follows:
1
The Merger
----------
1.1 Filing. This Merger Agreement, together with the officers'
certificates of each of the Constituent Corporations required by the
General Corporation Law of the State of California (the "California
Law"), shall be filed with the Secretary of State of the State of
California at the time specified in the Reorganization Agreement.
1.2 Effectiveness. The time at which this Agreement is filed with the
Secretary of State of the State of California is referred to herein as the
"Filing Time." The Merger shall become effective immediately after
the Filing Time (the "Effective Time").
81 1
1.3 Merger. At the Effective Time, Merger Sub shall be merged into
DocuMagix and the separate corporate existence of Merger Sub shall
thereupon cease. DocuMagix will be the Surviving Corporation in the
merger and the separate corporate existence of DocuMagix shall continue
unaffected and unimpaired by the Merger.
1.4 Further Action. If at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Merger Agreement or to vest the Surviving Corporation with the full
right, title and possession to all assets, property, rights, privileges,
immunities, powers and franchises of either or both of the Constituent
Corporations, the officers and directors of the Surviving Corporation are
fully authorized (in the name of either or both of the Constituent
Corporations or otherwise) to take all such action.
2
Corporate Governance Matters
----------------------------
2.1 Pre-Effective Time Amendment to Articles. At the Filing Time
and immediately prior to the Effective Time, Article VI Section 3.3 of the
Articles of Incorporation of DocuMagix shall be deleted.
2.2 Articles of Surviving Corporation. At the Effective Time, the
Articles of Incorporation of the Surviving Corporation shall be amended and
restated in full as of the Effective Time as set forth in Exhibit A attached
hereto.
3
Manner of Converting Shares of the Constituent Corporations
-----------------------------------------------------------
3.1 Conversion of Target Capital Stock.
(a) At the Effective Time, each then outstanding share of
common stock, no par value, of DocuMagix (the "DocuMagix Common Stock")
(other than shares that may become "dissenting shares" within the meaning of
Section 1300 of the California Law) shall cease to be an existing and issued
share and shall become and be converted into, by virtue of the Merger and
without any action on the part of Parent, Merger Sub, DocuMagix or the holder
thereof, the right to receive the fraction of a share of the common stock, par
value $0.01 per share, of JetFax ("JetFax Common Stock") equal to
0.0199 times the Consideration Number (as defined below) divided by the
number of shares of DocuMagix Common Stock outstanding immediately prior
to the Effective Time.
(b) At the Effective Time, each then outstanding share of
Series A Preferred Stock, no par value, of DocuMagix (the "DocuMagix
Series A Preferred Stock") (other than shares that may become "dissenting
shares" within the meaning of Section 1300 of the California Law) shall
82 2
cease to be an existing and issued share and shall become and be converted
into, by virtue of the Merger and without any action on the part of Parent,
Merger Sub, DocuMagix or the holder thereof, the right to receive the
fraction of a share of the common stock, par value $0.01 per share, of
JetFax ("JetFax Common Stock") equal to 0.0961 times the Consideration
Number divided by the number of shares of DocuMagix Series A Preferred
Stock outstanding immediately prior to the Effective Time.
(c) At the Effective Time, each then outstanding share of
Series B Preferred Stock, no par value, of DocuMagix (the "DocuMagix
Series B Preferred Stock") (other than shares that may become "dissenting
shares" within the meaning of Section 1300 of the California Law) shall
cease to be an existing and issued share and shall become and be converted
into, by virtue of the Merger and without any action on the part of Parent,
Merger Sub, DocuMagix or the holder thereof, the right to receive the
fraction of a share of the common stock, par value $0.01 per share, of
JetFax ("JetFax Common Stock") equal to 0.0620 times the Consideration Number
divided by the number of shares of DocuMagix Series B Preferred Stock
outstanding immediately prior to the Effective Time.
(d) At the Effective Time, each then outstanding share of
Series C Preferred Stock, no par value, of DocuMagix (the "DocuMagix
Series C Preferred Stock") (other than shares that may become "dissenting
shares" within the meaning of Section 1300 of the California Law) shall cease
to be an existing and issued share and shall become and be converted into,
by virtue of the Merger and without any action on the part of Parent, Merger
Sub, DocuMagix or the holder thereof, the right to receive the fraction
of a share of the common stock, par value $0.01 per share, of JetFax
("JetFax Common Stock") equal to 0.2331 times the Consideration Number
divided by the number of shares of DocuMagix Series C Preferred Stock
outstanding immediately prior to the Effective Time.
(e) At the Effective Time, each then outstanding share of
Series D Preferred Stock, no par value, of DocuMagix (the "DocuMagix
Series D Preferred Stock") (other than shares that may become "dissenting
shares" within the meaning of Section 1300 of the California Law) shall
cease to be an existing and issued share and shall become and be converted
into, by virtue of the Merger and without any action on the part of Parent,
Merger Sub, DocuMagix or the holder thereof, the right to receive the
fraction of a share of the common stock, par value $0.01 per share, of
JetFax ("JetFax Common Stock") equal to 0.3294 times the Consideration
Number divided by the number of shares of DocuMagix Series D Preferred Stock
outstanding immediately prior to the Effective Time.
(f) At the Effective Time, each then outstanding share of
Series E Preferred Stock, no par value, of DocuMagix (the "DocuMagix
Series E Preferred Stock") (other than shares that may become "dissenting
shares" within the meaning of Section 1300 of the California Law) shall
cease to be an existing and issued share and shall become and be converted
into, by virtue of the Merger and without any action on the part of Parent,
Merger Sub, DocuMagix or the holder thereof, the right to receive the
fraction of a share of the common stock, par value $0.01 per share, of
JetFax ("JetFax Common Stock") equal to 0.0325 times the Consideration Number
divided by the number
83 3
of shares of DocuMagix Series E Preferred Stock outstanding immediately prior
to the Effective Time.
(g) At the Effective Time, each then outstanding share of Series F
Preferred Stock, no par value, of DocuMagix (the "DocuMagix Series F
Preferred Stock") (other than shares that may become "dissenting shares" within
the meaning of Section 1300 of the California Law) shall cease to be an
existing and issued share and shall become and be converted into, by virtue
of the Merger and without any action on the part of Parent, Merger Sub,
DocuMagix or the holder thereof, the right to receive the fraction of a
share of the common stock, par value $0.01 per share, of JetFax ("JetFax
Common Stock") equal to 0.2007 times the Consideration Number divided by the
number of shares of DocuMagix Series F Preferred Stock outstanding
immediately prior to the Effective Time.
(h) At the Effective Time, each then outstanding share of
Series G Preferred Stock, no par value, of DocuMagix (the "DocuMagix
Series G Preferred Stock") (other than shares that may become "dissenting
shares" within the meaning of Section 1300 of the California Law) shall
cease to be an existing and issued share and shall become and be converted
into, by virtue of the Merger and without any action on the part of Parent,
Merger Sub, DocuMagix or the holder thereof, the right to receive the
fraction of a share of the common stock, par value $0.01 per share, of
JetFax ("JetFax Common Stock") equal to 0.0263 times the Consideration
Number divided by the number of shares of DocuMagix Series G Preferred
Stock outstanding immediately prior to the Effective Time.
(i) The Consideration shall be 793,957 shares of JetFax
Common Stock (as adjusted as appropriate to reflect any stock split,
reverse stock split, stock dividend, recapitalization or other similar
transaction effected by JetFax between the date of this Agreement and the
Effective Time). The Consideration Number shall be the number of shares of
JetFax Common Stock represented by the Consideration.
(j) The DocuMagix Common Stock, DocuMagix Series A
Preferred Stock, DocuMagix Series B Preferred Stock, DocuMagix Series C
Preferred Stock, DocuMagix Series D Preferred Stock, DocuMagix Series E
Preferred Stock, DocuMagix Series F Preferred Stock and DocuMagix Series G
Preferred Stock are hereafter collectively referred to as the DocuMagix
Capital Stock.
3.2 Merger Sub Common Stock. At the Effective Time, each
then outstanding share of common stock, no par value, of Merger Sub shall
cease to be an existing and issued share and shall become and be converted
into, by virtue of the Merger and without any action on the part of Parent,
Merger Sub or DocuMagix, one share of DocuMagix Common Stock and the
aggregate of such shares shall constitute the only outstanding shares of
capital stock of the Surviving Corporation.
3.3 Closing of DocuMagix's Transfer Books. At the Effective Time, holders
of certificates representing shares of DocuMagix's Capital Stock that were
outstanding immediately prior to the Effective Time shall cease to have
any rights as shareholders of DocuMagix and the
84 4
stock transfer books of DocuMagix shall be closed with respect to all
shares of such DocuMagix Capital Stock outstanding immediately prior to
the Effective Time. No further transfer of such shares of DocuMagix Capital
Stock shall be made on such stock transfer books after the Effective Time.
If, after the Effective Time, valid certificates previously representing
such shares are presented to DocuMagix or Parent, they shall be
exchanged as provided in Section 3.4.
3.4 Exchange of Certificates. Promptly following the Effective Time,
Parent shall transmit to the former DocuMagix shareholders appropriate
documents to be used by them to surrender their DocuMagix Capital Stock
certificates in exchange for Parent Common Stock certificates and cash in
lieu of any fractional shares of Parent Common Stock. Until so surrendered
and exchanged, each certificate for DocuMagix Capital Stock shall represent
solely the right to receive shares of Parent Common Stock into which the
shares of DocuMagix Capital Stock it theretofore represented shall have
been converted into the right to receive Parent Common Stock pursuant to
Section 3.1 (or to perfect the holder thereof's right to receive payment
for such shares pursuant to Section 1300 of the California Law and Section 3.6
hereof); provided, however, that customary and appropriate certifications and
indemnities allowing exchange against lost or destroyed certificates shall be
provided.
3.5 No Fractional Shares. No fractional shares of Parent Common
Stock shall be issued in connection with the Merger, and no certificates for
any such fractional shares shall be issued. In lieu of such fractional
shares, any holder of DocuMagix Capital Stock who would otherwise be
entitled to receive a fraction of a share of Parent Common Stock shall,
upon surrender of each stock certificate representing shares of
DocuMagix Capital Stock, be paid in cash the dollar amount (rounded to the
nearest whole cent), without interest, determined by multiplying such fraction
by $9.629.
3.6 Dissenting Shares.
(a) Notwithstanding anything to the contrary contained in
this Agreement, any shares of DocuMagix Capital Stock that, as of the
Effective Time, are or may become "dissenting shares" within the meaning of
Section 1300(b) of the California Law shall not be converted into or represent
the right to receive Parent Common Stock in accordance with Section 3.1
(or cash in lieu of fractional shares in accordance with Section 3.5), and
the holder or holders of such shares shall be entitled only to such rights as
may be granted to such holder or holders in Chapter 13 of the California Law;
provided, however, that if the status of any such shares as "dissenting
shares" shall not be perfected, or if any such shares shall lose their status
as "dissenting shares", then, as of the later of the Effective Time or the
time of the failure to perfect such status or the loss of such status, such
shares shall automatically be converted into and shall represent only the
right to receive (upon the surrender of the certificate or certificates
representing such shares) Parent Common Stock in accordance with Section
3.1 (and cash in lieu of fractional shares in accordance with Section 3.5).
(b) DocuMagix shall give Parent (i) prompt notice of any
written demand received by the Company prior to the Effective Time to
require DocuMagix to purchase shares of DocuMagix Capital Stock pursuant to
Chapter 13 of the California Law and of any other demand,
85 5
notice or instrument delivered to DocuMagix prior to the Effective Time
pursuant to the California Law, and (ii) the opportunity to participate
in all negotiations and proceedings with respect to any such demand,
notice or instrument. DocuMagix shall not make any payment or settlement
offer prior to the Effective Time with respect to any such demand unless Parent
shall have consented in writing to such payment or settlement offer.
4 Termination and Amendment
4.1 Termination. Notwithstanding the approval of this Merger
Agreement by the shareholders of Merger Sub and DocuMagix, this Merger
Agreement shall terminate forthwith in the event that the Reorganization
Agreement shall be terminated as therein provided.
4.2 Amendment. This Merger Agreement may be amended by the parties
hereto at any time before or after approval hereof by the shareholders of
either Merger Sub or DocuMagix, but, after any
such approval, no amendment shall be made without the further approval of
such shareholders if such amendment would (i) have a material adverse effect
on the shareholders of either Merger Sub or DocuMagix, (ii) change any of
the principal terms of the Merger Agreement, or (iii) change any term of
the Articles of Incorporation of the Surviving Corporation. This
Merger Agreement may not be amended except by an instrument in writing signed
on behalf of each of the parties hereto.
86 6
IN WITNESS WHEREOF, the parties have duly executed this
Merger Agreement as of the date first written above.
JF Acquisition Sub, Inc., DocuMagix, Inc.,
a California corporation a California corporation
By: By:
-------------------------- ----------------------
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President Chairman
By: By:
-------------------------- ----------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Secretary Assistant Secretary
87 7
JF ACQUISITION SUB, INC.
------------------------
OFFICERS' CERTIFICATE
---------------------
▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇ hereby certify that:
5 They are the President and Secretary, respectively, of JF
Acquisition Sub, Inc., a California corporation (the "Corporation").
6 The Agreement of Merger to which this Certificate is
attached (the "Merger Agreement") has been duly approved by the Board of
Directors of the Corporation.
7 The Corporation has one class of stock outstanding,
designated "Common Stock," of which 100 shares were outstanding and entitled to
vote on the merger.
8 The principal terms of the Merger Agreement were approved by
the Corporation by a vote of a number of shares which equaled or exceeded the
vote required. The vote required was greater than 50% of the outstanding
shares of Common Stock.
The vote of the stockholders of JetFax, Inc., a Delaware
corporation, the parent of the Corporation, which parent corporation is
issuing equity securities to the shareholders of DocuMagix, Inc. pursuant to
the Merger Agreement, was not required.
+
Each of the undersigned declares under penalty of perjury
that the matters set out in the foregoing Certificate are true of his own
knowledge. Executed at Menlo Park, California, on December 5, 1997.
--------------------------------
▇▇▇▇ ▇▇▇▇▇▇
President
--------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
Secretary
88 8
DOCUMAGIX, INC.
OFFICERS' CERTIFICATE
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ hereby certify that:
9 They are the Chairman and Assistant Secretary, respectively,
of DocuMagix, Inc., a California corporation (the
"Corporation").
10 The Agreement of Merger to which this Certificate is
attached (the "Merger Agreement") has been duly approved by the Board of
Directors of the Corporation.
11 The Corporation has two classes of stock outstanding
designated "Common Stock" and "Preferred Stock," of which 3,455,879 shares of
Common Stock and 17,913,130 shares of Preferred Stock were outstanding and
entitled to vote on the merger. The outstanding Preferred Stock consists of
3,300,000 shares of Series A Preferred Stock, 1,519,019 shares of Series B
Preferred Stock, 4,432,978 shares of Series C Preferred Stock, 6,567,951 shares
of the Series D Preferred Stock, 568,182 shares of the Series E Preferred
Stock, 1,375,000 shares of the Series F Preferred Stock and 150,000 shares of
the Series G Preferred Stock.
12 The principal terms of the Merger Agreement were approved by
the Corporation by a vote of a number of shares which equaled or exceeded the
vote required. The percentage vote required was (i) more than 50% of the
outstanding Common Stock, (ii) more than 50% of the outstanding Series A
Preferred Stock, (iii) more than 50% of the outstanding Series B Preferred
Stock, (iv) more than 50% of the outstanding Series C Preferred Stock, (v) more
than 50% of the outstanding Series D Preferred Stock, (vi) more than 50% of the
outstanding Series E Preferred Stock, (vii) more than 50% of the outstanding
Series F Preferred Stock, (viii) more than 50% of the Preferred Stock and (ix)
more than 50% of the Common Stock and Preferred Stock voting together as a
separate class on an as-converted-to Common Stock basis.
Each of the undersigned declares under penalty of perjury
that the matters set out in the foregoing Certificate are true of his own
knowledge. Executed at San Jose, California on December __, 1997.
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Chairman
--------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Assistant Secretary
89
EXHIBIT A
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
DOCUMAGIX, INC.
I.
The name of this corporation is DocuMagix, Inc.
II.
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General
Corporation Law of California other than the banking business, the trust
company business or the practice of a profession permitted to be
incorporated by the California Corporations Code.
III.
The corporation is authorized to issue only one class of stock, to be
designated Common Stock. The total number of shares of Common Stock presently
authorized is One Hundred (100).
IV.
(a) The liability of the directors of this corporation for monetary
damages shall be eliminated to the fullest extent permissible under
California law.
(b) This corporation is authorized to provide indemnification of
agents (as defined in Section 317 of the California Corporations Code)
for breach of duty to the corporation and its shareholders through bylaw
provisions or through agreements with the agents, or through shareholder
resolutions, or otherwise, in excess of the indemnification otherwise
permitted by Section 317 of the Corporations Code, subject to the limits on
such excess indemnification set forth in Section 204 of the Corporations Code.
(c) Any repeal or modification of this Article shall only
be prospective and shall not affect the rights under this Article in effect
at the time of the alleged occurrence of any act or omission to act giving
rise to liability or indemnification.
90
EXHIBIT F
---------
ESCROW AGREEMENT
----------------
This Escrow Agreement is entered into as of the date written below, by and
among the undersigned shareholder (the "Undersigned Shareholder"), JetFax,
Inc., a Delaware corporation ("Parent"), DocuMagix, Inc., a California
corporation (the "Company"), the shareholders of DocuMagix listed on Attachment
A hereto (the "Designated Shareholders"), ▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Initial Escrow
Shareholder Representative"), and American Stock Transfer & Trust Company (the
"Escrow Agent").
Recitals
--------
A. Parent, JF Acquisition Sub, Inc., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), the Designated Shareholders
and the Company have entered into an Agreement and Plan of Reorganization,
dated November 11, 1997 (the "Reorganization Agreement") which provides that
Merger Sub will be merged with and into the Company (the "Merger"), with the
Company being the surviving corporation, on the terms and conditions set forth
therein, resulting in the Company becoming a wholly-owned subsidiary of Parent.
B. The Reorganization Agreement contemplates the establishment of
an escrow arrangement to secure in part the indemnification and other
obligations of the Company and the Designated Shareholders under the
Reorganization Agreement. As a condition precedent to Parent's execution of
the Reorganization Agreement and related agreements, Parent has required that
the Company, the Designated Shareholders and the Initial Escrow Shareholder
Representative enter into this Escrow Agreement; and the Company, the
Designated Shareholders and the Escrow Shareholder Representative have agreed
to enter into this Escrow Agreement in order to induce Parent to consummate the
Merger.
C. By virtue of the Designated Shareholders' execution of the
Reorganization Agreement, and by the execution of this Escrow Agreement, the
Designated Shareholders have consented to: (i) the indemnification of the
Designated Shareholders as set forth in Section 9 of the Reorganization
Agreement and (ii) their agreement to be bound by the terms of this Escrow
Agreement, including without limitation (x) the establishment of this escrow to
secure their indemnification obligations under Section 9 of the Reorganization
Agreement, (y) the appointment of the Escrow Shareholder Representative as
their representative for the purposes of this Escrow Agreement and as attorney-
in-fact and agents for and on behalf of each of the Designated Shareholders,
and the taking by the Escrow Shareholder Representative of any and all actions
and the making of any decisions required or permitted to be taken or made by
them under this Escrow Agreement, and (z) all of the other terms, conditions
and limitations in this Escrow Agreement.
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Agreement
---------
The parties to this Escrow Agreement, intending to be legally bound, agree as
follows:
1. Defined Terms
Capitalized terms used and not otherwise defined in this Escrow Agreement
shall have the meanings assigned to them in the Reorganization Agreement.
2. Escrow
C.2.1 Shares to be Placed in Escrow. On the date of the Closing
(the "Closing Date"), Parent shall issue a certificate
for ten percent (10%) of the aggregate number of shares of the Common Stock of
Parent (the "Parent Common Stock") to be issued to the Designated Shareholders
in the Merger (the "Escrow Shares"), in the name of Escrow Agent or its
nominee, evidencing the shares of the Parent Common Stock to be held in escrow
in accordance with this Escrow Agreement. The Escrow Shares shall be held as a
trust fund and shall not be subject to any lien, attachment, trustee process or
any other judicial process of any creditor of any party hereto. The Escrow
Agent agrees to accept delivery of the Escrow Shares and to hold the Escrow
Shares in escrow (the "Escrow"), subject to the terms and conditions of this
Escrow Agreement.
C.2.2 Indemnification. Each of the Designated
Shareholders has agreed in Section 9 of the Reorganization Agreement that such
shareholders severally, but not jointly and severally, shall indemnify and hold
harmless each of Parent, Merger Sub and the Surviving Corporation and the other
Indemnitees from and against, and shall compensate and reimburse each of them
for Damages, as set forth therein. The Escrow Shares shall be security, in
part, for such indemnity obligation, subject to the limitations, and in the
manner provided, in this Escrow Agreement.
C.2.3 Voting of Shares. On any matter brought before the Parent
stockholders for a vote, the Escrow Agent shall vote
the Escrow Shares as directed by the Designated Shareholders individually.
Each Designated Shareholder shall have the right to direct the vote of the
number of shares resulting from the multiplication of the Designated
Shareholder's percentage set forth on Attachment A by the total number of
Escrow Shares held by the Escrow Agent on the record date for the vote.
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C.2.4 Dividends, Etc. Any distributions of cash, securities or
other property in respect of or in exchange for any of the Escrow Shares, other
than distributions of capital stock of the Parent (by way of stock dividend,
stock split or otherwise) not constituting a dividend for purposes of
Section 301 of the Code, shall be payable and distributed directly to the
stockholders and shall not be held in the Escrow. At the time any of the
Escrow Shares are required to be released from the Escrow to any person
pursuant to this Escrow Agreement, any distributions of capital stock of the
Parent previously made in respect of such released Escrow Shares and held in
the Escrow shall be released from the Escrow to such person.
C.2.5 Transferability. The interests of the Designated
Shareholders in the Escrow and in the Escrow Shares held in the Escrow shall
not be assignable or transferable, other than by operation of law. No transfer
of any of such interests by operation of law shall be recognized or given
effect until Parent and Escrow Agent shall have received written notice of such
transfer.
C.2.6 Fractional Shares. No fractional shares of Parent Common
Stock shall be retained in or released from the Escrow pursuant to this Escrow
Agreement. In connection with any release of shares from the Escrow, the
Escrow Agent shall be permitted to "round down" or to follow such other
rounding procedures as the Escrow Agent reasonably determines to be appropriate
in order to avoid (i) retaining any fractional share in the Escrow or (ii)
releasing any fractional share from the Escrow. All stock transfers pursuant
to this Escrow Agreement will be made through the transfer agent of the Parent
Common Stock, who will initially be American Stock Transfer & Trust Company.
3. Claim Procedures
C.3.1 Claim Notice. If Parent determines in good faith that
there is or has been a possible inaccuracy in or breach of
any representation or warranty made by the Company or covenant or other
provision imposed on the Company and set forth in any of the Reorganization
Agreement or related agreements, or in any document or instrument delivered
pursuant thereto or in connection therewith, (collectively, the "Transactional
Agreements") and if Parent is entitled, under the terms of the Reorganization
Agreement, to make a claim against the Escrow with respect to such possible
inaccuracy or breach, then Parent may deliver to both the Escrow Shareholder
Representative and the Escrow Agent a written notice of such possible
inaccuracy or breach (a "Claim Notice") setting forth (i) a brief description
of the circumstances supporting Parent's belief that such possible inaccuracy
or breach exists or has occurred, and (ii) to the extent possible, a non-
binding, preliminary estimate of the aggregate dollar amount of all Damages
that have arisen and may arise as a result of such possible inaccuracy or
breach (such aggregate amount being referred to as the "Claim Amount"). Such
Claim Notice must be delivered prior to the earlier of (i) the date the
Registration Statement is filed with the Securities and Exchange Commission and
(ii) one year after the Closing Date (the "Escrow Release Date").
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C.3.2 Response Notice. Within forty-five (45) days after the
delivery of a Claim Notice to the Escrow Shareholder Representative, the Escrow
Shareholder Representative shall deliver to Parent, with a copy to the Escrow
Agent, a written notice (the "Response Notice") containing: (i) instructions
to the effect that shares of Parent Common Stock having a Stipulated Value (as
defined in Section 6 of this Escrow Agreement) equal to the entire Claim Amount
set forth in such Claim Notice are to be released from the Escrow to Parent; or
(ii) instructions to the effect that shares of Parent Common Stock having a
Stipulated Value equal to a specified portion (but less than the entire amount)
of the Claim Amount set forth in such Claim Notice are to be released from the
Escrow to Parent, together with a statement that the remaining portion of such
Claim Amount is being disputed; or (iii) a statement that the entire Claim
Amount set forth in such Claim Notice is being disputed. If no Response Notice
is received by Parent from the Escrow Shareholder Representative within forty-
five (45) days after the delivery of a Claim Notice to the Escrow Shareholder
Representative, then the Escrow Shareholder Representative shall be deemed to
have given instructions that shares of Parent Common Stock having a Stipulated
Value equal to the entire Claim Amount set forth in such Claim Notice are to be
released to Parent from the Escrow.
C.3.3 Release of Shares to Parent.
(a) If the Escrow Shareholder Representative gives (or is
deemed to have given) instructions that shares of Parent Common Stock having a
Stipulated Value equal to the entire Claim Amount set forth in a Claim Notice
are to be released from the Escrow to Parent, then the Escrow Agent shall
promptly following the required delivery date for the Response Notice transfer,
deliver and assign to Parent such number of Escrow Shares held in the Escrow as
have a Stipulated Value equal to the Claim Amount (or such lesser number of
Escrow Shares as is then held in the Escrow).
(b) If a Response Notice delivered by the Escrow Shareholder
Representative in response to a Claim Notice contains instructions to the
effect that shares of Parent Common Stock having a Stipulated Value equal to a
specified portion (but not the entire amount) of the Claim Amount set forth in
such Claim Notice are to be released from the Escrow to Parent, then (i) the
Escrow Agent shall promptly following the required delivery date for the
Response Notice transfer, deliver and assign to Parent such number of Escrow
Shares held in the Escrow as have a Stipulated Value equal to such specified
portion of such Claim Amount, and (ii) the procedures set forth in Section
3.3(c) of this Escrow Agreement shall be followed with respect to the remaining
portion of such Claim Amount.
(c) If a Response Notice delivered by the Escrow Shareholder Representative in
response to a Claim Notice contains a statement that all or a portion of the
Claim Amount set forth in such Claim Notice is being disputed (such Claim
Amount or the disputed portion thereof being referred to as the "Disputed
Amount"), then, notwithstanding anything contained in Section 3 of this Escrow
Agreement, the Escrow Agent shall continue to hold in the Escrow (in addition
to any other shares of Parent Common Stock permitted to be retained in the
Escrow, whether in connection with any other dispute or otherwise) shares of
Parent Common Stock having a Stipulated Value equal to 125% of the Disputed
Amount or such lesser amount that remains in the Escrow. Such shares of Parent
Common Stock shall continue to be held in the Escrow until (i) delivery of a
notice executed by Parent and the Escrow Shareholder Representative setting
forth instructions to the Escrow Agent regarding the release of such shares, or
(ii) the Escrow Agent receives a copy of a court order containing instructions
to the Escrow Agent regarding the release of such shares. The Escrow Agent
shall thereupon release shares of Parent Common Stock from the Escrow in
accordance with the instructions set forth in such notice or order. (The
parties acknowledge that it is appropriate to retain more than 100% of the
Claim Amount in the Escrow in recognition of the fact that Parent may have
underestimated the aggregate amount of the actual and potential Damages arising
in connection with a particular Claim Notice.)
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4. Escrow Shareholder Representative
C.4.1 Escrow Shareholder Representative.
(a) The Designated Shareholders shall be represented hereunder by a
Escrow Shareholder Representative who shall initially be the Initial Escrow
Shareholder Representative. The Escrow Shareholder Representative is hereby
empowered by each Designated Shareholder to give and receive notices and
communications, to authorize delivery to Parent of Parent Common Stock or other
property placed in Escrow in satisfaction of claims by Parent, Merger Sub, the
Surviving Company or the other Indemnitees, to object to such deliveries, to
agree to, negotiate, enter into settlements and compromises of, request
arbitration of and comply with awards of arbitrators with respect to such
claims and to take any and all actions necessary or appropriate in the judgment
of the Escrow Shareholder Representative for the accomplishment of the
foregoing.
(b) In the event the Escrow Shareholder Representative shall
die or resign or otherwise terminate his status as such, a successor, who shall
be a Designated Shareholder (or an affiliate thereof), shall be appointed by
the Designated Shareholders holding a majority of the Escrow Shares. The
Escrow Shareholder Representative shall receive no compensation for his
services.
(c) The Designated Shareholders hereby agree that the Escrow
Shareholder Representative shall not be liable to the Designated Shareholders
for any act done or omitted hereunder while acting in good faith and in the
exercise of reasonable judgment. The Designated
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Shareholders agree to indemnify and hold the Escrow Shareholder Representative
harmless against any loss, liability, or expenses incurred by him in his
capacity as such, except to the extent such loss, liability or expense is due
to bad faith or negligent conduct. The Escrow Shareholder Representative shall
be entitled to reimbursement by the Designated Shareholders, pro rata to the
percentages set forth opposite the names of the Designated Shareholders on
Attachment A hereto, for attorneys fees and other out-of-pocket expenses
incurred by him in accordance with this Escrow Agreement.
(d) The Designated Shareholders agree that a decision by the
Escrow Shareholder Representative shall constitute a decision
of all of the Designated Shareholders, and shall be final, binding and
conclusive upon each of them. Parent, Merger Sub, the Surviving Company, the
other Indemnitees and the Escrow Agent may rely upon any act, decision, consent
or instruction of the Escrow Shareholder Representative as being the act,
decision, consent or instruction of each and all of the Designated Shareholders
and Parent, Merger Sub, the Surviving Company the other Indemnitees and the
Escrow Agent are hereby relieved from any liability to any person for any acts
done by them in accordance with any act, decision, consent or instruction of
the Escrow Shareholder Representative.
(e) The Escrow Shareholder Representative shall promptly
deliver to each Designated Shareholder a copy of any notice received or given
by the Escrow Shareholder Representative pursuant to this Escrow Agreement.
5. Release of Shares to Designated Shareholders
C.5.1 Shares to be Released. On the Escrow Release Date or, if a
Claim Notice has been delivered pursuant to Section 3.1 within 45 days of such
date, then 45 days after the delivery of such Claim Notice, the Escrow Agent
shall release to the Designated Shareholders from the Escrow all shares of
Parent Common Stock then held in the Escrow, except for any shares of Parent
Common Stock that are to be retained in the Escrow in accordance with Section
3.3(c) of this Escrow Agreement.
C.5.2 Procedures for Releasing Shares. Subject to Sections
7.1 and 8.5, any distribution of all or a portion of the Escrow Shares to the
Designated Shareholders shall be made in accordance with the percentages set
forth opposite such holders' respective names on Attachment A attached hereto.
6. Valuation of Shares Held in Escrow
For purposes of this Escrow Agreement, the "Stipulated Value" of each of
the Escrow Shares shall be deemed to be $8.00, which was the closing price on
the Nasdaq National Market of a share of Parent Common Stock as of the date the
Reorganization Agreement become effective (the "Valuation Date").
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7. Fees and Expenses
C.7.1 Parent agrees to pay or reimburse the Escrow Agent for legal
fees incurred in connection with the preparation of this Escrow Agreement and
to pay the Escrow Agent's reasonable compensation for its normal services
hereunder in both cases in accordance with the attached fee schedule, which may
be subject to change on an annual basis. The Escrow Agent shall be entitled to
reimbursement on demand for all expenses incurred in connection with the
administration of the escrow created hereby which are in excess of its
compensation for normal services hereunder, including without limitation,
payment of any legal fees incurred by the Escrow Agent in connection with
resolution of any claim by any party hereunder. Each of (i) Parent and
(ii) the Designated Shareholders shall be liable for one-half (1/2) of such
amounts and Parent shall be entitled to reimbursement from the Escrow Shares of
the Designated Shareholders' share of any such excess expenses, if such share
is paid by Parent.
C.7.2 Except as may otherwise be provided herein, all expenses
(including attorneys' fees) incurred by any Designated Shareholder in
connection with this Escrow Agreement shall be
borne by such Designated Shareholder.
C.7.3 Fifteen days following the delivery of a notice in writing
to the Escrow Agent and the Escrow Shareholder Representative by Parent in
respect of Section 7.1 or Section 8.5, the Escrow Agent shall transfer, deliver
and assign to Parent, in reimbursement of fees and expenses pursuant to the
last sentence of Section 7.1 or the first sentence of Section 8.5, such number
of Escrow Shares held in the Escrow which have a Stipulated Value equal to the
amount to be reimbursed unless the Escrow Agent receives written notice of
objection from the Escrow Shareholder Representative. In the event such
objection is received, the reimbursement claim shall be handled in accordance
with Section 3.3(c).
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8. Duties of the Escrow Agent; Limitation of Escrow Agent's Liability.
C.8.1 The sole duty of the Escrow Agent, other than as herein
specified, shall be to receive and hold the Escrow Shares, subject to
disbursement in accordance with this Escrow Agreement, and the Escrow Agent
shall be under no duty to determine whether Parent, the Escrow Shareholder
Representative or the Designated Shareholders are complying with the
requirements of this Escrow Agreement or any other agreement. Parent and
Designated Shareholders acknowledge and agree that the Escrow Agent (i)
shall not be responsible for any of the agreements referred to herein but shall
be obligated only for performance of such duties as are specifically set forth
in this Escrow Agreement; (ii) shall not be obligated to take any legal or
other action hereunder which might in its judgment involve any expense or
liability unless it shall have been furnished with acceptable
indemnification; (iii) may rely on and shall be protected in acting or
refraining from acting upon any written notice, instruction, instrument,
statement, request or document furnished to it hereunder and believed by it to
be genuine and to have been signed or presented by the proper person, and shall
have no responsibility for determining the accuracy thereof, and (iv) may
consult counsel satisfactory to it, and the opinion of such counsel, shall be
full and complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in accordance with the
opinion of such counsel.
C.8.2 Neither the Escrow Agent nor any of its directors, officer
or employees shall be liable to anyone for any action taken or omitted to be
taken by it or any of its directors, officers or employees hereunder except in
the case of Escrow Agent's willful misconduct or negligence. Parent and
Designated Shareholders, jointly and severally, covenant and agree to indemnify
the Escrow Agent and its directors, officers and employees and hold them
harmless without limitation from and against any loss, liability or expense of
any nature incurred by the Escrow Agent arising out of or in connection with
this Escrow Agreement or with the administration of its duties hereunder,
including but not limited to reasonable legal fees and other costs and
expenses, except such loss, liability or expense caused by the Escrow Agent's
willful misconduct or gross negligence.
C.8.3 Parent and Designated Shareholders, jointly and severally,
agree to assume any and all obligations imposed now or hereafter by any
applicable tax law with respect to the payment of Escrow Funds under this
Escrow Agreement, and to indemnify and hold the Escrow Agent and its directors,
officers and employees harmless from and against any taxes, additions for late
payment, interest, penalties and other expenses, that may be assessed against
the Escrow Agent on any such payment or other activities under this Escrow
Agreement. Parent and Designated Shareholders undertake to instruct the Escrow
Agent in writing with respect to the Escrow Agent's responsibility for
withholding and other taxes, assessments or other governmental charges,
certifications and governmental reporting in connection with its acting as
Escrow Agent under this Escrow Agreement. Parent and Designated Shareholders,
jointly and severally, agree to indemnify and hold the Escrow Agent and its
directors, officers and employees harmless from any liability on account of
taxes, assessments or other governmental charges, including without limitation
the withholding or
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deduction or the failure to withhold or deduct same, and any liability for
failure to obtain proper certifications or to properly report to governmental
authorities, to which the Escrow Agent may be or become subject in connection
with or which arises out of this Escrow Agreement, including costs and expenses
(including reasonable legal fees), interest and penalties. Notwithstanding the
foregoing, no distributions will be made unless the Escrow Agent is supplied
with an original, signed W-9 form or its equivalent prior to distribution.
C.8.4 The Escrow Agent shall have no more or less responsibility
or liability on account of any action or omission of any book-entry depository
or subescrow agent employed by the Escrow Agent than any such book-entry
depository or subescrow agent has to the Escrow Agent, except as to the extent
that such action or omission of any book-entry depository or subescrow agent
was caused by the Escrow Agent's own willful misconduct or negligence.
C.8.5 As among themselves, each of (i) Parent and (ii)
the Designated Shareholders shall be liable for one-half (1/2) of any amounts
owed to the Escrow Agent in satisfaction of any of the foregoing
indemnification obligations and Parent shall be entitled to reimbursement from
the Escrow Shares of the Designated Shareholders' share of any such loss,
liability or expense, if such share is paid by Parent. The provisions of
Section 8.2 and 8.3 shall survive termination of this Escrow Agreement.
9. General
C.9.1 Other Agreements. Nothing in this Escrow Agreement is intended
to limit any of Parent's or the Designated Shareholders' rights, or any
obligation of any Designated Shareholder, or of Parent under the Reorganization
Agreement (or any agreement entered into in connection with the transactions
contemplated by the Reorganization Agreement).
C.9.2 Governing Law. This Escrow Agreement shall be governed by
and construed in accordance with the laws of the
State of California, without giving effect to the conflict of
laws provisions thereunder.
C.9.3 Assignment; Binding Upon Successors and Assigns. No party
hereto may assign any of its rights or obligations hereunder without the prior
written consent of the other party hereto. This Escrow Agreement will be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
C.9.4 Severability. If any provision of this Escrow Agreement,
or the application thereof, is for any reason and to any extent be invalid or
unenforceable, the remainder of this Escrow Agreement and application of such
provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Escrow Agreement
with a valid and enforceable provision that
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will achieve, to the greatest extent possible, the economic, business and other
purposes of the void or unenforceable provision.
C.9.5 Counterparts. This Escrow Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original and all of which shall constitute one and the same instrument. This
Escrow Agreement will become binding when one or more counterparts hereof,
individually or taken together, bear the signatures of all the parties
reflected hereon as signatories.
C.9.6 Amendment and Waivers. Any term or provision of this
Escrow Agreement may be amended, and the observance of any term of this Escrow
Agreement may be waived (either generally or in a particular instance and
either retroactively or prospectively) only by a writing signed by the party to
be bound thereby; provided that this Escrow Agreement may be amended on behalf
of all of the Designated Shareholders by (i) the Escrow Shareholder
Representative or (ii) a majority in interest of the Designated Shareholders.
Notwithstanding any rights that may be created in any third party under the
terms of this Escrow Agreement, no such amendment or waiver will require the
consent of such third party to be effective. The waiver by a party of any
breach hereof or default in the performance hereof will not be deemed to
constitute a waiver of any other default or any succeeding breach or default.
C.9.7 Attorneys' Fees. Subject to Section 8.2, should suit be brought
to enforce or interpret any part of this Escrow Agreement, the prevailing party
will be entitled to recover, as an element of the costs of suit and not as
damages, reasonable attorneys' fees to be fixed by the court (including,
without limitation, costs, expenses and fees on any appeal). The prevailing
party will be entitled to recover its costs of suit, regardless of whether such
suit proceeds to final judgment.
C.9.8 Notices. All notices and other communications pursuant to
this Escrow Agreement shall be in writing and deemed to be sufficient if
contained in a written instrument and shall be deemed given if delivered
personally, telecopied, sent by nationally-recognized overnight courier or
mailed by registered or certified mail (return receipt requested), postage
prepaid, to the parties at the following address (or at such other address for
a party as shall be specified by like notice):
If to Parent to: JetFax, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Chief Financial Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Cooley Godward LLP
Five Palo Alto Square
▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
99
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Escrow Shareholder Representative to:
▇▇▇▇▇▇▇ ▇▇▇▇▇
U.S. Venture Partners
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Escrow Agent to: American Stock Transfer & Trust Company
▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
All such notices and other communications shall be deemed to have been
received (a) in the case of personal delivery, on the date of such delivery,
(b) in the case of a telecopy, when the party receiving such copy shall have
confirmed receipt of the communication, (c) in the case of delivery by
nationally-recognized overnight courier, on the business day following
dispatch, and (d) in the case of mailing, on the third business day following
such mailing.
C.9.9 Construction of Agreement. This Escrow Agreement has been
negotiated by the respective parties hereto and their attorneys and the
language hereof will not be construed for or against either party. A reference
to a section or an exhibit will mean a section in, or exhibit to, this Escrow
Agreement unless otherwise explicitly set forth. The titles and headings
herein are for reference purposes only and will not in any manner limit the
construction of this Escrow Agreement, which will be considered as a whole.
C.9.10 Further Assurances. Each party agrees to cooperate fully
with the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by any other party to evidence and reflect the transactions described
herein and contemplated hereby and to carry into effect the intents and
purposes of this Escrow Agreement.
C.9.11 Absence of Third Party Beneficiary Rights. No provisions
of this Escrow Agreement are intended, nor will be interpreted, to provide or
create any third party beneficiary rights or any other rights of any kind in
any client, customer, affiliate, stockholder, partner or any party hereto or
any other person or entity unless specifically provided otherwise herein, and,
except
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as so provided, all provisions hereof will be personal solely between
the parties to this Escrow Agreement.
C.9.12 Entire Agreement. This Escrow Agreement and the
Reorganization Agreement and the exhibits hereto and thereto constitute the
entire understanding and agreement of the parties hereto with respect to the
subject matter hereof and supersede all prior and contemporaneous agreements or
understandings, inducements or conditions, express or implied, written or oral,
between the parties with respect hereto. The express terms hereof control and
supersede any course of performance or usage of the trade inconsistent with any
of the terms hereof.
C.9.13 Resignation and Substitution of Escrow Agent. Escrow Agent
may at any time resign as Escrow Agent hereunder by giving thirty (30) days
prior written notice of resignation to Parent and the Escrow Shareholder
Representative. Prior to the effective date of the resignation as specified in
such notice, Parent will issue to the Escrow Agent a written instruction
authorizing redelivery of the Escrow Shares to a bank or trust company that it
selects subject to the reasonable consent of the Escrow Shareholder
Representative. Such bank or trust company shall have a principal office in
California or New York shall have capital, surplus and undivided profits in
excess of $50,000,000. If, however, Parent shall fail to name such a successor
agent within twenty (20) days after the notice of resignation from the Escrow
Agent, the Escrow Shareholder Representative shall be entitled to name such
successor escrow agent. If no successor escrow agent is named by Parent or the
Escrow Shareholder Representative, the Escrow Agent may apply to a court of
competent jurisdiction for appointment of a successor escrow agent.
In Witness Whereof, the parties have executed this Escrow
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Agreement as of November __, 1997.
JetFax, Inc.
By:
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Financial Officer
DocuMagix, Inc.
By:
------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Chief Financial Officer
American Stock Transfer & Trust Company
By:
------------------------------
Name:
Title: Escrow Agent
▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------
Title: Initial Escrow Shareholder
Representative
Designated Shareholder
----------------------------------
(Designated Shareholder's Signature)
Address for Notice:
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Attachment A
Designated Shareholders Percentage
BankBoston Ventures 30.24%
U.S. Venture Partners III 63.77%
U.S.V. Entrepreneur Partners 0.66%
Second Ventures Limited Partners 1.99%
▇▇▇▇▇▇ ▇▇▇▇▇▇ 0.72%
Ka-▇▇▇ ▇▇▇▇▇ 1.10%
▇▇▇▇▇▇ Living Trust dtd 8/30/92 1.52%
-------
Total 100.00%
103
Exhibit G
FORM OF EMPLOYMENT AND NONCOMPETITION AGREEMENT
104
Exhibit H
FORM OF NONCOMPETITION AGREEMENT
EXHIBIT I
FORM OF RELEASE
---------------
This Release ("Release") is being executed and delivered as of
November , 1997, by
-- ----------------------------------
("Releasor") in favor of, and for the benefit of, DocuMagix, Inc., a
California corporation (the "Corporation"), JetFax, Inc., a Delaware
corporation ("Parent"), and the other Releasees (as defined in Section 2).
Recitals
--------
A. Contemporaneously with the execution and delivery of this
Release, pursuant to an Agreement and Plan of Reorganization, dated as
of November 11, 1997, among the Corporation, Parent, JF Acquisition
Sub, Inc., a California corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), Releasor and certain other shareholders of the
Corporation (the "Reorganization Agreement"), Merger Sub is merging into the
Corporation (the merger of Merger Sub into the Corporation being referred to
in this Release as the "Merger"). As a result of the Merger, the
Corporation's shareholders are receiving shares of common stock of Parent
in exchange for their shares of voting common stock and voting preferred
stock of the Corporation, and the Corporation is becoming a wholly owned
subsidiary of Parent.
B. Parent has required, as a condition to consummating the Merger
and the other transactions contemplated by the Reorganization Agreement,
that Releasor execute and deliver this Release.
Agreement
---------
In order to induce Parent to consummate the transactions
contemplated by the Reorganization Agreement, and for other valuable
consideration (the receipt and sufficiency of which are hereby acknowledged
by Releasor), Releasor hereby covenants and agrees as follows:
1. Release. Releasor, for himself and for each of his
Associated Parties (as defined in Section 2), hereby generally, irrevocably,
unconditionally and completely releases and forever discharges each of the
Releasees (as defined in Section 2) from, and hereby irrevocably,
unconditionally and completely waives and relinquishes, each of the Released
Claims (as defined in Section 2).
2. Definitions.
(a) The term "Associated Parties," when used herein with respect to
Releasor, shall mean and include: (i) Releasor's predecessors, successors,
executors, administrators, heirs and estate; (ii) Releasor's past, present
and future assigns, agents and representatives; (iii) each entity that
Releasor has the power to bind (by Releasor's acts or signature) or over which
Releasor directly or indirectly exercises control; and (iv) each entity of
which Releasor owns, directly or indirectly, at least 50% of the outstanding
equity, beneficial, proprietary, ownership or voting interests.
(b) The term "Releasees" shall mean and include: (i) Parent;
(ii) the Corporation; (iii) each of the direct and indirect subsidiaries of
Parent; (iv) each other affiliate of Parent; and
105
(v) the successors and
past, present and future assigns, directors, officers, employees, agents,
attorneys and representatives of the respective entities identified or
otherwise referred to in clauses "(i)" through "(iv)" of this sentence,
other than Releasor.
(c) The term "Claims" shall mean and include all past,
present and future disputes, claims, controversies, demands, rights,
obligations, liabilities, actions and causes of action of every kind and
nature, including: (i) any unknown, unsuspected or undisclosed claim; (ii)
any claim or right that may be asserted or exercised by Releasor in
his capacity as a shareholder, director, officer or employee of the
Corporation or in any other capacity; and (iii) any claim, right or cause
of action based upon any breach of any express, implied, oral or written
contract or agreement; (iv) any tort claim; and (v) any indemnification claim.
(d) The term "Released Claims" shall mean and include each
and every Claim that (i) Releasor or any Associated Party of Releasor may
have had in the past, may now have or may have in the future against any of
the Releasees, and (ii) has arisen or arises out of, or relates to, any
circumstance, agreement, activity, action, omission, event or matter occurring
or existing on or prior to the date of this Release provided, however, that
the Released Claims shall not include:
(1) Releasor's rights, if any, against Parent under the
Reorganization Agreement; or
(2) Releasor's rights against the Corporation under the
[Noncompetition Agreement/the Employment and
Noncompetition Agreement] being entered into by Releasor and the Corporation
contemporaneously with the execution and delivery of this Release.
3. Representations and Warranties. Releasor represents
and warrants that:
(a) Releasor has not assigned, transferred, conveyed or
otherwise disposed of any Claim against any of the Releasees, or any direct or
indirect interest in any such Claim, in whole or in
part;
(b) to the best of Releasor's knowledge, no other person or
entity has any interest in any of the Released Claims;
(c) Releasor is not aware of any claim or potential claim
by any person or entity against Releasor, and is not aware of any other facts
or circumstances, that could give rise to a right of indemnification in favor
of Releasor against the Corporation;
(d) to the best of Releasor's knowledge, no Associated
Party of Releasor has or had any Claim against any of the Releasees;
(e) to the best of Releasor's knowledge, no Associated
Party of Releasor will in the future have any Claim against any Releasee
that arises from or relates to any circumstance, agreement, activity,
action, omission, event or matter occurring or existing on or prior to the
date of this Release;
(f) this Release has been duly and validly executed and
delivered by Releasor;
106
(g) this Release is a valid and binding obligation of Releasor
and Releasor's Associated Parties, and is enforceable against Releasor and
each of his Associated Parties in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium or other similar laws affecting creditors' rights, and
subject to general equity principles and to limitations on availability of
equitable relief, including specific performance;
(h) there is no action, suit, proceeding, dispute, litigation,
claim, complaint or investigation by or before any court, tribunal,
governmental body, governmental agency or arbitrator pending or, to the best
of the knowledge of Releasor, threatened against Releasor or any of
Releasor's Associated Parties that challenges or would challenge the
execution and delivery of this Release or the taking of any of the
actions required to be taken by Releasor under this Release;
(i) neither the execution and delivery of this Release nor the
performance hereof will: (i) result in any violation or breach of any
agreement or other instrument to which Releasor or any of Releasor's
Associated Parties is a party or by which Releasor or any of Releasor's
Associated Parties is bound; or (ii) result in a violation or any law, rule,
regulation, treaty, ruling, directive, order, arbitration award, judgment or
decree to which Releasor or any of Releasor's Associated Parties is
subject; and
(j) no authorization, instruction, consent or approval of any
person or entity is required to be obtained by Releasor or any of
Releasor's Associated Parties in connection with the execution and delivery
of this Release or the performance hereof.
4. Indemnification. Without in any way limiting any of
the rights or remedies otherwise available to any Releasee, Releasor
shall hold harmless and indemnify each Releasee from and against, and shall
compensate and reimburse each Releasee for, any loss, damage, injury,
decline in value, lost opportunity, liability, exposure, claim, demand,
settlement, judgment, award, fine, penalty, tax, fee (including reasonable
attorneys' fees) charge, cost (including costs of investigation) or expense of
any nature which are suffered or incurred at any time by any Releasee,
or to which any Releasee otherwise becomes subject at any time, and that
arises out of or by virtue of, or relates to: (a) any failure on the part of
Releasor to observe, perform or abide by, or any other breach of, any
restriction, covenant, obligation, representation, warranty or other provision
contained herein; (b) the assertion or purported assertion of any of the
Released Claims by Releasor or any of Releasor's Associated Parties; or
(c) any inaccuracy in or breach of any representation or warranty set forth in
this Release.
5. Notices. Any notice or other communication required or
permitted to be delivered to Releasor, the Corporation or Parent under this
Release shall be in writing and shall be deemed properly delivered, given
and received when delivered (by hand, by registered mail, by courier or
express delivery service or by facsimile) to the address or facsimile telephone
number set forth beneath the name of such party below (or to such other address
or facsimile telephone number as such party shall have specified in a written
notice given to the other party hereto):
if to the Corporation: DocuMagix, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Chief Financial
officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to Parent: JetFax, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Chief Financial
Officer
107
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to Releasor:
6. Severability. If any provision of this Release or any part of any such
provision is held under any circumstances to be invalid or unenforceable in
any jurisdiction, then (a) such provision or part thereof shall, with
respect to such circumstances and in such jurisdiction, be deemed amended
to conform to applicable laws so as to be valid and enforceable to the
fullest possible extent, (b) the invalidity or unenforceability of such
provision or part thereof under such circumstances and in such
jurisdiction shall not affect the validity or enforceability of such
provision or part thereof under any other circumstances or in any other
jurisdiction, and (c) the invalidity or unenforceability of such provision or
part thereof shall not affect the validity or enforceability of the
remainder of such provision or the validity or enforceability of any other
provision of this Release. Each provision of this Release is separable
from every other provision of this Release, and each part of each provision of
this Release is separable from every other part of such provision.
7. Governing Law. This Release shall be construed in accordance
with, and governed in all respects by, the laws of the State of California
(without giving effect to principles of conflicts of laws).
8. Waiver. No failure on the part of any Releasee to exercise any
power, right, privilege or remedy under this Release, and no delay on
the part of any Releasee in exercising any power, right, privilege or remedy
under this Release, shall operate as a waiver of such power, right,
privilege or remedy; and no single or partial exercise of any such power,
right, privilege or remedy shall preclude any other or further exercise
thereof or of any other power, right, privilege or remedy. No Releasee
shall be deemed to have waived any claim arising out of this Release, or any
power, right, privilege or remedy under this Release, unless the waiver of such
claim, power, right, privilege or remedy is expressly set forth in a written
instrument duly executed and delivered on behalf of such party; and any
such waiver shall not be applicable or have any effect except in the specific
instance in which it is given.
9. Captions. The captions contained in this Release are
for convenience of reference only, shall not be deemed to be a part of
this Release and shall not be referred to in connection with the construction
or interpretation of this Release.
108
10. Further Assurances. Releasor shall execute and/or cause to
be delivered to the Corporation and Parent such instruments and other
documents and shall take such other actions as Corporation or Parent may
reasonably request to effectuate the intent and purposes of this Release.
11. Entire Agreement. This Release sets forth the entire
understanding of the parties relating to the subject matter hereof and
supersedes all prior agreements and understandings between the parties
relating to the subject matter hereof.
12. Amendments. This Release may not be amended, modified,
altered, or supplemented other than by means of a written instrument
duly executed and delivered on behalf of Releasor, Parent and the
Corporation.
13. Binding Nature. This Release will be binding upon
Releasor and Releasor's Associated Parties and will inure to the benefit of
each of the Releasees.
14. Attorneys' Fees and Expenses. If any legal action or
other legal proceeding relating to the enforcement of any provision of
this Release is brought against Releasor, the prevailing party shall
be entitled to recover reasonable attorneys' fees, costs and
disbursements (in addition to any other relief to which the prevailing party
may be entitled).
15. Construction.
(a) For purposes of this Release, whenever the context
requires: the singular number shall include the plural, and vice versa.
(b) Releasor agrees that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of this Release.
(c) As used in this Release, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(d) Except as otherwise indicated, all references in this
Release to "Sections" are intended to refer to Sections of this Release.
Releasor has executed this Release as of the date first above written.
109
[Signature Page to Release]
110
EXHIBIT J
FORM OF LEGAL OPINION OF FENWICK & WEST LLP
[Capitalized terms used and not defined herein have the respective
meanings assigned to them in the Agreement and Plan of Reorganization]
1. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of California
and has all necessary power and authority to own, lease and operate its
properties and to carry on its business as now conducted.
2. All corporate action, including approval by the
Company's Board of Directors and its shareholders, required to be taken on
the part of the Company to authorize the Company to execute, deliver and
perform its obligations under the Reorganization Agreement and the
Agreement of Merger and to consummate the Merger has been duly and validly
taken.
3. The Reorganization Agreement has been duly authorized,
executed and delivered by the Company and is a valid and binding obligation
of the Company enforceable against the Company in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws affecting
creditors' rights, and subject to general equity principles and to limitations
on availability of equitable relief, including specific performance.
4. The Agreement of Merger has been duly authorized,
executed and delivered by the Company and is a valid and binding obligation
of the Company enforceable against the Company in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws affecting
creditors' rights, and subject to general equity principles and to limitations
on availability of equitable relief, including specific performance.
5. The execution and delivery of the Reorganization
Agreement and the Agreement of Merger by the Company, and the performance
by the Company of its obligations set forth therein (including the
consummation of the Merger ) do not violate any provisions of the Company's
articles of incorporation or bylaws, each as amended to date.
111
EXHIBIT K
CERTAIN EMPLOYEES OF DOCUMAGIX
Category I Employees
▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
Category II Employees
Hikma Ali
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇-▇▇▇▇ (▇▇▇▇▇▇) ▇▇▇▇
112
EXHIBIT L
---------
OPINION OF ▇▇▇▇▇▇ GODWARD LLP
-----------------------------
1. JetFax is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
2. Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of California.
3. All corporate action, including approval by JetFax's Board of
Directors, required to be taken on the part of JetFax to authorize JetFax to
execute and deliver the Reorganization Agreement has been taken. All
corporate action, including approval by Merger Sub's Board of Directors and
sole shareholder, required to be taken on the part of Merger Sub to
authorize Merger Sub to execute and deliver the Reorganization Agreement and
the Agreement of Merger and to consummate the Merger has been taken.
4. The Reorganization Agreement has been duly authorized,
executed and delivered by each of JetFax and Merger Sub and is a valid and
binding obligation of each of JetFax and Merger Sub enforceable against
JetFax and Merger Sub in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization, arrangement,
moratorium or other similar laws affecting creditors' rights, and subject to
general equity principles and to limitations on availability of equitable
relief, including specific performance. The Agreement of Merger has been
duly authorized, executed and delivered by Merger Sub and is a valid and
binding obligation of Merger Sub enforceable against Merger Sub in accordance
with its terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, arrangement, moratorium or other similar laws
affecting creditors' rights, and subject to general equity principles and to
limitations on availability of equitable relief, including specific
performance.
5. The execution and delivery of the Reorganization Agreement by
each of JetFax and Merger Sub, the execution and delivery of the Agreement
of Merger by Merger Sub and the consummation by Merger Sub of the Merger
do not violate any provisions of JetFax's Certificate of Incorporation or
Bylaws, each as amended to date, or Merger Sub's Articles of Incorporation
or Bylaws, each as amended to date.
112
EXHIBIT M
---------
FORM OF SHAREHOLDER INVESTMENT CERTIFICATION
--------------------------------------------
This Shareholder Investment Certification ("Certification") is being executed
and delivered as of November __, 1997, by the undersigned shareholder of
DocuMagix, Inc., a California corporation (the "Company"), in favor of and
for the benefit of JetFax, Inc., a Delaware corporation ("Parent").
RECITALS
--------
A. The undersigned shareholder of the Company
("Shareholder") owns the number of shares of the voting common stock, no
par value, and the number of shares of the voting preferred stock, no par
value, of the Company set forth below Shareholder's signature at the end of
this Certification. Said shares are referred to in this Certification as the
"Shares."
B. Pursuant to an Agreement and Plan of Reorganization, dated as of
November 11, 1997, among Parent, JF Acquisition Sub, Inc., a California
corporation and a wholly owned subsidiary of Parent ("Merger Sub"), the
Company and certain shareholders of the Company (the "Reorganization
Agreement"), it is contemplated that (if the Merger is approved by the
Company's shareholders and various other conditions are satisfied) Merger Sub
will merge into the Company (the merger of Merger Sub into the Company,
including, without limitation, the filing of the Agreement of Merger and
the Amendment to Articles (as defined in the Reorganization
Agreement), being referred to in this Certification as the "Merger"). Upon
the consummation of the Merger, the Company's shareholders are to receive
shares of common stock of Parent ("Parent Common Stock") in exchange for
their shares of voting common stock of the Company, and the Company is
to become a wholly owned subsidiary of Parent. Accordingly, it is
contemplated that Shareholder will receive shares of Parent Common Stock in
the Merger.
113
CERTIFICATION
-------------
1. Representations and Warranties of Shareholder.
Shareholder represents, warrants and certifies to Parent as follows:
(a) Shareholder is the holder and beneficial owner of the
Shares and has good and valid title to the Shares free and clear of any
liens, pledges, security interests, adverse claims, equities, options,
proxies, community property interests, charges, encumbrances or
restrictions of any nature. The Shares are the only shares of the capital
stock of the Company held by Shareholder. Shareholder has the ability to
vote all of the Shares at any meeting of the shareholders of the Company,
or by written consent in lieu of any such meeting. Shareholder has not
appointed or granted any proxy or entered into any agreement, contract,
commitment or understanding with respect to any of the Shares.
(b) Shareholder is aware (i) that the Parent Common Stock
to be issued to Shareholder in the Merger will not be registered and will not
be issued pursuant to a registration statement under the Securities Act of
1933, as amended (the "Act"), but will instead be issued in reliance on the
exemption from registration set forth in Section 4(2) of the Act and in Rule
506 under the Act, and (ii) that neither the Merger nor the issuance of
such Parent Common Stock has been approved or reviewed by the
Securities and Exchange Commission or by any other governmental agency.
(c) Shareholder is aware that, because the Parent Common Stock
to be issued in the Merger will not be registered under the Act, such Parent
Common Stock cannot be resold unless such Parent Common Stock is registered
under the Act or unless an exemption from registration is available.
Shareholder is also aware that: (i) except as expressly provided in
Section 10 of the Reorganization Agreement, Parent is under no obligation to
file a registration statement with respect to the Parent Common Stock to be
issued to Shareholder in the Merger; and (ii) the provisions of Rule 144 under
the Act will permit resale of the Parent Common Stock to be issued to
Shareholder in the Merger only under limited circumstances, and such Parent
Common Stock must be held by Shareholder for at least two years before it
can be sold pursuant to Rule 144.
(d) The Parent Common Stock to be issued to Shareholder in the
Merger will be acquired by Shareholder for investment and for his or her own
account, and not with a view to, or for resale in connection with, any
unregistered distribution thereof.
(e) Shareholder has received, reviewed and considered all the
information Shareholder considers necessary to enable Shareholder to
make an informed decision to invest in Parent Common Stock, including: (i)
a copy of Parent's report on Form 10-Q for the quarter ending July 5, 1997;
(ii) a copy of Parent's report on Form 10-Q for the quarter ending October 4,
1997 and (iii) a copy of Parent's Prospectus, dated June 10, 1997, filed
with the Securities and Exchange Commission (the "SEC") pursuant to Rule
424(b)(1) in connection with the Company's initial public offering and
Registration Statement on Form S-1 (the documents referred to in clauses
"(i)," "(ii)" and "(iii)" of this Section 1(e) being referred to
collectively in this Certification as the "Disclosure Documents").
(f) Shareholder acknowledges the he or she has appointed ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ (the "Purchaser Representative"), to act as his or her purchaser
representative in connection with his or her evaluation of the merits and
risks of the Merger and Shareholder's investment in Parent Common Stock.
Pursuant to an April 1997 agreement between DocuMagix and its employees,
substantially all employees will receive retention bonus payments upon
completion of the Transaction. Shareholder acknowledges that ▇▇. ▇▇▇▇▇▇▇▇▇▇ is
the Chief Financial Officer of DocuMagix and that she and other certain
113
key employees of DocuMagix will receive retention bonus payments from
DocuMagix of fifty percent of their annual base salary upon consummation of
the Merger. Shareholder further acknowledges that he or she has read
and understands the Information Statement (including the Reorganization
Agreement and the other exhibits thereto) and has had the opportunity to meet
with the Purchaser Representative for the purpose of discussing the merits
and risks of the Merger and his or her proposed investment in Parent Common
Stock.
(g) Shareholder has been given the opportunity: (i) to ask questions
of, and to receive answers from, persons acting on behalf of the Company
and Parent concerning the terms and conditions of the Merger and the
contemplated issuance of Parent Common Stock in the Merger, and the
business, properties, prospects and financial condition of the Company and
Parent; and (ii) to obtain any additional information (to the extent the
Company or Parent possesses such information or is able to acquire it
without unreasonable effort or expense and without breach of
confidentiality obligations) necessary to verify the accuracy of the
information set forth in the Disclosure Documents.
(h) Shareholder is knowledgeable, sophisticated and experienced in
making, and is qualified to make, decisions with respect to investments
in securities presenting investment decisions like that involved in
Shareholder's contemplated investment in the Parent Common Stock to be issued
in the Merger. Shareholder understands and has fully considered the risks
of acquiring and owning Parent Common Stock and further understands that: (i)
an investment in Parent Common Stock is a speculative investment which
involves a high degree of risk and is suitable only for an investor who
is able to bear the economic consequences of losing his or her entire
investment; and (ii) there are substantial restrictions on the
transferability of the Parent Common Stock to be issued in the Merger, and,
accordingly, it may not be possible for Shareholder to liquidate his or her
investment in such Parent Common Stock (in whole or in part) in the case of
emergency. Shareholder is able: (1) to hold the Parent Common Stock that he
or she is to receive in the Merger for a substantial period of time; and
(2) to afford a complete loss of his or her investment in such Parent Common
Stock.
(i) Shareholder understands that stop transfer instructions will be
given to Parent's transfer agent with respect to the Parent Common Stock to
be issued to Shareholder in the Merger, and that there will be placed on the
certificate or certificates representing such Parent Common Stock a
legend identical or similar in effect to the following legend (together with
any other legend or legends required by applicable state securities laws or
otherwise):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS REGISTERED
UNDER THE ACT OR UNLESS AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE ACT IS AVAILABLE."
(j) The representations and warranties contained in this Certification
are accurate in all respects as of the date of this Certification, will be
accurate in all respects at all times through the consummation of the
Merger and will be accurate in all respects as of the date of the consummation
of the Merger as if made on that date.
114
2. Reliance. Shareholder acknowledges that Parent will
rely on his or her representations, warranties and certifications set forth in
Section 1 above for purposes of determining his or her suitability as an
investor in Parent Common Stock and for purposes of confirming the
availability of an exemption from the registration requirements of the Act.
3. Prohibitions Against Transfer. Shareholder shall not
effect any sale, transfer or other disposition of any of the Parent
Common Stock that he or she is to receive in the Merger unless:
(a) such sale, transfer or other disposition has been
registered under the Act;
(b) such sale, transfer or other disposition is made in
conformity with the requirements of Rule 144 under the Act, as evidenced by
a broker's letter and a representation letter executed by Shareholder
(satisfactory in form and content to Parent) stating that such requirements
have been met;
(c) counsel reasonably satisfactory to Parent shall have
advised Parent in a written opinion letter (satisfactory in form
and content to Parent), upon which Parent may rely, that such sale,
transfer or other disposition will be exempt from registration under
the Act; or
(d) an authorized representative of the SEC shall have
rendered written advice to Shareholder to the effect that the SEC would take
no action, or that the staff of the SEC would not recommend that the SEC
take action, with respect to such sale, transfer or other disposition, and a
copy of such written advice and all other related communications with the SEC
shall have been delivered to Parent.
115
Shareholder has executed and delivered this Certification as of the date
first written above.
-----------------------------------------
(Signature)
Name:
-------------------------------------
Number of shares:
Common:
-------------------------------
Preferred:
-------------------------------
State of Residence:
----------------------
116
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
among:
JetFax, Inc.,
-------------
a Delaware corporation;
JF Acquisition Sub, Inc.,
-------------------------
a California corporation;
DocuMagix, Inc.,
----------------
a California corporation;
and
The Designated Shareholders
----------------------------
Dated as of November 11, 1997
----------------------------
117
EXHIBITS
--------
Exhibit A - List of Designated Shareholders
Exhibit B - Certain Definitions
Exhibit C - Form of Shareholder Agreement
Exhibit D-1 - Persons to execute Affiliate Agreements
Exhibit D-2 - Form of Affiliate Agreement
Exhibit E-1 - Form of Amendment to Restated Articles of
Incorporation of DocuMagix
Exhibit E-2 - Form of Agreement of Merger
Exhibit F - Form of Escrow Agreement
Exhibit G - Form of Employment and Noncompetition Agreement
Exhibit H - Form of Noncompetition Agreement
Exhibit I - Form of Release
Exhibit J - Form of Legal Opinion of Fenwick & West LLP
Exhibit K - Certain Employees of DocuMagix
Exhibit L - Form of Legal Opinion of Cooley Godward LLP
Exhibit M - Form of Shareholder Investment Certification
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TABLE OF CONTENTS
Page
Section 1. Description of Transaction 2
1.1 Merger of Merger Sub into DocuMagix 2
1.2 Effect of the Merger 2
1.3 Closing; Effective Time 2
1.4 Articles of Incorporation and Bylaws; Directors and Officers 2
1.5 Conversion of Shares 2
1.6 Employee Stock Options 4
1.7 Cancellation of Bridge Warrants 5
1.8 Cancellation of Bridge Notes 5
1.9 Closing of DocuMagix's Transfer Books 5
1.10 Exchange of Certificates 6
1.11 Escrow Agreement. 8
1.12 Dissenting Shares 8
1.13 Tax Consequences 8
1.14 Accounting Treatment. 9
1.15 Further Action 9
Section 2. Representations and Warranties of DocuMagix and the Designated
Shareholders 9
2.1 Due Organization; No Subsidiaries; Etc. 9
2.2 Articles of Incorporation and Bylaws; Records. 9
2.3 Capitalization, Etc. 10
2.4 Financial Statements. 11
2.5 Absence of Changes. 12
2.6 Title to Assets 14
2.7 Bank Accounts; Receivables. 14
2.8 Equipment; Leasehold. 15
2.9 Proprietary Assets. 15
2.10 Contracts. 17
2.11 Liabilities. 18
2.12 Compliance with Legal Requirements. 19
2.13 Governmental Authorizations. 19
2.14 Tax Matters. 19
2.15 Employee and Labor Matters; Benefit Plans. 20
2.16 Environmental Matters. 22
2.17 Product Warranty; Performance of Services 22
2.18 Insurance. 22
2.19 Related Party Transactions. 23
2.20 Legal Proceedings; Orders. 23
2.21 Authority; Binding Nature of Agreement. 23
2.22 Non-Contravention; Consents. 24
2.23 Full Disclosure. 24
Section 3. Representations and Warranties of JetFax and Merger Sub 25
3.1 Organization, Standing and Power 25
3.2 SEC Filings; Financial Statements. 25
3.3 Authority; Binding Nature of Agreement. 26
3.4 Valid Issuance. 26
3.5 Absence of Certain Changes or Events. 26
3.6 Legal Proceedings. 26
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Section 4. Certain Covenants of DocuMagix 26
4.1 Access and Investigation. 26
4.2 Operation of DocuMagix's Business. 27
4.3 Notification; Updates to Disclosure Schedule. 29
4.4 No Negotiation. 29
Section 5. Additional Covenants of the Parties 30
5.1 Filings and Consents. 30
5.2 Information Statement 30
5.3 DocuMagix Shareholders' Meeting 30
5.4 Public Announcements 31
5.5 Pooling of Interests 31
5.6 Affiliate Agreements 31
5.7 Best Efforts. 31
5.8 Employment and Noncompetition Agreements 31
5.9 Release 31
Section 6. Conditions Precedent to Obligations of JetFax
and Merger Sub 32
6.1 Accuracy of Representations. 32
6.2 Performance of Covenants 32
6.3 Shareholder Approval 32
6.4 Consents 32
6.5 Agreements and Documents 32
6.6 Rule 506 33
6.7 No Restraints 33
6.8 No Legal Proceedings. 33
6.9 Employees 34
6.10 No Material Adverse Change 34
6.11 Confidentiality and Nondisclosure Agreements. 34
6.12 Bridge Notes. 34
6.13 Bridge Warrants. 34
6.14 DocuMagix Stock Options. 34
Section 7. Conditions Precedent to Obligations of DocuMagix 34
7.1 Accuracy of Representations 34
7.2 Performance of Covenants 34
7.3 Documents 34
7.4 Listing 34
7.5 No Restraints 35
7.6 No Material Adverse Change. 35
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Section 8. Termination 35
8.1 Termination Events. 35
8.2 Termination Procedures. 36
8.3 Effect of Termination. 36
Section 9. Indemnification, Etc. 36
9.1 Survival of Representations, Etc. 36
9.2 Indemnification by Designated Shareholders. 37
9.3 Threshold; Ceiling. 37
9.4 Satisfaction of Indemnification Claim. 38
9.5 No Contribution. 38
9.6 Interest. 38
9.7 Defense of Third Party Claims. 38
9.8 Exercise of Remedies by Indemnitees Other Than JetFax. 39
9.9 Exclusive Remedy. 39
Section 10. Registration Rights 39
10.1 Piggyback Registration 39
10.2 Form S-3 Registration. 40
10.3 Indemnification. 41
10.4 Transferability of Registration Rights. 42
10.5 Amendment of Section 10. 43
Section 11. Miscellaneous Provisions 43
11.1 Designated Shareholders' Agent. 43
11.2 Further Assurances. 43
11.3 Fees and Expenses. 43
11.4 Attorneys' Fees. 44
11.5 Notices. 44
11.6 Time of the Essence. 45
11.7 Headings. 45
11.8 Counterparts. 45
11.9 Governing Law; Venue. 45
11.10 Successors and Assigns. 46
11.11 Remedies Cumulative; Specific Performance. 46
11.12 Waiver. 46
11.13 Amendments. 47
11.14 Severability. 47
11.15 Parties in Interest. 47
11.16 Entire Agreement. 47
11.17 Construction. 47
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