<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 11, 1998
REGISTRATION NO. 333-48103
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
GLOBAL IMAGING SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 5995 59-3247652
(State of Incorporation) (Primary S.I.C. Code Number) (IRS Employer
Identification No.)
---------------
13902 NORTH DALE MABRY, SUITE 300
TAMPA, FLORIDA 33618
(813) 960-5508
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------
THOMAS S. JOHNSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
GLOBAL IMAGING SYSTEMS, INC.
13902 NORTH DALE MABRY, SUITE 300
TAMPA, FLORIDA 33618
(813) 960-5508
(Name, address, including zip code and telephone number, including area code
of agent for service)
---------------
COPIES TO:
ALAN L. DYE, ESQ. WILLIAM J. GRANT, JR. ESQ.
HOGAN & HARTSON L.L.P. WILLKIE FARR & GALLAGHER
555 THIRTEENTH STREET, N.W. 153 EAST 53RD STREET, 45TH FLOOR
WASHINGTON, DC 20004-1109 NEW YORK, NEW YORK 10022
(202) 637-5600 (212) 821-8000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
---------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION--DATED JUNE 11, 1998
PROSPECTUS
- --------------------------------------------------------------------------------
7,000,000 Shares
GLOBAL IMAGING SYSTEMS, INC.
[LOGO, INCLUDING TEXT: "THINK GLOBALLY, ACT LOCALLY"]
Common Stock
- --------------------------------------------------------------------------------
Of the 7,000,000 shares (the "Shares") of common stock, $.01 par value per
share (the "Common Stock"), offered hereby, 6,700,000 shares are being sold by
Global Imaging Systems, Inc. ("Global" or the "Company") and 300,000 shares are
being sold by certain stockholders of the Company (the "Selling Stockholders").
The Company will not receive any proceeds from the sale of shares by the
Selling Stockholders. See "Principal and Selling Stockholders."
Prior to this offering (the "Offering"), there has been no public market for
the Common Stock. It is currently anticipated that the initial public offering
price will be between $14.00 and $16.00 per share. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price. The Common Stock has been approved for inclusion in The Nasdaq
Stock Market's National Market (the "Nasdaq National Market") under the symbol
"GISX."
At the request of the Company, the Underwriters have reserved up to 650,000
shares of Common Stock for sale at the initial public offering price to
directors, officers, employees, and business associates of the Company. Any
such shares which are not so purchased will be offered by the Underwriters to
the public on the same basis as the other shares offered hereby. See
"Underwriting."
SEE "RISK FACTORS" ON PAGES 8 TO 14 FOR A DISCUSSION OF CERTAIN MATERIAL
FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE
COMMON STOCK OFFERED HEREBY.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Price Underwriting Proceeds to
to Discounts and Proceeds to Selling
Public Commissions (1) Company (2) Stockholders
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.................. $ $ $ $
- ------------------------------------------------------------------------------
Total (3).................. $ $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended (the "Securities Act"). See
"Underwriting."
(2) Before deducting expenses payable by the Company estimated to be $2.0
million.
(3) Certain Selling Stockholders have granted the several Underwriters 30-day
over-allotment options to purchase up to 1,050,000 additional shares of
Common Stock on the same terms and conditions as set forth above. If all
such additional shares are purchased by the Underwriters, the total Price
to Public will be $ , the total Underwriting Discounts and Commissions
will be $ , the total Proceeds to Company will be $ and the total
Proceeds to Selling Stockholders will be $ . See "Underwriting."
- --------------------------------------------------------------------------------
The shares of Common Stock are offered by the several Underwriters, subject to
delivery by the Company and the Selling Stockholders and acceptance by the
Underwriters, to prior sale and to withdrawal, cancellation or modification of
the offer without notice. Delivery of the shares of Common Stock to the
Underwriters is expected to be made through the facilities of the Depository
Trust Company, New York, New York on or about , 1998.
PRUDENTIAL SECURITIES INCORPORATED
SALOMON SMITH BARNEY
WILLIAM BLAIR & COMPANY
RAYMOND JAMES & ASSOCIATES, INC.
June , 1998
<PAGE>
GLOBAL IMAGING SYSTEMS, INC. [LOGO]
"THINK GLOBALLY ACT LOCALLY"
[MAP OF UNITED STATES INDICATING COMPANY LOCATIONS]
CORPORATE HEADQUARTERS
CORE COMPANIES
SATELLITE COMPANIES
. Since its founding in June 1994, Global has acquired nine core companies
primarily in the Northeast, Southeast and Pacific Northwest and an
additional 15 satellite companies which have been integrated into the core
companies for a total of 46 locations.
. Global intends to enter new geographic markets by acquiring additional core
companies and expanding its core markets through the acquisition of smaller
companies. None of the Offering proceeds will be used to fund future
acquisitions. Certain acquisitions will require lender's consent.
. Global's strategy is to offer the following office imaging solutions:
AUTOMATED OFFICE EQUIPMENT NETWORK INTEGRATION SERVICES
ELECTRONIC PRESENTATION SYSTEMS DOCUMENT IMAGING MANAGEMENT
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING PURCHASES OF THE COMMON STOCK TO STABILIZE ITS MARKET PRICE,
PURCHASES OF THE COMMON STOCK TO COVER SOME OR ALL OF A SHORT POSITION IN THE
COMMON STOCK MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF PENALTY
BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE>
PROSPECTUS SUMMARY
The following information is qualified in its entirety by the more detailed
information and financial statements (including the notes thereto) appearing
elsewhere in this Prospectus. Except as otherwise indicated herein, the
information in this Prospectus (i) assumes that the Underwriters' over-
allotment options will not be exercised, (ii) reflects the reclassification of
the Company's Class B Common Stock as Common Stock, the increase in the
authorized shares of Common Stock to 50,000,000 shares, the effecting of a 132-
for-1 stock split of the Company's outstanding Class B Common Stock and Class C
Common Stock, and the authorization of 10,000,000 shares of Preferred Stock
pursuant to an amendment to the Company's Amended and Restated Certificate of
Incorporation completed in May 1998, and (iii) assumes the automatic conversion
into Common Stock of all outstanding shares of Class C Common Stock upon the
closing of the Offering. Except where the context indicates otherwise, all
references herein to "Global" or the "Company" refer to the Company and its
direct and indirect subsidiaries.
REDEMPTION OF CLASS A COMMON STOCK. In connection with and upon the
consummation of the Offering, each outstanding share of Class A Common Stock
will be redeemed (the "Class A Redemption") in exchange for a cash payment
equal to (a) the original purchase price per share of Class A Common Stock
($90) plus (b) yield equal to 8.0% per annum from the time of purchase through
May 31, 1998 plus a pro rata number of shares of Common Stock representing in
the aggregate the entitlement of the holders of Class A Common Stock to receive
10% of the pre-Offering value of the Company (approximately 3.41 shares of
Common Stock per share of Class A Common Stock). The Company will use
approximately $35,570,000 of the net proceeds of the Offering, and will issue
1,158,329 shares of Common Stock, to effect the Class A Redemption. Golder,
Thoma, Cressey, Rauner Fund IV Limited Partnership ("FUND IV") and Jackson
National Life Insurance Company ("JNL"), affiliates of the Company, will
receive approximately $23,191,000 and $3,833,000, respectively, and 738,294 and
130,233 shares of Common Stock, respectively, and Thomas Johnson, Global's
President, Chief Executive Officer and a director of the Company, Neal Berney,
a director of the Company, and Raymond Schilling, Michael Mueller, and Alfred
Vieira, executive officers of the Company, will receive approximately $572,000,
$225,000, $12,000, $23,000 and $12,000, respectively, and 18,457, 6,620, 369,
695 and 369 shares of Common Stock, respectively, in connection with the Class
A Redemption. Except as otherwise indicated herein, the information in this
Prospectus assumes the Class A Redemption will be effected. See "Risk Factors--
Benefits of the Offering to Existing Stockholders" and "Certain Transactions--
The Recapitalization."
THE COMPANY
Global Imaging Systems is a consolidator in the highly fragmented office
imaging solutions industry. The Company is a rapidly growing provider of a
broad line of office imaging solutions, which includes the sale and service of
automated office equipment (copiers, facsimile machines, printers and
duplicators), electronic presentation systems, and document imaging management
systems ("DIM" systems or "document technology systems"), as well as network
integration and management services. Since its founding in June 1994, the
Company has acquired 24 companies primarily in the Northeast, Southeast, and
Pacific Northwest, of which nine are "core" companies, at which all
administrative functions are concentrated, and the remaining 15 are "satellite"
companies whose administrative functions have been transferred to, and which
have been integrated into, the core companies. The Company's operating
philosophy is to "think globally, act locally." Under the Company's
decentralized management system, Global's core companies typically continue to
operate under their pre-acquisition names and with their pre-acquisition
management even after being acquired by Global, thus permitting existing client
relationships to be preserved. The Company believes that its emphasis on
superior customer service and the contractual nature of its service business
provide a significant source of recurring revenue. The Company's revenues grew
from $37.0 million for the year ended March 31, 1996 to $164.4 million for the
year ended March 31, 1998. Pro forma revenues for the year ended March 31, 1998
were $215.4 million.
3
<PAGE>
Operating results improved from a net loss of $192,000 for the fiscal year
ended March 31, 1996 to net income of $4.5 million for the fiscal year ended
March 31, 1998. Pro forma net income for the fiscal year ended March 31, 1998
was $3.7 million. At March 31, 1998 the Company had a pro forma net tangible
book value (net tangible assets less total liabilities and equity attributable
to the Class A Common Stock, as adjusted for the Class A Redemption) of
negative $98.0 million, and a pro forma retained earnings deficit (as adjusted
for the Class A Redemption) of $354,000.
Global seeks to become the provider of choice for all of its customers'
office imaging needs by offering a full range of products and services and
superior customer service. While Global's clientele includes large, Fortune 500
companies, its growth has been, and is expected to continue to be, largely
driven by serving middle market businesses. The Company sells and services a
variety of office imaging solutions, including copiers, facsimile machines,
printers, duplicators, LCD projectors, smartboards, overhead projectors, video
teleconferencing equipment, optical scanning equipment, micrographics
equipment, and the design and installation of equipment related to computer
networks. In addition, the Company offers a variety of ongoing services,
including supply and service contracts, network management contracts, technical
support and training.
The Company's strategic objective is to continue to grow profitably in both
existing markets and new markets through internal growth and by acquiring
additional office imaging solutions companies. Global intends to enter new
geographic markets by acquiring additional core companies and expanding its
core markets through the acquisition of satellite companies, which are
typically in close proximity to core companies. Global's strategy for
stimulating internal growth is to expand its product and service offerings,
take advantage of cross-selling opportunities, and market aggressively to
existing and new customers.
The Company is currently organized into nine core companies with operations
in 46 locations in 15 states, plus the District of Columbia. Global targets for
acquisition as core companies businesses that are leading competitors in the
markets they serve. The Company's goal is to acquire core and satellite
companies throughout the United States and Canada.
The market for sales and service of office imaging solutions is highly
fragmented. Of an estimated 3,700 dealer and distributor outlets in the United
States primarily engaged in the sale of automated office equipment and related
service, parts, and supplies, approximately 3,100 dealer outlets are
unaffiliated, according to Industry Analysts, Inc. The Company believes that
the black and white copier and related service and supplies market generated
sales of approximately $21.9 billion in the U.S. in 1996, and is expected to
grow to an estimated $31.2 billion in sales in 2001, while the color copier and
related service and supplies market generated sales of approximately $1.3
billion in the U.S. in 1996, and is expected to grow to an estimated $4.4
billion in sales in 2001. The network consulting and integration services
market generated sales in the U.S. of approximately $5.8 billion in 1996 and is
expected to grow to approximately $12.4 billion in sales by 2001, according to
International Data Corporation. The network management services market (as a
discrete segment) generated sales of approximately $1.5 billion in the U.S. in
1996, and is expected to grow to approximately $3.7 billion in sales by 2001,
according to International Data Corporation. The markets for electronic
presentation systems and document technology systems generated sales estimated
at approximately $719 million and $4.7 billion, respectively, in the U.S. in
1996, and are expected to grow to an estimated $1.5 billion and $14.7 billion
in sales in 2001, according to Pacific Media Associates and AIIM International,
respectively.
STRATEGY
The Company's goal is to become the provider of choice for all of its
customers' office imaging needs by offering a full range of products and
services and superior customer service. The Company's strategy to achieve this
goal contains the following elements:
Serve as a Single Source Provider of Office Imaging Solutions. The Company
believes that offering a full spectrum of products and services will give it a
competitive advantage and enable the Company to capitalize on its customer
relationships by cross-selling its products and services. As the technology
that drives copiers, facsimiles, printers, electronic presentation equipment
and DIM equipment continues to converge, there is a
4
<PAGE>
greater role for computers and networks in the functioning of these products.
Accordingly, customers are demanding more integrated office imaging solutions.
The Company intends to expand its offerings to provide products and services in
the automated office equipment market, the electronic presentation systems
market, the DIM systems market and the network integration markets in each of
its geographic markets. The Company believes that as and to the extent it
becomes engaged in these markets, an increasing percentage of the Company's
revenues and gross profits will be derived from sales of equipment and
supplies, which typically have lower gross profit margins than sales of service
and rentals.
Make Strategic Acquisitions. Global actively seeks to acquire core companies
in targeted geographic markets and to expand these core acquisitions through
internal growth and the acquisition of satellite companies. As part of its
acquisition strategy, Global looks for companies that are led by an experienced
management team that will continue to manage the company after it is acquired,
that have a strong regional market share, and that can grow internally and
through the acquisition of satellite companies.
A key component of the Company's growth strategy is to acquire satellite
companies in or near its core companies' markets. Core company management
frequently assists Global in identifying appropriate satellite companies to
acquire. In evaluating potential satellite acquisitions the Company considers,
among other factors, its proximity to a core company, whether the product lines
sold by the satellite are complementary with those of the core company, and the
service base that the potential satellite company has under service contract.
Stimulate Internal Growth. The Company seeks to stimulate internal growth in
its core companies by increasing the productivity of their sales forces through
the use of performance benchmarks developed by the Company, expanding product
and service offerings, increasing the size of its core companies' sales forces
and aggressively cross-selling its products and services.
Optimize Profitability and Operating Efficiency. Global's senior management
has developed an industry management model that encompasses a comprehensive set
of performance benchmarks. These performance benchmarks, which are used as the
primary form of internal reporting from the core companies to Global, allow the
Company and local management to monitor and improve the operations of each core
company. Through the use of these benchmark criteria, Global seeks to train the
managers of its core and satellite companies to optimize their business mix and
improve performance.
Global works to reduce costs by consolidating the back-office functions of
its satellite acquisitions into the core operations, enabling its core
companies to decrease technician driving time and increase the productivity of
sales personnel and administrators. Global also reduces costs through the
standardization of financial reporting, cash and inventory management, payroll,
billing, collections, insurance and employee benefit programs, and by
negotiating advantageous relationships with equipment manufacturers, other
suppliers and lessors.
Operate with a Decentralized Management Structure. Global vests
responsibility for day-to-day operating decisions at the core company level.
The Company believes that this decentralized approach permits local management
to maintain focus and motivation and provides optimal customer support. Local
management is supported by a senior management team that focuses on the
Company's growth strategy as well as corporate planning and financial reporting
and analysis.
The Company's executive offices are located at 13902 North Dale Mabry, Suite
300, Tampa, Florida 33618, and its telephone number is (813) 960-5508. The
Company was incorporated in Delaware in June 1994.
5
<PAGE>
THE OFFERING
<TABLE>
<C> <S>
Common Stock Offered by the Company................ 6,700,000 shares
Common Stock Offered by the Selling Stockholders... 300,000 shares
Common Stock to be Outstanding after the Offering.. 18,283,639 shares (1)
Use of Proceeds by the Company..................... To repay existing
indebtedness and to pay
the cash portion of the
redemption price of all of
the outstanding shares of
the Company's Class A
Common Stock. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol............. GISX
</TABLE>
- --------
(1) Does not include an aggregate of 1,820,000 shares reserved for grants or
purchases under the Company's 1998 Stock Option and Incentive Plan,
including 519,750 shares of Common Stock issuable upon the exercise of
options that will become outstanding upon the closing of the Offering at an
exercise price equal to the initial public offering price. Of these,
options to purchase 250, 20,250, 10,250, 10,250 and 5,250 shares,
respectively, will be issued to Messrs. Johnson, Berney, Schilling, Mueller
and Vieira. See "Management--1998 Stock Option and Incentive Plan."
RISK FACTORS
Investors should consider the risk factors involved in connection with an
investment in the Common Stock and the impact to investors from various events
that could adversely affect the Company's business. See "Risk Factors."
6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND PRO FORMA INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
INCEPTION
(JUNE 3, 1994) FISCAL YEAR ENDED
TO MARCH 31, MARCH 31,
-------------- ------------------------------------
PRO FORMA
1998
1995 1996 1997 1998 (1)(2)
-------------- ------- ------- -------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Total revenues............ $10,276 $36,966 $64,093 $164,375 $215,377
Total costs and operating
expenses................. 10,530 34,842 58,773 149,261 198,724
------- ------- ------- -------- --------
Income (loss) from
operations............... (254) 2,124 5,320 15,114 16,653
Net income (loss)......... $ (629) $ (192) $ 1,123 $ 4,453 $ 3,707
======= ======= ======= ======== ========
Net income (loss)
available to holders of
Common Stock (3)......... $ (819) $(1,215) $ (279) $ 2,011 $ 768
======= ======= ======= ======== ========
Earnings (loss) per common
share (basic and diluted)
(3)...................... $ (0.15) $ (0.15) $ (0.03) $ 0.21 $ 0.07
======= ======= ======= ======== ========
Weighted average number of
shares (basic and
diluted) (4)............. 5,331 8,018 8,729 9,805 10,425
======= ======= ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1998
------------------------
ACTUAL AS ADJUSTED (5)
-------- ---------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital........................................ $ 24,255 $ 24,255
Total assets........................................... 164,342 164,342
Long-term debt, including current maturities........... 97,485 41,590
Total stockholders' equity............................. 38,248 94,144
</TABLE>
- --------
(1) Gives effect to the Company's acquisitions of 12 companies during fiscal
1998 as if they had been completed on April 1, 1997. See "Selected Pro
Forma Financial Data."
(2) Excludes adjustments relating to certain identifiable personnel cost
savings resulting from the elimination of certain service, sales and
administrative positions; reductions to current compensation levels of
former owners of the businesses acquired by the Company; improved
purchasing terms and reduced administrative expenses.
(3) Reflects adjustments for amounts payable upon a sale of the Company or an
initial public offering to holders of Class A Common Stock equivalent to an
8.0% annual yield on the original per share amount of $90, and for 1998,
the accretion of the difference between the redemption value of the Class A
Common Stock and the value allocated to the stock, accreted from January
1998 to the anticipated date of the initial public offering.
(4) Assumes the conversion of the outstanding shares of Class C Common Stock
into Common Stock. See also, "Selected Pro Forma Financial Data."
(5) Gives effect to the Offering and the application of the estimated net
proceeds therefrom. See "Selected Pro Forma Financial Data" and "Use of
Proceeds."
7
<PAGE>
RISK FACTORS
An investment in the Shares involves a high degree of risk. Prospective
investors should carefully consider the following risk factors, in addition to
the other information contained elsewhere in this Prospectus, in evaluating an
investment in the Common Stock offered hereby.
When used in this Prospectus, the words "may," "will," "expect,"
"anticipate," "continue," "estimate," "project," "intend," and similar
expressions are intended to identify forward-looking statements regarding
events, conditions and financial trends that may affect the Company's future
plans or operations, business strategy, results of operations and financial
position. Prospective investors are cautioned that any forward-looking
statements are not guarantees of future performance and are subject to risks
and uncertainties and that actual results may differ materially from those
included within the forward-looking statements as a result of various factors.
Factors that could cause or contribute to such differences include, but are
not limited to, those described below, under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
elsewhere in this Prospectus.
NEED FOR SUBSTANTIAL ADDITIONAL FUNDS; HIGHLY LEVERAGED CAPITAL
STRUCTURE. The Company's acquisitions have primarily been and are expected to
be financed through a combination of equity capital, bank indebtedness and
cash generated from operations. In connection with future acquisitions, the
Company intends to incur indebtedness, which may be substantial in relation to
its equity capital, as well as to use its Common Stock for a portion of the
consideration. The extent to which the Company will be able or willing to use
its Common Stock for this purpose will depend on its market value from time to
time and the willingness of potential acquisition candidates to accept Common
Stock as part of the consideration for the sale of their companies. To the
extent the Company does not use Common Stock to make future acquisitions, the
Company will be required to use more of its cash resources, if available, or
to obtain debt or equity financing to continue its acquisition program. There
can be no assurance that the Company will be able to obtain such financing or
that, if available, it will be available on terms the Company deems
acceptable. As a result, the Company might be unable to maintain its
acquisition strategy, which may have a material adverse effect on the business
or future prospects of the Company. Moreover, as a result of financing
acquisitions with debt, the ratio of the Company's total liabilities to net
worth may be substantial. In addition to funding future acquisitions, the
Company requires a substantial amount of funds for debt service and to meet
its working capital and capital expenditure needs, and it is possible that
funds generated by operations and borrowings under available credit
arrangements may be insufficient to fund the Company's cash requirements. In
such event, the Company might need to obtain additional debt or equity
financing. In view of the Company's potentially leveraged position, the
restrictive covenants customarily contained in credit facilities for similar
companies, and the likelihood that substantially all of the assets of the
Company would be pledged to the Company's senior lenders under such a credit
facility, the Company may not be able to obtain such additional financing or
equity on favorable terms, if at all. Because of its potentially leveraged
condition, the Company may be particularly vulnerable to adverse changes in
the financial markets or downturns in its business or in general economic
conditions. See "Use of Proceeds" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
EXPANSION THROUGH ACQUISITIONS; RECOVERABILITY OF GOODWILL. A principal
element of the Company's strategy is to expand into additional geographic
markets and increase its product and service offerings through acquisitions.
The Company's ability to expand is dependent upon identifying, acquiring and
integrating companies that meet its acquisition criteria. Because of industry
consolidation, the Company faces strong competition in acquiring companies and
frequently competes for acquisitions with companies that have greater
resources. In many instances, the Company must obtain the consent of
manufacturers or other third parties in connection with its acquisitions. The
Company's current credit facility, for example, requires the Company to obtain
approval from its lender prior to the consummation of any acquisitions with an
individual purchase price in excess of $2 million, or an aggregate purchase
price in excess of $5 million in any fiscal year. There can be no assurance
that suitable acquisition candidates will continue to be available to the
Company, that the Company will successfully identify such candidates, that the
Company will be able to obtain any required consents or that the Company will
be able to acquire such companies at favorable prices. In addition, although
the Company
8
<PAGE>
conducts due diligence and generally requires representations, warranties and
indemnifications from the former owners of acquired companies, there can be no
assurance that such owners will have accurately represented the financial and
operating conditions of their companies or will be able to meet any
indemnification obligations that arise. Any unforeseen liabilities or
inaccuracies with respect to its acquired companies could have a material
adverse effect on the Company. In addition, the Company's acquisition strategy
places significant demands on the Company's resources, especially on the time
and attention of its senior management, and will require the Company to
identify, hire and integrate additional managers. There can be no assurance
that the Company's management and financial reporting systems, procedures and
controls will be adequate to support the Company as it continues to expand, or
that the Company will successfully identify, hire and integrate additional
managers. See "Business--Business Strategy." Finally, as a result of its
acquisitions, which are accounted for using the purchase method of accounting,
the Company has incurred and expects to continue to incur significant
amortization charges resulting from the excess of the purchase price paid over
the fair value of the net assets of the companies acquired. These current and
future goodwill amortization charges have and will continue to have a material
adverse effect on the Company's results of operations over the foreseeable
future. The Company amortizes goodwill on a straight-line basis over periods
ranging from 20 to 40 years. If the projected operating cash flows derived
from an acquired business are less than the carrying value of the goodwill
resulting from its acquisition, the Company will recognize impairment,
reducing the Company's profitability. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Results of
Operations."
RISKS OF INTEGRATION. The successful integration of companies acquired by
the Company depends on a number of factors, including the Company's ability to
transition acquired companies to the Company's management information systems,
the ability of the Company's core acquisitions to integrate satellite
acquisitions effectively, and the Company's ability to improve profitability
at the companies it acquires. There can be no assurance that the Company will
be able to integrate acquired companies without substantial costs, delays or
other operational or financial problems, that the Company will be able to
achieve expected economies of scale or that such companies, once integrated,
will ultimately generate sufficient revenues to justify the Company's
investment.
LIMITED COMBINED OPERATING HISTORY. Although a number of the companies
acquired by the Company have been in operation for some time, the Company
itself has a limited history of operations and profitability. Consequently,
the historical and pro forma information herein may not be indicative of the
Company's financial condition and future performance. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources" and "Business."
ENTRY INTO NEW MARKETS THROUGH ACQUISITIONS. A key element of the Company's
expansion strategy is to acquire companies in each of its core markets that
are engaged in the sale and service of electronic presentation systems and DIM
systems, and in network integration and facilities management services. These
are product and service segments in which the Company has relatively limited
or no operating experience. The Company's ability to enter these markets
successfully depends on its ability to identify, acquire and integrate
appropriate companies and to adapt to the varying conditions in each of these
markets. For example, the Company's success in the facilities management
market depends on the Company being able to operate profitably a primarily
labor-intensive business. Any acquisitions of companies in these markets that
are not good acquisition candidates, or that the Company is not ready or able
to integrate and operate profitably, could have a material adverse effect on
the Company. There can be no assurance that the Company will succeed in
identifying, acquiring, integrating and operating successful companies in
these new markets. See "Business--Business Strategy."
DEPENDENCE ON SUPPLIERS. The Company derives a majority of its revenues from
the sale of equipment and from service and supply contracts for such
equipment. Accordingly, the Company's success depends on its access to
reliable sources of equipment, parts and supplies at competitive prices. The
Company's automated office equipment dealers sell copiers primarily from Canon
Inc. ("Canon"), Konica Business Technologies, Inc. ("Konica"), Mita Copystar
America ("Mita"), Ricoh Corporation ("Ricoh"), Savin Corporation ("Savin") and
Sharp Electronics Corporation ("Sharp") and facsimile machines primarily from
Muratec America, Inc.
9
<PAGE>
("Muratec"), Panasonic Communications and Systems Company Division of
Matsushita Electric Corp. of America ("Panasonic") and Savin. The Company's
network integrators sell systems primarily from Compaq Computer Corporation
("Compaq"), Hewlett-Packard Company ("Hewlett Packard"), International
Business Machines Corporation ("IBM"), Microsoft Corporation ("Microsoft"),
Novell, Inc. ("Novell") and Tektronix, Inc. ("Tektronix"). The Company's DIM
systems dealer sells equipment primarily from Westbrook Technologies, Inc.
("Westbrook Technologies") and the Company's electronic presentation systems
dealer sells systems primarily from Epson America, Inc. ("Epson"), In Focus
Systems, Inc. ("InFocus"), Intel Corporation ("Intel"), Lightware, Inc.
("Lightware"), nVIEW Corporation ("nVIEW"), Proxima Corporation ("Proxima")
and Sharp. The Company's agreements with its suppliers generally permit the
Company to sell particular products on a nonexclusive basis in particular
geographic areas, have a one-year renewable term that may not be renewed by
the supplier on 30 days notice and that may be terminated by the supplier upon
notice (i) in the event that the Company does not meet minimum purchase quotas
or certain other requirements or (ii) under certain other circumstances,
including a change in the Company's ownership. Although the consummation of
the Offering may qualify as such a change in the Company's ownership, the
Company does not anticipate that its suppliers will terminate their agreements
with the Company as a result of the Offering. There can be no assurance that
the Company's suppliers will continue to be willing to sell their products to
the Company, or that they will do so at competitive prices. For example, the
Company believes that Sharp, InFocus and Proxima plan to use only 12 to 15
distributors of electronic presentation equipment nationwide by the year 2000.
During the twelve month period ended December 31, 1997, sales of electronic
presentation equipment by Sharp, InFocus and Proxima accounted for 6.0%, 2.2%
and 2.3%, respectively, of the Company's revenues. There can be no assurance
that the Company will be chosen by these or other suppliers to distribute
their products. The Company's inability to obtain equipment, parts or supplies
from any of its suppliers could have a material adverse effect on the
Company's business. There can also be no assurance that consumer preferences
will not shift to products manufactured by competitors of the Company's
suppliers. Finally, there can be no assurance that other factors, including
reduced access to credit resulting from economic conditions in Asia, will not
impair the ability of the Company's suppliers to provide products in a timely
manner or at competitive prices. See "Business--Suppliers."
NEED TO ATTRACT AND RETAIN SKILLED EMPLOYEES. Global's success is largely
dependent on its ability to attract, motivate and retain skilled employees.
Many of the markets in which the Company operates are experiencing low levels
of unemployment. As a result, the Company faces competition in hiring and
retaining skilled employees, particularly sales personnel, systems integration
professionals and service technicians. The Company's ability to fulfill its
service contracts and enter into new ones depends on the availability of
qualified service technicians. The Company's ability to generate both sales
and service revenues depends on the efforts of its sales personnel. The
inability of the Company to attract and retain skilled employees could have a
material adverse effect on the Company. There can be no assurance that the
Company will be successful in attracting new employees or retaining its
current or future employees.
DEPENDENCE ON CHIEF EXECUTIVE OFFICER. The success of Global is
substantially dependent on the efforts and ability of Thomas S. Johnson, its
President and Chief Executive Officer. Mr. Johnson is employed under an
Executive Agreement that renews automatically each August for one-year periods
unless otherwise terminated by either party upon 30 days notice. The Company
maintains key-man life insurance on Mr. Johnson. The loss or interruption of
the services of Mr. Johnson could have a material adverse effect upon Global's
results of operations and financial condition.
COMPETITION. The Company operates in highly competitive markets. The Company
faces competition in the automated office equipment market, the electronic
presentation systems market and the DIM systems market from large dealers like
Danka and IKON, independent dealers, and manufacturers' sales and service
divisions, including Canon, Eastman Kodak Company ("Kodak"), Konica, Minolta
Co., Ltd. ("Minolta"), Pitney Bowes, Inc. ("Pitney Bowes"), Wang Laboratories,
Inc. ("Wang") and Xerox Corporation ("Xerox") as well as office superstores
and consumer electronics chains. In the network integration services market,
the Company competes
10
<PAGE>
with large companies such as Ameridata Technologies, Inc. ("AmeriData") and GE
Capital Consulting ("GE Capital"), both of which are business units of General
Electric Company, Inacom Corp. ("Inacom") and Vanstar Corporation ("Vanstar"),
as well as a large number of smaller competitors with regional or local
operations and the in-house capabilities of its customers. Competition from
large, nationwide competitors is likely to increase (i) as the Company seeks
to attract additional customers and expand its markets geographically and with
respect to product and service offerings and (ii) as each of the automated
office equipment, electronic presentation systems, DIM systems and network
integration services markets experiences increased consolidation. In addition,
as digital and other new technology develops, the Company may find itself
competing with new distribution channels, including computer distributors and
value added resellers, for products containing new technology. Some
competitors have greater financial and personnel resources than the Company.
There can be no assurance that in the future the Company will be able to
compete favorably with all or any of its current or future competitors. The
Company also competes for acquisition candidates in the office imaging
solutions industry. See "Business--Competition."
TECHNOLOGICAL DEVELOPMENTS. The office imaging solutions industry is
undergoing an evolution in product, moving toward digital technology in a
multi-functional office environment. The Company's success will partly depend
on its ability to respond to this rapidly changing environment. There can be
no assurance that the Company will be able to anticipate which products or
technologies will gain market acceptance or that, even if the Company does
correctly anticipate market demand, the Company's suppliers will be willing or
able to supply such products to the Company at competitive prices. Further,
there can be no assurance the Company will be able to obtain any
manufacturer's authorization necessary to market any newly developed
equipment. Additionally, new products containing new technology may be sold
through other channels of distribution. While it is possible that
technological advancements, including the lowered per unit cost that often
accompanies technological improvements, may enhance unit sales, this trend may
reduce the Company's sales revenues, and reliability improvements may result
in reduced service revenues. The Company will also incur increased expenses
for the training of its sales and service personnel to familiarize them with
such new technologies. See "Business--The Industry--Consolidation--
Technological Change."
EFFECT OF POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS. The Company
may experience significant quarter to quarter fluctuations in its results of
operations. Quarterly results of operations may fluctuate as a result of a
variety of factors including, but not limited to, the timing of the
acquisition and integration of acquired companies, the demand for the
Company's products and services, the timing and introduction of new products
and services by the Company, its suppliers, or the Company's or its suppliers'
competitors, the market acceptance of new products and services, competitive
conditions in the office imaging solutions industry and general economic
conditions. As a result, the Company believes that period to period
comparisons of its results of operations are not necessarily meaningful or
indicative of the results that the Company may achieve in any subsequent
quarter or full year. Such quarterly fluctuations may result in volatility in
the market price of the Common Stock, and it is possible that in future
quarters the Company's results of operations could be below the expectations
of the public market. Such an event could have a material adverse effect on
the market price of the Common Stock of the Company. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Quarterly Results of Operations."
CREDIT FACILITY PREPAYMENT FEE. The Company intends to replace its existing
credit facility by paying it off with a combination of proceeds from the
Offering and with the proceeds from a replacement credit facility it expects
to obtain after the closing of the Offering. Under the Company's agreement
with its current lender, following the Offering and the partial repayment of
the term loan outstanding under the Credit Facility as described in "Use of
Proceeds," the Company has the right to prepay the entire amount due under its
existing credit facility within sixty days of the closing of the Offering
provided that it pays a prepayment fee of $250,000. There can be no assurance
that the Company will be able to obtain a replacement credit facility within
sixty days of the closing of the Offering, or at all. If the Company fails to
prepay the entire amount due within sixty days of the closing of the Offering,
the Company will be subject to a prepayment fee of 4.0% (declining to 3.0%,
2.0% and 1.0% on August 14, 1998, 1999 and 2000, respectively) of the amounts
then outstanding under the term loan component of its credit facility in
connection with any prepayment or partial prepayment of the loan.
11
<PAGE>
At March 31, 1998 approximately $97.3 million was due under the term loan. If
the Company does replace its existing credit facility, unamortized financing
fees incurred in conjunction with obtaining the facility will be written off
upon payment of the facility. The balance of such unamortized fees at March
31, 1998 was $2.9 million. The prepayment penalty and the unamortized
financing fee write-off are expected to occur during the quarter ending June
30, 1998. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
DEPENDENCE ON KEY MARKETS. A significant portion of the Company's revenues
and profitability are attributable to sales and service in the Northeast
market and the Southeast market, which accounted for 33% and 50% of the
Company's revenues, respectively, on a pro forma basis for the fiscal year
ended March 31, 1998. Accordingly, the Company's results of operations may be
significantly affected by fluctuations in the general economic and business
cycles in these markets. The Company's reliance on these markets makes it
susceptible to risks that it would not otherwise be exposed to if it operated
in a more geographically diverse market. The Company believes that it will be
susceptible to geographic concentration risks for the foreseeable future.
YEAR 2000 SOFTWARE ISSUE. The Company uses a number of computer software
programs and operating systems in its operations, including applications used
in sales and marketing, billing, inventory management and other administrative
functions. To the extent that the software applications used in such functions
and communications are unable to recognize the year 2000, the Company may
incur expenses in connection with the need to remediate such software and also
the risk and potential expense of any disruptions that may be caused by the
software's impaired functioning as the year 2000 approaches. The Company
believes that the manufacturers of the software applications it uses most
frequently, including its systems software and its word-processing and
spreadsheet software, are in the process of preparing or have already
completed Year 2000 remediations for their products. There can be no
assurance, however, that such remediation efforts have been or will be
successful. In addition, the Company communicates electronically with a number
of its customers and suppliers with respect to a variety of functions,
including ordering, billing and payroll. Any failure of the software of the
Company's suppliers or customers to address the Year 2000 issue could impair
the Company's ability to perform such functions. The Company is analyzing the
potential impact of the Year 2000 issue on the Company's software and on the
Company's interactions with its suppliers and customers. There can be no
assurance that the remediation costs and potential disruptions to the
Company's operations would not have a material adverse effect on the Company's
business, financial condition or results of operations.
RISK OF NON-PROPRIETARY CHARACTER OF GLOBAL'S INDUSTRY MANAGEMENT MODEL. The
industry management model developed by Global has been described in various
public forums, including industry seminars and publications, and has been made
available to a number of companies, including former consulting clients of
Global's President. Although the Company believes the application of the
industry management model requires a high degree of experience and skill,
there can be no assurance that other office imaging solutions companies will
not be able to replicate the Company's industry management model or implement
it more effectively than the Company or at a lower cost.
CONTROL BY OFFICERS, DIRECTORS AND SIGNIFICANT STOCKHOLDERS. Upon completion
of this Offering, the Company's executive officers and directors and their
affiliates will beneficially own 51.0% of the Company's Common Stock, and
Golder, Thoma, Cressey, Rauner Inc. ("Golder, Thoma, Cressey, Rauner"),
through its affiliation with FUND IV, will beneficially own 37.5% of the
Company's Common Stock. Accordingly, the Company's executive officers and
directors and their affiliates, particularly Golder, Thoma, Cressey, Rauner,
will be able to influence the election of directors and corporate actions
requiring stockholder approval. Such concentration of ownership could limit
the price that certain investors might be willing to pay in the future for
shares of Common Stock, and could have the effect of making it more difficult
for a third party to acquire, or of discouraging a third party from attempting
to acquire, control of the Company. See "Principal and Selling Stockholders"
and "Certain Transactions."
BENEFITS OF THE OFFERING TO EXISTING STOCKHOLDERS. The Selling Stockholders
and other current stockholders will significantly benefit from this Offering.
Certain of the existing stockholders will be entitled to
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<PAGE>
receive proceeds in an aggregate amount of approximately $35,570,000 from the
Offering as a result of the redemption of shares of Class A Common Stock they
hold and will realize significant gains. FUND IV and JNL will receive
approximately $23,191,000 and $3,833,000, respectively, and 738,294 and
130,233 shares of Common Stock, respectively, as a result of the Class A
Redemption. Thomas Johnson, Global's President, Chief Executive Officer and a
director of the Company, Neal Berney, a director of the Company, and Raymond
Schilling, Michael Mueller, and Alfred Vieira, executive officers of the
Company, will receive approximately $572,000, $225,000, $12,000, $23,000 and
$12,000, respectively, and 18,457, 6,620, 369, 695 and 369 shares of Common
Stock, respectively, in connection with the Class A Redemption. See "Certain
Transactions--The Recapitalization." In addition, the Selling Stockholders
will receive an estimated $4,185,000 ($18,832,500 if the Underwriters' over-
allotment options are exercised in full) in net proceeds from the Offering,
based on an assumed initial public offering price of $15.00 per share. See
"Use of Proceeds," "Certain Transactions" and "Principal and Selling
Stockholders." It is anticipated that the Offering will create a public market
for the Company's Common Stock, thus allowing existing stockholders to sell
stock in the public market from time to time pursuant to Rule 144, other
exemptions from registration or pursuant to subsequently filed registrations
statements, subject to lock-up agreements entered into in connection with the
Offering. See "Shares Eligible for Future Sale."
ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER AND BYLAW PROVISIONS. The Company's
Certificate of Incorporation and Bylaws, as well as Delaware corporate law,
contain certain provisions that could have the effect of delaying, deferring
or preventing a change in control of the Company. These provisions could limit
the price that certain investors might be willing to pay in the future for
shares of the Common Stock. Certain of such provisions allow the Company to
issue without stockholder approval preferred stock having rights senior to
those of the Common Stock. Other provisions impose various procedural and
other requirements that could make it difficult for stockholders to effect
certain corporate actions. See "Description of Capital Stock--Delaware Law and
Certain Charter, Bylaw and Other Provisions" and "Description of Capital
Stock--Preferred Stock."
DILUTION. Purchasers of the Common Stock offered hereby will experience an
immediate and substantial dilution of $15.27 per share (based on an assumed
initial public offering price of $15.00 per share) in the pro forma net
tangible book value of their Common Stock from the initial public offering
price. Without taking into account any changes in the net tangible book value
after March 31, 1998, other than to give effect to (1) the redemption upon
completion of the Offering of all of the outstanding shares of Class A Common
Stock of the Company for aggregate payments of approximately $35,570,000 and
the issuance of 1,158,329 shares of Common Stock and (2) the sale of 6,700,000
shares of Common Stock by the Company in the Offering at an assumed initial
public offering price of $15.00 per share and the application of the estimated
net Offering proceeds as described in "Use of Proceeds," the pro forma net
tangible book value of the Company as of March 31, 1998 would have been
$(4,992,486). In addition, no assurance can be given that the Company's
stockholders will not in the future suffer significant dilution. Global
intends to make a substantial number of future acquisitions. If these
potential acquisitions are consummated, some or all of the purchase price may
be paid with Common Stock or other equity securities of the Company. In the
event that additional equity is issued in connection with acquisitions, the
Company's stockholders may suffer dilution. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS. Sales of substantial
amounts of Common Stock in the public market following this Offering could
adversely affect the prevailing market price of the Common Stock and the
Company's ability to raise capital in the future. Upon completion of this
Offering, the Company will have a total of 18,283,639 shares of Common Stock
outstanding, of which the 7,000,000 shares offered hereby (8,050,000 shares if
the Underwriters' over-allotment options are exercised in full) will be freely
tradeable without restriction under the Securities Act, by persons other than
"affiliates" of the Company, as defined under the Securities Act. The
remaining 11,283,639 shares of Common Stock outstanding (10,233,639 shares of
Common Stock if the Underwriters' over-allotment options are exercised in
full) are "restricted securities" as that term is defined by Rule 144
promulgated under the Securities Act (the "Restricted Shares"). Of the
Restricted Shares, approximately 10,600,000 shares will become eligible for
sale 90 days after completion of the Offering, subject in some cases to
certain volume restrictions and other conditions imposed under Rule 144. The
remaining approximately 680,000 shares will be eligible for sale upon the
expiration of their respective holding
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<PAGE>
periods as set forth in Rule 144. The Company, its executive officers and
directors, the Selling Stockholders and certain other stockholders have agreed
that, subject to certain exceptions, they will not, without the prior written
consent of Prudential Securities Incorporated, on behalf of the Underwriters,
directly or indirectly, offer, sell, offer to sell, contract to sell, pledge,
grant any option to purchase or otherwise sell or dispose (or announce any
offer, sale, offer of sale, contract of sale, pledge, grant of any option to
purchase or other sale or disposition) of any shares of Common Stock or any
other securities convertible into, or exercisable or exchangeable for, shares
of Common Stock or other similar securities of the Company for a period of 180
days from the date of this Prospectus. 11,270,847 of the Restricted Shares
(10,220,847 if the Underwriters' over-allotment options are exercised in full)
are subject to such lock-up agreements. After such 180-day period, this
restriction will expire and shares permitted to be sold under Rule 144 would
be eligible for sale, provided that the Company shall have been subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended, for
at least 90 days and the relevant holding period under Rule 144 shall have
expired. Prudential Securities Incorporated may, in its sole discretion, at
any time and without prior notice, release all or any portion of the shares of
Common Stock subject to such agreements.
Following the date of this Prospectus, the Company intends to register on
one or more registration statements on Form S-8 1,820,000 shares of Common
Stock issuable under its 1998 Stock Option and Incentive Plan (the "Stock
Plan"). Of the 1,820,000 shares issuable under the Stock Plan, no shares were
subject to outstanding options as of March 31, 1998, and no shares will be
issuable pursuant to any options granted under the Stock Plan prior to 180
days following the date of this Prospectus. See "Management--1998 Stock Option
and Incentive Stock Plan" and "Shares Eligible for Future Sale."
The holders of approximately 11,283,639 shares of Common Stock (10,233,639
shares of Common Stock if the Underwriters' over-allotment options are
exercised in full) are entitled to certain registration rights with respect to
such shares. If such holders, by exercising their registration rights, cause a
large number of shares to be registered and sold in the public market, such
sales could have an adverse effect on the market price of the Company's Common
Stock. See "Description of Capital Stock--Registration Rights" and "Shares
Eligible for Future Sale." In addition, if the Company is required, pursuant
to piggy-back registration rights, to include shares held by such persons in a
registration statement which the Company files to raise additional capital,
the inclusion of such shares could have an adverse effect on the Company's
ability to raise needed capital. The registration rights require the Company
to refrain from filing most types of registration statements within 90 days
after registering its stockholders shares. This restriction could also have an
adverse effect on the Company's ability to raise needed capital.
NO DIVIDENDS. The Company has not declared or paid cash dividends on its
Common Stock and does not expect to do so in the foreseeable future. Moreover,
the Company is restricted under the terms of its credit facility from
declaring or paying dividends to its stockholders. See "Dividend Policy" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
NO PRIOR PUBLIC MARKET; POSSIBLE STOCK PRICE VOLATILITY. Prior to this
Offering there has been no public market for the Common Stock, and there can
be no assurance an active public market for the Common Stock will develop or,
if developed, be sustained. The initial public offering price will be
determined through negotiations among the Company, the Selling Stockholders
and the Representatives of the Underwriters based on several factors that may
not be indicative of future market prices. See "Underwriting" for a discussion
of the factors to be considered in determining the initial public offering
price. The trading price of the Common Stock and the price at which the
Company may sell securities in the future may be subject to wide fluctuations
in response to fluctuations in competitors' stock prices, general trends in
the office imaging industry, changes in earnings estimates by analysts,
fluctuations in quarterly results of operations, general market conditions,
the Company's liquidity or ability to raise additional funds, and other
factors or events. In addition, the stock market has experienced extreme
fluctuations in price and volume. This volatility has significantly affected
the market prices of securities for reasons frequently unrelated to or
disproportionate to the operating performance of the specific companies. These
market fluctuations as well as general fluctuations in the stock markets may
adversely affect the market price of the Common Stock.
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<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from this Offering are estimated to be
$91,465,000 assuming an initial public offering price of $15.00 per share (the
mid-point of the range set forth on the cover of this Prospectus) and after
deducting underwriting discounts and commissions and estimated Offering
expenses payable by the Company.
The Company intends to use approximately $55,895,000 of the estimated net
proceeds for the repayment of amounts due to Jackson National Life Insurance
Company pursuant to the Company's credit facility (the "Credit Facility") and
$35,570,000 of the estimated net proceeds for the cash portion of the
redemption price of all of the outstanding shares of the Company's Class A
Common Stock. The amounts borrowed under the Credit Facility, which bear
interest at 3.25% over LIBOR and are payable in installments over the life of
the Credit Facility (which becomes due and payable on August 14, 2004), were
used to fund the purchase price of businesses acquired by the Company. The
Company has entered into a Commitment Letter with First Union National Bank
("First Union") pursuant to which the Company expects it will obtain a $175
million revolving credit facility (the "Replacement Facility") after the
closing of the Offering which will bear interest at rates ranging from 0.625%
to 1.5% over LIBOR or, at the Company's option, ranging from 0.0% to 0.5% over
a base rate related to prime rate. The Company plans to borrow approximately
$41,400,000 under the Replacement Facility to pay off the balance of the
Credit Facility. See "Risk Factors--Need for Substantial Additional Funds;
Highly Leveraged Capital Structure" and "--Credit Facility Prepayment Fee."
No portion of the net proceeds will be used to pay for future acquisitions
by the Company. Pending their use as described in this Prospectus, the net
proceeds of the Offering will be invested in short-term, interest-bearing,
investment-grade securities or guaranteed obligations of the United States
government. The Company will not receive any proceeds from the sale of shares
of Common Stock by the Selling Stockholders. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" and "Principal and Selling Stockholders."
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its Common
Stock and does not anticipate declaring or paying cash dividends in the
foreseeable future. It is the present policy of the Company's Board of
Directors to retain earnings, if any, to finance the development of the
Company's business. Moreover, the Company is restricted under the terms of its
credit facility from declaring or paying dividends to its stockholders. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
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CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1998: (i) on an actual basis as adjusted for a 132-for-1 stock split of
the Company's Common Stock and Class C Common Stock, the reclassification of
the Company's Class B Common Stock as "Common Stock", increases in the
authorized number of shares of Common Stock and the authorized number of
shares of Class C Common Stock and the authorization of 10,000,000 shares of
Preferred Stock effected in May 1998; (ii) on an as adjusted basis to give
effect to the sale by the Company of the 6,700,000 shares offered hereby at an
assumed initial public offering price of $15.00 per share (the mid-point of
the range set forth on the cover of this Prospectus) and the application of
the estimated net proceeds therefrom as described under "Use of Proceeds," the
redemption of all of the outstanding shares of Class A Common Stock including
the payment of the cumulative unpaid yield on the Class A Common Stock upon
the completion of the Offering in exchange for aggregate payments of
approximately $35,570,000 and the issuance of 1,158,329 shares of Common Stock
and the conversion of all of the outstanding shares of Class C Common Stock
upon the completion of the Offering into an equal number of shares of Common
Stock. This table is qualified in its entirety by, and should be read in
conjunction with, the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1998
-------------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt, including current maturities......... $ 97,485 $ 41,590
Stockholders' equity:
Common Stock, $.01 par value: 50,000,000 shares
authorized; 9,521,058 shares issued and
outstanding, actual; 18,283,639 shares issued and
outstanding, as adjusted (1)...................... 95 183
Preferred Stock, $.01 par value: 10,000,000 shares
authorized; no shares issued and outstanding,
actual and as adjusted............................ -- --
Class A Common Stock, $.01 par value: 400,000
shares authorized; 339,945.071 shares issued and
outstanding, actual; no shares issued and
outstanding, as adjusted.......................... 3 --
Class C Common Stock, $.01 par value: 905,000
shares authorized; 904,252 shares issued and
outstanding, actual; no shares issued and
outstanding, as adjusted.......................... 9 --
Additional paid-in capital......................... 33,618 94,546
Retained earnings (deficit) (2).................... 4,754 (354)
Stockholder receivables............................ (231) (231)
-------- --------
Total stockholders' equity....................... 38,248 94,144
-------- --------
Total capitalization........................... $135,733 $135,734
======== ========
</TABLE>
- --------
(1) Excludes 519,750 shares of Common Stock issuable upon the exercise of
options that will become outstanding upon the closing of the Offering at
an exercise price equal to the initial public offering price.
(2) Retained earnings (deficit) has been reduced on an as adjusted basis to
reflect the payment of the cumulative unpaid yield on the Class A Common
Stock redeemed in connection with the Offering.
16
<PAGE>
DILUTION
Purchasers of the Common Stock offered hereby will experience an immediate
and substantial dilution in the pro forma net tangible book value of their
Common Stock from the initial public offering price. The Company's pro forma
net tangible book value at March 31, 1998 attributable to Common Stock was
$(97,957,486), or $(8.46) per share. Pro forma net tangible book value per
share represents the Company's pro forma tangible net worth attributable to
Common Stock (net tangible assets less total liabilities and equity
attributable to the Class A Common Stock) divided by the number of shares of
Common Stock outstanding, as adjusted for the redemption upon completion of
the Offering of all of the outstanding shares of Class A Common Stock of the
Company for aggregate payments of approximately $35,570,000 and the issuance
of 1,158,329 shares of Common Stock. Without taking into account any other
changes in the net tangible book value after March 31, 1998, other than to
give effect to the sale of 6,700,000 shares of Common Stock by the Company in
the Offering at an assumed initial public offering price of $15.00 per share
and the application of the estimated net Offering proceeds as described in
"Use of Proceeds," the pro forma net tangible book value of the Company as of
March 31, 1998 would have been $(4,992,486), or $(.27) per share. See Note 12
of Notes to Consolidated Financial Statements. This represents an immediate
increase in pro forma net tangible book value of $8.19 per share to existing
stockholders and an immediate dilution in pro forma net tangible book value of
$15.27 per share to purchasers of Common Stock in the Offering. The following
table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price....................... $15.00
Pro forma net tangible book value as of March 31, 1998.... $(8.46)
Increase attributable to new investors.................... 8.19
------
Pro forma net tangible book value after the Offering........ (.27)
------
Dilution to new investors................................... $15.27
======
</TABLE>
The following table summarizes, as of March 31, 1998, on a pro forma basis
and after giving effect to the Offering, the differences between the existing
stockholders and the new investors with respect to the number of shares of
Common Stock purchased, the total consideration paid and the average price per
share paid (based upon an assumed initial public offering price of $15.00 per
share):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------ -------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders
(1) ................... 11,583,639 63.4% $ 866,592 0.9% $ 0.07
New investors (1)....... 6,700,000 36.6 100,500,000 99.1 15.00
---------- ----- ------------ -----
Total................. 18,283,639 100.0% $101,366,592 100.0%
========== ===== ============ =====
</TABLE>
- --------
(1) Does not reflect the sale of 300,000 shares of Common Stock by the Selling
Stockholders in the Offering and does not include 519,750 shares of Common
Stock issuable upon the exercise of options that will become outstanding
upon the closing of the Offering at an exercise price equal to the initial
public offering price.
17
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data with respect to the Company's
statement of operations for the ten months ended March 31, 1995, the fiscal
years ended March 31, 1996, 1997 and 1998 and the balance sheet data as of
March 31, 1995, 1996, 1997 and 1998 are derived from the Consolidated
Financial Statements of the Company which have been audited by Ernst & Young
LLP, independent certified public accountants. The following data should be
read in conjunction with the Consolidated Financial Statements of the Company
and the related notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
INCEPTION FISCAL YEAR ENDED
(JUNE 3, 1994) MARCH 31,
TO MARCH 31, --------------------------
1995 1996 1997 1998
-------------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Equipment and supply sales..... $ 6,541 $20,561 $41,200 $121,316
Service and rental revenues.... 3,735 16,405 22,893 43,059
------- ------- ------- --------
Total revenues.................. 10,276 36,966 64,093 164,375
Costs and operating expenses:
Cost of equipment and supply
sales......................... 4,193 13,456 27,087 85,972
Service and rental costs....... 1,885 8,303 11,467 21,594
Selling, general and
administrative expenses....... 4,123 11,687 18,280 38,619
Intangible asset amortization.. 329 1,396 1,939 3,076
------- ------- ------- --------
Total costs and operating
expenses....................... 10,530 34,842 58,773 149,261
------- ------- ------- --------
Income (loss) from operations... (254) 2,124 5,320 15,114
Interest expense................ 375 2,041 3,190 6,713
------- ------- ------- --------
Income (loss) before income
taxes.......................... (629) 83 2,130 8,401
Income taxes.................... 0 275 1,007 3,948
------- ------- ------- --------
Net income (loss)............... (629) (192) 1,123 4,453
Yield adjustment on Class A
Common Stock (1)............... (190) (1,023) (1,402) (2,442)
------- ------- ------- --------
Net income (loss) available to
holders of Common Stock........ $ (819) $(1,215) $ (279) $ 2,011
======= ======= ======= ========
Earnings (loss) per share (basic
and diluted)................... $ (0.15) $ (0.15) $ (0.03) $ 0.21
======= ======= ======= ========
Weighted average number of
shares used in the calculation
(2)........................... 5,331 8,018 8,729 9,805
======= ======= ======= ========
<CAPTION>
MARCH 31,
-----------------------------------------
1995 1996 1997 1998
-------------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital................. $ 2,901 $ 5,038 $ 9,655 $ 24,255
Total assets.................... 32,229 43,675 68,990 164,342
Long-term debt, including
current maturities............. 22,836 21,831 36,873 97,485
Total stockholders' equity...... 4,344 15,232 19,796 38,248
</TABLE>
- --------
(1) Reflects adjustments for amounts payable upon a sale of the Company or an
initial public offering to holders of Class A Common Stock equivalent to
an 8.0% annual yield on the original per share amount of $90, and for
1998, the accretion of the difference between the redemption value of the
Class A Common Stock and the value allocated to the stock, accreted from
January 1998 to the anticipated date of the initial public offering.
(2) Assumes the conversion of the outstanding shares of Class C Common Stock
into Common Stock.
18
<PAGE>
SELECTED PRO FORMA FINANCIAL DATA
The following selected pro forma financial data are derived from the
Unaudited Pro Forma Consolidated Financial Data of the Company appearing
elsewhere in this Prospectus. The Pro Forma Statement of Operations Data for
the fiscal year ended March 31, 1998 gives effect to the Company's acquisition
of 12 companies acquired during the 1998 fiscal year as if they had occurred
on April 1, 1997.
The pro forma financial data should be read in conjunction with the
Unaudited Pro Forma Consolidated Financial Information of the Company and the
related notes thereto included elsewhere in this Prospectus. Management
believes the assumptions used in the Unaudited Pro Forma Consolidated
Financial Information provide a reasonable basis on which to present the pro
forma financial data. The pro forma financial data are provided for
informational purposes only and should not be construed to be indicative of
the Company's financial position or results of operations had the transactions
and events described in the notes thereto been consummated on the dates
assumed and are not intended to project the Company's financial condition or
results of operations on any future date or for any future period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
MARCH 31, 1998
-----------------
(IN THOUSANDS,
EXCEPT PER SHARE
DATA)
<S> <C>
PRO FORMA STATEMENT OF OPERATIONS DATA:
Revenues:
Equipment and supply sales................................... $158,476
Service and rental revenues.................................. 56,901
--------
Total revenues................................................ 215,377
Costs and operating expenses:
Cost of equipment and supply sales........................... 111,788
Service and rental costs..................................... 28,779
Selling, general and administrative expenses................. 54,052
Intangible asset amortization................................ 4,105
--------
Total costs and operating expenses............................ 198,724
--------
Income from operations (1).................................... 16,653
Interest expense.............................................. 9,311
--------
Income before income taxes.................................... 7,342
Income taxes.................................................. 3,635
--------
Net income.................................................... 3,707
Yield adjustment on Class A Common Stock (2).................. (2,939)
--------
Net income available to holders of Common Stock............... $ 768
========
Earnings per share (basic and diluted)........................ $ 0.07
========
Weighted average number of shares used in the calculation
(3)........................................................ 10,425
========
</TABLE>
- --------
(1) Excludes adjustments relating to certain identifiable personnel cost
savings resulting from the elimination of certain service, sales and
administrative positions; reductions to current compensation levels of
former owners of the businesses acquired by the Company; improved
purchasing terms and reduced administrative expenses.
(2) Reflects adjustments for amounts payable upon a sale of the Company or an
initial public offering to holders of Class A Common Stock equivalent to
an 8.0% annual yield on the original per share amount of $90, and for
1998, the accretion of the difference between the redemption value of the
Class A Common Stock and the value allocated to the stock, accreted from
January 1998 to the anticipated date of the initial public offering.
(3) Assumes the conversion of outstanding shares of Class C Common Stock into
Common Stock.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with "Selected
Financial Data" and "Selected Pro Forma Financial Data," the Consolidated
Financial Statements and the related Notes thereto, the Unaudited Pro Forma
Consolidated Financial Data and the related Notes thereto, the audited
financial statements for certain businesses acquired by the Company and the
related Notes thereto, and the other financial information appearing elsewhere
in this Prospectus. Except for the historical information contained herein,
the discussions in this Prospectus contain forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
materially from those discussed herein. Factors that could cause or contribute
to such differences include, but are not limited to, those discussed below and
in the section entitled "Risk Factors" as well as those discussed elsewhere in
this Prospectus.
OVERVIEW
Global was founded in June 1994 with the goal of becoming a leading
consolidator in the highly fragmented office imaging solutions industry. The
Company is a rapidly growing provider of an array of office imaging solutions,
which encompasses the sale and service of automated office equipment (copiers,
facsimile machines, printers and duplicators), electronic presentation
equipment and DIM systems as well as network integration and management
services. Since its founding, the Company has acquired nine core companies
primarily in the Northeast, Southeast, and Pacific Northwest, and 15
additional satellite companies that have been integrated into the core
companies. The first acquisition was completed in August 1994. Management
believes that the businesses that have been acquired by the Company (the
"Acquired Businesses") and other businesses that the Company plans to acquire
will benefit from increased operating efficiencies, the support of experienced
and professional senior management, expansion of the types of office imaging
products and services offered, increased access to capital, and increased
emphasis on financial management. Therefore, the pro forma results discussed
below do not necessarily represent the results of the Company had each of the
Acquired Businesses been operated by the Company during the periods presented.
The pro forma results discussed for the year ended March 31, 1998 include
adjustments made to reflect: (i) amortization expense to reflect financing
fees, goodwill and non-compete agreements recorded as a result of purchase
accounting; (ii) interest expense resulting from increased borrowings to fund
the cash portion of the purchase price for the businesses acquired; and
(iii) income tax expense that would have resulted if the Acquired Businesses
had been combined and subject to an assumed federal statutory rate and the
applicable state statutory rate for each of the Acquired Businesses throughout
the periods presented. Management believes that these adjustments more
accurately reflect the operating results and financial position of the
Acquired Businesses had they been owned by the Company throughout the periods
discussed. The pro forma results exclude adjustments relating to: (i) certain
identifiable personnel cost savings resulting from the elimination of certain
service, sales and administrative positions, net of additional expenses
related to positions added in connection with the Company's acquisitions of
the Acquired Businesses; (ii) reduced expenses to reflect the current
compensation levels of former owners of the Acquired Businesses; (iii)
improved purchasing terms; and (iv) reduced administrative expenses.
Management believes that the cost efficiencies achieved are sustainable and
expects they will continue. The Company's incremental costs to assimilate
Acquired Businesses are usually incurred within several months of the
acquisition date and are not significant.
The Company derives its revenues from two sources: (i) sales of equipment
and supplies and (ii) sales of complementary services and equipment rentals.
The growth of equipment revenues and the complementary supplies, parts and
service revenues is dependent on several factors, including the demand for
equipment, the Company's reputation for providing timely and reliable service,
and general economic conditions. Revenues generated from the sale of equipment
and complementary supplies, parts and services revenues are impacted by price,
general economic conditions, service reputation, and competitors' actions in
the marketplace. Revenues
20
<PAGE>
from the sale of complementary supplies, parts and services are also affected
by equipment sales and rental volumes.
As the Company acquires businesses, the percentage of its revenues derived
from sales of equipment and supplies, as opposed to service and rentals,
fluctuates according to whether the businesses acquired are automated office
equipment dealers (which typically derive a higher percentage of revenues from
service and rentals) or are network integrators or electronic presentation
systems or DIM systems dealers (which typically derive a higher percentage of
revenues from sales of equipment and supplies). Generally, sales of equipment
and supplies have lower gross profit margins than sales of service and
rentals. The Company expects that, over time, it will increasingly become
engaged in the network integration, electronic presentation systems and DIM
systems markets and, accordingly, a larger percentage of its revenues and
gross profits will be derived from the sale of equipment and supplies.
Cost of goods sold consists primarily of the cost of new equipment, cost of
supplies and parts, labor costs to provide services, rental equipment
depreciation and other direct operating costs. The Company depreciates its
rental equipment primarily over a three-year period on a straight-line basis
with no residual value.
Gross profit as a percentage of revenues varies from period to period
depending upon numerous variables, including the mix of revenues from
equipment, supplies, service and rentals; the mix of revenues among the
markets served by the Company; and the mix of revenues of the businesses
acquired.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, information
derived from the actual and pro forma consolidated statements of operations of
the Company expressed as a percentage of total revenues.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
MARCH 31,
-------------------------------
PRO FORMA
1996 1997 1998 1998
----- ----- ----- ---------
<S> <C> <C> <C> <C>
Equipment and supplies
sales.................. 55.6% 64.3% 73.8% 73.6%
Service and rental
revenues............... 44.4 35.7 26.2 26.4
----- ----- ----- -----
Total revenues.......... 100.0 100.0 100.0 100.0
Cost of goods sold...... 58.9 60.2 65.4 65.3
----- ----- ----- -----
Gross profit............ 41.1 39.8 34.6 34.7
Selling, general, and
administrative
expenses............... 31.6 28.5 23.5 25.1
Intangible asset
amortization........... 3.8 3.0 1.9 1.9
----- ----- ----- -----
Income from operations.. 5.7 8.3 9.2 7.7
Interest expense........ 5.5 5.0 4.1 4.3
----- ----- ----- -----
Income (loss) before
income taxes........... 0.2 3.3 5.1 3.4
Income taxes............ 0.7 1.5 2.4 1.7
----- ----- ----- -----
Net income (loss)....... (0.5)% 1.8% 2.7% 1.7%
===== ===== ===== =====
</TABLE>
Fiscal Year Ended March 31, 1998 Compared to Fiscal Year Ended March 31, 1997
Revenues
Total revenues increased 156.5% from $64.1 million for the fiscal year ended
March 31, 1997 to $164.4 million for the fiscal year ended March 31, 1998. The
majority of the revenue growth was attributable to the acquisition of
businesses during 1997 and 1998, with the remainder coming from internal
growth. Pro forma revenues were $215.4 million for the fiscal year ended March
31, 1998.
Equipment and supplies sales increased 194.5% from $41.2 million, or 64.3%
of total revenues, for the fiscal year ended March 31, 1997 to $121.3 million,
or 73.8% of total revenues, for the fiscal year ended March 31, 1998.
Equipment and Supply sales were $158.5 million, or 73.6% of total revenues for
the pro forma year ended
21
<PAGE>
March 31, 1998. The equipment component of sales of the businesses acquired in
1997 and 1998 was a larger portion of total revenues than for the Company's
existing businesses.
Service and rental revenues increased 88.1%, from $22.9 million, or 35.7% of
total revenues for the fiscal year ended March 31, 1997 to $43.1 million, or
26.2% of total revenues, for the fiscal year ended March 31, 1998. Pro forma
service and rental revenues were $56.9 million, or 26.4% of total pro forma
revenues, for the fiscal year ended March 31, 1998, consistent with the change
in the revenue mix described above.
Gross Profit
Total gross profit increased 122.4% from $25.5 million, or 39.8% of total
revenues, for the fiscal year ended March 31, 1997 to $56.8 million, or 34.6%
of total revenues, for the fiscal year ended March 31, 1998. The change in
total gross profit margins from year to year was due to the change in the
revenue mix. Office equipment dealers typically derive a higher percentage of
total revenues from service and rentals, while network integration and
electronic presentation systems and DIM systems dealers derive a higher
percentage of total revenues from sales of equipment and supplies. The
equipment component of sales of the businesses acquired in 1997 and 1998
accounted for a larger portion of total revenues than the Company's existing
businesses. Sales of equipment and supplies generally generate lower gross
profit margins than service and rental revenues. Combined service and rental
gross profit margins were 49.9% for the fiscal year ended March 31, 1997 and
for the fiscal year ended March 31, 1998.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 111.3% from $18.3
million, or 28.5% of revenues, for the fiscal year ended March 31, 1997 to
$38.6 million, or 23.5% of revenues, for the fiscal year ended March 31, 1998.
The increase in expenses was primarily due to the acquisition of businesses in
1997 and 1998. The decline in expenses as a percentage of revenues was the
result of the acquisition of profitable businesses, the change in the
composition of the Company's businesses, and revenues increasing by 156.5%
without a proportionate increase in selling, general, and administrative
expenses.
Intangible Asset Amortization
For the fiscal years ended March 31, 1997 and 1998, asset amortization was
$1.9 million and $3.1 million, respectively. Asset amortization includes the
amortization of goodwill and non-compete agreements from acquisitions.
Income From Operations
Income from operations increased 184.1% from $5.3 million, or 8.3% of total
revenues, for the fiscal year ended March 31, 1997 to $15.1 million, or 9.2%
of total revenues, for the fiscal year ended March 31, 1998. Pro forma income
from operations was $16.7 million, or 7.7% of revenues, for the fiscal year
ended March 31, 1998.
Interest Expense
Interest expense increased 110.5%, from $3.2 million for the fiscal year
ended March 31, 1997 to $6.7 million for the fiscal year ended March 31, 1998.
The increase was primarily due to the increase in the Company's borrowings.
The proceeds from the additional borrowings were used to fund the cost of the
businesses acquired in 1997 and 1998. Interest expense includes the
amortization of financing fees incurred in connection with the JNL Credit
Facility.
Income Taxes
The provision for income taxes was $1.0 million for the fiscal year ended
March 31, 1997 and $3.9 million for the fiscal year ended March 31, 1998. The
increase in income taxes was primarily due to increased pre-tax
22
<PAGE>
income resulting from the inclusion of businesses acquired during 1997 and
1998. The effective income tax rate decreased slightly from 47.3% for the
fiscal year ended March 31, 1997 to 47.0% for the fiscal year ended March 31,
1998. The effective income tax rate for 1997 and 1998 was higher than the
federal statutory rate of 34.0% plus state and local taxes, primarily due to
non-deductible goodwill amortization relating to the businesses acquired
during the fiscal years ended March 31, 1997 and March 31, 1998. See Note 8 of
Notes to Consolidated Financial Statements.
Fiscal Year Ended March 31, 1997 Compared to Fiscal Year Ended March 31, 1996
Revenues
Total revenues increased 73% from $37.0 million for the fiscal year ended
March 31, 1996 to $64.1 million for the fiscal year ended March 31, 1997. The
majority of the revenue growth was attributable to the acquisition of
businesses during 1996 and 1997, with the remainder coming from internal
growth.
Equipment and supplies sales increased 100% from $20.6 million, or 55.6% of
total revenues, for the fiscal year ended March 31, 1996 to $41.2 million, or
64.3% of total revenues, for the fiscal year ended March 31, 1997. The
equipment component of sales of the businesses acquired in 1996 and 1997 was a
larger portion of total revenues than for the Company's existing businesses.
Service and rental revenues increased 40%, from $16.4 million, or 44.4% of
total revenues for the fiscal year ended March 31, 1996 to $22.9 million, or
35.7% of total revenues, for the fiscal year ended March 31, 1997.
Gross Profit
Total gross profit increased 68% from $15.2 million, or 41.1% of total
revenues, for the fiscal year ended March 31, 1996 to $25.5 million, or 39.8%
of total revenues, for the fiscal year ended March 31, 1997. The change in
total gross profit margins from year to year was due to the change in the
revenue mix as described in the Revenues section above. Combined service and
rental gross profit margins were 49.4% for the fiscal year ended March 31,
1996 and 49.9% for the fiscal year ended March 31, 1997.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 56% from $11.7
million, or 31.6% of revenues, for the fiscal year ended March 31, 1996 to
$18.3 million, or 28.5% of revenues, for the fiscal year ended March 31, 1997.
The increase in expenses was primarily due to the acquisition of businesses in
1996 and 1997. The decline in expenses as a percentage of revenues was the
result of the acquisition of profitable businesses, the change in the
composition of the Company's businesses, and revenues increasing more rapidly
than expenses.
Intangible Asset Amortization
For the fiscal years ended March 31, 1996 and 1997, asset amortization was
$1.4 million and $1.9 million, respectively. Asset amortization includes the
amortization of goodwill and non-compete agreements from acquisitions.
Income From Operations
Income from operations increased 150% from $2.1 million, or 5.7% of total
revenues, for the fiscal year ended March 31, 1996 to $5.3 million, or 8.3% of
total revenues, for the fiscal year ended March 31, 1997.
23
<PAGE>
Interest Expense
Interest expense increased 56%, from $2.0 million for the fiscal year ended
March 31, 1996 to $3.2 million for the fiscal year ended March 31, 1997. The
increase was primarily due to the increase in the Company's borrowings. The
proceeds from the additional borrowings were used to fund the cost of the
businesses acquired in 1996 and 1997. Interest expense includes the
amortization of financing fees incurred in connection with the senior debt
facility.
Income Taxes
The provision for income taxes was $275,000 for the fiscal year ended March
31, 1996 and $1.0 million for the fiscal year ended March 31, 1997. The
increase in income taxes was primarily due to increased pre-tax income
resulting from the inclusion of businesses acquired during 1996 and 1997. The
effective income tax rate decreased from 332.8% for the fiscal year ended
March 31, 1996 to 47.3% for the fiscal year ended March 31, 1997. The
effective income tax rate for 1996 was higher than the federal statutory rate
of 34.0% plus state and local taxes, primarily due to non-deductible goodwill
amortization relating to the businesses acquired during the fiscal years ended
March 31, 1995 and March 31, 1996. See Note 8 of Notes to Consolidated
Financial Statements.
QUARTERLY RESULTS OF OPERATIONS
The following table presents selected consolidated financial information for
each of the Company's last six fiscal quarters. The information has been
derived from unaudited consolidated financial statements that in the opinion
of management reflect all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of such quarterly information.
<TABLE>
<CAPTION>
QUARTERS ENDED
---------------------------------------------------------------------
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1996 1997 1997 1997 1997 1998
------------ --------- -------- ------------- ------------ ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Equipment and supply
sales................. $12,588 $13,697 $15,182 $30,543 $34,790 $40,801
Service and rental rev-
enues................. 5,957 6,282 6,730 10,860 11,925 13,544
------- ------- ------- ------- ------- -------
Total revenues.......... 18,545 19,979 21,912 41,403 46,715 54,345
Costs and operating ex-
penses:
Cost of equipment and
supply sales.......... 8,436 9,105 10,273 22,363 24,851 28,485
Service and rental
costs................. 2,996 3,193 3,304 5,216 5,973 7,101
Selling, general and
administrative
expenses.............. 5,013 5,544 5,502 9,460 10,856 12,802
Intangible asset amor-
tization.............. 526 536 563 753 843 917
------- ------- ------- ------- ------- -------
Total costs and operat-
ing expenses........... 16,971 18,378 19,642 37,792 42,523 49,305
------- ------- ------- ------- ------- -------
Income from operations.. 1,574 1,601 2,270 3,611 4,192 5,040
Interest expense........ 780 863 938 1,616 1,980 2,178
------- ------- ------- ------- ------- -------
Income before income
taxes.................. 794 738 1,332 1,995 2,212 2,862
Income taxes............ 376 349 661 990 1,099 1,198
------- ------- ------- ------- ------- -------
Net income.............. 418 389 671 1,005 1,113 1,664
Yield adjustment on
Class A Common Stock
(1).................... (376) (373) (382) (434) (533) (1,093)
------- ------- ------- ------- ------- -------
Net income available to
holders of Common
Stock.................. $ 42 $ 16 $ 289 $ 571 $ 580 $ 571
======= ======= ======= ======= ======= =======
Earnings per share
(basic and diluted).... $ 0.00 $ 0.00 $ 0.03 $ 0.06 $ 0.06 $ 0.06
======= ======= ======= ======= ======= =======
Weighted average number
of shares used in
calculation (2)........ 9,020 9,092 9,315 9,549 9,959 10,404
======= ======= ======= ======= ======= =======
</TABLE>
- --------
(1) Reflects adjustments for amounts payable upon a sale of the Company or an
initial public offering to holders of Class A Common Stock equivalent to
an 8.0% annual yield on the original per share amount of $90, and for
1998, the accretion of the difference between the redemption value of the
Class A Common Stock and the value allocated to the stock, accreted from
January 1998 to the anticipated date of the initial public offering.
(2) Assumes conversion of the outstanding shares of Class C Common Stock into
Common Stock.
24
<PAGE>
The following table sets forth selected consolidated financial information
as a percentage of total revenues for each of the Company's last six fiscal
quarters.
<TABLE>
<CAPTION>
QUARTERS ENDED
--------------------------------------------------------------------
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1996 1997 1997 1997 1997 1998
------------ --------- -------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Equipment and supply
sales................. 67.9% 68.6% 69.3% 73.8% 74.5% 75.1%
Service and rental rev-
enues................. 32.1 31.4 30.7 26.2 25.5 24.9
----- ----- ----- ----- ----- -----
Total revenues.......... 100.0 100.0 100.0 100.0 100.0 100.0
Costs and operating ex-
penses:
Cost of equipment and
supply sales.......... 45.5 45.6 46.9 54.0 53.2 52.4
Service and rental
costs................. 16.2 16.0 15.1 12.6 12.8 13.1
Selling, general and
administration
expenses.............. 27.0 27.7 25.1 22.9 23.2 23.5
Intangible asset amor-
tization.............. 2.8 2.7 2.5 1.8 1.8 1.7
----- ----- ----- ----- ----- -----
Total costs and
operating expenses..... 91.5 92.0 89.6 91.3 91.0 90.7
----- ----- ----- ----- ----- -----
Income from operations.. 8.5 8.0 10.4 8.7 9.0 9.3
Interest expense........ 4.2 4.3 4.3 3.9 4.2 4.0
----- ----- ----- ----- ----- -----
Income before income
taxes.................. 4.3 3.7 6.1 4.8 4.8 5.3
Income taxes............ 2.0 1.7 3.0 2.4 2.4 2.2
----- ----- ----- ----- ----- -----
Net income ............. 2.3% 2.0% 3.1% 2.4% 2.4% 3.1%
===== ===== ===== ===== ===== =====
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations primarily through internal cash
flow, sales of stock and bank financing, including the Company's financing
facilities described below. These sources of funds have been used to fund the
Company's growth both internally and through acquisitions. The Company is
pursuing an acquisition strategy and therefore expects to acquire more
businesses.
The Company's Credit Facility consists of a $6.0 million revolving line of
credit and a term facility under which it may borrow up to $114.0 million for
acquisitions and for working capital purposes. At March 31, 1998, $97.3
million was outstanding under the Credit Facility, all of which was
outstanding under the term facility. The revolving line of credit and the term
loan bear interest at 3.00% and 3.25% over LIBOR, respectively. Principal
under the Credit Facility is repayable in installments over the life of the
Credit Facility. All remaining principal under the Credit Facility is due and
payable on August 14, 2004. The agreement governing the Credit Facility (the
"Credit Agreement") requires the Company to pledge substantially all of its
assets, including the capital stock of the Company's subsidiaries, to JNL. The
Credit Agreement requires strict compliance with numerous covenants that
restrict, among other things, amendments to the Company's Certificate of
Incorporation or Bylaws, dividend payments, sales of stock or assets or the
incurrence of additional debt by the Company or its Subsidiaries.
The Company intends to replace the Credit Facility by paying it off with a
combination of the net proceeds of the Offering and with proceeds from a
replacement credit facility it expects to obtain after the closing of the
Offering. Under the terms of a commitment letter the Company has entered into
with First Union (the "Commitment Letter"), First Union has committed to
provide or arrange a $175 million revolving credit facility to the Company
(the "Replacement Facility"). The Replacement Facility will bear interest at
rates ranging from 0.625% to 1.5% over LIBOR or, at the Company's option,
ranging from 0.0% to 0.5% over a base rate related to prime rate, and will
vary according to the Company's ratio of its total funded debt to earnings
before interest, taxes, depreciation and amortization. Amounts borrowed under
the Replacement Facility may be repaid and reborrowed over the life of the
Replacement Facility, with a final maturity date of five years after the
closing of the Replacement Facility. The terms of the Replacement Facility
will require strict compliance with numerous affirmative, negative and
financial covenants similar to those found in the Credit Agreement with JNL.
Pursuant to the Commitment Letter, amounts borrowed under the Replacement
Facility may be used to refinance amounts owed to JNL, and to fund working
capital and general corporate purposes, including acquisitions, subject to
prior lender approval in the case of acquisitions with a cash purchase price
of over $15 million or an aggregate price (cash, stock or other consideration)
of over $40 million.
25
<PAGE>
Under the Company's agreement with JNL, following the Offering and the
partial repayment of the term loans outstanding under the Credit Facility as
described in "Use of Proceeds," the Company has the right to prepay the entire
amount due under the Credit Facility within 60 days of the closing of the
Offering provided that it pays a prepayment fee of $250,000. If the Company
fails to prepay the entire amount due within 60 days of the closing of the
Offering, the Company will be subject to a prepayment fee of 4.0% (declining
to 3.0%, 2.0% and 1.0% on August 14, 1998, 1999 and 2000, respectively) of the
amounts due under the term loan component of the Credit Facility. There can be
no assurance that the Company will be able to obtain the Replacement Facility
or another replacement credit facility within 60 days, or at all or that, if
obtained, such credit facility will be upon terms favorable to the Company. If
the Company does replace the Credit Facility, unamortized financing fees
incurred in conjunction with obtaining the Credit Facility will be written off
upon payment of amounts due thereunder. The balance of such unamortized
financing fees was $2.9 million at March 31, 1998.
Under the terms of one of its purchase agreements, the Company may be
required to make payments of up to $3.0 million over the next four years to
certain former owners of the Acquired Business based on the profitability of
the Acquired Business during such time period.
For the fiscal year ended March 31, 1998 the net cash provided by operations
was $5.8 million and for the fiscal year ended March 31, 1997 the net cash
provided by operations was $4.3 million. For the year ended March 31, 1998 and
for the year ended March 31, 1997 the Company's net cash used in investing
activities was $71.9 million and $19.0 million, respectively, primarily for
the purchase of Acquired Businesses. For the year ended March 31, 1998 and the
year ended March 31, 1997, the Company's net cash provided by financing
activities was $69.6 million and $15.2 million, respectively. Net cash
provided by financing activities consists of equity capital provided by FUND
IV, JNL, and certain members of management of the Company and Acquired
Businesses, and net borrowings under the Credit Facility.
The Company believes that the Credit Facility, together with the cash on
hand after giving effect to the Offering and funds generated by the Company's
operations, will provide the Company with sufficient liquidity and capital
resources to pursue its business strategy at least through March 1999,
including the funding of working capital, acquisitions, capital expenditures
and other needs. Management believes that inflation has not had a material
effect on the Company.
YEAR 2000 SOFTWARE ISSUE
The Company uses a number of computer software programs and operating
systems in its operations, including applications used in sales and marketing,
billing, inventory management and other administrative functions. To the
extent that the software applications used in such functions and
communications are unable to recognize the year 2000, the Company may incur
expenses in connection with the need to remediate such software and also may
incur the risk and potential expense of disruptions that may be caused by the
software's impaired functioning as the year 2000 approaches. The Company
believes that the manufacturers of the software applications it uses most
frequently, including its systems software and its word processing and
spreadsheet software, are in the process of preparing or have already
completed Year 2000 remediations for their products. The Company believes that
with the remediations to existing software and conversions to new software,
the Year 2000 issue will not pose significant operational problems for its
computer systems.
In addition, the Company communicates electronically with a number of its
suppliers and customers with respect to a variety of functions, including
ordering, billing and payroll. Any failure of the software of the Company's
suppliers or customers to address the Year 2000 issue could impair the
Company's ability to perform such functions. The Company is analyzing the
potential impact of the Year 2000 issue on the Company's interactions with its
suppliers and customers.
26
<PAGE>
BUSINESS
Global Imaging Systems is a consolidator in the highly fragmented office
imaging solutions industry. The Company is a rapidly growing provider of a
broad line of office imaging solutions, which includes the sale and service of
automated office equipment (copiers, facsimile machines, printers and
duplicators), electronic presentation systems, and document imaging management
systems ("DIM" systems or "document technology systems"), as well as network
integration and management services. Since its founding in June 1994, the
Company has acquired 24 companies primarily in the Northeast, Southeast, and
Pacific Northwest, of which nine are "core" companies, at which all
administrative functions are concentrated, and the remaining 15 are
"satellite" companies whose administrative functions have been transferred to,
and which have been integrated into, the core companies. The Company's
operating philosophy is to "think globally, act locally." Under the Company's
decentralized management system, Global's core companies typically continue to
operate under their pre-acquisition names and with their pre-acquisition
management even after being acquired by Global, thus permitting existing
client relationships to be preserved. The Company believes that its emphasis
on superior customer service and the contractual nature of its service
business provide a significant source of recurring revenue.
Global seeks to become the provider of choice for all of its customers'
office imaging needs by offering a full range of products and services and
superior customer service. While Global's clientele includes large, Fortune
500 companies, its growth has been, and is expected to continue to be, largely
driven by serving middle market businesses. The Company sells and services a
variety of office imaging solutions, including copiers, facsimile machines,
printers, duplicators, LCD projectors, smartboards, overhead projectors, video
teleconferencing equipment, optical scanning equipment, micrographics
equipment, and the design and installation of equipment related to computer
networks. In addition, the Company offers a variety of ongoing services,
including supply and service contracts, network management contracts,
technical support and training.
The Company's strategic objective is to continue to grow profitably in both
existing markets and new markets through internal growth and by acquiring
additional office imaging solutions companies. Global intends to enter new
geographic markets by acquiring additional core companies and expanding its
core markets through the acquisition of satellite companies, which are
typically in close proximity to core companies. Global's strategy for
stimulating internal growth is to expand its product and service offerings,
take advantage of cross-selling opportunities, and market aggressively to
existing and new customers.
The Company is currently organized into nine core companies with operations
in 46 locations in 15 states, plus the District of Columbia. Global targets
for acquisition as core companies businesses that are leading competitors in
the markets they serve. The Company's goal is to acquire core and satellite
companies throughout the United States and Canada.
27
<PAGE>
Certain information regarding the nine current core companies, including pro
forma revenues for the fiscal year ended March 31, 1998, is summarized below:
<TABLE>
<CAPTION>
Effective Date
Acquired/
Revenues No. of Date of
Core Company Regional Focus (in thousands) Satellites Incorporation
<S> <C> <C> <C> <C>
Felco Office Systems, Texas $ 9,291 1 July 1994/
Inc. Mar. 1985
Conway Office Products, Upper New England, $43,743 4 Jan. 1995/
Inc. Upstate New York, Apr. 1976
Eastern Massachusetts
Berney, Inc. Alabama, Mississippi, $14,056 3 Feb. 1995/
Florida Panhandle June 1964
Amcom Office Systems Western $13,140 2 Feb. 1996/
Pennsylvania Jan. 1978
Copy Service & Supply, North Carolina, $ 5,912 0 July 1996/
Inc. South Carolina Jan. 1984
Southern Business Georgia, Florida, $24,546 1 Nov. 1996/
Communications, Inc. Tennessee, Mar. 1981
Washington D.C.,
Maryland, Virginia
Electronic Systems, Inc. Virginia, $63,267 1 July 1997/
Washington D.C. Aug. 1980
Quality Business Pacific Northwest $19,128 2 Sept. 1997/
Systems, Inc. Feb. 1986
Connecticut Business Western Massachusetts, $22,293 1 Jan. 1998/
Systems, Inc. Connecticut, Lower June 1988
New York, Rhode Island
</TABLE>
THE INDUSTRY
The market for sales and service of office imaging solutions is highly
fragmented. Of an estimated 3,700 dealer and distributor outlets in the United
States primarily engaged in the sale of automated office equipment and related
service, parts, and supplies, approximately 3,100 dealer outlets are
unaffiliated, according to Industry Analysts, Inc. The Company believes that
the black and white copier and related service and supplies market generated
sales of approximately $21.9 billion in the U.S. in 1996, and is expected to
grow to an estimated $31.2 billion in sales in 2001, while the color copier
and related service and supplies market generated sales of approximately $1.3
billion in the U.S. in 1996, and is expected to grow to an estimated $4.4
billion in sales in 2001. The network consulting and integration services
market generated sales in the U.S. of approximately $5.8 billion in 1996 and
is expected to grow to approximately $12.4 billion by 2001, according to
International Data Corporation. The network management services market (as a
discrete segment) generated sales of approximately $1.5 billion in the U.S. in
1996, and is expected to grow to approximately $3.7 billion in sales by 2001,
according to International Data Corporation. The markets for electronic
presentation systems and document technology systems generated sales estimated
at approximately $719 million and $4.7 billion, respectively, in the U.S. in
1996, and are expected to grow to an estimated $1.5 billion and $14.7 billion
in sales in 2001, according to Pacific Media Associates and AIIM
International, respectively.
28
<PAGE>
CONSOLIDATION
Consolidation of independent distributors and service providers is occurring
throughout the office imaging solutions industry. This consolidation has been
driven by a number of factors, including the following:
Technological Change. The technology of office imaging solutions is changing
rapidly. Digital technology, which allows an image to be scanned
electronically and transmitted through networks of personal computers, has in
recent years been incorporated into copiers, electronic presentation equipment
and DIM technology. As a result, the role for computers and networks in office
imaging solutions has been dramatically expanded and the functions of copiers,
facsimile machines, and printers have been converging. The introduction of
digital technology has led to computer networks becoming an integral part of
office imaging solutions, as digital technology allows images to be captured,
transmitted, reproduced and stored over wide geographic areas. This has led to
increasing demand by larger companies for more centralized network integration
services over a broader geographic area. The rapid pace of technological
change, including the change from analog to digital technologies, and the
resulting expansion of product offerings and increase in product support costs
have outpaced the technical, managerial and financial resources of many
smaller distributors and service providers, causing them to seek larger
partners. Further, the blurring of the distinction among office imaging
technologies and the increased role for computers has made it important for
dealers without network integration expertise to partner with companies that
have such expertise.
Dealer Consolidation by Suppliers. The cost of new product development and
fierce competition among equipment manufacturers have resulted in their
seeking efficiencies by consolidating their dealer networks. Increasingly,
manufacturers are seeking to concentrate their business with a smaller number
of dealers that possess leading service capabilities and wide geographic
coverage.
Distribution Channel Changes. In the market for automated office equipment,
consolidation is also resulting from changes in distribution channels. Office
superstores and consumer electronics chains have entered the market for lower-
end office products, offering these products at prices that are forcing
smaller dealers out of the market. Smaller dealers also face difficulty
competing in the market for mid-range copiers, because they are not well
equipped to provide the sophisticated support services required by businesses
that purchase these products. Typically, office superstores and consumer
electronics chains also do not offer the support services required by
purchasers of mid-range copiers.
OFFICE IMAGING PRODUCTS AND SERVICES
The automated office equipment market is generally regarded by participants
as consisting of six black and white copier segments (both digital and analog)
categorized by price and number of pages per minute, a color copier segment, a
duplicator segment, a facsimile equipment segment, a printer segment and a
multi-function equipment segment.
The electronic presentation systems market consists of the sale and service
of LCD projectors and panels, smartboards, overhead projectors and video
conferencing equipment. As in the automated office equipment market, products
in this market increasingly utilize digital technology, and customers for
these products are designating a single buyer to address their needs in both
markets. This market is characterized by strong competition among
manufacturers, with new products being introduced frequently. As a result,
some manufacturers are offering their most popular new products only to those
dealers who agree to limit their product offerings to that one manufacturer.
The five largest suppliers of LCD projectors, Epson, InFocus, Proxima, Sanyo
and Sharp, accounted for over 60% of the market in 1997, according to Pacific
Media Associates.
Like automated office equipment and electronic presentation systems, DIM
systems also involve digital technology and are ultimately used by the same
end-users as other types of office imaging equipment. This market consists of
optical disk storage equipment, write once read many ("WORM") disks and CD-ROM
optical storage products, as well as micrographic equipment (microfilm and
microfiche). These products are used
29
<PAGE>
to capture and store large volumes of visual data. Key customers for these
products include banks, educational institutions, government institutions,
libraries and insurance companies.
With the rise of digital copier technology, the customer's need for office
imaging equipment is becoming increasingly linked to its need for network
integration services. Network integrators provide outsourced management and
support to organizations' computer network infrastructures. As organizations
seek to take advantage of productivity-enhancing computer network technology,
they face a complex and costly set of issues relating to the design,
selection, implementation and management of their computer networks. Among
other challenges, organizations must select from an expanding number of
product options with shortening life cycles; integrate diverse and often
incompatible hardware and software environments; and deal with a shortage of
qualified information technology service personnel. As a result, many smaller
businesses seek to outsource installation, upgrade and support, and large
organizations seek to outsource network improvement functions and the
evaluation of new products.
BUSINESS STRATEGY
Management believes the Company is well positioned to benefit from industry
trends and continued consolidation in the office imaging solutions industry.
The Company's goal is to become the provider of choice for all of its
customers' office imaging needs by offering a full range of products and
services and superior customer service. The Company's strategy to achieve this
goal contains the following elements:
Serve as a Single Source Provider of Office Imaging Solutions. The Company
believes that offering a full spectrum of products and services will give it a
competitive advantage and enable the Company to capitalize on its customer
relationships by cross-selling its products and services. As the technology
that drives copiers, facsimiles, printers, electronic presentation equipment
and DIM equipment continues to converge, there is a greater role for computers
and networks in the functioning of these products. Accordingly, customers are
demanding more integrated office imaging solutions. The Company intends to
expand its offerings to provide products and services in the automated office
equipment market, the electronic presentation systems market, the DIM systems
market and the network integration markets in each of its geographic markets.
The Company believes that as and to the extent it becomes engaged in these
markets, an increasing percentage of the Company's revenues and gross profits
will be derived from sales of equipment and supplies, which typically have
lower gross profit margins than sales of service and rentals. Additionally,
management believes that the Company has the opportunity to leverage its
infrastructure, customer base, and expertise by offering outsourced facilities
management services to its customers.
Make Strategic Acquisitions. Global actively seeks to acquire core companies
in targeted geographic markets and to expand these core acquisitions through
internal growth and the acquisition of satellite companies. As part of its
acquisition strategy, Global looks for companies that are led by an
experienced management team that will continue to manage the company after it
is acquired, that have a strong regional market share, and that can grow
internally and through the acquisition of satellite companies. Global's senior
management team has substantial experience in making acquisitions. See
"Management." Since its founding in June 1994, the Company has acquired nine
core companies primarily in the Northeast, Southeast, and Pacific Northwest,
and an additional 15 satellite companies which have been integrated into the
core companies. The Company's goal is to acquire core and satellite companies
throughout the United States and Canada.
A key component of the Company's growth strategy is to acquire satellite
companies in or near its core companies' markets. Core company management
frequently assists Global in identifying appropriate satellite companies to
acquire. In evaluating potential satellite acquisitions the Company considers,
among other factors, its proximity to a core company, whether the product
lines sold by the satellite are complementary with those of the core company,
its management and employee base and the service base that the potential
satellite company has under service contract.
Stimulate Internal Growth. The Company seeks to stimulate internal growth in
its core companies by increasing the productivity of their sales forces
through the use of performance benchmarks developed by the Company, expanding
product and service offerings, increasing the size of its core companies'
sales forces and aggressively cross-selling its products and services.
30
<PAGE>
Optimize Profitability and Operating Efficiency. Global's senior management
has developed an industry management model that encompasses a comprehensive set
of performance benchmarks. These performance benchmarks, which are used as the
primary form of internal reporting from the core companies to Global, allow the
Company and local management to monitor and improve the operations of each core
company. Through the use of these benchmark criteria, Global seeks to train the
managers of its core and satellite companies to optimize their business mix and
improve performance.
Global works to reduce costs by consolidating the back-office functions of
its satellite acquisitions into the core operations and by increasing the
productivity of sales and service personnel and administrators. Global also
reduces costs through the standardization of financial reporting, cash and
inventory management, payroll, billing, collections, insurance and employee
benefit programs, and by negotiating advantageous relationships with equipment
manufacturers, other suppliers and lessors.
Operate with a Decentralized Management Structure. Global believes that the
experienced local management teams of its core companies possess a valuable
understanding of their respective markets and existing customer relationships.
Accordingly, Global follows a decentralized management approach, vesting
responsibility for day-to-day operating decisions at the core company level.
Under Global's decentralized structure, core companies and, in some cases,
satellite companies retain their local name and management after acquisition.
The Company believes that this decentralized approach permits local management
to maintain focus and motivation and provides optimal customer support. Local
management is supported by a senior management team that focuses on the
Company's growth strategy as well as corporate planning and financial reporting
and analysis.
PRODUCT AND SERVICE OFFERINGS
Global currently sells office imaging products and services in four markets:
the automated office equipment market, the electronic presentation systems
market, the document imaging management systems ("DIM" systems) market and the
network integration services market.
In each of these markets, the Company provides a number of office imaging
solutions, including the following:
AUTOMATED NETWORK INTEGRATION ELECTRONIC PRESENTATION
OFFICE EQUIPMENT SERVICES SYSTEMS DIM SYSTEMS
. Black and white copiers (digital and analog)
. Network design and installation, and related software
and hardware
. LCD projectors and panels
. Microfiche and
microfilm
equipment
. Color copiers (digital)
. Smartboards
. Technical support contracts
. Duplicators (digital and analog) . CD-ROM optical
storage products
. Video conferencing equipment
. Network maintenance contracts
. Facsimile machines . Overhead projectors
. Write once read
many ("WORM")
disks and related
equipment
. Training
. Printers (including color) . Color printers
. Internet services
. Multi-function equipment . Audio visual equipment
. Related supply and service contracts . Related supplies
. Related supplies
. Related service
contracts
. Related servicecontracts
. Point-of-sale training
. Related training
31
<PAGE>
For the fiscal year ended March 31, 1998, pro forma revenues from the
automated office equipment market, the network integration services market,
the electronic presentation systems market and the DIM systems market
represented approximately 62%, 28%, 9% and 1%, respectively, of the Company's
pro forma revenues.
A substantial amount of the Company's revenues are derived from its service
activities, and the Company seeks to take advantage of the "after market"
opportunities presented by its sales of office imaging equipment. The
Company's copier service and supply contracts, for example, provide the
Company with a predictable source of revenue that is based on the number of
copies made by its customers. In the network integration market, the Company's
focus is on entering into contracts involving the provision of ongoing
maintenance and technical support, which generate a recurring revenue stream.
The Company believes that a commitment to effective and responsive service
is key to its success in obtaining repeat business from customers and in
developing market recognition that is essential for growth. Most of the
Company's copier sales, on a pro forma basis and measured by revenue
generated, are accompanied by service and supply contracts, which typically
provide that the Company be paid for service on a per-copy basis and continue
for either a one year term or, in some cases, are month to month contracts. As
part of its commitment to providing quality service, the Company strives to
provide its automated office equipment customers with two to four hour
response time to service calls during business hours, and offers a 24 hour
technical assistance "hotline" to its network integration customers. In
addition, the Company's service technicians are generally manufacturer- or
vendor-certified to service the equipment sold by the Company.
CUSTOMERS, SALES AND MARKETING
The Company believes that its customers decide to purchase products and
services from Global based on a variety of factors, the most important of
which are the strength of their relationship with the Company, the quality of
service provided, and price.
Global's growth has been largely driven by serving middle market businesses.
In addition, Global also serves a number of large, Fortune 500 companies, as
well as educational institutions, government entities and other non-profit
groups. The Company estimates that it currently has over 50,000 customers that
have purchased equipment or services in the past twelve months, on a pro forma
basis. During the nine months ended December 31, 1997 on a pro forma basis,
none of the Company's customers accounted for more than 2% of the Company's
total revenues and the Company's top five customers collectively accounted for
less than 6% of the Company's total revenues.
Global believes that the experienced local management teams of its core
companies possess valuable understanding of their respective markets and
existing customer relationships upon which they may capitalize. At the local
level, the core companies make marketing decisions, including decisions
regarding their product offering mix, promotional programs, advertising, and
selecting trade shows to attend. Global's nine core companies and their
respective satellites employ approximately 410 persons in sales and marketing.
All of the Company's sales personnel are compensated at least partly on a
commission basis, with the structure of compensation and commissions
established by the Company's local management within the confines of the
Company's industry management model. The Company generates sales from within
its existing customer base by tracking the expiration of leases, seeking
opportunities to engage in cross-selling, and giving incentives to service
personnel to create sales leads. Each of the core companies also operates a
telemarketing program to generate sales leads in addition to door-to-door
marketing.
TRAINING
The Company's sales and service employees are provided extensive, ongoing
training. Each core company has its own technical trainer and training is
scheduled on a regular basis. Core company technical trainers are typically
certified by the Company's suppliers, which authorizes the Company's service
technicians to act as
32
<PAGE>
factory certified technicians. The Company also provides formalized product
and general sales training to its sales and marketing personnel.
SUPPLIERS
The Company's automated office equipment dealers represent a number of
suppliers, including Konica, Canon, Hewlett Packard, Mita, Muratec, Panasonic,
Ricoh, Riso, Inc., Savin and Sharp. The electronic presentation equipment sold
by the Company includes overhead projectors by Apollo International of
Delaware, Inc. and Minnesota Mining & Manufacturing Company ("3M") and LCD
projectors by Sharp, nView, Proxima, In Focus, Epson and Lightware, as well as
Smartboards by Smart Technologies, Inc. In the DIM systems market, the Company
sells microfilm and microfiche recording and viewing equipment by Canon, and
optical data storage equipment by Canon, Compaq, and Westbrook Technologies.
The Company's network integrators sell personal and laptop computers
manufactured by IBM, Dell Computer Corporation, Compaq, AST Research, Inc.,
NEC America, Inc. and Toshiba America, Inc., and networking software by
Microsoft, Novell, Banyan Systems Incorporated and Raptor Systems, Inc. One of
these suppliers, Konica, accounted for 18% of the Company's purchases of
equipment in the twelve month period ended December 31, 1997, on a pro forma
basis (and 21% of such purchases historically). No other supplier represented
in excess of 10% of such purchases, on a pro forma basis (or 11% of such
purchases, historically).
The Company's agreements with its suppliers generally permit the Company to
sell particular products on a nonexclusive basis in particular geographic
areas, have a one-year renewable term that may be not be renewed by the
supplier on 30 days notice and that may be terminated by the supplier upon
notice (i) in the event that the Company does not meet minimum purchase
quotas, or certain other requirements or (ii) under certain other
circumstances, including a change in the Company's ownership. Although the
consummation of the Offering may qualify as such a change in the Company's
ownership, the Company does not anticipate that its suppliers will terminate
their agreements with the Company as a result of the Offering.
LEASING AND RENTALS
A majority of the copiers sold by the Company are financed by third-party
leasing companies. Under its "Preferred Vendor Leasing Program," the Company
has contracted with three nationwide equipment lease vendors, General Electric
Capital Corporation, Copelco Capital, Inc., and Tokai Financial Services,
Inc., granting these vendors preferential rights to provide the Company's
customers leasing services in exchange for their agreement to offer the
Company better leasing rates and terms than are generally available through
individual copier dealers, control over the lease residuals, and a
standardized leasing application for use with all of these preferred vendors.
Control over the lease residuals gives the Company the option to purchase the
leased equipment, under already negotiated terms, at the end of the lease
term. This flexibility allows the Company to sell the equipment to its
customer at the end of the lease term, or to include arrangements for such a
sale in connection with the original purchase of the equipment. Currently,
only the Company's automated office equipment dealers have widely offered
third party leasing arrangements to their customers, but the Company plans to
increase the use of third party leases in the electronic presentation and DIM
systems markets where, the Company believes, high equipment costs make leasing
a promising financing alternative for many customers.
In some cases, the Company's automated office equipment dealers also rent
equipment. Rental arrangements provide the Company with a steady, monthly
revenue stream and, like the Company's leasing arrangements, give the Company
control over disposition of the equipment at the end of the rental term.
COMPETITION
The Company faces competition in the automated office equipment market, the
electronic presentation systems market and the DIM systems market from large
dealers like IKON and Danka, independent dealers, and manufacturers' sales and
service divisions, including Canon, Kodak, Konica, Minolta, Pitney Bowes, Wang
and Xerox, as well as office superstores and consumer electronics chains. As
digital and other new technology develops, the Company may find itself
competing with new distributions channels, including computer distributors and
value added resellers, for products containing new technology. Principal areas
of competition in these markets include price and product capabilities;
quality and speed of post-sales service support; availability of equipment,
parts and supplies; speed of delivery; financing terms and availability of
financing, leasing, or rental programs.
33
<PAGE>
In the network integration services market, the Company competes with large
companies such as GE Capital, AmeriData, Inacom and Vanstar, as well as a
large number of smaller competitors with regional or local operations and the
in-house capabilities of its customers. Principal areas of competition in this
market include reputation, quality and speed of support, and price.
The Company also faces competition in acquiring core and satellite companies
from consolidators such as IKON, Danka, and a number of other independent
dealers that have been active in consolidating in its markets in recent years.
See "Business--The Industry."
EMPLOYEES
The Company has approximately 1,140 employees, most of whom are employed
through the Company's core companies. Of these, approximately 410 are engaged
in sales and marketing, 500 in service, and 220 in operations and
administration. Thirteen employees are employed at Global's corporate
headquarters in Tampa, Florida. None of the Company's employees is covered by
collective bargaining agreements. Management believes that the Company has
good relations with its employees.
GOVERNMENT AND ENVIRONMENTAL REGULATION
The Company is subject to regulation under various federal, state and local
laws relating to employee safety and health and environmental protection. The
Company is not aware of any material non-compliance with any such law.
LEGAL PROCEEDINGS
The Company is not currently involved in any legal proceeding or
investigation that is expected by management to have a material adverse effect
on the Company.
34
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Carl D. Thoma............ 49 Chairman of the Board of Directors
Thomas S. Johnson........ 52 Director, President and Chief Executive Officer
Bruce D. Gorchow......... 40 Director
William C. Kessinger..... 32 Director
L. Neal Berney........... 45 Director
Raymond Schilling........ 43 Vice President, Chief Financial Officer, Secretary
and Treasurer
Michael Mueller.......... 46 Vice President, Chief Operating Officer
Alfred N. Vieira......... 50 Vice President of Service
</TABLE>
CARL D. THOMA has served as a director of the Company since its founding in
June 1994. Mr. Thoma is the Managing Partner of Thoma Cressey Equity Partners,
a private equity investment company in Chicago, Illinois, Denver, Colorado and
San Francisco, California formed in December 1997 as a successor entity to
Golder, Thoma, Cressey, Rauner. Mr. Thoma co-founded and has been a Principal
and General Partner with Golder, Thoma, Cressey, Rauner in Chicago, Illinois,
since 1980 and has been a Managing Partner of Golder, Thoma, Cressey, Rauner
since 1993. Mr. Thoma is also a director of ITI Marketing Services, National
Equipment Services, Inc., Paging Network, Inc., Outsource Partners, Inc. and
Capitol Office Solutions, Inc.
THOMAS S. JOHNSON has served as a director and as President and Chief
Executive Officer of the Company since its founding in June 1994. From 1991 to
1994, Mr. Johnson was an office imaging industry consultant. From 1989 to
1990, Mr. Johnson served as Chief Operating Officer for Danka. From 1975 to
1989, Mr. Johnson worked at IKON (formerly known as Alco Standard Corporation)
in various staff and operating roles. When he left there in 1989, he was Vice
President--Operations of the Office Products group and was responsible for
acquisitions and turning around under-performing operations. Mr. Johnson has
been involved in the acquisition of over 55 office equipment dealers since
1985, and has over 22 years of experience in acquiring and integrating
businesses. Mr. Johnson graduated with a B.S. degree from the University of
Florida in 1972, and received his MBA from Harvard Business School in 1976.
Mr. Johnson is also a director of Capitol Office Solutions, Inc.
BRUCE D. GORCHOW has served as a director of the Company since October 1996.
Since 1991, Mr. Gorchow has served as Executive Vice President and head of the
Private Finance Group of PPM America, Inc. Prior to joining PPM America, Inc.,
Mr. Gorchow was a Vice President at Equitable Capital Management, Inc. Mr.
Gorchow received his B.A. in Economics from Haverford College in 1980 and
received his MBA in Finance from the Wharton School of the University of
Pennsylvania in 1982. Mr. Gorchow is also a director of Leiner Health
Products, Inc., Tomah Products, Inc., Burke Industries, Inc., Elgar
Electronics, Inc. and Capitol Office Solutions, Inc.
WILLIAM C. KESSINGER has served as a director of the Company since December
1995. Mr. Kessinger is a Principal in GTCR Golder Rauner, LLC, a private
equity investment company in Chicago, Illinois formed in January 1998 as a
successor entity to Golder, Thoma, Cressey, Rauner. Mr. Kessinger joined
Golder, Thoma, Cressey, Rauner in May 1995 and became a Principal in September
1997. Prior thereto, Mr. Kessinger was a Principal with The Parthenon Group
from July 1994 to May 1995. From August 1992 to June 1994, Mr. Kessinger
attended Harvard Business School, where he received his MBA. Prior to that
time, Mr. Kessinger served as an Associate with Prudential Asset Management
Asia from August 1988 to June 1992. Mr. Kessinger is also a director of
AnswerThink Consulting Group, Inc., Capitol Office Solutions, Inc., Excaliber,
Inc., National Equipment Services, Inc., Users, Inc. and National Computer
Print, Inc.
L. NEAL BERNEY has served as a director of the Company since October 1996.
Since 1980, Mr. Berney has served as President of Berney, Inc., which was
acquired by the Company in February 1995. Mr. Berney has been active in the
office products industry for over 27 years.
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<PAGE>
RAYMOND SCHILLING has served as Vice President, Chief Financial Officer,
Secretary and Treasurer of the Company since its inception in June 1994. From
1988 to 1994, Mr. Schilling was Vice President--Finance of the
California/Nevada region of McCaw Communications and responsible for all of
its finance and administrative functions. From 1980 to 1988, Mr. Schilling
worked with Mr. Johnson at IKON in various accounting and financial reporting
functions, including as controller of Alco Office Products, where his
responsibilities included acquisitions and evaluation, integration,
development and installation of financial systems. From 1986 to 1988, Mr.
Schilling also was Vice President of Finance and Administration of San Sierra
Business Systems (an Alco Office Products dealer). From 1976 to 1980, Mr.
Schilling was employed by Price Waterhouse as a CPA. In total, Mr. Schilling
has been involved in the acquisition of over 35 businesses and has over 16
years of experience in acquiring and integrating businesses. Mr. Schilling
graduated with a B.A. in Economics and Accounting from Muhlenberg College in
1976.
MICHAEL MUELLER has served as a Vice President and Chief Operating Officer
of the Company since January 1, 1995. From 1986 to December 1994, Mr. Mueller
was employed as Vice President by Global Services Inc., a copier and office
product sales and service company in Houston, Texas, and served as its Chief
Financial Officer from 1988 to 1994. Mr. Mueller obtained his B.B.A. from the
University of Houston in 1974.
ALFRED N. VIEIRA has served as a Vice President of Service of the Company
since March 1997. From May 1996 to March 1997, Mr. Vieira served as Vice
President and General Manager of Felco Office Systems, Inc.'s four branch
locations in South Texas. From 1979 to May 1996, Mr. Vieira was employed by
Global Services Inc., and served as its Vice President of Operations from May
1988 to May 1996. Mr. Vieira studied electrical engineering at City University
of New York.
BOARD COMPOSITION
The Board currently is composed of five directors. After the Offering, the
Board expects to increase the size of the Board to seven directors and to
appoint two additional directors who are not employees of the Company or any
of its affiliates. In accordance with the terms of the Company's Amended and
Restated Certificate of Incorporation to be filed and effective upon the
closing of the Offering, the terms of office of the Board of Directors will be
divided into three classes: Class I, whose term will expire at the annual
meeting of stockholders to be held in 1999, Class II, whose term will expire
at the annual meeting of stockholders to be held in 2000, and Class III, whose
term will expire at the annual meeting of stockholders in 2001. The current
Class I director is Neal Berney; the Class II directors are Bruce Gorchow and
William Kessinger; and the Class III directors are Thomas Johnson and Carl
Thoma. At each annual meeting of stockholders, the successors to the directors
whose terms will then expire will be elected to serve from the time of
election and qualification until election and qualification of their
successors at the third annual meeting following election. In addition, the
Company's Amended and Restated Certificate of Incorporation provides that the
authorized number of directors may be changed only by resolution of the Board
of Directors. Any additional directorships resulting from an increase in the
number of directors will be distributed among the three classes so that, as
nearly as possible, each class will consist of one-third of the directors.
Directors of the Company may be removed without cause only upon the
affirmative vote of the holders of 75% of the outstanding Common Stock, or for
cause only upon the affirmative vote of the holders of a majority of the
outstanding Common Stock.
Pursuant to the terms of a Stockholders Agreement among FUND IV, the
Company, and the Company's stockholders, the Company's stockholders agreed to
vote their shares in favor of the election to the Board of the Company's Chief
Executive Officer, three designees of FUND IV and one designee of JNL. These
provisions of the Stockholders Agreement will terminate upon the consummation
of the Offering. Messrs. Thoma, Kessinger and Berney are currently serving as
the director designees of FUND IV, and Mr. Gorchow is the director designee of
JNL. See "Certain Transactions." In addition, the Company has a policy of
nominating for election to the Board, for rotating terms, one of the
presidents of its core companies. Mr. Berney, who is the president of Berney,
Inc., is currently serving as a director pursuant to this policy.
All officers serve at the discretion of the Board of Directors. There are no
family relationships among any of the directors or executive officers of the
Company.
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<PAGE>
COMMITTEES OF THE BOARD
The Board of Directors has established a Compensation Committee, which is
responsible for determining compensation for the Company's executive officers
and administering the Stock Plan. Carl Thoma, William Kessinger and Bruce
Gorchow, all of whom are non-employee directors, are the members of the
Compensation Committee. The Company has also established an Audit Committee,
which is responsible for making recommendations concerning the engagement of
independent public accountants, reviewing the plans and results of such
engagement with the independent public accountants, reviewing the independence
of the independent public accountants, considering the range of audit and non-
audit fees and reviewing the adequacy of the Company's internal accounting
controls. Carl Thoma, William Kessinger and Bruce Gorchow are the members of
the Audit Committee.
COMPENSATION OF DIRECTORS
All directors of the Company are entitled to reimbursement for certain
expenses in connection with their attendance at Board and committee meetings.
Non-employee directors other than Carl Thoma, William Kessinger, and Bruce
Gorchow will also receive a $1,500 fee for each meeting of the Board attended
by such directors. In addition, employee and non-employee directors are
eligible to receive awards under the Stock Plan. Options to purchase 20,250
shares and 250 shares of the Company's Common Stock have been approved for
issuance to Neal Berney and Thomas Johnson, respectively, upon the closing of
the Offering, at an exercise price per share equal to the initial public
offering price set forth on the cover of this Prospectus. No options have been
approved for issuance to any other director of the Company. Currently, the
Company anticipates that non-employee directors of the Company, other than
Carl Thoma, William Kessinger, and Bruce Gorchow, will receive an option to
purchase 10,000 shares of Common Stock upon their initial election to the
Board, and an option to purchase 2,000 shares of Common Stock for each of the
following years during which he or she serves as a director. Each such option
is expected to be exercisable for a purchase price equal to the market value
of the underlying stock on the date of grant, to have a term of ten years and
to vest in five equal annual installments beginning on the first anniversary
of the date of grant. See "Management--1998 Stock Option and Incentive Plan."
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<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth the compensation
paid to or earned by the Company's Chief Executive Officer and all other
executive officers of the Company whose salary and bonus for services rendered
in all capacities to the Company during the year ended March 31, 1998 exceeded
$100,000 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
ANNUAL COMPENSATION RESTRICTED
-------------------- STOCK ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY ($) BONUS ($) AWARDS ($)(1) COMPENSATION ($)(2)
- --------------------------- ----------- ---------- --------- ------------- -------------------
<S> <C> <C> <C> <C> <C>
Thomas S. Johnson
President and Chief
Executive Officer..... 1998 $225,000 $105,000 $43,138 $4,125
1997 210,120 51,000 -- 1,831
Raymond Schilling
Vice President, Chief
Financial Officer,
Secretary and
Treasurer............. 1998 118,962 45,320 -- 1,168
1997 113,550 30,250 -- 336
Michael Mueller
Vice President, Chief
Operating Officer..... 1998 118,962 45,320 -- 3,505
1997 113,300 48,250 -- 1,332
Alfred N. Vieira
Vice President of
Service............... 1998 105,000 33,333 -- 1,050
</TABLE>
- --------
(1) At March 31, 1998, Messrs. Johnson, Schilling, Mueller and Vieira held
209,948, 86,275, 69,019 and 138,038 restricted shares of Common Stock,
respectively, worth an aggregate of $3,134,905, $1,288,243, $1,030,579 and
$2,061,158. Valuations are based on the difference between the price paid
by the named executive officer for the restricted shares and the assumed
initial public offering price of $15.00 per share.
(2) Consists of matching contributions to the Company's Savings Plan.
EXECUTIVE EMPLOYMENT AGREEMENTS
The Company and FUND IV have entered into executive employment agreements
with each of Mr. Johnson, Mr. Schilling, Mr. Mueller and Mr. Vieira (the
"Executive Agreements"). Under their respective Executive Agreements, Mr.
Johnson, Mr. Schilling, Mr. Mueller and Mr. Vieira (the "Executives") receive
annual base salaries currently set at $250,000, $135,000, $135,000 and
$115,000, respectively, subject to periodic increases at the discretion of the
Board and are eligible for an annual bonus of up to 50% of their annual base
salary upon the attainment of certain defined objectives. Pursuant to their
Executive Agreements, Mr. Johnson, Mr. Schilling and Mr. Mueller were
guaranteed certain one-time bonuses in connection with the Company's first
year of operation. Each of the Executives is entitled to all other benefits
approved by the Board and made available to the Company's senior management.
Mr. Johnson is also entitled to receive reimbursement of up to $12,000
annually for certain perquisites. Mr. Johnson's employment under his Executive
Agreement renews automatically for one-year periods unless otherwise
terminated by either party upon 30 days notice. Mr. Schilling, Mr. Mueller,
and Mr. Vieira's employment under their respective Executive Agreements shall
continue at the pleasure of the Board or until the Executive's resignation,
removal, death or disability. In the event of a termination by the Company
without cause, or a termination by Mr. Johnson for good reason, including as a
result of a change in control of the Company, Mr. Johnson is entitled to
receive severance pay equal to his current base salary for a period of one
year and all fringe benefits to which he otherwise would be entitled for
approximately one year. Mr. Johnson, Mr. Schilling, Mr. Mueller, and Mr.
Vieira are each entitled to
38
<PAGE>
a pro rata share of their annual bonus in the event of a termination by the
Company without cause or a voluntary termination by such Executive. The
Executive Agreements contain confidentiality covenants and a covenant not to
compete with the Company for a period of one year following termination of
employment.
Under their respective Executive Agreements, Mr. Johnson, Mr. Schilling, Mr.
Mueller and Mr. Vieira received the right to purchase, and purchased, 647,059,
215,685, 172,548 and 172,548 shares, respectively, of Common Stock at a price
of $0.07 per share. Under his Executive Agreement, Mr. Johnson also received
the right to purchase, at a price of $0.07 per share, certain shares of Common
Stock that were reserved for issuance to senior management in June 1994 and
that remain unissued as of the time of the Company's initial public offering.
Mr. Johnson has purchased 9,026 shares of the Company's Common Stock pursuant
to such right, subject to the Company's right to repurchase such shares in the
event the Offering is not consummated. The Executive Agreements provide the
Company with the right to repurchase shares of Common Stock purchased by an
Executive thereunder under certain circumstances relating to the termination
of his employment. The purchase price payable by the Company upon exercise of
its right of repurchase would be equal to the Executive's purchase price or
the fair market value of the shares, depending upon the length of the
Executive's service with the Company prior to termination of employment.
Following the Offering, the Company's right of repurchase under each Executive
Agreement will terminate as to a number of shares equal to 20% of the shares
purchased thereunder, multiplied by the number of years that have expired
since the date of the agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the formation of the Compensation Committee in February 1998, all
determinations with respect to executive officer compensation were made by the
Board of Directors, including Mr. Johnson, the Company's Chief Executive
Officer, and Mr. Berney, who is an officer of the Company's subsidiary,
Berney, Inc. Each of the Company's directors has purchased securities of the
Company or is affiliated with an entity that has purchased securities of the
Company. See "Certain Transactions" and "Principal and Selling Stockholders."
SAVINGS PLAN
The Company maintains a savings plan (the "Savings Plan") that is intended
to be a qualified retirement plan under the Internal Revenue Code. Generally,
all employees of the Company who are at least 21 years of age are eligible to
participate in the Savings Plan upon the completion of 12 consecutive months
of employment with the Company. Participants may make salary deferral
contributions to the Savings Plan, subject to limitations imposed by the
Internal Revenue Code. Participants' contributions may be invested in any of
several investment alternatives including, after the Offering, a fund that
will invest solely in shares of the Company's Common Stock. The Savings Plan
allows the Company to make discretionary matching contributions to each
participant's account. Employer contributions are subject to a graduated
vesting schedule based upon length of service with the Company.
1998 STOCK OPTION AND INCENTIVE PLAN
The Company has adopted the 1998 Stock Option and Incentive Plan (the "Stock
Plan"), which authorizes the issuance of up to 1,820,000 shares of the
Company's Common Stock pursuant to stock options, restricted stock or
restricted stock units granted to directors, officers and employees of and
consultants and advisors to the Company. No more than 600,000 shares may be
issued under the Stock Plan as restricted stock or as restricted stock units,
and the maximum number of options that may be granted, and the maximum number
of shares of restricted stock or shares represented by restricted stock units
that may be awarded, under the Stock Plan to any eligible employee or
consultant during any calendar year is 400,000.
The Stock Plan is administered by the Compensation Committee of the Board of
Directors. Subject to limitations set forth in the Stock Plan, the Committee
determines to whom options, restricted stock and restricted stock units are
granted, the term, exercise price (which may not be less than the fair market
value of underlying shares on the date of grant), and vesting schedules of
options, the rate at which options may be exercised, and
39
<PAGE>
the conditions to vesting of awards of restricted stock and restricted stock
units. The maximum term of options granted under the Stock Plan is ten years
and the exercise price may be payable in cash or, if permitted by the
applicable option agreement, in Common Stock or a combination of cash and
Common Stock or by cashless exercise using a broker acceptable to the Company.
As of the date of this Prospectus, options to purchase 519,750 shares of the
Company's Common Stock had been approved for issuance to certain employees of
the Company upon the closing of the Offering, at an exercise price per share
equal to the initial public offering price set forth on the cover of this
Prospectus, including options to purchase 250 shares, 10,250 shares, 10,250
shares and 5,250 shares of Common Stock, respectively, approved for issuance
to Messrs. Johnson, Schilling, Mueller and Vieira. All of these options are
subject to vesting requirements based on continued employment (typically 20%
per year of employment). No shares subject to these options have vested or
will vest prior to 180 days following the date of this Prospectus. No other
options or other awards were outstanding or are expected to be granted under
the Stock Plan prior to the closing of the Offering.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
As permitted by the Delaware General Corporation Law, the Company's Amended
and Restated Certificate of Incorporation to be filed and effective upon the
closing of the Offering (the "Charter") provides that directors of the Company
shall not be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of the Delaware General Corporation Law, relating to prohibited dividends or
distributions or the repurchase or redemption of stock or (iv) for any
transaction from which the director derives an improper personal benefit. As a
result of this provision, the Company and its stockholders may be unable to
obtain monetary damages from a director for breach of his or her duty of care.
Additionally, the Charter and the Company's amended and restated bylaws to
be effective upon the closing of the Offering (the "Bylaws") provide for
indemnification of the Company's directors and officers to the fullest extent
permitted by law. The Company has entered into indemnification agreements with
its directors and certain officers and key employees which may, in certain
cases, be broader than the specific indemnification provisions of applicable
law. The indemnification agreements may require the Company, among other
things, to indemnify such directors, officers and key employees against
certain liabilities that may arise by reason of their status or service as
directors, officers and employees, to advance the expenses incurred by such
parties as a result of any threatened claims or proceedings brought against
them as to which they could be indemnified, and to cover such persons under
the Company's directors' and officers' liability insurance policies to the
maximum extent that insurance coverage is maintained.
There is no pending litigation or proceeding involving any director, officer
or employee of the Company as to which indemnification is being sought, nor is
the Company aware of any pending or threatened litigation that may result in
claims for indemnification by any such person.
40
<PAGE>
CERTAIN TRANSACTIONS
THE RECAPITALIZATION
In connection with and upon the consummation of the Offering, each
outstanding share of Class A Common Stock will be redeemed in exchange for a
cash payment equal to (a) the original purchase price per share of Class A
Common Stock ($90) plus (b) yield equal to 8% per annum from the time of
purchase through May 31, 1998, provided that the Offering closes prior to June
30, 1998, plus a pro rata number of shares of Common Stock representing in the
aggregate the entitlement of the holders of Class A Common Stock to receive
10% of the pre-Offering value of the Company (approximately 3.41 shares of
Common Stock per share of Class A Common Stock). The redemption price, in cash
and Common Stock, for the shares of Class A Common Stock is based on the terms
of the Company's Amended and Restated Certificate of Incorporation, as
amended, and a Stockholders Agreement among the Company and its stockholders,
and is set forth in the Company's Amended and Restated Certificate of
Incorporation. The Company will use approximately $35,570,000 of the net
proceeds of the Offering to redeem all of the shares of Class A Common Stock.
In connection with the redemption, FUND IV, an affiliate of Golder, Thoma,
Cressey, Rauner and a holder of a majority of the Company's outstanding stock
prior to the Offering, will receive approximately $23,191,000 and 738,294
shares of Common Stock upon consummation of the Offering in addition to any
amounts it may receive as a Selling Stockholder. Carl Thoma and William
Kessinger, directors of the Company, are both principals of Golder, Thoma,
Cressey, Rauner, and Mr. Thoma is a general partner of Golder, Thoma, Cressey,
Rauner. JNL, which is affiliated with Bruce Gorchow, a director of the
Company, will receive approximately $3,833,000 and 130,233 shares of Common
Stock, in addition to any amounts JNL may receive as a Selling Stockholder.
Messrs. Thoma, Kessinger and Gorchow do not hold any shares of Class A Common
Stock directly, and will not directly receive any of the cash or Common Stock
paid and issued to redeem the Class A Common Stock. Thomas Johnson, Global's
President, Chief Executive Officer and a director of the Company, Neal Berney,
a director of the Company, and Raymond Schilling, Michael Mueller, and Alfred
Vieira, executive officers of the Company, will receive approximately
$572,000, $225,000, $12,000, $23,000 and $12,000, respectively, and 18,457,
6,620, 369, 695 and 369 shares, respectively, in connection with the Class A
Redemption. In addition, FUND IV and JNL will receive estimated net proceeds
of approximately $3,765,000 and $385,000, respectively, as Selling
Stockholders in the Offering, based on an assumed initial public offering
price of $15 per share. If the Underwriters' over-allotment options are
exercised in full, FUND IV and JNL will receive an additional approximately
$12,291,000 and $1,347,000, respectively, in estimated net proceeds, and
Messrs. Johnson and Schilling will receive estimated net proceeds of
approximately $837,000 and $55,000, respectively, based on an assumed initial
public offering price of $15 per share. See "Use of Proceeds" and "Principal
and Selling Stockholders."
FOUNDING AGREEMENTS
The Company was founded in June 1994 by Thomas Johnson and FUND IV. In
connection with the formation of the Company, Mr. Johnson, Raymond Schilling,
FUND IV and the Company entered into various agreements relating to the
management and ownership of the Company. These agreements include an Equity
Purchase Agreement, a Registration Agreement, a Stockholders Agreement, and a
Consulting Agreement (collectively, and as amended to date, the "Founding
Agreements"). A number of the Founding Agreements were amended subsequent to
June 1994 to, among other things, add additional stockholders as parties
thereto and to reflect the transactions described below. Substantially all of
the provisions of the Founding Agreements, with the exception of the
Registration Agreement, will terminate upon completion of the Offering. In
connection with the Company's formation, the Company and FUND IV also entered
into Executive Agreements with Mr. Johnson and Mr. Schilling and,
subsequently, with Michael Mueller and Alfred Vieira. See "Management--
Executive Employment Agreements."
Pursuant to the provisions of the Equity Purchase Agreement among the
Company, FUND IV, Mr. Johnson, and certain additional purchasers named therein
dated as of June 9, 1994, as amended on August 14, 1996 (the "Equity Purchase
Agreement"), the Company sold 6,312,766 shares of Common Stock to FUND IV
and 157,819 shares of Common Stock to Mr. Johnson at a per share purchase
price of $0.08. In addition,
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<PAGE>
FUND IV and Mr. Johnson agreed to purchase, upon the Company's meeting
certain criteria, and subsequently purchased, 216,666.674 and 5,416.697 shares
(the "New Shares") of the Company's Class A Common Stock ("Class A Shares"),
respectively, at a per share purchase price of $90.00. Mr. Johnson paid for
his purchases with the proceeds of a loan from Golder, Thoma, Cressey, Rauner.
The Company and its stockholders have entered into a stockholders agreement,
dated as of June 9, 1994, as amended (the "Stockholders Agreement") which, as
amended, (i) provides for the designation of three directors of the Company by
FUND IV, one director by JNL and for the remainder of the Board to consist of
the Company's chief executive officer; (ii) imposes certain restrictions on
the transfer of shares of the Company; (iii) requires the stockholders to take
all necessary or desirable actions in connection with an initial public
offering of the Company approved by FUND IV, including approving any amendment
to the Company's certificate of incorporation to provide for conversion of
shares of Class A Common Stock into Common Stock in the event that not all
shares of Class A Common Stock will be redeemed for cash, or any other
recapitalization advised by the underwriters and consistent with the terms of
the Company's certificate of incorporation; (iv) requires the Company to offer
to sell shares to the stockholders under certain circumstances upon
authorization of an issuance or sale of additional shares, and (v) grants
certain stockholders certain participation rights in connection with a sale of
shares by other stockholders. The terms of the Stockholders Agreement will
terminate prior to the closing of the Offering.
The Company and its stockholders entered into a registration agreement,
dated as of June 9, 1994, as amended (the "Registration Agreement") pursuant
to which the stockholders have the right in certain circumstances, subject to
certain conditions, to require the Company to register their shares of the
Company's Common Stock for resale under the Securities Act. Under the
Registration Agreement, except in limited circumstances, the Company is
obligated to pay all expenses in connection with such registration. See
"Description of Capital Stock--Registration Rights."
Global and Golder, Thoma, Cressey, Rauner entered into a consulting
agreement dated as of June 9, 1994 (the "Consulting Agreement"), pursuant to
which Golder, Thoma, Cressey, Rauner provides financial and management
consulting services to the Company. Under the Consulting Agreement, Golder,
Thoma, Cressey, Rauner receives an annual management fee of $200,000 (plus
reimbursement of reasonable out-of-pocket expenses and interest on accrued but
unpaid fees) and a placement fee of 1% of the amount of debt or equity capital
raised by Global, excluding the net proceeds of the Offering, for Golder,
Thoma, Cressey, Rauner's assistance in obtaining such capital. In fiscal years
1995, 1996, 1997 and 1998, the Company paid Golder, Thoma, Cressey, Rauner
management fees of $130,000, $200,000, $200,000 and $200,000, and placement
fees of $75,000, $390,000, $0 and $0, respectively. The Consulting Agreement
terminates pursuant to its terms upon the closing of the Offering.
LINE OF CREDIT TRANSACTIONS
In August 1996, the Company and its subsidiaries entered into a secured
credit agreement (as amended in November 1997, the "Credit Agreement") with
JNL and its affiliate PPM America, Inc. ("PPM America"), pursuant to which the
Company has a $6.0 million revolving credit facility and a term credit
facility under which it may borrow up to $114.0 million (the "Credit
Facility"). The term and revolving loans bear interest at 3.25% and 3.00% over
LIBOR, respectively. Principal under the term loan component of the Credit
Facility is repayable in installments over the life of the Credit Facility,
with the final payment due and payable on August 14, 2004. The Company has
pledged substantially all of its assets, including the capital stock of
Global's subsidiaries, to JNL pursuant to the Credit Agreement. The Credit
Agreement requires strict compliance with certain covenants which restrict,
among other things, dividend payments, sales of stock or assets or the
incurrence of additional debt. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
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<PAGE>
In connection with the Company's obtaining the Credit Facility in August
1996, JNL received a financing fee of $1.6 million. Golder, Thoma, Cressey,
Rauner agreed to waive its 1.0% placement fee on the August 1996 debt capital
raised by the Company, because the majority of the work to obtain the
financing was performed by another party, which charged a 1.0% placement fee.
In November 1997 the Credit Agreement was amended and restated to increase
the amount of funds available under the Credit Facility to $120.0 million. In
connection with the amendment, the Company paid JNL a financing fee of
$800,000. The Company believes that the terms of the November 1997 Credit
Agreement amendment and placement fee were on terms no less favorable to it
than it could have obtained from unaffiliated third parties.
In connection with the Credit Facility, Global and JNL entered into an
Investor Purchase Agreement, dated as of August 14, 1996, pursuant to which
the Company sold to JNL 27,083.33 shares of Class A Common Stock at a per
share price of $90.00, and 633,933 shares of Class C Common Stock at a per
share price of $0.10. As a result of its purchase, JNL became a holder of more
than 5% of the Company's outstanding stock. JNL, Global, FUND IV and certain
other stockholders of the Company also entered into amendments to the
Company's Equity Purchase Agreement, Stockholders Agreement and Registration
Agreement which, as amended (i) added JNL as a party thereto; (ii) granted the
Company certain rights to redeem shares of Common Stock held by Mr. Johnson
and FUND IV in the event that Mr. Johnson and FUND IV failed to purchase their
New Shares pursuant to the Equity Purchase Agreement; (iii) granted JNL
certain rights to require the Company to register under the Securities Act
shares of Common Stock held by JNL; (iv) granted JNL the right to designate
one director of the Company and one observer with rights to attend all
meetings of the Company's Board of Directors; (v) required the Company to
amend its certificate of incorporation to provide for conversion of Class A
Common Stock into Common Stock at a discount to market rates under certain
circumstances; and (vi) granted JNL preemptive rights to purchase additional
shares of Class A Common Stock and Class C Common Stock under certain
circumstances. Of these rights, only JNL's rights to require the registration
of shares held by it under the Securities Act will continue after the
Offering. Bruce Gorchow, an executive vice president of PPM America and a
director of the Company, was elected to the Company's Board of Directors
pursuant to JNL's board designation rights under the Stockholders Agreement.
In November 1997, pursuant to JNL's rights under the Stockholders Agreement,
the Company sold JNL an additional 11,136.268 shares of Class A Common Stock
at a per share price of $90.00, and an additional 260,663 shares of Class C
Common Stock at a per share price of $0.10. Shares of Class C Common Stock,
which are non-voting, will convert into shares of Common Stock upon the
closing of the Offering at a rate of one share of Common Stock for each share
of Class C Common Stock.
ACQUISITION OF CAPITOL OFFICE SOLUTIONS, INC. BY FUND IV AND GLOBAL MANAGEMENT
In June 1997, FUND IV, in combination with certain other Global stockholders
and members of Global's management, acquired two thirds of the outstanding
stock of Capitol Office Solutions, Inc. ("Capitol"), a company engaged in the
office imaging solutions industry located in the metropolitan Washington, D.C.
area. Following the acquisition, FUND IV held discussions with the holder of
the minority interest in Capitol about the possibility of a business
combination between Capitol and the Company. The parties were unable to reach
agreement, however, and there can be no assurance that any such business
combination will be consummated in the future. Global and Capitol do not
currently offer the same products and services in any shared geographic
market. In the absence of a business combination, the Company expects that
FUND IV, JNL, and members of the Company's management will sell their Capitol
stock and resign from Capitol's Board of Directors.
As part of the Capitol transaction, Mr. Johnson, Global's President and
Chief Executive Officer and a director of Global; Neal Berney, a director of
Global; Raymond Schilling, Michael Mueller, and Alfred Vieira, executive
officers of Global; and JNL purchased an aggregate of 11.5% of the stock of
Capitol. Global made loans to Mr. Johnson, Mr. Schilling, Mr. Mueller and Mr.
Vieira in the amounts of $200,000, $115,324, $93,169 and $91,507,
respectively. The loans were made on competitive terms and are evidenced by
promissory notes
43
<PAGE>
which bear interest at an annual rate of 8.0% payable at maturity, and which
mature on June 30, 2000. The promissory notes are secured by the Capitol stock
purchased with the loan proceeds. Except for FUND IV, none of these
stockholders holds in excess of ten percent of the voting stock of Capitol. In
connection with the Capitol transaction, JNL extended Capitol a $30.0 million
line of credit. The directors of Capitol include Carl Thoma, William
Kessinger, Bruce Gorchow and Thomas Johnson.
Global and Capitol entered into a consulting agreement dated as of June 30,
1997 (the "Capitol Consulting Agreement"), pursuant to which Global provides
management consulting and advisory services to Capitol. Under the Capitol
Consulting Agreement, Global receives an annual management fee of $150,000
(plus reimbursement of reasonable out-of-pocket expenses and interest on
accrued but unpaid fees). From July 1, 1997 through March 31, 1998, $112,500
in management fees have accrued pursuant to the Capitol Consulting Agreement.
Global also received a one-time fee of $270,000 for Global's assistance in
arranging the Capitol transaction and the JNL loan to Capitol. The Consulting
Agreement terminates upon the sale of Capitol or its assets to a party
unaffiliated with Global or, at Capitol's option, at such time as FUND IV
holds less than 10% of the outstanding common equity of Capitol.
ADDITIONAL LOANS TO MANAGEMENT
In connection with Mr. Schilling's relocation to Tampa, Global loaned Mr.
Schilling $35,000 pursuant to a promissory note, dated September 28, 1995
(which replaces a promissory note dated October 18, 1994 for $30,000), which
bears interest at 6.28% per annum. Interest and principal on Mr. Schilling's
note would become due upon Mr. Schilling's voluntary resignation from
employment with the Company prior to three years from the date of the note, or
will be forgiven on such date if he has not so resigned. Global also loaned to
Mr. Mueller $11,793 in connection with his relocation to Tampa. Mr. Mueller's
loan is evidenced by a promissory note dated April 17, 1995 which contains
terms similar to those of Mr. Schilling's note.
ACQUISITION OF BERNEY, INC.
On February 24, 1995, the Company acquired all of the outstanding capital
stock of Berney, Inc. (the "Berney Acquisition") pursuant to a Stock Purchase
Agreement (the "Berney Acquisition Agreement") in exchange for $4.6 million in
cash ($460,000 of which was allocated as consideration for certain agreements
by the former stockholders of Berney, Inc. not to compete with the Company).
L. Neal Berney, a director of the Company, held a majority of the capital
stock of Berney, Inc. prior to its acquisition by the Company.
In connection with the acquisition of Berney, Inc., Mr. Berney entered into
an Equity Purchase Agreement with the Company and certain other former
stockholders of Berney, Inc., pursuant to which Mr. Berney purchased 996.66
shares of the Company's Class A Common Stock at a per share price of $90.00,
and 29,038 shares of the Company's Common Stock at a per share price of $0.08.
Mr. Berney entered into an executive agreement with Berney, Inc. upon its
acquisition by Global on February 24, 1995 (the "Berney Executive Agreement").
Pursuant to the Berney Executive Agreement, Mr. Berney receives an annual base
salary initially set at $132,000, subject to periodic increases at the
discretion of the board of directors of Berney, Inc., which consists of Mr.
Johnson, Mr. Berney and Mr. Kessinger. Mr. Berney is eligible for an annual
bonus of up to 50% of his annual base salary upon the attainment of certain
defined objectives. The Berney Executive Agreement renews automatically for
one-year periods unless either party gives 30 days notice of termination.
In connection with the Company's acquisition of Berney, Inc., the Company
entered into a lease (the "Berney Lease") with an entity partly owned by Mr.
Berney (the "Berney entity") pursuant to which the Company rents space from
such entity at rates the Company believes are commercially competitive. The
Berney Lease expires on February 29, 2000 and may be extended at the option of
the Company for an additional five year term. In fiscal years 1996, 1997 and
1998 Berney, Inc. has paid $134,000, $141,000 and $170,000, respectively, in
rent pursuant to the Berney Lease. In addition, the Company has reached a
tentative agreement to lease space in an additional building from the Berney
entity.
44
<PAGE>
OTHER TRANSACTIONS
In April 1996, the Company facilitated the sale of 2,210 shares of Class A
Common Stock and 64,390 shares of Common Stock by a departing employee, at a
per share purchase price of $102.13 and $.08, respectively, to certain
investors, all of whom were employees of the Company. In connection with their
participation in the transaction, Neal Berney, Raymond Schilling, Michael
Mueller and Mr. Johnson's son Todd Johnson paid approximately $99,000, $5,600,
$10,000 and $5,000, respectively, and received 946.381, 54.167, 95.749 and
47.875 shares of Class A Common Stock and 27,573, 1,578, 2,789 and 1,394
shares of Common Stock, respectively.
In November 1997, the Company facilitated the sale of 1,083.333 shares of
Class A Common Stock and 31,563 shares of Common Stock by a departing
employee, at a per share purchase price of $102.17 and $.08, respectively, to
certain investors, all of whom were employees of or service providers to the
Company. As part of the Company's termination agreement with the departing
employee, the Company paid the employee an aggregate of approximately $1,400
to compensate for the difference between the sale price for the Common Stock
and the then-determined fair market value of such Common Stock. In connection
with the transaction, Raymond Schilling paid approximately $5,700 and received
54.167 shares of Class A Common Stock and 1,578 shares of Common Stock, and
Michael Mueller, Alfred Vieira, Todd Johnson and Tidewater Partners, LLC, an
entity whose managing members are J. Hovey Kemp and Christopher Hagan,
partners at Hogan & Hartson L.L.P., counsel to the Company, each paid
approximately $11,300 and received 108.333 shares of Class A Common Stock and
3,156 shares of Common Stock.
Mr. Johnson's son, Todd Johnson, is employed by the Company. Todd Johnson
received approximately $56,000 in salary and bonus in fiscal 1997 and
approximately $54,000 in salary in fiscal 1998 and $15,000 in bonus for fiscal
1998.
In March 1998, the Company sold 67,594 shares of Common Stock to FUND IV,
and 9,656 shares of Common Stock to JNL, for a per share purchase price of
$.07 in accordance with the terms of Thomas Johnson's Executive Agreement and
the Stockholders Agreement.
The Company has entered into indemnification agreements with its directors
and executive officers for the indemnification of and advancement of expenses
to such persons to the full extent permitted by law. See "Management--
Limitation of Liability and Indemnification Matters."
The JNL line of credit transactions, the loans to executive officers to
purchase shares of Capitol stock and the Capitol Consulting Agreement, the
transactions described in "Acquisition of Berney, Inc." and the facilitation
of the resale of Global's stock by departing employees were undertaken on
terms the Company believes were no less favorable to it than it would have
obtained from non-affiliated parties, and were in some cases the transactions
pursuant to which such parties became affiliated with the Company. The Company
does not believe that for the other transactions described herein, including
the Class A Redemption, the founding transactions and the relocation loans,
comparable transactions with non-affiliated parties exist, as such
transactions are not of the type that would normally be engaged in with non-
affiliated parties.
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<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of the Company's Common Stock as of March 31, 1998, and as adjusted
to reflect the sale of 7,000,000 shares of the Common Stock offered hereby,
for (i) each person (or group of affiliated persons) known by the Company to
be the beneficial owner of more than 5% of the outstanding Common Stock; (ii)
each of the Named Executive Officers; (iii) each director of the Company; (iv)
each Selling Stockholder and (v) all of the Company's directors and executive
officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARED BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING OFFERING (3)
NAME AND ADDRESS OF ----------------------- SHARES TO BE SOLD -----------------------
BENEFICIAL OWNER (1) NUMBER PERCENT IN OFFERING (2)(3) NUMBER PERCENT
- -------------------- ------------ ---------- ------------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Golder, Thoma, Cressey,
Rauner Fund IV Limited
Partnership (4)........ 7,118,654 61.5% 269,887 6,848,767 37.5%
Jackson National Life
Insurance Company (5).. 1,034,485 8.9 27,584 1,006,901 5.5
Thomas S. Johnson (6)... 832,361 7.2 -- 832,361 4.6
Raymond Schilling (7)... 219,210 1.9 -- 219,210 1.2
Michael Mueller (8)..... 179,188 1.5 -- 179,188 *
Alfred N. Vieira (9).... 176,073 1.5 -- 176,073 *
Carl D. Thoma (4)....... 7,118,654 61.5 269,887 6,848,767 37.5
Bruce D. Gorchow (5).... 1,034,485 8.9 27,584 1,006,901 5.5
William C.
Kessinger (4).......... 7,118,654 61.5 269,887 6,848,767 37.5
L. Neal Berney (10)..... 63,232 * -- 63,232 *
James B. Conway (11).... 211,531 1.8 587 210,944 1.2
Green, Manning & Bunch
Holdings, Inc. (12)... 51,236 * 1,942 49,294 *
All directors and
executive officers as a
group
(8 persons) (13)....... 9,623,203 83.1% 297,471 9,325,732 51.0%
</TABLE>
- --------
* Less than 1%.
(1) Unless otherwise indicated, each person has sole voting and investment
power with respect to shares shown as beneficially owned by such person.
Except as otherwise specified below, the address of each of the beneficial
owners identified is 13902 North Dale Mabry, Suite 300, Tampa, Florida
33618.
(2) In connection with the redemption of Class A Common Stock to be effected
by the Company upon completion of the Offering, FUND IV, JNL, Mr. Johnson,
Mr. Schilling, Mr. Mueller, Mr. Vieira and Mr. Berney will receive
approximately $23,191,000, $3,833,000, $572,000, $12,000, $23,000, $12,000
and $225,000, respectively, in partial payment for the redemption of the
shares of Class A Common Stock held by them. In addition to the cash
payments, they will receive 738,294, 130,233, 18,457, 369, 695, 369 and
6,620 shares of Common Stock, respectively as payment for the redemption
of their shares of Class A Common Stock.
(3) Assumes no exercise of the Underwriters' over-allotment options to
purchase up to an aggregate of 1,050,000 shares of Common Stock from the
Selling Stockholders. If the over-allotment options are exercised in
full, the total number of shares held by FUND IV, JNL, Messrs. Johnson,
Schilling and Conway and GMB after the offering will be reduced to
5,967,677 (32.6%), 910,346 (5.0%), 772,361 (4.2%), 215,250 (1.2%),
208,891 (1.1%) and 49,294 (less than one percent), respectively.
(4) Consists of 6,380,360 shares held of record by FUND IV; and 738,294 shares
of Common Stock issuable to FUND IV upon completion of the Offering in
connection with the redemption of 216,666.674 shares of Class A Common
Stock currently held by FUND IV. Mr. Thoma and Mr. Kessinger, each of whom
is a director of the Company and a principal of Golder, Thoma, Cressey,
Rauner, share voting and investment power with respect to such shares and
each may be deemed to be the beneficial owner of such shares. The address
of each of FUND IV, Carl D. Thoma and William Kessinger is c/o Golder,
Thoma, Cressey, Rauner, Inc., 233 South Wacker Drive, 61st Floor,
6100 Sears Tower, Chicago, Illinois 60606.
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<PAGE>
(5) Consists of 904,252 shares held of record by JNL and 130,233 shares of
Common Stock issuable to JNL upon completion of the Offering in
connection with the redemption of 38,219.598 shares of Class A Common
Stock currently held by JNL. Mr. Gorchow, a director of the Company, is
Executive Vice President of PPM America, Inc., which, as the exclusive
investment advisor to JNL, shares voting and investment power with
respect to shares held by JNL. Accordingly, Mr. Gorchow may be deemed to
be the beneficial owner of such shares. The address of JNL and
Mr. Gorchow is c/o PPM America, Inc., 225 West Wacker Drive, Suite 1200,
Chicago, Illinois 60606.
(6) Includes 18,457 shares of Common Stock issuable to Mr. Johnson upon
completion of the Offering in connection with the redemption of 5,416.697
shares of Class A Common Stock currently held by Mr. Johnson; and 46,200
shares of Common Stock held of record by members of Mr. Johnson's
immediate family over which Mr. Johnson has shared dispositive and sole
voting power.
(7) Includes 369 shares of Common Stock issuable to Mr. Schilling upon
completion of the Offering in connection with the redemption of 108.334
shares of Class A Common Stock currently held by Mr. Schilling.
(8) Includes 695 shares of Common Stock issuable to Mr. Mueller upon
completion of the Offering in connection with the redemption of 204.082
shares of Class A Common Stock currently held by Mr. Mueller.
(9) Includes 369 shares of Common Stock issuable to Mr. Vieira upon
completion of the Offering in connection with the redemption of 108.333
shares of Class A Common Stock currently held by Mr. Vieira.
(10) Includes 6,620 shares of Common Stock issuable to Mr. Berney upon
completion of the Offering in connection with the redemption of
1,943.041 shares of Class A Common Stock currently held by Mr. Berney;
and 28,306 shares of Common Stock held of record by a trust for the
benefit of members of Mr. Berney's immediate family, of which Mr.
Berney's spouse is a co-trustee, and over which shares Mr. Berney may be
deemed to have shared voting and dispositive power. Mr. Berney's address
is c/o Berney, Inc., 209 Gunn Road, Montgomery, Alabama, 36117.
(11) Consists of 189,383 shares held of record by Mr. Conway and 22,148
shares of Common Stock issuable to Mr. Conway upon completion of the
Offering in connection with the redemption of 6,500 shares of Class A
Stock currently held by Mr. Conway. Mr. Conway's address is c/o Conway
Office Products, Inc., 110 Perimeter Road, Nashua, New Hampshire 03063.
(12) Consists of 44,725 shares held of record by Green, Manning & Bunch
Holdings, Inc. ("GMB") and 6,511 shares of Common Stock issuable to GMB
upon completion of the Offering in connection with the redemption of
1,910.809 shares of Class A Stock currently held by GMB. GMB's address
is 3600 Republic Plaza, 370 Seventeenth Street, Denver, Colorado 80202.
(13) Includes 895,037 shares of Common Stock issuable upon completion of the
Offering in connection with the redemption of 262,666.759 shares of
Class A Common Stock currently held by the Company's directors and
executive officers. See Notes (4) through (10) above.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The Company is authorized to issue 51,305,000 shares of Common Stock, of
which 50,000,000 shares are designated as Common Stock, 400,000 shares are
designated as Class A Common Stock, and 905,000 are designated as Class C
Common Stock. After the filing of the Amended and Restated Certificate of
Incorporation to be filed and effective upon the closing of the Offering (the
"Charter"), the Company will be authorized to issue 50,000,000 shares of
Common Stock. As of March 31, 1998 the Company had outstanding
11,583,639 shares of Common Stock and had approximately 93 holders of record
of the Common Stock. Each stockholder of record is entitled to one vote for
each outstanding share of Common Stock owned by such stockholder on every
matter properly submitted to the stockholders for their vote.
Subject to the dividend rights of holders of the Preferred Stock, holders of
Common Stock are entitled to any dividend declared by the Board of Directors
out of funds legally available for such purpose, and, after the payment of any
liquidation preferences to all holders of Preferred Stock, holders of Common
Stock are entitled to receive on a pro rata basis all remaining assets of the
Company available for distribution to the stockholders in the event of the
liquidation, dissolution, or winding up of the Company. Holders of Common
Stock do not have any preemptive right under the Charter to become subscribers
or purchasers of additional shares of any class of the Company's capital
stock.
PREFERRED STOCK
As of the closing of this Offering, no shares of preferred stock, $0.01 par
value per share ("Preferred Stock") will be outstanding. Thereafter, the Board
of Directors will be authorized, without further stockholder approval, to
issue up to 10,000,000 shares of Preferred Stock in one or more series and to
fix the rights, preferences, privileges and restrictions thereof, including
dividend rights, conversion rights, voting rights, terms of redemption and
liquidation preferences, and to fix the number of shares constituting any
series and the designations of such series.
The issuance of Preferred Stock may have the effect of delaying or
preventing a change in control of the Company. The issuance of Preferred Stock
could decrease the amount of earnings and assets available for distribution to
the holders of Common Stock or could adversely affect the rights and powers,
including voting rights, of the holders of the Common Stock. In certain
circumstances, such issuance could have the effect of decreasing the market
price of the Common Stock. The Company currently has no plans to issue any
shares of Preferred Stock.
REGISTRATION RIGHTS
Following the sale of the shares of Common Stock offered hereby, the holders
of 11,283,639 shares of Common Stock (10,233,639 shares if the Underwriters
over-allotment options are exercised in full) will have certain rights with
respect to the registration of their shares under the Securities Act, pursuant
to the terms of the Registration Agreement among the Company and the holders
of such shares (the "Holders"). If the Company proposes to register any of its
securities under the Securities Act, either for its own account or the
accounts of others, the Holders are entitled to notice of such registration
and are entitled to include their shares of Common Stock in such registration;
provided that the underwriters of any offering have the right under certain
conditions to limit the number of such shares included in such registration.
Certain holders may also require the Company to file, at the Company's
expense, an unlimited number of registration statements under the Securities
Act with respect to their shares of Common Stock, provided that the aggregate
net cash proceeds to all sellers of Common Stock on any such registration
statement is at least $5 million and subject to certain frequency limitations.
Pursuant to the Registration Agreement, the Company has agreed not to make any
public offering of any shares of Common Stock or any securities convertible
into Common Stock for a period extending 90 days after the date of any
underwritten offering in which shares are registered pursuant to the
Registration Agreement without the prior written consent of the underwriters
of such offering, subject to certain exceptions.
The existence and exercise of the foregoing registration rights may hinder
efforts by the Company to arrange future financing for the Company and may
have an adverse effect on the market price of the Common Stock. See "Risk
Factors--Need For Substantial Additional Funds; Highly Leveraged Capital
Structure."
48
<PAGE>
DELAWARE LAW AND CERTAIN CHARTER, BYLAW AND OTHER PROVISIONS
The Charter allows the Company to issue without stockholder approval
preferred stock having rights senior to those of the Common Stock. In
addition, the Company will be subject to the provisions of Section 203 of the
Delaware General Corporation Law. Section 203 prohibits publicly held Delaware
corporations from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. A "business combination"
includes mergers, asset sales and other transactions resulting in a financial
benefit to the interested stockholder. Subject to certain exceptions, an
"interested stockholder" is a person who, together with affiliates and
associates, owns, or within three years did own, 15% or more of the
corporation's voting stock. These provisions could have the effect of
delaying, deferring or preventing a change in control of the Company or
reducing the price that certain investors might be willing to pay in the
future for shares of the Common Stock.
The Charter provides that each director will serve for a three-year term
with approximately one third of the directors to be elected annually.
Candidates for director may be nominated only by the Board of Directors or by
a stockholder who gives written notice to the Company no later than 60 days
prior nor earlier than 90 days prior to the first anniversary of the last
annual meeting of stockholders. The Company may have as many directors as may
be determined from time to time pursuant to a resolution of the Board. Between
stockholder meetings, the Board may appoint new directors to fill vacancies or
newly created directorships. The Charter will not provide for cumulative
voting at stockholder meetings for election of directors. As a result,
stockholders controlling more than 50% of the outstanding Common Stock can
elect the entire Board of Directors, while stockholders controlling 49% or
less of the Common Stock may not be able to elect any directors. A director
may be removed from office without cause only by the affirmative vote of 75%
of the combined voting power of the then outstanding shares entitled to vote
generally in the election of directors and for cause only by the affirmative
vote of a majority of such combined voting power. See "Management--Board
Composition."
The Charter and the Bylaws also require that, any action required or
permitted to be taken by stockholders of the Company must be effected at a
duly called annual or special meeting of the stockholders and may not be
effected by a consent in writing unless such consent is obtained from the
holders of at least 75% of the outstanding shares of stock entitled to vote on
such action. In addition, special meetings of the stockholders of the Company
may be called only by the Board of Directors, the Chairman of the Board, the
chief executive officer of the Company, or by any person or persons holding
shares representing at least 20% of the outstanding capital stock. These
provisions may have the effect of deterring hostile takeovers or delaying
changes in control or management of the Company.
TRANSFER AGENT AND REGISTRAR
First Union National Bank has been appointed as the transfer agent and
registrar for the Company's Common Stock.
49
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 18,283,639 shares of
Common Stock outstanding. Of these shares, the 7,000,000 shares (8,050,000
shares if the Underwriters' over-allotment options are exercised in full) of
Common Stock sold in the Offering will be freely transferable without
restriction under the Securities Act unless they are held by the Company's
"affiliates," as defined in Rule 144 under the Securities Act.
The remaining 11,283,639 shares of Common Stock outstanding (10,233,639
shares of Common Stock if the Underwriters' over-allotment options are
exercised in full) are "restricted securities" as that term is defined in Rule
144 (the "Restricted Shares"). Of the Restricted Shares, approximately
10,600,000 shares will become eligible for sale 90 days after completion of
the Offering, subject in some cases to certain volume restrictions and other
conditions imposed under Rule 144. The remaining approximately 680,000 shares
will be eligible for sale upon the expiration of their respective holding
periods as set forth in Rule 144. In addition, the holders of approximately
11,283,639 of the Restricted Shares are entitled to certain registration
rights with respect to such shares. See "Description of Capital Stock--
Registration Rights." While 11,270,847 of the Restricted Shares (10,220,847 if
the Underwriters' over-allotment options are exercised in full) are subject to
lock-up agreements and may not be sold for 180 days following the date of this
Prospectus, such agreements provide that Prudential Securities Incorporated
may, in its sole discretion at any time and without notice, release all or a
portion of the shares from these lock-up agreements.
Following the date of this Prospectus, the Company intends to register on
one or more registration statements on Form S-8 approximately 1,820,000 shares
of Common Stock issuable under the Stock Plan. Of the 1,820,000 shares
issuable under the Stock Plan, none will be outstanding on the date of
completion of the Offering and no options to purchase such shares will vest
prior to 180 days following the date of this Prospectus.
In general, under Rule 144, a person (or persons whose shares are
aggregated), including an affiliate, who has beneficially owned shares for at
least one year (including holding periods of prior owners other than
affiliates) is entitled to sell, within any three-month period commencing 90
days after the closing of the Offering, a number of shares that does not
exceed the greater of (i) 1% of the then outstanding Common Stock
(approximately 182,836 shares immediately after this Offering) or (ii) the
average weekly trading volume in the Common Stock during the four calendar
weeks preceding the sale, subject to the filing of a Form 144 with respect to
the sale and other limitations. A person who is not an affiliate, has not been
an affiliate within three months prior to sale and has beneficially owned
restricted securities for at least two years is entitled to sell such shares
under Rule 144 without regard to any of the limitations described above.
The Company, its executive officers and directors, the Selling Stockholders
and certain stockholders of the Company have agreed that they will not, for a
period of 180 days subsequent to the date of this Prospectus, directly or
indirectly, offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise sell or dispose (or announce any offer, sale,
offer of sale, contract of sale, pledge, grant of any option to purchase or
other sale or disposition) of any shares of Common Stock or securities
substantially similar thereto, or any securities convertible into or
exercisable or exchangeable for, any shares of Common Stock or securities
substantially similar thereto of the Company (excluding shares of Common Stock
held or proposed to be held through the Company's Savings Plan) without the
prior written consent of Prudential Securities Incorporated, on behalf of the
Underwriters, except that such agreements do not prevent the Company from
granting additional options under the Stock Plan. Prudential Securities
Incorporated may, in its sole discretion, at any time and without notice,
release all or any portion of the securities subject to such lock-up
agreements.
Prior to the Offering, there has been no public market for the Common Stock
of the Company. Sales of a substantial amount of Common Stock in the public
market could adversely affect the market price of the Common Stock and impair
the Company's ability to sell equity securities in the future on favorable
terms.
50
<PAGE>
UNDERWRITING
The underwriters named below (the "Underwriters"), for whom Prudential
Securities Incorporated, Smith Barney Inc., William Blair & Company, L.L.C.
and Raymond James & Associates, Inc. are acting as representatives (the
"Representatives"), have severally agreed, subject to the terms and conditions
contained in the Underwriting Agreement, to purchase from the Company and the
Selling Stockholders the number of shares of Common Stock set forth opposite
their respective names:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Prudential Securities Incorporated.................................
Smith Barney Inc...................................................
William Blair & Company, L.L.C.....................................
Raymond James & Associates, Inc....................................
---------
Total.............................................................. 7,000,000
=========
</TABLE>
The Company and the Selling Stockholders are obligated to sell, and the
Underwriters are obligated to purchase, all of the shares of Common Stock
offered hereby, if any are purchased.
The Underwriters, through their Representatives, have advised the Company
and the Selling Stockholders that they propose to offer the shares of Common
Stock initially at the public offering price set forth on the cover page of
this Prospectus; that the Underwriters may reallow to selected dealers a
concession of $ per share; and that such dealers may reallow a concession
of $ per share to certain other dealers. After the initial public offering,
the offering price and the concessions may be changed by the Representatives.
The Selling Stockholders have granted the Underwriters over-allotment
options, exercisable for 30 days from the date of this Prospectus, to
purchase, in the aggregate, up to 1,050,000 additional shares of Common Stock
at the initial public offering price, less underwriting discounts and
commissions, as set forth on the cover page of this Prospectus. The
Underwriters may exercise such options solely for the purpose of covering
over-allotments incurred in the sale of the shares of Common Stock offered
hereby. To the extent such options to purchase are exercised, each Underwriter
will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number set
forth next to such Underwriter's name in the preceding table bears to
7,000,000.
The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters and contribute to any losses arising out of certain
liabilities, including liabilities under the Securities Act.
The Representatives have informed the Company and the Selling Stockholders
that the Underwriters do not intend to confirm sales to any accounts over
which they exercise discretionary authority.
The Company, its executive officers and directors, the Selling Stockholders
and certain stockholders of the Company have agreed that they will not, for a
period of 180 days subsequent to the date of this Prospectus, directly or
indirectly, offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise sell or dispose (or announce any offer, sale,
offer of sale, contract of sale, pledge, grant of any option to purchase or
other sale or disposition) of any shares of Common Stock or securities
substantially similar thereto, or any securities convertible into or
exercisable or exchangeable for, any shares of Common Stock or securities
substantially similar thereto of the Company (excluding shares of Common Stock
held or proposed to be held through the Company's Savings Plan) without the
prior written consent of Prudential Securities Incorporated, on
51
<PAGE>
behalf of the Underwriters, except that such agreements do not prevent the
Company from granting additional options under the Stock Plan. Prudential
Securities Incorporated may, in its sole discretion, at any time and without
notice, release all or any portion of the securities subject to such lock-up
agreements.
At the request of the Company, the Underwriters have initially reserved up
to 650,000 shares of Common Stock for sale at the initial public offering
price to directors, officers, employees, and business associates of the
Company. The number of shares of Common Stock reserved for sale to directors,
officers, employees and business associates may be increased. The number of
shares of Common Stock available for sale to the general public will be
reduced to the extent such persons purchase such reserved shares. Any reserved
shares which are not so purchased will be offered by the Underwriters to the
public on the same basis as the other shares offered hereby.
Prior to the Offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price will be
determined through negotiations among the Company, the Selling Stockholders
and the Representatives. Among the factors to be considered in making such
determination will be the prevailing market conditions, the Company's
financial and operating history and condition, its prospects and the prospects
for its industry in general, the management of the Company and the market
prices of securities for companies in businesses similar to that of the
Company.
In connection with the Offering, certain Underwriters (and selling group
members, if any) and their respective affiliates may engage in transactions
that stabilize, maintain or otherwise affect the market price of the Common
Stock. Such transactions may include stabilization transactions effected in
accordance with Rule 104 of Regulation M, pursuant to which such persons may
bid for or purchase Common Stock for the purpose of stabilizing its market
price. The Underwriters also may create a short position for the account of
the Underwriters by selling more Common Stock in connection with the Offering
than they are committed to purchase from the Company and the Selling
Stockholders, and in such case may purchase Common Stock in the open market
following the closing of the Offering to cover all or a portion of such short
position. The Underwriters may also cover all or a portion of such short
position, up to 1,050,000 shares of Common Stock, by exercising the
Underwriters' over-allotment options referred to above. In addition,
Prudential Securities Incorporated, on behalf of the Underwriters, may impose
"penalty bids" under contractual arrangements with the Underwriters whereby it
may reclaim from an Underwriter (or dealer participating in the Offering) for
the account of the other Underwriters, the selling concession with respect to
Common Stock that is distributed in the Offering but subsequently purchased
for the account of the Underwriters in the open market. Any of the
transactions described in this paragraph may result in the maintenance of the
price of the Common Stock at a level above that which might otherwise prevail
in the open market. None of the transactions described in this paragraph is
required, and, if they are undertaken, may be discontinued at any time.
LEGAL MATTERS
The legality of the shares of Common Stock offered hereby will be passed
upon for the Company by Hogan & Hartson L.L.P., Washington, D.C. Certain legal
matters will be passed upon for the Underwriters by Willkie Farr & Gallagher,
New York, New York. Tidewater Partners, LLC ("Tidewater"), a limited liability
company whose managing members are J. Hovey Kemp and Christopher J. Hagan,
partners of Hogan & Hartson L.L.P., and whose additional members consist of
two attorneys and one legal assistant at Hogan & Hartson L.L.P., owns 650
shares of the Company's Class A Common Stock and 15,834 shares of Common
Stock. Upon completion of the Offering and the redemption of shares of the
Company's Class A Common Stock, Tidewater will receive approximately $65,000
and will hold a total of 18,048 shares of Common Stock. J. Hovey Kemp and
Christopher J. Hagan each serve as Assistant Secretary to the Company. Mr.
Kemp is also a Director and an Assistant Secretary of Capitol.
52
<PAGE>
EXPERTS
The consolidated financial statements of Global Imaging Systems, Inc. at
March 31, 1996, March 31, 1997, and March 31, 1998 and for each of the three
years in the period ended March 31, 1998, appearing in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
The financial statements of Copy Service & Supply, Inc. for the five-month
period ended May 31, 1996, appearing in this Prospectus and Registration
Statement have been audited by Barnard, Combs, Potts & Rhyne, PA, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
The financial statements of Southern Business Communications Group for the
nine-month period ended September 30, 1996, appearing in this Prospectus and
Registration Statement have been audited by Smith & Howard, P.C., independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
The financial statements of Electronic Systems, Inc. for each of the two
years in the period ended December 31, 1996, and for the six-month period
ended June 30, 1997, appearing in this Prospectus and Registration Statement
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon appearing elsewhere herein, and are included in reliance
upon such report given upon the authority of such firm as experts in
accounting and auditing.
The financial statements of Eastern Copy Products, Inc. and Subsidiaries for
each of the three years in the period ended July 31, 1997, appearing in this
Prospectus and Registration Statement have been audited by Pasquale & Bowers,
LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The financial statements of Duplicating Specialties, Inc. d/b/a Copytronix
for the ten-month period ended August 31, 1997, appearing in this Prospectus
and Registration Statement have been audited by Moss Adams LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
The financial statements of Electronic Systems of Richmond, Inc. for the
year ended December 31, 1996 and for the eleven-month period ended November
30, 1997, appearing in this Prospectus and Registration Statement have been
audited by Edmondson, LedBetter & Ballard, L.L.P., independent auditors, as
set forth in their report thereon appearing elsewhere herein, and are included
in reliance upon such report given upon the authority of such firm as experts
in accounting and auditing.
The financial statements of Connecticut Business Systems, Inc. for each of
the two years in the period ended September 30, 1997, and for the three-month
period ended December 31, 1997, appearing in this Prospectus and Registration
Statement have been audited by Arthur Andersen LLP, independent auditors, as
set forth in their report thereon appearing elsewhere herein, and are included
in reliance upon such report given upon the authority of such firm as experts
in accounting and auditing.
The financial statements of the Business Systems Division of Bloom's Inc.,
for the year ended January 31, 1997, and for the eleven-month period ended
December 31, 1997, appearing in this Prospectus and Registration Statement
have been audited by Joseph D. Kalicka & Company, LLP, independent auditors,
as set forth in their report thereon appearing elsewhere herein, and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
53
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form S-1 under the Securities Act, of which this
Prospectus is a part, with respect to the Common Stock offered hereby. This
Prospectus omits certain information contained in the Registration Statement,
and reference is made to the Registration Statement for further information
with respect to the Company and the Common Stock offered hereby. Statements
contained herein concerning the provisions of documents are necessarily
summaries of such documents and when any such document is an exhibit to the
Registration Statement, each such statement is qualified in its entirety by
reference to the copy of such document filed with the Commission. The
Registration Statement, including the exhibits and schedules thereto, may be
inspected without charge at the principal office of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, and the Commission's Regional
Offices at 65 Park Place, Room 1288, New York, New York 10017, and Northwest
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60621-
2511, and copies may be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Registration Statement, including all exhibits and schedules, and such
reports and other information may also be accessed electronically by means of
the Commission's site on the World Wide Web, at http://www.sec.gov.
The Company intends to furnish to its stockholders annual reports containing
financial statements audited by its independent certified public accountants
and make available to its stockholders quarterly reports containing unaudited
financial data for the first three quarters of each fiscal year.
54
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
FINANCIAL STATEMENTS OF GLOBAL IMAGING SYSTEMS, INC.
Report of Independent Auditors........................................... F-3
Consolidated Balance Sheets as of March 31, 1996, 1997 and 1998.......... F-4
Consolidated Statements of Operations for the Years Ended March 31, 1996,
1997 and 1998........................................................... F-6
Consolidated Statements of Stockholders' Equity (Deficit) for the Years
Ended March 31, 1996, 1997 and 1998 .................................... F-7
Consolidated Statements of Cash Flows for the Years Ended March 31, 1996,
1997 and 1998........................................................... F-8
Notes to Consolidated Financial Statements............................... F-9
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
Basis of Presentation.................................................... F-19
Unaudited Pro Forma Consolidated Statement of Income--Year Ended March
31, 1998................................................................ F-20
FINANCIAL STATEMENTS OF COPY SERVICE & SUPPLY, INC.
Independent Auditors' Report............................................. F-22
Combined Statement of Income and Owners' Capital for the Five-Month
Period Ended May 31, 1996............................................... F-23
Combined Statement of Cash Flows for the Five-Month Period Ended May 31,
1996.................................................................... F-24
Notes to Financial Statements............................................ F-25
FINANCIAL STATEMENTS OF SOUTHERN BUSINESS COMMUNICATIONS GROUP
Independent Auditors' Report............................................. F-30
Combined Statement of Income for the Nine-Month Period Ended September
30, 1996................................................................ F-31
Combined Statement of Cash Flows for the Nine-Month Period Ended
September 30, 1996...................................................... F-32
Notes to Combined Financial Statements................................... F-33
FINANCIAL STATEMENTS OF ELECTRONIC SYSTEMS, INC.
Report of Independent Auditors........................................... F-35
Statements of Income and Retained Earnings for the Years Ended December
31, 1995 and 1996 and the Six-Month Period Ended June 30, 1997.......... F-36
Statements of Cash Flows for the Years Ended December 31, 1995 and 1996
and the Six-Month Period Ended June 30, 1997............................ F-37
Notes to Financial Statements............................................ F-38
FINANCIAL STATEMENTS OF EASTERN COPY PRODUCTS, INC. AND SUBSIDIARIES
Independent Auditors' Report............................................. F-41
Consolidated Statements of Income and Retained Earnings for the Years
Ended July 31, 1995, 1996 and 1997...................................... F-42
Consolidated Statements of Cash Flows for the Years Ended July 31, 1995,
1996 and 1997........................................................... F-43
Notes to the Consolidated Financial Statements........................... F-44
FINANCIAL STATEMENTS OF DUPLICATING SPECIALTIES, INC. (COPYTRONIX)
Independent Auditor's Report............................................. F-48
Statement of Income and Retained Earnings for the Ten-Month Period Ended
August 31, 1997......................................................... F-49
Statement of Cash Flows for the Ten-Month Period Ended August 31, 1997... F-50
Notes to Financial Statements............................................ F-51
</TABLE>
F-1
<PAGE>
<TABLE>
<S> <C>
FINANCIAL STATEMENTS OF ELECTRONIC SYSTEMS OF RICHMOND, INC.
Independent Auditor's Report.............................................. F-54
Statements of Income and Retained Earnings for the Year Ended December 31,
1996 and the Eleven-Month Period Ended November 30, 1997................. F-55
Statements of Cash Flows for the Year Ended December 31, 1996 and the
Eleven-Month Period Ended November 30, 1997.............................. F-56
Notes to Financial Statements............................................. F-57
FINANCIAL STATEMENTS OF CONNECTICUT BUSINESS SYSTEMS, INC.
Report of Independent Public Accountants.................................. F-59
Statements of Income (Loss) and Retained Earnings (Deficit) for the Years
Ended September 30, 1996 and 1997 and Three-Month Period Ended December
31, 1997................................................................. F-60
Statements of Cash Flows for the Years Ended September 30, 1996 and 1997
and the Three-Month Period Ended December 31, 1997....................... F-61
Notes to Financial Statements............................................. F-62
FINANCIAL STATEMENTS OF BUSINESS SYSTEMS DIVISION (BLOOMS)
Report of Independent Certified Public Accountants........................ F-66
Statements of Divisional Net Assets for the Year Ended January 31, 1997
and the 11-Month Period Ended December 31, 1997.......................... F-67
Statements of Divisional Operations for the Year Ended January 31, 1997
and the 11-Month Period Ended December 31, 1997 ......................... F-68
Statements of Changes in Divisional Net Assets for the Year Ended January
31, 1997 and the 11-Month Period Ended December 31, 1997................. F-69
Statements of Divisional Cash Flows for the Year Ended January 31, 1997
and the 11-Month Period Ended December 31, 1997.......................... F-70
Notes to Financial Statements............................................. F-71
</TABLE>
F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Global Imaging Systems, Inc.
We have audited the accompanying consolidated balance sheets of Global
Imaging Systems, Inc. as of March 31, 1996, 1997 and 1998, and the related
consolidated statements of operations, stockholders' equity, and cash flows
for each of the three years in the period ended March 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Global Imaging Systems, Inc. at March 31, 1996, 1997 and 1998, and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended March 31, 1998, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Tampa, Florida
May 6, 1998
except as to Note 12, as to which the date is May 28, 1998.
F-3
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31
------------------------------------
1996 1997 1998
----------- ----------- ------------
A S S E T S
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents............... $ 397,727 $ 960,758 $ 4,496,085
Accounts receivable, net of allowance
for doubtful accounts ($200,000,
$309,000 and $871,000 at March 31,
1996, 1997 and 1998, respectively)..... 5,653,186 10,856,167 27,571,944
Inventories............................. 5,526,050 10,055,214 19,061,389
Deferred income taxes................... 251,000 554,000 1,543,000
Prepaid expenses and other current
assets................................. 134,448 112,260 424,706
----------- ----------- ------------
Total current assets.................. 11,962,411 22,538,399 53,097,124
Rental equipment, net..................... 2,634,613 3,668,106 4,655,318
Property and equipment, net............... 1,246,512 1,721,134 4,418,612
Other assets.............................. 294,930 173,816 2,146,653
Deferred income taxes..................... 121,500 870,000 571,000
Related party notes receivable............ -- 46,793 546,793
Intangible assets, net:
Goodwill................................ 25,074,904 35,824,147 94,685,401
Noncompete agreements................... 1,933,333 1,615,855 1,336,227
Financing fees.......................... 406,987 2,531,917 2,885,181
----------- ----------- ------------
Total assets.......................... $43,675,190 $68,990,167 $164,342,309
=========== =========== ============
</TABLE>
See accompanying notes.
F-4
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS--(CONTINUED)
<TABLE>
<CAPTION>
UNAUDITED
MARCH 31 PRO FORMA
-------------------------------------- MARCH 31
1996 1997 1998 1998
----------- ----------- ------------ ----------
L I A B I L I T I E S A N D S T O C K H O L D E R S ' E Q U I T Y
<S> <C> <C> <C> <C>
Current liabilities:
Accounts payable......... $ 1,468,904 $ 3,811,761 $ 10,555,655
Accrued liabilities...... 773,833 1,467,343 3,878,262
Accrued compensation and
benefits................ 940,328 1,789,605 3,542,921
Current maturities of
long-term debt.......... 312,641 562,700 232,916
Deferred revenue......... 3,358,279 5,252,390 10,632,476
Income taxes payable..... 70,000 -- --
----------- ----------- ------------
Total current
liabilities........... 6,923,985 12,883,799 28,842,230
Long-term debt, less
current maturities........ 21,518,848 36,310,123 97,251,600
----------- ----------- ------------
Total liabilities...... 28,442,833 49,193,922 126,093,830
Stockholders' equity:
Class A common stock,
$.01 par value: 400,000
shares authorized;
172,917, 211,146 and
339,945 shares issued
and outstanding at March
31, 1996, 1997 and 1998,
respectively............ 1,729 2,111 3,399 $ --
Class B common stock,
$.01 par value:
50,000,000 shares
authorized; 8,114,436,
8,562,708 and 9,521,058
shares issued and
outstanding at March 31,
1996, 1997 and 1998,
respectively............ 81,144 85,627 95,211 106,794
Class C common stock,
$.01 par value: 905,000
shares authorized; -0-,
633,996 and 904,252
shares issued and
outstanding at March 31,
1996, 1997 and 1998,
respectively............ -- 6,340 9,043 9,043
Additional paid-in
capital................. 15,970,927 19,500,286 33,617,680 3,148,307
Retained earnings
(deficit)............... (821,443) 301,881 4,754,465 (354,127)
----------- ----------- ------------ ----------
15,232,357 19,896,245 38,479,798 2,910,017
Less stockholder
receivables............. -- (100,000) (231,319) (231,319)
----------- ----------- ------------ ----------
Total stockholders'
equity................ 15,232,357 19,796,245 38,248,479 $2,678,698
----------- ----------- ------------ ==========
Total liabilities and
stockholders' equity.. $43,675,190 $68,990,167 $164,342,309
=========== =========== ============
</TABLE>
See accompanying notes.
F-5
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31
--------------------------------------
1996 1997 1998
----------- ----------- ------------
<S> <C> <C> <C>
Revenues:
Equipment and supplies sales........ $20,561,009 $41,200,292 $121,316,021
Service and rentals................. 16,404,888 22,892,898 43,059,246
----------- ----------- ------------
Total revenues.................... 36,965,897 64,093,190 164,375,267
Costs and operating expenses:
Cost of equipment and supplies
sales.............................. 13,455,435 27,087,299 85,971,953
Service and rental costs............ 8,302,791 11,467,191 21,593,696
Selling, general and administrative
expenses........................... 11,687,398 18,279,813 38,619,666
Intangible asset amortization....... 1,396,463 1,939,288 3,075,831
----------- ----------- ------------
Total costs and operating
expenses......................... 34,842,087 58,773,591 149,261,146
----------- ----------- ------------
Income from operations................ 2,123,810 5,319,599 15,114,121
Interest expense...................... (2,041,178) (3,189,204) (6,713,327)
----------- ----------- ------------
Income before income taxes............ 82,632 2,130,395 8,400,794
Income taxes.......................... 275,000 1,007,071 3,948,210
----------- ----------- ------------
Net income (loss)..................... (192,368) 1,123,324 4,452,584
Yield adjustment on Class A common
stock................................ (1,022,979) (1,402,225) (2,442,119)
----------- ----------- ------------
Net income (loss) available to common
stockholders......................... $(1,215,347) $ (278,901) $ 2,010,465
=========== =========== ============
Earnings (loss) per share, basic and
diluted.............................. $ (.15) $ (.03) $ .21
=========== =========== ============
Weighted average number of shares used
in the calculation................... 8,017,812 8,728,568 9,804,953
=========== =========== ============
</TABLE>
See accompanying notes.
F-6
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
COMMON STOCK COMMON STOCK COMMON STOCK ADDITIONAL RETAINED
----------------- ------------------- ----------------- PAID-IN STOCKHOLDER EARNINGS
SHARES PAR VALUE SHARES PAR VALUE SHARES PAR VALUE CAPITAL RECEIVABLES (DEFICIT) TOTAL
------- --------- --------- --------- ------- --------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at March
31, 1995........ 48,995 $ 490 7,890,960 $78,910 -- $ -- $ 4,893,491 $ -- $ (629,075) $ 4,343,816
Common stock
issued......... 123,922 1,239 223,476 2,234 -- -- 11,077,436 -- -- 11,080,909
Net loss........ -- -- -- -- -- -- -- -- (192,368) (192,368)
------- ------ --------- ------- ------- ------ ----------- --------- ---------- -----------
Balances at March
31, 1996........ 172,917 1,729 8,114,436 81,144 -- -- 15,970,927 -- (821,443) 15,232,357
Common stock
issued......... 38,229 382 448,272 4,483 633,996 6,340 3,529,359 (100,000) -- 3,440,564
Net income...... -- -- -- -- -- -- -- -- 1,123,324 1,123,324
------- ------ --------- ------- ------- ------ ----------- --------- ---------- -----------
Balances at March
31, 1997........ 211,146 2,111 8,562,708 85,627 633,996 6,340 19,500,286 (100,000) 301,881 19,796,245
Common stock
issued......... 128,799 1,288 958,350 9,584 270,256 2,703 14,117,394 (131,319) -- 13,999,650
Net income...... -- -- -- -- -- -- -- -- 4,452,584 4,452,584
------- ------ --------- ------- ------- ------ ----------- --------- ---------- -----------
Balances at March
31, 1998........ 339,945 $3,399 9,521,058 $95,211 904,252 $9,043 $33,617,680 $(231,319) $4,754,465 $38,248,479
======= ====== ========= ======= ======= ====== =========== ========= ========== ===========
</TABLE>
See accompanying notes.
F-7
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31
---------------------------------------
1996 1997 1998
----------- ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)..................... $ (192,368) $ 1,123,324 $ 4,452,584
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation........................ 2,237,923 2,533,486 3,592,850
Amortization........................ 1,687,168 2,575,879 3,630,127
Deferred income taxes............... (372,500) (527,500) 278,000
Changes in operating assets and
liabilities, net of amounts
acquired in purchase business
combinations:
Accounts receivable............... (770,168) (2,105,605) (2,340,904)
Inventories....................... (936,942) (1,278,697) (1,034,153)
Prepaid expenses and other current
assets........................... 213,760 131,414 47,843
Other assets...................... (201,600) 71,692 (201,332)
Accounts payable.................. 387,810 615,923 (1,565,038)
Accrued liabilities............... (1,427,399) 1,010,451 (545,106)
Deferred revenue.................. 282,893 268,518 (72,248)
Income taxes...................... (63,308) (105,000) (440,051)
----------- ------------ ------------
Net cash provided by operating
activities........................... 845,269 4,313,885 5,802,572
INVESTING ACTIVITIES
Related party notes receivable........ -- (46,793) (500,000)
Purchases of property, equipment and
rental equipment..................... (1,593,964) (2,939,709) (3,423,734)
Payment for purchase of businesses,
net of cash acquired................. (8,098,428) (16,008,039) (67,974,869)
----------- ------------ ------------
Net cash used in investing
activities........................... (9,692,392) (18,994,541) (71,898,603)
FINANCING ACTIVITIES
Net draws (payments) under line of
credit agreements.................... (1,883,248) 14,564,648 60,560,308
Financing fees........................ (697,830) (2,761,525) (884,148)
Deferred cost of initial public
offering............................. -- -- (1,646,900)
Common stock issued for cash.......... 11,080,909 3,440,564 11,602,098
----------- ------------ ------------
Net cash provided by financing
activities........................... 8,499,831 15,243,687 69,631,358
----------- ------------ ------------
Net increase (decrease) in cash and
cash equivalents..................... (347,292) 563,031 3,535,327
Cash and cash equivalents, beginning
of year.............................. 745,019 397,727 960,758
----------- ------------ ------------
Cash and cash equivalents, end of
year................................. $ 397,727 $ 960,758 $ 4,496,085
=========== ============ ============
</TABLE>
See accompanying notes.
F-8
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
Global Imaging Systems, Inc. was formed on June 3, 1994. The Company's
principal operating subsidiaries are located in the United States and are in
the business of supplying photocopiers, facsimile equipment, automated office
equipment, electronic presentation and document imaging equipment, network
integration services and related service, parts, and supplies. The
consolidated financial statements include the financial statements of Global
Imaging Systems, Inc. and its subsidiaries (the Company). All significant
intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Revenue Recognition
Revenue is recognized as follows:
Supply sales to customers are recognized at the time of shipment. Equipment
sales are recognized at the time of customer acceptance, or in the case of
equipment sales financed by third-party leasing companies, at the time of
acceptance by the leasing company and the customer.
Maintenance contract service revenues are recognized ratably over the term
of the underlying maintenance contract. Other service revenues are recognized
as earned. Deferred revenue consists of unearned maintenance contract revenue
that is recognized over the life of the related contract, generally 12 months.
Rental equipment revenue is recognized ratably over the lives of the
underlying cancelable operating leases, principally one to three years.
Pro Forma Stockholders' Equity (Unaudited)
The Company's presentation of unaudited pro forma stockholders' equity at
March 31, 1998 reflects the effect of the redemption of all outstanding shares
of the Company's Class A common stock, but does not give effect to the receipt
of any proceeds from the Company's initial public offering (Note 12). The
redemption price used was the original cost of $90 plus the cumulative unpaid
yield of 8% and approximately 1,158,000 shares of newly issued common stock.
Financial Instruments
The Company's financial instruments include cash, accounts receivable,
accounts payable, and long-term debt. The carrying amount of these financial
instruments approximate their fair market value.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three
months or less when acquired to be cash equivalents.
F-9
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash and cash
equivalents, and trade receivables. Concentrations of credit risk with respect
to trade receivables are limited due to the large number of customers
comprising the Company's customer base and their dispersion across different
industries and geographical areas. As of March 31, 1998, the Company had no
significant concentrations of credit risk.
Inventories
Inventories consist of photocopiers, facsimile equipment, automated office
equipment, electronic presentation equipment, document imaging equipment,
computers and related software, and related parts and supplies and are valued
at the lower of cost (specific identification and/or average cost for
equipment and average cost for related parts and supplies) or market value.
Inventories are stated net of reserves of $133,026, $326,099 and $1,295,020 at
March 31, 1996, 1997 and 1998, respectively, for excess and slow moving
inventories.
Long-Lived Assets
The recoverability of long-lived assets (including related intangibles) is
evaluated at the operating unit level by an analysis of operating results and
consideration of other significant events or changes in the business
environment. If an operating unit has current operating losses and there is a
likelihood that such operating losses will continue, the Company will
determine if impairment exists based on the undiscounted expected future cash
flows from operations before interest. Impairment losses would be measured
based on the amount by which the carrying amount exceeds the fair value.
Rental Equipment
Rental equipment is stated at cost less accumulated depreciation.
Depreciation is provided using the straight-line method over the assets'
estimated economic lives, principally three years.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization is principally provided using the
straight-line method over the assets' estimated economic lives, which range
from three to ten years.
Intangibles
Goodwill (excess of purchase price over fair value of net assets acquired)
recognized in business combinations accounted for as purchases is amortized
over periods of between 20 and 40 years on the straight-line basis.
Accumulated amortization was approximately $600,000, $1,400,000 and $3,200,000
at March 31, 1996, 1997 and 1998, respectively.
Noncompete agreements are amortized over the lives of the agreements, which
range from two to four years, using the straight-line basis. Accumulated
amortization was approximately $1,100,000, $2,200,000 and $3,500,000 at March
31, 1996, 1997 and 1998, respectively.
Financing fees are amortized over the terms of the underlying debt
agreements using the straight-line method, which method approximates the
effective interest rate method. Accumulated amortization at March 31, 1996,
1997 and 1998 was approximately $285,000, $230,000 and $760,000, respectively.
In August 1996, the
F-10
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Company refinanced its existing lines of credit. Unamortized financing fees of
$292,000 that related to the existing lines of credit were charged to
operations at that time.
New Accounting Standard
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 131, Disclosures About
Segments of an Enterprise and Related Information. SFAS No. 131 establishes
standards for reporting information about operating segments and supersedes
SFAS No. 14, Financial Reporting for Segments of a Business Enterprise. This
statement is effective for financial statements for periods beginning after
December 15, 1997. SFAS No. 131 will be adopted in fiscal 1999.
2. ACQUISITIONS
During the year ended March 31, 1996, the Company acquired four businesses
that provide office imaging solutions and related services for an aggregate
purchase price of approximately $9,088,000 primarily for cash, including the
direct costs of acquisitions of approximately $223,000. Liabilities totaling
$3,112,000 were assumed by the Company in connection with these acquisitions.
The Company also sold stock at its fair market value of approximately $588,000
in connection with these acquisitions. Total assets related to these four
acquisitions were $12,200,000, including goodwill of approximately $8,000,000.
During the year ended March 31, 1997, the Company acquired four businesses
that provide office imaging solutions and related services for an aggregate
purchase price of approximately $16,982,000 primarily for cash, including the
direct costs of acquisitions of approximately $518,000. The Company assumed
$4,118,000 in liabilities in connection with these acquisitions. The Company
also sold stock at its fair market value of approximately $883,000 in
connection with these acquisitions. Total assets related to these four
acquisitions were $21,100,000, including goodwill of approximately
$12,000,000.
During the year ended March 31, 1998, the Company acquired 12 businesses
that provide office imaging solutions and related services for an aggregate
purchase price of approximately $72,267,000 primarily for cash, including the
direct costs of acquisitions of approximately $621,000. Liabilities assumed in
connection with these acquisitions totaled $21,400,000. The Company also sold
stock in connection with these acquisitions. The Class B common stock was
valued from $3.30 to $8.20 per share and the Class A common stock from $65.00
to $80.00 per share. Stock valued at approximately $6,058,000 was sold in
connection with these acquisitions. The excess of the fair value of the stock
over the sales price was approximately $2,400,000 and has been considered
additional purchase price.
Significant acquisitions during the year ended March 31, 1998 include
Electronic Systems, Inc. (ESI), Eastern Copy Products, Inc. (ECP), Electronic
Systems of Richmond, Inc. (ESR), and Connecticut Business Systems, Inc. (CBS).
The following summarizes these acquisitions:
<TABLE>
<CAPTION>
ACQUISITION TOTAL ASSETS GOODWILL
ACQUIRED COMPANY DATE ACQUIRED ACQUIRED
---------------- ------------- ------------- -----------
<S> <C> <C> <C>
ESI................................ July 1997 $34,700,000 $24,800,000
ECP................................ August 1997 9,100,000 5,300,000
ESR................................ December 1997 15,700,000 8,600,000
CBS................................ December 1997 12,800,000 9,300,000
----------- -----------
$72,300,000 $48,000,000
=========== ===========
</TABLE>
F-11
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Total assets related to the remaining eight acquisitions was $19,700,000,
including goodwill of approximately $11,300,000.
All acquisitions have been accounted for as purchases and accordingly are
included in the results of operations from their dates of acquisitions. In
connection with the allocation of purchase price, there were no significant
adjustments to fair value.
Under the terms of one of its purchase agreements, the Company is committed
to make contingent payments (the Earn-out) of up to $3,000,000 to two of the
former owners of the acquired company on or before June 30, 2002. This
contingent payment is based on the future profitability, specifically earnings
before interest and taxes, of the acquired company. The former owner may
receive a portion of the Earn-out equal to $250,000, payable by June 30 of
each year for fiscal years ending March 31, 1999, 2000 and 2001. The former
owner shall be entitled to receive, on or before June 30, 2002, the balance of
the Earn-out, if applicable, minus any portion of the Earn-out previously
paid. The Earn-out, if paid, will be recorded as goodwill related to the
acquired company.
The unaudited pro forma results presented below include the effects of the
acquisitions as if they had been consummated at the beginning of the year
prior to acquisition. The unaudited proforma financial information below is
not necessarily indicative of either future results of operations or results
that might have been achieved had the acquisitions been consummated at the
beginning of the year prior to acquisition.
<TABLE>
<CAPTION>
UNAUDITED PROFORMA
YEAR ENDED MARCH 31
---------------------------------------
1996 1997 1998
----------- ------------ ------------
<S> <C> <C> <C>
Revenues........................ $75,504,139 $196,842,526 $215,376,735
Net income (loss)............... (1,215,279) (90,136) 3,707,319
Net income (loss) available to
common stockholders............ (2,738,917) (2,535,200) 768,188
Earnings (loss) per share....... (.30) (.22) .07
</TABLE>
3. RENTAL EQUIPMENT
The Company's rental equipment consists of the following:
<TABLE>
<CAPTION>
MARCH 31
-----------------------------------
1996 1997 1998
---------- ---------- -----------
<S> <C> <C> <C>
Rental equipment on operating
leases........................... $4,899,205 $7,959,553 $11,594,114
Less accumulated depreciation..... (2,264,592) (4,291,447) (6,938,796)
---------- ---------- -----------
Rental equipment, net............. $2,634,613 $3,668,106 $ 4,655,318
========== ========== ===========
</TABLE>
4. PROPERTY AND EQUIPMENT
The Company's property and equipment consists of the following:
<TABLE>
<CAPTION>
MARCH 31
----------------------------------
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Office furniture, equipment and
leasehold improvements............ $1,664,452 $2,645,701 $6,288,680
Less accumulated depreciation and
amortization...................... (417,940) (924,567) (1,870,068)
---------- ---------- ----------
Property and equipment, net........ $1,246,512 $1,721,134 $4,418,612
========== ========== ==========
</TABLE>
F-12
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
MARCH 31
-------------------------------------
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Term and revolving loans........... $20,979,105 $36,105,694 $97,251,600
Various notes payable.............. 852,384 767,129 232,916
----------- ----------- -----------
21,831,489 36,872,823 97,484,516
Less current maturities............ (312,641) (562,700) (232,916)
----------- ----------- -----------
$21,518,848 $36,310,123 $97,251,600
=========== =========== ===========
</TABLE>
The Company currently has a credit facility with Jackson National Life
Insurance Company (the Credit Facility) of up to $120,000,000 for acquisitions
and for working capital purposes. At March 31, 1998, $22,748,000 was available
under the Credit Facility, including $6,000,000 available for working capital
under the revolving line of credit. The Credit Facility bears interest at
3.25% and 3.00% over LIBOR (5.6328% at March 31, 1998) for the term and
revolving loans, respectively. Principal under the Credit Facility is
repayable in semi-annual installments beginning in fiscal 2000. In addition to
these scheduled payments, the Company is required to prepay outstanding
principal in an amount equal to 70% of the excess cash flow (as defined) for
each fiscal year within 90 days of year end. No amounts have been required to
be prepaid under this provision. All remaining principal under the Credit
Facility is due and payable in August 2004.
Under the terms of the Credit Facility, the Company has pledged
substantially all of its assets to the lender. The terms of the Credit
Facility also require compliance with numerous covenants that restrict, among
other things, dividend payments, sales of stock or assets or the incurrence of
additional debt.
In fiscal 1997, the Company sold 633,996 shares of Class C common stock and
27,083 shares of Class A common stock at their fair value for an aggregate
amount of $2,500,000 to its lender. During the year ended March 31, 1998, the
Company sold 270,256 shares of Class C common stock and 11,136 shares of Class
A common stock in connection with certain antidilution provisions. Of such
shares of Class C Common Stock 260,600 shares were sold at the same per share
price as the fiscal 1997 shares were sold to the Company's lender, and 9,656
shares were sold at a per share price of $0.07, resulting in aggregate
proceeds of $1,030,000 to the Company. Additionally, in 1997, the Company paid
a financing fee of 2% to the lender to increase the Credit Facility by
$40,000,000 to $120,000,000.
In September 1996, the Company purchased an interest rate cap from a bank on
$23,500,000 of the term loan debt outstanding. In January 1998, the Company
purchased an additional rate cap on an additional $26,475,000 of the term
loan. The interest rate caps are for three-year terms and provide for the
Company to be reimbursed by the bank if the annual average of the LIBOR rate
exceeds 8%. The cost of the interest rate caps ($150,000) is amortized over
the three-year term of the agreement and is included in interest.
Aggregate annual maturities of long-term debt at March 31, 1998 are as
follows:
<TABLE>
<S> <C>
1999.......................................................... $ 232,916
2000.......................................................... 6,807,612
2001.......................................................... 14,321,805
2002.......................................................... 13,776,212
2003.......................................................... 12,693,640
Thereafter.................................................... 49,652,331
-----------
Total......................................................... $97,484,516
===========
</TABLE>
F-13
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Interest paid was approximately $1,782,000, $2,700,000 and $6,000,000 for
the years ended March 31, 1996, 1997 and 1998, respectively.
The Company has signed a commitment letter with First Union for a $175
million revolving credit facility, contingent upon the closing of the public
offering. The letter was signed in April 1998. The terms of the new credit
facility would include a five year term; collateralization of all Company
assets; a variable interest rate ranging from 0.625% to 1.5% over LIBOR, or at
the Company's option, ranging from 0.0% to 0.5% over a base rate related to
the prime rate; quarterly interest payments; an unused facility fee and
various restrictive covenants, including certain financial covenants.
Under the terms of the existing Credit Facility, the Company will be subject
to a prepayment fee of 1% to 4% of the outstanding balance depending on the
length of time elapsed from the beginning of the term of the loan to the date
of prepayment. In the case that the loan is repaid within 60 days of an
initial public offering of the Company's common stock, this fee will be
reduced to the lesser of 1% of the outstanding balance or $250,000.
6. STOCKHOLDERS' EQUITY
From inception through March 31, 1998, the Company has sold stock in
connection with business combinations and to its founding stockholders,
employees and others. During the year ended March 31, 1998, such stock was
subscribed and sold as units of approximately 7.15 shares of Class A common
stock and one share of Class B (or one share of Class C) common stock. The
sales of those units have been recorded at their estimated fair value at the
date of the commitment to sell the shares, except for shares issued in
connection with antidilution provisions, which shares were issued at the per
share price at the date of the transaction giving rise to the antidilution
issuance. The value of the units has been allocated between shares of the
Class A and Class B (or Class C) common stock based on their estimated fair
values.
Class B stockholders are entitled to voting rights of one vote per share.
Class A and Class C stockholders are not entitled to voting rights.
No distributions other than in complete liquidation of the Company can be
made without approval of the Board of Directors. In the event of such a
distribution, the priority is as follows for the distribution of funds to
stockholders:
1. Class A stockholders are first entitled to a portion of the distribution
equivalent to 8% per annum (the Yield) of the original share cost ($90).
2. Class A stockholders are then entitled to receive a distribution equivalent
to the original cost ($90) of the shares.
3. After the required distributions in clauses 1 and 2 above have been
completed, holders of shares of Class A common stock are entitled to
receive 10% of, and holders of shares of Class B common stock and Class C
common stock are entitled to receive 90% of, the remaining portion of the
distribution.
During 1998, the Board of Directors approved an increase in the authorized
number of shares of Class A, Class B and Class C stock, to 400,000, 50,000,000
and 905,000 shares, respectively.
In connection with the founding agreements, one of the founders and various
members of senior management have received the right to purchase, and have
purchased, an aggregate of 1,207,800 shares of Class B common stock at a price
of $0.07 per share. In June 1994, the Company's president (who is also a
founding stockholder), received an option to purchase at a price of $0.07 per
share, certain shares of common stock that were reserved for issuance to
senior management. At March 31, 1998, the number of such shares which remain
F-14
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
unissued was zero. Of the 1,207,800 shares, 86,276 shares were allocated
between and purchased by the Company's president, the principal lender,
Jackson National Life Insurance Company, and its majority stockholder (Golder,
Thoma, Cressey, Rauner, Inc.) based on their current ownership of the
Company's common stock. These shares are subject to the Company's right to
repurchase such shares in the event that an initial public offering of the
Company's stock is not consummated.
7. EARNINGS PER SHARE
In 1997, the FASB issued SFAS No. 128, Earnings per Share. SFAS No. 128
replaced the calculations of primary and fully diluted earnings per share with
basic and diluted earnings per share.
The weighted average number of shares outstanding used in the calculation of
both basic and diluted earnings per share have been adjusted to give
retroactive effect to (i) the 86,276 shares of common stock sold during the
year ended March 31, 1998 pursuant to a pre-existing contractual obligation;
and (ii) the 132-for-1 stock split to be effective upon the closing of the
initial public offering of the Company's common stock.
The Company is accreting the approximately $1,000,000 difference of the
redemption value of the Class A common stock and the value allocated to the
stock for calculation of the earnings per share beginning January 1998 (the
month following the date an initial public offering became probable) through
the estimated date of the initial public offering. Such accretion was
approximately $500,000 during the year ended March 31, 1998.
Assuming redemption of the Class A common stock using the proceeds from the
number of shares of common stock necessary at $15 per share to redeem such
shares, earnings per share would have been $0.10 for the year ended March 31,
1997 and $0.35 for the year ended March 31, 1998.
8. INCOME TAXES
The Company accounts for income taxes under FASB No. 109, Accounting for
Income Taxes. Deferred income tax assets and liabilities are determined based
upon differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.
The components of the income tax provision (benefit) are as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31
--------------------------------
1996 1997 1998
-------- ---------- ----------
<S> <C> <C> <C>
Current:
Federal................................... $435,000 $1,159,571 $2,807,210
State..................................... 212,500 375,000 863,000
-------- ---------- ----------
647,500 1,534,571 3,670,210
Deferred:
Federal................................... (316,500) (448,400) 213,000
State..................................... (56,000) (79,100) 65,000
-------- ---------- ----------
(372,500) (527,500) 278,000
-------- ---------- ----------
$275,000 $1,007,071 $3,948,210
======== ========== ==========
</TABLE>
F-15
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A reconciliation of the difference between the effective income tax rate and
the statutory federal tax rate follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31
--------------------------------
1996 1997 1998
-------- ---------- ----------
<S> <C> <C> <C>
Tax at U.S. statutory rate................. $ 28,095 $ 724,334 $2,856,250
State taxes, net of federal benefit........ 45,142 187,080 616,342
Goodwill amortization...................... 150,703 216,252 288,919
Valuation allowance........................ (8,500) (175,500) --
Other permanent differences................ 59,560 54,905 186,699
-------- ---------- ----------
$275,000 $1,007,071 $3,948,210
======== ========== ==========
</TABLE>
Significant components of the Company's deferred tax assets and liabilities
are as follows:
<TABLE>
<CAPTION>
MARCH 31
-------------------------------
1996 1997 1998
-------- ---------- ----------
<S> <C> <C> <C>
Deferred tax assets:
Noncompete agreements........................ $351,000 $ 713,000 $1,091,000
Inventory related............................ 120,000 305,000 688,000
Various accrued expenses..................... 31,200 139,000 239,000
Deferred revenue............................. -- -- 403,000
Depreciation................................. 191,000 269,000 199,000
Accounts receivable related.................. 99,800 110,000 213,000
Other items.................................. 20,000 33,000 --
-------- ---------- ----------
Gross deferred tax asset....................... 813,000 1,569,000 2,833,000
Less valuation allowance....................... (395,500) -- --
-------- ---------- ----------
417,500 1,569,000 2,833,000
Deferred tax liabilities:
Goodwill..................................... 45,000 145,000 654,000
Other items.................................. -- -- 65,000
-------- ---------- ----------
Net deferred tax asset......................... $372,500 $1,424,000 $2,114,000
======== ========== ==========
Classified as follows:
Current asset................................ $251,000 $ 554,000 $1,543,000
Noncurrent asset............................. 121,500 870,000 571,000
-------- ---------- ----------
$372,500 $1,424,000 $2,114,000
======== ========== ==========
</TABLE>
SFAS No. 109 requires a valuation allowance to reduce the deferred tax
assets reported if, based on the weight of the evidence, it is more likely
than not that some portion or all of the deferred tax assets will not be
realized. A portion of the reduction of the valuation allowance during the
years ended March 31, 1996 and 1997 was credited to goodwill since it related
to basis differences from previous business combinations not previously
recognized. After consideration of all the evidence, both positive and
negative, management has determined that a valuation allowance is not
necessary as of March 31, 1998.
Cash paid for income taxes was $645,000, $1,581,000 and $3,467,900 for the
years ended March 31, 1996, 1997 and 1998, respectively.
F-16
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. EMPLOYEE BENEFIT PLANS
The majority of the employees of the Company are eligible to participate in
defined contribution plans (the Plans) established under Section 401(k) of the
U.S. Internal Revenue Code. Employees are generally eligible to contribute
voluntarily to the Plans after one year of service. The Company may contribute
a discretionary amount of the employee contribution up to specified limits.
Employees are always vested in their contributed balance and generally
become fully vested in the Company's contributions after seven years of
service. The expense related to the Company's contributions to the Plans for
the years ended March 31, 1996, 1997 and 1998 was approximately $206,000,
$302,000 and $519,000, respectively.
10. LEASES
The Company is obligated under various noncancelable operating leases for
its office facilities, office equipment and vehicles. Certain of the leases
for its office facilities are with various employee stockholders. Future
noncancelable lease commitments as of March 31, 1998 are as follows:
<TABLE>
<CAPTION>
RELATED-PARTY
LEASES OTHER LEASES TOTAL
------------- ------------ -----------
<S> <C> <C> <C>
1999.................................. $1,101,181 $1,634,138 $ 2,735,319
2000.................................. 994,954 1,480,705 2,475,659
2001.................................. 899,609 1,301,489 2,201,098
2002.................................. 835,604 916,152 1,751,756
2003.................................. 618,360 531,631 1,149,991
Thereafter............................ -- 453,595 453,595
---------- ---------- -----------
Total............................... $4,449,708 $6,317,710 $10,767,418
========== ========== ===========
</TABLE>
Rental expense related to the above leases was as follows:
<TABLE>
<CAPTION>
RELATED-PARTY OTHER LEASE
LEASE EXPENSE EXPENSE TOTAL
------------- ----------- ----------
<S> <C> <C> <C>
Year ended March 31, 1996.............. $249,712 $ 315,288 $ 565,000
Year ended March 31, 1997.............. 530,407 261,593 792,000
Year ended March 31, 1998.............. 862,423 1,235,600 2,098,023
</TABLE>
11. RELATED-PARTY TRANSACTIONS
During 1994, the Company entered into a seven-year consulting agreement with
its majority stockholder, Golder, Thoma, Cressey, Rauner, Inc. (the Majority
Stockholder). Under the terms of this agreement, the Company is obligated to
pay the Majority Stockholder an annual management fee of $200,000. The Company
is also obligated to pay a 1% placement fee to the Majority Stockholder for
all debt and equity raised by the Company during the term of the agreement.
The agreement will terminate earlier than the aforementioned seven-year term
upon the closing of any initial public offering of the Company's common stock
or a sale of substantially all of the Company's assets or common stock.
The Majority Stockholder agreed to waive their 1% placement fee related to
debt refinancing completed in August 1996, because the majority of the work to
obtain the financing was performed by another related party, Green, Manning &
Bunch, which charged a 1% fee.
F-17
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In connection with the aforementioned agreements, the Company incurred
management fees and placement fees. The following shows the fees paid in each
period:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31
--------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Management fees................................... $200,000 $200,000 $200,000
Placement fees.................................... 390,000 800,000 --
</TABLE>
The Company entered into a consulting agreement with Capitol Office
Solutions (Capitol) in July 1997, whereby the Company will provide certain
human resources, administration, financial, accounting, and consulting
services to Capitol for an annual fee of $150,000. Additionally, the Company
received a one-time fee of $270,000 from Capitol related to assisting Capitol
in obtaining financing. The majority stockholders of the Company also own the
majority of the outstanding stock of Capitol.
Related party notes receivable relate to amounts loaned to officers of the
Company to purchase stock in Capitol. These notes, which bear interest of 8%
per annum, are due and payable, with interest, on June 30, 2000, and are
collateralized by the shares purchased with the proceeds of the notes.
Also at March 31, 1998, the Company held notes receivable from employees
with balances totaling $231,319. These notes arose from transactions in fiscal
years 1997 and 1998, whereby the Company loaned the employees money to
purchase shares of the Company's stock. The notes, which bear interest of 8%
per annum, are due and payable, with interest, on dates from July 1 to
November 1, 2000. These notes are collateralized by the shares purchased with
the proceeds of the notes. These receivables are shown on the balance sheet as
a component of stockholders' equity.
12. SUBSEQUENT EVENTS
The Board of Directors (the Board) contemplates an initial public offering
(the Offering) of the Company's Common Stock.
Effective May 28, 1998, the Board of Directors approved a change in the
Company's capital stock to authorize 10,000,000 shares of $.01 par value
preferred shares, 50,000,000 shares of $.01 par value Class B common stock and
905,000 shares of $.01 par value Class C common stock. At this time, the Board
also authorized a 132-for-1 split for holders of its Class B and Class C
common stock; provided for the automatic conversion into one share of Class B
common stock of each share of its Class C common stock upon consummation of
the Offering; provided that, upon consummation of the Offering, each share of
Class A common stock would automatically be redeemed for $90 plus 8% per annum
from the time of its purchase through May 31, 1998 (provided that the Offering
closes prior to June 30, 1998) and approximately 3.41 shares of Class B common
stock; and renamed its Class B common stock (Common Stock). The accompanying
consolidated financial statements have been restated to reflect this change in
capitalization.
The Board of Directors has adopted a stock option plan, which is to take
effect upon the closing of the Offering. Under the terms of the stock option
plan, 1,820,000 shares of the Company's common stock may be granted pursuant
to stock options or granted or sold as restricted stock to directors, officers
and employees of and consultants and advisors to the Company. Under the stock
option plan, the Board has authorized that upon the closing of the Offering,
options to purchase 519,750 shares of common stock of the Company at an
exercise price equal to the Offering price per share will be granted to key
employees. All of these options are subject to vesting requirements based on
length of service.
F-18
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited proforma consolidated statement of operations is
based on the historical financial statements of the Company, and the
businesses acquired during fiscal 1998, which are more fully described below.
The unaudited pro forma consolidated statement of operations for the fiscal
year ended March 31, 1998 gives effect to acquisitions consummated during
fiscal year 1998, as if those acquisitions occurred on April 1, 1997.
During the fiscal year ended March 31, 1998, the Company acquired the
following twelve entities: Cascade Office Systems, Inc., Connecticut Business
Systems, Inc., Copy Care, Duplicating Specialties, Inc. d/b/a Copytronix,
Eastern Copy Products, Inc. and Subsidiaries, Electronic Systems, Inc.,
Electronic Systems of Richmond, Inc., Fowler Communications, Inc., Quality
Business Systems, Inc., South Alabama Business Machines, Inc., United Office
Systems, Inc., and the Business Systems Division of Bloom's, Inc.
The pro forma adjustments are based upon currently available information as
well as upon certain assumptions that management believes are reasonable. Each
of the acquisitions was accounted for under the purchase method of accounting.
The unaudited pro forma consolidated financial statements are not
necessarily indicative of either future results of operations or results that
might have been achieved had the foregoing transactions been consummated as of
the indicated dates. The unaudited pro forma consolidated financial statements
should be read in conjunction with the notes thereto and the historical
consolidated financial statements of the Company, together with the related
notes thereto, included in this Prospectus and Registration Statement.
F-19
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF INCOME
FISCAL YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
HISTORICAL ACQUIRED PRO FORMA PRO FORMA
COMPANY BUSINESSES(A) ADJUSTMENTS(B) CONSOLIDATED
------------ ------------- -------------- ------------
<S> <C> <C> <C> <C>
Revenue:
Equipment and supplies
sales................ $121,316,021 $37,159,504 -- $158,475,525
Service and rental
revenue.............. 43,059,246 13,841,964 -- 56,901,210
------------ ----------- ----------- ------------
Total Revenue....... 164,375,267 51,001,468 -- 215,376,735
Costs and operating
expenses:
Cost of equipment and
supplies sales....... 85,971,953 25,816,249 -- 111,788,202
Service and rental
costs................ 21,593,696 7,185,654 -- 28,779,350
Selling, general, and
administrative
expenses............. 38,619,666 15,431,716 -- 54,051,382
Intangible asset
amortization and
charges.............. 3,075,831 -- $ 1,029,118 (c) 4,104,949
------------ ----------- ----------- ------------
Total costs and
operating
expenses........... 149,261,146 48,433,619 1,029,118 198,723,883
------------ ----------- ----------- ------------
Income from operations.. 15,114,121 2,567,849 (1,029,118) 16,652,852
Interest expense, net... 6,713,327 22,639 2,574,424 (d) 9,310,390
------------ ----------- ----------- ------------
Income (loss) before
income taxes........... 8,400,794 2,545,210 (3,603,542) 7,342,462
Income taxes............ 3,948,210 1,013,042 (1,326,109)(e) 3,635,143
------------ ----------- ----------- ------------
Net income (loss)....... 4,452,584 $ 1,532,168 $(2,277,433) 3,707,319
=========== ===========
Yield adjustment on
class A common stock... (2,442,119) (2,939,131)
------------ ------------
Net income available to
common stockholders.... $ 2,010,465 $ 768,188
============ ============
Earnings per common
share (basic and
diluted)............... $ 0.21 $ 0.07
============ ============
Weighted average number
of shares used in the
calculation............ 9,804,953 10,425,486
============ ============
</TABLE>
See accompanying notes to the unaudited pro forma consolidated financial
statements.
F-20
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME
FISCAL YEAR ENDED MARCH 31, 1998
(a) Represents historical operating results of the following twelve entities
prior to acquisition of their stock or certain of their assets and
liabilities by the Company as indicated in Note 2 to the consolidated
audited financial statements on pages F-11 and F-12: Cascade Office
Systems, Inc., Connecticut Business Systems, Inc., the Business Systems
Division of Bloom's, Inc., Copy Care, Inc., Duplicating Specialties, Inc.
d/b/a Copytronix, Eastern Copy Products, Inc. and Subsidiaries,
Electronic Systems, Inc., Electronic Systems of Richmond, Inc., Fowler
Communications, Inc., Quality Business Systems, Inc., South Alabama
Business Machines, Inc., and United Office Systems, Inc.
(b) Excludes adjustments resulting from the elimination of certain sales,
service, and administrative positions net of additional expenses related
to positions added in connection with the Company's acquisitions of the
Acquired Businesses; decreases in former owners' salaries and
perquisites; improved purchasing terms; and decreases in certain other
general and administrative expenses. Prior to completing an acquisition,
the Company formulates a formal integration plan which clearly identifies
employees to be terminated, their job classifications or functions, and
their locations. Staff reductions are typically completed within several
months of the acquisition date. Former owners that remain with the
Company post-acquisition are compensated according to the terms of an
employment contract executed at the time of the acquisition.
(c) Reflects additional goodwill amortization expense of $883,358 and non-
compete covenant amortization expense of $145,761. The goodwill
amortization periods range from 20 to 40 years; goodwill is amortized
using the straight-line method. The non-compete covenant amortization
periods range from 2 to 4 years; non-compete covenants are amortized
using the straight-line method.
(d) Reflects additional interest expense related to borrowings that would
have been incurred by the Company to finance the acquisitions, had all of
the acquisitions been consummated at April 1, 1997. An average interest
rate of 8.9% was used for this calculation which approximates the
Company's average borrowing rate during such period. A .125% change in
the average interest rate used would cause a change of approximately
$40,000 in interest expense.
(e) Represents the income tax impact on purchase accounting adjustments and
other pro forma adjustments based on an effective rate of approximately
38%.
F-21
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Copy Service and Supply, Inc.
Statesville, North Carolina
We have audited the accompanying combined statements of income and owners'
capital and cash flows of Copy Service and Supply, Inc. for the five months
ended May 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined results of operations and cash flows of
Copy Service and Supply, Inc. for the five months ended May 31, 1996 in
conformity with generally accepted accounting principles.
/s/ Barnard, Combs, Potts & Rhyne, PA
Statesville, North Carolina
February 12, 1998
F-22
<PAGE>
COPY SERVICE AND SUPPLY, INC.
COMBINED STATEMENT OF INCOME
AND OWNERS' CAPITAL
FOR THE FIVE MONTHS ENDED MAY 31, 1996
<TABLE>
<S> <C>
Revenue:
Equipment and supplies............................................. $ 833,370
Service agreement renewal.......................................... 628,202
Rental income...................................................... 92,872
---------
1,554,444
Cost of goods sold:
Equipment and supplies............................................. 569,600
Cost of service agreement renewal.................................. 361,240
Cost of rental income.............................................. 16,906
---------
947,746
Gross profit..................................................... 606,698
Selling, general and administrative expenses......................... 508,740
---------
Income from operations............................................... 97,958
Other income (deductions):
Gain on sale of fixed assets....................................... (7,740)
Interest income.................................................... 6,182
Interest expense................................................... (17,864)
---------
Income before income taxes....................................... 78,536
---------
Income taxes:
Current............................................................ (1,646)
Deferred........................................................... 21,288
---------
19,642
---------
Net income....................................................... 58,894
Owners' capital, beginning of period................................. 522,642
---------
Owners' capital, end of period..................................... $ 581,536
=========
</TABLE>
See accompanying notes.
F-23
<PAGE>
COPY SERVICE AND SUPPLY, INC
COMBINED STATEMENT OF CASH FLOWS
FOR THE FIVE MONTHS ENDED MAY 31, 1996
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income......................................................... $ 58,894
Adjustments to reconcile net income to net cash provided by
operations:
Depreciation and amortization..................................... 37,719
Loss on sale of fixed assets...................................... 7,740
Deferred tax...................................................... 21,288
(Increase) decrease in:
Accounts receivable.............................................. (55,689)
Inventory........................................................ 68,433
Refundable income tax............................................ (531)
Increase (decrease) in:
Accounts payable................................................. (51,702)
Accrued expenses................................................. 14,303
Deferred income.................................................. (55,658)
---------
Net cash provided by operating activities....................... 44,797
---------
Cash flows from investing activities:
Purchase of fixed assets........................................... (2,679)
Lease obligation................................................... (2,335)
Proceeds from sale of fixed assets................................. 47,036
---------
Net cash used by investing activities........................... 42,022
---------
Cash flows from financing activities:
New borrowings:
Short-term........................................................ 74,592
Debt reduction:
Long-term......................................................... (110,220)
Shareholder loans.................................................. (14,000)
---------
Net cash provided (used) by financing activities................ (49,628)
---------
Increase in cash.................................................... 37,191
Cash at beginning of period......................................... 83,417
---------
Cash at end of period........................................... $ 120,608
=========
</TABLE>
Supplemental disclosures of noncash investing and financing activities.
See accompanying notes.
F-24
<PAGE>
COPY SERVICE AND SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Combination--The combined financial statements include the
accounts of Copy Service and Supply, Inc., CSS Leasing, LLC, and Office
Furniture Concepts, Inc. All material intercompany transactions have been
eliminated.
Organization And Operations--Copy Service and Supply, Inc. incorporated on
January 1, 1984, and operations began immediately thereafter. The Company
sells copiers, business machines and office furniture. The Company services
and furnishes supplies for the equipment it sells.
CSS Leasing, LLC is a limited liability company pursuant to 57C-2-20 of the
General Statue of North Carolina. The Company was formed for the purpose of
entering into various leasing contracts for office equipment, furniture or
other business equipment. Operations began on September 30, 1994.
Office Furniture Concepts, Inc. was incorporated on August 17, 1995, and
operations began immediately thereafter. The Company sells office furniture.
Receivables--Receivables are shown at face value. At May 31, 1996 management
reviewed receivables and all accounts considered uncollectible have been
written off.
Inventory--Inventories are valued at the lower of cost, on the first-in,
first-out basis, or market.
Fixed Assets--Fixed assets are stated at cost. For financial reporting
depreciation prior to 1987 is computed using the accelerated cost recovery
method over the estimated useful lives of 3 to 5 years. Fixed assets purchased
after 1987 are depreciated using the straight line method over the estimated
useful lives of 3 to 40 years. Maintenance and repairs are charged to expense
as incurred and renewals and improvements are capitalized. Gains and losses on
disposals are reflected in current operations except for the gains on traded
properties, which are reflected in the basis of new assets.
Income Taxes--The provision for income taxes includes deferred taxes arising
from temporary differences between financial and tax depreciation due to the
use of accelerated method for tax purposes, and allowance for inventory
obsolescence for book purposes. Tax credits are treated as a reduction of
federal income taxes for the year in which the credits are used. The tax
provision is for Copy Service and Supply, Inc. only because CSS Leasing, LLC
and Office Furniture Concepts, Inc. are entities which are taxed at the owner
level.
Revenue Recognition--The Company sells service contracts for the equipment
it sells. The contracts are for a specified number of copies or for a
specified time period, primarily from one to three years. The customer pays
for the service contracts in advance and the Company recognizes revenue on
these contracts ratably over the life of the contracts. Other service revenues
are recognized as earned.
Supply sales to customers are recognized at the time of shipment. Equipment
sales are recognized at the time of customer acceptance, or in the case of
equipment sales financed by third-party leasing companies, at the time of
acceptance by the leasing company and the customer.
Rental equipment revenue is recognized ratably over the lives of the
underlying cancelable operating leases, principally one to three years.
Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the
F-25
<PAGE>
COPY SERVICE AND SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
reported amounts of revenues and expenses during the reporting period. Actual
results could vary from the estimates that were used.
Cash And Cash Equivalents--The Company considers all highly liquid
investments with maturities of three months or less when acquired to be cash
equivalents.
NOTE 2--OBLIGATION UNDER SALES-TYPE LEASES:
CSS Leasing, LLC is in the business of leasing office furniture and
equipment. At the inception of the lease, determination is made whether it
qualifies as a sales-type or operating lease.
The following is an analysis of minimum future sales-type lease payments to
be received as of May 31, 1996:
<TABLE>
<S> <C>
May 31, 1997........................................................ $19,738
May 31, 1998........................................................ 15,963
May 31, 1999........................................................ 12,014
May 31, 2000........................................................ 5,012
-------
Total minimum lease receivable...................................... 52,727
Less: imputed interest 13,893
-------
Present value of lease receivable at May 31, 1996................... $38,834
=======
Current portion..................................................... $13,050
=======
Long-term portion................................................... $25,784
=======
</TABLE>
NOTE 3--OPERATING LEASES:
CSS Leasing, LLC is a lessor of office furniture and equipment. The
following is the book value of equipment under operating leases as of May 31,
1996.
<TABLE>
<S> <C>
Leased equipment.................................................... $243,457
Less: accumulated depreciation...................................... 50,744
--------
Net book value...................................................... $192,713
========
</TABLE>
Total depreciation expense was $16,906 for the five months ended May 31,
1996.
Future minimum rentals on noncancelable leases in the aggregate and for the
next three years are as follows:
<TABLE>
<S> <C>
May 31, 1997........................................................ $153,426
May 31, 1998........................................................ 69,473
May 31, 1999........................................................ 8,367
--------
Total minimum rentals............................................. $231,266
========
</TABLE>
F-26
<PAGE>
COPY SERVICE AND SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4--FIXED ASSETS:
The major components of fixed assets are as follows:
<TABLE>
<S> <C>
Furniture, fixtures and equipment................................... $369,299
Vehicles............................................................ 178,774
Leasehold improvements.............................................. 51,683
--------
Total fixed assets................................................ 599,756
Accumulated depreciation............................................ 264,544
--------
Net fixed assets.................................................... $335,212
========
</TABLE>
Depreciation expense for the five months ended May 31, 1996 was $37,673.
NOTE 5--NOTES PAYABLE AND LONG-TERM DEBT:
An analysis of long-term debt is as follows:
<TABLE>
<S> <C>
$200,000 line of credit with bank, interest rate of prime plus
.50%, collateralized by inventory and equipment.................. $200,000
Note payable to bank, due in monthly installments of $276, includ-
ing interest at 7%, collateralized by vehicle.................... 3,700
Note payable to bank, due in monthly installments of $257,
including interest at 6.75%, collateralized by vehicle........... 5,067
Note payable to bank, due in monthly installments of $357,
including interest at 8.25%, collateralized by vehicle........... 6,027
Note payable to bank, due in monthly installments of $333,
including interest at 9.25%, collateralized by vehicle........... 7,276
Note payable to bank, due in monthly installments of $572,
including interest at 9.0%, collateralized by equipment.......... 12,986
Note payable to bank, due in monthly installments of $329,
including interest at 8.75%, collateralized by vehicle........... 7,754
Note payable to bank, due in monthly installments of $7,100,
including interest at 8.50%, collateralized by equipment......... 52,661
Note payable to bank, due in monthly installments of $4,821,
including interest at 8.75%, collateralized by equipment......... 63,116
Credit line with bank, interest payable monthly at 8.5%, maturity
date January 10, 1997, collateralized by equipment .............. 32,213
--------
390,800
Less current installments of long-term debt....................... 361,644
--------
Long-term debt, excluding current installments ................... $ 29,156
========
</TABLE>
F-27
<PAGE>
COPY SERVICE AND SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Principle payments for the next three years are as follows:
<TABLE>
<S> <C>
May 31, 1997......................................................... $361,644
May 31, 1998......................................................... 28,017
May 31, 1999......................................................... 1,139
--------
$390,800
========
</TABLE>
NOTE 6--PROFIT SHARING PLAN:
The Company has a profit sharing plan which is available to all employees
who have attained certain age and service requirements. Contributions made to
the plan are entrusted to an investment company which provides investment
consultation and administration. No contribution was made for the five months
ended May 31, 1996.
NOTE 7--OPERATING LEASE:
The Company conducts its operations from leased facilities. The main office,
showroom space and one branch office are leased from the 100% shareholder.
There are four annual renewable leases, payable $9,999 per month, expiring on
various dates.
Two of the Company's branch offices are leased for a total of $700 per
month. These leases are month to month leases. Also, the Company has one
branch office which is a 36 month lease for a total of $1,046 per month.
Lease expense for the five months ended May 31, 1996 was $58,725.
Future minimum lease payments are as follows:
<TABLE>
<S> <C>
May 31, 1997......................................................... $70,693
</TABLE>
NOTE 8--SUPPLEMENTARY CASH FLOWS INFORMATION:
<TABLE>
<S> <C>
Interest paid........................................................ $ 9,321
Income taxes paid.................................................... $ 0
</TABLE>
NOTE 9--CONCENTRATED CREDIT RISK:
The Companies are principally engaged in the business of selling and leasing
copiers business machines and office furniture. Consequently, the ability to
collect the amounts due from customers may be affected by economic fluctuation
in the industry.
NOTE 10--RELATED PARTY:
The 100% shareholder of Copy Service and Supply, Inc. also owns 60% of CSS
Leasing, LLC.
During 1995 the furniture division of Copy Service and Supply, Inc. was
Incorporated. The Corporate name is Office Furniture Concepts, Inc. The
inventory and various fixed assets were transferred into the newly formed
corporation. The 100% shareholder of Copy Service and Supply, Inc. also owns
49% of Office Furniture Concepts, Inc.
F-28
<PAGE>
COPY SERVICE AND SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11--INCOME TAXES:
A reconciliation of the provision for income taxes with the amount of income
tax computed at the Federal statutory rate (34%) follows:
<TABLE>
<S> <C>
Tax expense at statutory rate....................................... $26,702
Increase (decrease) in taxes resulting from:
Elimination of non taxable entities................................. (6,164)
Expenses not tax deductible......................................... 2,708
State taxes, net of federal benefit................................. (3,604)
-------
Provision for income taxes charged to operation..................... $19,642
=======
</TABLE>
NOTE 12--SUBSEQUENT EVENTS:
On June 1, 1996 the Company was sold to new owners. After the sale CSS
Leasing LLC and Office Furniture Concepts, Inc. were merged into Copy Service
and Supply, Inc.
F-29
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors Southern Business Communications Group
We have audited the accompanying combined statements of income and cash
flows of Southern Business Communications Group for the nine months ended
September 30, 1996. These combined financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these combined financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
Southern Business Communications Group for the nine months ended September 30,
1996 in conformity with generally accepted accounting principles.
/s/ Smith & Howard, P.C.
Atlanta, Georgia
January 8, 1998
F-30
<PAGE>
SOUTHERN BUSINESS COMMUNICATIONS GROUP
COMBINED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<S> <C>
Revenues
Net product sales................................................ $11,878,102
Service and rentals.............................................. 1,534,257
-----------
13,412,359
Costs and Expenses
Cost of products sold............................................ 9,106,579
Service and rental costs......................................... 427,911
Selling, general and administrative.............................. 2,680,675
-----------
12,215,165
-----------
Operating Income................................................... 1,197,194
Other Income (Expense)
Interest expense................................................. (93,993)
Other............................................................ 24,932
-----------
(69,061)
-----------
Net Income..................................................... $ 1,128,133
===========
</TABLE>
See accompanying notes.
F-31
<PAGE>
SOUTHERN BUSINESS COMMUNICATIONS GROUP
COMBINED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<S> <C>
Cash Flows from Operating Activities:
Cash received from customers.................................. $ 13,537,742
Cash paid to suppliers and employees.......................... (12,017,450)
Interest paid................................................. (93,993)
Other income.................................................. 24,932
------------
Net Cash Provided by Operating Activities................... 1,451,231
------------
Cash Flows from Investing Activities:
Purchases of property and equipment........................... (46,594)
Loans to shareholders......................................... (360,000)
------------
Net Cash Required by Investing Activities................... (406,594)
------------
Cash Flows from Financing Activities:
Net line of credit borrowings................................. 206,759
Principal payments on notes payable to related parties, net... (300,047)
Proceeds from issuance of long-term debt...................... 228,926
Principal payments on long-term debt and capital lease
obligation................................................... (345,330)
Distributions to shareholders................................. (819,643)
------------
Net Cash Required by Financing Activities................... (1,029,335)
------------
Net Increase in Cash............................................ 15,302
Cash at Beginning of Period..................................... 62,624
------------
Cash at End of Period........................................... $ 77,926
============
Reconciliation of Net Income to Net Cash Provided by Operating
Activities:
Net Income...................................................... $ 1,128,133
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:
Depreciation.................................................. 90,558
Decrease in accounts receivable............................... 282,258
Decrease in inventories....................................... 144,627
Decrease in accounts payable and checks outstanding........... (71,181)
Decrease in deferred revenue.................................. (156,875)
Increase in accrued liabilities............................... 33,711
------------
Total Adjustments........................................... 323,098
------------
Net Cash Provided by Operating Activities....................... $ 1,451,231
============
</TABLE>
See accompanying notes.
F-32
<PAGE>
SOUTHERN BUSINESS COMMUNICATIONS GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1. DESCRIPTION OF THE BUSINESS
Southern Business Communications Group (the Company) is engaged in the sale
and installation or leasing of electronic presentation equipment, document
imaging management, and system integration. The Company also provides
maintenance on the equipment and microfilm service bureau work to convert
paper files to microfilm.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The combined financial statements include the accounts of Southern Business
Communications, Inc. (SBC), Southern Business Communications of D.C., Inc.
(SBC of DC), and ATS Atlanta (ATS), three companies affiliated through common
ownership. All significant inter-company transactions have been eliminated.
Revenue Recognition
Revenues from product sales are recognized upon shipment to customer.
Revenues related to systems support agreements are recognized ratably over the
terms of the agreements, generally one year.
Inventories
Inventories consist of audio, visual, micrographic and computer equipment
and related parts and supplies valued at the lower of cost or market as
determined using the first-in, first-out (FIFO) method.
Depreciation and Amortization
Depreciation of property and equipment is provided over the useful lives of
the assets primarily on the straight-line method.
Useful lives for depreciable assets are as follows:
<TABLE>
<S> <C>
Building and improvements....................................... 31 years
Machinery and equipment......................................... 3 to 7 years
Furniture and fixtures.......................................... 5 to 7 years
Equipment held for lease........................................ 5 years
</TABLE>
Income Taxes
As a result of elections with the IRS made by the stockholders of the
entities comprising the Company, the Company is not liable for income taxes as
of September 30, 1996. The stockholders are liable for individual income taxes
on their respective shares of the entities' taxable income, and the
accompanying combined financial statements do not include a provision for
income taxes.
NOTE 3. LINES OF CREDIT
The Company has working capital revolving line of credit agreements with a
bank which provide for total borrowings of $2,100,000. Borrowings are limited
to 85% of accounts receivable and 50% of inventories, with borrowings based on
inventories limited to specified amounts per the agreements. Borrowings under
the agreements are secured by accounts receivable, inventories and the
personal guarantees of the Company's stockholders. Interest is payable monthly
at the bank's prime rate. Outstanding borrowings under the agreements at
September 30, 1996 totaled $907,189 as follows: SBC--$785,225, SBC of DC--
$111,964, ATS--$10,000.
F-33
<PAGE>
SOUTHERN BUSINESS COMMUNICATIONS GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
SBC also has a second line of credit with the same bank which provides for
borrowings up to $250,000 for capital expenditures. Interest is payable
monthly at the bank's prime rate. Borrowings under the agreement are secured
by a second lien on the SBC's land and building. There were no outstanding
borrowings under this agreement at September 30, 1996.
NOTE 4. LONG-TERM DEBT
Principal payments on long-term debt are as follows for years ending
September 30:
<TABLE>
<S> <C>
1997................................................................ $ 30,991
1998................................................................ 28,429
1999................................................................ 26,862
2000................................................................ 26,161
2001................................................................ 29,919
Thereafter.......................................................... 284,942
--------
$427,304
========
</TABLE>
NOTE 5. LEASES
The Company leases office space under operating leases that expire at
various dates through 2000. Rent expense under these leases approximated
$44,000. Future minimum rental payments required under operating leases with
initial or remaining noncancellable lease terms in excess of one year are as
follows:
<TABLE>
<S> <C>
1997................................................................ $ 66,912
1998................................................................ 68,364
1999................................................................ 48,840
2000................................................................ 10,977
--------
$195,093
========
</TABLE>
NOTE 6. PROFIT SHARING PLAN
The Company has a profit sharing 401(k) plan (the Plan) which is qualified
under Section 401(k) of the Internal Revenue Code and covers substantially all
employees. Under the provisions of the Plan, the Company contributes
discretionary amounts as determined by the Board of Directors. Participants'
vested interests in the Company's contributions are based upon years of
service, as defined, with the Company. Contributions to the Plan were $23,628.
NOTE 7. SUBSEQUENT EVENT
Subsequent to September 30, 1996, all of the outstanding stock of SBC, SBC
of DC and ATS was purchased by an unrelated corporation which owns other
companies engaged in the same lines of business as the Company.
F-34
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Stockholders
Electronic Systems, Inc.
We have audited the accompanying statements of income and retained earnings
and cash flows of Electronic Systems, Inc. for the years ended December 31,
1995 and 1996 and the six months ended June 30, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of
Electronic Systems, Inc. for the years ended December 31, 1995 and 1996 and
the six months ended June 30, 1997 in conformity with generally accepted
accounting principles.
/s/ Ernst & Young
Richmond, Virginia
January 23, 1998
F-35
<PAGE>
ELECTRONIC SYSTEMS, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31 ENDED
------------------------ JUNE 30
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Revenue:
Equipment, supplies and parts........ $24,096,319 $35,903,314 $20,373,983
Service and training................. 4,013,939 6,304,117 3,899,523
Rental............................... 758,271 802,465 422,963
----------- ----------- -----------
Total revenue...................... 28,868,529 43,009,896 24,696,469
Cost of goods and services sold:
Equipment, supplies and parts........ 20,478,529 31,008,200 17,294,908
Service and training................. 1,883,456 3,115,095 1,804,993
Rental............................... 470,729 513,096 282,111
----------- ----------- -----------
Total cost of goods and services
sold.............................. 22,832,714 34,636,391 19,382,012
----------- ----------- -----------
6,035,815 8,373,505 5,314,457
Selling, general, and administrative
expenses.............................. 4,824,892 5,961,952 4,482,983
----------- ----------- -----------
1,210,923 2,411,553 831,474
Other income (expense):
Interest expense..................... (78,207) (87,713) (17,250)
Interest income...................... 16,498 21,850 34,135
Management fee....................... 15,000 25,000 14,000
Other, net........................... 100,008 32,740 90,031
----------- ----------- -----------
53,299 (8,123) 120,916
----------- ----------- -----------
Net income............................. 1,264,222 2,403,430 952,390
Retained earnings at beginning of
year.................................. 1,958,487 2,877,594 4,682,982
Distributions to shareholders.......... (345,115) (598,042) (1,174,346)
----------- ----------- -----------
Retained earnings at end of year....... $ 2,877,594 $ 4,682,982 $ 4,461,026
=========== =========== ===========
</TABLE>
See accompanying notes.
F-36
<PAGE>
ELECTRONIC SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31 ENDED
------------------------ JUNE 30
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income............................. $ 1,264,222 $ 2,403,430 $ 952,390
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization........ 398,866 521,799 250,726
(Gain) loss on sale of assets........ 1,610 8,243 (26,620)
Provision for doubtful accounts...... 20,776 -- 108,000
Changes in operating assets and
liabilities:
Accounts receivable................. (1,725,911) 35,132 (691,819)
Inventories......................... (617,253) (463,747) 248,873
Prepaid expenses and other.......... 42,368 (336) (44,952)
Accounts payable.................... 801,781 2,032,101 (1,301,766)
Accrued expenses and other
liabilities........................ 162,239 371,848 554,626
----------- ----------- -----------
Net cash provided by operating
activities............................ 348,698 4,908,470 49,458
INVESTING ACTIVITIES
Purchases of property and equipment.... (659,254) (444,200) (339,048)
Proceeds on sale of property and
equipment............................. 39,176 101,242 45,043
Proceeds on notes receivable from
shareholders.......................... -- -- 166,980
----------- ----------- -----------
Net cash used in investing activities.. (620,078) (342,958) (127,025)
FINANCING ACTIVITIES
Borrowings on revolving credit loan.... 1,792,325 200,000 --
Repayments on revolving credit loan.... (1,026,630) (1,178,705) --
Principal payments on long-term debt... (149,200) (236,700) (20,000)
Distributions to shareholders.......... (345,115) (598,042) (1,174,346)
----------- ----------- -----------
Net cash (used) provided by financing
activities............................ 271,380 (1,813,447) (1,194,346)
(Decrease) increase in cash............ -- 2,752,065 (1,271,913)
Cash at beginning of year.............. 10,450 10,450 2,762,515
----------- ----------- -----------
Cash at end of year.................... $ 10,450 $ 2,762,515 $ 1,490,602
=========== =========== ===========
</TABLE>
See accompanying notes.
F-37
<PAGE>
ELECTRONIC SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
1. SIGNIFICANT ACCOUNTING POLICIES
Electronic Systems, Inc. (the Company) is an office technology supplier
incorporated in Virginia. The Company sells and services computer hardware,
software and copiers and provides consulting and training services for various
office systems. The following is a description of the Company's significant
accounting policies:
Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
Inventories
Inventories are stated at the lower of cost or market, primarily using
specific identification.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using
both straight-line and accelerated methods over the estimated useful lives of
the related assets.
Rental Equipment
Equipment is rented to customers under operating leases. Rental equipment is
stated at cost. Depreciation is computed using the straight-line method over
the estimated useful life of the related asset. Future minimum rentals as of
June 30, 1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30 AMOUNT
------------------- --------
<S> <C>
1998................................................................ $426,258
1999................................................................ 261,103
2000................................................................ 105,828
--------
$793,189
========
</TABLE>
Revenue Recognition
Revenues are recognized as follows:
Equipment and supply sales revenues are recognized when shipped or delivered
and title and risk of loss pass to the customer.
Maintenance contract service revenues are recognized ratably over the term
of the underlying maintenance contract. Other service revenues are recognized
as earned.
Rental revenue is recognized ratably over the term of the underlying leases,
typically one to three years.
Advertising
The costs of advertising the Company's products and services are generally
expensed as incurred. Total advertising costs amounted to $176,910, $197,525
and $47,392 in 1995, 1996 and 1997, respectively.
Income Taxes
The Company is organized to be taxed under the provisions of Subchapter S of
the Internal Revenue Code. Under these provisions, the Company does not pay
federal or state income taxes on its corporate income. Instead the Company's
income is included in the income of its stockholders for federal and state
income tax purposes.
F-38
<PAGE>
ELECTRONIC SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management make estimates and
assumptions which affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Long Lived Assets
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of, which requires impairment losses be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. Statement 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company adopted Statement 121 in 1996 and such adoption had no effect on the
financial statements.
2. BORROWINGS
The Company has a term loan collateralized by its headquarters land and
building. The loan bears interest at 90.2778% of prime and principal payments
are $40,000 for each of the next five years.
Interest paid on all indebtedness was $78,207, $87,713 and $17,256 in 1995,
1996 and 1997, respectively.
3. EMPLOYEE BENEFIT PLANS
The Company has a 401(k) plan which covers all full-time employees meeting
certain eligibility requirements. Participants may elect to contribute up to
15% of their compensation on a pre-tax basis, as defined in the plan. The
Company contributes an amount equal to 50% of the participant's contribution
not to exceed 5% of each participant's base compensation. Participants are
fully vested in the Company contributions. The Company made contributions of
$68,404, $93,390 and $62,766 in 1995, 1996 and 1997, respectively.
The Company also maintains a profit sharing plan which covers all full time
employees meeting certain eligibility requirements. Contributions to the plan
are at the discretion of the Board of Directors. The Company contributed
$92,000, $120,000 and $60,000 in 1995, 1996 and 1997, respectively.
4. LEASES
The Company is obligated under various noncancelable operating leases for
facilities, warehouse space and training centers.
Future minimum lease payments under the noncancelable operating leases as of
June 30, 1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30 AMOUNT
------------------- --------
<S> <C>
1998................................................................ $113,449
1999................................................................ 74,339
2000................................................................ 65,570
2001................................................................ 68,849
2002................................................................ 41,309
--------
$363,516
========
</TABLE>
Rent expense amounted to $57,914, $77,126 and $61,658 in 1995, 1996 and
1997, respectively.
F-39
<PAGE>
ELECTRONIC SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. RELATED PARTY TRANSACTIONS
The Company provides certain administrative and accounting services to
Electronic Systems of Richmond, Inc., a corporation owned by certain
shareholders of Electronic Systems, Inc. Management fees of $15,000, $25,000
and $14,000 were received by the Company in 1995, 1996 and 1997, respectively.
6. CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of cash equivalents and
accounts receivable. The Company's temporary cash is invested in short-term
money market accounts.
The Company markets its products and services to customers located primarily
in Virginia. The Company performs credit evaluations of its customers prior to
delivery or commencement of services and normally does not require collateral.
Payments for equipment are typically due within thirty days of billing and
supplies and services are typically due upon receipt. The Company maintains an
allowance for potential credit losses and losses have historically been within
management's expectations. Credit losses have historically been insignificant.
The carrying values of amounts classified as current assets and current
liabilities approximate fair values due to the short-term nature of these
instruments. The carrying value of long-term debt approximates fair value as
current borrowing rates approximately market rates for loans with similar
rates.
Two customers accounted for 11%, 20% and 8% of the Company's sales in 1995,
1996 and 1997, respectively.
7. SUBSEQUENT EVENTS
Effective July 7, 1997, all outstanding stock of the Company was acquired by
Global Imaging Systems, Inc. In connection with the acquisition, the Company's
S Corporation election was terminated and from the date of acquisition forward
the earnings of the Company will be taxed at the corporate level.
Immediately prior to the acquisition, the headquarters building and land and
related term debt were transferred in the form of a shareholder distribution
to an entity owned by the shareholders of the Company. The Company has entered
into an agreement to lease these facilities for five years, with initial rent
of $185,082 per year, escalating 2% annually.
F-40
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Eastern Copy Products, Inc. and Subsidiaries
We have audited the accompanying consolidated statements of income and
retained earnings and cash flows of EASTERN COPY PRODUCTS, INC. AND
SUBSIDIARIES for the years ended July 31, 1997, 1996, and 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of operations and cash
flows of EASTERN COPY PRODUCTS, INC. AND SUBSIDIARIES as of July 31, 1997,
1996, and 1995 in conformity with generally accepted accounting principles.
/s/ Pasquale & Bowers, LLP
Syracuse, New York
December 17, 1997
F-41
<PAGE>
EASTERN COPY PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
YEARS ENDED JULY 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Sales and service
Equipment sales....................... $ 8,389,297 $ 5,838,732 $ 4,691,487
Service............................... 5,897,324 5,281,391 4,640,232
Rental income......................... 737,113 761,268 733,635
Other................................. 230,241 163,977 203,475
----------- ----------- -----------
15,253,975 12,045,368 10,268,829
----------- ----------- -----------
Cost of sales and service
Cost of equipment sales............... 5,549,634 3,914,590 2,822,924
Cost of service....................... 3,982,670 3,645,680 3,142,454
Depreciation on rental equipment...... 254,990 170,193 182,768
Other................................. 126,740 104,937 96,405
----------- ----------- -----------
9,914,034 7,835,400 6,244,551
----------- ----------- -----------
Gross profit............................ 5,339,941 4,209,968 4,024,278
Selling, general and administrative
expenses............................... 4,971,142 4,087,298 3,689,948
----------- ----------- -----------
Income from operations.................. 368,799 122,670 334,330
Other expense--net, including interest
expense of $108,879, $111,947, and
$123,441............................... 76,090 54,537 78,732
----------- ----------- -----------
Income before provision for income
taxes.................................. 292,709 68,133 255,598
Provision for income taxes (Note 5)..... 110, 000 12,400 99,800
----------- ----------- -----------
Net income.............................. 182,709 55,733 155,798
Retained earnings (accumulated
deficit)--beginning of year............ 55,645 (88) (155,886)
----------- ----------- -----------
Retained earnings (accumulated
deficit)--end of year.................. $ 238,354 $ 55,645 $ (88)
=========== =========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-42
<PAGE>
EASTERN COPY PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JULY 31, 1997, 1996, AND 1995
INCREASE (DECREASE) IN CASH
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities
Net income.................................. $ 182,709 $ 55,733 $ 155,798
--------- --------- ---------
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Deferred tax expense (benefit)............ (29,000) (138,000) 65,000
Depreciation.............................. 283,640 210,788 232,672
Bad debt expense.......................... 124,242 40,236 38,889
Loss on disposal of assets................ 0 0 3,355
Changes in assets and liabilities
affecting cash flow from operating
activities:
Accounts receivable..................... (263,488) (317,460) (129,802)
Inventory............................... 677,796 34,657 (456,844)
Other current assets.................... 17,179 (52,319) 66,530
Other assets............................ 0 800 0
Accounts payable........................ (111,511) (439,855) 36,831
Notes payable........................... (231,243) 424,747 85,940
Accrued expenses........................ 12,309 115,168 (65,573)
Deferred revenue........................ 8,419 195,200 (79,325)
Income taxes payable.................... 126,000 86,964 14,688
Other current liabilities............... (29,028) 2,802 (5,512)
--------- --------- ---------
Total adjustments..................... 585,315 163,728 (193,151)
--------- --------- ---------
Net cash provided by (used in) operat-
ing activities....................... 768,024 219,461 (37,353)
--------- --------- ---------
Cash flows from investing activities
Capital expenditures--Net................... (559,067) (102,409) (70,609)
--------- --------- ---------
Net cash used in investing activi-
ties................................. (559,067) (102,409) (70,609)
--------- --------- ---------
Cash flows from financing activities
Proceeds from long-term debt................ 131,219 93,611 55,472
Payments on long-term debt.................. (202,168) (180,436) (161,000)
Payments on capital lease obligations....... 0 (5,426) (57,887)
(Advances) Repayments on shareholder loan--
Net........................................ (10,925) (39,985) 41,415
--------- --------- ---------
Net cash used in financing activi-
ties................................. (81,874) (132,236) (122,000)
--------- --------- ---------
Net increase (decrease) in cash............... 127,083 (15,184) (229,962)
Cash--Beginning of year....................... 112,274 127,458 357,420
--------- --------- ---------
Cash--End of year............................. $ 239,357 $ 112,274 $ 127,458
========= ========= =========
</TABLE>
See Accompanying Notes to the Consolidated Financial Statements.
F-43
<PAGE>
EASTERN COPY PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The parent company is primarily involved in the selling, leasing and
servicing of Konica office copiers. Eastern Copy Credit Corporation, Inc., a
wholly-owned subsidiary, was formerly involved in the leasing of office
copiers and is now inactive. Eastern Copy Products Vend-A-Copy Division, Inc.,
a wholly-owned subsidiary, is engaged in providing copy vending services to
the general public.
Principles of Consolidation
The consolidated financial statements include the accounts of Eastern Copy
Products, Inc., and both of its wholly-owned subsidiaries. All intercompany
accounts and transactions have been eliminated. "Company" as used herein
refers to the consolidated group.
Concentrations of Credit Risk
The Company, in the normal course of business, grants credit to customers,
essentially all of whom are located in central or western New York State. The
Company uses the direct write-off method to provide for bad debts. Management
considers any allowance necessary for uncollectible accounts receivable at
July 31, 1997, 1996, and 1995 as not material to the financial statements.
At July 31, 1997, the Company had approximately $92,000 in bank deposits in
excess of federally insured levels.
Inventory
Inventory represents copiers, parts and supplies held for sale or lease.
Inventory is stated at the lower of average cost or market.
Revenue Recognition
Revenue is recognized when earned. The Company recognizes revenue on
maintenance contracts primarily on a straight-line basis over the term of the
related agreements. Lengths of the maintenance agreements generally range from
one to three years.
The three year agreements generally involve the Company providing a copier
and the related maintenance under one installment contract. Essentially all of
these contracts, and the conditional title to the associated equipment, are
subsequently sold to a third party financing company in exchange for cash
proceeds. A portion of the proceeds are allocated to machine sales and
recognized currently, while the remainder is deferred and recognized as
service income on a straight-line basis over the term of the related
agreement.
Revenue is recorded on equipment sales upon delivery to a customer. Service
revenue is recorded at the time service is performed.
Depreciation
Fixed assets are recorded at cost.
The cost of fixed assets is depreciated over the estimated useful lives of
the related assets using the straight-line method for financial statement
purposes.
F-44
<PAGE>
EASTERN COPY PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Income Taxes
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
taxes related primarily to differences between the basis of deferred revenue
and fixed assets for financial and income tax reporting. The deferred tax
assets and liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Supplemental Disclosures of Cash Flow Information
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Cash paid during the year for--Interest.......... $108,879 $111,947 $123,441
--Income taxes................................... $ 2,093 $ 69,747 $ 20,460
</TABLE>
Capital expenditures reflected in the statements of cash flows includes the
net increase in vending copiers in service and the net increase in copiers on
operating lease.
Non-Cash Financing Activities
During fiscal 1996, the Company issued 10 shares of common stock at its fair
market value to Konica Business Machines, Inc. In consideration for the
shares, Konica transferred all of the assets and liabilities of Konica's
Buffalo, New York branch to the Company. The assets and liabilities
transferred consisted of computer parts and equipment inventory, and
obligations under customer maintenance agreements. Following is a summary of
the transaction:
<TABLE>
<S> <C>
Copier inventory transferred.................................... $ 261,024
Liabilities under maintenance agreements assumed................ (110,400)
---------
Value assigned to common stock issued........................... $ 150,624
=========
</TABLE>
2. NOTES PAYABLE
The Company has various notes payable owed to financing companies under
inventory financing arrangements. The arrangements call for the respective
financing company to pay the invoice cost, less available discounts, on
inventory purchases. The Company then remits payment for the full invoiced
cost to the financing company; if payment to the finance company is made
within 30 days, the Company retains a portion of the discount. Interest is
charged on any late payments.
F-45
<PAGE>
EASTERN COPY PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. LONG-TERM DEBT
Scheduled maturities of long-term debt for the next four years and in the
aggregate are as follows:
<TABLE>
<CAPTION>
YEARS ENDING
JULY 31,
------------
<S> <C>
1998............................... $732,017
1999............................... 70,438
2000............................... 49,528
2001............................... 19,411
--------
$871,394
========
</TABLE>
4. COMMITMENTS
The Company leases vehicles, office equipment, office and warehouse
facilities under various noncancelable operating leases. Lease expense under
these arrangements for the years ended July 31, 1997, 1996, and 1995,
approximated $234,000, $96,000, and $63,000, respectively. Minimum future
rental payments due under the agreements for the next five years and in the
aggregate are as follows:
<TABLE>
<CAPTION>
YEARS ENDING
JULY 31,
------------
<S> <C>
1998............................. $ 287,868
1999............................. 239,428
2000............................. 241,615
2001............................. 205,865
2002............................. 171,990
Thereafter....................... 79,464
----------
$1,226,230
==========
</TABLE>
The Company also leases certain other office and warehouse facilities on a
month-to-month basis, and accounts for the agreements as operating leases.
5. INCOME TAXES
The components of the provision for income taxes at July 31, 1997, 1996, and
1995, are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- --------- --------
<S> <C> <C> <C>
Current expense--Federal..................... $129,000 $ 133,000 $ 50,600
--State...................................... 10,000 17,400 6,200
Current benefit from utilization of operating
loss carryforward--Federal.................. 0 0 (22,000)
Deferred tax expense (benefit)--Federal...... (23,000) (110,000) 47,000
--State...................................... (6,000) (28,000) 18,000
-------- --------- --------
$110,000 $ 12,400 $ 99,800
======== ========= ========
</TABLE>
F-46
<PAGE>
EASTERN COPY PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The net deferred tax asset at July 31, 1997, 1996, and 1995, is comprised of
the following:
<TABLE>
<CAPTION>
1997 1996 1995
-------- --------- ---------
<S> <C> <C> <C>
Deferred tax assets.......................... $796,000 $ 787,000 $ 703,000
Deferred tax liabilities..................... (94,000) (114,000) (168,000)
-------- --------- ---------
Net deferred tax asset....................... $702,000 $ 673,000 $ 535,000
======== ========= =========
</TABLE>
The reconciliation of the effective income tax rate is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Federal income tax rate....................................... 34% 15% 34%
State taxes, net of federal income tax benefit................ 6 6 6
Other, net.................................................... (2) (3) (1)
--- --- ---
38% 18% 39%
=== === ===
</TABLE>
Deferred tax assets result primarily from different methods of revenue
recognition on certain maintenance contracts for book and tax purposes.
Deferred tax liabilities result mainly from the use of accelerated
depreciation methods for tax purposes.
At July 31, 1997, the Company has a state operating loss carryforward of
approximately $146,000 available to offset future state taxable income
expiring through the year 2011.
6. RELATED PARTY TRANSACTIONS
The Company leases office and warehouse space from its shareholder on a
month-to-month basis. Rent expense incurred under the arrangements amounted to
$150,000 for fiscal years 1997, 1996, and 1995, and is included in selling,
general and administrative expenses.
7. MAJOR SUPPLIER
The Company buys substantially all of its equipment, parts, and supplies
held for resale from Konica. Net amounts due Konica at July 31, 1997, 1996,
and 1995, approximated $724,000, $780,000, and $1,398,000, respectively, and
are included in accounts payable.
8. PENSION PLAN
The Company maintains a 401(k) profit sharing plan covering substantially
all employees meeting certain age and length of service requirements. Employer
contributions are at the discretion of the Board of Directors. No
contributions were made for the years ended July 31, 1997, 1996, and 1995.
9. SUBSEQUENT EVENTS
Stock Purchase Agreement
Effective August 1, 1997, the Company entered into a Stock Purchase
Agreement with Conway Office Products, Inc. ("Conway"), a wholly-owned
subsidiary of Global Imaging Systems, Inc. for all the capital stock of the
Company. The total purchase price for the stock of the Company was
approximately $6,750,000.
Merger
Effective September 1, 1997, Eastern Copy Products Vend-A-Copy Division,
Inc. and Eastern Copy Credit Corporation, Inc., merged into Eastern Copy
Products, Inc.
F-47
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Board of Directors
Duplicating Specialties, Inc.
We have audited the accompanying statements of income and retained earnings
and cash flows of Duplicating Specialties, Inc. for the ten months ended
August 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of
Duplicating Specialties, Inc. for the ten months ended August 31, 1997 in
conformity with generally accepted accounting principles.
/s/ Moss Adams LLP
Vancouver, Washington
December 19, 1997
F-48
<PAGE>
DUPLICATING SPECIALTIES, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE TEN MONTHS ENDED AUGUST 31, 1997
<TABLE>
<S> <C>
Revenue
Equipment and supplies............................................ $4,240,383
Service agreement revenue......................................... 2,006,268
Rental income..................................................... 72,736
----------
6,319,387
Cost of sales
Cost of equipment and supplies sales.............................. 2,642,715
Cost of service agreement revenue................................. 927,691
Cost of rental income............................................. 22,184
----------
3,592,590
Gross profit........................................................ 2,726,797
Selling, general and administrative expenses........................ 2,493,602
Provision for doubtful accounts..................................... 25,201
----------
Operating income.................................................... 207,994
----------
Other income (expense)
Miscellaneous income.............................................. 10,556
Interest expense.................................................. (7,470)
----------
3,086
----------
Net income before income taxes...................................... 211,080
Income taxes........................................................ 93,361
----------
Net income.......................................................... 117,719
Retained earnings, beginning of period.............................. 625,249
----------
Retained earnings, end of period.................................... $ 742,968
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-49
<PAGE>
DUPLICATING SPECIALTIES, INC.
STATEMENT OF CASH FLOWS
FOR THE TEN MONTHS ENDED AUGUST 31, 1997
<TABLE>
<S> <C>
Cash flows from operating activities
Net income........................................................ $ 117,719
Adjustments to reconcile net income to net cash flows from
operating activities
Depreciation.................................................... 57,560
Net deferred taxes.............................................. (94,687)
Gain on sale of assets.......................................... (456)
Increase (decrease) in cash due to changes in assets and
liabilities
Accounts receivable, net........................................ (24,421)
Inventory....................................................... 141,727
Prepaid expense................................................. 24,110
Cash surrender value of life insurance.......................... 9,473
Deposits........................................................ 1,317
Accounts payable................................................ (188,859)
Accrued expenses................................................ 413,033
Deferred service contract revenue............................... 40,921
---------
Net cash flows from operating activities...................... 497,437
Cash flows from investing activities
Purchase of equipment............................................. (112,570)
Proceeds from sale of assets...................................... 17,040
---------
Net cash flows from investing activities...................... (95,530)
Cash flows from financing activities
Net change in short-term note payable............................. (202,000)
Proceeds from long-term borrowings................................ 25,000
Payments on long-term borrowings.................................. (18,774)
Increase in due from stockholder.................................. (10,686)
---------
Net cash flows from financing activities...................... (206,460)
---------
Net increase in cash................................................ 195,447
Cash, beginning of period........................................... 46,930
---------
Cash, end of period................................................. $ 242,377
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-50
<PAGE>
DUPLICATING SPECIALITIES, INC.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1997
NOTE 1--NATURE OF BUSINESS
The Company is an Oregon corporation engaged in the business of selling and
providing maintenance and supplies for reproduction equipment and facsimile
machines. Customers are primarily located in Oregon and Southwest Washington.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
Cash and cash equivalents--For purposes of the statement of cash flows, the
Company considers all highly liquid debt instruments purchased with a maturity
of three months or less to be cash equivalents. The Company maintains its cash
in bank deposit accounts which, at times, may exceed federally insured limits.
The Company has not experienced any losses in such accounts and believes it is
not exposed to any significant credit risk on cash and cash equivalents.
Accounts receivable--Management periodically assesses the collectability of
accounts receivable. This assessment provides the basis for the allowance for
doubtful accounts and related bad debt expense. The allowance for doubtful
accounts was $30,000 as of August 31, 1997. Credit is generally extended to
customers without collateral requirements.
Inventory--Inventory is stated at the lower of cost (first-in first-out
method) or market.
Equipment and vehicles--Expenditures for maintenance and repairs are charged
to expense as incurred, whereas major betterments and equipment additions are
capitalized. The Company has provided for depreciation of equipment using
straight-line and accelerated methods over estimated useful lives ranging from
three to ten years.
Revenue recognition--Revenues are recorded at the time of shipment of
products or performance of services. Deferred service contract revenue is
recognized over the estimated service period, based upon copier usage.
Contracts are billed in increments of preventive maintenance cycles.
Income taxes--Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently due plus
deferred taxes related primarily to differences between the bases of the
equipment and vehicles for financial and income tax reporting. The deferred
tax assets and liabilities represent future tax return consequences of these
differences which will either be taxable or deductible when the assets and
liabilities are recovered or settled.
Use of estimates--The preparation of the financial statements in conformity
with generally accepted accounting principles require management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
NOTE 3--INVENTORY
Inventory as of August 31, 1997 consists of:
<TABLE>
<S> <C>
Duplicating equipment............................................ $330,520
Supplies......................................................... 118,651
Service parts and accessories.................................... 309,955
--------
$759,126
========
</TABLE>
F-51
<PAGE>
DUPLICATING SPECIALTIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4--LONG-TERM DEBT
Long-term debt as of August 31, 1997 consists of:
<TABLE>
<S> <C>
Notes payable collateralized by automotive equipment. Interest
rates from 3.9% to 8.58%. Due in monthly payments totaling
$1,792, including interest. Maturing from October 1998 to March
2002. Paid in full during September 1997......................... $41,925
Less current portion.............................................. 16,087
-------
$25,838
=======
</TABLE>
The following is a schedule of required principal payments on long-term debt
during the succeeding five years:
<TABLE>
<CAPTION>
YEAR ENDING
AUGUST
31,
-----------
<S> <C>
1998............................................................ $16,087
1999............................................................ 12,286
2000............................................................ 5,081
2001............................................................ 5,283
2002............................................................ 3,188
-------
$41,925
=======
</TABLE>
NOTE 5--LEASES
The Company leases office and warehouse space under a long-term operating
lease. The lease agreement provides for monthly payments of $6,500 (increasing
to $7,850 effective September 1, 1997), plus property taxes. The lease expires
November 30, 2003. Lease expense for the ten months ended August 31, 1997 was
$73,990. The following is a schedule of future minimum facility lease
payments, required for the next 5 years, under the operating lease as of
August 31, 1997.
<TABLE>
<CAPTION>
YEAR ENDING
AUGUST 31,
-----------
<S> <C>
1998 ......................................................... $ 94,200
1999 .......................................................... 94,200
2000 .......................................................... 94,200
2001 .......................................................... 94,200
2002 .......................................................... 94,200
--------
$471,000
========
</TABLE>
NOTE 6--PROFIT SHARING AND 401(K) PLAN
The Company adopted a profit sharing plan effective November 1, 1969. The
plan provides for contributions to be determined annually by the board of
directors of up to 15% of eligible compensation. The Company approved a
contribution of $116,027 for the ten months ended August 31, 1997.
In addition, the Company provides a 401(k) plan benefit whereby eligible
employee contributions are matched by the Company. The Company contribution
for the 401(k) plan was $32,071 for the ten months ended August 31, 1997.
F-52
<PAGE>
DUPLICATING SPECIALTIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
As more fully described in Note 10, the Company was acquired subsequent to
period end and these plans were terminated and replaced by plans of the new
parent company.
NOTE 7--INCOME TAXES
The deferred tax asset and liability as of August 31, 1997 consist of the
following:
<TABLE>
<S> <C>
Current deferred tax asset
Allowance for doubtful accounts................................ $ 11,700
Accrued officer salaries....................................... 86,171
Accrued vacation............................................... 9,849
--------
$107,720
========
Noncurrent deferred tax liability
Depreciation................................................... $ 23,584
========
</TABLE>
The components of income tax expense are as follows:
<TABLE>
<S> <C>
Current.......................................................... $188,048
Deferred......................................................... (94,687)
--------
$ 93,361
========
</TABLE>
The Company's income tax expense differed from the statutory Federal rate as
follows:
<TABLE>
<S> <C>
Statutory rate applied to net income before income taxes.......... $65,571
Increase in income taxes resulting from
Effect of non-deductible expenses under federal tax code........ 4,049
State and local taxes, net of federal tax benefit............... 25,051
Other........................................................... (1,310)
-------
$93,361
=======
</TABLE>
NOTE 8--SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<S> <C>
Cash paid for interest............................................ $ 7,470
=======
Cash paid for income taxes........................................ $81,688
=======
</TABLE>
NOTE 9--CONCENTRATION
Approximately 80% of all inventory purchases of the Company were from one
vendor during the ten months ended August 31, 1997.
NOTE 10--SUBSEQUENT EVENT
Subsequent to, but effective as of, August 31, 1997 all outstanding stock of
the Company was purchased by Global Imaging Systems, Inc., a Delaware
corporation.
F-53
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors Global Imaging Systems, Inc. Tampa, Florida
We have audited the accompanying statements of income and retained earnings
and statements of cash flow of Electronic Systems of Richmond, Inc. for the
eleven-month and twelve-month periods ended November 30, 1997 and December 31,
1996, respectively. These financial statements are the responsibility of
Electronic Systems of Richmond, Inc.'s management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the statements of income and retained earnings and
statements of cash flows referred to above present fairly, in all material
respects, the results of operations and cash flows of Electronic Systems of
Richmond, Inc. for the eleven-month and twelve-month periods ended November
30, 1997 and December 31, 1996, respectively, in conformity with generally
accepted accounting principles.
/s/ EDMONDSON, LEDBETTER & BALLARD,
L.L.P.
Norfolk, Virginia
January 27, 1998
F-54
<PAGE>
ELECTRONIC SYSTEMS OF RICHMOND, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE ELEVEN-MONTH AND TWELVE-MONTH PERIODS ENDED
NOVEMBER 30, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
NOVEMBER 30, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Revenue
Net sales of products............................. $ 9,337,430 $ 20,075,135
Service and rental................................ 1,635,354 1,474,899
----------- ------------
Total revenue................................... 10,972,784 21,550,034
----------- ------------
Costs and expenses
Cost of goods sold................................ 6,260,046 16,973,045
Service and rental costs.......................... 676,726 686,579
Selling, general and administrative............... 1,939,057 2,190,345
----------- ------------
Total costs and expenses........................ 8,875,829 19,849,969
----------- ------------
Net profit...................................... 2,096,955 1,700,065
----------- ------------
Other income
Interest income................................... 152,943 110,746
Other income...................................... 78,178 7,755
----------- ------------
Total other income.............................. 231,121 118,501
----------- ------------
Net income...................................... 2,328,076 1,818,566
Retained earnings, beginning of period.......... 2,783,057 1,606,491
Dividends declared................................ (3,956,262) (642,000)
----------- ------------
Retained earnings, end of period................ $ 1,154,871 $ 2,783,057
=========== ============
</TABLE>
See Independent Auditor's Report
and Accompanying Notes to Financial Statements
F-55
<PAGE>
ELECTRONIC SYSTEMS OF RICHMOND, INC.
STATEMENTS OF CASH FLOWS
FOR THE ELEVEN-MONTH AND TWELVE-MONTH PERIODS ENDED
NOVEMBER 30, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
NOVEMBER 30, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net income......................................... $ 2,328,076 $1,818,566
Adjustments to reconcile net income to net cash
from operating activities
Depreciation...................................... 17,074 19,213
Uncollectible accounts expense.................... -- 37,747
Loss on disposition of assets..................... -- 84
(Increase) decrease in operating assets
Accounts receivable.............................. (1,531,626) 1,611,357
Inventories of machines, parts and supplies...... (155,670) 453,519
Prepaid expense.................................. 2,054 (1,396)
Increase (decrease) in operating liabilities
Accounts payable................................. (3,277,819) 1,941,085
Accrued commissions.............................. 701,623 33,855
Sales tax payable................................ (4,080) 650
Deferred income.................................. 67,315 113,321
Other............................................ 1,169 342
----------- ----------
Net cash provided (used) by operating activities... (1,851,884) 6,028,343
----------- ----------
Cash flows from investing activities
Acquisition of equipment........................... (12,431) (19,557)
----------- ----------
Net cash used by investing activities.............. (12,431) (19,557)
----------- ----------
Cash flows from financing activities
Proceeds from issuance of common stock............. 110,670 --
Dividends paid..................................... (1,120,440) (642,000)
----------- ----------
Net cash used by financing activities.............. (1,009,770) (642,000)
----------- ----------
Increase in cash and cash equivalents................ (2,874,085) 5,366,786
Cash and cash equivalents, beginning of period....... 6,844,570 1,477,784
----------- ----------
Cash and cash equivalents, end of period............. $ 3,970,485 $6,844,570
=========== ==========
Supplemental disclosure of cash flow information
Cash paid during the period for interest........... $ 2,721 $ 4,075
=========== ==========
Supplemental schedule of noncash investing and fi-
nancing activities
Increase in dividends payable...................... $ 2,835,822 $ --
=========== ==========
</TABLE>
See Independent Auditor's Report
and Accompanying Notes to Financial Statements
F-56
<PAGE>
ELECTRONIC SYSTEMS OF RICHMOND, INC.
NOTES TO FINANCIAL STATEMENTS
NATURE OF BUSINESS
The Company is engaged in the sale of technologies and related services,
primarily as a systems integrator with a focus on computer networking,
networking security, data systems security, migration services and Internet
access and connectivity. The Company serves its customers from locations in
Richmond and Arlington, Virginia.
Effective December 1, 1997, Electronic Systems of Richmond, Inc. became a
subsidiary of Electronic Systems, Inc. and adopted a March 31 year-end.
SIGNIFICANT ACCOUNTING POLICIES
Estimates Management uses estimates and assumptions in preparing these
financial statements in accordance with generally accepted accounting
principles. Those estimates and assumptions affect the reported assets and
liabilities and the reported revenues and expenses. Actual results could vary
from the estimates that were used.
Revenue Recognition Income is recognized at point of sale except for income
from maintenance agreements and training which is recognized over individual
contract terms and as training is provided.
Cash Equivalents The Company considers all highly liquid debt instruments
purchased with an original maturity of three months or less to be cash
equivalents.
Accounts Receivable The Company routinely extends its customers trade
credit, most of which is not collateralized or otherwise secured.
Uncollectible accounts receivable are charged to operations in the period in
which an account is determined to be uncollectible.
Inventory Inventories are valued at the lower of cost or market, using the
specific identification method.
Equipment All equipment is recorded at cost and depreciated using the
straight-line method. Depreciable lives are from five to seven years.
Advertising Advertising costs are charged to operations when incurred.
Income Taxes The Corporation is not subject to corporate income tax because
its shareholders have elected to be taxed according to Subchapter S of the
Internal Revenue Code. As such, net income or loss; certain items of income
and expense; and credits, if any, are passed through to the shareholders for
inclusion in their tax returns.
UNCOLLECTIBLE ACCOUNTS
Included in expense for the period ended December 31, 1996 are $37,747 of
uncollectible acccounts. There were no uncollectible accounts charged to
expense for the period ended November 30, 1997.
ADVERTISING
Advertising expenses were $30,788 and $71,822 for the periods ended November
30, 1997 and December 31, 1996, respectively.
DEPRECIATION
Depreciation charges of $17,074 and $19,213 were expensed for the periods
ended November 30, 1997 and December 31, 1996, respectively.
F-57
<PAGE>
ELECTRONIC SYSTEMS OF RICHMOND, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
RELATED PARTY TRANSACTIONS
The Company receives administrative and accounting personnel assistance from
Electronic Systems, Inc., an affiliated corporation with in excess of 50% of
its stock owned by several of the stockholders of Electronic Systems of
Richmond, Inc. Included in administrative expense are management fees of
$33,750 and $25,000 paid to Electronic Systems, Inc., for the periods ended
November 30, 1997 and December 31, 1996, respectively.
OPERATING LEASES
The Company leases its Richmond facilities through a non-cancelable
operating lease which expires November 30, 2000. The Company leases its
Arlington facilities through a non-cancelable operating lease which expires
May 31, 2000. These leases provide for annual operating expense adjustments.
Occupancy expense attributable to operating leases was $103,813 and $95,554,
respectively, for the periods ended November 30, 1997 and December 31, 1996,
respectively.
Minimum future rent commitments under these leases for the four months
ending March 31, 1998, and for each of the next four years ending March 31,
are:
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002 TOTAL
------- -------- -------- -------- ----- --------
<S> <C> <C> <C> <C> <C>
$37,428 $114,610 $119,464 $ 55,492 $ -- $326,994
</TABLE>
EMPLOYEE BENEFIT PLANS
Effective July 1, 1996, the Company began to offer a profit sharing plan
with a 401(k) deferral feature covering substantially all employees who have
attained age 21, have been employed for at least one year, and who work a
minimum of 1,000 hours annually. Contributions to the plan are an employer-
matching contribution of 50% of employee elective deferrals up to 5% of
salary. The Company's policy is to fund the contributions as accrued. Employer
contributions to this plan were $16,772 and $7,454 for the periods ended
November 30, 1997 and December 31, 1996, respectively, exclusive of plan
administration costs.
CONCENTRATION OF CREDIT RISK
At November 30, 1997 and at various times during the periods ended November
30, 1997 and December 31, 1996, the Company had on deposit with a single
financial institution, more than $100,000, which is the limit currently
insured by the Federal Deposit Insurance Corporation.
DIVIDENDS
The Company declared dividends of $3,693.99 and $629.41 per share for the
periods ended November 30, 1997 and December 31, 1996, respectively.
SUBSEQUENT EVENT
Effective December 1, 1997, shareholders of record November 30, 1997 were
redeemed by a new shareholder, Electronic Systems, Inc.
RECLASSIFICATIONS
Certain amounts in the December 31, 1996 financial statements have been
reclassified to conform with the current year financial statement
presentation. These reclassifications had no effect on operating results as
previously reported.
F-58
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Connecticut Business Systems, Inc.:
We have audited the accompanying statements of income (loss) and retained
earnings (deficit) and cash flows of Connecticut Business Systems, Inc. for
the years ended September 30, 1996 and September 30, 1997 and for the three
months ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of
Connecticut Business System, Inc. for the years ended September 30, 1996 and
September 30, 1997 and for the three months ended December 31, 1997 in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Hartford, Connecticut
February 16, 1998
F-59
<PAGE>
CONNECTICUT BUSINESS SYSTEMS, INC.
STATEMENTS OF INCOME (LOSS) AND RETAINED EARNINGS (DEFICIT)
FOR THE YEARS ENDED SEPTEMBER 30, 1996 AND 1997
AND THE THREE MONTHS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------- THREE MONTHS ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1997 DECEMBER 31, 1997
------------------ ------------------ ------------------
<S> <C> <C> <C>
Net sales:
Equipment............. $ 5,608,784 $ 6,577,866 $1,592,616
Supplies.............. 2,083,713 2,241,317 601,013
Service............... 3,995,009 4,330,964 1,154,604
Other................. 113,613 139,469 34,507
----------- ----------- ----------
Total net sales..... 11,801,119 13,289,616 3,382,740
----------- ----------- ----------
Costs and operating
expenses:
Equipment............. 3,505,491 4,113,684 934,930
Supplies.............. 1,230,029 1,314,995 343,953
Service............... 2,279,942 2,207,399 558,607
Selling, general and
administrative....... 4,545,790 5,227,111 1,261,578
Other................. 166,414 193,563 38,562
----------- ----------- ----------
11,727,666 13,056,752 3,137,630
----------- ----------- ----------
Income from
operations......... 73,453 232,864 245,110
Interest expense........ 122,405 123,402 38,352
----------- ----------- ----------
Income (loss) before
provision for income
taxes................ (48,952) 109,462 206,758
Provision (benefit) for
state income taxes..... -- (18,000) 20,000
----------- ----------- ----------
Net income (loss)... (48,952) 127,462 186,758
Retained earnings
(deficit), beginning of
period................. (112,471) (161,423) (33,961)
Distribution to
shareholders........... -- -- 32,000
----------- ----------- ----------
Retained earnings
(deficit), end of
period................. $ (161,423) $ (33,961) $ 120,797
=========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-60
<PAGE>
CONNECTICUT BUSINESS SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1996 AND 1997
AND THE THREE MONTHS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------
SEPTEMBER 30, SEPTEMBER 30, THREE MONTHS ENDED
1996 1997 DECEMBER 31, 1997
------------- ------------- ------------------
<S> <C> <C> <C>
Cash flows from operating activ-
ities:
Net income (loss)............. $ (48,952) $ 127,462 $ 186,758
Adjustments to reconcile net
income (loss) to net cash
provided by operating activi-
ties:
Depreciation................ 192,147 275,788 82,191
Changes in operating assets
and liabilities--
Accounts receivable....... 2,622 (57,816) 47,680
Inventories............... 81,146 99,995 (31,621)
Other receivables......... (44,529) 29,785 12,580
Deposits.................. 28,770 (25,995) (3,172)
Accounts payable.......... (99,723) (158,858) 53,425
Accrued expenses.......... 65,956 201,445 (82,069)
Unearned income........... (68,118) (188,668) 74,477
Deferred tax asset........ -- (18,000) 12,000
--------- --------- ---------
Net cash provided by oper-
ating activities......... 109,319 285,138 352,249
--------- --------- ---------
Cash flows from investing activ-
ities:
Acquisition of property and
equipment.................... (483,194) (701,678) (120,335)
Disposition of property and
equipment.................... 268,384 281,497 25,907
--------- --------- ---------
Net cash used for invest-
ing activities........... (214,810) (420,181) (94,428)
--------- --------- ---------
Cash flows from financing activ-
ities:
Net proceeds from notes pay-
able to stockholders......... 216,776 566,697 --
Repayments of revolving and
other note payable, net...... (59,284) (439,433) (165,000)
(Decrease) increase of long-
term liabilities............. (64,207) 10,912 13,994
--------- --------- ---------
Net cash provided by (used
for) financing
activities............... 93,285 138,176 (151,006)
--------- --------- ---------
Net (decrease) increase in
cash........................... (12,206) 3,133 106,815
Cash, beginning of period....... 28,073 15,867 19,000
--------- --------- ---------
Cash, end of period............. $ 15,867 $ 19,000 $ 125,815
========= ========= =========
Supplemental disclosure of cash
flow information:
Cash paid for interest........ $ 122,883 $ 127,892 $ 38,252
========= ========= =========
Cash paid for state income
taxes........................ $ 3,529 $ 4,508 $ --
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-61
<PAGE>
CONNECTICUT BUSINESS SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 AND 1997 AND DECEMBER 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization--
Connecticut Business Systems, Inc. (the Company) commenced operations on
April 18, 1986 when it purchased property, equipment and inventory from
Columbia Business Systems, Inc. The Company sells, rents and services
photocopy machines, facsimile machines and duplicators and distributes related
supplies.
Use of estimates--
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Inventories--
Inventories are stated at the lower of cost (average cost and specific
identification) or market. The inventory value at September 30, 1996,
September 30, 1997 and December 31, 1997 are net of reserves for
excess/obsolete inventory of approximately $-0-, $170,000 and $58,000,
respectively.
Property and equipment--
Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the following estimated useful lives:
<TABLE>
<S> <C>
Demo and showroom equipment...................................... 2-5 years
Furniture and fixtures........................................... 5 years
Warehouse equipment.............................................. 5 years
Vehicles......................................................... 3 years
Leasehold improvements........................................... 7 years
</TABLE>
Revenue recognition and unearned income--
Revenue on the sale of machines and supplies is recorded when the machines
and supplies are shipped. Revenue for services is recorded when the services
are provided. Maintenance contract service revenues are recognized ratably
over the term of the applicable maintenance contract.
Amounts billed under maintenance agreements are reflected in unearned income
and recognized as income on a straight-line basis over the term of the related
contract. Contract terms range from one to three years, but primarily are for
a one year term.
Concentration of credit risk--
Financial instruments which may subject the Company to concentrations of
credit risk consist principally of trade receivables. Concentrations of credit
risk with respect to trade receivables are limited due to the large number of
customers comprising the Company's customer base. The Company purchases a
majority of its machines for resale from one vendor. Purchases from this
vendor are based on inventory requirements and no purchase commitments or
blanket purchase orders existed at September 30, 1996, September 30, 1997 or
December 31, 1997.
F-62
<PAGE>
CONNECTICUT BUSINESS SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. REVOLVING AND OTHER NOTE PAYABLE:
At September 30, 1996, September 30, 1997 and December 31, 1997, the Company
had the following notes payable:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
1996 1997 1997
------------- ------------- ------------
<S> <C> <C> <C>
Revolving note payable, with
interest at bank's prime (8.50% at
September 30, 1997) plus 1%,
payable monthly................... $600,000 $165,000 $--
Note payable with interest at
14.123% payable monthly........... 4,433 -- --
-------- -------- ----
604,433 165,000 --
Less--current maturities........... (604,433) (165,000) --
-------- -------- ----
Long-term debt..................... $ -- $ -- $--
======== ======== ====
</TABLE>
Under the terms of the revolving note payable (the Note), the Company may
borrow up to $1,250,000, not to exceed 80% of eligible accounts receivable, as
defined, and 45% of eligible inventory, as defined. As of September 30, 1996,
September 30, 1997 and December 31, 1997, the Company had $650,000, $1,085,000
and $1,250,000, respectively, of available borrowing under the Note.
The Note is collateralized by substantially all assets of the Company and
personally guaranteed by the stockholders.
The Note also contains certain restrictive financial covenants including
minimum tangible net worth of $500,000 (which considers amounts due
stockholders as capital), a current ratio greater than 1.1, minimum working
capital of $450,000 (as defined) and a debt service ratio greater than 1.2. As
of September 30, 1996, September 30, 1997 and December 31, 1997, the Company
was in compliance with these covenants.
3. NOTES PAYABLE TO STOCKHOLDERS:
The Company has entered into note agreements with its two stockholders.
These notes are due upon demand and bear interest at 10%, payable quarterly.
These notes are classified as long-term as the stockholders do not intend to
request repayment until after December 31, 1998. A portion of these notes
payable is subordinated to the Company's bank debt and is classified as
Subordinated Notes Payable to Stockholders in the accompanying financial
statements (see Note 8 for Subsequent Event).
4. INCOME TAXES:
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." This
standard requires that a deferred tax asset or liability be recognized for the
estimated future tax effects attributable to temporary differences.
The Company has elected to be taxed as an S corporation for Federal income
tax purposes. As such, the Company is not subject to Federal income taxes as
the taxable income of the Company is included in the individual income tax
returns of the stockholders of the Company.
F-63
<PAGE>
CONNECTICUT BUSINESS SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The provision (benefit) for state income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------
SEPTEMBER 30, SEPTEMBER 30, THREE MONTHS ENDED
1996 1997 DECEMBER 31, 1997
------------- ------------- ------------------
<S> <C> <C> <C>
Current....................... $-- $ -- $ 8,000
Deferred...................... -- (18,000) 12,000
---- -------- -------
$-- $(18,000) $20,000
==== ======== =======
</TABLE>
Deferred tax assets and liability are comprised of the following:
<TABLE>
<CAPTION>
CURRENT ASSET LONG-TERM LIABILITY
---------------------------------------- ----------------------------------------
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
1996 1997 1997 1996 1997 1997
------------- ------------- ------------ ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Depreciation............ $ -- $ -- $ -- $28,600 $18,000 $18,000
Inventory reserves...... -- 18,000 6,000 -- -- --
Deferred income......... 15,000 15,000 15,000 -- -- --
------- ------- ------- ------- ------- -------
$15,000 $33,000 $21,000 $28,600 $18,000 $18,000
======= ======= ======= ======= ======= =======
</TABLE>
5. EMPLOYEE BENEFIT PLAN:
Effective January 1, 1992, the Company established a salary deferral plan
under Section 401(k) of the Internal Revenue Code. Substantially all full-time
salaried employees are eligible to participate in the plan which provides for
salary deferrals from 1% to 15% of gross wages, up to a maximum deferral of
$9,500. The Company's annual contribution to the plan is discretionary.
Approximately $17,000, $20,000 and $3,000 are included in general and
administrative expenses on the accompanying Statements of Income and Retained
Earnings (Deficit) for the years ended September 30, 1996, September 30, 1997
and for the three months ended December 31, 1997, respectively, relating to
the Company's discretionary contribution.
6. OTHER LONG-TERM LIABILITIES:
As of September 30, 1996, September 30, 1997 and December 31, 1997 other
long-term liabilities consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
1996 1997 1997
------------- ------------- ------------
<S> <C> <C> <C>
Unearned income..................... $29,924 $51,436 $65,430
Deferred state income taxes......... 28,600 18,000 18,000
------- ------- -------
$58,524 $69,436 $83,430
======= ======= =======
</TABLE>
7. COMMITMENTS:
The Company leased its Rocky Hill facility from CBS Realty Associates (CBS
Realty), a partnership related through common ownership through March, 1997.
In March, 1997, CBS Realty sold the building to an unrelated third party. The
Company has entered into a seven year triple net lease for this space at
approximately $140,000 per year. The Company also leases office space in
Norwalk, CT. (expires September, 1998) and Westchester, NY. (expires August,
1998) and office equipment and vehicles under operating leases expiring in
various years. Total lease expense resulting from the agreements noted above
approximated $277,000, $293,000 and $82,000 for the years ended September 30,
1996, September 30, 1997 and the three months ended December 31, 1997,
respectively.
F-64
<PAGE>
CONNECTICUT BUSINESS SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Minimum future annual rental payments under noncancellable operating leases,
as of December 31, 1997, are as follows:
<TABLE>
<S> <C>
1998 (nine months).............................................. $ 246,044
1999............................................................ 222,789
2000............................................................ 214,562
2001............................................................ 192,443
2002............................................................ 168,068
Thereafter...................................................... 230,554
----------
$1,274,460
==========
</TABLE>
8. SUBSEQUENT EVENT:
As of the close of business on December 31, 1997, the stockholders of the
Company sold their stock to Global Imaging Systems, Inc. (Global) for
$8,700,000 in cash and $650,000 in stock. In addition, the Company, through
funding provided by Global, repaid the notes due the former stockholders of
approximately $1,405,000.
F-65
<PAGE>
To the Stockholder and To the Stockholders and
Board of Directors Board of Directors
Bloom's, Incorporated Global Imaging Systems, Inc.
Enfield, Connecticut Tampa, Florida
We have audited the accompanying statement of divisional net assets of
Business Systems Division ("BSD"), an operating division of Bloom's,
Incorporated (which is a Massachusetts S Corporation) as of December 31, 1997
and January 31, 1997, and the related statements of divisional operations,
changes in divisional net assets, and divisional cash flows for the eleven
months ended December 31, 1997 and the year ended January 31, 1997. These
financial statements are the responsibility of the management of Bloom's,
Incorporated. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provides a reasonable basis
for our opinion.
The accompanying financial statements were prepared on the basis of
presentation as described in Note 1, and are not intended to be a complete
presentation of all of the assets and liabilities of Business Systems Division
as if it were a standalone entity.
In our opinion, the accompanying financial statements as of December 31,
1997 and January 31, 1997 and for the periods then ended, present fairly, in
all material respects, the net assets of Business Systems Division and its
divisional operations, cash flows and changes in net assets in accordance with
the basis of accounting described in Note 1 in conformity with generally
accepted accounting principles.
/s/ Joseph D. Kalicka & Company, LLP
JOSEPH D. KALICKA & COMPANY, LLP
Certified Public Accountants
Holyoke, Massachusetts
February 6, 1998 (for the period ended December 31, 1997)
February 20, 1998 (for the period ended January 31, 1997)
F-66
<PAGE>
BUSINESS SYSTEMS DIVISION
(AN OPERATING DIVISION OF BLOOM'S, INCORPORATED)
STATEMENTS OF DIVISIONAL NET ASSETS
DECEMBER 31, 1997 AND JANUARY 31, 1997
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
1997 1997
------------ -----------
A S S E T S
<S> <C> <C>
Current assets:
Cash funds.......................................... $ 50 $ 50
Accounts receivable--trade.......................... 1,327,584 1,324,137
Other receivables................................... 2,074 3,555
Inventory........................................... 820,921 659,316
----------- -----------
Total current assets.............................. 2,150,629 1,987,058
----------- -----------
Property and equipment:
Equipment rental fleet.............................. 2,117,793 2,146,233
Vehicles............................................ 238,871 249,177
Furniture and equipment............................. 80,815 70,207
----------- -----------
2,437,479 2,465,617
Accumulated depreciation............................ (2,052,535) (1,776,567)
----------- -----------
Total property and equipment...................... 384,944 689,050
----------- -----------
Other assets:
Deposits............................................ 450 450
Accounts receivable--trade--noncurrent.............. 480,260 306,799
----------- -----------
Total other assets................................ 480,710 307,249
----------- -----------
Total assets...................................... $ 3,016,283 $ 2,983,357
=========== ===========
L I A B I L I T I E S A N D D I V I S I O N A L N E T A S S E T S
Current liabilities:
Accounts payable.................................... $ 45,493 $ 44,859
Accrued expenses.................................... 137,634 195,501
Deferred revenues................................... 726,703 817,128
----------- -----------
Total current liabilities......................... 909,830 1,057,488
----------- -----------
Other liabilities:
Deferred revenues--noncurrent....................... 132,345 67,494
Accounts payable--noncurrent........................ 119,970 --
----------- -----------
Total other liabilities........................... 252,315 67,494
----------- -----------
Total liabilities................................. 1,162,145 1,124,982
----------- -----------
Divisional net assets............................... 1,854,138 1,858,375
----------- -----------
Total liabilities and divisional net assets....... $ 3,016,283 $ 2,983,357
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-67
<PAGE>
BUSINESS SYSTEMS DIVISION
(AN OPERATING DIVISION OF BLOOM'S, INCORPORATED)
STATEMENTS OF DIVISIONAL OPERATIONS
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1997 AND YEAR ENDED JANUARY 31, 1997
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
1997 1997
------------ -----------
<S> <C> <C>
Net sales:
Equipment........................................... $3,173,138 $2,399,948
Supplies............................................ 1,205,492 1,152,446
Service............................................. 2,320,161 2,481,687
Rental.............................................. 718,711 795,731
Other............................................... 600,623 522,216
---------- ----------
Total net sales................................... 8,018,125 7,352,028
---------- ----------
Costs and operating expenses:
Equipment........................................... 2,470,845 1,911,202
Supplies............................................ 862,645 804,788
Service............................................. 1,046,690 1,081,357
Rental.............................................. 91,196 85,157
Selling, general and administrative................. 3,578,078 3,822,870
---------- ----------
Total costs and operating expenses................ 8,049,454 7,705,374
---------- ----------
Loss from operations.................................. (31,329) (353,346)
Other income (expense):
Interest expense.................................... (41,553) (62,184)
Interest income..................................... 21,283 22,750
---------- ----------
(20,270) (39,434)
---------- ----------
Loss before provision for income taxes................ (51,599) (392,780)
(Provision) benefit for state income taxes.......... 5,000 31,000
---------- ----------
Divisional net loss................................... $ (46,599) $ (361,780)
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-68
<PAGE>
BUSINESS SYSTEMS DIVISION
(AN OPERATING DIVISION OF BLOOM'S, INCORPORATED)
STATEMENTS OF CHANGES IN DIVISIONAL NET ASSETS
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1997 AND YEAR ENDED JANUARY 31, 1997
<TABLE>
<S> <C>
Divisional net assets, February 1, 1996............................ $1,693,200
Activity--year ended January 31, 1997:
Net assets provided by Bloom's, Incorporated to Business Systems
Division........................................................ 526,955
Net loss for year................................................ (361,780)
----------
Divisional net assets, January 31, 1997............................ 1,858,375
Activity--eleven months ended December 31, 1997:
Net assets provided by Bloom's, Incorporated to Business System's
Division........................................................ 42,362
Net loss for period.............................................. (46,599)
----------
Divisional net assets--December 31, 1997........................... $1,854,138
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-69
<PAGE>
BUSINESS SYSTEMS DIVISION
(AN OPERATING DIVISION OF BLOOM'S, INCORPORATED)
STATEMENTS OF DIVISIONAL CASH FLOWS
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1997 AND YEAR ENDED JANUARY 31, 1997
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
1997 1997
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................ $ (46,599) $(361,780)
Adjustment to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation...................................... 359,567 464,128
Changes in operating assets and liabilities:
Accounts receivable--trade...................... (176,908) (487,440)
Other receivables............................... 1,481 (3,555)
Inventories..................................... (161,605) 130,741
Accounts payable................................ 120,604 (70,924)
Accrued expenses................................ (57,867) 104,818
Deferred income................................. (25,574) (14,735)
--------- ---------
Net cash provided (used) by operating
activities..................................... 13,099 (238,747)
--------- ---------
Cash flows from investing activities:
Acquisition of equipment............................ (55,461) (287,758)
Deposits made....................................... -- (450)
--------- ---------
Net cash used by investing activities........... (55,461) (288,208)
--------- ---------
Cash flows from financing activities:
Cash provided by Bloom's Incorporated............... 42,362 526,955
--------- ---------
Net cash provided by financing activities....... 42,362 526,955
--------- ---------
Net change in cash.................................... -- --
Divisional cash, beginning of period.................. 50 50
--------- ---------
Divisional cash, end of period........................ $ 50 $ 50
========= =========
Supplemental cash flow information:
Interest paid during period......................... $ 41,553 $ 62,184
========= =========
Taxes paid during period............................ None None
========= =========
</TABLE>
Additional cash flow disclosures:
During the eleven months ended December 31, 1997 the Division disposed of
$84,977 of fully depreciated equipment through retirement or sale and $220,557
was disposed of during the earlier period.
The accompanying notes are an integral part of these financial statements.
F-70
<PAGE>
BUSINESS SYSTEMS DIVISION
(AN OPERATING DIVISION OF BLOOM'S, INCORPORATED)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND JANUARY 31, 1997
1. ORGANIZATION AND BASIS OF PRESENTATION:
Business Systems Division ("BSD", the "Division") is an operating division
of Bloom's, Incorporated, (the "Company", "Bloom's"). Bloom's was organized
under the laws of the Commonwealth of Massachusetts in 1948 and maintains its
corporate offices in Enfield, Connecticut with sales and service locations in
Massachusetts and Connecticut. Bloom's, Incorporated is a Massachusetts S
corporation, and closes its fiscal year on January 31, of each year.
The Company is engaged in retail sales, service, and lease of graphic arts
equipment, photocopiers and fax machines. The Printed Products Division
provides graphic arts equipment and supplies to the printing trade. Business
Systems Division provides copiers and fax machines to the general business and
educational community.
In January, 1998, the Company agreed to sell substantially all of the direct
operating assets of the Business Systems Division (exclusive of cash and
prepaids), subject to certain direct liabilities and obligations, to Global
Imaging System's, Inc. ("Global") through its Connecticut subsidiary,
Connecticut Business Systems, Inc. to be effective, February 1, 1998.
These divisional financial statements have been prepared using the
historical basis of accounting but include only the net assets and resulting
cash flows directly attributable to the BSD division along with the related
revenues and expenses for the Division including certain corporate
allocations, all of which are included in Bloom's financial statements. Net
assets, as used in these financial statements, may also include certain
liabilities which are not to be assumed by Global.
In accordance with Securities and Exchange Commission Staff Accounting
Bulletin No. 55, these statements have been adjusted to include certain
corporate expenses incurred by Bloom's on the Division's behalf. The financial
statements may not necessarily present BSD's net assets, results of
operations, changes in net assets and cash flows if the Division was a
standalone entity.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
A. Corporate allocation:
Bloom's, Incorporated provides services to BSD, including management,
accounting, working capital financing, tax, financial accounting and
reporting, benefits administration, occupancy, shipping/receiving, insurance,
information systems management, accounts receivable and credit, and accounts
payable functions. For purposes of these financial statements, the above
corporate costs have been allocated based upon the percentage of time
corporate administrative personnel were estimated to spend on the BSD division
along with an estimated percentage of common occupancy costs deemed incurred
by BSD. Such allocations and corporate charges totalled approximately
$1,170,000 for the eleven months ended December 31, 1997, of which
approximately $568,000 was for remuneration paid to the majority
stockholder/officer.
Corporate allocations for the year ended January 31, 1997 amounted to
approximately $1,435,000, of which approximately $684,000 was for remuneration
to the same stockholder/officer.
Management believes that the basis used for allocating corporate
administrative services is reasonable. However, the amounts included in these
allocations may differ from those that would result from transactions among
unrelated parties. In addition, these allocations were not based on specific
costs attributable to BSD
F-71
<PAGE>
BUSINESS SYSTEMS DIVISION
(AN OPERATING DIVISION OF BLOOM'S, INCORPORATED)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
division and may not be representative of actual costs that would have been
incurred if BSD division had been operating independently.
B. Revenue recognition:
Assets, liabilities, revenues and expenses are recognized on the accrual
method of accounting. Revenues from the sale of machines and supplies is
recognized when the product is shipped to the customer through a regular sale
or a direct-sales type lease. Revenues for service are recorded at the time
the service is provided. Maintenance contract service revenues are recognized
ratably over the term of the applicable maintenance contract or on a per copy
basis, where the contract stipulates a minimum number of copies.
Unearned revenues at December 31, 1997 of $859,048 are the result of
billings to customers under maintenance service agreements which are scheduled
to be earned after December 31, 1997. Contract terms range from one month to
three years, but are generally for periods of one year. Unearned revenues at
January 31, 1997 amounted to $884,622.
C. Accounts receivable:
The Company uses the direct write-off method to provide for bad debts.
Management considers an allowance for uncollectible accounts at December 31,
1997 and January 31, 1997 unnecessary and not material to the financial
statements.
Accounts receivable at December 31, 1997 and January 31, 1997 include
billings for product sales, service, contracts, and equipment sold under
Company financed sales type leases. When the Company directly finances the
sale of equipment through direct leasing arrangement and the economic risks of
ownership are effectively borne by the customer, the arrangement is recognized
as a sale upon shipment of the equipment. Customer payments under these
arrangements are to be received over the life of the lease and give rise to
deferred receivables.
D. Inventories:
Inventories, which consist of equipment, supplies and parts are stated at
the lower of average cost or market. Inventory at December 31, 1997 is stated
net of reserves for excess/obsolete inventory of approximately $41,000
($31,500 at January 31, 1997).
E. Concentrations of credit risk:
Financial instruments which may subject the Company (and BSD) to
concentrations of credit risk consist principally of cash and cash equivalents
and trade receivables. Concentrations of credit risk relating to cash and cash
equivalents arose when from time to time during the period cash deposited in
one financial institution exceeded the FDIC insured limits of $100,000. Credit
risks relating to concentrations from accounts receivable are mitigated due to
the large number of customers within the Company's customer base, all of whom
are located in the New England region.
In addition, BSD purchases substantially all of its equipment inventory for
resale and a majority of its resale supplies and parts from one vendor.
Purchases from this vendor are based upon inventory requirements and no
purchase commitments or blanket purchase orders exist at December 31, 1997.
The Company's formal agreement with that vendor expired in 1996 and continues
on an informal basis.
F-72
<PAGE>
BUSINESS SYSTEMS DIVISION
(AN OPERATING DIVISION OF BLOOM'S, INCORPORATED)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
F. Equipment and depreciation:
Equipment is recorded at cost. Depreciation is provided using straight line
and accelerated methods over estimated useful lives (for furniture, fixtures,
and motor vehicles) and the rental period for depreciation of the equipment
rental fleet. Components of accumulated depreciation at December 31, 1997 and
January 31, 1997 are as follows:
<TABLE>
<CAPTION>
ACCUMULATED ACCUMULATED
DEPRECIATION DEPRECIATION LIFE
12/31/97 1/31/97 (YEARS)
------------ ------------ -------
<S> <C> <C> <C>
Equipment Rental Fleet................... $1,787,124 $1,540,013 1-5
Motor vehicles........................... 222,335 206,158 5
Furniture & equipment.................... 43,076 30,396 5
---------- ----------
Totals................................. $2,052,535 $1,776,567
========== ==========
</TABLE>
Depreciation charged to expense for the eleven months ended December 31,
1997 amounted to $359,567 ($464,128 for the year ended January 31, 1997).
Expenditures for maintenance and repairs are charged against income as
incurred. Company policy is to charge or credit to income any loss or gain
resulting from disposal or retirements of vehicles or furniture and equipment.
Gains or losses on disposition of equipment rental fleet are included in net
sales on the statement of operations.
G. Leases:
The Company is the lessor of equipment under operating leases expiring in
various years. The cost and accumulated depreciation of leased assets are
included in equipment as rental (Note 1F).
H. Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. One
significant estimate is the amounts of corporate expenses allocable to BSD as
more fully described in Note 2A.
I. Advertising costs:
The Company expenses production costs of advertising the first time
advertising takes place. Advertising costs for the eleven months ended
December 31, 1997 amounted to approximately $147,000, ($176,000 for the year
ended January 31, 1997) which is stated net of manufacturers' reimbursement.
3. INCOME TAXES:
Bloom's has elected and the stockholders have consented to be taxed under
the provisions of Subchapter S of the Internal Revenue Code effective for tax
years after January 31, 1987. In lieu of federal corporation income taxes, the
stockholders of an S corporation are taxed on their proportionate share of the
corporation's taxable income. Therefore, no provisions or liabilities for
federal income taxes has been included in these financial statements.
F-73
<PAGE>
BUSINESS SYSTEMS DIVISION
(AN OPERATING DIVISION OF BLOOM'S, INCORPORATED)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
As a Massachusetts S corporation, the Company is subject to corporate income
taxes on its net income because total receipts aggregate $6 million or more.
The Company is also subject to Connecticut corporate income taxes.
Statement of Financial Accounting Standards No. 109 requires that deferred
income taxes be computed using the liability method under which deferred
income tax assets and liabilities are computed based on differences between
the financial statement and tax basis of assets and liabilities which will
result in taxable or deductible amounts on future tax returns. These financial
statements do not include any provisions for deferred state income taxes since
they are not considered material.
State income tax benefits of $5,000 and $31,000, respectively, included on
the statement of operations for the period ended December 31, 1997 and January
31, 1997 result from the tax savings inuring to the Company each year, when
taxes are computed on all operations.
4. WORKING CAPITAL AND ALLOCATED INTEREST:
The working capital employed by BSD is provided directly by Bloom's,
Incorporated and by an unsecured revolver note payable to a commercial bank
held in the name of Bloom's, Incorporated. The note, currently limited to
$2,500,000, was amended in August, 1997 and is scheduled to expire on July 31,
1998 unless renewed. This note is not included as those liabilities to be
assumed by Global. However, interest, at the prime rate, of approximately
$42,000 for the eleven months ended December 31, 1997, has been allocated to
these financial statements on the basis of direct employable assets of each of
the operating divisions of Bloom's, Incorporated. Amounts for the year ended
January 31, 1997 approximated $62,000.
5. RELATED PARTY TRANSACTIONS--LEASE:
In March 1981, the Company entered into a 25 year lease agreement with the
Company's majority stockholder (lessor) covering its general offices and
warehouse in Enfield, Connecticut.
During the eleven months ended December 31, 1997, the Company made rental
payments under the lease of $107,000. Of this amount, approximately $58,000
has been allocated to BSD on the basis of the occupancy formula discussed in
Note 2A ($63,000 for the earlier period). Aggregate future annual minimum
rentals to Bloom's, Incorporated (excluding payment for real estate taxes,
maintenance, utilities and insurance) are estimated as follows:
<TABLE>
<CAPTION>
THRU DECEMBER 31,
-----------------
<S> <C>
1998............................................................ $107,000
1999............................................................ 107,000
2000............................................................ 107,000
2001............................................................ 107,000
2002............................................................ 107,000
Thereafter...................................................... 330,000
--------
$865,000
========
</TABLE>
Obligations under this lease will not be assumed by Global.
F-74
<PAGE>
BUSINESS SYSTEMS DIVISION
(AN OPERATING DIVISION OF BLOOM'S, INCORPORATED)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
6. COMMITMENTS:
The Company is obligated under three leases at December 31, 1997 which are
used exclusively by BSD division for outside sales offices. The terms of these
arrangements are summarized below:
East Hartford, CT:
The facility lease is dated March 15, 1996 which calls for minimum
monthly payments of $2,500 per month through September 30, 1998, plus a
share of operating expenses.
Pittsfield, MA:
The facility is rented on a month to month basis and currently calls for
monthly rents of $700 per month plus common expenses.
Fairfield, CT:
The facility arrangement calls for monthly rents of $750 plus common
expenses on a month to month basis. In January, 1998, monthly rents were
increased to $1,000.
The Company is also committed under three (3) vehicle leases which will
expire during 1998 and 1999. Minimum monthly rents aggregate $646 per month,
with two leases expiring in May, 1998 ($406 per month) and the third lease
expiring in October, 1999 for $240 per month. All vehicles are used in BSD
operations.
Future minimum monthly payments under facility and vehicle leases (all of
which are to be transferred to Global) are as follows at December 31, 1997:
<TABLE>
<CAPTION>
AGGREGATE
MINIMUM
PAYMENTS
---------
<S> <C>
1998............................................................. $29,910
1999............................................................. 2,400
-------
Total.......................................................... $32,310
=======
</TABLE>
7. EMPLOYEE BENEFIT PLAN:
The Company maintains a salary deferral plan under section 401(k) of the
Internal Revenue Code which covers substantially all employees. Company
contributions to the plan are at the discretion of the Board of Directors.
There were no employer contributions to the plan for the eleven months ended
December 31, 1997. Employer contributions amounted to approximately $110,000
for the year ended January 31, 1997, of which approximately $65,000 was
charged to BSD Division.
8. SUBSEQUENT EVENT:
Effective February 1, 1998, one of BSD's larger customers decided not to
renew a portion of their rental arrangement and returned approximately 90
copiers out of a total of approximately 250 under lease during 1997.
Financially, this may result in a reduction in future annual rental (and total
annual sales) of approximately $200,000 to $250,000.
F-75
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Customers continue to demand more integrated office imaging solutions. As
the technology that drives copiers, facsimiles, printers, electronic
presentation equipment and DIM equipment continues to converge, there is an
increasing role for computers and networks in the functioning of these
products.
[Graphic depicting the Company's logo, which contains the words "Global
Imaging Systems, Inc." and "Think Globally Act Locally." The logo is circled
by the words "After Market Services & Supplies . After Market Services &
Supplies . " and appears at the center of a wheel with eight spokes. One
spoke leads to a photograph labeled "Network Services." One leads to an image
of a copier labeled "Digital Copiers/Printers." One leads to an image of a fax
machine labeled "Facsimile." One leads to an image of an office building
labeled "Remote Locations." One leads to an image of a computer labeled
"Computer Workstations." One leads to an image of a projector and screen
labeled "Presentation Products." One spoke leads to an image labeled "Document
Imaging and Management." One leads to an image of a classroom labeled
"Training and Support."]
Global intends to expand its offerings to provide products and services in
the automated office equipment market, the electronic presentation systems
market, the DIM systems market and the network integration markets in each of
its geographic markets.
<PAGE>
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NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR ANY OF THE UNDER-
WRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITA-
TION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK
OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SO-
LICITATION OF ANY OFFER TO BUY THE SHARES OF COMMON STOCK BY ANYONE IN ANY JU-
RISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIR-
CUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1998 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDI-
TION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UN-
DERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................................................... 3
Risk Factors............................................................... 8
Use of Proceeds............................................................ 15
Dividend Policy............................................................ 15
Capitalization............................................................. 16
Dilution................................................................... 17
Selected Financial Data.................................................... 18
Selected Pro Forma Financial Data.......................................... 19
Management's Discussion and Analysis
of Financial Condition and Results of Operations.......................... 20
Business................................................................... 27
Management................................................................. 35
Certain Transactions....................................................... 41
Principal and Selling Stockholders......................................... 46
Description of Capital Stock............................................... 48
Shares Eligible for Future Sale............................................ 50
Underwriting............................................................... 51
Legal Matters.............................................................. 52
Experts.................................................................... 53
Additional Information..................................................... 54
Index to Financial Statements.............................................. F-1
</TABLE>
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- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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7,000,000 Shares
LOGO
Common Stock
----------------
P R O S P E C T U S
----------------
PRUDENTIAL SECURITIES INCORPORATED
SALOMON SMITH BARNEY
WILLIAM BLAIR & COMPANY
RAYMOND JAMES & ASSOCIATES, INC.
June , 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all fees and expenses, other than the
underwriting discounts and commissions, payable by the Registrant in
connection with the sale of the Common Stock being registered. All amounts
shown are estimates except for the registration fee, the Nasdaq National
Market fee and the NASD filing fee.
<TABLE>
<CAPTION>
AMOUNT
----------
<S> <C>
Securities and Exchange Commission registration fee.............. $ 37,996
NASD filing fee.................................................. 13,380
Nasdaq National Market fee....................................... 94,000
Blue sky qualification fees and expenses......................... 20,000
Accounting fees and expenses..................................... 1,221,000
Legal fees and expenses.......................................... 250,000
Printing and engraving expenses.................................. 270,000
Transfer agent and registrar fees................................ 2,000
Miscellaneous expenses........................................... 91,624
----------
Total.......................................................... $2,000,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Amended and Restated Certificate of Incorporation to be filed and
effective upon the closing of the Offering (the "Charter") and Amended and
Restated Bylaws of the Company provide for the indemnification of the
Company's directors and officers to the fullest extent permitted by law.
Insofar as indemnification for liabilities under the Securities Act may be
permitted to directors, officers or controlling persons of the Company
pursuant to the Company's Certificate of Incorporation, as amended, Bylaws and
the Delaware General Corporation Law, the Company has been informed that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in such Act and is therefore unenforceable.
As permitted by the Delaware General Corporation Law, the Charter provides
that directors of the Company shall not be personally liable to the Company or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law, relating
to prohibited dividends or distributions or the repurchase or redemption of
stock or (iv) for any transaction from which the director derives an improper
personal benefit. As a result of this provision, the Company and its
stockholders may be unable to obtain monetary damages from a director for
breach of his or her duty of care.
Additionally, the Company has entered into indemnification agreements with
certain of its directors, officers and other key personnel, which may, in
certain cases, be broader than the specific indemnification provisions
contained under applicable law. The indemnification agreements may require the
Company, among other things, to indemnify such officers, directors and key
personnel against certain liabilities that may arise by reason of their status
or service as directors, officers or employees of the Company, to advance the
expenses incurred by such parties as a result of any threatened claims or
proceedings brought against them as to which they could be indemnified, and to
cover such officers, directors and key employees under the Company's
directors' and officers' liability insurance policies to the maximum extent
that insurance coverage is maintained.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since April 1, 1995 the Company has sold and issued the following
unregistered securities:
(a) In January 1996, the Company sold 3,832.83 shares of Class A Common
Stock ("Class A Common Shares") and 111,672 shares of Common Stock ("Common
Shares") for aggregate purchase prices of $344,955 and $8,845, respectively,
to executives of three companies in connection with the Company's acquisition
of those companies. One of the executives paid for his purchase with a three-
year secured promissory note in the principal amount of $49,800, bearing an
annual interest rate of 8%.
(b) In January 1996, the Company sold 1,083.333 Class A Common Shares and
31,563 Common Shares for purchase prices of $97,500 and $2,500, respectively,
to an employee who paid for his purchase with a three-year secured promissory
note in the principal amount of $100,000, bearing an annual interest rate of
8%.
(c) In January 1996, the Company sold 216.660 Class A Common Shares and
6,312 Common Shares for purchase prices of $19,500 and $500, respectively, to
an employee.
(d) In February 1996, the Company sold 2,535 Class A Common Shares and
73,859 Common Shares for aggregate purchase prices of $228,150 and $5,850,
respectively, to executives of a company in connection with its acquisition by
the Company.
(e) In April 1996, the Company facilitated the sale of 2,210 shares of Class
A Common Stock and 64,390 shares of Common Stock by a departing employee at a
per share purchase price of $102.13 and $.08, respectively, to certain
investors, all of whom were employees of the Company. In connection with the
transaction, Neal Berney, Raymond Schilling, Michael Mueller, and Thomas
Johnson's son Todd Johnson paid approximately $99,000, $5,600, $10,000 and
$5,000, respectively, and received 946.381, 54.167, 95.749 and 47.875 shares
of Class A Common Stock and 27,573, 1,578, 2,789 and 1,394 shares of Common
Stock.
(f) In June 1996, the Company sold 2,608.667 Class A Common Shares and
76,005 Common Shares for aggregate purchase prices of $234,780 and $6,020,
respectively, to executives of a company in connection with its acquisition by
the Company. The executives provided $190,800 of the aggregate purchase price
in the form of capital stock of Office Furniture Concepts, Inc., a North
Carolina corporation.
(g) In August 1996, the Company sold 27,083.33 Class A Common Shares and
633,932 shares of Class C Common Stock for purchase prices of $2,437,500 and
$62,500, respectively, to Jackson National Life Insurance Company ("JNL") in
connection with the Company's obtaining a credit facility from JNL.
(h) In September 1996, the Company sold 1,354.166 Class A Common Shares and
31,696 Common Shares for purchase prices of $121,875 and $3,125, respectively,
to an investor in a private placement.
(i) In November 1996, the Company sold 6,370 Class A Common Shares and
149,100 Common Shares for aggregate purchase prices of $573,300 and $14,700,
respectively, to executives of a company in connection with its acquisition by
the Company.
(j) In March 1997, the Company sold 812.50 Class A Common Shares and 19,017
Common Shares for aggregate purchase prices of $73,125 and $1,875,
respectively, to an employee and to an investor in a private placement.
(k) In March 1997, the Company sold 172,547 Common Shares for a purchase
price of $11,764.62 to Alfred N. Vieira.
(l) In April 1997, the Company sold 2,600 Class A Common Shares and 47,999
Common Shares for aggregate purchase prices of $234,000 and $6,000,
respectively, to executives of a company in connection with its acquisition by
the Company. One of the executives paid for her purchase with a 21-month
secured promissory note in the principal amount of $20,000, bearing an annual
interest rate of 8%.
(m) In July 1997, the Company sold 1,083.33 Class A Common Shares and 19,999
Common Shares for purchase prices of $97,500 and $2,500, respectively, to an
employee who paid for the purchase with a three-year secured promissory note
in the principal amount of $100,000, bearing interest at an annual rate of 8%.
II-2
<PAGE>
(n) In August 1997, the Company sold 18,200 Class A Common Shares and
335,999 Common Shares for aggregate purchase prices of $1,638,000 and $42,000,
respectively, to an individual, an entity and to executives of a company in
connection with the company's acquisition by the Company.
(o) In August 1997, the Company sold 117 Class A Common Shares and 2,159
Common Shares for purchase prices of $10,530 and $270, respectively, to an
employee.
(p) In September 1997, the Company sold 617.499 Class A Common Shares and
11,399 Common Shares for aggregate purchase prices of $55,575 and $1,425,
respectively, to employees.
(q) In September 1997, the Company sold 4,901 Class A Common Shares and
90,480 Common Shares for aggregate purchase prices of $441,090 and $11,310,
respectively, to executives of a company in connection with its acquisition by
the Company and to an employee.
(r) In September 1997, the Company sold 1,083.33 Class A Common Shares and
19,999 Common Shares for purchase prices of $97,500 and $2,500, respectively,
to an employee who paid for the purchase with a three-year secured promissory
note in the principal amount of $100,000, bearing an annual interest rate of
8%.
(s) In November 1997, the Company sold 1,300 Class A Common Shares and
23,999 Common Shares for aggregate purchase prices of $117,000 and $3,000,
respectively, to employees.
(t) In November 1997, the Company facilitated the sale of 1,083.333 shares
of Class A Common Stock and 31,563 shares of Common Stock by a departing
employee at a per share purchase price of $102.17 and $.08, respectively, to
certain investors, all of whom were employees of or service providers to the
Company. As part of the Company's termination agreement with the departing
employee, the Company paid the employee an aggregate of approximately $1,400
to compensate for the difference between the sale price for the Common Stock
and the then-determined fair market value of such Common Stock. In connection
with the transaction, Raymond Schilling paid approximately $5,700 and received
54.167 shares of Class A Common Stock and 1,578 shares of Common Stock, and
Michael Mueller, Alfred Vieira, Todd Johnson and Tidewater Partners, LLC, an
entity whose managing members are J. Hovey Kemp and Christopher Hagan,
partners at Hogan & Hartson L.L.P., counsel to the Company, each paid
approximately $11,300 and received 108.333 shares of Class A Common Stock and
3,156 shares of Common Stock.
(u) In November 1997, the Company sold 4,283.5 Class A Common Shares and
79,079 Common Shares for aggregate purchase prices of $385,515 and $9,885,
respectively, to executives of a company in connection with its acquisition by
the Company.
(v) In November 1997, the Company sold 45,166.953 Class A Common Shares for
a purchase price of $4,065,025.80 to Golder Thoma Cressey Rauner Fund IV
Limited Partnership ("FUND IV") and 1,106.258 Class A Common Shares for a
purchase price of $99,563.20 to Thomas Johnson under the terms of an Equity
Purchase Agreement dated June 9, 1994.
(w) In November 1997, the Company sold 11,136.268 Class A Common Shares and
260,663 shares of Class C Common Stock for purchase prices of $1,002,264.16
and $25,699.08, respectively, pursuant to JNL's preemptive right under the
Stockholders Agreement.
(x) In November 1997, the Company sold 556.643 Class A Common Shares and
13,029 Common Shares for purchase prices of $50,097.84 and $1,284.56,
respectively, to an investor in a private placement.
(y) In December 1997, the Company sold 5,850 Class A Common Shares and
107,999 Common Shares for aggregate purchase prices of $526,500 and $13,500,
respectively, to executives of a company in connection with its acquisition by
the Company and to an individual employee.
(z) In January 1998, the Company sold 7,020 Class A Common Shares and
129,599 Common Shares for aggregate purchase prices of $631,800 and $16,200,
respectively, to an individual in connection with the Company's acquisition of
a company.
(aa) In March 1998, the Company sold 67,593 and 9,026 shares of Common
Stock, respectively, to FUND IV and Thomas Johnson for purchase prices of
$4,609 and $615, respectively, pursuant to the terms of Mr. Johnson's
Executive Agreement, dated as of June 9, 1994. At that time, the Company also
sold 9,656 shares of Common Stock to JNL for a purchase price of $658,
pursuant to JNL's rights under the Stockholders Agreement, dated June 9, 1994,
as amended on August 14, 1996.
II-3
<PAGE>
The share amounts set forth above give effect to the company's 132-for-1
stock split of the Common Stock expected to be effected in May 1998. The sales
and issuances of securities in the transactions described above were deemed to
be exempt from registration under the Securities Act by virtue of Section 4(2)
or Regulation D promulgated thereunder.
Appropriate legends are affixed to the stock certificates issued in the
aforementioned transactions. Similar legends were imposed in connection with
any subsequent sales of any such securities. All recipients received adequate
information about the Company or had access, through employment or other
relationships, to such information.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation.
3.2 Amended and Restated Certificate of Incorporation (to be filed with the
Secretary of State of Delaware upon the closing of this offering).*
3.3 Bylaws*
3.4 Amended and Restated Bylaws (to become effective upon the closing of
this offering).*
4.1 Specimen Common Stock Certificate.*
5.1 Opinion of Hogan & Hartson L.L.P. with respect to the legality of the
Common Stock.
10.1 Equity Purchase Agreement, dated as of June 9, 1994, as amended, by and
among Global; Thomas S. Johnson; Golder, Thoma, Cressey, Rauner Fund IV
Limited Partnership ("FUND IV") and additional stockholders.*
10.2 Registration Agreement, dated as of June 9, 1994, as amended, by and
among Global and the stockholders identified therein.*
10.3 Termination Agreement, dated as of May 27, 1998, by and among Global;
FUND IV; Golder, Thoma, Cressey, Rauner, Inc. and the stockholders
identified therein.
10.4 Form of Equity Subscription Agreement, by and between Global and
certain of its stockholders.*
10.5 Amended and Restated Credit Agreement, dated as of November 14, 1997,
as amended, by and among Jackson National Life Insurance Company
("JNL") as Lender and PPM America, Inc., as Agent, Global and its
subsidiaries.*
10.5.1 Third Amendment to Amended and Restated Credit Agreement and Loan
Documents dated as of May 8, 1998, by and among JNL, PPM America, Inc.,
Global and its subsidiaries.
10.6 Investor Purchase Agreement, dated as of August 14, 1996, between
Global and JNL.*
10.7 Investor Purchase Agreement, dated as of September 30, 1996, between
Global and Green Manning & Bunch Holdings, Inc.*
10.8 Executive Agreement, dated as of June 9, 1994, as amended, by and among
Global, Thomas S. Johnson and FUND IV.+
10.9 Executive Agreement, dated as of June 9, 1994, as amended, by and among
Global, Raymond Schilling and FUND IV.+
10.10 Executive Agreement, dated as of January 1, 1995, as amended, by and
among Global, H. Michael Mueller and FUND IV.+
10.11 Executive Agreement, dated as of March 31, 1997, by and among Global,
Alfred N. Vieira and FUND IV.+
10.12 1998 Stock Option and Incentive Plan.+
10.13 Form of Supply Agreement between the Company and Konica.++*
10.14 Non-Exclusive Third Party Lessor Agreement, dated July 16, 1996, as
amended, by and between Global and General Electric Capital
Corporation.++*
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S>
10.15 License Agreement, dated as of July 31, 1996, as amended, between Global
and Copelco Capital, Inc.++*
10.16 Non-Exclusive Third Party Lessor Agreement, dated July 26, 1996, as
amended, by and between Global and Tokai Financial Services, Inc.++*
10.17 Stock Purchase Agreement, dated as of June 27, 1996 by and among Global
as Buyer, Copy Service & Supply, Inc., Office Furniture Concepts, Inc.,
CSS Leasing, LLC and Terry K. Smith and Crystal E. Smith as Sellers.
10.18 Stock Purchase Agreement, dated as of November 13, 1996 by and among
Global as Buyer and Southern Business Communications, Inc. and Mark M.
Lloyd and Arthur E. Kreps as Sellers.++
10.19 Asset Purchase Agreement, dated as of November 13, 1996 by and among
ATS-Atlanta One, LLC as Seller, ATS-Atlanta One, Inc. as Purchaser, and
ATS-Atlanta, Inc., Mark M. Lloyd and Arthur E. Kreps.
10.20 Stock Purchase Agreement, dated as of August 7, 1997 by and among
Global, ESI Acquisition Corporation as Buyer, Electronic Systems, Inc.
("ESI") and the Shareholders of ESI as Sellers.++
10.21 Stock Purchase Agreement, dated as of August 29, 1997 by and among
Global, Conway Office Products as Buyer, Eastern Copy Products, Inc. and
Michael E. Kleinhans as Seller.
10.22 Stock Purchase Agreement, dated as of September 30, 1997 by and among
Global as Buyer, Duplicating Specialties, Inc. (d/b/a Copytronix) and
Dean Groves as Seller.++
10.23 Stock Purchase Agreement, dated as of September 30, 1997 by and among
Global as Buyer, Quality Business Systems, Inc. and Gary Stevens as
Seller.++
10.24 Stock Purchase Agreement, dated as of September 30, 1997 by and among
Global as Buyer, Cascade Office Systems, Inc. and Fred Woodard as
Seller.++
10.25 Stock Purchase Agreement, dated as of December 23, 1997 by and among
Global, ESI as Buyer, Electronic Systems of Richmond, Inc. ("ESRI") and
the Shareholders of ESRI as Seller.++
10.26 Stock Purchase Agreement, dated as of December 31, 1997, as assigned, by
and among Global, Connecticut Business Systems, Inc. as Buyer, and the
Company, Michael E. Shea, Jr. and Peter Wenzke as Sellers.++
10.27 Asset Purchase Agreement, dated as of February 26, 1998 by and among
Connecticut Systems, Inc., Bloom's Business Systems, a division of
Bloom's Incorporated, the Assets and Bloom's Incorporated as Seller.++
10.28 Stock Purchase Agreement, dated as of November 13, 1996, by and among
Global as Buyer, Southern Business Communications of D.C., Inc., and
George Gough, Mark M. Lloyd, and Arthur E. Kreps as Sellers.
10.29 Form of Indemnification Agreement between Global and its directors and
executive officers.+*
10.30 Letter Agreement, dated April 22, 1998, by and among Global, First Union
National Bank and First Union Capital Markets Group.++*
10.31 Stockholders Agreement, dated as of June 9, 1994, as amended, by and
among Global and its stockholders.
10.32 Equity Subscription Agreement, dated as of March 27, 1998, by and among
Global, FUND IV, JNL and Thomas S. Johnson.
21.1 Subsidiaries of Global.*
23.1 The consent of Ernst & Young LLP.
23.2 The consent of Barnard, Combs, Potts & Rhyne, PA.
23.3 The consent of Smith & Howard, P.C.
23.4 The consent of Ernst & Young LLP.
23.5 The consent of Pasquale & Bowers, LLP.
23.6 The consent of Moss Adams LLP.
23.7 The consent of Edmondson, LedBetter & Ballard, L.L.P.
</TABLE>
II-5
<PAGE>
<TABLE>
<C> <S>
23.8 The consent of Arthur Andersen LLP.
23.9 The consent of Joseph D. Kalicka & Company, LLP.
23.10 The consent of Hogan & Hartson L.L.P. (included in Exhibit 5.1).
23.11 The consent of Pacific Media Associates.*
23.12 The consent of International Data Corporation.*
23.13 The consent of AIIM International.*
23.14 The consent of Industry Analysts, Inc.*
24.1 Power of Attorney.*
27.1 Financial Data Schedule.*
</TABLE>
- --------
*Previously filed.
+Management contract or compensatory plan, contract or arrangement.
++Confidential treatment has been requested for portions of this exhibit.
(b) Financial Statement Schedules
Report of Independent Auditors on Schedule
Schedule II--Valuation and Qualifying Accounts
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective; and
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as may be required by the
underwriter to permit prompt delivery to each purchaser.
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, GLOBAL IMAGING
SYSTEMS, INC. HAS DULY CAUSED THIS AMENDED REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
TAMPA, STATE OF FLORIDA ON THE 10TH DAY OF JUNE, 1998.
Global Imaging Systems, Inc.
/s/ Thomas S. Johnson
By: __________________________________
THOMAS S. JOHNSON President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this amended
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<S> <C>
NAME TITLE
DATE
/s/ Thomas S. Johnson President, Chief June 10, 1998
- ------------------------------------ Executive Officer
THOMAS S. JOHNSON and Director
(Principal
Executive Officer
/s/ Raymond Schilling Vice President, June 10, 1998
- ------------------------------------ Chief Financial
RAYMOND SCHILLING Officer, Secretary
and Treasurer
(Principal
Financial and
Accounting
Officer)
* Chairman of the June 10, 1998
- ------------------------------------ Board
CARL D. THOMA
* Director June 10, 1998
- ------------------------------------
L. NEAL BERNEY
* Director June 10, 1998
- ------------------------------------
BRUCE D. GORCHOW
* Director June 10, 1998
- ------------------------------------
WILLIAM C. KESSINGER
/s/ Thomas S. Johnson
*By: _______________________________
THOMAS S. JOHNSON
Attorney-In-Fact
</TABLE>
II-7
<PAGE>
REPORT OF INDEPENDENT AUDITORS ON SCHEDULE
We have audited the consolidated financial statements of Global Imaging
Systems, Inc. as of March 31, 1996, 1997 and 1998, and for each of the three
years in the period ended March 31, 1998, and have issued our report thereon
dated May 6, 1998 (included elsewhere in this Registration Statement). Our
audits also included the financial statement schedule listed in Item 16(b) of
this Registration Statement. This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Tampa, Florida
May 6, 1998
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
RESERVE FOR RETURNS AND ALLOWANCES AND BAD DEBTS:
<TABLE>
<CAPTION>
ADDITIONS
----------------------
BALANCE AT THE CHARGED TO CHARGED TO BALANCE AT THE
BEGINNING OF COSTS AND OTHER END OF
THE PERIOD EXPENSES ACCOUNTS(1) DEDUCTIONS THE PERIOD
-------------- ---------- ----------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Period Ended:
March 31,
1996........ $137,000 $ 34,498 $ 58,666 $ 30,164 $200,000
March 31,
1997........ $200,000 $ 30,824 $147,005 $ 68,785 $309,044
March 31,
1998........ $309,044 $289,879 $532,689 $261,068 $870,544
</TABLE>
RESERVE FOR EXCESS AND SLOW-MOVING INVENTORY:
<TABLE>
<CAPTION>
ADDITIONS
----------------------
BALANCE AT THE CHARGED TO CHARGED TO BALANCE AT THE
BEGINNING OF COSTS AND OTHER END OF
THE PERIOD EXPENSES ACCOUNTS(1) DEDUCTIONS THE PERIOD
-------------- ---------- ----------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Period Ended:
March 31,
1996........ $256,778 $197,248 $ 98,000 $419,000 $ 133,026
March 31,
1997........ $133,026 $256,280 $340,000 $403,207 $ 326,099
March 31,
1998........ $326,099 $888,802 $686,877 $606,758 $1,295,020
</TABLE>
- --------
(1) These amounts primarily represent reserve balances acquired in connection
with business combinations.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- ----------- ---
<C> <S> <C>
1.1 Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation.
3.2 Amended and Restated Certificate of Incorporation (to be filed
with the Secretary of State of Delaware upon the closing of
this offering).*
3.3 Bylaws*
3.4 Amended and Restated Bylaws (to become effective upon the
closing of this offering).*
4.1 Specimen Common Stock Certificate.*
5.1 Opinion of Hogan & Hartson L.L.P. with respect to the legality
of the Common Stock.
10.1 Equity Purchase Agreement, dated as of June 9, 1994, as
amended, by and among Global; Thomas S. Johnson; Golder, Thoma,
Cressey, Rauner Fund IV Limited Partnership ("FUND IV") and
additional stockholders.*
10.2 Registration Agreement, dated as of June 9, 1994, as amended,
by and among Global and the stockholders identified therein.*
10.3 Termination Agreement, dated as of May 27, 1998, by and among
Global; FUND IV; Golder, Thoma, Cressey, Rauner, Inc. and the
stockholders identified therein.
10.4 Form of Equity Subscription Agreement, by and between Global
and certain of its stockholders.*
10.5 Amended and Restated Credit Agreement, dated as of November 14,
1997, as amended, as amended, by and among Jackson National
Life Insurance Company ("JNL") as Lender and PPM America, Inc.,
as Agent, Global and its subsidiaries.*
10.5.1 Third Amendment to Amended and Restated Credit Agreement and
Loan Documents, dated as of May 8, 1998, by and among JNL, PPM
America, Inc., Global and its subsidiaries.
10.6 Investor Purchase Agreement, dated as of August 14, 1996,
between Global and JNL.*
10.7 Investor Purchase Agreement, dated as of September 30, 1996,
between Global and Green Manning & Bunch Holdings, Inc.*
10.8 Executive Agreement, dated as of June 9, 1994, as amended, by
and among Global, Thomas S. Johnson and FUND IV.+
10.9 Executive Agreement, dated as of June 9, 1994, as amended, by
and among Global, Raymond Schilling and FUND IV.+
10.10 Executive Agreement, dated as of January 1, 1995, as amended,
by and among Global, H. Michael Mueller and FUND IV.+
10.11 Executive Agreement, dated as of March 31, 1997, by and among
Global, Alfred N. Vieira and FUND IV.+
10.12 1998 Stock Option and Incentive Plan.+
10.13 Form of Supply Agreement between the Company and Konica.++*
10.14 Non-Exclusive Third Party Lessor Agreement, dated July 16,
1996, as amended, by and between Global and General Electric
Capital Corporation.++*
10.15 License Agreement, dated as of July 31, 1996, as amended,
between Global and Copelco Capital, Inc.++*
10.16 Non-Exclusive Third Party Lessor Agreement, dated July 26,
1996, as amended, by and between Global and Tokai Financial
Services, Inc.++*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- ----------- ---
<C> <S> <C>
10.17 Stock Purchase Agreement, dated as of June 27, 1996 by and
among Global as Buyer, Copy Service & Supply, Inc., Office
Furniture Concepts, Inc., CSS Leasing, LLC and Terry K. Smith
and Crystal E. Smith as Sellers.
10.18 Stock Purchase Agreement, dated as of November 13, 1996 by and
among Global as Buyer and Southern Business Communications,
Inc. and Mark M. Lloyd and Arthur E. Kreps as Sellers.++
10.19 Asset Purchase Agreement, dated as of November 13, 1996 by and
among ATS-Atlanta One, LLC as Seller, ATS-Atlanta One, Inc. as
Purchaser, and ATS-Atlanta, Inc., Mark M. Lloyd and Arthur E.
Kreps.
10.20 Stock Purchase Agreement, dated as of August 7, 1997 by and
among Global, ESI Acquisition Corporation as Buyer, Electronic
Systems, Inc. ("ESI") and the Shareholders of ESI as Sellers.++
10.21 Stock Purchase Agreement, dated as of August 29, 1997 by and
among Global, Conway Office Products as Buyer, Eastern Copy
Products, Inc. and Michael E. Kleinhans as Seller.
10.22 Stock Purchase Agreement, dated as of September 30, 1997 by and
among Global as Buyer, Duplicating Specialties, Inc. (d/b/a
Copytronix) and Dean Groves as Seller.++
10.23 Stock Purchase Agreement, dated as of September 30, 1997 by and
among Global as Buyer, Quality Business Systems, Inc. and Gary
Stevens as Seller.++
10.24 Stock Purchase Agreement, dated as of September 30, 1997 by and
among Global as Buyer, Cascade Office Systems, Inc. and Fred
Woodard as Seller.++
10.25 Stock Purchase Agreement, dated as of December 23, 1997 by and
among Global, ESI as Buyer, Electronic Systems of Richmond,
Inc. ("ESRI") and the Shareholders of ESRI as Seller.++
10.26 Stock Purchase Agreement, dated as of December 31, 1997, as
assigned, by and among Global, Connecticut Business Systems,
Inc. as Buyer, and the Company, Michael E. Shea, Jr. and Peter
Wenzke as Sellers.++
10.27 Asset Purchase Agreement, dated as of February 26, 1998 by and
among Connecticut Systems, Inc., Bloom's Business Systems, a
division of Bloom's Incorporated, the Assets and Bloom's
Incorporated as Seller.++
10.28 Stock Purchase Agreement, dated as of November 13, 1996, by and
among Global as Buyer, Southern Business Communications of
D.C., Inc., and George Gough, Mark M. Lloyd, and Arthur E.
Kreps as Sellers.
10.29 Form of Indemnification Agreement between Global and its
directors and executive officers.+*
10.30 Letter Agreement, dated April 22, 1998, by and among Global,
First Union National Bank and First Union Capital Markets
Group.++*
10.31 Stockholders Agreement, dated as of June 9, 1994, as amended,
by and among Global and its stockholders.
10.32 Equity Subscription Agreement, dated as of March 27, 1998, by
and among Global, FUND IV, JNL and Thomas S. Johnson.
21.1 Subsidiaries of Global.*
23.1 The consent of Ernst & Young LLP.
23.2 The consent of Barnard, Combs, Potts & Rhyne, PA.
23.3 The consent of Smith & Howard, P.C.
23.4 The consent of Ernst & Young LLP.
23.5 The consent of Pasquale & Bowers, LLP.
23.6 The consent of Moss Adams LLP.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- ----------- ---
<C> <S> <C>
23.7 The consent of Edmondson, LedBetter & Ballard, L.L.P.
23.8 The consent of Arthur Andersen LLP.
23.9 The consent of Joseph D. Kalicka & Company, LLP.
23.10 The consent of Hogan & Hartson L.L.P. (included in Exhibit 5.1).
23.11 The consent of Pacific Media Associates.*
23.12 The consent of International Data Corporation.*
23.13 The consent of AIIM International.*
23.14 The Consent of Industry Analysts, Inc.*
24.1 Power of Attorney.*
27.1 Financial Data Schedule.*
</TABLE>
- --------
*Previously filed.
+Management contract or compensatory plan, contract or arrangement.
++Confidential treatment has been requested for portions of this exhibit.
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
7,000,000 Shares/1/
Common Stock
UNDERWRITING AGREEMENT
----------------------
June ___, 1998
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
WILLIAM BLAIR, L.L.C.
RAYMOND JAMES & ASSOCIATES, INC.
As Representatives of the several Underwriters
c/o Prudential Securities Incorporated
One New York Plaza
New York, New York 10292
Ladies and Gentlemen:
GLOBAL IMAGING SYSTEMS, INC., a Delaware corporation (the "Company"), and
each of the selling stockholders of the Company named in Schedule 1 hereto (the
"Selling Stockholders") severally confirm their respective agreements with the
several underwriters named in Schedule 2 hereto (the "Underwriters"), for whom
you have been duly authorized to act as representatives (in such capacities, the
"Representatives"), as set forth below. If you are the only Underwriters, all
references herein to the Representatives shall be deemed to be to the
Underwriters.
1. Securities. Subject to the terms and conditions herein contained, the
----------
Company proposes to issue and sell to the several Underwriters an aggregate
of 6,700,000 shares (the "Company Shares") of the Company's Common Stock, par
value $0.01 per share ("Common Stock") and the Selling Stockholders propose to
sell to the several Underwriters an aggregate of 300,000 shares (together with
the Company Shares, the "Firm Securities") of Common Stock. The Selling
Stockholders propose to sell, severally, to the several Underwriters not more
than an aggregate of 1,050,000 additional shares of Common Stock if requested by
the Representatives as provided in Section 3 of this agreement (the "Agreement")
in the respective amounts set forth opposite the names of the Selling
Stockholders in Schedule 1 hereto. Any and all shares of Common Stock to be
purchased by the Underwriters pursuant to such option are referred to herein as
the "Option Securities", and the Firm Securities and any Option Securities are
collectively referred to herein as the "Securities".
- --------------------
/1/ Plus an option to purchase from the Selling Stockholders up to 1,050,000
additional shares to cover over-allotments.
<PAGE>
2(A). Representations and Warranties of the Company and its Chief
-----------------------------------------------------------
Executive Officer. The Company and Thomas S. Johnson, president and chief
- ------------------
executive officer of the Company ("Johnson"), jointly and severally represent
and warrant to, and agree with, each of the several Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-48103) with
respect to the Securities, including a prospectus subject to completion, has
been filed by the Company with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), and one
or more amendments to such registration statement may have been so filed. After
the execution of this Agreement, the Company will file with the Commission
either (i) if such registration statement, as it may have been amended, has been
declared by the Commission to be effective under the Act, either (A) if the
Company relies on Rule 434 under the Act, a Term Sheet (as hereinafter defined)
relating to the Securities, that shall identify the Preliminary Prospectus (as
hereinafter defined) that it supplements containing such information as is
required or permitted by Rules 434, 430A and 424(b) under the Act or (B) if the
Company does not rely on Rule 434 under the Act, a prospectus in the form most
recently included in an amendment to such registration statement (or, if no such
amendment shall have been filed, in such registration statement), with such
changes or insertions as are required by Rule 430A under the Act or permitted by
Rule 424(b) under the Act, and in the case of either clause (i)(A) or (i)(B) of
this sentence as have been or shall be provided to and approved by the
Representatives, or (ii) if such registration statement, as it may have been
amended, has not been declared by the Commission to be effective under the Act,
an amendment to such registration statement, including a form of prospectus, a
copy of which amendment has been furnished to and approved by the
Representatives prior to the execution of this Agreement. The Company may also
file a related registration statement with the Commission pursuant to Rule
462(b) under the Act for the purpose of registering certain additional
Securities, which registration shall be effective upon filing with the
Commission. As used in this Agreement, the term "Original Registration
Statement" means the registration statement initially filed relating to the
Securities, as amended at the time when it was or is declared effective,
including all financial schedules and exhibits thereto and including any
information omitted therefrom pursuant to Rule 430A under the Act and included
in the Prospectus (as hereinafter defined); the term "Rule 462(b) Registration
Statement" means any registration statement filed with the Commission pursuant
to Rule 462(b) under the Act (including the Original Registration Statement and
any Preliminary Prospectus or Prospectus incorporated therein at the time such
registration statement becomes effective); the term "Registration Statement"
includes both the Original Registration Statement and any Rule 462(b)
Registration Statement; the term "Preliminary Prospectus" means each prospectus
subject to completion filed with such registration statement or any amendment
thereto (including the prospectus subject to completion, if any, included in the
Registration Statement or any amendment thereto at the time it was or is
declared effective); the term "Prospectus" means:
(A) if the Company relies on Rule 434 under the Act, the Term Sheet
relating to the Securities that is first filed pursuant to Rule 424(b)(7)
under the Act, together with the Preliminary Prospectus identified therein
that such Term Sheet supplements;
(B) if the Company does not rely on Rule 434 under the Act, the
prospectus first filed with the Commission pursuant to Rule 424(b) under
the Act; or
(C) if the Company does not rely on Rule 434 under the Act and if no
prospectus is
2
<PAGE>
required to be filed pursuant to Rule 424(b) under the Act, the prospectus
included in the Registration Statement;
and the term "Term Sheet" means any term sheet that satisfies the requirements
of Rule 434 under the Act. Any reference herein to the "date" of a Prospectus
that includes a Term Sheet shall mean the date of such Term Sheet.
(b) The Commission has not issued any order preventing or suspending use
of any Preliminary Prospectus. When any Preliminary Prospectus was filed with
the Commission it (i) contained all statements required to be stated therein in
accordance with, and complied in all material respects with the requirements of,
the Act and the rules and regulations of the Commission thereunder and (ii) did
not include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. When the
Registration Statement or any amendment thereto was or is declared effective, it
(i) contained or will contain all statements required to be stated therein in
accordance with, and complied or will comply in all material respects with the
requirements of, the Act and the rules and regulations of the Commission
thereunder and (ii) did not or will not include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading. When the Prospectus or any Term Sheet that is
a part thereof or any amendment or supplement to the Prospectus is filed with
the Commission pursuant to Rule 424(b) (or, if the Prospectus or part thereof or
such amendment or supplement is not required to be so filed, when the
Registration Statement or the amendment thereto containing such amendment or
supplement to the Prospectus was or is declared effective) and on the Firm
Closing Date and any Option Closing Date (both as hereinafter defined), the
Prospectus, as amended or supplemented at any such time, (i) contained or will
contain all statements required to be stated therein in accordance with, and
complied or will comply in all material respects with the requirements of, the
Act and the rules and regulations of the Commission thereunder and (ii) did not
or will not include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The foregoing
provisions of this paragraph (b) do not apply to statements or omissions made in
any Preliminary Prospectus, the Registration Statement or any amendment thereto
or the Prospectus or any amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through the Representatives specifically for use therein.
(c) If the Company has elected to rely on Rule 462(b) and the Rule
462(b) Registration Statement has not been declared effective (i) the Company
has filed or will file a Rule 462(b) Registration Statement in compliance with
and that is effective upon filing pursuant to Rule 462(b) and (ii) the Company
has given or will give irrevocable instructions for transmission of the
applicable filing fee in connection with the filing of the Rule 462(b)
Registration Statement, in compliance with Rule 111 promulgated under the Act or
the Commission has received payment of such filing fee.
(d) The Company and each of its subsidiaries have been duly organized
and are validly existing as corporations in good standing under the laws of
their respective jurisdictions of incorporation and are duly qualified to
transact business as foreign corporations and are in good standing under the
laws of all other jurisdictions where the ownership or leasing of their
respective
3
<PAGE>
properties or the conduct of their respective businesses requires such
qualification, except where the failure to be so qualified does not amount to a
material liability or disability to the Company and its subsidiaries, taken as a
whole.
(e) The Company and each of its subsidiaries have full power (corporate
and other) to own or lease their respective properties and conduct their
respective businesses as described in the Registration Statement and the
Prospectus or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus; and the Company has full power (corporate and other) to
enter into this Agreement and to carry out all the terms and provisions hereof
to be carried out by it.
(f) The issued shares of capital stock of each of the Company's
subsidiaries have been duly authorized and validly issued, are fully paid and
nonassessable and are owned beneficially by the Company or its subsidiaries free
and clear of any security interests, liens, encumbrances, equities or claims,
other than the liens granted to JNL pursuant to the Company's Credit Agreement.
(g) The Company has an authorized, issued and outstanding capitalization
as set forth in the Prospectus or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus. All of the issued shares of capital stock of
the Company have been duly authorized and validly issued and are fully paid and
nonassessable. The Firm Securities and the Option Securities have been duly
authorized and at the Firm Closing Date or the related Option Closing Date (as
the case may be), after payment therefor in accordance herewith, will be validly
issued, fully paid and nonassessable. No holders of outstanding shares of
capital stock of the Company are entitled as such to any preemptive or other
rights to subscribe for any of the Firm Securities to be sold by the Company,
and no holder of securities of the Company has any right which has not been
fully waived or complied with to require the Company to register the offer or
sale of any securities owned by such holder under the Act in the public offering
contemplated by this Agreement.
(h) The capital stock of the Company conforms to the description thereof
contained in the Prospectus or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus.
(i) Except as disclosed in the Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus), there are no outstanding
(A) securities or obligations of the Company or any of its subsidiaries
convertible into or exchangeable for any capital stock of the Company or any
such subsidiary, (B) warrants, rights or options to subscribe for or purchase
from the Company or any such subsidiary any such capital stock or any such
convertible or exchangeable securities or obligations, or (C) obligations of the
Company or any such subsidiary to issue any shares of capital stock, any such
convertible or exchangeable securities or obligations, or any such warrants,
rights or options.
(j) The consolidated financial statements and schedules of the Company
and its consolidated subsidiaries included in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) fairly present the financial position of the Company and
its consolidated subsidiaries and the results of operations and changes in
financial condition as of the dates and periods therein specified. Such
financial statements and schedules have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved (except as otherwise noted therein). The selected financial
data set forth under the caption "Selected Financial Data" in the Prospectus
(or, if
4
<PAGE>
the Prospectus is not in existence, the most recent Preliminary Prospectus)
fairly present, on the basis stated in the Prospectus (or such Preliminary
Prospectus), the information included therein.
(k) Ernst & Young LLP, who have certified certain financial statements
of the Company and its consolidated subsidiaries and delivered their report with
respect to the audited consolidated financial statements and schedules included
in the Registration Statement and the Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus), are independent public
accountants as required by the Act and the applicable rules and regulations
thereunder.
(l) The execution and delivery of this Agreement have been duly
authorized by the Company and this Agreement has been duly executed and
delivered by the Company, and is the valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, receivership, conservatorship or other
similar laws, regulations or procedures of general applicability relating to or
affecting enforcement of the rights of creditors or by general equity principles
and the discretion of the court before which any proceeding is brought
(regardless of whether enforceability is considered in a proceeding in equity or
at law) and except as the obligations of the Company under the indemnification
and contribution provisions hereof may be limited by public policy under certain
circumstances, including applicable federal or state securities laws.
(m) No legal or governmental proceedings are pending to which the
Company or any of its subsidiaries is a party or to which the property of the
Company or any of its subsidiaries is subject that are required to be described
in the Registration Statement or the Prospectus and are not described therein
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus), and, to the Company's knowledge, no such proceedings have been
threatened against the Company or any of its subsidiaries or with respect to any
of their respective properties; and no contract or other document is required to
be described in the Registration Statement or the Prospectus or to be filed as
an exhibit to the Registration Statement that is not described therein (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus) or
filed as required.
(n) The issuance, offering and sale of the Securities to the
Underwriters by the Company and the Selling Stockholders pursuant to this
Agreement, the compliance by the Company with the other provisions of this
Agreement and the consummation of the other transactions herein contemplated do
not (i) require the consent, approval, authorization, registration or
qualification of or with any governmental authority, except such as have been
obtained, such as may be required under state securities or blue sky laws or
from the NASD and, if the registration statement filed with respect to the
Securities (as amended) is not effective under the Act as of the time of
execution hereof, such as may be required (and shall be obtained as provided in
this Agreement) under the Act, or (ii) conflict with or result in a breach or
violation of any of the terms and provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, lease or other agreement or instrument
to which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries or any of their respective properties are
bound, or the charter documents or by-laws of the Company or any of its
subsidiaries, or any statute or any judgment, decree, order, rule or regulation
of any court or other governmental authority or any arbitrator applicable to the
Company or any of its subsidiaries, except where such breach, violation or
default would not amount to a material liability or disability to the Company
and its subsidiaries, taken as a whole, or adversely impact the value of the
5
<PAGE>
Securities.
(o) Subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus, neither the Company nor any
of its subsidiaries has sustained any material loss or interference with their
respective businesses or properties from fire, flood, hurricane, accident or
other calamity, whether or not covered by insurance, or from any labor dispute
or any legal or governmental proceeding and there has not been any material
adverse change, or any development involving a prospective material adverse
change, in the condition (financial or otherwise), management, business
prospects, net worth, or results of the operations of the Company or any of its
subsidiaries, except in each case as described in or contemplated by the
Prospectus or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus.
(p) The Company has not, directly or indirectly, (i) taken any action
designed to cause or to result in, or that has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Securities or (ii) since the filing of the Registration Statement (A) sold, bid
for, purchased, or paid anyone any compensation for soliciting purchases of, the
Securities or (B) paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the Company (except for
the sale of Securities under this Agreement).
(q) The Company has not distributed and, prior to the later of (I) the
Closing Date and (ii) the completion of the distribution of the Securities, will
not distribute any offering material in connection with the offering and sale of
the Securities other than the Registration Statement or any amendment thereto,
any Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, or other materials, if any permitted by the Act.
(r) Subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus), (1) the Company and its
subsidiaries have not incurred any material liability or obligation, direct or
contingent, nor entered into any material transaction not in the ordinary course
of business; (2) the Company has not purchased any of its outstanding capital
stock, nor declared, paid or otherwise made any dividend or distribution of any
kind on its capital stock; and (3) there has not been any material change in the
capital stock, short-term debt or long-term debt of the Company and its
consolidated subsidiaries, except in each case as described in or contemplated
by the Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(s) The Company and each of its subsidiaries have marketable title to
all personal property owned by each of them, in each case free and clear of any
security interests, liens, encumbrances, equities, claims and other defects,
except such as do not materially and adversely affect the value of such property
and do not interfere with the use made or proposed to be made of such property
by the Company or such subsidiary, and any real property and buildings held
under lease by the Company or any such subsidiary are held under valid,
subsisting and enforceable leases, with such exceptions as are not material and
do not interfere with the use made or proposed to be made of such property and
buildings by the Company or such subsidiary, in each case except as described in
or contemplated by the Prospectus (or, if the Prospectus is not in existence,
the
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most recent Preliminary Prospectus). Neither the Company nor any of its
subsidiaries owns any real property.
(t) No labor dispute with the employees of the Company or any of its
subsidiaries exists or is threatened or imminent that could result in a material
adverse change in the condition (financial or otherwise), business prospects,
net worth or results of operations of the Company and its subsidiaries taken as
a whole, except as described in or contemplated by the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus).
(u) The Company and its subsidiaries own or possess, or can acquire on
reasonable terms, all material patents, patent applications, trademarks, service
marks, trade names, licenses, copyrights and proprietary or other confidential
information currently employed by them in connection with their respective
businesses, and neither the Company nor any such subsidiary has received any
notice of infringement of or conflict with asserted rights of any third party
with respect to any of the foregoing which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would result in a
material adverse change in the condition (financial or otherwise), business
prospects, net worth or results of operations of the Company and its
subsidiaries taken as a whole, except as described in or contemplated by the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(v) The Company and each of its subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which they are
engaged; neither the Company nor any such subsidiary has been refused any
insurance coverage sought or applied for; and neither the Company nor any such
subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition
(financial or otherwise), business prospects, net worth or results of operations
of the Company and its subsidiaries taken as a whole, except as described in or
contemplated by the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus).
(w) No subsidiary of the Company is currently prohibited, directly or
indirectly, from paying any dividends to the Company, from making any other
distribution on such subsidiary's capital stock, from repaying to the Company
any loans or advances to such subsidiary from the Company or from transferring
any of such subsidiary's property or assets to the Company or any other
subsidiary of the Company, except as described in or contemplated by the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(x) The Company and its subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state or foreign
regulatory authorities necessary to conduct their respective businesses, and
neither the Company nor any such subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization or permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would result in a material adverse
change in the condition (financial or otherwise), business prospects, net worth
or results of operations of the Company and its subsidiaries taken as a whole,
except as described in or contemplated by the Prospectus (or, if the
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Prospectus is not in existence, the most recent Preliminary Prospectus).
(y) The Company will conduct its operations in a manner that will not
subject it to registration as an investment company under the Investment Company
Act of 1940, as amended, and this transaction will not cause the Company to
become an investment company subject to registration under such Act.
(z) The Company has filed all foreign, federal, state and local tax
returns that are required to be filed or has requested extensions thereof
(except in any case in which the failure so to file would not have a material
adverse effect on the Company and its subsidiaries taken as a whole) and has
paid all taxes required to be paid by it and any other assessment, fine or
penalty levied against it, to the extent that any of the foregoing is due and
payable, except for any such assessment, fine or penalty that is currently being
contested in good faith or as described in or contemplated by the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus).
(aa) Neither the Company nor any of its subsidiaries is in violation of
any federal or state law or regulation relating to occupational safety and
health or to the storage, handling or transportation of hazardous or toxic
materials and the Company and its subsidiaries have received all permits,
licenses or other approvals required of them under applicable federal and state
occupational safety and health and environmental laws and regulations to conduct
their respective businesses, and the Company and each such subsidiary is in
compliance with all terms and conditions of any such permit, license or
approval, except any such violation of law or regulation, failure to receive
required permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals which would not,
singly or in the aggregate, result in a material adverse change in the condition
(financial or otherwise), business prospects, net worth or results of operations
of the Company and its subsidiaries taken as a whole, except as described in or
contemplated by the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus).
(bb) Each certificate signed by any officer of the Company and delivered
to the Representatives or counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to each Underwriter as to the matters
covered thereby.
(cc) Except for the shares of capital stock of each of the subsidiaries
owned by the Company and such subsidiaries, neither the Company nor any such
subsidiary owns any shares of stock or any other equity securities of any
corporation or has any equity interest in any firm, partnership, association or
other entity, except as described in or contemplated by the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus).
(dd) There are no holders of securities of the Company, who, by reason of
the filing of the Registration Statement, have the right (and have not waived
such right) to request the Company to register under the Act, or to include in
the Registration Statement, securities held by them.
(ee) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance that (1)
transactions are executed in accordance
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with management's general or specific authorizations; (2) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability; (3) access to assets is permitted only in accordance with
management's general or specific authorization; and (4) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(ff) No material default exists, and no event has occurred which, with
notice or lapse of time or both, would constitute a material default in the due
performance and observance of any term, covenant or condition of any indenture,
mortgage, deed of trust, lease or other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or any of their respective properties is bound or may be
affected in any material adverse respect with regard to property, business or
operations of the Company and its subsidiaries taken as a whole.
2(B). Representations and Warranties of the Selling Stockholders. Each
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Selling Stockholder, severally and not jointly, represents and warrants to, and
agrees with, each of the several Underwriters that:
(a) Such Selling Stockholder has full power to enter into this Agreement
and to sell, assign, transfer and deliver to the Underwriters the Firm
Securities and the Option Securities to be sold by such Selling Stockholder
hereunder in accordance with the terms of this Agreement; and this Agreement has
been duly executed and delivered by such Selling Stockholder.
(b) Such Selling Stockholder has duly executed and delivered a custody
agreement and power of attorney (the "Custody Agreement" and "Power-of-
Attorney"), each in the form heretofore delivered to the Representatives,
appointing each of Johnson and Raymond Schilling (the "Attorneys-in-Fact") with
authority to execute, deliver and perform this Agreement on behalf of such
Selling Stockholder and appointing First Union National Bank as custodian
thereunder (the "Custodian"). Certificates in negotiable form, endorsed in
blank or accompanied by blank stock powers duly executed, with signatures
appropriately guaranteed, representing the Firm Securities and the Option
Securities to be sold by such Selling Stockholder hereunder or securities that
will convert automatically into such Securities on the Firm Closing Date have
been deposited with the Custodian pursuant to the Custody Agreement and Power of
Attorney for the purpose of delivery pursuant to this Agreement. Such Selling
Stockholder has full power to enter into the Custody Agreement and Power-of-
Attorney and to perform her, his or its obligations thereunder. The Custody
Agreement and Power-of-Attorney have been duly executed and delivered by such
Selling Stockholder and, assuming due authorization, execution and delivery by
the Custodian, are the legal, valid, binding and enforceable instruments of such
Selling Stockholder, except as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, receivership,
conservatorship or other similar laws, regulations or procedures of general
applicability relating to or affecting enforcement of the rights of creditors or
by general equity principles and the discretion of the court before which any
proceeding is brought (regardless of whether enforceability is considered in a
proceeding in equity or at law) and except as the obligations of the Company
under the indemnification and contribution provisions hereof may be limited by
public policy under certain circumstances, including applicable federal or state
securities laws. Such Selling Stockholder agrees that each of the Firm
Securities and the Option
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Securities or securities convertible into such Securities represented by the
certificates on deposit with the Custodian is subject to the interests of the
Underwriters hereunder, that the arrangements made for such custody, the
appointment of the Attorneys-in-Fact and the right, power and authority of the
Attorneys-in-Fact to execute and deliver this Agreement, to agree on the price
at which the Securities (including such Selling Stockholder's Firm Securities
and Option Securities) are to be sold to the Underwriters, and to carry out the
terms of this Agreement, are to that extent irrevocable and that the obligations
of such Selling Stockholder hereunder shall not be terminated, except as
provided in this Agreement or the Custody Agreement and Power of Attorney, by
any act of such Selling Stockholder, by operation of law or otherwise, whether
by the death or incapacity of such Selling Stockholder or in the case of a trust
or estate by the death of the trustee or trustees or the executor or executors
or the termination of such trust or estate. If such Selling Stockholder, or any
trustee or executor should die or become incapacitated or any such trust should
be terminated, or if any other event should occur, before the delivery of such
Firm Securities or Option Securities or securities convertible into such
Securities hereunder, the certificates for such Firm Securities or Option
Securities deposited with the Custodian shall be delivered by the Custodian in
accordance with the respective terms and conditions of this Agreement as if such
death, incapacity, termination or other event had not occurred, regardless of
whether or not the Custodian or the Attorneys-in-Fact shall have received notice
thereof.
(c) Such Selling Stockholder is the lawful owner of the Firm Securities
and the Option Securities (or the securities convertible into such Securities)
to be sold by such Selling Stockholder hereunder and upon sale and delivery of,
and payment for, such Firm Securities and Option Securities, as provided herein,
such Selling Stockholder will convey good and marketable title to such Firm
Securities and Option Securities, free and clear of any security interests,
liens, encumbrances, equities, claims or other defects.
(d) Such Selling Stockholder has not, directly or indirectly, (i) taken
any action designed to cause or result in, or that has constituted or which
might reasonably be expected to constitute, the stabilization or manipulation of
the price of any security of the Company to facilitate the sale or resale of the
Securities or (ii) since the filing of the Registration Statement (A) sold, bid
for, purchased, or paid anyone any compensation for soliciting purchases of, the
Securities or (B) paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the Company (except for
the sale of Securities by such Selling Stockholder under this Agreement).
(e) Such Selling Stockholder has not distributed and, prior to the later
of (i) the Option Closing Date (as defined below) and (ii) the completion of the
distribution of the Securities, will not distribute any offering material in
connection with the offering and sale of the Securities other than the
Registration Statement or any amendment thereto, any Preliminary Prospectus and
the Prospectus or any amendment or supplement thereto, or other materials, if
any, permitted by the Act.
(f) In order to document the Underwriters' compliance with the reporting
and withholding provisions of the Internal Revenue Code of 1986, as amended,
with respect to the transactions herein contemplated, such Selling Stockholder
agrees to deliver to you prior to or on the Firm Closing Date, as hereinafter
defined, a properly completed and executed United States Treasury Department
Form W-8 or W-9 (or other applicable form of statement specified by Treasury
Department regulations in lieu thereof).
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(g) The sale by such Selling Stockholder of Option Securities pursuant
hereto is not prompted by any adverse information concerning the Company that is
not set forth in the Registration Statement or the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus).
(h) The sale of the Firm Securities and the Option Securities to the
Underwriters by such Selling Stockholder pursuant to this Agreement, the
compliance by such Selling Stockholder with the other provisions of this
Agreement, the Custody Agreement and the Power of Attorney and the consummation
of the other transactions herein contemplated do not (A) require the consent,
approval, authorization, registration or qualification of or with any
governmental authority, except such as have been obtained, such as may be
required under state securities or blue sky laws or from the NASD and, if the
Registration Statement is not effective under the Act as of the time of
execution hereof, such as may be required (and shall be obtained as provided in
this Agreement) under the Act, or (B) conflict with or result in a material
breach or violation of any of the terms and provisions of, or constitute a
default under any indenture, mortgage, deed of trust, lease or other agreement
or instrument to which such Selling Stockholder is a party or by which such
Selling Stockholder or any of such Selling Stockholder's properties are bound,
or any statute or any judgment, decree, order, rule or regulation of any court
or other governmental authority or any arbitrator applicable to such Selling
Stockholder.
(i) The information furnished by or on behalf of such Selling Stockholder
relating to such Selling Stockholder and the Securities being sold hereunder by
such Selling Stockholder included in the Registration Statement and the
Prospectus does not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make such information not misleading.
3. Purchase, Sale and Delivery of the Securities. (a) On the basis of the
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representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell 6,700,000 shares of Firm Securities, each of the Selling
Stockholders agrees to sell to the several Underwriters the number of shares of
Firm Securities set forth opposite the name of such Selling Stockholder in
column (a) of Schedule 1 hereto, and each of the Underwriters, severally and not
jointly, agrees to purchase from the Company and the Selling Stockholders, the
number of Firm Securities set forth opposite the name of such Underwriter in
Column (a) of Schedule 2 hereto at a purchase price of $________ per share. One
or more certificates in definitive form for the Firm Securities that the several
Underwriters have agreed to purchase hereunder, and in such denomination or
denominations and registered in such name or names as the Representatives
request upon notice to the Company and the Attorneys-in-Fact at least 48 hours
prior to the Firm Closing Date, shall be delivered by or on behalf of the
Company and the Selling Stockholders to the Representatives for the respective
accounts of the Underwriters, against payment by or on behalf of the
Underwriters of the purchase price therefor by wire transfer in same-day funds
(the "Wired Funds") to the account of the Company and each Selling Stockholder.
Such delivery of and payment for the Firm Securities shall be made at the
offices of Hogan & Hartson L.L.P., Columbia Square, 555 Thirteenth Street, NW,
Washington, D.C. at 9:30 A.M., New York time, on __________, 1998, or at such
other place, time or date as the Representatives and the Company may agree upon
or as the Representatives may determine pursuant to Section 9 hereof, such time
and date of delivery against payment being herein referred to as the "Firm
Closing Date".
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The Company and each Selling Stockholder will make such certificate or
certificates for the Firm Securities available for checking and packaging by the
Representatives at the offices in New York, New York of the Company's transfer
agent or registrar or of Prudential Securities Incorporated at least 24 hours
prior to the Firm Closing Date.
(b) For the purpose of covering any over-allotments in connection with the
distribution and sale of the Firm Securities as contemplated by the Prospectus,
each of the Selling Stockholders, severally and not jointly, hereby grants to
the several Underwriters an option to purchase, severally and not jointly, the
number of Option Securities set forth opposite the name of such Underwriter in
column (b) of Schedule 2 hereto. The purchase price to be paid for any Option
Securities shall be the same price per share as the price per share for the Firm
Securities set forth above in paragraph (a) of this Section 3. The option
granted hereby may be exercised as to all or any part of the Option Securities
from time to time within 30 (thirty) days after the date of the Prospectus (or,
if such 30th day shall be a Saturday or Sunday or a holiday, on the next
business day thereafter when the New York Stock Exchange is open for trading).
The Underwriters shall not be under any obligation to purchase any of the Option
Securities prior to the exercise of such option. The Representatives may from
time to time exercise the option granted hereby by giving notice in writing or
by telephone (confirmed in writing) to the Attorneys-in-Fact and the Company
setting forth the aggregate number of Option Securities as to which the several
Underwriters are then exercising the option and the date and time for delivery
of and payment for such Option Securities. Any such date of delivery shall be
determined by the Representatives but shall not be earlier than three business
days or later than five business days after such exercise of the option and, in
any event, shall not be earlier than the Firm Closing Date. The time and date
set forth in such notice, or such other time on such other date as the
Representatives, the Attorneys-in-Fact and the Company may agree upon or as the
Representatives may determine pursuant to Section 9 hereof, is herein called the
"Option Closing Date" with respect to such Option Securities. Upon exercise of
the option as provided herein, each of the Selling Stockholders shall become
obligated to sell to the several Underwriters up to the number of Option
Securities set forth opposite the name of such Selling Stockholder in column (b)
of Schedule 1 hereto, in the same percentage of the total number of Option
Securities as to which the several Underwriters are exercising the option herein
as the number set forth opposite the name of such Selling Stockholder in column
(b) of Schedule 1 bears to 1,050,000, as adjusted by the Company in such manner
as it deems advisable to avoid fractional shares, and, subject to the terms and
conditions herein set forth, each of the Underwriters (severally and not
jointly) shall become obligated to purchase from the Selling Stockholders the
number of Option Securities set forth opposite the name of such Underwriter in
Column (b) of Schedule 2 hereto in the same percentage of the total number of
the Option Securities as to which the several Underwriters are then exercising
the option as such Underwriter is obligated to purchase of the aggregate number
of Firm Securities, as adjusted by the Representatives in such manner as they
deem advisable to avoid fractional shares. If the option is exercised as to all
or any portion of the Option Securities, one or more certificates in definitive
form for such Option Securities, and payment therefor, shall be delivered on the
related Option Closing Date in the manner, and upon the terms and conditions,
set forth in paragraph (a) of this Section 3, except that reference therein to
the Firm Securities and the Firm Closing Date shall be deemed, for purposes of
this paragraph (b), to refer to such Option Securities and Option Closing Date,
respectively.
(c) The Company, each Selling Stockholder and the Underwriters hereby
acknowledge
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that the wire transfer by or on behalf of the Underwriters of the purchase price
for any Securities, and/or the delivery by the Company or a Selling Stockholder
of stock certificates representing Securities does not constitute closing of a
purchase and sale of the Securities. Only execution and delivery of a receipt
for Securities by the Underwriters and execution by the Company and the Selling
Stockholders of a receipt for payment of the purchase price of such Securities
indicate completion of the closing of a purchase of the Securities from the
Company or any Selling Stockholder. Furthermore, in the event that the
Underwriters wire funds to the Company or any Selling Stockholder prior to the
completion of the closing of a purchase of Securities, the Company and each
Selling Stockholder hereby acknowledge that until the Underwriters execute and
deliver a receipt for the Securities, by facsimile or otherwise, the Company and
each Selling Stockholder will not be entitled to the Wired Funds and shall
return the Wired Funds to the Underwriters as soon as practicable (by wire
transfer of same-day funds) upon demand. In the event that the closing of a
purchase of Securities is not completed and the Wired Funds are not returned by
the Company or any Selling Stockholder to the Underwriters on the same day the
Wired Funds were received by the Company, the Company and each Selling
Stockholder agree to pay to the Underwriters in respect of each day the Wired
Funds could practicably be and are not returned by it, in same-day funds,
interest on the amount of such Wired Funds in an amount representing the
Underwriters' cost of financing as reasonably determined by Prudential
Securities Incorporated.
(d) It is understood that any of you, individually and not as one of the
Representatives, may (but shall not be obligated to) make payment on behalf of
any Underwriter or Underwriters for any of the Securities to be purchased by
such Underwriter or Underwriters. No such payment shall relieve such Underwriter
or Underwriters from any of its or their obligations hereunder.
4. Offering by the Underwriters. Upon your authorization of the release
-----------------------------
of the Firm Securities, the several Underwriters propose to offer the Firm
Securities for sale to the public upon the terms set forth in the Prospectus.
5. Covenants of the Company and the Selling Stockholders. (A) The
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Company covenants and agrees with each of the Underwriters that:
(a) The Company will use its best efforts to cause the Registration
Statement, if not effective at the time of execution of this Agreement, and any
amendments thereto to become effective as promptly as possible. If required, the
Company will file the Prospectus or any Term Sheet that constitutes a part
thereof and any amendment or supplement thereto with the Commission in the
manner and within the time period required by Rules 434 and 424(b) under the
Act. During any time when a prospectus relating to the Securities is required to
be delivered under the Act, the Company (i) will comply with all requirements
imposed upon it by the Act and the rules and regulations of the Commission
thereunder to the extent necessary to permit the continuance of sales of or
dealings in the Securities in accordance with the provisions hereof and of the
Prospectus, as then amended or supplemented, and (ii) will not file with the
Commission the Prospectus, Term Sheet or the amendment referred to in the second
sentence of Section 2(A)(a) hereof, any amendment or supplement to such
Prospectus, Term Sheet or any amendment to the Registration Statement or any
Rule 462(b) Registration Statement unless the Representatives previously have
been advised and furnished with a copy (through their counsel) for a reasonable
period of time prior to the proposed filing and shall have given their consent.
The Company will prepare and file with the Commission, in accordance with the
rules and regulations of the Commission, promptly upon request by the
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Representatives or counsel for the Underwriters, any amendments to the
Registration Statement or amendments or supplements to the Prospectus that may
be necessary or advisable in connection with the distribution of the Securities
by the several Underwriters, and will use its best efforts to cause any such
amendment to the Registration Statement to be declared effective by the
Commission as promptly as possible. The Company will advise the Representatives,
promptly after receiving notice thereof, of the time when the Registration
Statement or any amendment thereto has been filed or declared effective or the
Prospectus or any amendment or supplement thereto has been filed and will
provide evidence satisfactory to the Representatives of each such filing or
effectiveness.
(b) The Company will advise the Representatives, promptly after receiving
notice or obtaining knowledge thereof, of (i) the issuance by the Commission of
any stop order suspending the effectiveness of the Original Registration
Statement or any Rule 462(b) Registration Statement or any amendment thereto or
any order preventing or suspending the use of any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, (ii) the suspension of the
qualification of the Securities for offering or sale in any jurisdiction, (iii)
the institution, threatening or contemplation of any proceeding for any such
purpose or (iv) any request made by the Commission for amending the Original
Registration Statement or any Rule 462(b) Registration Statement, for amending
or supplementing the Prospectus or for additional information. The Company will
use its best efforts to prevent the issuance of any such stop order and, if any
such stop order is issued, to obtain the withdrawal thereof as promptly as
possible.
(c) The Company will cooperate, when and as requested by you, in the
qualification of the Securities for offering and sale under the securities or
blue sky laws of such jurisdictions as the Representatives may designate and
will continue such qualifications in effect for as long as may be necessary to
complete the distribution of the Securities, provided, however, that in
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connection therewith the Company shall not be required to qualify as a foreign
corporation or to execute a general consent to service of process in any
jurisdiction.
(d) If, at any time prior to the later of (i) the final date when a
prospectus relating to the Securities is required to be delivered under the Act
or (ii) the Option Closing Date, any event occurs as a result of which the
Prospectus, as then amended or supplemented, would include any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, or if for any other reason it is necessary at any time to
amend or supplement the Prospectus to comply with the Act or the rules or
regulations of the Commission thereunder, the Company will promptly notify the
Representatives thereof and, subject to Section 5(a) hereof, will prepare and
file with the Commission, at the Company's expense, an amendment to the
Registration Statement or an amendment or supplement to the Prospectus that
corrects such statement or omission or effects such compliance.
(e) The Company will, without charge, provide (i) to the Representatives
and to counsel for the Underwriters a conformed copy of the registration
statement originally filed with respect to the Securities and each amendment
thereto (in each case including exhibits thereto) or any Rule 462(b)
Registration Statement, certified by the Secretary or an Assistant Secretary of
the Company to be true and complete copies thereof as filed with the Commission
by electronic transmission, (ii) to each other Underwriter, a conformed copy of
such registration statement or any Rule 462(b) Registration Statement and each
amendment thereto (in each case without exhibits thereto) and (iii)
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so long as a prospectus relating to the Securities is required to be delivered
under the Act, as many copies of each Preliminary Prospectus or the Prospectus
or any amendment or supplement thereto as the Representatives may reasonably
request; without limiting the application of clause (iii) of this sentence, the
Company, not later than (A) 6:00 P.M., New York City time, on the date of
determination of the public offering price, if such determination occurred at or
prior to 10:00 A.M., New York City time, on such date or (B) 2:00 P.M., New York
City time, on the business day following the date of determination of the public
offering price, if such determination occurred after 10:00 A.M., New York City
time, on such date, will use its best efforts to deliver to the Underwriters,
without charge, as many copies of the Prospectus and any amendment or supplement
thereto as the Representatives may reasonably request for purposes of confirming
orders that are expected to settle on the Firm Closing Date.
(f) The Company, as soon as practicable, will make generally available to
its securityholders and to the Representatives a consolidated earnings statement
of the Company and its subsidiaries that satisfies the provisions of Section
11(a) of the Act and Rule 158 thereunder.
(g) The Company will apply the net proceeds to it from the sale of the
Securities as set forth under "Use of Proceeds" in the Prospectus.
(h) The Company will not, directly or indirectly, without the prior written
consent of Prudential Securities Incorporated, on behalf of the Underwriters,
offer, sell, offer to sell, contract to sell, pledge, grant any option to
purchase or otherwise sell or dispose (or announce any offer, sale, offer of
sale, contract of sale, pledge, grant of any option to purchase or other sale or
disposition) of any shares of Common Stock or any securities convertible into,
or exchangeable or exercisable for, shares of Common Stock for a period of 180
days after the date hereof, except pursuant to this Agreement, other than grants
of options pursuant to the Company's 1998 Stock Option and Incentive Plan and
pursuant to the Company's Savings Plan.
(i) The Company will not, directly or indirectly, (i) take any action
designed to cause or to result in, or that has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Securities or (ii) except for the sale of the Firm Securities pursuant to this
Agreement, (A) sell, bid for, purchase, or pay anyone any compensation for
soliciting purchases of, the Securities or (B) pay or agree to pay to any person
any compensation for soliciting another to purchase any other securities of the
Company (except for the sale of Securities by the Selling Securityholders under
this Agreement).
(j) The Company will obtain the agreements described in Section 7(f) hereof
prior to the Firm Closing Date.
(k) If at any time during the 25-day period after the Registration
Statement becomes effective or the period prior to the Option Closing Date, any
rumor, publication or event relating to or affecting the Company shall occur as
a result of which in your opinion the market price of the Common Stock has been
or is likely to be materially affected (regardless of whether such rumor,
publication or event necessitates a supplement to or amendment of the
Prospectus), the Company will, after notice from you advising the Company to the
effect set forth above, forthwith prepare, consult with you concerning the
substance of, and disseminate a press release or other public
15
<PAGE>
statement, reasonably satisfactory to you, responding to or commenting on such
rumor, publication or event.
(l) If the Company elects to rely on Rule 462(b), the Company shall both
file a Rule 462(b) Registration Statement with the Commission in compliance with
Rule 462(b) and pay the applicable fees in accordance with Rule 111 promulgated
under the Act by the time confirmations are sent or given, as specified by Rule
462(b)(2).
(m) The Company will cause the Securities to be duly included for quotation
on The Nasdaq Stock Market's National Market (the "Nasdaq National Market")
prior to the Firm Closing Date. The Company will make best efforts to ensure
that the Securities remain included for quotation on the Nasdaq National Market
following the Firm Closing Date.
(B) Each of the Selling Stockholders covenants and agrees with each of the
Underwriters that:
(a) Such Selling Stockholder will not, directly or indirectly, (i) take any
action designed to cause or result in, or that has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Securities or (ii) except for the sale of Securities pursuant to this Agreement
(A) sell, bid for, purchase, or pay anyone any compensation for soliciting
purchases of, the Securities or (B) pay or agree to pay to any person any
compensation for soliciting another to purchase any other securities of the
Company.
(b) Such Selling Stockholder will not, directly or indirectly, without the
prior written consent of Prudential Securities Incorporated, on behalf of the
Underwriters, offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise sell or dispose (or announce any offer, sale,
offer of sale, contract of sale, pledge, grant of any option to purchase or
other sale or disposition) any shares of Common Stock or such similar
securities, beneficially owned by such Selling Stockholder (excluding any shares
of the Common Stock that may be acquired through the Company's Savings Plan, as
that term is defined in the Registration Statement) for a period of 180 days
after the date hereof (other than (i) the redemption by the Company of the
shares of Class A Common Stock as described in the Registration Statement and
(ii) the transfer of any or all shares of the Common Stock now owned or
hereafter acquired by the undersigned to a member of the undersigned's immediate
family or to a trust, limited partnership or other entity whose sole
beneficiaries or equity owners are the undersigned and/or members of the
undersigned's immediate family; provided, however, that any such transferee
-------- -------
shall execute and deliver to you an agreement of substantially the tenor of this
Section 5(B)(b) with respect to such shares).
(c) Such Selling Stockholder will pay all Federal and other taxes, if any,
on the transfer or sale of the Firm Securities and the Option Securities being
sold by such Selling Stockholder to the Underwriters.
(d) Such Selling Stockholder will do or perform all things required to be
done or performed by such Selling Stockholder prior to any Firm Closing Date or
Option Closing Date to satisfy all conditions precedent to the delivery of the
Firm Securities and the Option Securities being sold by such Selling Stockholder
pursuant to this Agreement.
16
<PAGE>
6. Expenses. The Company will pay all costs and expenses incident to the
--------
performance of the obligations of the Company and the Selling Stockholders under
this Agreement, whether or not the transactions contemplated herein are
consummated or this Agreement is terminated pursuant to Section 11 hereof,
including all costs and expenses incident to (i) the printing or other
production of documents with respect to the transactions, including any costs of
printing the registration statement originally filed with respect to the
Securities and any amendment thereto, any Rule 462(b) Registration Statement,
any Preliminary Prospectus and the Prospectus and any amendment or supplement
thereto, this Agreement and any blue sky memoranda, (ii) all arrangements
relating to the delivery to the Underwriters of copies of the foregoing
documents, (iii) the fees and disbursements of the counsel, the accountants and
any other experts or advisors retained by the Company and, in accordance with
applicable agreements between the Company and the Selling Stockholders, the
Selling Stockholders, (iv) preparation, issuance and delivery to the
Underwriters of any certificates evidencing the Securities, including transfer
agent's and registrar's fees, (v) the qualification of the Securities under
state securities and blue sky laws, including filing fees and fees and
disbursements of counsel for the Underwriters relating thereto and, in
accordance with applicable agreements between the Company and the Selling
Stockholders, the Selling Stockholders, (vi) the filing fees of the Commission
and the National Association of Securities Dealers, Inc. relating to the
Securities, (vii) any quotation of the Securities on the Nasdaq National Market,
(viii) any meetings with prospective investors in the Securities (other than as
shall have been specifically approved by the Representatives to be paid for by
the Underwriters) and (ix) advertising relating to the offering of the
Securities (other than advertising at the sole request of the Representatives).
If the sale of the Securities provided for herein is not consummated because any
condition to the obligations of the Underwriters set forth in Section 7 hereof
is not satisfied, because this Agreement is terminated pursuant to Section 11
hereof or because of any failure, refusal or inability on the part of the
Company to perform all obligations and satisfy all conditions on its part to be
performed or satisfied hereunder other than by reason of a default by any of the
Underwriters, the Company will reimburse the Underwriters severally upon demand
for all out-of-pocket expenses (including counsel fees and disbursements) that
shall have been incurred by them in connection with the proposed purchase and
sale of the Securities. The Company shall not in any event be liable to any of
the Underwriters for the loss of anticipated profits from the transactions
covered by this Agreement.
Each Selling Stockholder will pay any transfer taxes attributable to the
sale by such Selling Stockholder of the Securities it sells hereunder.
7. Conditions of the Underwriters' Obligations. The obligations of the
-------------------------------------------
several Underwriters to purchase and pay for the Firm Securities shall be
subject, in the Representatives' sole discretion, to the accuracy of the
representations and warranties of the Company and Johnson in Section 2(A) hereof
and of the Selling Stockholders in Section 2(B) hereof, in each case as of the
date hereof and as of the Firm Closing Date, as if made on and as of the Firm
Closing Date, to the accuracy of the statements of the Company's officers made
pursuant to the provisions hereof, to the performance by the Company and the
Selling Stockholders of their respective covenants and agreements hereunder and
to the following additional conditions:
(a) If the Original Registration Statement or any amendment thereto filed
prior to the Firm Closing Date has not been declared effective as of the time of
execution hereof, the Original Registration Statement or such amendment and, if
the Company has elected to rely upon Rule 462(b),
17
<PAGE>
the Rule 462(b) Registration Statement shall have been declared effective not
later than the earlier of (i) 11:00 A.M., New York time, on the date on which
the amendment to the registration statement originally filed with respect to the
Securities or to the Registration Statement, as the case may be, containing
information regarding the initial public offering price of the Securities has
been filed with the Commission and (ii) the time confirmations are sent or given
as specified by Rule 462(b)(2), or with respect to the Original Registration
Statement, or such later time and date as shall have been consented to by the
Representatives; if required, the Prospectus or any Term Sheet that constitutes
a part thereof and any amendment or supplement thereto shall have been filed
with the Commission in the manner and within the time period required by Rules
434 and 424(b) under the Act; no stop order suspending the effectiveness of the
Registration Statement or any amendment thereto shall have been issued, and no
proceedings for that purpose shall have been instituted or threatened or, to the
knowledge of the Company, the Selling Stockholders or the Representatives, shall
be contemplated by the Commission; and the Company and each Selling Stockholder
shall have complied with any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus or
otherwise).
(b) The Representatives shall have received an opinion, dated the Firm
Closing Date, of Hogan & Hartson, L.L.P., counsel for the Company, to the effect
that:
(i) the Company and each of its subsidiaries listed in Schedule 3
hereto (the "Subsidiaries") have been duly organized and are validly
existing as corporations in good standing under the laws of their
respective jurisdictions of incorporation and are duly qualified to
transact business as foreign corporations and are in good standing under
the laws of all other jurisdictions where the ownership or leasing of their
respective properties or the conduct of their respective businesses
requires such qualification, except where the failure to be so qualified
does not amount to a material liability or disability to the Company and
the Subsidiaries, taken as a whole;
(ii) the Company and each of the Subsidiaries have corporate power to
own or lease their respective properties and conduct their respective
businesses as described in the Registration Statement and the Prospectus,
and the Company has corporate power to enter into this Agreement and to
carry out all the terms and provisions hereof to be carried out by it;
(iii) the issued shares of capital stock of each of the Subsidiaries
have been duly authorized and validly issued, are fully paid and
nonassessable and are owned beneficially by the Company free and clear of
any perfected security interests or, to the best knowledge of such counsel,
any other security interests, liens, encumbrances, equities or claims;
(iv) the Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus; all of the issued shares of
capital stock of the Company have been duly authorized and validly issued
and are fully paid and nonassessable, have been issued in compliance with
all applicable federal and state securities laws and were not issued in
violation of or subject to any preemptive rights or other rights to
subscribe for or purchase securities; the Firm Securities have been duly
authorized by all necessary corporate action of the Company and, when
issued and delivered to and paid for by the Underwriters pursuant to this
Agreement, will be validly issued, fully paid and nonassessable; the
Securities have been
18
<PAGE>
duly included for trading on the Nasdaq National Market; no holders of
outstanding shares of capital stock of the Company are entitled as such to
any preemptive or other rights to subscribe for any of the Securities; and
no holders of securities of the Company are entitled to have such
securities registered under the Registration Statement;
(v) the statements set forth under the heading "Description of
Capital Stock" in the Prospectus, insofar as such statements purport to
summarize certain provisions of the capital stock of the Company, provide a
fair summary of such provisions; and the statements set forth under the
heading "Business--Legal Proceedings" in the Prospectus, insofar as such
statements constitute a summary of the legal matters, documents or
proceedings referred to therein, provide a fair summary of such legal
matters, documents and proceedings;
(vi) the execution and delivery of this Agreement have been duly
authorized by all necessary corporate action of the Company and this
Agreement has been duly executed and delivered by the Company;
(vii) (A) no legal or governmental proceedings are pending to which
the Company or any of the Subsidiaries is a party or to which the property
of the Company or any of the Subsidiaries is subject that are required to
be described in the Registration Statement or the Prospectus and are not
described therein, and, to the best knowledge of such counsel, no such
proceedings have been threatened against the Company or any of the
Subsidiaries or with respect to any of their respective properties and (B)
no contract or other document is required to be described in the
Registration Statement or the Prospectus or to be filed as an exhibit to
the Registration Statement that is not described therein or filed as
required;
(viii) the issuance, offering and sale of the Securities to the
Underwriters by the Company pursuant to this Agreement, the compliance by
the Company with the other provisions of this Agreement and the
consummation of the other transactions herein contemplated do not (A)
require the consent, approval, authorization, registration or qualification
of or with any governmental authority, except such as have been obtained
and such as may be required under state securities or blue sky laws, or (B)
conflict with or result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any indenture, mortgage, deed
of trust, lease or other agreement or instrument, known to such counsel, to
which the Company or any of the Subsidiaries is a party or by which the
Company or any of the Subsidiaries or any of their respective properties
are bound, or the charter documents or by-laws of the Company or any of the
Subsidiaries, or any statute or any judgment, decree, order, rule or
regulation of any court or other governmental authority or any arbitrator
known to such counsel and applicable to the Company or Subsidiaries;
(ix) the Registration Statement is effective under the Act; any
required filing of the Prospectus, or any Term Sheet that constitutes a
part thereof, pursuant to Rules 434 and 424(b) has been made in the manner
and within the time period required by Rules 434 and 424(b); and no stop
order suspending the effectiveness of the Registration Statement or any
amendment thereto has been issued, and no proceedings for that purpose have
been instituted or threatened or, to the best knowledge of such counsel,
are contemplated by the Commission;
19
<PAGE>
(x) the Registration Statement originally filed with respect to the
Securities and each amendment thereto, any Rule 462(b) Registration
Statement and the Prospectus (in each case, other than the financial
statements and other financial information contained therein, as to which
such counsel need express no opinion) comply as to form in all material
respects with the applicable requirements of the Act and the rules and
regulations of the Commission thereunder; and
(xi) if the Company elects to rely on Rule 434, the Prospectus is not
"materially different", as such term is used in Rule 434, from the
prospectus included in the Registration Statement at the time of its
effectiveness or an effective post-effective amendment thereto (including
such information that is permitted to be omitted pursuant to Rule 430A).
Such counsel shall also state that they have no reason to believe that the
Registration Statement, as of its effective date, contained any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Prospectus, as of its date or the date of such opinion, included or includes any
untrue statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials [and, as to matters involving the
application of laws of any jurisdiction other than the State of
__________________ or the United States, to the extent satisfactory in form and
scope to counsel for the Underwriters, upon the opinion of [insert name of local
---------------------
counsel]. [The foregoing opinion shall also state that the Underwriters are
- --------
justified in relying upon such opinion of [insert name of local counsel], and
------------------------------
copies of such opinion shall be delivered to the Representatives and counsel for
the Underwriters.]
References to the Registration Statement and the Prospectus in this
paragraph (b) shall include any amendment or supplement thereto at the date of
such opinion.
(b)(2) The Representative shall have received an opinion, dated the
Firm Closing Date, of Hogan & Hartson, counsel for the Selling Stockholders
[other than [ ], counsel for which is [ ]], to the effect that:
(i) each Selling Stockholder has full corporate, partnership or
trust power, as applicable, to enter into this Agreement; the Custody
Agreement and the Power-of-Attorney and to sell, transfer and deliver the
Securities being sold by such Selling Stockholder hereunder in the manner
provided in this Agreement and to perform its obligations under the Custody
Agreement; if such Selling Stockholder is a corporation, the execution and
delivery of this Agreement and, in the case of each Selling Stockholder,
the Custody Agreement and the Power-of-Attorney, have been duly authorized
by all necessary corporate action of each Selling Stockholder; this
Agreement and, in the case of each Selling Stockholder, the Custody
Agreement and the Power-of-Attorney, have been duly executed and delivered
by each Selling Stockholder each such agreement constitutes the
20
<PAGE>
legal, valid, binding and enforceable instrument of each Selling
Stockholder, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is sought
in a proceeding in equity or at law);
(ii) when the Underwriters obtain control of the Securities to be
sold by the Selling Stockholders, assuming that the Underwriters purchased
such Securities for value and without notice of any adverse claim to such
Securities within the meaning of Section 8-102 of the Uniform Commercial
Code as in effect in the State of Delaware, the Underwriters will have
acquired all rights of the Selling Stockholders in such Securities free of
any adverse claim;
(iii) the sale of the Securities to the Underwriters by each Selling
Stockholder pursuant to this Agreement, the compliance by each Selling
Stockholder with the provisions of this Agreement and, in the case of each
Selling Stockholder, the Custody Agreement, and the consummation of the
other transactions herein contemplated do not (i) require the consent,
approval, authorization, registration or qualification of or with any
governmental authority, except such as have been obtained and such as may
be required under state securities or blue sky laws, or (ii) conflict with
or result in a breach or violation of any of the terms and provision of, or
constitute a default under any indenture, mortgage, deed of trust, lease or
other agreement or instrument to which such Selling Stockholder is a party
or by which such Selling Stockholder or any of such Selling Stockholder's
properties are bound, or the charter documents of by-laws of such Selling
Stockholder or any of its subsidiaries or any statute or any judgment,
decree, order, rule or regulation of any court or other governmental
authority or any arbitrator applicable to such Selling Stockholder.
In rendering any such opinion, such counsel may rely, as to the matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials, the Selling Stockholders and
representations and warranties of the Company and the Selling Stockholders
contained herein, in the Custody Agreements and in the Powers of Attorney.
(c) The Representatives shall have received an opinion, dated the Firm
Closing Date, of Willkie Farr & Gallagher, 787 Seventh Avenue, New York, New
York, counsel for the Underwriters, with respect to the issuance and sale of the
Firm Securities, the Registration Statement and the Prospectus, and such other
related matters as the Representatives may reasonably require, and the Company
shall have furnished to such counsel such documents as they may reasonably
request for the purpose of enabling them to pass upon such matters. [In
rendering such opinion, such counsel may rely as to all matters of law upon the
opinion of [insert name of local counsel] referred to in paragraph (b) above.]
------------------------------
(d) The Representatives shall have received from Ernst & Young LLP a letter
or letters dated, respectively, the date hereof and the Firm Closing Date, in
form and substance satisfactory to the Representatives, to the effect that:
(i) they are independent accountants with respect to the Company and
its consolidated subsidiaries within the meaning of the Act and the
applicable rules and
21
<PAGE>
regulations thereunder;
(ii) in their opinion, the audited consolidated financial statements
and schedules examined by them and included in the Registration Statement
and the Prospectus comply in form in all material respects with the
applicable accounting requirements of the Act and the related published
rules and regulations;
(iii) on the basis of carrying out certain specified procedures (which
do not constitute an examination made in accordance with generally accepted
auditing standards) that would not necessarily reveal matters of significance
with respect to the comments set forth in this paragraph (iii), a reading of the
minute books of the shareholders, the board of directors and any committees
thereof of the Company, and inquiries of certain officials of the Company who
have responsibility for financial and accounting matters, nothing came to their
attention that caused them to believe that, at a specific date not more than
five business days prior to the date of such letter, there were any changes in
the capital stock or long-term debt of the Company consolidated or any decreases
in net current assets or stockholders' equity of the Company consolidated, in
each case compared with amounts shown on the March 31, 1998 consolidated balance
sheet included in the Registration Statement and the Prospectus, or, for the
period from April 1, 1998 to such specified date, there were any decreases, as
compared with a period of substantially the same length of time ended on March
31, 1998, in total revenues, net income before income taxes or total or per
share amounts of net income of the Company consolidated, except in all instances
for changes, decreases or increases set forth in such letter;
(iv) they have carried out certain specified procedures, not
constituting an audit, with respect to certain amounts, percentages and
financial information that are derived from the general accounting records of
the Company and its consolidated subsidiaries and are included in the
Registration Statement and the Prospectus and have compared such amounts,
percentages and financial information with such records of the Company and its
consolidated subsidiaries and with information derived from such records and
have found them to be in agreement, excluding any questions of legal
interpretation; and
(v) on the basis of a reading of the unaudited pro forma
consolidated financial statements included in the Registration Statement and the
Prospectus, carrying out certain specified procedures that would not necessarily
reveal matters of significance with respect to the comments set forth in this
paragraph (v), inquiries of certain officials of the Company who have
responsibility for financial and accounting matters and proving the arithmetic
accuracy of the application of the pro forma adjustments to the historical
amounts in the unaudited pro forma consolidated financial statements, nothing
came to their attention that caused them to believe that the unaudited pro forma
consolidated financial statements do not comply in form in all material respects
with the applicable accounting requirements of Rule 11-02 of Regulation S-X or
that the pro forma adjustments have not been properly applied to the historical
amounts in the compilation of such statements.
In the event that the letters referred to above set forth any such
changes, decreases or increases, it shall be a further condition to the
obligations of the Underwriters that (A) such letters shall be accompanied by a
written explanation of the Company as to the significance thereof, unless the
Representatives deem such explanation unnecessary, and (B) such changes,
decreases or increases do not, in the sole judgment of the Representatives, make
it impractical or inadvisable to
22
<PAGE>
proceed with the purchase and delivery of the Securities as contemplated by the
Registration Statement, as amended as of the date hereof.
References to the Registration Statement and the Prospectus in this
paragraph (d) with respect to either letter referred to above shall include any
amendment or supplement thereto at the date of such letter.
(e)(1) The Representatives shall have received a certificate, dated the
Firm Closing Date, of the principal executive officer and the principal
financial or accounting officer of the Company to the effect that:
(i) the representations and warranties of the Company in this
Agreement are true and correct as if made on and as of the Firm Closing
Date; the Registration Statement, as amended as of the Firm Closing Date,
does not include any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein not misleading,
and the Prospectus, as amended or supplemented as of the Firm Closing Date,
does not include any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; and
the Company has performed all covenants and agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to the Firm
Closing Date;
(ii) no stop order suspending the effectiveness of the Registration
Statement or any amendment thereto has been issued, and no proceedings for
that purpose have been instituted or threatened or, to the best of the
Company's knowledge, are contemplated by the Commission; and
(iii) subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, neither the Company
nor any of its subsidiaries has sustained any material loss or interference
with their respective businesses or properties from fire, flood, hurricane,
accident or other calamity, whether or not covered by insurance, or from
any labor dispute or any legal or governmental proceeding, and there has
not been any material adverse change, or any development involving a
prospective material adverse change, in the condition (financial or
otherwise), management, business prospects, net worth or results of
operations of the Company or any of its subsidiaries, except in each case
as described in or contemplated by the Prospectus (exclusive of any
amendment or supplement thereto).
(e)(2) The Representatives shall have received a certificate, dated the
Firm Closing Date, from each Selling Stockholder, signed by one of the
Attorneys-in-Fact, to the effect that:
(i) the representations and warranties of such Selling Stockholder
in this Agreement are true and correct as if made on and as of the Firm
Closing Date; and
(ii) such Selling Stockholder has performed all covenants and
agreements on its part to be performed or satisfied at or prior to the Firm
Closing Date.
(f) The Representatives shall have received from each person who is a
director or officer
23
<PAGE>
of the Company and from each shareholder (other than one former employee who
owns approximately 12,000 shares of Common Stock) an agreement to the effect
that such person will not, directly or indirectly, without the prior written
consent of Prudential Securities Incorporated, on behalf of the Underwriters,
offer, sell, offer to sell, contract to sell, pledge, grant any option to
purchase or otherwise sell or dispose (or announce any offer, sale, offer of
sale, contract of sale, pledge, grant of any option to purchase or other sale or
disposition) of any shares of Common Stock or any securities convertible into,
or exchangeable or exercisable for, shares of Common Stock (excluding any shares
of the Common Stock that may be acquired through the Company's Savings Plan, as
that term is defined in the Registration Statement) for a period of 180 days
after the date of this Agreement (other than (i) shares of Class A Common Stock
redeemed by the Company as described in the Registration Statement and (ii) any
or all shares of the Common Stock now owned or hereafter acquired by the
undersigned that are transferred to a member of the undersigned's immediate
family or to a trust, limited partnership or other entity whose sole
beneficiaries or equity owners are the undersigned and/or members of the
undersigned's immediate family; provided, however, that any such transferee
-------- -------
shall execute and deliver to you an agreement of substantially the tenor of this
section 7(f) with respect to such shares).
(g) On or before the Firm Closing Date, the Representatives and counsel for
the Underwriters shall have received such further certificates, documents or
other information as they may have reasonably requested from the Company.
(h) Prior to the commencement of the offering of the Securities, the
Securities shall have been included for trading on the Nasdaq National Market.
All opinions, certificates, letters and documents delivered pursuant to
this Agreement will comply with the provisions hereof only if they are
reasonably satisfactory in all material respects to the Representatives and
counsel for the Underwriters. The Company shall furnish to the Representatives
such conformed copies of such opinions, certificates, letters and documents in
such quantities as the Representatives and counsel for the Underwriters shall
reasonably request.
The respective obligations of the several Underwriters to purchase and pay
for any Option Securities shall be subject, in their discretion, to each of the
foregoing conditions to purchase the Firm Securities, except that all references
to the Firm Securities and the Firm Closing Date shall be deemed to refer to
such Option Securities and the related Option Closing Date, respectively.
8. Indemnification and Contribution. (a) The Company and Johnson, jointly
--------------------------------
and severally, agree to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section 15 of
the Act or Section 20 of the Securities Exchange Act of 1934 (the "Exchange
Act"), against any losses, claims, damages or liabilities, joint or several, to
which such Underwriter or such controlling person may become subject under the
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement made by the
Company or Johnson in Section 2 of this Agreement,
(ii) any untrue statement or alleged untrue statement of any material
fact
24
<PAGE>
contained in (A) the Registration Statement or any amendment thereto, any
Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto or (B) any application or other document, or any amendment or
supplement thereto, executed by the Company or Johnson or based upon
written information furnished by or on behalf of the Company or Johnson
filed in any jurisdiction in order to qualify the Securities under the
securities or blue sky laws thereof or filed with the Commission or any
securities association or securities exchange (each an "Application"),
(iii) the omission or alleged omission to state in the Registration
Statement or any amendment thereto, any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, or any Application a
material fact required to be stated therein or necessary to make the
statements therein not misleading or
(iv) any untrue statement or alleged untrue statement of any material
fact contained in any audio or visual materials used in connection with the
marketing of the Securities, including without limitation, slides, videos,
films or tape recordings,
and will reimburse, as incurred, each Underwriter and each such controlling
person for any legal or other expenses reasonably incurred by such Underwriter
or such controlling person in connection with investigating, defending against
or appearing as a third-party witness in connection with any such loss, claim,
damage, liability or action; provided, however, that the Company and Johnson
-------- -------
will not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement or any amendment thereto, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto or any Application in reliance
upon and in conformity with written information furnished to the Company by such
Underwriter through the Representatives specifically for use therein; and
provided, further, that the Company and Johnson will not be liable to any
- -------- -------
Underwriter or any person controlling such Underwriter with respect to any such
untrue statement or omission made in any Preliminary Prospectus that is
corrected in the Prospectus (or any amendment or supplement thereto) if the
person asserting any such loss, claim, damage or liability purchased Securities
from such Underwriter but was not sent or given a copy of the Prospectus (as
amended or supplemented) at or prior to the written confirmation of the sale of
such Securities to such person in any case where such delivery of the Prospectus
(as amended or supplemented) is required by the Act, unless such failure to
deliver the Prospectus (as amended or supplemented) was a result of
noncompliance by the Company with Section 5(d) and (e) of this Agreement. This
indemnity agreement will be in addition to any liability which the Company or
Johnson may otherwise have. Neither the Company nor Johnson will, without the
prior written consent of the Underwriter or Underwriters purchasing, in the
aggregate, more than fifty percent (50%) of the Securities, settle or compromise
or consent to the entry of any judgment in any pending or threatened claim,
action, suit or proceeding in respect of which indemnification may be sought
hereunder (whether or not any such Underwriter or any person who controls any
such Underwriter within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act is a party to such claim, action, suit or proceeding), unless
such settlement, compromise or consent includes an unconditional release of all
of the Underwriters and such controlling persons from all liability arising out
of such claim, action, suit or proceeding.
(b) Each Selling Stockholder, other than Johnson, severally and not
jointly, agrees to
25
<PAGE>
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter or such controlling person may
become subject under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement made by such Selling
Stockholder in Section 2(B) of this Agreement, and will reimburse, as incurred,
each Underwriter and each such controlling person for any legal or other
expenses reasonably incurred by such Underwriter or such controlling person in
connection with investigating, defending against or appearing as a third-party
witness in connection with any such loss, claim damage, liability or action;
provided, however, that such Selling Stockholder will not be liable to any
Underwriter or any person controlling such Underwriter with respect to any such
untrue statement or omission made in any Preliminary Prospectus that is
corrected in the Prospectus (or any amendment or supplement thereto) if the
person asserting any such loss, claim, damage or liability purchased Securities
from such Underwriter but was not sent or given a copy of the Prospectus (as
amended or supplemented) at or prior to the written confirmation of the sale of
such Securities to such person in any case where such delivery of the Prospectus
(as amended or supplemented) is required by the Act, unless such failure to
deliver the Prospectus (as amended or supplemented) was a result of
noncompliance by the Company with Section 5(A)(d) or (e) of this Agreement. This
indemnity agreement will be in addition to any liability which such Selling
Stockholder may otherwise have. No Selling Stockholder will, without the prior
written consent of the Underwriters purchasing, in the aggregate, more than
fifty percent (50%) of the Securities, settle or compromise or consent to the
entry of any judgment in any pending or threatened claim, action, suit or
proceeding in respect of which indemnification may be sought hereunder (whether
or not any such Underwriter or any person who controls any such Underwriter
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act is
a party to such claim, action, suit or proceeding), unless such settlement,
compromise or consent includes an unconditional release of all of the
Underwriters and such controlling persons from all liability arising out of such
claim, action, suit or proceeding.
(c) Each Underwriter, severally and not jointly, will indemnify and hold
harmless the Company, each of its directors, each of its officers who signed the
Registration Statement, each Selling Stockholder and each person, if any, who
controls the Company or such Selling Stockholder within the meaning of Section
15 of the Act or Section 20 of the Exchange Act against any losses, claims,
damages or liabilities to which the Company, any such director or officer of the
Company, such Selling Stockholder or any such controlling person of the Company
or such Selling Stockholder may become subject under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any untrue statement or alleged
untrue statement of any material fact contained in the Registration Statement or
any amendment thereto, any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto, or any Application or (ii) the omission or the
alleged omission to state therein a material fact required to be stated in the
Registration Statement or any amendment thereto, any Preliminary Prospectus or
the Prospectus or any amendment or supplement thereto, or any Application or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by such Underwriter
through the Representatives specifically for use therein, and, subject to the
limitation set forth immediately
26
<PAGE>
preceding this clause, will reimburse, as incurred, any legal or other expenses
reasonably incurred by the Company or any such director or officer, such Selling
Stockholder or such controlling person in connection with investigating or
defending any such loss, claim, damage, liability or any action in respect
thereof. This indemnity agreement will be in addition to any liability which
such Underwriter may otherwise have.
(d) Promptly after receipt by an indemnified party under this Section 8 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Section 8. In case any such action is brought against any indemnified party, and
it notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party;
provided, however, that if the defendants in any such action include both the
- -------- -------
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be one or more legal defenses available
to it and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, the indemnifying party shall not have
the right to direct the defense of such action on behalf of such indemnified
party or parties and such indemnified party or parties shall have the right to
select separate counsel to defend such action on behalf of such indemnified
party or parties. After notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof and approval by such
indemnified party of counsel appointed to defend such action, the indemnifying
party will not be liable to such indemnified party under this Section 8 for any
legal or other expenses, other than reasonable costs of investigation,
subsequently incurred by such indemnified party in connection with the defense
thereof, unless (i) the indemnified party shall have employed separate counsel
in accordance with the proviso to the next preceding sentence (it being
understood, however, that in connection with such action the indemnifying party
shall not be liable for the expenses of more than one separate counsel (in
addition to local counsel) in any one action or separate but substantially
similar actions in the same jurisdiction arising out of the same general
allegations or circumstances, designated by the Representatives in the case of
paragraph (a) of this Section 8, representing the indemnified parties under such
paragraph (a) who are parties to such action or actions) or (ii) the
indemnifying party does not promptly retain counsel satisfactory to the
indemnified party or (iii) the indemnifying party has authorized the employment
of counsel for the indemnified party at the expense of the indemnifying party.
After such notice from the indemnifying party to such indemnified party, the
indemnifying party will not be liable for the costs and expenses of any
settlement of such action effected by such indemnified party without the consent
of the indemnifying party.
(e) In circumstances in which the indemnity agreement provided for in the
preceding paragraphs of this Section 8 is unavailable or insufficient, for any
reason, to hold harmless an indemnified party in respect of any losses, claims,
damages or liabilities (or actions in respect thereof), each indemnifying party,
in order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect (i) the relative benefits received by
the indemnifying party or parties on the one hand and the
27
<PAGE>
indemnified party on the other from the offering of the Securities or (ii) if
the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the indemnifying party or parties on the one hand and the indemnified party on
the other in connection with the statements or omissions or alleged statements
or omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Stockholders on the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total proceeds from the offering (before
deducting expenses) received by the Company and the Selling Stockholders bear to
the total underwriting discounts and commissions received by the Underwriters.
The relative fault of the parties shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or any Selling Stockholder, or the
Underwriters, the parties' relative intents, knowledge, access to information
and opportunity to correct or prevent such statement or omission, and any other
equitable considerations appropriate in the circumstances. The Company, the
Selling Stockholders and the Underwriters agree that it would not be equitable
if the amount of such contribution were determined by pro rata or per capita
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take into account
the equitable considerations referred to above in this paragraph (e).
Notwithstanding any other provision of this paragraph (e), no Underwriter shall
be obligated to make contributions hereunder that in the aggregate exceed the
total public offering price of the Securities purchased by such Underwriter
under this Agreement, less the aggregate amount of any damages that such
Underwriter has otherwise been required to pay in respect of the same or any
substantially similar claim, and no person guilty of fraudulent
misrepresentation (within the meaning of Section II(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute hereunder are
several in proportion to their respective underwriting obligations and not
joint, and contributions among Underwriters shall be governed by the provisions
of the Prudential Securities Incorporated Master Agreement Among Underwriters.
For purposes of this paragraph (e), each person, if any, who controls an
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement and each person, if any, who controls the Company or any
Selling Stockholder within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act, shall have the same rights to contribution as the Company or
such Selling Stockholder, as the case may be.
(f) The aggregate liability of the Selling Stockholders, other than
Johnson, under all provisions of this Agreement shall, in each case, not exceed
an amount equal to the aggregate proceeds received by such Selling Stockholder
for the Securities sold by such person or entity to the Underwriters. The
aggregate liability of Johnson under all provisions of this Agreement shall not
exceed an amount equal to the sum of (i) the aggregate cash proceeds received by
Johnson in redemption of his Class A Shares and (ii) the aggregate proceeds
received by Johnson in consideration for the Securities sold by Johnson to the
Underwriters hereunder.
9. Default of Underwriters. If one or more Underwriters default in their
-----------------------
obligations to purchase Firm Securities or Option Securities hereunder and the
aggregate number of such Securities
28
<PAGE>
that such defaulting Underwriter or Underwriters agreed but failed to purchase
is ten percent or less of the aggregate number of Firm Securities or Option
Securities to be purchased by all of the Underwriters at such time hereunder,
the other Underwriters may make arrangements satisfactory to the Representatives
for the purchase of such Securities by other persons (who may include one or
more of the non-defaulting Underwriters, including the Representatives), but if
no such arrangements are made by the Firm Closing Date or the related Option
Closing Date, as the case may be, the other Underwriters shall be obligated
severally in proportion to their respective commitments hereunder to purchase
the Firm Securities or Option Securities that such defaulting Underwriter or
Underwriters agreed but failed to purchase. If one or more Underwriters so
default with respect to an aggregate number of Securities that is more than ten
percent of the aggregate number of Firm Securities or Option Securities, as the
case may be, to be purchased by all of the Underwriters at such time hereunder,
and if arrangements satisfactory to the Representatives are not made within 36
hours after such default for the purchase by other persons (who may include one
or more of the non-defaulting Underwriters, including the Representatives) of
the Securities with respect to which such default occurs, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or the
Company other than as provided in Section 10 hereof. In the event of any default
by one or more Underwriters as described in this Section 9, the Representatives
shall have the right to postpone the Firm Closing Date or the Option Closing
Date, as the case may be, established as provided in Section 3 hereof for not
more than seven business days in order that any necessary changes may be made in
the arrangements or documents for the purchase and delivery of the Firm
Securities or Option Securities, as the case may be. As used in this Agreement,
the term "Underwriter" includes any person substituted for an Underwriter under
this Section 9. Nothing herein shall relieve any defaulting Underwriter from
liability for its default.
10. Survival. The respective representations, warranties, agreements,
--------
covenants, indemnities and other statements of the Company, its officers, the
Selling Stockholders and the several Underwriters set forth in this Agreement or
made by or on behalf of them, respectively, pursuant to this Agreement shall
remain in full force and effect, regardless of (i) any investigation made by or
on behalf of the Company, any of its officers or directors, the Selling
Stockholders, any Underwriter or any controlling person referred to in Section 8
hereof and (ii) delivery of and payment for the Securities. The respective
agreements, covenants, indemnities and other statements set forth in Sections 6
and 8 hereof shall remain in full force and effect, regardless of any
termination or cancellation of this Agreement.
11. Termination. (a) This Agreement may be terminated with respect to the
-----------
Firm Securities or any Option Securities in the sole discretion of the
Representatives by notice to the Company and the Selling Stockholders given
prior to the Firm Closing Date or the related Option Closing Date, respectively,
in the event that the Company or any of the Selling Stockholders shall have
failed, refused or been unable to perform all obligations and satisfy all
conditions on its part to be performed or satisfied hereunder at or prior
thereto or, if at or prior to the Firm Closing Date or such Option Closing Date,
respectively,
(i) the Company or any of its subsidiaries shall have, in the sole
judgment of the Representatives, sustained any material loss or
interference with their respective businesses or properties from fire,
flood, hurricane, accident or other calamity, whether or not covered by
insurance, or from any labor dispute or any legal or governmental
proceeding or there shall
29
<PAGE>
have been any material adverse change, or any development involving a
prospective material adverse change (including without limitation a change
in management or control of the Company), in the condition (financial or
otherwise), business prospects, net worth or results of operations of the
Company and its subsidiaries, except in each case as described in or
contemplated by the Prospectus (exclusive of any amendment or supplement
thereto);
(ii) trading in the Common Stock shall have been suspended by the
Commission or the Nasdaq National Market or trading in securities generally
on the New York Stock Exchange or Nasdaq National Market shall have been
suspended or minimum or maximum prices shall have been established on any
such exchange or market system;
(iii) a banking moratorium shall have been declared by New York or
United States authorities; or
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or (C) any other calamity or crisis or material
adverse change in general economic, political or financial conditions
having an effect on the U.S. financial markets that, in the sole judgment
of the Representatives, makes it impractical or inadvisable to proceed with
the public offering or the delivery of the Securities as contemplated by
the Registration Statement, as amended as of the date hereof.
(b) Termination of this Agreement pursuant to this Section 11 shall be
without liability of any party to any other party except as provided in Section
10 hereof.
12. Information Supplied by Underwriters. The statements set forth in the
-------------------------------------
last paragraph on the front cover page and under the heading "Underwriting" in
any Preliminary Prospectus or the Prospectus (to the extent such statements
relate to the Underwriters) constitute the only information furnished by any
Underwriter through the Representatives to the Company for the purposes of
Sections 2(A)(b) and 8 hereof. The Underwriters confirm that such statements
(to such extent) are correct.
13. Default by Selling Stockholders. If on the Firm Closing Date or the
-------------------------------
Option Closing Date any Selling Stockholder fails to sell the Securities which
such Selling Stockholder has agreed to sell on such date as set forth in
Schedule 1 hereto or Section 3(b) hereof, the Company agrees that it will sell
or arrange for the sale of at least 10% of that number of shares of Common Stock
to the Underwriters which represents Securities which such Selling Stockholder
has failed to so sell, as set forth in Schedule 1 hereto or Section 3(b) hereof,
or such lesser number as may be requested by the Representatives.
14. Notices. All communications hereunder shall be in writing and, if
-------
sent to any of the Underwriters, shall be delivered or sent by mail, telex or
facsimile transmission and confirmed in writing to Prudential Securities
Incorporated, One New York Plaza, New York, New York 10292, Attention: Equity
Transactions Group, with a copy to William J. Grant, Jr., Willkie Farr &
Gallagher, 787 Seventh Avenue, New York, New York 10019; if sent to the Company,
shall be delivered or sent by mail, telex or facsimile transmission and
confirmed in writing to the Company at Global Imaging Systems, Inc., 13902 North
Dale Mabry, Suite 300, Tampa, Florida 33618, with a copy to Alan L.
30
<PAGE>
Dye, Esq., Hogan & Hartson L.L.P., 555 Thirteenth Street, N.W., Washington, D.C.
20004-1109 and, if sent to any Selling Stockholder, shall be delivered or sent
by mail at its address on the register of the Company.
15. Successors. This Agreement shall inure to the benefit of and shall be
----------
binding upon the several Underwriters, the Company and the Selling Stockholders
and their respective successors and legal representatives, and nothing expressed
or mentioned in this Agreement is intended or shall be construed to give any
other person any legal or equitable right, remedy or claim under or in respect
of this Agreement, or any provisions herein contained, this Agreement and all
conditions and provisions hereof being intended to be and being for the sole and
exclusive benefit of such persons and for the benefit of no other person except
that (i) the indemnities of the Company and the Selling Stockholders contained
in Section 8 of this Agreement shall also be for the benefit of any person or
persons who control any Underwriter within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act and (ii) the indemnities of the Underwriters
contained in Section 8 of this Agreement shall also be for the benefit of the
directors of the Company, the officers of the Company who have signed the
Registration Statement and any person or persons who control the Company within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act and the
Selling Stockholders. No purchaser of Securities from any Underwriter shall be
deemed a successor because of such purchase.
16. Applicable Law. The validity and interpretation of this Agreement,
--------------
and the terms and conditions set forth herein, shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to any provisions relating to conflicts of laws.
17. Consent to Jurisdiction and Service of Process. All judicial
----------------------------------------------
proceedings arising out of or relating to this Agreement may be brought in any
state or federal court of competent jurisdiction in the State of New York, and
by execution and delivery of this Agreement, each Selling Stockholder accepts
for itself and in connection with its properties, generally and unconditionally,
the nonexclusive jurisdiction of the aforesaid courts and waives any defense of
forum non conveniens and irrevocably agrees to be bound by any judgment rendered
thereby in connection with this Agreement. Each Selling Stockholder designates
and appoints Thomas Johnson and Raymond Schilling and such other persons as may
hereafter be selected by such Selling Stockholder irrevocably agreeing in
writing to so serve, as its agent to receive on its behalf service of all
process in any such proceedings in any such court, such service being hereby
acknowledged by such Selling Stockholder to be effective and binding service in
every respect. A copy of any such process so served shall be mailed by
registered mail to such Selling Stockholder at its address provided in Section
14 hereof; provided, however, that, unless otherwise provided by applicable law,
-------- -------
any failure to mail such copy shall not affect the validity of service of such
process. If any agent appointed by such Selling Stockholder refuses to accept
service, such Selling Stockholder hereby agrees that service of process
sufficient for personal jurisdiction in any action against such Selling
Stockholder in the State of New York may be made by registered or certified
mail, return receipt requested, to such Selling Stockholder at its address
provided in Section 14 hereof, and such Selling Stockholder hereby acknowledges
that such service shall be effective and binding in every respect. Nothing
herein shall affect the right to serve process in any other manner permitted by
law or shall limit the right of any Underwriter to bring proceedings against any
Selling Stockholder in the courts of any other jurisdiction.
31
<PAGE>
18. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
32
<PAGE>
If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose, whereupon
this letter shall constitute an agreement binding the Company, each Selling
Stockholder and each of the several Underwriters.
Very truly yours,
GLOBAL IMAGING SYSTEMS, INC.
By
--------------------------
Thomas S. Johnson
President and Chief Executive Officer
SELLING STOCKHOLDERS
By
--------------------------
as Attorney-in-Fact, acting on behalf of
the Selling Stockholders listed in
Schedule 1 hereof
--------------------------
Thomas S. Johnson
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
WILLIAM BLAIR, L.L.C.
RAYMOND JAMES & ASSOCIATES, INC.
By PRUDENTIAL SECURITIES INCORPORATED
By
---------------------------
Name: Jean-Claude Canfin
Title: Managing Director
For itself and on behalf of the Representatives
33
<PAGE>
SCHEDULE 1
SELLING STOCKHOLDERS
(a) (b)
Selling Stockholder Number of Firm Number of Option
------------------- -------------- ----------------
Securities Securities
---------- ----------
to be Sold to to be Sold to
------------- -------------
Underwriters Underwriters
------------ ------------
Golder, Thoma, Cressey, Rauner Fund IV 269,887 881,090
Limited Partnership
Jackson National Life Insurance Company 27,584 96,555
Thomas Johnson 0 60,000
Raymond Schilling 0 3,960
James Conway 587 2,053
Green, Manning & Bunch Holdings, Inc. 1,942 6,342
Total 300,000 1,050,000
<PAGE>
SCHEDULE 2
UNDERWRITERS
(a) (b)
Number of
Number of Firm Option
Securities to be Securities to be
Purchased from the Purchased from
Company and the the Selling
Underwriter Selling Stockholder Stockholders
- ----------- -------------------- ------------
Prudential Securities Incorporated
Smith Barney Inc.
William Blair, L.L.C.
Raymond James & Associates, Inc.
[ ]
Total 7,000,000 1,050,000
<PAGE>
SCHEDULE 3
SUBSIDIARIES
Global Imaging Finance Company
Global Imaging Operations, Inc.
Copy Service and Supply, Inc.
Office Furniture Concepts, Inc.
Felco Office Systems, Inc.
American Photocopy Equipment Company of Pittsburgh d/b/a AMCOM Office Systems
Berney, Inc.
Southern Copy Systems, Inc.
Cameron Office Products, Inc.
Conway Office Products, Inc.
Business Equipment Unlimited
Electronic Systems, Inc.
Eastern Copy Products, Inc.
Southern Business Communications, Inc.
Quality Business Systems, Inc.
Duplicating Specialties, Inc.
CSS Leasing, LLC
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
GLOBAL IMAGING SYSTEMS, INC.
This corporation was organized by filing its original Certificate of
Incorporation under the name of "Global Imaging Systems Inc." with the Secretary
of State of Delaware on June 3, 1994. This Amended and Restated Certificate of
Incorporation, which restates, integrates and further amends the Certificate of
Incorporation of this corporation, was duly adopted in accordance with Sections
242 and 245 of the General Corporation Law of the State of Delaware.
ARTICLE I
The corporation was organized and exists under Delaware law.
ARTICLE II
The name of the corporation is Global Imaging Systems, Inc.
(hereinafter referred to as the "CORPORATION").
ARTICLE III
The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle 19801. The name of its registered agent at such
address is The Corporation Trust Company.
ARTICLE IV
The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
<PAGE>
ARTICLE V
5.1 AUTHORIZED SHARES
The total number of shares of all classes of stock that the
Corporation shall have the authority to issue is sixty-one million, three
hundred five thousand (61,305,000) shares. Fifty-one million, three hundred five
thousand (51,305,000) shares shall be Common Stock, each having a par value of
one cent ($.01) per share ("COMMON SHARES"), consisting of:
(1) 400,000 shares of Class A Common Stock, par value $.01 per share
("CLASS A COMMON");
(2) 50,000,000 shares of Common Stock (formerly "Class B Common
Stock"), par value $.01 per share ("COMMON STOCK"); and
(3) 905,000 shares of Class C Common Stock, par value $.01 per share
("CLASS C COMMON").
Ten million (10,000,000) shares shall be Preferred Stock, each having a par
value of $.01 per share ("PREFERRED SHARES").
Upon the filing of this Amended and Restated Certificate of
Incorporation, each outstanding share of Class B Common Stock shall be
redesignated as "Common Stock." Also upon the filing of this Amended and
Restated Certificate of Incorporation, each outstanding share of Class B Common
Stock shall be divided into one hundred thirty-two (132) outstanding shares of
Common Stock, and each outstanding share of Class C Common shall be divided into
one hundred thirty-two (132) outstanding shares of Class C Common (the "STOCK
SPLIT").
No fractional shares of Common Stock or Class C Common shall be
created or outstanding upon the effectiveness of the Stock Split. All shares of
Common Stock (including fractions thereof) issuable to a holder upon
effectiveness of the Stock Split shall be aggregated for purposes of determining
whether the Stock Split would result in the issuance of any fractional share,
and all shares of Class C Common (including fractions thereof) issuable to a
holder upon effectiveness of the Stock Split shall be aggregated for purposes of
determining whether the Stock Split would result in the issuance of any
fractional share. If, after the aforementioned aggregation and Stock Split, any
holder of Common Stock or of Class C Common would otherwise be entitled to be
issued any fractional share, the Corporation shall, in lieu of issuing such
fractional share, pay cash equal to the fair market value of such fractional
share, as determined in good faith by the Corporation's Board of Directors.
-2-
<PAGE>
The Class A Common, the Common Stock, the Class C Common and any other
common stock issued hereafter are referred to collectively as the "COMMON
SHARES." The Common Shares and the Preferred Shares shall have the rights,
preferences and limitations set forth below. Capitalized terms used but not
otherwise defined in Section 5.1 or Section 5.2 of this Article are defined in
Section 5.4.
5.2 COMMON SHARES
Except as otherwise provided in this Section 5.2 or as otherwise
required by applicable law, all shares of Class A Common, Common Stock and Class
C Common shall (1) be subject to all of the rights, privileges, preferences and
priorities of the Preferred Shares as set forth in the certificate of
designations filed to establish each series of Preferred Shares and (2) shall be
identical in all respects and shall entitle the holders thereof to the rights
and privileges, subject to the same qualifications, limitations and
restrictions.
5.2.1 VOTING RIGHTS
Except as otherwise provided in this Section 5.2 or as otherwise
required by applicable law, all holders of Common Stock shall be entitled to one
vote per share on all matters to be voted on by the Corporation's stockholders.
Except for any amendment to this Article V of the Certificate of Incorporation
or except as otherwise required by applicable law, each holder of Class A Common
and Class C Common shall not be entitled to vote on any matter submitted to a
vote of the Corporation's stockholders.
5.2.2 DISTRIBUTIONS
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of shares of any class of stock having preference over
the Common Shares as to the payment of dividends or other distributions,
including upon liquidation of the Corporation, the full amount of such dividends
or other distributions to which such holders are respectively entitled in
preference to the Common Shares, then Distributions may be paid on the Common
Shares and on any class or series of stock entitled to participate therewith as
to Distributions, out of any assets legally available for the payment of
Distributions thereon, but only when and as declared by the Board of Directors
of the Corporation, except in the case of Distributions in complete liquidation
of the Corporation. At the time of each Distribution, such Distribution shall be
made to the holders of Class A Common, Common Stock and Class C Common
outstanding as of the time of such Distribution in the following priority:
(I) The holders of Class A Common shall be entitled to receive all or
a portion of such Distribution (ratably among such holders based upon
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the number of shares of Class A Common held by each such holder as of the time
of such Distribution) equal to the aggregate Unpaid Yield on the outstanding
shares of Class A Common as of the time of such Distribution, and no
Distribution or any portion thereof shall be made under Sections 5.2.2(ii) and
5.2.2(iii) below until the entire amount of the Unpaid Yield on the outstanding
shares of Class A Common as of the time of such Distribution has been paid in
full. The Distributions made pursuant to this Section 5.2.2(i) to holders of
Class A Common shall constitute a payment of Yield on Class A Common.
(II) After the required amount of a Distribution has been made
in full pursuant to Section 5.2.2(i) above, the holders of Class A Common, as a
separate class, shall be entitled to receive all or a portion of such
Distribution (ratably among such holders based upon the number of shares of
Class A Common held by each such holder as of the time of such Distribution)
equal to the aggregate Unreturned Original Cost of the outstanding shares of
Class A Common as of the time of such Distribution, and no Distribution or any
portion thereof shall be made under Section 5.2.2(iii) below until the entire
amount of the Unreturned Original Cost of the outstanding shares of Class A
Common as of the time of such Distribution has been paid in full. The
Distributions made pursuant to this Section 5.2.2(ii) to holders of Class A
Common shall constitute a return of Original Cost of Class A Common.
(III) After the required amount of a Distribution has been
made pursuant to Sections 5.2.2(i) and 5.2.2(ii) above, (A) if there are any
shares of Class A Common outstanding, (1) the holders of Class A Common shall be
entitled to receive 10% of the remaining portion of such Distribution (ratably
among such holders based on the number of shares of Class A Common held by each
such holder as of the time of such Distribution) and (2) the holders of Common
Stock and Class C Common, as a single class, shall be entitled to receive 90% of
the remaining portion of such Distribution (ratably among such holders based
upon the number of shares of Common Stock and Class C Common held by each such
holder as of the time of such Distribution), and (B) if there are no shares of
Class A Common outstanding, the holders of Common Stock and Class C Common, as a
single class, shall be entitled to receive 100% of the remaining portion of such
Distribution (ratably among such holders based upon the number of shares of
Common Stock and Class C Common held by each such holder as of the time of such
Distribution).
5.2.3 CONVERSION PROVISION
(A) OPTIONAL CONVERSION OF CLASS A COMMON OR OF CLASS C
---------------------------------------------------
COMMON. Upon compliance with the provisions of Section 5.2.3(c) below, each
- ------
holder of Class A Common or of Class C Common may at any time convert any whole
number or all of such holder's Class A Common or Class C Common, as the case may
be, into shares of fully paid and nonassessable Common Stock. Each share of
Class A Common Stock converted hereunder shall be
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converted into a number of shares of Common Stock equal to the Common Stock
Amount Per Share. Each share of Class C Common converted hereunder shall be
converted at the rate (subject to adjustment as provided in Section 5.2.3(b)) of
one share of Common Stock for each share of Class C Common surrendered for
conversion.
(B) ADJUSTMENTS ON CONVERSION. If the Corporation shall in any manner
-------------------------
subdivide (by stock split, reclassification, stock dividend or otherwise) or
combine (by reverse stock split, reclassification or otherwise) any class or
series of the outstanding Common Shares, effective provision shall be made by
the Board of Directors of the Corporation to appropriately protect the rights of
the holders of the Common Shares, including provision for the protection of all
conversion rights hereunder. In case of any reorganization, reclassification or
change of any class or series of the Common Shares (other than a change in par
value, or from par value to no par value as a result of a subdivision or
combination), or in case of any consolidation of the Corporation with one or
more other corporations or a merger of the Corporation with another corporation
(other than a consolidation or merger in which the Corporation is the continuing
corporation and which does not result in any reclassification or change of any
class or series of outstanding Common Shares), or in case of any sale, lease or
other disposition to another entity (other than a wholly owned subsidiary of the
Corporation) of all or substantially all the assets of the Corporation or in
case of any other similar event, each holder of a share of Class C Common shall
have the right at any time thereafter, so long as the conversion right hereunder
with respect to such share of Class C Common would exist had such event not
occurred, to convert such share into the kind and amount of shares of stock and
other securities and property (including cash) receivable upon such
reorganization, reclassification, change, consolidation, merger, sale, lease or
other disposition or other similar event had such share of Class C Common been
converted into Common Stock immediately prior to such reorganization,
reclassification, change, consolidation, merger, sale, lease or other
disposition or other similar event. In the event of such a reorganization,
reclassification, change, consolidation, merger, sale, lease or other
disposition or other similar event, effective provision shall be made in the
certificate of incorporation of the resulting or surviving corporation or
otherwise to appropriately protect the rights and interests herein of the
holders of Common Shares (including provision for the protection of the
conversion rights of any class or series of the Common Shares) that shall be
applicable, as nearly as reasonably may be, to any such other shares of stock
and other security and property deliverable upon conversion of any class or
series of the Common Shares into which each share of such class or series of
Common Shares might have been converted immediately prior to such event. The
Corporation shall not have the power to be a party to any reorganization,
reclassification, change, consolidation, merger, sale, lease or other
disposition or other similar event pursuant to which any holder of any class or
series of Common Shares would be required to take (x) any voting securities, the
voting provisions of which would cause such holder to violate any law,
regulation or
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other requirement of any government body applicable to such holder, or (y) any
securities convertible into voting securities, the voting provisions of which if
such convention took place would cause such holder to violate any law,
regulation or other requirement of any government body applicable to such holder
other than securities which are specifically provided to be convertible only in
the event that such conversion may occur without any such violation.
(C) MANNER OF EFFECTING CONVERSION. To convert Class A Common or Class
------------------------------
C Common into Common Stock, a holder must: (w) complete and sign a conversion
notice on the back of the certificate representing the shares of Class A Common
or Class C Common, as the case may be, to be converted or deliver written notice
to the Corporation (or, if a conversion agent has been designated, to such agent
(the "CONVERSION AGENT")); (x) surrender such Class A Common or Class C Common
stock certificate to an officer designated by the Corporation or, if a
Conversion Agent has been designated, to the Conversion Agent; (y) if the shares
are being issued in a name other than that of the holder, furnish appropriate
endorsements and transfer documents if required by the registrar for the
Corporation's stock or the Conversion Agent; and (z) if the shares are being
issued in a name other than that of the holder, pay any transfer tax or similar
tax if required by Section 5.2.3(e). Such conversion shall be deemed to have
been effected on the date and time such shares of Class A Common or Class C
Common are surrendered for conversion, and the person entitled to receive shares
of Common Stock issuable on such conversion shall be treated for all purposes as
the record holder of the shares of Common Stock as of such date and time. As
soon as practicable after the conversion has been effected, the Corporation
shall deliver (or shall cause any Conversion Agent to deliver) a certificate or
certificates for the number of shares of Common Stock issuable upon the
conversion. If less than all the shares represented by any certificate
representing Common Shares are being converted, a new stock certificate
representing the unconverted shares shall be promptly issued by the Corporation
to the holder thereof.
(D) AUTOMATIC CONVERSION OF CLASS C COMMON.
--------------------------------------
(I) Each share of Class C Common shall automatically be
converted into shares of Common Stock immediately prior to the closing of a
Qualified Public Offering with respect to aggregate offering proceeds of at
least $20 million, at the rate (subject to adjustment as provided in Section
5.2.3(b)) of one share of Common Stock for each share of Class C Common.
(II) Upon the occurrence of the event specified in paragraph (i)
above, the outstanding shares of Class C Common shall be converted automatically
without any further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the Corporation or its
transfer agent; provided, however, that the Corporation shall not be obligated
to issue certificates evidencing the shares of Common Stock issuable upon such
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conversion unless the certificates evidencing such shares of Class C Common are
either delivered to the Corporation or its transfer agent as provided below, or
the holder notifies the Corporation or its transfer agent that such certificates
have been lost, stolen or destroyed and executes an agreement satisfactory to
the Corporation to indemnify the Corporation from any loss incurred by or in
connection with such certificates. Upon the occurrence of such automatic
conversion of the Class C Common, the holders of shares of Class C Common shall
surrender the certificates representing such shares at the office of the
Corporation or any transfer agent for the Class C Common. Thereupon, there
shall be issued and delivered to such holder promptly at such office in its name
as shown on such surrendered certificate or certificates, a certificate or
certificates for the number of shares of Common Stock into which the shares of
Class C Common surrendered were convertible on the date on which such automatic
conversion occurred.
(E) TRANSFER TAXES, ETC. If a holder converts Class A Common or
-------------------
Class C Common, the Corporation shall pay any documentary, stamp or similar
issue or transfer tax due on the issue of shares of Common Stock upon such
conversion. However, the holder shall pay any such tax which is due if and
because the shares are issued in a name other than that of such holder.
(F) RESERVATION OF SHARES. The Corporation shall reserve out of its
---------------------
authorized but unissued Common Stock or its Common Stock held in treasury
sufficient shares of Common Stock to permit the conversions of all outstanding
shares of Class A Common or Class C Common pursuant to Section 5.2.3 of this
Article V. All Common Stock issued upon such conversion shall be fully paid and
non-assessable.
5.2.4 REDEMPTION.
(A) REDEMPTION AFTER QUALIFIED PUBLIC OFFERING.
------------------------------------------
(I) Upon the occurrence of any Qualified Public Offering, the
Corporation shall redeem all of the outstanding shares of Class A Common. The
Corporation shall effect such redemption by paying, for each share of Class A
Common, (A) cash in an amount equal to the sum of (1) the Unreturned Original
Cost plus (2) the Unpaid Yield and (B) a number of shares of Common Stock equal
to the Common Stock Amount Per Share (the "REDEMPTION PRICE").
(II) As used in this Section 5.2.4(a), the term "REDEMPTION
DATE" shall refer to the date upon which the Qualified Public Offering
triggering the automatic redemption hereunder closes with respect to aggregate
offering proceeds of at least $20 million (the "CLOSING DATE"); provided,
however, that, if the Corporation receives the proceeds from such closing too
late in the day for the Corporation to effect the cash deposit required pursuant
to Section 5.2.4(a)(vi) on such date using such proceeds, then the Redemption
Date
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shall be the next day on which such deposit can be effected. On or prior to the
Redemption Date, written notice shall be mailed, first class postage prepaid, or
delivered personally, to each holder of record (at the close of business on the
day immediately preceding the Redemption Date) of the Class A Common, at the
address last shown on the records of the Corporation for such holder, notifying
such holder of the redemption, the Redemption Date, the Redemption Price and the
place at which payment may be obtained and calling upon such holder to surrender
to the Corporation, in the manner and at the place designated, his or her
certificate or certificates representing the shares of Class A Common (the
"REDEMPTION NOTICE"). Except as provided in Section 5.2.4(a)(iii), on or after
the Redemption Date, each holder of Class A Common shall surrender to the
Corporation the certificate or certificates representing such shares, in the
manner and at the place designated in the Redemption Notice, and thereupon the
Redemption Price of such shares shall be payable (and the Common Stock portion
thereof deliverable) to the order of the person whose name appears on such
certificate or certificates as the owner thereof, and each surrendered
certificate shall be canceled.
(III) From and after the Redemption Date, unless there shall
have been a default in payment of the Redemption Price, all rights of the
holders of shares of Class A Common as holders of Class A Common (except the
right to receive the Redemption Price, without interest on the cash portion
thereof, and including the shares of Common Stock comprising a part thereof,
upon surrender of their certificate or certificates) shall cease with respect to
such shares, and such shares shall not thereafter be transferred on the books of
the Corporation or be deemed to be outstanding for any purpose whatsoever. If
the funds of the Corporation legally available for redemption of shares of Class
A Common are insufficient to redeem all of the shares of Class A Common, those
funds which are legally available will be used to pay first the Unpaid Yield
component of the Redemption Price, then the Unreturned Original Cost component
of the Redemption Price on a pro rata basis according to the number of shares
held, and the remaining unpaid cash portion of the Redemption Price shall be
paid to the holders of the Class A Common by the issuance of shares of Common
Stock, valued at the initial public offering price of such shares in the
Qualified Public Offering.
(IV) From and after the Redemption Date, unless there shall have been
a default in payment of the Redemption Price, holders of shares of Class A
Common shall have the rights of holders of Common Stock with respect to the
shares of Common Stock to which such holders are entitled upon redemption, and
such shares shall be deemed to be outstanding whether or not the certificates
representing the redeemed shares of Class A Common are surrendered to the
Corporation or its agent; provided, however, that the Corporation shall not be
obligated to issue certificates evidencing the shares of Common Stock issuable
upon redemption of shares of the Class A Common unless the certificates
evidencing such shares of Class A Common are either delivered to the Corporation
or its agent as provided below, or the holder notifies the Corporation or its
agent that such
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certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Corporation to indemnify the Corporation from any loss
incurred by or in connection with such certificates. Upon the occurrence of such
automatic redemption of the Class A Common, the holders of shares of Class A
Common shall surrender the certificates representing such shares at the office
of the Corporation or any transfer agent for the Class A Common. Thereupon,
there shall be issued and delivered to such holder promptly at such office in
its name as shown on such surrendered certificate or certificates, a certificate
or certificates for the number of shares of Common Stock payable upon the
redemption of the shares of Class A Common represented by the surrendered
certificate.
(V) No fractional shares of Common Stock shall be issued upon
redemption of the Class A Common. All shares of Common Stock (including
fractions thereof) issuable upon redemption of more than one share of Class A
Common by a holder thereof shall be aggregated for purposes of determining
whether the redemption would result in the issuance of any fractional share.
If, after the aforementioned aggregation, the redemption would result in the
issuance of any fractional share, the Corporation shall, in lieu of issuing any
fractional share, pay cash equal to the product of such fraction multiplied by
the Common Stock's initial public offering price.
(VI) On the Closing Date, the Corporation shall deposit the cash
portion of the Redemption Price of all shares of Class A Common with a bank or
trust corporation having aggregate capital and surplus in excess of $100,000,000
as a trust fund for the benefit of the respective holders of the shares of Class
A Common, with irrevocable instructions and authority to the bank or trust
corporation to pay the cash portion of the Redemption Price for such shares to
their respective holders on or after the Redemption Date upon receipt of
notification from the Corporation that such holder has surrendered his or her
Class A Common certificate to the Corporation pursuant to Section 5.2.4(a)(iv)
above; provided, however, that if the Corporation receives the proceeds from the
closing of the Qualified Public Offering triggering the automatic redemption
hereunder too late in the day for the Corporation to effect such cash deposit on
the Closing Date using such proceeds, then the Corporation shall effect such
cash deposit on the next day on which such deposit can be effected, and the
Corporation shall also deliver instructions and authority to the bank designated
to receive the proceeds of such Qualified Public Offering for the Corporation's
account to effect such deposit. On the Closing Date, the Corporation shall also
provide irrevocable instructions and authority to the Corporation's transfer
agent to issue the shares of Common Stock payable in redemption of the shares of
Class A Common in accordance with Section 5.2.4(a)(iv) above. As of the
Redemption Date, the deposit and the foregoing instructions to the transfer
agent shall constitute full redemption payment for the shares of Class A Common
to their holders, and from and after the Redemption Date the shares of Class A
Common shall be redeemed and shall be deemed to be no longer outstanding, and
the holders thereof shall cease to be stockholders with
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respect to such shares and shall have no rights with respect thereto except the
right to receive from the bank or trust corporation payment of the cash portion
of the Redemption Price of the shares, without interest, upon surrender of their
certificates therefor, plus to receive from the transfer agent stock
certificates representing the shares of Common Stock issuable as payment for the
redemption. The balance of any moneys deposited by the Corporation pursuant to
this Section 5.2.4(a)(vi) remaining unclaimed at the expiration of two (2) years
following the Redemption Date shall thereafter be returned to the Corporation
upon its request expressed in a resolution of its Board of Directors.
(B) SPECIAL REDEMPTIONS. If a Sale of the Corporation has
-------------------
occurred or the Corporation obtains knowledge that a Sale of the Corporation is
to occur, the Corporation shall give prompt written notice of such Sale of the
Corporation describing in reasonable detail the definitive terms and date of
consummation thereof to each holder of Class A Common, but in any event such
notice shall not be given later than five days after the occurrence of such Sale
of the Corporation. The holder or holders of a majority of the Class A Common
then outstanding may require the Corporation to redeem all of the shares of
Class A Common by giving written notice to the Corporation of such election (the
"CLASS A ELECTION") prior to the later of (i) 21 days after receipt of the
Corporation's notice and (ii) five (5) days prior to the consummation of the
sale of the Corporation (the "EXPIRATION DATE"). Upon receipt of the Class A
Election, the Corporation shall be obligated to redeem the Class A Common on the
later to occur of (i) the occurrence of the Sale of the Corporation or (ii) five
(5) days after the Corporation's receipt of such election. The redemption price
for each share of Class A Common shall be equal to the sum of (i) the Unreturned
Original Cost, (ii) the Unpaid Yield and (iii) the Fair Market Value of the
Class A Common. If in any case a proposed Sale of the Corporation does not
occur, all requests to make such redemption in connection therewith shall be
automatically rescinded.
5.2.5 STOCK SPLITS AND STOCK DIVIDENDS.
The Corporation shall not in any manner subdivide (by stock split,
stock dividend or otherwise) or combine (by stock split, stock dividend or
otherwise) the outstanding Common Shares of one Class unless the outstanding
Common Shares of all the other classes shall be proportionately subdivided or
combined, or unless the applicable conversion rates, redemption price formulas,
and definitions set forth in this Certificate of Incorporation are
proportionately adjusted. All such subdivisions and combinations shall be
payable only in Class A Common to the holders of Class A Common, in Common Stock
to the holders of Common Stock, and in Class C Common to the holders of Class C
Common. In no event shall a stock split or stock dividend constitute a payment
of Yield or a return of Original Cost.
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5.2.6 REGISTRATION OF TRANSFER
The Corporation shall keep at its principal office (or such other
place as the Corporation reasonably designates) a register for the registration
of Common Shares. Upon the surrender of any certificate representing shares of
any Class of Common Shares at such place, the Corporation shall, at the request
of the registered holder of such certificate, execute and deliver a new
certificate or certificates in exchange therefor representing in the aggregate
the number of shares of such Class represented by the surrendered certificate,
and the Corporation forthwith shall cancel such surrendered certificate, and the
Corporation forthwith shall cancel such surrendered certificate. Each such new
certificate will be registered in such name and will represent such number of
shares of such Class as is requested by the holder of the surrendered
certificate and shall be substantially identical in form to the surrendered
certificate. The issuance of new certificates shall be made without charge to
the holders of the surrendered certificates for any issuance tax in respect
thereof or other cost incurred by the Corporation in connection with such
issuance.
5.2.7 REPLACEMENT.
Upon receipt of evidence reasonably satisfactory to the Corporation
(an affidavit of the registered holder will be satisfactory) of the ownership
and the loss, theft, theft, destruction or mutilation of any certificate
evidencing one or more shares of any Class of Common Shares, and in the case of
any such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Corporation (provided that if the holder is a financial
institution or other institutional investor its own agreement will be
satisfactory), or, in the case of any such mutilation upon surrender of such
certificate, the Corporation shall (at its expense) execute and deliver in lieu
of such certificate a new certificate of like kind representing the number of
shares of such Class represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate.
5.2.8 NOTICES
All notices referred to herein shall be in writing, shall be delivered
personally or by first Class mail, postage prepaid, and shall be deemed to have
been given when so delivered or mailed to the Corporation at its principal
executive offices and to any stockholder at such holder's address as it appears
in the stock records of the Corporation (unless otherwise specified in a written
notice to the Corporation by such holder).
5.2.9 AMENDMENT AND WAIVER.
No amendment or waiver of any provision of this Article V shall be
effective without the prior written consent of the holders of a majority of each
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Class of the then outstanding Common Shares voting separately and not as a
single class.
5.3 PREFERRED SHARES
The Board is authorized, subject to limitations prescribed by the
Delaware General Corporation Law and the provisions of this Certificate of
Incorporation, to provide, by resolution or resolutions from time to time and by
filing a certificate of designations pursuant to the Delaware General
Corporation Law, for the issuance of the shares of Preferred Shares in series,
to establish from time to time the number of shares to be included in each such
series, to fix the powers, designations, preferences and relative,
participating, optional or other special rights of the shares of each such
series and to fix the qualifications, limitations or restrictions thereof. Any
such provision for the issuance of any series of Preferred Shares shall require
the approval of the holders of at least three fourths of the outstanding shares
of Class A Common then outstanding, if any.
5.4 DEFINITIONS
"AFFILIATE" of GTCR means any general or limited partner of GTCR or
any other Person or investment fund controlling, controlled by or under common
control with GTCR.
"COMMON STOCK AMOUNT PER SHARE" means a number of shares of Common
Stock equal to the quotient obtained by dividing (i) the sum of the number of
shares of Common Stock plus the number of shares of Class C Common outstanding
immediately prior to the closing of the relevant Qualified Public Offering (or,
in the case of a conversion pursuant to Section 5.2.3 hereof, the date preceding
such conversion) minus the number of shares of Common Stock issued prior to such
point in time upon the conversion of any shares of Class A Common pursuant to
Section 5.2.3 hereof (as adjusted for any stock splits, combinations, or similar
events) by (ii) the product of nine (9) multiplied by the sum of the number of
shares of Class A Common outstanding immediately prior to the closing of the
Qualified Public Offering (or, in the case of a conversion pursuant to Section
5.2.3 hereof, the date preceding such conversion) plus the number of shares of
Class A Common that have been converted prior to such point in time pursuant to
Section 5.2.3 hereof (as adjusted for any stock splits, combinations, or similar
events).
"DISTRIBUTION" means each distribution made by the Corporation to
holders of Common Shares, whether in cash, property, or securities of the
Corporation and whether by dividend, liquidating distributions or otherwise;
provided that neither of the following shall be a Distribution: (a) any
redemption or repurchase by the Corporation of any Common Shares for any reason
(after which such shares shall cease to be outstanding shares) or (b) any
recapitalization or
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exchange of any Common Shares, or any subdivision (by stock split, stock
dividend or otherwise) or any combination (by stock split, stock dividend or
otherwise) of any outstanding Common Shares.
"FAIR MARKET VALUE" means the fair market value of each share of the
Class A Common as of the date of determination as computed in accordance with
the following formula:
FMVA = (AMP/9) x (1/TCA)
WHERE
FMVA = The fair market value per share of Class A Common.
AMP = The product of (i) the Market Price and (ii) the sum of
the number of shares of Common Stock plus the number of
shares of Class C Common outstanding on the date of
determination minus the number of shares of Common
Stock issued prior to the date of determination upon
the conversion of any shares of Class A Common pursuant
to Section 5.2.3 hereof (as adjusted for any stock
splits, combinations, or similar events).
TCA = The total number of outstanding shares of Class A
Common on the date of determination (plus the number of
shares of Class A Common that have been converted prior
to the date of determination pursuant to Section 5.2.3
hereof (as adjusted for any stock splits, combinations,
or similar events)).
"GTCR" means Golder, Thoma, Cressey, Rauner Fund IV, L.P.
"ORIGINAL COST" of each share of Class A Common shall be equal to
$90.00 (as proportionally adjusted for all stock splits, stock dividends and
other recapitalizations affecting the Class A Common).
"MARKET PRICE" of the Common Stock means the average of the closing
prices of the Common Stock's sales on all securities exchanges on which the
Common Stock may at the time be listed, or, if there have been no sales on any
such exchange on any day, the average of the highest bid and lowest asked prices
on all such exchanges at the end of such day, or, if on any day the Common Stock
is not so
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listed, the closing sale price of the Common Stock on the NASDAQ National Market
System if it is listed on the NASDAQ National Market System, or if the Common
Stock is not listed on the NASDAQ National Market System, the average of the
representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M.,
New York time, or, if on any day the Common Stock is not quoted in the NASDAQ
System, the average of the highest bid and lowest asked prices on such day in
the domestic over-the-counter market as reported by the National Quotation
Bureau, Incorporated, or any similar successor organization, in each such case
averaged over a period of 21 days consisting of the day as of which "FAIR MARKET
VALUE" is being determined and the 20 consecutive business days prior to such
day. If at any time the Common Stock is not listed on any securities exchange or
quoted in the NASDAQ System or the over-the-counter market, "FAIR MARKET VALUE"
will be the fair value thereof determined jointly by the Corporation and the
holders of a majority of the Common Shares, with the consent of the holders of a
majority of the Class C Common Stock, which consent shall not be unreasonably
withheld. If such parties are unable to reach agreement within a reasonable
period of time, such fair value will be determined by an independent appraiser
jointly selected by the Corporation and the holders of a majority of the Common
Stock. In determining the "FAIR MARKET VALUE" of the Common Stock under the
preceding two sentences, the Corporation or the independent appraiser, as the
case may be, shall subtract the aggregate amount of the Unreturned Original Cost
and the Unpaid Yield, if any, on the outstanding Class A Common.
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or political
subdivision thereof.
"QUALIFIED PUBLIC OFFERING" means the sale in an underwritten public
offering registered under the Securities Act of shares of the Corporation's
Common Shares having an aggregate offering value of at least $20 million,
including any amounts to be sold on account of selling security holders or upon
the exercise of underwriters' options and prior to the deduction of fees,
expenses and underwriters' discounts and commissions.
"SALE OF THE CORPORATION" means any transaction or series of
transactions pursuant to which any Person(s) other than GTCR in the aggregate
acquire(s) (i) capital stock of the Corporation possessing the voting power
(other than voting rights accruing only in the event of a default, breach or
event of noncompliance) to elect a majority of the Corporation's board of
directors (whether by merger, consolidation, reorganization, combination, sale
or transfer of the Corporation's capital stock, shareholder or voting agreement,
proxy, power of attorney or otherwise) or (ii) all or substantially all of the
Corporation's and its Subsidiaries' assets determined on a consolidated basis
(measured by either book value in accordance with generally accepted accounting
principles consistently
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<PAGE>
applied or fair market value determined in the reasonable good faith judgment of
the Corporation's board of directors).
"SUBSIDIARY" means with respect to any Person, any corporation of
which the shares of stock having a majority of the general voting power in
electing the board of directors are, at the time as of which any determination
is being made, owned by such Person either directly or indirectly through
Subsidiaries.
"UNPAID YIELD" of any share of Class A Common means an amount equal to
the excess, if any, of (a) the aggregate Yield accrued on such share, over (b)
the aggregate amount of Distributions made by the Corporation that constitute
payment of Yield on such share.
"UNRETURNED ORIGINAL COST" of any share of Class A Common means an
amount equal to the excess, if any, of (a) the Original Cost of such share, over
(b) the aggregate amount of Distributions made by the Corporation that
constitute a return of Original Cost of such share.
"YIELD" means, with respect to each share of Class A Common, the
amount accruing on such share, from the date of its original issuance by the
Corporation through the date on which the Corporation declares or becomes
obligated to pay, as the case may be, any Distribution or redemption price, each
day during such period at the rate of 8% per annum of such share's Unreturned
Original Cost; provided, however, that for purposes of calculating the
Redemption Price of a share of Class A Common in connection with a Qualified
Public Offering, the Yield shall be calculated through May 31, 1998 in the event
such Qualified Public Offering closes with respect to at least $20 million in
aggregate offering proceeds on or prior to June 30, 1998.
ARTICLE VI
The Corporation is to have perpetual existence.
ARTICLE VII
In furtherance and not in limitation of the powers conferred by
statute, the board of directors of the Corporation is expressly authorized to
make, alter or repeal the by-laws of the Corporation.
ARTICLE VIII
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws of the Corporation may provide. The books of the
Corporation may be kept outside the State of Delaware at such place or places as
-15-
<PAGE>
may be designated from time to time by the board of directors or in the by-laws
of the Corporation. Election of directors need not be by written ballot unless
the by-laws of the Corporation so provide.
ARTICLE IX
The Corporation shall, to the fullest extent permitted by Delaware law
as in effect from time to time, indemnify any person against all liability and
expense (including attorney's fees) incurred by reason of the fact that he is or
was a director or officer of the Corporation or, while serving at the request of
the Corporation as a director, officer, partner or trustee of, or in any similar
managerial or fiduciary position of, or as an employee or agent of, another
corporation, partnership, joint venture, trust, association, or other entity.
Expenses (including attorneys' fees) incurred in defending an action, suit, or
proceeding may be paid by the Corporation in advance of the final disposition of
such action, suit, or proceeding to the full extent and under the circumstances
permitted by Delaware law. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee, fiduciary,
or agent of the Corporation against any liability asserted against and incurred
by such person in any such capacity or arising out of such person's position,
whether or not the Corporation would have the power to indemnify against such
liability under the provisions of this Article IX. The indemnification provided
by this Article XI shall not be deemed exclusive of any other rights to which
those indemnified may be entitled under this certificate of incorporation, any
bylaw, agreement, vote of stockholders or disinterested directors, statute, or
otherwise, and shall inure to the benefit of their heirs, executors, and
administrators. The provisions of this Article IX shall not be deemed to
preclude the Corporation from indemnifying other persons from similar or other
expenses and liabilities as the board of directors or the stockholders may
determine in a specific instance or by resolution of general application. Any
repeal or modification of this Article IX by the stockholders of the Corporation
shall not adversely affect any right or protection of a director or officer of
the Corporation existing at the time of such repeal or modification.
ARTICLE X
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except as to liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) for violations of Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived any
improper personal benefit. If the Delaware General Corporation law hereafter is
amended to further eliminate or limit the liability of a director, then a
director of the Corporation, in addition to the
-16-
<PAGE>
circumstances in which a director is not personally liable as set forth in the
preceding sentence, shall not be liable to the fullest extent permitted by the
amended Delaware General Corporation Law. Any repeal or modification of this
Article X by the stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at the time of
such repeal or modification.
ARTICLE XI
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this certificate of incorporation in the manner now
or hereafter prescribed herein and by the laws of the State of Delaware, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
The undersigned, for the purpose of Amending and Restating the
Certificate of Incorporation of the Corporation, does make and file this Amended
and Restated Certificate of Incorporation and does hereby certify that the facts
herein stated are true; and I have accordingly hereunto set my hand.
Executed this 27th day of May, 1998.
/s/ THOMAS S. JOHNSON
____________________________
Thomas S. Johnson
President
ATTEST:
/s/ RAYMOND SCHILLING
__________________________________
Raymond Schilling
Secretary
-17-
<PAGE>
EXHIBIT 5.1
[HOGAN & HARTSON L.L.P. LETTERHEAD]
June 10, 1998
Board of Directors
Global Imaging Systems, Inc.
13902 North Dale Mabry, Suite 300
Tampa, Florida 33618
Ladies and Gentlemen:
We are acting as counsel to Global Imaging Systems, Inc., a Delaware
corporation (the "COMPANY"), in connection with its registration statement on
Form S-1, File No. 333-48103, as amended (the "REGISTRATION STATEMENT"), filed
with the Securities and Exchange Commission relating to the proposed public
offering of up to 8,050,000 shares of the Company's common stock, par value $.01
per share, 6,700,000 of which shares are to be sold by the Company (the "COMPANY
SHARES") and up to 1,350,000 of which shares are to be sold by certain selling
stockholders (the "SELLING STOCKHOLDER SHARES"). This opinion letter is
furnished to you at your request to enable you to fulfill the requirements of
Item 601(b)(5) of Regulation S-K, 17 C.F.R. (S) 229.601(b)(5), in connection
with the Registration Statement.
For purposes of this opinion letter, we have examined copies of the
following documents:
1. An executed copy of the Registration Statement.
2. The Certificate of Incorporation of the Company, as certified by
the Secretary of the State of the State of Delaware on May 28,
1998, and by the Secretary of the Company on the date hereof as
then being complete, accurate and in effect.
3. The Bylaws of the Company, as certified by the Secretary of the
Company on the date hereof as then being complete, accurate and
in effect.
4. The proposed form of Underwriting Agreement among the Company and
the several Underwriters to be named therein, for whom Prudential
Securities Incorporated, Smith Barney Inc., William Blair,
L.L.C., and Raymond James & Associates, Inc., will act as
representatives, filed as Exhibit 1.1 to the Registration
Statement (the "UNDERWRITING AGREEMENT").
<PAGE>
Board of Directors
Global Imaging Systems, Inc.
June 10, 1998
Page 2
5. Resolutions of the Board of Directors of the Company (the
"BOARD") adopted on February 6, 1998, and on April 9, 1998,
as certified by the Secretary of the Company on the date hereof
as then being complete, accurate and in effect, relating to the
issuance and sale of the Company Shares and arrangements in
connection therewith.
6. Resolutions of the Board adopted on February 6, 1998, April 9,
1998, and June 10, 1998 relating to the original issuance of the
Selling Stockholder Shares (or shares of stock that will be
converted into Selling Stockholder Shares) as certified by the
Secretary of the Company on the date hereof as then being
complete, accurate and in effect.
In our examination of the aforesaid documents, we have assumed the
genuineness of all signatures, the legal capacity of all natural persons, the
accuracy and completeness of all documents submitted to us, the authenticity of
all original documents, and the conformity to authentic original documents of
all documents submitted to us as copies (including telecopies). This opinion
letter is given, and all statements herein are made, in the context of the
foregoing.
This opinion letter is based as to matters of law solely on the
General Corporation Law of the State of Delaware. We express no opinion herein
as to any other laws, statutes, regulations, or ordinances.
Based upon, subject to and limited by the foregoing, we are of the
opinion that:
(a) following (i) final action of the Pricing Committee of the Board
approving the price of the Company Shares, (ii) execution and delivery by the
Company of the Underwriting Agreement, (iii) effectiveness of the Registration
Statement, (iv) sale and issuance of the Company Shares pursuant to the terms of
the Underwriting Agreement and (v) receipt by the Company of the consideration
for the Company Shares specified in the resolutions of the Board and the Pricing
Committee referred to above, the Company Shares will be validly issued, fully
paid and nonassessable under the General Corporation Law of the State of
Delaware; and
<PAGE>
Board of Directors
Global Imaging Systems, Inc.
June 10, 1998
Page 3
(b) assuming receipt by the Company of the consideration for the
Selling Stockholder Shares as specified in the resolutions of the Board of
Directors authorizing the issuance thereof, the Selling Stockholder Shares will
be validly issued, fully paid and nonassessable under the General Corporation
Law of the State of Delaware.
This opinion letter has been prepared for your use in connection with
the filing of the Registration Statement on the date of this opinion letter and
speaks as of the date hereof. We assume no obligation to advise you of any
changes in the foregoing subsequent to the delivery of this opinion letter.
We hereby consent to the filing of this opinion letter as Exhibit 5.1
to the Registration Statement and to the reference to this firm under the
caption "Legal Matters" in the prospectus constituting a part of the
Registration Statement. In giving this consent, we do not thereby admit that we
are an "expert" within the meaning of the Securities Act of 1933, as amended.
Very truly yours,
/s/ Hogan & Hartson L.L.P.
HOGAN & HARTSON L.L.P.
<PAGE>
EXHIBIT 10.3
------------
TERMINATION AGREEMENT
---------------------
THIS TERMINATION AGREEMENT (this "Agreement") is made this 27th day of
May, 1998, by and among GLOBAL IMAGING SYSTEMS, INC., a Delaware corporation
(the "Company"); GOLDER, THOMA, CRESSEY, RAUNER FUND IV, LIMITED PARTNERSHIP, a
Delaware limited partnership ("GTCR IV"); GOLDER, THOMA, CRESSEY, RAUNER, INC.,
a Delaware corporation ("GTCR Inc."), JACKSON NATIONAL LIFE INSURANCE COMPANY, a
Michigan life insurance company ("JNL"), GREEN MANNING & BUNCH HOLDINGS, INC., a
Colorado corporation ("GMB"), THOMAS S. JOHNSON ("Johnson"), RAYMOND SCHILLING
("Schilling"), ALFRED N. VIEIRA ("Vieira"), MICHAEL MUELLER ("Mueller"), JAMES
B. CONWAY ("Conway") and WILLIAM G. KAMAREK ("Kamarek") (GTCR IV, JNL, GMB,
Johnson, Schilling, Vieira Mueller, Conway and Kamarek may be referred to
hereafter collectively as the "Stockholders" and individually as a
"Stockholder"). Except for those defined in the recitals, capitalized terms used
herein have the meanings specified in Section 9 hereof.
WITNESSETH:
WHEREAS, under the Equity Purchase Agreement by and among the Company,
GTCR IV and Johnson dated as of June 9, 1994, as amended (the "Equity Purchase
Agreement"), the Company has sold 47,823.99 shares of Class B Common Stock, par
value $.01 per share ("Class B Common Shares"), and 1,195.60 Class B Common
Shares to GTCR IV and Johnson, respectively, and sold 216,666.674 shares of
Class A Common Stock, par value $.01 per share ("Class A Common Shares") and
5,416.697 Class A Common Shares to GTCR IV and Johnson, respectively.
WHEREAS, the Company, the Stockholders and all other existing
stockholders of the Company are parties to a Stockholders Agreement dated June
9, 1994, as amended (the "Stockholders Agreement"), pursuant to which the
parties thereto agreed on the composition of the Company's Board of Directors,
granted certain preemptive rights and placed certain restrictions on the
transfer of their shares of the Company's capital stock.
WHEREAS, under the terms of the Investor Purchase Agreement by and
among the Company and JNL dated August 14, 1996, as amended (the "JNL Purchase
Agreement"), the Company has sold 38,219.598 Class A Common Shares and 6,777.246
shares of Class C Common Stock, par value $.01 per share ("Class C Common
Shares") to JNL.
WHEREAS, under the terms of the Investor Purchase Agreement by and
among the Company and Green Manning & Bunch Holdings, Inc. ("GMB") dated
September 30, 1996, as amended (the "GMB Purchase Agreement"), the Company has
sold 1,910.809 Class A Common Shares and 338.832 Class B Common Shares to GMB.
<PAGE>
WHEREAS, under the Executive Agreement by and between the Company,
GTCR IV and Johnson dated June 9, 1994, as amended (the "Johnson Executive
Agreement"), the Company has sold 4,970.592 Class B Common Shares to Johnson.
WHEREAS, under the Johnson Executive Agreement, GTCR IV had the right
to buy a certain number of Unissued Shares (as defined therein) (the "GTCR
Executive Shares").
WHEREAS, under the Executive Agreement by and between the Company,
GTCR IV and Schilling dated June 9, 1994, as amended (the "Schilling Executive
Agreement"), the Company has sold 1,633.98 Class B Common Shares to Schilling.
WHEREAS, under the Executive Agreement by and between the Company,
GTCR IV and Vieira dated March 31, 1997, as amended (the "Vieira Executive
Agreement"), the Company has sold 1,307.18 Class B Common Shares to Vieira.
WHEREAS, under the Executive Agreement by and between the Company,
GTCR IV and Mueller dated January 1, 1995, as amended (the "Mueller Executive
Agreement"), the Company has sold 1,307.18 Class B Common Shares to Mueller.
WHEREAS, the Company and GTCR Inc. are parties to a Consulting
Agreement dated as of June 9, 1994 (the "GTCR Consulting Agreement"), pursuant
to which Company pays to GTCR Inc. (i) annual management fees and (ii) certain
placement fees in connection with any debt or equity financing.
WHEREAS, the Company, the Stockholders and certain other stockholders
of the Company are parties to a Registration Agreement dated June 9, 1994, as
amended (the "Registration Agreement"), pursuant to which the parties thereto
were granted registration rights for their shares of the Company's capital
stock.
WHEREAS, the Company is in the process of preparing its Initial Public
Offering, pursuant to which the Company will be able to establish a public
market for its Common Stock and which is expected to benefit all of the parties
hereto.
WHEREAS, the managing underwriters of the Initial Public Offering have
advised the Company that the success of the Initial Public Offering is
contingent upon certain factors, including (i) the reclassification of all of
the shares of Class B Common Shares into shares of the Company's Common Stock,
par value $.01 per share (the "Common Stock"); (ii) the redemption of all of the
outstanding Class A Common Shares in cash for the original cost and unpaid yield
thereon and in shares of Common Stock in an amount equal to 10% of the
outstanding shares of Common Stock prior to the Initial Public Offering (the
"Class A Redemption"); (iii) the conversion of all of the outstanding Class C
Common Shares into shares of Common Stock, and (iv) the relinquishment of
certain rights of the Stockholders.
-2-
<PAGE>
WHEREAS, in connection with the Initial Public Offering, the parties
hereto desire to amend, terminate or waive certain contractual rights among them
and desire to enter into this Agreement to evidence same.
WHEREAS, 339,945.071 Class A Common Shares, 72,202.712 Class B Common
Shares, and 6,777.246 Class C Common Shares are issued and outstanding.
WHEREAS, the Stockholders hold in the aggregate approximately 82% of
the outstanding Class A Common Shares, 86% of the outstanding Class B Common
Shares, and 100% of the outstanding Class C Common Shares.
NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned parties, intending legally to be bound hereby,
agree to the following terms:
SECTION 1
Equity Purchase Agreement
-------------------------
1.1 Termination of Equity Purchase Agreement. At the Effective Time,
----------------------------------------
GTCR IV, Johnson and the Company hereby agree that the Equity Purchase Agreement
shall be terminated in its entirety, the rights, duties, and obligations of the
parties thereto shall be extinguished, and none of its provisions shall continue
to have any force and effect.
1.2 General Waiver for Equity Purchase Agreement. At the Effective Time,
--------------------------------------------
GTCR IV, Johnson and the Company hereby agree that any and all breaches and
violations of the terms of the Equity Purchase Agreement and any rights and
unsatisfied obligations of any party arising thereunder, whether occurring or
arising before or after the date hereof, shall be waived, including, but not
limited to, the right of any "Qualified Holder" (as defined in the Equity
Purchase Agreement) to consent to certain transactions described in Sections 5.D
------------
and 5.E of the Equity Purchase Agreement as well as the provisions of Section 9G
--- ----------
thereof in connection with the stock split of the Common Stock.
1.3 Consents under Equity Purchase Agreement. GTCR IV and Johnson hereby
----------------------------------------
consent under Section 5.D of the Equity Purchase Agreement to (i) the amendments
to the Company's Amended and Restated Certificate of Incorporation as set forth
on the attached Exhibit A and (ii) the Class A Redemption. GTCR IV, as defined
---------
as a "Qualified Holder" under the Equity Purchase Agreement, hereby consents
under Section 5.E. of the Equity Purchase Agreement to (x) the issuance of
shares of Common Stock in the Initial Public Offering; (y) the Class A
Redemption and the conversion of Class C Common Shares and Class B Common Shares
into shares of Common Stock; and (z) any other action taken or agreement
executed by the Company to accomplish the Initial Public Offering.
-3-
<PAGE>
SECTION 2
Stockholders Agreement
----------------------
2.1 Termination of Stockholders Agreement. At the Effective Time, each
-------------------------------------
of the Stockholders and the Company hereby agree that the Stockholders Agreement
shall be terminated in its entirety, the rights, duties, and obligations of the
parties thereto shall be extinguished, and none of its provisions shall continue
to have any force and effect.
2.2 General Waiver for Stockholders Agreement. At the Effective Time,
-----------------------------------------
each of the Stockholders and the Company hereby agree that any and all breaches
and violations of the terms of the Stockholders Agreement and any and all rights
and unsatisfied obligations arising thereunder, whether occurring or arising
before or after the date hereof, shall be waived, including, but not limited to,
any requirement for consent thereunder and any right of any Stockholder to
purchase stock under Section 6 thereof (with respect to the issuance of the GTCR
Executive Shares or otherwise).
2.3 Waiver and Amendment of Stockholders Agreement for Initial Public
-----------------------------------------------------------------
Offering. The Stockholders and the Company hereby agree that the provisions of
- --------
the Stockholders Agreement shall not apply to, and are hereby waived with
respect to, the Company's issuance of stock in the Initial Public Offering,
including without limitation, any preemptive rights with respect to any stock
offered in the Initial Public Offering, and no purchasers of such stock will
become parties to the Stockholders Agreement. The Stockholders and the Company
further agree that Section 21 of the Stockholders Agreement is hereby deleted in
its entirety, and, in connection with the Initial Public Offering, the Company
shall instead make the amendments to its Amended and Restated Certificate of
Incorporation set forth on the attached Exhibit A.
---------
SECTION 3
JNL Purchase Agreement
----------------------
3.1 Termination of JNL Purchase Agreement. At the Effective Time, JNL
-------------------------------------
and the Company each hereby agree that the JNL Purchase Agreement shall be
terminated in its entirety, the rights, duties, and obligations of the parties
thereto shall be extinguished, and none of its provisions shall continue to have
any force and effect.
3.2 General Waiver for JNL Purchase Agreement. At the Effective Time,
-----------------------------------------
JNL and the Company each hereby agree that any and all breaches and violations
of the terms of the JNL Purchase Agreement and any and all rights and
unsatisfied obligations arising under Section 4 thereof, whether occurring or
arising before or after the date hereof, shall be waived, including, but not
limited to, any requirement for the consent of JNL (as defined therein as a
"Qualified Holder") for the issuance of equity securities of the Company.
3.3 Consents under JNL Purchase Agreement. JNL, as defined as a
-------------------------------------
"Qualified Holder" under the JNL Purchase Agreement, hereby consents under
Sections 4.C
-4-
<PAGE>
and 4.D thereof to (i) the amendments to the Company's Amended and
Restated Certificate of Incorporation as set forth on the attached Exhibit A;
---------
(ii) the issuance of shares of Common Stock in the Initial Public Offering;
(iii) the Class A Redemption and the conversion of Class C Common Shares into
shares of Common Stock, insofar as the redemption and/or conversion may
constitute the payment of dividends or the making of a distribution on the
Company's equity securities or a recapitalization; and (iv) any other action
taken or agreement executed by the Company to accomplish the Initial Public
Offering.
SECTION 4
GMB Purchase Agreement
----------------------
4.1 Termination of GMB Purchase Agreement. At the Effective Time, GMB
-------------------------------------
and the Company hereby agree that the GMB Purchase Agreement shall be terminated
in its entirety, the rights, duties, and obligations of the parties thereto
shall be extinguished, and none of its provisions shall continue to have any
force and effect.
4.2 General Waiver for GMB Purchase Agreement. At the Effective Time,
-----------------------------------------
GMB and the Company hereby agree that any and all breaches and violations of the
terms of the GMB Purchase Agreement and any and all rights and unsatisfied
obligations arising under Section 4 thereof, whether occurring or arising before
or after the date hereof, shall be waived, including, but not limited to, any
requirement for the consent of GMB to any action.
4.3 Consents under GMB Purchase Agreement. GMB, as defined as a
-------------------------------------
"Qualified Holder" under the GMB Purchase Agreement, hereby consents under
Sections 4.C thereof to (i) the amendments to the Company's Amended and Restated
Certificate of Incorporation as set forth on the attached Exhibit A; (ii) the
---------
Class A Redemption, insofar as it may constitute the payment of dividends or the
making of a distribution on the Company's equity securities; and (iii) any other
action taken or agreement executed by the Company to accomplish the Initial
Public Offering.
SECTION 5
Executive Agreements
--------------------
5.1 Amendment and General Waiver of Johnson Executive Agreement.
-----------------------------------------------------------
Johnson, GTCR IV and the Company hereby agree that Sections 1.5 and 2.4(e) are
hereby deleted from the Johnson Executive Agreement and shall have no further
force and effect. At the Effective Time, any and all breaches and violations of
the terms of the Johnson Executive Agreement arising before the Effective Time
shall be waived.
5.2 General Waiver of Schilling Executive Agreement. At the Effective
-----------------------------------------------
Time, Schilling, GTCR IV and the Company hereby agree that Section 2.4(b) is
hereby deleted from the Schilling Executive Agreement and shall have no further
force and effect. At
-5-
<PAGE>
the Effective Time, any and all breaches and violations of the terms of the
Schilling Executive Agreement arising before the Effective Time shall be waived.
5.3 General Waiver of Vieira Executive Agreement. At the Effective Time,
--------------------------------------------
Vieira, GTCR IV and the Company hereby agree that Section 2.4(b) is hereby
deleted from the Vieira Executive Agreement and shall have no further force and
effect. At the Effective Time, any and all breaches and violations of the terms
of the Vieira Executive Agreement arising before the Effective Time shall be
waived.
5.4 General Waiver of Mueller Executive Agreement. At the Effective
---------------------------------------------
Time, Mueller, GTCR IV and the Company hereby agree that Section 2.4(b) is
hereby deleted from the Mueller Executive Agreement and shall have no further
force and effect. At the Effective Time, any and all breaches and violations of
the terms of the Mueller Executive Agreement, arising before the Effective Time
shall be waived.
SECTION 6
GTCR Consulting Agreement
-------------------------
6.1 Termination of GTCR Consulting Agreement. At the Effective Time,
----------------------------------------
GTCR Inc. and the Company hereby agree that the GTCR Consulting Agreement shall
be terminated in its entirety, the rights, duties, and obligations of the
parties thereto shall be extinguished, and none of its provisions shall continue
to have any force and effect.
6.2 General Waiver for GTCR Consulting Agreement. At the Effective Time,
--------------------------------------------
GTCR Inc. and the Company each agree that any and all breaches and violations of
the terms of the GTCR Consulting Agreement and any and all rights and
unsatisfied obligations arising thereunder, whether occurring or arising before
or after the date hereof, shall be waived, including, but not limited to, the
right of GTCR Inc. to receive any management fees or placement fees under
Sections 2 and 3 thereof, respectively.
6.3 Specific Waiver for GTCR Consulting Agreement for Initial Public
----------------------------------------------------------------
Offering. GTCR Inc. agrees that the Company shall not have to pay GTCR Inc. any
- --------
placement fee (of 1% or otherwise) under Section 3 of the GTCR Consulting
Agreement with respect to any funds raised in the Initial Public Offering.
6.4 Management Fees. Notwithstanding the foregoing provisions of this
---------------
Section 6, GTCR Inc. and the Company hereby agree that the Company shall pay
GTCR Inc. (a) a pro rata portion of the 1998 management fee of $200,000 under
Section 4 of the GTCR Consulting Agreement for the period beginning on January
1, 1998 and ending on the date of the Offering Closing, and (b) $200,000 for the
management fee due for the calendar year of 1997.
-6-
<PAGE>
SECTION 7
Registration Agreement
----------------------
7.1 Waivers and Consents for Registration Agreement. Except for the
-----------------------------------------------
limited right to participate in the Initial Public Offering pursuant to the
Notice set forth in Exhibit B hereto (the "IPO Piggyback Right"), the
---------
Stockholders hereby waive (i) any rights of any holder of registerable
securities pursuant to the Registration Agreement to participate in the Initial
Public Offering and (ii) any noncompliance by the Company with the provisions of
Section 2 of the Registration Agreement in connection with the IPO Piggyback
Right, including the right to select the underwriters of the Initial Public
Offering; provided, however, that such waiver shall not prejudice or limit the
future rights of any Stockholders under the Registration Agreement after the
consummation of the Initial Public Offering.
SECTION 8
Lock-Up Agreements; Corporate Governance Matters; Waiver
--------------------------------------------------------
8.1 Execution of Underwriter Lock-up Agreement. Each of the Stockholders
------------------------------------------
shall, before the Effective Time, execute a lock-up agreement in the form
attached as Exhibit C for the benefit of the Underwriters if required by the
---------
Underwriters for the Initial Public Offering.
8.2 Approval of Corporate Governance Matters. Each of the Stockholders
----------------------------------------
having voting rights shall, before the Effective Time, approve the matters set
forth in the attached Exhibit D to be voted on by the Company's stockholders.
---------
8.3 General Waiver. As of the Effective Time, and except as otherwise
--------------
provided herein, each of the Company and the Stockholders hereby waives any and
all rights and claims, if any, that it may have now or later under the Equity
Purchase Agreement, the Stockholders Agreement, the JNL Purchase Agreement, the
GMB Purchase Agreement, and the GTCR Consulting Agreement and also hereby waives
any right between the date hereof and the Effective Time to receive notice
pursuant to the terms of any of these same agreements.
SECTION 9
Definitions
-----------
9.1 Definitions. For purposes of this Agreement, the following terms
-----------
shall have the meanings set forth below:
"Effective Time" shall mean the time at which the Registration
Statement is declared effective by the Securities and Exchange Commission.
-7-
<PAGE>
"Initial Public Offering" means the Company's first public offering of
Common Stock that is effected pursuant to a registration statement on Form S-1
filed with and declared effective by the Securities and Exchange Commission
("SEC") under the Securities Act of 1933, as amended, and pursuant to which (i)
the Company receives gross proceeds of at least $10,000,000 and (ii) following
the closing of such public offering, the Common Stock is traded on a national
securities exchange, the NASDAQ National Market System or any registered inter-
dealer quotation system involving at least three registered market-makers.
"Offering Closing" means the closing of the Initial Public Offering.
"Registration Statement" means the Company's registration statement on
Form S-1 filed with the SEC in order to accomplish the Initial Public Offering.
"Underwriters" shall mean Prudential Securities Incorporated, Salomon
Smith Barney, William Blair & Company, Raymond James & Associates, Inc., and any
other institutions who enter into an underwriting agreement with the Company
with respect to the Initial Public Offering.
SECTION 10
Miscellaneous
-------------
10.1 Termination. This Agreement may be terminated (i) in a writing
-----------
signed by all parties hereto at any time prior to the Effective Time; (ii) by
the written election of either the Company or any Stockholder if the Effective
Time is not prior to June 30, 1998, and if the electing party is not in default
of any of the provisions of this Agreement; or (iii) by the written election of
any Stockholder if the Offering Closing has not occurred within 60 days of the
Effective Time. In the event of the termination and abandonment of this
Agreement, each party hereto (and its respective agents, directors or officers,
where appropriate) shall not have any liability or further obligation to any
other party hereto, except that nothing herein shall relieve any party from
liability for any willful breach of this Agreement. In the event that the
Offering Closing does not occur within fifteen (15) business days after the
Effective Time, this Agreement shall be terminated, and the Equity Purchase
Agreement, the Stockholders Agreement, the JNL Purchase Agreement, the GMB
Purchase Agreement, and the GTCR Consulting Agreement shall be reinstated into
full force and effect as if they had never been terminated at the Effective Time
pursuant to Sections 1.1, 2.1, 3.1, 4.1, and 6.1 hereof.
10.2 Remedies. Any Person having any rights under any provision of this
--------
Agreement shall be entitled to enforce such rights specifically, to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law.
10.3 Amendment and Waiver. Any amendment, modification, supplement, or
--------------------
waiver of a provision of this Agreement shall be in a written document and shall
be effective only against parties executing the written document. The failure of
any party to
-8-
<PAGE>
enforce any provision of this Agreement shall not be a waiver of the provision
and shall not affect the right of the party thereafter to enforce each and every
provision of this Agreement.
10.4 Additional Documents. Each party hereto shall cooperate, shall take
--------------------
such further action and shall execute and deliver any further documents,
certificates and instruments that any other party reasonably requests in order
to carry out the provisions and purposes of this Agreement.
10.5 Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto, whether so expressed or
not.
10.6 Severability. Whenever possible, each provision of this Agreement
------------
shall have the interpretation necessary to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, the provision shall be ineffective only to
the extent of the prohibition or invalidity, without invalidating the remainder
of this Agreement.
10.7 Counterparts; Facsimile Transmission. This Agreement may be
------------------------------------
executed in two or more counterparts, any one of which may contain only one
signature, and all the counterparts taken together shall constitute a single
agreement. This Agreement may also be executed and delivered by facsimile
transmission.
10.8 Governing Law. THIS AGREEMENT AND ITS EXHIBITS SHALL BE GOVERNED BY
-------------
THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF DELAWARE.
[THIS SPACE INTENTIONALLY LEFT BLANK]
-9-
<PAGE>
IN WITNESS WHEREOF, the undersigned have each executed this Agreement
as of the date first set forth above.
GLOBAL IMAGING SYSTEMS, INC.
By: /s/ Thomas S. Johnson
---------------------
Thomas S. Johnson
President and Chief Executive Officer
GOLDER, THOMA, CRESSEY, RAUNER, INC.
By: /s/ Carl D. Thoma
-----------------
Name: Carl D. Thoma
---------------
Title: Authorized Officer
--------------------
STOCKHOLDERS:
GOLDER, THOMA, CRESSEY, RAUNER, FUND IV LIMITED
PARTNERSHIP
By: GTCR IV, L.P.
Its: General Partner
By: Golder, Thoma, Cressey, Rauner Inc.
Its: General Partner
By: /s/ Carl D. Thoma
-----------------
Carl D. Thoma
Authorized Officer
JACKSON NATIONAL LIFE INSURANCE COMPANY
By: /s/ Bruce D. Gorchow
--------------------
Name: Bruce D. Gorchow
----------------
Title: Managing Director
-----------------
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<PAGE>
GREEN MANNING & BUNCH HOLDINGS, INC.
By: /s/ James T. Bunch
------------------
Name: James T. Bunch
--------------
Title: Vice President
--------------
/s/ Thomas S. Johnson
---------------------
Thomas S. Johnson
/s/ Raymond Schilling
---------------------
Raymond Schilling
/s/ Alfred N. Vieira
--------------------
Alfred N. Vieira
/s/ Michael Mueller
-------------------
Michael Mueller
/s/ James B. Conway
-------------------
James B. Conway
/s/ William G. Kamarek
----------------------
William G. Kamarek
-11-
<PAGE>
EXHIBIT 10.5.1
THIRD AMENDMENT TO AMENDED AND
RESTATED CREDIT AGREEMENT AND LOAN DOCUMENTS
--------------------------------------------
THIS THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
AND LOAN DOCUMENTS (this "Amendment") is made and entered into as of May 8,
1998, by and among GLOBAL IMAGING SYSTEMS INC., a Delaware corporation
("Global"), GLOBAL IMAGING OPERATIONS, INC., a Delaware corporation
("Operations"), GLOBAL IMAGING FINANCE COMPANY, a Delaware corporation
("Finance"), COPY SERVICE & SUPPLY, INC., a North Carolina corporation ("Copy
Service"), OFFICE FURNITURE CONCEPTS, INC., a North Carolina corporation
("Office Concepts"), CSS LEASING, LLC, a North Carolina limited liability
company ("CSS Leasing"), FELCO OFFICE SYSTEMS, INC., a Texas corporation
("Felco"), BERNEY, INC., an Alabama corporation ("Berney"), CONWAY OFFICE
PRODUCTS, INC. a New Hampshire corporation ("Conway"), AMERICAN PHOTOCOPY
EQUIPMENT COMPANY OF PITTSBURGH, a Delaware corporation ("AMCOM"), SOUTHERN COPY
SYSTEMS, INC., an Alabama corporation ("Southern Copy"), BUSINESS EQUIPMENT
UNLIMITED, a Maine corporation ("Business Equipment"), CAMERON OFFICE PRODUCTS,
INC., a Massachusetts corporation ("Cameron"), SOUTHERN BUSINESS COMMUNICATIONS,
INC., a Georgia corporation ("Southern Business"), ELECTRONIC SYSTEMS, INC., a
Virginia corporation ("Electronic Systems"), EASTERN COPY PRODUCTS, INC., a New
York corporation ("Eastern Copy"), QUALITY BUSINESS SYSTEMS, INC., a Washington
corporation ("Quality Business"), DUPLICATING SPECIALTIES, INC., an Oregon
corporation ("Duplicating Specialties"), ELECTRONIC SYSTEMS OF RICHMOND, INC., a
Virginia corporation ("ESR"), CONNECTICUT BUSINESS SYSTEMS, INC., a Connecticut
corporation ("CBS"), (Global, Operations, Finance, Copy Service, Office
Concepts, CSS Leasing, Felco, Berney, Conway, AMCOM, Southern Copy, Business
Equipment, Cameron, Southern Business, Electronic Systems, Eastern Copy, Quality
Business, Duplicating Specialties and ESR are each individually and collectively
referred to herein as "Borrower"; JACKSON NATIONAL LIFE INSURANCE COMPANY, a
Michigan insurance corporation, ("Jackson" or "Lender" and collectively with all
other Lenders, if any, the "Lenders") and PPM AMERICA, INC., a Delaware
corporation, as Agent for the Lenders (the "Agent").
PRELIMINARY STATEMENTS
----------------------
A. Borrower, Lender and Agent are parties to that Amended and
Restated Credit Agreement, dated as of August 14, 1996 as amended and restated
from time to time and most recently by that certain Second Amendment to Amended
and Restated Credit Agreement and Loan Documents dated as of January 9, 1998
(the "Credit Agreement").
B. Global anticipates consummating an initial public offering of its
shares of common stock on or around May 15, 1998 (the "Offering") pursuant to
the terms and conditions of, and in accordance with, that certain Registration
Statement under the Securities Act of 1933 which was filed on or around March
17, 1998 (the "Registration Statement").
<PAGE>
C. In connection with the Offering, Borrower has requested that (a)
certain terms and conditions of the Credit Agreement be modified, amended or
waived in order for the Offering to be in compliance therewith, and (b) Agent
and the Lender consent to the consummation of the Offering.
D. The Borrower, Agent and Lender desire to modify and amend the
Credit Agreement and the Agent and the Lender have agreed to grant the waivers
and/or consents as hereinafter set forth in accordance with the terms herein.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties, intending to be legally bound, agree as
follows:
AGREEMENT
---------
ARTICLE I
Definitions
-----------
Unless otherwise defined herein, capitalized terms used in this
Amendment are defined in the Credit Agreement, as amended hereby.
ARTICLE II
General Consents
----------------
In connection with the Offering, the Agent and the Lender hereby
consent to: (i) the Offering; (ii) Global's authorization and issuance of common
and preferred stock in connection therewith; and (iii) the use of the name of
the Agent or the Lender in any press releases, filings or other documentation in
connection therewith; provided, however, that any use of the Agent or the
-----------------
Lender's name shall be approved by the Agent prior to its release, which
approval shall not be unreasonably withheld.
ARTICLE III
Amendments and/or Waivers to the Credit Agreement
-------------------------------------------------
In connection with, and for purposes of consummating the Offering,
the Credit Agreement is hereby amended and certain provisions thereof are hereby
waived as follows:
3.01 The Agent and the Lender hereby waive the requirement set forth in
the first sentence of Section 1.5(D) that the Borrower prepay the Term Loans
with the entire amount of the net proceeds received from the Offering (the
"Proceeds"). The Borrower shall be permitted to use a portion of the Proceeds
to: (i) redeem its shares of Class A Common Stock in accordance
-2-
<PAGE>
with Section 3.05(i)(a) hereof; and (ii) pay any costs, fees and expenses
incurred in connection with the Offering (collectively, the "Permitted
Payments"). All of the remaining Proceeds, after giving effect to the Permitted
Payments (the "Remaining Proceeds"), shall be used to repay the Obligations
within sixty days from the completion of the Offering. It is understood and
agreed that payment of the Remaining Proceeds shall be subject to a Prepayment
Fee which shall be calculated in accordance with Subsection 1.7(A) unless the
Borrower fully and indefeasibly prepays all of the Obligations within sixty days
after the completion of the Offering, in which case the Prepayment Fee shall be
reduced to $250,000 in accordance with 1.7(B)(i).
3.02 The third sentence of Subsection 1.5(D) is deleted in its entirety
and the following is substituted in lieu thereof:
"All such prepayments shall be applied to the Obligations in
the order set forth in subsection 1.5(A)."
3.03 Subsections 1.7(A)(i), (ii), (iii), (iv) and (v) are deleted in
their entirety and the following is substituted in lieu thereof:
"(i) 4.0% of the Second 12 month
prepayment amount period following the
Original Closing Date
(ii) 3.0% of the Third 12 month
prepayment amount period following the
Original Closing Date
(iii) 2.0% of the Fourth 12 month
prepayment amount period following the
Original Closing Date
(iv) 1.0% of the Fifth and Sixth 12
prepayment amount month periods
following the Original
Closing Date"
3.04 Subsection 1.7(B)(i) is hereby deleted in its entirety and the
following is substituted in lieu thereof:
"(i) in the event that Global completes the Offering
and fully and indefeasibly prepays all of the
Obligations within sixty days from completion of the
Offering, then in such event, Borrower shall only be
required to pay a prepayment fee in an amount equal
to $250,000."
3.05 The restrictions set forth in Section 3.5 are hereby waived to the
extent necessary to permit Global in connection with the Offering to: (i) redeem
all of the outstanding shares of its Class A Common Stock in exchange for (a)
payments in the amount of ninety ($90) dollars per
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<PAGE>
share plus the unpaid yield thereon, and (b) shares of Common Stock, in an
aggregate amount not to exceed ten (10%) percent of Global's issued and
outstanding Common Stock; and (ii) convert its Class C Common Stock into Common
Stock, for no additional cash, stock or other consideration.
3.06 The restrictions set forth in Section 3.6(A)(i) are hereby waived
to the extent necessary to permit Global to amend its charter and by-laws in
connection with the Offering substantially in the form of Exhibit A hereto and
---------
upon completion of the Offering, substantially in the form of Exhibit B hereto.
---------
3.07 Section 6.1(T) is deleted in its entirety and the following is
substituted in lieu thereof:
"(T) Change in Control. Except in connection with the
-----------------
Offering, GTCR IV sells or otherwise disposes of any of its
shares of the Common Stock of Global."
3.08 Section 10.1 Certain Defined Terms is hereby amended to add the
---------------------
following terms, in alphabetical order, respectively.
"Offering" means the initial public offering of
Global's Common Stock pursuant to the terms and
conditions of, and in accordance with the
Registration Statement."
"Registration Statement" means Global's Registration
Statement under the Securities Act of 1933 which was
filed with the Securities and Exchange Commission on
or around March 17, 1998."
ARTICLE IV
Conditions
----------
Conditions to Effectiveness. The effectiveness of this
---------------------------
Agreement is subject to (i) the consummation of the Offering, and (ii) the
satisfaction of the following conditions precedent, unless specifically waived
in writing by Lender:
(a) Agent shall have received, in form and substance satisfactory to
Agent:
(i) this Amendment, duly executed by each Borrower;
(ii) copies of the Registration Statement as filed with the
Securities and Exchange Commission and any other
documentation in connection therewith required by Agent;
(iii) a company general certificate certified by the Secretary of
each of the Borrowers that its Board of Directors has
adopted and ratified resolutions
-4-
<PAGE>
which authorize the execution, delivery and performance by
it of this Agreement;
(iv) such additional documents, instruments and information as
Agent or its legal counsel may reasonably request.
(b) The representations and warranties contained herein, in the Credit
Agreement and in the other Loan Documents, shall be true and correct as of the
date hereof, as if made on the date hereof.
(c) No Event of Default or event or condition which, with notice or
passage of time or both, would constitute an Event of Default, shall have
occurred and be continuing, unless such event, condition or Event of Default has
been specifically waived in writing by Agent or Lenders.
ARTICLE V
No Waiver
---------
Except as specifically set forth herein, nothing contained in this
Amendment shall be construed as a waiver by Agent or any Lender of any covenant
or provision of the Credit Agreement or the other Loan Documents or of any other
contract or instrument between Borrower and any Lender or Agent, and the failure
of any Lender or Agent at any time or times hereafter to require strict
performance by Borrower of any provision thereof shall not waive, affect or
diminish any right of Lenders or Agent to thereafter demand strict compliance
therewith. Each of Lenders and Agent hereby reserve all rights granted under the
Credit Agreement, the other Loan Documents and any other contract or instrument
between Borrower and any Lender or Agent.
ARTICLE VI
Ratifications, Representations and Warranties
---------------------------------------------
6.01 Ratifications. The terms and provisions set forth herein shall
-------------
modify and supersede all inconsistent terms and provisions set forth in the
Credit Agreement and the other Loan Documents, and, except as expressly modified
and superseded by this Amendment, the terms and provisions of the Credit
Agreement and the other Loan Documents are ratified and confirmed and shall
continue in full force and effect. Borrower, Agent and Lenders agree that the
Credit Agreement and the other Loan Documents, as amended hereby, shall continue
to be legal, valid, binding and enforceable in accordance with their respective
terms.
6.02 Representations and Warranties. Borrower hereby represents and
------------------------------
warrants to Lender that (a) the execution, delivery and performance of this
Amendment and any and all other Loan Documents executed and/or delivered in
connection herewith have been authorized by all requisite corporate action on
the part of Borrower and will not violate the Restated Certificate of
Incorporation or Bylaws of Borrower; (b) the representations and warranties
contained in the
-5-
<PAGE>
Credit Agreement, as amended hereby, and any other Loan Documents are true and
correct on and as of the date hereof and on and as of the date of execution
hereof as though made on and as of each such date; (c) no Event of Default or
event or condition which, with notice or passage of time or both, would
constitute an Event of Default under the Credit Agreement, as amended hereby,
has occurred and is continuing; and (d) Borrower is in full compliance with all
covenants and agreements contained in the Credit Agreement and the other Loan
Documents, as amended hereby.
ARTICLE VII
Miscellaneous Provisions
------------------------
7.01 Survival of Representations and Warranties. All representations
------------------------------------------
and warranties made in the Credit Agreement or any other Loan Document,
including without limitation, any document furnished in connection with this
Amendment, shall survive the execution and delivery of this Amendment and the
other Loan Documents, and no investigation by Agent or any Lender or any closing
shall affect the representations and warranties or the right of Agent or Lenders
to rely upon them.
7.02 Reference to Credit Agreement. Each of the Credit Agreement and
-----------------------------
the other Loan Documents, and any and all other agreements, documents or
instruments now or hereafter executed and delivered pursuant to the terms hereof
or pursuant to the terms of the Credit Agreement, as amended hereby, are hereby
amended so that any reference in the Credit Agreement and such other Loan
Documents to the Credit Agreement or any such Loan Documents shall mean a
reference to the Credit Agreement and the other Loan Documents as amended
hereby.
7.03 Expenses of Agent. As provided in the Credit Agreement, Borrower
-----------------
agrees to pay on demand all reasonable costs and expenses incurred by Agent in
connection with the preparation, negotiation and execution of this Amendment and
the other Loan Documents executed pursuant hereto, and any and all amendments,
modifications and supplements thereto, including without limitation, the
reasonable costs and fees of Agent's legal counsel.
7.04 Severability. Any provision of this Amendment held by a court of
------------
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
7.05 Successors and Assigns. This Amendment is binding upon and shall
----------------------
insure to the benefit of Agent, Lenders and Borrower and their respective
successors and assigns, except that Borrower may not assign or transfer any of
its rights or obligations hereunder without the prior written consent of Agent
and Lenders.
7.06 Counterparts. This Amendment may be executed in one or more
------------
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
instrument.
-6-
<PAGE>
7.07 Effect of Waiver. No consent or waiver, express or implied, by
----------------
Agent or Lender to or for any breach of or deviation from any covenant or
condition by Borrower shall be deemed a consent to or waiver of any other breach
of the same or any other covenant, condition or duty.
7.08 Headings. The headings, captions, and arrangements used in this
--------
Amendment are for convenience only and shall not affect the interpretation of
this Amendment.
7.09 Applicable Law. THIS AMENDMENT AND ALL OTHER AGREEMENTS EXECUTED
--------------
PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE IN AND
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF NEW YORK (WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW).
7.10 Final Agreement. THE CREDIT AGREEMENT AND THE OTHER LOAN
---------------
DOCUMENTS, EACH AS AMENDED HEREBY, REPRESENT THE ENTIRE EXPRESSION OF THE
PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATE THIS AMENDMENT IS
EXECUTED. THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS AMENDED HEREBY,
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES. NO MODIFICATION, RESCISSION, WAIVER, RELEASE OR AMENDMENT OF ANY
PROVISION OF THIS AMENDMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED
BY BORROWER, AGENT AND LENDERS.
-7-
<PAGE>
Witness the due execution hereof by the respective duly authorized
officers of the undersigned as of the date first written above.
GLOBAL IMAGING SYSTEMS INC.
GLOBAL IMAGING OPERATIONS, INC.
GLOBAL IMAGING FINANCE COMPANY
By: /s/ THOMAS S. JOHNSON
-------------------------------------
Thomas S. Johnson
President
COPY SERVICE AND SUPPLY, INC.
OFFICE FURNITURE CONCEPTS, INC.
FELCO OFFICE SYSTEMS, INC.
BERNEY, INC.
CONWAY OFFICE PRODUCTS, INC.
AMERICAN PHOTOCOPY EQUIPMENT COMPANY
OF PITTSBURGH
SOUTHERN COPY SYSTEMS, INC.
BUSINESS EQUIPMENT UNLIMITED
CAMERON OFFICE PRODUCTS, INC.
SOUTHERN BUSINESS COMMUNICATIONS, INC.
ELECTRONIC SYSTEMS, INC.
EASTERN COPY PRODUCTS, INC.
QUALITY BUSINESS SYSTEMS, INC.
DUPLICATING SPECIALTIES, INC.
ELECTRONIC SYSTEMS OF RICHMOND, INC.
CONNECTICUT BUSINESS SYSTEMS, INC.
By: /s/ THOMAS S. JOHNSON
-------------------------------------
Thomas S. Johnson
Chairman
CSS LEASING, LLC
By: /s/ THOMAS S. JOHNSON
-------------------------------------
Thomas S. Johnson
Manager and President
-8-
<PAGE>
JACKSON NATIONAL LIFE INSURANCE
COMPANY, as Lender
By: PPM America, Inc.,
Attorney-in-Fact
By: /s/ BEN JAMES
-------------------------------------
Title: Managing Director
PPM AMERICA, INC., as Agent
By: /s/ BEN JAMES
-------------------------------------
Title: Managing Director
-9-
<PAGE>
EXHIBIT 10.8
EXECUTIVE AGREEMENT
This Executive Agreement (this "Agreement") is entered into as of June 9,
1994, by and between Thomas S. Johnson (the "Executive") and Global Imaging
Systems Inc., a Delaware corporation (the "Company"). Golder, Thoma, Cressey,
Rauner Fund IV Limited Partnership, an Illinois limited partnership (the "Fund")
is also a party to this Agreement for purposes of Sections 1.5 and 2.4 of this
Agreement.
WITNESSETH:
WHEREAS, Executive wishes to purchase, and the Company wishes to sell to
Executive, 4,901.96 shares of the Company's Class B Common Stock, par value $.01
per share (the "Class B Common"), representing 7.5% of the shares of the
Company's Common Stock, par value $.0l per share (the "Common Stock"), and
WHEREAS, the Company desires to make available up to 4,901.95 shares of the
Company's Class B Common for purchase by other members of the Company's or its
direct or indirect subsidiaries' senior management to be selected by Executive
and the Company's Board of Directors (the "Board"), and
WHEREAS, the Company and Executive desire to enter into an agreement to
provide for the terms and conditions of Executive's employment with the Company,
and the terms and conditions relating to Executive's purchase of shares of the
Company's Class B Common.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties hereto agree as follows:
ARTICLE I. TERMS AND CONDITIONS OF SERVICES
1.1 Engagement. The Company hereby engages the Executive as the Company's
President and Chief Executive Officer, and Executive agrees to serve the
Company, during the Service Term (defined in Section 1.7) in the capacities, and
subject to the terms and conditions, set forth in this Agreement.
1.2 Services.
(a) During the Service Term, Executive will, as President and Chief
Executive Officer of the Company, be in charge of all day-to-day operations of
the Company, but the following actions must be approved by the Company's Board,
including:
<PAGE>
(i) Acquisitions or dispositions of the assets or stock of a
business with a value in excess of $250,000;
(ii) Employment agreements and stock or option issuances;
(iii) Annual corporate objectives;
(iv) Annual operating budgets (including capital expenditures
budgets);
(v) Contracts with a cost to the Company in excess of $100,000;
(vi) The terms of and any significant revisions to existing and
new borrowing arrangements in excess of $100,000;
(vii) Dividends, distributions or redemptions of the Company's
capital stock; and
(viii) Statutory matters, including sales of stock, amendments to
the Company' charter or bylaws and qualifying to do business in other
jurisdictions.
Executive will devote his best efforts and substantially all of his business
time and attention (except for vacation periods and periods of illness or other
incapacity) to the business of the Company and its subsidiaries. Notwithstanding
the foregoing, and provided that such activities do not interfere with the
fulfillment of Executive's obligations hereunder, Executive may (i) serve as a
director of a Corporation that does not compete with the Company and is not
engaged in the office product service business; (ii) serve as a director,
trustee or officer or otherwise participate in educational, welfare, social,
religious and civic organizations; (iii) serve as a director, officer or
employee of any other entity if and to the extent specifically consented to in
writing by the Board; and (iv) acquire investment interests in one or more
entities which are not, directly or indirectly, in competition with the Company
or its subsidiaries and which do not provide supplies to the Company, except
that the Executive may own up to 1% of the outstanding voting securities of any
publicly-held company.
(b) Unless the Company and Executive agree to the contrary,
Executive's place of employment shall be at the Company's principal executive
offices in Tampa, Florida; provided, however, that Executive will travel to such
other locations as may be necessary in order to discharge his duties hereunder.
In the event that the Company and Executive agree that Executive should relocate
his place of employment more than 100 miles from Tampa, Florida, the Company
will reimburse Executive for all reasonable relocation expenses incurred.
(c) The Company shall reimburse the Executive for all out-of-pocket
expenses (up to a maximum of $250,000) of the Executive incurred for the benefit
of the Company prior to the date hereof. In addition, the Company will purchase
the Executive's computer equipment for $6,717.14 as soon as practicable after
the date hereof.
-2-
<PAGE>
1.3 Salary and Bonus. During the Service Term, the Company will pay
Executive an annual base salary of $200,000, subject to periodic increases at
the discretion of the Company's Board of Directors (the "Base Salary"). In
addition, Executive will be eligible for an annual bonus of up to 50% of his
Base Salary based on Executive's attainment of defined budget and corporate
objectives as set by the Company's Board for the year in accordance with any
management incentive bonus plan or other incentive plan or bonus which the Board
establishes and maintains for its key employees; provided, however, that
Executive shall be guaranteed to receive a one-time bonus of $50,000 in the
month following the date which is one year after the consummation of the Base
Acquisition (the "Bonus Month"). In addition, Executive shall be entitled to an
additional one-time bonus of $50,000 in the event that the Company, together
with its wholly-owned subsidiaries, achieves a quarterly EBIT (as hereinafter
defined) of at least $1.25 million for any fiscal quarter prior to the
expiration of the fiscal quarter in which the Bonus Month occurs. For purposes
of this Agreement, "EBIT" shall mean the Company's earnings before interest and
taxes computed in accordance with Generally Accepted Accounting Principles,
consistently applied. Upon termination of his employment with the Company for
any reason other than Cause or resignation without Good Reason (as defined in
Section 1.7), Executive will be entitled to receive a pro rata portion of the
incentive compensation for the year (pro rated based upon the number of days in
such year during which Executive is employed by the Company) in which the
termination occurred. Such pro rated incentive compensation shall be paid at
such time as the Company pays incentive compensation to its other management
employees for such year.
1.4 Other Benefits. Executive shall be entitled to receive fringe benefits
customary for the industry including three weeks vacation, health/accident
insurance, disability insurance and life insurance, reimbursement of reasonable
business expenses and other employee benefits as in effect from time to time for
the management employees of the Company and such other fringe benefits as may be
agreed upon by Executive and the Company. In addition, Executive shall receive
an annual allowance for excess fringe benefits of up to $12,000, including,
without limitation, the following:
(a) Excess life insurance;
(b) Reimbursement of reasonable business expenses;
(c) Spouse travel to appropriate business affairs;
(d) Excess disability insurance; and
(e) The lease or purchase of an automobile.
1.5 Board Membership. So long as Executive is employed as President and
Chief Executive Officer of the Company, the Company will nominate, and the
Company and the Fund will each use its best efforts to cause Executive to be
elected, as a member of the Board in accordance with that certain Stockholders
Agreement of even date herewith, among the Company, the Fund, Executive and the
other initial stockholders of the Company (the "Stockholders Agreement").
-3-
<PAGE>
1.6 Termination.
(a) Events of Termination. Executive's employment with the Company
shall cease upon:
(i) Executive's death.
(ii) Executive's retirement.
(iii) Executive's disability, which means his incapacity due to
physical or mental illness such that he is unable to perform his previously
assigned duties where (A) such incapacity has been determined to exist by
the Company's disability insurance carrier or by two licensed physicians
(one selected by the Company and one by Executive), and (B) the Board has
determined in good faith that such incapacity will continue for such period
of time that it would have a material adverse effect on the Company.
(iv) Termination by the Company by the delivery to Executive of a
written notice from the Board that Executive has been terminated ("Notice
of Termination") with or without Cause. "Cause" shall mean:
(A) the continued willful failure or refusal by Executive to
substantially perform his duties with the Company (other than any
such failure due to physical or mental illness) after a period of 30
days after written demand for such performance is delivered to him by
the Board, which demand specifically identifies the manner that the
Board believes that Executive has not substantially performed his
duties and that such duties are not unreasonable or illegal.
(B) Executive's conviction of a crime that constitutes a
felony in the jurisdiction involved, or that involves the
misappropriation of Company funds or assets for personal use, unless
such conviction is being appealed by Executive in good faith.
The delivery by the Company of notice to Executive that it does not intend
to renew this Agreement as provided in Section 1.7 shall constitute a
termination by the Company without Cause unless such notice fulfills the
requirements of Section 1.6(a)(iv)(A) or (B) above.
(v) The Executive's voluntary resignation by the delivery to the
Board of a written notice from Executive that Executive has resigned with
or without Good Reason. "Good Reason" shall mean the Executive's
resignation (a) after Executive has delivered written notice to the Company
stating that his position, duties or responsibilities have been materially
altered by the Company without his written consent and such alteration has
not been corrected by the Company within 30 days of such notice, (b) within
three months following the
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occurrence of a Change in Control (as defined in Paragraph (c) below), or
(c) after the Company requires the Executive to be based in any city other than
the city where the Executive was based without a valid business reason.
(b) Severance Pay.
(i) If Executive's employment is terminated by the Company
without Cause or if he resigns for Good Reason, including without
limitation in each case any termination without Cause or a resignation for
Good Reason as of the end of the Service Term, then Executive shall be
entitled to severance pay ("Severance Pay") in an aggregate amount equal to
Executive's current Base Salary for a period of one year; provided,
however, that the Company's obligation to Executive for Severance Pay shall
immediately cease if Executive is in violation of the provisions of Section
1.8(a) hereof. The Severance Pay shall be paid by the Company to the
Executive in twelve equal monthly consecutive installments payable
commencing on the Company's regularly scheduled payroll date next following
the date of Executive's termination or resignation with Good Reason. Until
such time as Executive has received all of his Severance Pay, he will be
entitled to continue to receive all fringe benefits required to be provided
by the Company to Executive under Section 1.4 of this Agreement.
(ii) If Executive is terminated by the Company with Cause or if
Executive resigns his position, then the Company shall owe no Severance
Pay.
(iii) Notwithstanding the foregoing, Executive shall only be
entitled to Severance Pay in the event that the Company, together with its
wholly-owned subsidiaries, has acquired a business or businesses in the
copier/office equipment dealer industry with an aggregate pro forma EBIT
(as defined in Section 1.3) for the then current fiscal year of at least $5
million.
(c) Change in Control. For purposes of this Agreement, a "Change in
Control" shall mean a change in control of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A, as in
effect on the date of this Agreement, promulgated under the Securities Exchange
Act of 1934, as amended (without regard to whether the Company is subject to
such Regulation).
1.7 Term of Employment. Executive's employment under this Agreement shall
commence on the date of the Company's Base Acquisition (as hereinafter defined)
and shall continue for three years from such date (the "Service Term");
thereafter this Agreement shall be automatically renewed and the Service Term
extended for one-year periods commencing on the third anniversary date of the
Base Acquisition and, thereafter, on each successive anniversary date unless the
Company or Executive notifies the other party in writing at least thirty days
prior to such anniversary date that it or he desires to terminate this
Agreement. For purposes of this Section 1.7, "Base Acquisition" shall mean the
Company's first acquisition of a business or businesses engaged in the
copier/office equipment dealer industry.
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1.8 Covenant Not to Compete.
(a) Executive agrees that, while Executive is employed by the Company
under this Agreement and for a period of one year thereafter, he will not:
(i) except with the express written consent of the Board, either
directly or indirectly, for himself or on behalf or in conjunction with any
other person, partnership, corporation or other entity, own, maintain, engage
in, render any services for, manage, contact, have any financial interest in, or
permit his name to be used in connection with, any copier/office equipment
dealer business which then competes with the Company or its subsidiaries or any
business in which the Company has entertained discussions to acquire such
business prior to the date that Executive's employment hereunder is terminated;
provided, however, that notwithstanding the foregoing, Executive may during such
period (a) own up to 1% of the outstanding voting securities of any publicly-
held company and (b) resume his consulting business in the manner now conducted
by him; and
(ii) solicit any current or prospective customers of the Company
in any market in which the Company or its subsidiaries are engaged or have firm
plans to enter within six months after the date that Executive's employment
hereunder is terminated;
(iii) make any remarks, statements, speeches or any other written
or oral communication to any person or the public which would in any way
disparage, criticize, embarrass, slander, libel or otherwise be derogatory to
the Company and its subsidiaries, or their employees, officers or directors or
to GTCR and its Affiliates.
(b) If, at the time of enforcement of any provision of Section 1.8(a)
above, a court holds that the restrictions stated therein are unreasonable under
circumstances then existing, the parties hereto agree that the maximum period,
scope or geographical area reasonable under such circumstances will be
substituted for the stated period, scope or area.
(c) In the event of a breach by Executive of the provisions of Section
1.8(a) above, the Company or its successors or assigns may, in addition to other
rights and remedies existing in their favor, apply to any court of competent
jurisdiction for specific performance and/or injunctive or other relief in order
to enforce or prevent any violations of the provisions thereof.
1.9 Confidential Information. Executive acknowledges that the information,
observations and data obtained by him during the course of his employment with
the Company concerning the business or affairs of the Company and its affiliates
are the property of the Company. Therefore, Executive agrees that he will not
disclose to any unauthorized person or use for his own benefit any of such
information, observations or data without the Board's prior
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written consent, unless and to the extent that the aforementioned matters (i)
are generic to the Industry; (ii) are known or developed by Executive prior to
the date of this Agreement; (iii) become generally known to and available for
use by the public otherwise than as a result of the Executive's acts or
omissions in violation of this Agreement; or (iv) are required to be disclosed
by judicial process or law. Executive agrees to deliver to the Company at the
termination of his employment, or at any other time the Company may request, all
memoranda, notes, plans, records, reports and other documents (and copies
thereof) relating to the business of the Company and its affiliates which he may
then possess or have under his control.
1.10 Executive's Representations and Warranty. Executive represents and
warrants that he has full right and authority to enter into this Agreement and
fully to perform his obligations hereunder, that he is not subject to any
non-competition agreement, and that his past, present and anticipated future
activities have not and will not infringe on the proprietary rights of others.
Executive further represents and warrants that he is not obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency which would conflict with his obligation to use his best
efforts to promote the interests of the Company or which would conflict with the
Company's business as conducted or proposed to be conducted. Neither the
execution nor delivery of this Agreement, nor the carrying on of the Company's
business as an officer, director or employee by Executive, will conflict with or
result in a breach of the terms, conditions or provisions of or constitute a
default under any contract, covenant or instrument under which Executive is now
obligated.
ARTICLE II. TERMS AND CONDITIONS
RELATING TO EXECUTIVE SHARES
2.1 Definitions. For purposes of Articles II and III of this Agreement, the
following terms will have the meanings set forth below:
"Executive Shares" means all shares of the Company's Class B Common
purchased by Executive pursuant to Section 2.2 hereof; all Executive Shares will
continue to be Executive Shares in the hands of any holder other than Executive
(except for the Fund, the Fund's affiliates and purchasers pursuant to an
offering registered with the Securities and Exchange Commission or purchasers
acquiring Executive Shares in a market sale made pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended (the "1933 Act")), and
each such other holder of Executive Shares will succeed to all rights and
obligations attributable to Executive as a holder of Executive Shares hereunder.
"Fair Market Value" of each share of Class B Common shall mean (a) the
Company's EBIT (as defined in Section 1.3) for the rolling twelve month period
ending on the last day of the most recent calendar quarter prior to the date of
determination multiplied by (b) the Recent Acquisition Multiples plus, (c)
Excess Cash less, (d) the sum of (i) all outstanding long-term indebtedness of
the Company and its subsidiaries on the date of determination, (ii) the
redemption value of all shares of the Company's preferred stock (if any) and all
accrued dividends thereon on the date of determination, and (iii) the sum of the
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Unreturned Original Cost and the Unpaid Yield (as such terms are defined in the
Company's certificate of incorporation in effect on the date hereof) on the
Company's Class A Common Stock, multiplied by (e) .9 and divided by (f) the
aggregate number of shares of Class B Common then outstanding. For purposes of
this definition, "Recent Acquisition Multiples" shall mean (x) the sum of the
aggregate purchase prices paid by the Company for its three most recent
acquisitions in the copier/office equipment dealer industry (or such total
number of acquisitions if the Company has made less than three acquisitions)
prior to the date of determination, divided by (y) the sum of the pro forma EBIT
for each of such acquisitions calculated based on the Company's projections for
such acquisitions for the twelve calendar months following the month of the
consummation of each such acquisition. For purposes of this definition, "Excess
Cash" shall mean the amount by which cash or cash equivalents of the Company
exceed the Company's current liabilities on the date of determination, as
reasonably determined by the Board in good faith in accordance with generally
accepted accounting principles.
"Initial Public Offering" shall mean the completion of the first offering
of the Company's Common Stock to the public pursuant to an effective
registration statement under the Securities Act with net proceeds to the Company
or the sellers of such Common Stock of not less than $5 million.
"Restricted Shares" means, on any date following Executive's Starting Date
as President and Chief Executive Officer of the Company but prior to the fifth
anniversary of the Starting Date, a number of Executive Shares equal to 80% of
the number of Executive Shares outstanding on such date reduced by 16% of such
Executive Shares for each full year of the Service Term prior to such date
(calculated annually on each anniversary of the Starting Date). No Executive
Shares shall be Restricted Shares on or after the fifth anniversary of the
Starting Date or, if earlier, upon the occurrence of any event specified in
Section 2.8. In the event of the termination of Executive's employment because
of Executive's death or disability (as reasonably determined by the Company's
Board in accordance with Section 1.6 hereof), the number of Restricted Shares
outstanding on the resultant Termination Date shall be the lesser of the number
of Restricted Shares as calculated above or 50% of the number of Executive
Shares outstanding on such date.
"Securities Act" shall mean the Securities Act of 1933, as amended from
time to time.
"Vested Shares" means Executive Shares that are not Restricted Shares.
2.2 Purchase and Sale of Executive Shares.
(a) Executive hereby subscribes and agrees to purchase, and the Company
hereby agrees to sell to Executive, on the date hereof, 4,901.96 shares of the
Company's Class B Common at an issuance price of $9.00 per share, for a total
purchase price in cash of $44,118.
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(b) The Company will also reserve up to 4,901.95 shares of Class B
Common for sale to other members of the Company's management (the "Other
Executive Stock") at a price of $9.00 per share. The allocation of the Other
Executive Stock among such managers shall be determined by the Executive in
consultation with the Board. In the event that any portion of the Other
Executive Stock has not been sold prior to the earlier of (i) a public offering
of the Company's Class B Common or (ii) the date of a Sale (as defined in the
Stockholders Agreement) of the Company (collectively, the "Unissued Shares"),
than the Unissued Shares shall be offered for sale to the Fund and the Executive
at a price of $9.00 per share. In the event both the Fund and the Executive
elect to purchase such Unissued Shares, the sale of the Unissued Shares to the
Fund and the Executive shall be allocated between them based on their relative
percentage ownership of the Common Stock on such date (assuming for purposes
hereof the conversion of all outstanding shares of the Company's Class A Common
Stock into 10% of the Class B Common outstanding immediately following the
conversion).
2.3 Investment Representations. Executive represents and warrants that the
Executive Shares to be acquired by him pursuant to this Agreement will be
acquired for his own account and not with a view to, or present intention of,
distribution thereof in violation of the Securities Act, and will not be
disposed of in contravention of the Securities Act. Executive acknowledges that
he is able to bear the economic risk of his investment in the Executive Shares
for an indefinite period of time, because the Executive Shares have not been
registered under the Securities Act and, therefore, cannot be sold unless
subsequently registered under the Securities Act or an exemption from such
registration is available.
2.4 Repurchase Option.
(a) If the services provided by the Executive to the Company shall
terminate at any time for any reason whatsoever (the date of such termination
referred to herein as the "Termination Date"), the Company shall have the option
("Option") to purchase from Executive all of his (i) Restricted Shares as of the
Termination Date, at the purchase price per share originally paid by Executive
for the Restricted Shares and (ii) Vested Shares at a purchase price per share
equal to the Fair Market Value. The Company shall give written notice of its
intention to purchase such Executive Shares to Executive (or his personal
representative) within 90 days after the Termination Date and shall deliver a
check or cash in payment for such Executive Shares within 120 days after the
Termination Date. Executive shall deliver to the Company a properly endorsed
unencumbered certificate representing the Executive Shares so repurchased.
(b) If for any reason the Company does not elect to purchase all the
Executive Shares pursuant to the Option, the Fund shall be entitled to exercise
the Option in the manner set forth in Section 2.4(a) for the Executive Shares
that the Company has not elected to purchase (the "Available Shares"). As soon
as practicable after the Company has determined that there will be Available
Shares, but in any event within 30 days after the Termination Date, the Company
will give written notice to the Fund setting forth the number of Available
Shares, and the Fund may elect to purchase Available Shares by delivering
written notice to the Company and Executive within 60 days after receipt of such
notice. As soon as practicable,
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and in any event within the 120 day period set forth above in Section 2.4(a),
the Company shall notify Executive as to the number of Executive Shares being
purchased by the Fund and the Fund shall deliver a check or cash in payment for
such Executive Shares within 120 days after the Termination Date.
(c) Executive shall not sell, transfer, pledge or otherwise dispose of
Executive Shares, or any interest in any Executive Shares, except that Executive
may transfer all or a part of his Executive Shares to members of his immediate
family by gift, or to a trust for the benefit of Executive and/or members of his
immediate family, or by will or the laws of descent and distribution, and any
such trust may transfer shares to the Executive and/or members of the
Executive's immediate family in accordance with its terms; provided that any
Executive Shares so transferred shall remain subject to all the terms and
conditions of this Agreement; and further provided that Executive shall retain
the power to vote any Executive Shares so transferred under an irrevocable proxy
or other arrangement reasonably satisfactory to the Company (the "Retention
Agreement").
(d) The right to repurchase Executive Shares shall terminate if there
is a Change in Control of the Company (as defined in Section 1.6(c)) or if the
Company (i) sells to an unaffiliated third party all or substantially all of its
assets on a consolidated basis in any single transaction or series of related
transactions (other than sales in the ordinary course of business) or (ii)
merges or consolidates with or into another corporation, except for a merger
after giving effect to which, the holders of the Company's voting capital stock
immediately prior to the merger, assuming conversion or exercise of all
securities convertible into or exercisable for voting capital stock (the "Voting
Capital"), will own a majority of the Company's Voting Capital subsequent to the
merger. The right to repurchase Vested Shares set forth in Sections 2.4(a) and
(b) shall terminate upon the closing of an Initial Public Offering.
2.5 Changes in Capital Structure. If any changes are made in the Company's
Common Stock by reason of any merger, consolidation, reorganization,
recapitalization, stock dividend, stock split or any other combination or
exchange of Common Stock, any and all new or substituted securities to which
Executive is entitled because of his ownership of the Executive Shares shall be
deemed to be Executive Shares for the purposes of this Agreement, and
corresponding adjustments shall be made in the number and kind of securities
which Executive has the right to acquire hereunder. For the purpose of
establishing the purchase price under the Option, the original price per share
paid by Executive as described in Section 2.2 shall be appropriately adjusted to
reflect such changes. In addition, the right to purchase Executive Shares under
Section 2.4(a) above (i) shall be made in good faith by the Board and (ii) shall
not be made within six months of any event specified in Section 2.8, unless
Executive has been terminated for Cause.
2.6 Stockholders Agreement. Executive agrees to execute and to be bound by
the terms of the Stockholders Agreement and to the addition of the stock
certificate legend required by the Stockholders Agreement on his shares of
Common Stock.
2.7 Transfers Not Recognized. Executive recognizes that his Executive
Shares are subject to certain restrictions on transfer, including the Option,
the Retention
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Agreement, and the Stockholders Agreement. Any sale, transfer or other
disposition by Executive of all or a portion of the Executive Shares, or any
interest therein, which is not made in conformity with the above restrictions,
as well as any others in this Agreement or the Stockholders Agreement, shall be
null and void, and the secretary of the Company or other person having custody
and control of the stock transfer records of the Company shall not be required
to recognize such sale, transfer, or other disposition, nor to issue a new stock
certificate or certificates therefor unless or until the secretary or such other
person shall have received written evidence satisfactory to counsel for the
Company that the sale, transfer, or other disposition is made in conformity with
and not in violation of the terms of this Agreement.
2.8 Termination of Restrictions. The restrictions on the Executive Shares,
including the restrictions on the transfer thereof, set forth in this Article II
will terminate on the first to occur of (i) the date on which the Company is
merged or consolidated into a new surviving company and the holders of the
Company's Common Stock immediately prior to the merger or consolidation own less
than a majority of the Company's Common Stock subsequent to such merger or
consolidation, (ii) there is a sale of all, or substantially all, of the
Company's assets or capital stock in a single transaction or series of related
transactions, (iii) upon a Change in Control of the Company (as defined in
Section 1.6(c)). Except for the provisions of Section 2.4(a)(i), the
restrictions on Executive Shares shall terminate upon the closing of an Initial
Public Offering.
2.9 Securities Act Restrictions.
(a) The certificates representing the Executive Shares will bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON
____________, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN
OTHER AGREEMENTS SET FORTH IN AN EXECUTIVE AGREEMENT BETWEEN, AMONG OTHERS,
GLOBAL IMAGING SYSTEMS INC. AND THOMAS S. JOHNSON, DATED AS OF JUNE
__, 1994, A COPY OF WHICH MAY BE OBTAINED BY THE HOLDER HEREOF AT SUCH
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
(b) No holder of Executive Shares may sell, transfer or dispose of any
Executive Shares (except pursuant to an effective registration statement under
the Securities Act) without first delivering to the Company an opinion of
counsel reasonably acceptable in form and substance to the Company that
registration under the Securities Act is not required in connection with such
transfer.
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(c) Each holder of Executive Shares agrees not to effect any public
sale or distribution of any equity securities of the Company, or any securities
convertible into or exchangeable or exercisable for such securities, during the
seven days prior to and the 90 days after the date on which any registration
statement covering securities of the Company (whether a primary or secondary
offering) becomes effective under the Securities Act.
2.10 Section 83(b) Filing. Within 30 days after the date of this Agreement,
Executive will make an effective election with the Internal Revenue Service
under Section 83(b) of the Internal Revenue Code and the regulations promulgated
thereunder in the form of Exhibit A attached hereto for the Executive Shares.
ARTICLE III. GENERAL PROVISIONS
3.1 Notices. Any notice provided for in this Agreement must be in writing
and must be delivered to the recipient at the address below indicated:
To the Company:
P.O. Box 273478
Tampa, Florida 33688-3478
Facsimile No. (813) 264-7877
Attention: Chairman
To Executive:
Thomas S. Johnson
P.O. Box 273478
Tampa, Florida 33688-3478
Facsimile No.: (813) 264-7877
To the Fund:
Golder, Thoma, Cressey, Rauner
Fund IV Limited Partnership
Suite 6100
233 South Wacker Drive
Chicago, Illinois 60606
Attention: Carl D. Thoma
Facsimile No.: (312) 382-2201
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given five business days
after mailing by first class mail, certified
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return receipt requested, one business day after delivery to a receipted courier
for next business day delivery, or upon transmission by telex or facsimile.
3.2 Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
3.3 Complete Agreement. This Agreement, those documents expressly referred
to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
3.4 Counterparts; Facsimile Transmission. This Agreement may be executed on
separate counterparts, each of which is deemed to be an original and all of
which taken together constitute one and the same agreement. This Agreement may
be executed and delivered by facsimile transmission.
3.5 Successors and Assigns. This Agreement is intended to bind and inure to
the benefit of and be enforceable by Executive, the Company and the Fund, and
their respective successors and assigns, except that Executive may not assign
any of his rights or obligations under Article I.
3.6 Choice of Law. The corporate law of the State of Delaware will govern
all questions concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity and
interpretation of this Agreement will be governed by the internal law, and not
the law of conflicts, of the State of Florida.
3.7 Remedies. Each of the parties to this Agreement (including the Fund)
will be entitled to enforce its rights under this Agreement specifically, to
recover damages by reason of any provision of this Agreement and to exercise all
other rights existing in its favor. The parties hereto agree and acknowledge
that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that any party may in its sole discretion apply
to any court of law or equity of competent jurisdiction for specific performance
and/or injunctive relief in order to enforce or prevent any violations of the
provisions of this Agreement. The prevailing party in any action described in
this Section 3.7 shall be entitled to payment of its reasonable attorneys' fees
from the other party.
3.8 Amendments and Waivers. Any provision of this Agreement may be amended
or waived only with the prior written consent of the Company and Executive;
provided that no provision of Section 1.5 or Article II may be amended or waived
without the prior written consent of the Fund.
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3.9 Expenses. The Company agrees to pay and hold the Executive harmless
against liability for the payment of the reasonable fees and expenses of his
counsel arising in connection with the negotiation, execution and consummation
of the transactions contemplated by this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
EXECUTIVE:
By: /s/ Thomas S. Johnson
------------------------------
Thomas S. Johnson
GLOBAL IMAGING SYSTEMS INC.
By: /s/ Carl D. Thoma
------------------------------
Carl D. Thoma
Chairman
Accepted as of June 9, 1994:
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV LIMITED PARTNERSHIP
By: GOLDER, THOMA, CRESSEY,
RAUNER IV L.P.
General Partner
By: Golder, Thoma, Cressey, Rauner, Inc.
General Partner
By: /s/ Carl D. Thoma
-----------------------------
Carl D. Thoma
Authorized Officer
The Exhibits to this Executive Agreement are not included with this Registration
Statement on Form S-1. Global will provide these exhibits upon the request of
the Securities and Exchange Commission.
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AMENDMENT NO. 1
TO
EXECUTIVE AGREEMENT
THIS AMENDMENT NO. 1 TO EXECUTIVE AGREEMENT is entered into as of August
14, 1996 by and among Global Imaging Systems Inc., a Delaware corporation (the
"Company"), Golder, Thoma, Cressey, Rauner Fund IV, L.P. ("GTCR") and Thomas S.
Johnson ("Johnson").
WITNESSETH
The Company, GTCR and Johnson are parties to an Executive Agreement dated
June 9, 1994 (the "Executive Agreement"). In order to induce GTCR to amend that
certain Equity Purchase Agreement dated June 9, 1994 among the Company, GTCR and
Johnson (the "Purchase Agreement"), the Company, GTCR and Johnson have agreed to
make certain changes to the Executive Agreement.
Certain capitalized terms used herein are defined in the Executive
Agreement.
The parties hereto agree as follows:
1. AMENDMENTS TO EXECUTIVE AGREEMENT.
1.1. Definitions. Section 2.1 of the Executive Agreement is hereby amended
to add the following new definition:
"Purchase Agreement" shall mean the Equity Purchase Agreement among
the Company, GTCR and Johnson dated June 9, 1994, as amended from time to
time."
1.2. New Paragraph. A new Section 2.4(e) is hereby added to the Executive
Agreement to read as follows:
"(e) Upon the earlier of (i) a Sale of the Company (as defined in
the Stockholders Agreement) or (ii) a Qualified Public Offering (as defined
in the Stockholders Agreement), the Company shall have the right to redeem
a number of Executive Shares determined based on the following formula:
<PAGE>
Redeemed Amount = OB x (1 - (OA / IC))
WHERE:
OB = The number of Class B Common Shares purchased by the Executive
pursuant to this Agreement.
OA = The number of Class A Common Shares purchased by GTCR pursuant to the
Purchase Agreement on the date of determination.
IC = The aggregate number of shares of Class A Common which GTCR would have
acquired if it had purchased its full Individual Commitment under the
Purchase Agreement.
For example:
If Executive purchased 5,000 shares of Class B Common pursuant to the
Executive Agreement and GTCR has purchased 8,000 of its 10,000 shares of
Class A Common pursuant to the Purchase Agreement prior to a Qualified Public
Offering, then:
Redeemed Amount = 5,000 x (1 - (8,000 / 10,000))
Redeemed Amount = 5,000 x (1 - .8)
Redeemed Amount = 5,000 x .2
Redeemed Amount = 1,000 shares of Class B Common
The number of Redeemed Shares may then be repurchased in cash by the Company
for an amount equal to the original purchase price for such shares. In
addition, the Company shall reimburse the Executive for any income taxes
associated with such redemption."
2. EFFECT OF THE AMENDMENT. All references in the Purchase Agreement or in
any other document to the "Johnson Executive Agreement" shall mean the Executive
Agreement as amended by this Amendment. Except as specifically amended above,
the Executive Agreement shall remain in full force and effect and is hereby
ratified and confirmed.
3. DESCRIPTIVE HEADINGS. The descriptive headings of this Amendment are
inserted for convenience only and do not constitute a part of this Amendment.
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4. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of Florida.
5. COUNTERPARTS. This Amendment may be executed and delivered in
counterparts, each of which shall constitute an original, and all of which
together shall constitute one Amendment.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 to
Executive Agreement as of the date first written above.
GLOBAL IMAGING SYSTEMS INC.
By: /s/ Thomas S. Johnson
-----------------------------------
Thomas S. Johnson, President
and Chief Executive Officer
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV LIMITED PARTNERSHIP
By: GTCR IV, L.P.
General Partner
By: Golder, Thoma, Cressey, Rauner Inc.
General Partner
By:
-----------------------------------
Carl D. Thoma
Authorized Officer
/s/ Thomas S. Johnson
---------------------------------------
Thomas S. Johnson
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IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 to
Executive Agreement as of the date first written above.
GLOBAL IMAGING SYSTEMS INC.
By:
-----------------------------------
Thomas S. Johnson, President
and Chief Executive Officer
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV LIMITED PARTNERSHIP
By: GTCR IV, L.P.
General Partner
By: Golder, Thoma, Cressey, Rauner Inc.
General Partner
By: /s/ Carl D. Thoma
-----------------------------------
Carl D. Thoma
Authorized Officer
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Thomas S. Johnson
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EXHIBIT 10.9
EXECUTIVE AGREEMENT
This Executive Agreement (this "Agreement") is entered into as of June 9,
1994, by and between Raymond Schilling (the "Executive") and Global Imaging
Systems Inc., a Delaware corporation (the "Company"). Golder, Thoma, Cressey,
Rauner Fund IV Limited Partnership, an Illinois limited partnership (the "Fund")
is also a party to this Agreement for purposes of Section 2.4 of this Agreement.
WITNESSETH:
WHEREAS, Executive wishes to purchase, and the Company wishes to sell to
Executive, 1,633.98 shares of the Company's Class B Common Stock, par value $.01
per share (the "Class B Common"), representing 2.5% of the shares of the
Company's Common Stock, par value $.01 per share (the "Common Stock"), and
WHEREAS, the Company and Executive desire to enter into an agreement to
provide for the terms and conditions of Executive's employment with the Company,
and the terms and conditions relating to Executive's purchase of shares of the
Company's Class B Common.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties hereto agree as follows:
ARTICLE I. TERMS AND CONDITIONS OF SERVICES
1.1 Engagement. The Company hereby engages the Executive as the Company's
Vice President, Chief Financial Officer, Treasurer and Secretary, and Executive
agrees to serve the Company, during the Service Term (defined in Section 1.5) in
the capacities, and subject to the terms and conditions, set forth in this
Agreement.
1.2 Services.
(a) During the Service Term, Executive will serve as Vice
President, Chief Financial Officer, Treasurer and Secretary of the Company and
will be responsible for all financial and accounting matters of the Company as
well as such other duties and responsibilities as established from time to time
by the Company's Chief Executive Officer and the Company's Board of Directors
(the "Board"). Executive will devote his best efforts and substantially all of
his business time and attention (except for vacation periods and periods of
illness or other incapacity) to the business of the Company and its
subsidiaries. Notwithstanding the foregoing, and provided that such activities
do not interfere with the fulfillment of
<PAGE>
Executive's obligations hereunder, Executive may (i) serve as a director of a
Corporation that does not compete with the Company and is not engaged in the
office product service business; (ii) serve as a director, trustee or officer or
otherwise participate in educational, welfare, social, religious and civic
organizations; (iii) serve as a director, officer or employee of any other
entity if and to the extent specifically consented to in writing by the Board;
and (iv) acquire investment interests in one or more entities which are not,
directly or indirectly, in competition with the Company or its subsidiaries and
which do not provide supplies to the Company, except that the Executive may own
up to 1 % of the outstanding voting securities of any publicly-held company.
(b) Unless the Company and Executive agree to the contrary,
Executive's place of employment shall be at the Company's principal executive
offices in Tampa, Florida; provided, however, that Executive will work out of
his home in Sacramento or at such other locations as may be necessary in order
to discharge his duties hereunder until consummation of the Company's Base
Acquisition (as defined in Section 1.5 below). In connection with the
establishment of the principal executive office, the Company will pay all of the
Executive's reasonable out-of-pocket moving expenses associated with his
relocation to Tampa (up to a maximum of $40,000). In the event that the Company
and Executive agree that Executive should relocate his place of employment more
than 100 miles from Tampa, Florida, the Company will reimburse Executive for all
reasonable relocation expenses incurred.
(c) The Company shall reimburse the Executive for all out-of-pocket
expenses of the Executive incurred for the benefit of the Company prior to the
date hereof.
1.3 Salary and Bonus. During the Service Term, the Company will pay
Executive an annual base salary of $100,000, subject to periodic increases at
the discretion of the Company's Board of Directors (the "Base Salary"). In
addition, Executive will be eligible for an annual bonus of up to 40% of his
Base Salary based on Executive's attainment of defined budget and corporate
objectives as set by the Company's Board for the year in accordance with any
management incentive bonus plan or other incentive plan or bonus which the Board
establishes and maintains for its key employees; provided, however, that
Executive shall be entitled to a one-time bonus of $20,000 in the month
following the date which is one year after the consummation of the Base
Acquisition (the "Bonus Month"). In addition, Executive shall be entitled to an
additional one-time bonus of $20,000 in the event that the Company, together
with its wholly-owned subsidiaries, achieves a quarterly EBIT (as hereinafter
defined) of at least $1.25 million for any fiscal quarter prior to the
expiration of the fiscal quarter in which the Bonus Month occurs. For purposes
of this Agreement, "EBIT" shall mean the Company's earnings before interest and
taxes computed in accordance with Generally Accepted Accounting Principles,
consistently applied. Upon termination of his employment with the Company for
any reason other than good cause shown or his resignation with Good Reason (as
defined in the Executive Agreement with Johnson of even date herewith),
Executive will be entitled to receive a pro rata portion of the incentive
compensation for the year (pro rated based upon the number of days in such year
during which Executive is employed by the Company) in which the termination
occurred. Such pro rated incentive compensation shall be paid at such time as
the Company pays incentive compensation to its other management employees for
such year.
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1.4 Other Benefits. Executive shall be entitled to receive fringe benefits
customary for the industry including three weeks vacation, health/accident
insurance, disability insurance and life insurance, reimbursement of reasonable
business expenses and other employee benefits as in effect from time to time for
the management employees of the Company.
1.5 Term of Employment. Executive's employment under this Agreement shall
commence on May 1, 1994 and shall continue at the pleasure of the Board in
accordance with the Company's bylaws or until the first to occur of Executive's
resignation, removal, death or disability (as determined in good faith by the
Board) (the "Service Term"); provided, however, that the Service Term shall end
on December 31, 1994 and Executive's employment with the Company shall terminate
on such date (and the Company shall owe Executive no severance pay), in the
event that the Company has not consummated a Base Acquisition (as hereinafter
defined) prior to December 31, 1994; provided, however, that if the Company is
engaged in good faith negotiations towards the consummation of a Base
Acquisition on such date, then the Service Term shall be extended unless such
negotiations terminate without consummation of the Base Acquisition. For
purposes of this Section 1.6, "Base Acquisition" shall mean the Company's first
acquisition of a business engaged in the copier/office equipment dealer
industry.
1.6 Covenant Not to Compete.
(a) Executive agrees that, while Executive is employed by the Company
under this Agreement and for a period of one year thereafter, he will not:
(i) except with the express written consent of the Board,
either directly or indirectly, for himself or on behalf or in conjunction with
any other person, partnership, corporation or other entity, own, maintain,
engage in, render any services for, manage, contact, have any financial interest
in, or permit his name to be used in connection with, any copier/office
equipment dealer business which then competes with the Company or its
subsidiaries or any business in which the Company has entertained discussions to
acquire such business prior to after the date that Executive's employment
hereunder is terminated; provided, however, that notwithstanding the foregoing,
Executive may during such period own up to 1 % of the outstanding voting
securities of any publicly-held company; or
(ii) make any remarks, statements, speeches or any other written
or oral communication to any person or the public which would in any way
disparage, criticize, embarrass, slander, libel or otherwise be derogatory to
the Company and its subsidiaries, or their employees, officers or directors or
to GTCR and its Affiliates.
(b) If, at the time of enforcement of any provision of Section 1.6(a)
above, a court holds that the restrictions stated therein are unreasonable under
circumstances then existing, the parties hereto agree that the maximum period,
scope or geographical area reasonable under such circumstances will be
substituted for the stated period, scope or area.
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(c) In the event of a breach by Executive of the provisions of
Section 1.6(a) above, the Company or its successors or assigns may, in addition
to other rights and remedies existing in their favor, apply to any court of
competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce or prevent any violations of the provisions thereof.
1.7 Confidential Information. Executive acknowledges that the information,
observations and data obtained by him during the course of his employment with
the Company concerning the business or affairs of the Company and its affiliates
are the property of the Company. Therefore, Executive agrees that he will not
disclose to any unauthorized person or use for his own benefit any of such
information, observations or data without the Board's prior written consent,
unless and to the extent that the aforementioned matters (i) are generic to the
Industry; (ii) are known or developed by Executive prior to the date of this
Agreement; (iii) become generally known to and available for use by the public
otherwise than as a result of the Executive's acts or omissions in violation of
this Agreement; or (iv) are required to be disclosed by judicial process or law.
Executive agrees to deliver to the Company at the termination of his employment,
or at any other time the Company may request, all memoranda, notes, plans,
records, reports and other documents (and copies thereof) relating to the
business of the Company and its affiliates which he may then possess or have
under his control.
1.8 Executive's Representations and Warranty. Executive represents and
warrants that he has full right and authority to enter into this Agreement and
fully to perform his obligations hereunder, that he is not subject to any
non-competition agreement, and that his past, present and anticipated future
activities have not and will not infringe on the proprietary rights of others.
Executive further represents and warrants that he is not obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency which would conflict with his obligation to use his best
efforts to promote the interests of the Company or which would conflict with the
Company's business as conducted or proposed to be conducted. Neither the
execution nor delivery of this Agreement, nor the carrying on of the Company's
business as an officer, director or employee by Executive, will conflict with or
result in a breach of the terms, conditions or provisions of or constitute a
default under any contract, covenant or instrument under which Executive is now
obligated.
ARTICLE II. TERMS AND CONDITIONS
RELATING TO EXECUTIVE SHARES
2.1 Definitions. For purposes of Articles II and III of this
Agreement, the following terms will have the meanings set forth below:
"Executive Shares" means all shares of the Company's Class B Common
purchased by Executive pursuant to Section 2.2 hereof; all Executive Shares will
continue to be Executive Shares in the hands of any holder other than Executive
(except for the Fund, the Fund's affiliates and purchasers pursuant to an
offering registered with the Securities and
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Exchange Commission or purchasers acquiring Executive Shares in a market sale
made pursuant to Rule 144 promulgated under the Securities Act of 1933, as
amended (the "1933 Act")), and each such other holder of Executive Shares will
succeed to all rights and obligations attributable to Executive as a holder of
Executive Shares hereunder.
"Change in Control" shall mean a change in control of a nature that would
be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A, as in effect on the date of this Agreement, promulgated under
the Securities Exchange Act of 1934, as amended (without regard to whether the
Company is subject to such Regulation).
"Fair Market Value" of each share of Class B Common shall mean (a) the
Company's EBIT (as defined in Section 1.3) for the rolling twelve month period
ending on the last day of the most recent calendar quarter prior to the date of
determination multiplied by (b) the Recent Acquisition Multiples plus, (c)
Excess Cash less, (d) the sum of (i) all outstanding long-term indebtedness of
the Company and its subsidiaries on the date of determination, (ii) the
redemption value of all shares of the Company's preferred stock (if any) and all
accrued dividends thereon on the date of determination, and (iii) the sum of the
Unreturned Original Cost and the Unpaid Yield (as such terms are defined in the
Company's certificate of incorporation in effect on the date hereof) on the
Company's Class A Common Stock, multiplied by (e) .9 and divided by (f) the
aggregate number of shares of Class B Common then outstanding. For purposes of
this definition, "Recent Acquisition Multiples" shall mean (x) the sum of the
aggregate purchase prices paid by the Company for its three most recent
acquisitions in the copier/office equipment dealer industry (or such total
number of acquisitions if the Company has made less than three acquisitions)
prior to the date of determination, divided by (y) the sum of the pro forma EBIT
for each of such acquisitions calculated based on the Company's projections for
such acquisitions for the twelve calendar months following the month of the
consummation of each such acquisition. For purposes of this definition, "Excess
Cash" shall mean the amount by which cash or cash equivalents of the Company
exceed the Company's current liabilities on the date of determination, as
reasonably determined by the Board in good faith in accordance with generally
accepted accounting principles.
"Initial Public Offering" shall mean the completion of the first offering
of the Company's Common Stock to the public pursuant to an effective
registration statement under the Securities Act with net proceeds to the Company
or the sellers of such Common Stock of not less than $5 million.
"Restricted Shares" means, on any date following the Company's Base
Acquisition but prior to the fifth anniversary of the Base Acquisition, a number
of Executive Shares equal to 100% of the number of Executive Shares outstanding
on such date reduced by 20% of such Executive Shares for each full year prior to
such date (calculated annually on each anniversary of the Base Acquisition). No
Executive Shares shall be Restricted Shares on or after the fifth anniversary of
the Base Acquisition or, if earlier, upon the occurrence of any event specified
in Section 2.8. In the event of the termination of Executive's employment
because of Executive's death or disability (as reasonably determined by the
Company's Board in accordance with Section 1.5 hereof), the number of Restricted
Shares outstanding on the
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resultant Termination Date shall be the lesser of the number of Restricted
Shares as calculated above or 50% of the number of Executive Shares outstanding
on such date.
"Securities Act" shall mean the Securities Act of 1933, as amended from
time to time.
"Vested Shares" means Executive Shares that are not Restricted Shares.
2.2 Purchase and Sale of Executive Shares. Executive hereby subscribes
and agrees to purchase, and the Company hereby agrees to sell to Executive, on
the date hereof, 1,633.98 shares of the Company's Class B Common at an issuance
price of $9.00 per share, for a total purchase price in cash of $14,706.
2.3 Investment Representations. Executive represents and warrants that the
Executive Shares to be acquired by him pursuant to this Agreement will be
acquired for his own account and not with a view to, or present intention of,
distribution thereof in violation of the Securities Act, and will not be
disposed of in contravention of the Securities Act. Executive acknowledges that
he is able to bear the economic risk of his investment in the Executive Shares
for an indefinite period of time, because the Executive Shares have not been
registered under the Securities Act and, therefore, cannot be sold unless
subsequently registered under the Securities Act or an exemption from such
registration is available.
2.4 Repurchase Option.
(a) If the services provided by the Executive to the Company shall
terminate at any time for any reason whatsoever (the date of such termination
referred to herein as the "Termination Date"), the Company shall have the option
("Option") to purchase from Executive all of his (i) Restricted Shares as of the
Termination Date, at the purchase price per share originally paid by Executive
for the Restricted Shares and (ii) Vested Shares at a purchase price per share
equal to the Fair Market Value. The Company shall give written notice of its
intention to purchase such Executive Shares to Executive (or his personal
representative) within 90 days after the Termination Date and shall deliver a
check or cash in payment for such Executive Shares within 120 days after the
Termination Date. Executive shall deliver to the Company a properly endorsed
unencumbered certificate representing the Executive Shares so repurchased.
(b) If for any reason the Company does not elect to purchase all the
Executive Shares pursuant to the Option, the Fund shall be entitled to exercise
the Option in the manner set forth in Section 2.4(a) for the Executive Shares
that the Company has not elected to purchase (the "Available Shares"). As soon
as practicable after the Company has determined that there will be Available
Shares, but in any event within 30 days after the Termination Date, the Company
will give written notice to the Fund setting forth the number of Available
Shares, and the Fund may elect to purchase Available Shares by delivering
written notice to the Company and Executive within 60 days after receipt of such
notice. As soon as practicable, and in any event within the 120 day period set
forth above in Section 2.4(a), the Company shall notify Executive as to the
number of Executive Shares being purchased by the Fund and the
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Fund shall deliver a check or cash in payment for such Executive Shares within
120 days after the Termination Date.
(c) Executive shall not sell, transfer, pledge or otherwise dispose
of Executive Shares, or any interest in any Executive Shares, except that
Executive may transfer all or a part of his Executive Shares to members of his
immediate family by gift, or to a trust for the benefit of Executive and/or
members of his immediate family, or by will or the laws of descent and
distribution, and any such trust may transfer shares to the Executive and/or
members of the Executive's immediate family in accordance with its terms;
provided that any Executive Shares so transferred shall remain subject to all
the terms and conditions of this Agreement; and further provided that Executive
shall retain the power to vote any Executive Shares so transferred under an
irrevocable proxy or other arrangement reasonably satisfactory to the Company
(the "Retention Agreement").
(d) The right to repurchase Executive Shares shall terminate if there
is a Change in Control of the Company or if the Company (i) sells to an
unaffiliated third party all or substantially all of its assets on a
consolidated basis in any single transaction or series of related transactions
(other than sales in the ordinary course of business) or (ii) merges or
consolidates with or into another corporation, except for a merger after giving
effect to which, the holders of the Company's voting capital stock immediately
prior to the merger, assuming conversion or exercise of all securities
convertible into or exercisable for voting capital stock (the "Voting Capital"),
will own a majority of the Company's Voting Capital subsequent to the merger.
The right to repurchase Vested Shares set forth in Sections 2.4(a) and (b) shall
terminate upon the closing of an Initial Public Offering.
2.5 Changes in Capital Structure. If any changes are made in the
Company's Common Stock by reason of any merger, consolidation, reorganization,
recapitalization, stock dividend, stock split or any other combination or
exchange of Common Stock, any and all new or substituted securities to which
Executive is entitled because of his ownership of the Executive Shares shall be
deemed to be Executive Shares for the purposes of this Agreement, and
corresponding adjustments shall be made in the number and kind of securities
which Executive has the right to acquire hereunder. For the purpose of
establishing the purchase price under the Option, the original price per share
paid by Executive as described in Section 2.2 shall be appropriately adjusted to
reflect such changes. In addition, the right to purchase Executive Shares under
Section 2.4(a) above (i) shall be made in good faith by the Board and (ii) shall
not be made within six months of any event specified in Section 2.8, unless
Executive has been terminated for cause.
2.6 Stockholders Agreement. Executive agrees to execute and to be
bound by the terms of the Stockholders Agreement and to the addition of the
stock certificate legend required by the Stockholders Agreement on his shares of
Common Stock.
2.7 Transfers Not Recognized. Executive recognizes that his Executive
Shares are subject to certain restrictions on transfer, including the Option,
the Retention Agreement, and the Stockholders Agreement. Any sale, transfer or
other disposition by Executive of all or a portion of the Executive Shares, or
any interest therein, which is not made
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in conformity with the above restrictions, as well as any others in this
Agreement or the Stockholders Agreement, shall be null and void, and the
secretary of the Company or other person having custody and control of the stock
transfer records of the Company shall not be required to recognize such sale,
transfer, or other disposition, nor to issue a new stock certificate or
certificates therefor unless or until the secretary or such other person shall
have received written evidence satisfactory to counsel for the Company that the
sale, transfer, or other disposition is made in conformity with and not in
violation of the terms of this Agreement.
2.8 Termination of Restrictions. The restrictions on the Executive
Shares, including the restrictions on the transfer thereof, set forth in this
Article II will terminate on the first to occur of (i) the date on which the
Company is merged or consolidated into a new surviving company and the holders
of the Company's Common Stock immediately prior to the merger or consolidation
own less than a majority of the Company's Common Stock subsequent to such merger
or consolidation, (ii) there is a sale of all, or substantially all, of the
Company's assets or capital stock in a single transaction or series of related
transactions, or (iii) upon a Change in Control of the Company. Except for the
provisions of Section 2.4(a)(i), the restrictions on Executive Shares shall
terminate upon the closing of an Initial Public Offering.
2.9 Securities Act Restrictions.
(a) The certificates representing the Executive Shares will bear
the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE
ORIGINALLY ISSUED ON ____________,HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT
REQUIRED. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN
REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN
AN EXECUTIVE AGREEMENT BETWEEN, AMONG OTHERS, GLOBAL IMAGING
SYSTEMS INC. AND RAYMOND SCHILLING, DATED AS OF JUNE _, 1994,
A COPY OF WHICH MAY BE OBTAINED BY THE HOLDER HEREOF AT SUCH
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
(b) No holder of Executive Shares may sell, transfer or dispose
of any Executive Shares (except pursuant to an effective registration statement
under the Securities Act) without first delivering to the Company an opinion of
counsel reasonably acceptable in form and substance to the Company that
registration under the Securities Act is not required in connection with such
transfer.
(c) Each holder of Executive Shares agrees not to effect any
public sale or distribution of any equity securities of the Company, or any
securities convertible into or
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exchangeable or exercisable for such securities, during the seven days prior to
and the 90 days after the date on which any registration statement covering
securities of the Company (whether a primary or secondary offering) becomes
effective under the Securities Act.
2.10 Section 83(b) Filing. Within 30 days after the date of this
Agreement, Executive will make an effective election with the Internal Revenue
Service under Section 83(b) of the Internal Revenue Code and the regulations
promulgated thereunder in the form of Exhibit A attached hereto for the
Executive Shares.
ARTICLE III. GENERAL PROVISIONS
3.1 Notices. Any notice provided for in this Agreement must be in
writing and must be delivered to the recipient at the address below indicated:
To the Company:
P.O. Box 273478
Tampa, Florida 33688-3478
Facsimile No. (813) 264-7877
Attention: Chairman
To Executive:
Raymond Schilling
P.O. Box 273478
Tampa, Florida 33688-3478
Facsimile No.: (813) 264-7877
To the Fund:
Golder, Thoma, Cressey, Rauner
Fund IV Limited Partnership
Suite 6100
233 South Wacker Drive
Chicago, Illinois 60606
Attention: Carl D. Thoma
Facsimile No.: (312) 382-2201
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given five business days
after mailing by first class mail, certified return receipt requested, one
business day after delivery to a receipted courier for next business day
delivery, or upon transmission by telex or facsimile.
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3.2 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
3.3 Complete Agreement. This Agreement, those documents expressly
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
3.4 Counterparts; Facsimile Transmission. This Agreement may be
executed on separate counterparts, each of which is deemed to be an original and
all of which taken together constitute one and the same agreement. This
Agreement may be executed and delivered by facsimile transmission.
3.5 Successors and Assigns. This Agreement is intended to bind and
inure to the benefit of and be enforceable by Executive, the Company and the
Fund, and their respective successors and assigns, except that Executive may not
assign any of his rights or obligations under Article I.
3.6 Choice of Law. The corporate law of the State of Delaware will
govern all questions concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity and
interpretation of this Agreement will be governed by the internal law, and not
the law of conflicts, of the State of Florida.
3.7 Remedies. Each of the parties to this Agreement (including the
Fund) will be entitled to enforce its rights under this Agreement specifically,
to recover damages by reason of any provision of this Agreement and to exercise
all other rights existing in its favor. The parties hereto agree and acknowledge
that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that any party may in its sole discretion apply
to any court of law or equity of competent jurisdiction for specific performance
and/or injunctive relief in order to enforce or prevent any violations of the
provisions of this Agreement. The prevailing party in any action described in
this Section 3.7 shall be entitled to payment of its reasonable attorneys' fees
from the other party.
3.8 Amendments and Waivers. Any provision of this Agreement may be
amended or waived only with the prior written consent of the Company and
Executive; provided that no provision of Article II may be amended or waived
without the prior written consent of the Fund.
3.9 Expenses. The Company agrees to pay and hold the Executive
harmless against liability for the payment of the reasonable fees and expenses
of his counsel arising in
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connection with the negotiation, execution and consummation of the transactions
contemplated by this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
EXECUTIVE:
By: /s/ Raymond Schilling
----------------------------------
Raymond Schilling
GLOBAL IMAGING SYSTEMS INC.
By: /s/ Thomas S. Johnson
----------------------------------
Thomas S. Johnson
President and Chief Executive Officer
Accepted as of June 9, 1994:
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV LIMITED PARTNERSHIP
By: GOLDER, THOMA, CRESSEY,
RAUNER IV L.P.
General Partner
By: Golder, Thoma, Cressey,
Rauner, Inc.
General Partner
By: /s/ Carl D. Thoma
---------------------------
Carl D. Thoma
Authorized Officer
The Exhibits to this Executive Agreement are not included with this Registration
Statement on Form S-1. Global will provide these exhibits upon the request of
the Securities and Exchange Commission.
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AMENDMENT NO. 1
TO
EXECUTIVE AGREEMENT
THIS AMENDMENT NO. 1 TO EXECUTIVE AGREEMENT is entered into as of August
14, 1996 by and among Global Imaging Systems Inc., a Delaware corporation (the
"Company"), Golder, Thoma, Cressey, Rauner Fund IV, L.P. ("GTCR") and Raymond
Schilling ("Schilling").
WITNESSETH
The Company, GTCR and Schilling are parties to an Executive Agreement dated
June 9, 1994 (the "Executive Agreement"). In order to induce GTCR to amend that
certain Equity Purchase Agreement dated June 9, 1994 among the Company, GTCR and
Schilling (the "Purchase Agreement"), the Company, GTCR and Schilling have
agreed to make certain changes to the Executive Agreement.
Certain capitalized terms used herein are defined in the Executive
Agreement.
The parties hereto agree as follows:
1. AMENDMENTS TO EXECUTIVE AGREEMENT.
1.1. Definitions. Section 2.1 of the Executive Agreement is hereby amended
to add the following new definition:
"Purchase Agreement" shall mean the Equity Purchase Agreement among the
Company, GTCR and Schilling dated June 9, 1994, as amended from time to
time."
1.2. New Paragraph. A new Section 2.4(e) is hereby added to the Executive
Agreement to read as follows:
"(e) Upon the earlier of (i) a Sale of the Company (as defined in the
Stockholders Agreement) or (ii) a Qualified Public Offering (as defined in
the Stockholders Agreement), the Company shall have the right to redeem a
number of Executive Shares determined based on the following formula:
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Redeemed Amount = OB x (1 - (OA / IC))
WHERE:
OB = The number of Class B Common Shares purchased by the Executive
pursuant to this Agreement.
OA = The number of Class A Common Shares purchased by GTCR pursuant to the
Purchase Agreement on the date of determination.
IC = The aggregate number of shares of Class A Common which GTCR would have
acquired if it had purchased its full Individual Commitment under the
Purchase Agreement.
For example:
If Executive purchased 5,000 shares of Class B Common pursuant to the
Executive Agreement and GTCR has purchased 8,000 of its 10,000 shares of Class A
Common pursuant to the Purchase Agreement prior to a Qualified Public Offering,
then:
Redeemed Amount = 5,000 x (1 - (8,000 / 10,000))
Redeemed Amount = 5,000 x (l - .8)
Redeemed Amount = 5,000 x .2
Redeemed Amount = 1,000 shares of Class B Common
The number of Redeemed Shares may then be repurchased in cash by the
Company for an amount equal to the original purchase price for such shares.
In addition, the Company shall reimburse the Executive for any income taxes
associated with such redemption."
2. EFFECT OF THE AMENDMENT. All references in the Purchase Agreement or in
any other document to the "Schilling Executive Agreement" shall mean the
Executive Agreement as amended by this Amendment. Except as specifically amended
above, the Executive Agreement shall remain in full force and effect and is
hereby ratified and confirmed.
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<PAGE>
3. DESCRIPTIVE HEADINGS. The descriptive headings of this Amendment are
inserted for convenience only and do not constitute a part of this Amendment.
4. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of Florida.
5. COUNTERPARTS. This Amendment may be executed and delivered in
counterparts, each of which shall constitute an original, and all of which
together shall constitute one Amendment.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 to
Executive Agreement as of the date first written above.
GLOBAL IMAGING SYSTEMS INC.
By: /s/ Thomas S. Johnson
------------------------------------
Thomas S. Johnson, President
and Chief Executive Officer
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV LIMITED PARTNERSHIP
By: GTCR IV, L.P.
General Partner
By: Golder, Thoma, Cressey, Rauner Inc.
General Partner
By: /s/ Carl D. Thoma
------------------------------------
Carl D. Thoma
Authorized Officer
/s/ Raymond Schi1ling
----------------------------------------
Raymond Schi1ling
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<PAGE>
EXHIBIT 10.10
EXECUTIVE AGREEMENT
This Executive Agreement (this "Agreement") is entered into as of
January 1, 1995, by and between Michael Mueller (the "Executive") and Global
Imaging Systems Inc., a Delaware corporation (the "Company"). Golder, Thoma,
Cressey, Rauner Fund IV Limited Partnership, a Delaware limited partnership (the
"Fund") is also a party to this Agreement for purposes of Section 2.4 of this
Agreement.
WITNESSETH:
WHEREAS, Executive wishes to purchase, and the Company wishes to sell
to Executive, 1,307.18 shares of the Company's Class B Common Stock, par value
$.01 per share (the "Class B Common"), representing 2.0% of the shares of the
Company's Common Stock, par value $.01 per share (the "Common Stock"), and
WHEREAS, the Company and Executive desire to enter into an agreement
to provide for the terms and conditions of Executive's employment with the
Company, and the terms and conditions relating to Executive's purchase of shares
of the Company's Class B Common.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties hereto agree as follows:
ARTICLE I. TERMS AND CONDITIONS OF SERVICES
1.1 Engagement. The Company hereby engages the Executive as the
Company's Vice President, and Executive agrees to serve the Company, during the
Service Term (defined in Section 1.5) in the capacities, and subject to the
terms and conditions, set forth in this Agreement.
1.2 Services.
(a) During the Service Term, Executive will serve as Vice
President of the Company and will be responsible for all operational and human
resources matters of the Company as well as such other duties and
responsibilities as established from time to time by the Company's Chief
Executive Officer and the Company's Board of Directors (the "Board"). Executive
will devote his best efforts and substantially all of his business time and
attention (except for vacation periods and periods of illness or other
incapacity) to the business of the Company and its subsidiaries. Notwithstanding
the foregoing, and provided that such activities do not interfere with the
fulfillment of Executive's obligations hereunder, Executive
<PAGE>
may (i) serve as a director of a Corporation that does not compete with the
Company and is not engaged in the office product service business; (ii) serve as
a director, trustee or officer or otherwise participate in educational, welfare,
social, religious and civic organizations; (iii) serve as a director, officer or
employee of any other entity if and to the extent specifically consented to in
writing by the Board; and (iv) acquire investment interests in one or more
entities which are not, directly or indirectly, in competition with the Company
or its subsidiaries and which do not provide supplies to the Company, except
that the Executive may own up to 1% of the outstanding voting securities of any
publicly-held company.
(b) Unless the Company and Executive agree to the contrary,
Executive's place of employment shall be at the Company's principal executive
offices in Tampa, Florida; provided, however, that Executive will work at such
other locations as may be necessary in order to discharge his duties hereunder.
In connection with the establishment of the principal executive office, the
Company will pay all of the Executive's reasonable out-of-pocket moving expenses
associated with his relocation to Tampa (up to a maximum of $40,000). In the
event that the Company and Executive agree that Executive should relocate his
place of employment more than 100 miles from Tampa, Florida, the Company will
reimburse Executive for all reasonable relocation expenses incurred.
1.3 Salary and Bonus. During the Service Term, the Company will pay
Executive an annual base salary of $100,000, subject to periodic increases at
the discretion of the Company's Board of Directors (the "Base Salary"). In
addition, Executive will be eligible for an annual bonus of up to 40% of his
Base Salary based on Executive's attainment of defined budget and corporate
objectives as set by the Company's Board for the year in accordance with any
management incentive bonus plan or other incentive plan or bonus which the Board
establishes and maintains for its key employees; provided, however, that
Executive shall be entitled to a one-time bonus of $13,333 in August 1995 (pro
rata with other executives of the Company based on Executive's length of service
with the Company). In addition, Executive shall be entitled to an additional
one-time bonus of $13,333 in the event that the Company, together with its
wholly-owned subsidiaries, achieves a quarterly EBIT (as hereinafter defined) of
at least $1.25 million for any fiscal quarter prior to the expiration of the
fiscal quarter ending September 30, 1995. For purposes of this Agreement,
"EBIT" shall mean the Company's earnings before interest and taxes computed in
accordance with Generally Accepted Accounting Principles, consistently applied.
Upon termination of his employment with the Company for any reason other than
good cause shown or his resignation without Good Reason (as defined in the
Executive Agreement with Johnson of even date herewith), Executive will be
entitled to receive a pro rata portion of the incentive compensation for the
year (pro rated based upon the number of days in such year during which
Executive is employed by the Company) in which the termination occurred. Such
pro rated incentive compensation shall be paid at such time as the Company pays
incentive compensation to its other management employees for such year.
1.4 Other Benefits. Executive shall be entitled to receive fringe
benefits customary for the industry including three weeks vacation,
health/accident insurance, disability
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<PAGE>
insurance and life insurance, reimbursement of reasonable business expenses and
other employee benefits as in effect from time to time for the management
employees of the Company.
1.5 Term of Employment. Executive's employment under this Agreement
shall commence on January 1, 1995 and shall continue at the pleasure of the
Board in accordance with the Company's bylaws or until the first to occur of
Executive's resignation, removal, death or disability (as determined in good
faith by the Board) (the "Service Term").
1.6 Covenant Not to Compete.
(a) Executive agrees that, while Executive is employed by the
Company under this Agreement and for a period of one year thereafter, he will
not:
(i) except with the express written consent of the Board,
either directly or indirectly, for himself or on behalf or in
conjunction with any other person, partnership, corporation or other
entity, own, maintain, engage in, render any services for, manage,
contact, have any financial interest in, or permit his name to be used
in connection with, any copier/office equipment dealer business which
then competes with the Company or its subsidiaries or any business in
which the Company has entertained discussions to acquire such business
prior to after the date that Executive's employment hereunder is
terminated; provided, however, that notwithstanding the foregoing,
Executive may during such period own up to 1% of the outstanding
voting securities of any publicly-held company; or
(ii) make any remarks, statements, speeches or any other
written or oral communication to any person or the public which would
in any way disparage, criticize, embarrass, slander, libel or
otherwise be derogatory to the Company and its subsidiaries, or their
employees, officers or directors or to GTCR and its Affiliates.
(b) If, at the time of enforcement of any provision of Section
1.6(a) above, a court holds that the restrictions stated therein are
unreasonable under circumstances then existing, the parties hereto agree that
the maximum period, scope or geographical area reasonable under such
circumstances will be substituted for the stated period, scope or area.
(c) In the event of a breach by Executive of the provisions of
Section 1.6(a) above, the Company or its successors or assigns may, in addition
to other rights and remedies existing in their favor, apply to any court of
competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce or prevent any violations of the provisions thereof.
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<PAGE>
1.7 Confidential Information. Executive acknowledges that the
information, observations and data obtained by him during the course of his
employment with the Company concerning the business or affairs of the Company
and its affiliates are the property of the Company. Therefore Executive agrees
that he will not disclose to any unauthorized person or use for his own benefit
any of such information, observations or data without the Board's prior written
consent, unless and to the extent that the aforementioned matters (i) are
generic to the office equipment dealer industry; (ii) are known or developed by
Executive prior to the date of this Agreement; (iii) become generally known to
and available for use by the public otherwise than as a result of the
Executive's acts or omissions in violation of this Agreement; or (iv) are
required to be disclosed by judicial process or law. Executive agrees to
deliver to the Company at the termination of his employment, or at any other
time the Company may request, all memoranda, notes, plans, records, reports and
other documents (and copies thereof) relating to the business of the Company and
its affiliates which he may then possess or have under his control.
1.8 Executive's Representations and Warranty. Executive represents
and warrants that he has full right and authority to enter into this Agreement
and fully to perform his obligations hereunder, that he is not subject to any
non-competition agreement, and that his past, present and anticipated future
activities have not and will not infringe on the proprietary rights of others.
Executive further represents and warrants that he is not obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency which would conflict with his obligation to use his best
efforts to promote the interests of the Company or which would conflict with the
Company's business as conducted or proposed to be conducted. Neither the
execution nor delivery of this Agreement, nor the carrying on of the Company's
business as an officer, director or employee by Executive, will conflict with or
result in a breach of the terms, conditions or provisions of or constitute a
default under any contract, covenant or instrument under which Executive is now
obligated.
ARTICLE II. TERMS AND CONDITIONS
RELATING TO EXECUTIVE SHARES
2.1 Definitions. For purposes of Articles II and III of this
Agreement, the following terms will have the meanings set forth below:
"Executive Shares" means all shares of the Company's Class B Common
purchased by Executive pursuant to Section 2.2 hereof; all Executive Shares will
continue to be Executive Shares in the hands of any holder other than Executive
(except for the Fund, the Fund's affiliates and purchasers pursuant to an
offering registered with the Securities and Exchange Commission or purchasers
acquiring Executive Shares in a market sale made pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended (the "1933 Act")), and
each such other holder of Executive Shares will succeed to all rights and
obligations attributable to Executive as a holder of Executive Shares hereunder.
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<PAGE>
"Change in Control" shall mean a change in control of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A, as in effect on the date of this Agreement, promulgated under
the Securities Exchange Act of 1934, as amended (without regard to whether the
Company is subject to such Regulation).
"Fair Market Value" of each share of Class B Common shall mean (a) the
Company's EBIT (as defined in Section 1.3) for the rolling twelve month period
ending on the last day of the most recent calendar quarter prior to the date of
determination multiplied by (b) the Recent Acquisition Multiples plus, (c)
Excess Cash less, (d) the sum of (i) all outstanding long-term indebtedness of
the Company and its subsidiaries on the date of determination, (ii) the
redemption value of all shares of the Company's preferred stock (if any) and all
accrued dividends thereon on the date of determination, and (iii) the sum of the
Unreturned Original Cost and the Unpaid Yield (as such terms are defined in the
Company's certificate of incorporation in effect on the date hereof) on the
Company's Class A Common Stock, multiplied by (e) .9 and divided by (f) the
aggregate number of shares of Class B Common then outstanding. For purposes of
this definition, "Recent Acquisition Multiples" shall mean (x) the sum of the
aggregate purchase prices paid by the Company for its three most recent
acquisitions in the copier/office equipment dealer industry (or such total
number of acquisitions if the Company has made less than three acquisitions)
prior to the date of determination, divided by (y) the sum of the pro forma EBIT
for each of such acquisitions calculated based on the Company's projections for
such acquisitions for the twelve calendar months following the month of the
consummation of each such acquisition. For purposes of this definition, "Excess
Cash" shall mean the amount by which cash or cash equivalents of the Company
exceed the Company's current liabilities on the date of determination, as
reasonably determined by the Board in good faith in accordance with generally
accepted accounting principles.
"Initial Public Offering" shall mean the completion of the first
offering of the Company's Common Stock to the public pursuant to an effective
registration statement under the Securities Act with net proceeds to the Company
or the sellers of such Common Stock of not less than $5 million.
"Restricted Shares" means, on any date following the date hereof but
prior to the fifth anniversary of the date hereof, a number of Executive Shares
equal to 100% of the number of Executive Shares outstanding on such date reduced
by 20% of such Executive Shares for each full year prior to such date
(calculated annually on each anniversary of the date hereof). No Executive
Shares shall be Restricted Shares on or after the fifth anniversary of the date
hereof or, if earlier, upon the occurrence of any event specified in Section
2.8. In the event of the termination of Executive's employment because of
Executive's death or disability (as reasonably determined by the Company's Board
in accordance with Section 1.5 hereof), the number of Restricted Shares
outstanding on the resultant Termination Date shall be the lesser of the number
of Restricted Shares as calculated above or 50% of the number of Executive
Shares outstanding on such date.
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<PAGE>
"Securities Act" shall mean the Securities Act of 1933, as amended
from time to time.
"Vested Shares" means Executive Shares that are not Restricted Shares.
2.2 Purchase and Sale of Executive Shares. Executive hereby
subscribes and agrees to purchase, and the Company hereby agrees to sell to
Executive, on the date hereof, 1,307.18 shares of the Company's Class B Common
at an issuance price of $9.00 per share, for a total purchase price in cash of
$11,764.62.
2.3 Investment Representations. Executive represents and warrants
that the Executive Shares to be acquired by him pursuant to this Agreement will
be acquired for his own account and not with a view to, or present intention of,
distribution thereof in violation of the Securities Act, and will not be
disposed of in contravention of the Securities Act. Executive acknowledges that
he is able to bear the economic risk of his investment in the Executive Shares
for an indefinite period of time, because the Executive Shares have not been
registered under the Securities Act and, therefore, cannot be sold unless
subsequently registered under the Securities Act or an exemption from such
registration is available.
2.4 Repurchase Option.
(a) If the services provided by the Executive to the Company
shall terminate at any time for any reason whatsoever (the date of such
termination referred to herein as the "Termination Date"), the Company shall
have the option ("Option") to purchase from Executive all of his (i) Restricted
Shares as of the Termination Date, at the purchase price per share originally
paid by Executive for the Restricted Shares and (ii) Vested Shares at a purchase
price per share equal to the Fair Market Value. The Company shall give written
notice of its intention to purchase such Executive Shares to Executive (or his
personal representative) within 90 days after the Termination Date and shall
deliver a check or cash in payment for such Executive Shares within 120 days
after the Termination Date. Executive shall deliver to the Company a properly
endorsed unencumbered certificate representing the Executive Shares so
repurchased.
(b) If for any reason the Company does not elect to purchase all
the Executive Shares pursuant to the Option, the Fund shall be entitled to
exercise the Option in the manner set forth in Section 2.4(a) for the Executive
Shares that the Company has not elected to purchase (the "Available Shares").
As soon as practicable after the Company has determined that there will be
Available Shares, but in any event within 30 days after the Termination Date,
the Company will give written notice to the Fund setting forth the number of
Available Shares, and the Fund may elect to purchase Available Shares by
delivering written notice to the Company and Executive within 60 days after
receipt of such notice. As soon as practicable, and in any event within the 120
day period set forth above in Section 2.4(a), the Company shall notify Executive
as to the number of Executive Shares being
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<PAGE>
purchased by the Fund and the Fund shall deliver a check or cash in payment for
such Executive Shares within 120 days after the Termination Date.
(c) Executive shall not sell, transfer, pledge or otherwise
dispose of Executive Shares, or any interest in any Executive Shares, except
that Executive may transfer all or a part of his Executive Shares to members of
his immediate family by gift, or to a trust for the benefit of Executive and/or
members of his immediate family, or by will or the laws of descent and
distribution, and any such trust may transfer shares to the Executive and/or
members of the Executive's immediate family in accordance with its terms;
provided that any Executive Shares so transferred shall remain subject to all
the terms and conditions of this Agreement; and further provided that Executive
shall retain the power to vote any Executive Shares so transferred under an
irrevocable proxy or other arrangement reasonably satisfactory to the Company
(the "Retention Agreement").
(d) The right to repurchase Executive Shares shall terminate if
there is a Change in Control of the Company or if the Company (i) sells to an
unaffiliated third party all or substantially all of its assets on a
consolidated basis in any single transaction or series of related transactions
(other than sales in the ordinary course of business) or (ii) merges or
consolidates with or into another corporation, except for a merger after giving
effect to which, the holders of the Company's voting capital stock immediately
prior to the merger, assuming conversion or exercise of all securities
convertible into or exercisable for voting capital stock (the "Voting Capital"),
will own a majority of the Company's Voting Capital subsequent to the merger.
The right to repurchase Vested Shares set forth in Sections 2.4(a) and (b) shall
terminate upon the closing of an Initial Public Offering.
2.5 Changes in Capital Structure. If any changes are made in the
Company's Common Stock by reason of any merger, consolidation, reorganization,
recapitalization, stock dividend, stock split or any other combination or
exchange of Common Stock, any and all new or substituted securities to which
Executive is entitled because of his ownership of the Executive Shares shall be
deemed to be Executive Shares for the purposes of this Agreement, and
corresponding adjustments shall be made in the number and kind of securities
which Executive has the right to acquire hereunder. For the purpose of
establishing the purchase price under the Option, the original price per share
paid by Executive as described in Section 2.2 shall be appropriately adjusted to
reflect such changes. In addition, the right to purchase Executive Shares under
Section 2.4(a) above (i) shall be made in good faith by the Board and (ii) shall
not be made within six months of any event specified in Section 2.8, unless
Executive has been terminated for cause.
2.6 Stockholders Agreement. Executive agrees to execute and to be
bound by the terms of the Stockholders Agreement and to the addition of the
stock certificate legend required by the Stockholders Agreement on his shares of
Common Stock.
2.7 Transfers Not Recognized. Executive recognizes that his
Executive Shares are subject to certain restrictions on transfer, including the
Option, the Retention
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Agreement, and the Stockholders Agreement. Any sale, transfer or other
disposition by Executive of all or a portion of the Executive Shares, or any
interest therein, which is not made in conformity with the above restrictions,
as well as any others in this Agreement or the Stockholders Agreement, shall be
null and void, and the secretary of the Company or other person having custody
and control of the stock transfer records of the Company shall not be required
to recognize such sale, transfer, or other disposition, nor to issue a new stock
certificate or certificates therefor unless or until the secretary or such other
person shall have received written evidence satisfactory to counsel for the
Company that the sale, transfer, or other disposition is made in conformity with
and not in violation of the terms of this Agreement.
2.8 Termination of Restrictions. The restrictions on the Executive
Shares, including the restrictions on the transfer thereof, set forth in this
Article II will terminate on the first to occur of (i) the date on which the
Company is merged or consolidated into a new surviving company and the holders
of the Company's Common Stock immediately prior to the merger or consolidation
own less than a majority of the Company's Common Stock subsequent to such merger
or consolidation, (ii) there is a sale of all, or substantially all, of the
Company's assets or capital stock in a single transaction or series of related
transactions, or (iii) upon a Change in Control of the Company. Except for the
provisions of Section 2.4(a)(i), the restrictions on Executive Shares shall
terminate upon the closing of an Initial Public Offering.
2.9 Securities Act Restrictions.
(a) The certificates representing the Executive Shares will bear
the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
ON __________________, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
ISSUER THAT REGISTRATION IS NOT REQUIRED. THE SECURITIES REPRESENTED
BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET
FORTH IN AN EXECUTIVE AGREEMENT BETWEEN, AMONG OTHERS, GLOBAL IMAGING
SYSTEMS INC. AND MICHAEL MUELLER, DATED AS OF JANUARY 1, 1995, A COPY
OF WHICH MAY BE OBTAINED BY THE HOLDER HEREOF AT SUCH COMPANY'S
PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
(b) No holder of Executive Shares may sell, transfer or dispose
of any Executive Shares (except pursuant to an effective registration statement
under the Securities Act) without first delivering to the Company an opinion of
counsel reasonably acceptable in
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form and substance to the Company that registration under the Securities Act is
not required in connection with such transfer.
(c) Each holder of Executive Shares agrees not to effect any
public sale or distribution of any equity securities of the Company, or any
securities convertible into or exchangeable or exercisable for such securities,
during the seven days prior to and the 90 days after the date on which any
registration statement covering securities of the Company (whether a primary or
secondary offering) becomes effective under the Securities Act.
2.10 Section 83(b) Filing. Within 30 days after the date of this
Agreement, Executive will make an effective election with the Internal Revenue
Service under Section 83(b) of the Internal Revenue Code and the regulations
promulgated thereunder in the form of Exhibit A attached hereto for the
Executive Shares.
ARTICLE III. GENERAL PROVISIONS
3.1 Notices. Any notice provided for in this Agreement must be in
writing and must be delivered to the recipient at the address below indicated:
To the Company:
P.O. Box 273478
Tampa, Florida 33688-3478
Facsimile No. (813) 264-7877
Attention: Chairman
To Executive:
Michael Mueller
P.O. Box 273478
Tampa, Florida 33688-3478
Facsimile No.: (813) 264-7877
To the Fund:
Golder, Thoma, Cressey, Rauner
Fund IV Limited Partnership
Suite 6100
233 South Wacker Drive
Chicago, Illinois 60606
Attention: Carl D. Thoma
Facsimile No.: (312) 382-2201
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<PAGE>
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given five business days
after mailing by first class mail, certified return receipt requested, one
business day after delivery to a receipted courier for next business day
delivery, or upon transmission by telex or facsimile.
3.2 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
3.3 Complete Agreement. This Agreement, those documents expressly
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
3.4 Counterparts; Facsimile Transmission. This Agreement may be
executed on separate counterparts, each of which is deemed to be an original and
all of which taken together constitute one and the same agreement. This
Agreement may be executed and delivered by facsimile transmission.
3.5 Successors and Assigns. This Agreement is intended to bind and
inure to the benefit of and be enforceable by Executive, the Company and the
Fund, and their respective successors and assigns, except that Executive may not
assign any of his rights or obligations under Article I.
3.6 Choice of Law. The corporate law of the State of Delaware will
govern all questions concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity and
interpretation of this Agreement will be governed by the internal law, and not
the law of conflicts, of the State of Florida.
3.7 Remedies. Each of the parties to this Agreement (including the
Fund) will be entitled to enforce its rights under this Agreement specifically,
to recover damages by reason of any provision of this Agreement and to exercise
all other rights existing in its favor. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction for specific
performance and/or injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement. The prevailing party in any
action described in this Section 3.7 shall be entitled to payment of its
reasonable attorneys' fees from the other party.
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3.8 Amendments and Waivers. Any provision of this Agreement may be
amended or waived only with the prior written consent of the Company and
Executive; provided that no provision of Article II may be amended or waived
without the prior written consent of the Fund.
3.9 Expenses. The Company agrees to pay and hold the Executive
harmless against liability for the payment of the reasonable fees and expenses
of his counsel arising in connection with the negotiation, execution and
consummation of the transactions contemplated by this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.
EXECUTIVE:
By: /s/ Michael Mueller
--------------------------------------
Michael Mueller
GLOBAL IMAGING SYSTEMS INC.
By: /s/ Thomas S. Johnson
--------------------------------------
Thomas S. Johnson
President and Chief Executive Officer
Accepted as of January 18, 1995:
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV LIMITED PARTNERSHIP
By: GOLDER, THOMA, CRESSEY,
RAUNER IV L.P.
General Partner
By: Golder, Thoma, Cressey,
Rauner, Inc.
General Partner
By: /s/ Carl D. Thoma
-----------------
Carl D. Thoma
Authorized Officer
The Exhibits to this Executive Agreement are not included with this Registration
Statement on Form S-1. Global will provide these exhibits upon the request of
the Securities and Exchange Commission.
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AMENDMENT NO. 1
TO
EXECUTIVE AGREEMENT
THIS AMENDMENT NO. 1 TO EXECUTIVE AGREEMENT is entered into as of August
14, 1996 by and among Global Imaging Systems Inc., a Delaware corporation (the
"Company"), Golder, Thoma, Cressey, Rauner Fund IV, L.P. ("GTCR") and Michael
Mueller ("Mueller").
WITNESSETH
The Company, GTCR and Mueller are parties to an Executive Agreement dated
June 9, 1994 (the "Executive Agreement"). In order to induce GTCR to amend that
certain Equity Purchase Agreement dated June 9, 1994 among the Company, GTCR and
Mueller (the "Purchase Agreement"), the Company, GTCR and Mueller have agreed to
make certain changes to the Executive Agreement.
Certain capitalized terms used herein are defined in the Executive
Agreement.
The parties hereto agree as follows:
1. AMENDMENTS TO EXECUTIVE AGREEMENT.
1.1. Definitions. Section 2.1 of the Executive Agreement is hereby amended
to add the following new definition:
"Purchase Agreement" shall mean the Equity Purchase Agreement among
the Company, GTCR and Mueller dated June 9, 1994, as amended from time to
time.
1.2. New Paragraph. A new Section 2.4(e) is hereby added to the Executive
Agreement to read as follows:
"(e) Upon the earlier of (i) a Sale of the Company (as defined in
the Stockholders Agreement) or (ii) a Qualified Public Offering (as defined
in the Stockholders Agreement), the Company shall have the right to redeem
a number of Executive Shares determined based on the following formula:
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Redeemed Amount = OB x (1 - (OA / IC))
WHERE:
OB = The number of Class B Common Shares purchased by the Executive
pursuant to this Agreement.
OA = The number of Class A Common Shares purchased by GTCR pursuant to the
Purchase Agreement on the date of determination.
IC = The aggregate number of shares of Class A Common which GTCR would
have acquired if it had purchased its full Individual Commitment
under the Purchase Agreement.
For example:
If Executive purchased 5,000 shares of Class B Common pursuant to the Executive
Agreement and GTCR has purchased 8,000 of its 10,000 shares of Class A Common
pursuant to the Purchase Agreement prior to a Qualified Public Offering, then:
Redeemed Amount = 5,000 x (1 - (8,000 / 10,000))
Redeemed Amount = 5,000 x (1 - .8)
Redeemed Amount = 5,000 x .2
Redeemed Amount = 1,000 shares of Class B Common
The number of Redeemed Shares may then be repurchased in cash by the
Company for an amount equal to the original purchase price for such shares.
In addition, the Company shall reimburse the Executive for any income taxes
associated with such redemption."
2. EFFECT OF THE AMENDMENT. All references in the Purchase Agreement or in
any other document to the "Mueller Executive Agreement" shall mean the Executive
Agreement as amended by this Amendment. Except as specifically amended above,
the Executive Agreement shall remain in full force and effect and is hereby
ratified and confirmed.
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3. DESCRIPTIVE HEADINGS. The descriptive headings of this Amendment are
inserted for convenience only and do not constitute a part of this Amendment.
4. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of Florida.
5. COUNTERPARTS. This Amendment may be executed and delivered in
counterparts, each of which shall constitute an original, and all of which
together shall constitute one Amendment.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 to
Executive Agreement as of the date first written above.
GLOBAL IMAGING SYSTEMS INC.
By: /s/ Thomas S. Johnson
--------------------------------------
Thomas S. Johnson, President
and Chief Executive Officer
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV LIMITED PARTNERSHIP
By: GTCR IV, L.P.
General Partner
By: Golder, Thoma, Cressey, Rauner Inc.
General Partner
By:
--------------------------------------
Carl D. Thoma
Authorized Officer
/s/ Michael Mueller
-----------------------------------------
Michael Mueller
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IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 to
Executive Agreement as of the date first written above.
GLOBAL IMAGING SYSTEMS INC.
By:
-----------------------------------
Thomas S. Johnson, President
and Chief Executive Officer
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV LIMITED PARTNERSHIP
By: GTCR IV, L.P.
General Partner
By: Golder, Thoma, Cressey, Rauner Inc.
General Partner
By: /s/ Carl D. Thoma
-----------------------------------
Carl D. Thoma
Authorized Officer
/s/ Michael Mueller
-----------------------------------------
Michael Mueller
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EXHIBIT 10.11
EXECUTIVE AGREEMENT
This EXECUTIVE AGREEMENT (this "Agreement") is entered into as of
March 31, 1997, by and between Alfred N. Vieira (the "Executive") and Global
Imaging Systems Inc., a Delaware corporation (the "Company"). Golder, Thoma,
Cressey, Rauner Fund IV Limited Partnership, a Delaware limited partnership (the
"Fund") is also a party to this Agreement for purposes of Section 2.4 of this
Agreement.
WITNESSETH:
WHEREAS, Executive wishes to purchase, and the Company wishes to sell
to Executive, 1,307.18 shares of the Company's Class B Common Stock, par value
$.01 per share (the "Class B Common"), and
WHEREAS, the Company and Executive desire to enter into an agreement
to provide for the terms and conditions of Executive's employment with the
Company, and the terms and conditions relating to Executive's purchase of shares
of the Company's Class B Common.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties hereto agree as follows:
ARTICLE I. TERMS AND CONDITIONS OF SERVICES
1.1 Engagement. The Company hereby engages the Executive as a Vice
President of the Company, and Executive agrees to serve the Company, during the
Service Term (defined in Section 1.5) in the capacities, and subject to the
terms and conditions, set forth in this Agreement.
1.2 Services.
(a) During the Service Term, Executive will serve as a Vice
President of the Company and will be responsible for all technical service,
training and spare parts inventory matters as well as such other duties and
responsibilities as established from time to time by the Company's Chief
Executive Officer and the Company's Board of Directors (the "Board"). Executive
will devote his best efforts and substantially all of his business time and
attention (except for vacation periods and periods of illness or other
incapacity) to the business of the Company and its subsidiaries. Notwithstanding
the foregoing, and provided that such activities do not interfere with the
fulfillment of Executive's obligations hereunder, Executive may (i) serve as a
director of a Corporation that does not compete with the Company and is not
engaged in the office product service business; (ii) serve as a director,
trustee or officer or otherwise participate in educational, welfare, social,
religious and civic organizations; (iii) serve
<PAGE>
as a director, officer or employee of any other entity if and to the extent
specifically consented to in writing by the Board; and (iv) acquire investment
interests in one or more entities which are not, directly or indirectly, in
competition with the Company or its subsidiaries and which do not provide
supplies to the Company, except that the Executive may own up to 1% of the
outstanding voting securities of any publicly-held company.
(b) Unless the Company and Executive agree to the contrary,
Executive's place of employment shall be at the Company's principal executive
offices in Tampa, Florida; provided, however, that Executive will work at such
other locations as may be necessary in order to discharge his duties hereunder.
In connection with the establishment of the principal executive office, the
Company will pay all of the Executive's reasonable out-of-pocket moving expenses
associated with his relocation to Tampa (up to a maximum of $40,000). In the
event that the Company and Executive agree that Executive should relocate his
place of employment more than 100 miles from Tampa, Florida, the Company will
reimburse Executive for all reasonable relocation expenses incurred.
1.3 Salary and Bonus. During the Service Term, the Company will pay
Executive an annual base salary of $105,000, subject to periodic increases at
the discretion of the Company's Board of Directors (the "Base Salary"). In
addition, Executive will be eligible for an annual bonus of up to 40% of his
Base Salary based on Executive's attainment of defined budget and corporate
objectives as set by the Company's Board for the year in accordance with any
management incentive bonus plan or other incentive plan or bonus which the Board
establishes and maintains for its key employees. Upon termination of his
employment with the Company for any reason other than good cause shown or his
resignation, Executive will be entitled to receive a pro rata portion of the
incentive compensation for the year (pro rated based upon the number of days in
such year during which Executive is employed by the Company) in which the
termination occurred. Such pro rated incentive compensation shall be paid at
such time as the Company pays incentive compensation to its other management
employees for such year.
1.4 Other Benefits. Executive shall be entitled to receive fringe
benefits customary for the industry including three weeks vacation,
health/accident insurance, disability insurance and life insurance,
reimbursement of reasonable business expenses and other employee benefits as in
effect from time to time for the management employees of the Company.
1.5 Term of Employment. Executive's employment under this Agreement
shall commence on March 31, 1997 and shall continue at the pleasure of the Board
in accordance with the Company's bylaws or until the first to occur of
Executive's resignation, removal, death or disability (as determined in good
faith by the Board) (the "Service Term").
1.6 Covenant Not to Compete.
(a) Executive agrees that, while Executive is employed by the
Company under this Agreement and for a period of 12 months thereafter, he will
not:
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(i) except with the express written consent of the Board,
either directly or indirectly, for himself or on behalf or in
conjunction with any other person, partnership, corporation or other
entity, own, maintain, engage in, render any services for, manage,
contact, have any financial interest in, or permit his name to be used
in connection with, any copier/office equipment dealer business which
then competes with the Company or its subsidiaries or any business in
which the Company has entertained discussions to acquire such business
prior to after the date that Executive's employment hereunder is
terminated; provided, however, that notwithstanding the foregoing,
Executive may during such period own up to 1% of the outstanding
voting securities of any publicly-held company; or
(ii) make any remarks, statements, speeches or any other
written or oral communication to any person or the public which would
in any way disparage, criticize, embarrass, slander, libel or
otherwise be derogatory to the Company and its subsidiaries, or their
employees, officers or directors or to the Fund and its Affiliates.
(b) If, at the time of enforcement of any provision of Section
1.6(a) above, a court holds that the restrictions stated therein are
unreasonable under circumstances then existing, the parties hereto agree that
the maximum period, scope or geographical area reasonable under such
circumstances will be substituted for the stated period, scope or area.
(c) In the event of a breach by Executive of the provisions of
Section 1.6(a) above, the Company or its successors or assigns may, in addition
to other rights and remedies existing in their favor, apply to any court of
competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce or prevent any violations of the provisions thereof.
(d) The provisions of this Section 1.6 are independent of any
other noncompete agreement between the Company and the Executive and shall be
cumulative with any such noncompete provisions set forth in such agreement.
1.7 Confidential Information. Executive acknowledges that the
information, observations and data obtained by him during the course of his
employment with the Company concerning the business or affairs of the Company
and its affiliates are the property of the Company. Therefore, Executive agrees
that he will not disclose to any unauthorized person or use for his own benefit
any of such information, observations or data without the Board's prior written
consent, unless and to the extent that the aforementioned matters (i) are
generic to the office equipment dealer industry; (ii) are known or developed by
Executive prior to the date of this Agreement; (iii) become generally known to
and available for use by the public otherwise than as a result of the
Executive's acts or omissions in violation of this Agreement; or (iv) are
required to be disclosed by judicial process or law. Executive agrees to
deliver to the Company at the termination of his employment, or at any other
time the Company may request, all memoranda, notes, plans, records, reports and
other documents (and copies thereof) relating to
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the business of the Company and its affiliates which he may then possess or have
under his control.
1.8 Executive's Representations and Warranty. Executive represents
and warrants that he has full right and authority to enter into this Agreement
and fully to perform his obligations hereunder, that he is not subject to any
non-competition agreement, and that his past, present and anticipated future
activities have not and will not infringe on the proprietary rights of others.
Executive further represents and warrants that he is not obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency which would conflict with his obligation to use his best
efforts to promote the interests of the Company or which would conflict with the
Company's business as conducted or proposed to be conducted. Neither the
execution nor delivery of this Agreement, nor the carrying on of the Company's
business as an officer, director or employee by Executive, will conflict with or
result in a breach of the terms, conditions or provisions of or constitute a
default under any contract, covenant or instrument under which Executive is now
obligated.
ARTICLE II. TERMS AND CONDITIONS
RELATING TO EXECUTIVE SHARES
2.1 Definitions. For purposes of Articles II and III of this
Agreement, the following terms will have the meanings set forth below:
"Common Stock" means all shares of all classes of the Company's common
stock.
"Change in Control" shall mean a change in control of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A, as in effect on the date of this Agreement, promulgated under
the Securities Exchange Act of 1934, as amended (without regard to whether the
Company is subject to such Regulation).
"EBIT" shall mean the Company's earnings before interest and taxes
computed in accordance with generally accepted accounting principles.
"Executive Shares" means all shares of the Company's Class B Common
purchased by Executive pursuant to Section 2.2 hereof; all Executive Shares will
continue to be Executive Shares in the hands of any holder other than Executive
(except for the Fund, the Fund's affiliates and purchasers pursuant to an
offering registered with the Securities and Exchange Commission or purchasers
acquiring Executive Shares in a market sale made pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended (the "1933 Act")), and
each such other holder of Executive Shares will succeed to all rights and
obligations attributable to Executive as a holder of Executive Shares hereunder.
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"Fair Market Value" of each share of Class B Common shall mean (a) the
Company's EBIT for the rolling twelve month period ending on the last day of the
most recent calendar quarter prior to the date of determination multiplied by
(b) the Recent Acquisition Multiples plus, (c) Excess Cash less, (d) the sum of
(i) all outstanding long-term indebtedness of the Company and its subsidiaries
on the date of determination, (ii) the redemption value of all shares of the
Company's preferred stock (if any) and all accrued dividends thereon on the date
of determination, and (iii) the sum of the Unreturned Original Cost and the
Unpaid Yield (as such terms are defined in the Company's certificate of
incorporation in effect on the date hereof) on the Company's Class A Common
Stock, multiplied by (e) .9 and divided by (f) the aggregate number of shares of
Class B Common then outstanding. For purposes of this definition, "Recent
Acquisition Multiples" shall mean (x) the sum of the aggregate purchase prices
paid by the Company for its three most recent acquisitions in the copier/office
equipment dealer industry (or such total number of acquisitions if the Company
has made less than three acquisitions) prior to the date of determination,
divided by (y) the sum of the pro forma EBIT for each of such acquisitions
calculated based on the Company's projections for such acquisitions for the
twelve calendar months following the month of the consummation of each such
acquisition. For purposes of this definition, "Excess Cash" shall mean the
amount by which cash or cash equivalents of the Company exceed the Company's
current liabilities on the date of determination, as reasonably determined by
the Board in good faith in accordance with generally accepted accounting
principles.
"Initial Public Offering" shall mean the completion of the first
offering of the Company's Common Stock to the public pursuant to an effective
registration statement under the Securities Act with net proceeds to the Company
or the sellers of such Common Stock of not less than $5 million.
"Purchase Agreement" shall mean the Equity Purchase Agreement dated
June 9, 1994, as amended from time to time, among the Company, GTCR and Thomas
S. Johnson.
"Restricted Shares" means, on any date following the date hereof but
prior to the fifth anniversary of the date hereof, a number of Executive Shares
equal to 100% of the number of Executive Shares outstanding on such date reduced
by 20% of such Executive Shares for each full year prior to such date
(calculated annually on each anniversary of the date hereof). No Executive
Shares shall be Restricted Shares on or after the fifth anniversary of the date
hereof or, if earlier, upon the occurrence of any event specified in Section
2.8. In the event of the termination of Executive's employment because of
Executive's death or disability (as reasonably determined by the Company's Board
in accordance with Section 1.5 hereof), the number of Restricted Shares
outstanding on the resultant Termination Date shall be the lesser of the number
of Restricted Shares as calculated above or 50% of the number of Executive
Shares outstanding on such date.
"Securities Act" shall mean the Securities Act of 1933, as amended
from time to time.
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"Stockholders Agreement" shall mean that certain Stockholders
Agreement dated June 9, 1994, as amended from time to time, among the Company,
the Fund and the other stockholders of the Company.
"Vested Shares" means Executive Shares that are not Restricted Shares.
2.2 Purchase and Sale of Executive Shares. Executive hereby
subscribes and agrees to purchase, and the Company hereby agrees to sell to
Executive, on the date hereof, 1,307.18 shares of the Company's Class B Common
at an issuance price of $9.00 per share, for a total purchase price in cash of
$11,764.62.
2.3 Investment Representations. Executive represents and warrants
that the Executive Shares to be acquired by him pursuant to this Agreement will
be acquired for his own account and not with a view to, or present intention of,
distribution thereof in violation of the Securities Act, and will not be
disposed of in contravention of the Securities Act. Executive acknowledges that
he is able to bear the economic risk of his investment in the Executive Shares
for an indefinite period of time, because the Executive Shares have not been
registered under the Securities Act and, therefore, cannot be sold unless
subsequently registered under the Securities Act or an exemption from such
registration is available.
2.4 Repurchase Option.
(a) If the services provided by the Executive to the Company
shall terminate at any time for any reason whatsoever (the date of such
termination referred to herein as the "Termination Date"), the Company shall
have the option ("Option") to purchase from Executive all of his (i) Restricted
Shares as of the Termination Date, at the purchase price per share originally
paid by Executive for the Restricted Shares and (ii) Vested Shares at a purchase
price per share equal to the Fair Market Value. The Company shall give written
notice of its intention to purchase such Executive Shares to Executive (or his
personal representative) within 90 days after the Termination Date and shall
deliver a check or cash in payment for such Executive Shares within 120 days
after the Termination Date. Executive shall deliver to the Company a properly
endorsed unencumbered certificate representing the Executive Shares so
repurchased.
(b) If for any reason the Company does not elect to purchase all
the Executive Shares pursuant to the Option, the Fund shall be entitled to
exercise the Option in the manner set forth in Section 2.4(a) for the Executive
Shares that the Company has not elected to purchase (the "Available Shares").
As soon as practicable after the Company has determined that there will be
Available Shares, but in any event within 30 days after the Termination Date,
the Company will give written notice to the Fund setting forth the number of
Available Shares, and the Fund may elect to purchase Available Shares by
delivering written notice to the Company and Executive within 60 days after
receipt of such notice. As soon as practicable, and in any event within the 120
day period set forth above in Section 2.4(a), the Company shall notify Executive
as to the number of Executive Shares being purchased by the Fund and the
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Fund shall deliver a check or cash in payment for such Executive Shares within
120 days after the Termination Date.
(c) Executive shall not sell, transfer, pledge or otherwise
dispose of Executive Shares, or any interest in any Executive Shares, except
that Executive may transfer all or a part of his Executive Shares to members of
his immediate family by gift, or to a trust for the benefit of Executive and/or
members of his immediate family, or by will or the laws of descent and
distribution, and any such trust may transfer shares to the Executive and/or
members of the Executive's immediate family in accordance with its terms;
provided that any Executive Shares so transferred shall remain subject to all
the terms and conditions of this Agreement; and further provided that Executive
shall retain the power to vote any Executive Shares so transferred under an
irrevocable proxy or other arrangement reasonably satisfactory to the Company
(the "Retention Agreement").
(d) The right to repurchase Executive Shares shall terminate if
there is a Change in Control of the Company or if the Company (i) sells to an
unaffiliated third party all or substantially all of its assets on a
consolidated basis in any single transaction or series of related transactions
(other than sales in the ordinary course of business) or (ii) merges or
consolidates with or into another corporation, except for a merger after giving
effect to which, the holders of the Company's voting capital stock immediately
prior to the merger, assuming conversion or exercise of all securities
convertible into or exercisable for voting capital stock (the "Voting Capital"),
will own a majority of the Company's Voting Capital subsequent to the merger.
The right to repurchase Vested Shares set forth in Sections 2.4(a) and (b) shall
terminate upon the closing of an Initial Public Offering.
(e) Upon the earlier of (i) a Sale of the Company (as defined in
the Stockholders Agreement) or (ii) a Qualified Public Offering (as defined in
the Stockholders Agreement), the Company shall have the right to redeem a number
of Executive Shares determined based on the following formula:
Redeemed Amount = OB x (1 - (OA / IC))
WHERE:
OB = The number of Class B Common Shares purchased by the
Executive pursuant to this Agreement.
OA = The number of Class A Common Shares purchased by the Fund
pursuant to the Purchase Agreement prior to the date of
determination.
IC = The aggregate number of shares of Class A Common which the
Fund would have acquired if it had purchased its full
Individual Commitment under the Purchase Agreement.
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For example:
If Executive purchased 5,000 shares of Class B Common pursuant to the
Executive Agreement and the Fund has purchased 8,000 of its 10,000
shares of Class A Common pursuant to the Purchase Agreement prior to a
Qualified Public Offering, then:
Redeemed Amount = 5,000 x (1 - (8,000 / 10,000))
Redeemed Amount = 5,000 x (1 - .8)
Redeemed Amount = 5,000 x .2
Redeemed Amount = 1,000 shares of Class B Common
The number of Redeemed Shares may then be repurchased in cash by the
Company for an amount equal to the original purchase price for such
shares ($9.00 per share). In addition, the Company shall reimburse
the Executive for any income taxes associated with such redemption.
2.5 Changes in Capital Structure. If any changes are made in the
Company's Common Stock by reason of any merger, consolidation, reorganization,
recapitalization, stock dividend, stock split or any other combination or
exchange of Common Stock, any and all new or substituted securities to which
Executive is entitled because of his ownership of the Executive Shares shall be
deemed to be Executive Shares for the purposes of this Agreement, and
corresponding adjustments shall be made in the number and kind of securities
which Executive has the right to acquire hereunder. For the purpose of
establishing the purchase price under the Option, the original price per share
paid by Executive as described in Section 2.2 shall be appropriately adjusted to
reflect such changes. In addition, the right to purchase Executive Shares under
Section 2.4(a) above (i) shall be made in good faith by the Board and (ii) shall
not be made within six months of any event specified in Section 2.8, unless
Executive has been terminated for cause.
2.6 Stockholders Agreement. Executive agrees to execute and to be
bound by the terms of the Stockholders Agreement and to the addition of the
stock certificate legend required by the Stockholders Agreement on his shares of
Common Stock.
2.7 Transfers Not Recognized. Executive recognizes that his
Executive Shares are subject to certain restrictions on transfer, including the
Option, the Retention Agreement, and the Stockholders Agreement. Any sale,
transfer or other disposition by Executive of all or a portion of the Executive
Shares, or any interest therein, which is not made in conformity with the above
restrictions, as well as any others in this Agreement or the Stockholders
Agreement, shall be null and void, and the secretary of the Company or other
person having custody and control of the stock transfer records of the Company
shall not be required to recognize such sale, transfer, or other disposition,
nor to issue a new stock certificate
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or certificates therefor unless or until the secretary or such other person
shall have received written evidence satisfactory to counsel for the Company
that the sale, transfer, or other disposition is made in conformity with and not
in violation of the terms of this Agreement.
2.8 Termination of Restrictions. The restrictions on the Executive
Shares, including the restrictions on the transfer thereof, set forth in this
Article II will terminate on the first to occur of (i) the date on which the
Company is merged or consolidated into a new surviving company and the holders
of the Company's Common Stock immediately prior to the merger or consolidation
own less than a majority of the Company's Common Stock subsequent to such merger
or consolidation, (ii) there is a sale of all, or substantially all, of the
Company's assets or capital stock in a single transaction or series of related
transactions, or (iii) upon a Change in Control of the Company. Except for the
provisions of Section 2.4(a)(i), the restrictions on Executive Shares hereunder
shall terminate upon the closing of an Initial Public Offering.
2.9 Securities Act Restrictions.
(a) The certificates representing the Executive Shares will bear
the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
ON MARCH 31, 1997, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT
REGISTRATION IS NOT REQUIRED. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER,
CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN
AN EXECUTIVE AGREEMENT BETWEEN, AMONG OTHERS, GLOBAL IMAGING SYSTEMS
INC. AND ALFRED N. VIEIRA, DATED AS OF MARCH 31, 1997, A COPY OF WHICH
MAY BE OBTAINED BY THE HOLDER HEREOF AT SUCH COMPANY'S PRINCIPAL PLACE
OF BUSINESS WITHOUT CHARGE."
(b) No holder of Executive Shares may sell, transfer or dispose
of any Executive Shares (except pursuant to an effective registration statement
under the Securities Act) without first delivering to the Company an opinion of
counsel reasonably acceptable in form and substance to the Company that
registration under the Securities Act is not required in connection with such
transfer.
(c) Each holder of Executive Shares agrees not to effect any
public sale or distribution of any equity securities of the Company, or any
securities convertible into or exchangeable or exercisable for such securities,
during the seven days prior to and the 90 days after the date on which any
registration statement covering securities of the Company (whether a primary or
secondary offering) becomes effective under the Securities Act.
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2.10 Section 83(b) Filing. Within 30 days after the date of this
Agreement, Executive will make an effective election with the Internal Revenue
Service under Section 83(b) of the Internal Revenue Code and the regulations
promulgated thereunder in the form of Exhibit A attached hereto for the
Executive Shares.
ARTICLE III. GENERAL PROVISIONS
3.1 Notices. Any notice provided for in this Agreement must be in
writing and must be delivered to the recipient at the address below indicated:
To the Company:
P.O. Box 273478
Tampa, Florida 33688-3478
Facsimile No. (813) 264-7877
Attention: Chairman
To Executive:
Alfred N. Vieira
P.O. Box 273478
Tampa, Florida 33688-3478
Facsimile No.: (813) 264-7877
To the Fund:
Golder, Thoma, Cressey, Rauner
Fund IV Limited Partnership
Suite 6100
233 South Wacker Drive
Chicago, Illinois 60606
Attention: Carl D. Thoma
Facsimile No.: (312) 382-2201
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given five business days
after mailing by first class mail, certified return receipt requested, one
business day after delivery to a receipted courier for next business day
delivery, or upon transmission by telex or facsimile.
3.2 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under
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any applicable law or rule in any jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision or any other jurisdiction,
but this Agreement will be reformed, construed and enforced in such jurisdiction
as if such invalid, illegal or unenforceable provision had never been contained
herein.
3.3 Complete Agreement. This Agreement, those documents expressly
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
3.4 Counterparts; Facsimile Transmission. This Agreement may be
executed on separate counterparts, each of which is deemed to be an original and
all of which taken together constitute one and the same agreement. This
Agreement may be executed and delivered by facsimile transmission.
3.5 Successors and Assigns. This Agreement is intended to bind and
inure to the benefit of and be enforceable by Executive, the Company and the
Fund, and their respective successors and assigns, except that Executive may not
assign any of his rights or obligations under Article I.
3.6 Choice of Law. The corporate law of the State of Delaware will
govern all questions concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity and
interpretation of this Agreement will be governed by the internal law, and not
the law of conflicts, of the State of Florida.
3.7 Remedies. Each of the parties to this Agreement (including the
Fund) will be entitled to enforce its rights under this Agreement specifically,
to recover damages by reason of any provision of this Agreement and to exercise
all other rights existing in its favor. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction for specific
performance and/or injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement. The prevailing party in any
action described in this Section 3.7 shall be entitled to payment of its
reasonable attorneys' fees from the other party.
3.8 Amendments and Waivers. Any provision of this Agreement may be
amended or waived only with the prior written consent of the Company and
Executive; provided that no provision of Article II may be amended or waived
without the prior written consent of the Fund.
3.9 Expenses. The Company agrees to pay and hold the Executive
harmless against liability for the payment of the reasonable fees and expenses
of his counsel arising in connection with the negotiation, execution and
consummation of the transactions contemplated by this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.
EXECUTIVE:
By: /s/ Alfred N. Vieira
------------------------------------------
Alfred N. Vieira
GLOBAL IMAGING SYSTEMS INC.
By: /s/ Thomas S. Johnson
------------------------------------------
Thomas S. Johnson
President and Chief Executive Officer
Accepted as of April 1, 1997:
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV LIMITED PARTNERSHIP
By: GOLDER, THOMA, CRESSEY,
RAUNER IV L.P.
General Partner
By: Golder, Thoma, Cressey,
Rauner, Inc.
General Partner
By: /s/ Carl D. Thoma
------------------------------
Carl D. Thoma
Authorized Officer
The Exhibits to this Executive Agreement are not included with this Registration
Statement on Form S-1. Global will provide these exhibits upon the request of
the Securities and Exchange Commission.
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<PAGE>
EXHIBIT 10.12
GLOBAL IMAGING SYSTEMS, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
<PAGE>
TABLE OF CONTENTS
Page
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1. PURPOSE.............................................................. 1
2. DEFINITIONS.......................................................... 1
3. ADMINISTRATION OF THE PLAN........................................... 4
3.1. Board........................................................... 4
3.2. Committee....................................................... 5
3.3. Grants.......................................................... 5
3.4. No Liability.................................................... 5
3.5. Applicability of Rule 16b-3..................................... 6
4. STOCK SUBJECT TO THE PLAN............................................ 6
5. EFFECTIVE DATE AND TERM OF THE PLAN.................................. 6
5.1. Effective Date.................................................. 6
5.2. Term............................................................ 6
6. OPTION GRANTS........................................................ 6
6.1. Company or Subsidiary Employees................................. 6
6.2. Successive Grants............................................... 7
7. LIMITATIONS ON GRANTS................................................ 7
7.1. Limitation on Shares of Stock Subject to Grants................. 7
7.2. Limitations on Incentive Stock Options.......................... 7
8. AWARD AGREEMENT...................................................... 7
9. OPTION PRICE......................................................... 8
10. VESTING, TERM AND EXERCISE OF OPTIONS................................ 8
10.1. Vesting and Option Period...................................... 8
10.2. Term........................................................... 8
10.3. Acceleration................................................... 8
10.4. Termination of Employment or Other Relationship................ 9
10.5. Rights in the Event of Death................................... 9
10.6. Rights in the Event of Disability.............................. 10
10.7. Limitations on Exercise of Option.............................. 10
10.8. Method of Exercise............................................. 10
10.9. Delivery of Stock Certificates................................. 11
11. TRANSFERABILITY OF OPTIONS........................................... 11
11.1. General Rule................................................... 11
11.2. Family Transfers............................................... 11
12. RESTRICTED STOCK..................................................... 12
12.1. Grant of Restricted Stock or Restricted Stock Units............ 12
12.2. Restrictions................................................... 12
12.3. Restricted Stock Certificates.................................. 13
12.4. Rights of Holders of Restricted Stock.......................... 13
12.5. Rights of Holders of Restricted Stock Units.................... 13
12.6. Termination of Employment or Other Relationship................ 13
<PAGE>
12.7. Rights in the Event of Death................................... 14
12.8. Rights in the Event of Disability.............................. 14
12.9. Delivery of Stock and Payment Therefor......................... 14
13. PARACHUTE LIMITATIONS................................................ 15
14. REQUIREMENTS OF LAW.................................................. 16
14.1. General........................................................ 16
14.2. Rule 16b-3..................................................... 16
15. AMENDMENT AND TERMINATION OF THE PLAN................................ 17
16. EFFECT OF CHANGES IN CAPITALIZATION.................................. 17
16.1. Changes in Stock............................................... 17
16.2. Reorganization in Which the Company Is the Surviving
Entity and in Which No Change of Control Occurs................ 18
16.3. Reorganization, Sale of Assets or Sale of Stock Which
Involves a Change of Control................................... 18
16.4. Adjustments.................................................... 19
16.5. No Limitations on Company...................................... 19
17. DISCLAIMER OF RIGHTS................................................. 19
18. NONEXCLUSIVITY OF THE PLAN........................................... 20
19. WITHHOLDING TAXES.................................................... 20
20. CAPTIONS............................................................. 20
21. OTHER PROVISIONS..................................................... 20
22. NUMBER AND GENDER.................................................... 21
23. SEVERABILITY......................................................... 21
24. POOLING.............................................................. 21
25. GOVERNING LAW........................................................ 21
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GLOBAL IMAGING SYSTEMS, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
Global Imaging Systems, Inc., a Delaware corporation (the "Company"), sets
forth herein the terms of its 1998 Stock Option and Incentive Plan (the "Plan")
as follows:
1. PURPOSE
The Plan is intended to enhance the Company's ability to attract and retain
highly qualified officers, key employees, outside directors and other persons,
and to motivate such officers, key employees, outside directors and other
persons to serve the Company and its affiliates (as defined herein) and to
expend maximum effort to improve the business results and earnings of the
Company, by providing to such officers, key employees, outside directors and
other persons an opportunity to acquire or increase a direct proprietary
interest in the operations and future success of the Company. To this end, the
Plan provides for the grant of stock options, restricted stock and restricted
stock units in accordance with the terms hereof. Stock options granted under
the Plan may be non-qualified stock options or incentive stock options, as
provided herein, except that stock options granted to outside directors shall in
all cases be non-qualified stock options.
2. DEFINITIONS
For purposes of interpreting the Plan and related documents (including Award
Agreements), the following definitions shall apply:
2.1 "affiliate" of, or person "affiliated" with, a person means any company
or other trade or business that controls, is controlled by or is under common
control with such person within the meaning of Rule 405 of Regulation C under
the Securities Act.
2.2 "Award Agreement" means the stock option agreement, restricted stock
agreement, restricted stock unit agreement or other written agreement between
the Company and a Grantee that evidences and sets out the terms and conditions
of a Grant.
2.3 "Benefit Arrangement" shall have the meaning set forth in SECTION 13
hereof.
2.4 "Board" means the Board of Directors of the Company.
<PAGE>
2.5 "Change of Control" means (i) the dissolution or liquidation of the
Company or a merger, consolidation, or reorganization of the Company with one or
more other entities in which the Company is not the surviving entity, (ii) a
sale of substantially all of the assets of the Company to another entity, or
(iii) any transaction (including without limitation a merger or reorganization
in which the Company is the surviving entity) which results in any person or
entity (other than persons who are stockholders or affiliates of the Company at
the time the Plan is approved by the Company's stockholders) owning 50% or more
of the combined voting power of all classes of stock of the Company.
2.6 "Code" means the Internal Revenue Code of 1986, as now in effect or as
hereafter amended.
2.7 "Committee" means a committee of, and designated from time to time by
resolution of, the Board, which shall consist of no fewer than two members of
the Board, none of whom shall be an officer or other salaried employee of the
Company or any affiliate of the Company.
2.8 "Company" means Global Imaging Systems, Inc.
2.9 "Effective Date" means April 9, 1998, the date on which the Plan was
adopted by the Board.
2.10 "Exchange Act" means the Securities Exchange Act of 1934, as now in
effect or as hereafter amended.
2.11 "Fair Market Value" means the value of a share of Stock, determined
as follows: if on the Grant Date or other determination date the Stock is
listed on an established national or regional stock exchange, is admitted to
quotation on the NASDAQ National Market, or is publicly traded on an established
securities market, the Fair Market Value of a share of Stock shall be the
closing price of the Stock on such exchange or in such market (the highest such
closing price if there is more than one such exchange or market) on the Grant
Date or such other determination date (or if there is no such reported closing
price, the Fair Market Value shall be the mean between the highest bid and
lowest asked prices or between the high and low sale prices on such trading day)
or, if no sale of Stock is reported for such trading day, on the next preceding
day on which any sale shall have been reported. If the Stock is not listed on
such an exchange, quoted on such system or traded on such a market, Fair Market
Value shall be the value of the Stock as determined by the Board in good faith.
2.12 "Grant" means an award of an Option, Restricted Stock or Restricted
Stock Units under the Plan.
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2.13 "Grant Date" means, as determined by the Board or authorized
Committee, (i) the date as of which the Board or such Committee approves a
Grant, (ii) the date on which the recipient of a Grantee first becomes eligible
to receive a Grant under SECTION 6 hereof, or (iii) such other date as may be
specified by the Board or such Committee.
2.14 "Grantee" means a person who receives or holds an Option, Restricted
Stock or Restricted Stock Unit under the Plan.
2.15 "Immediate Family Members" means the spouse, children and
grandchildren of the Grantee.
2.16 "Incentive Stock Option" means an "incentive stock option" within the
meaning of Section 422 of the Code, or the corresponding provision of any
subsequently enacted tax statute, as amended from time to time.
2.17 "Option" means an option to purchase one or more shares of Stock
pursuant to the Plan.
2.18 "Option Period" means the period during which Options may be
exercised as set forth in SECTION 10 hereof.
2.19 "Option Price" means the purchase price for each share of Stock
subject to an Option.
2.20 "Other Agreement" shall have the meaning set forth in SECTION 13
hereof.
2.21 "Outside Director" means a member of the Board who is not an officer
or employee of the Company.
2.22 "Plan" means this Global Imaging Systems, Inc. 1998 Stock Option and
Incentive Plan.
2.23 "Reporting Person" means a person who is required to file reports
under Section 16(a) of the Exchange Act.
2.24 "Restricted Period" means the period during which Restricted Stock or
Restricted Stock Units are subject to restrictions or conditions pursuant to
SECTION 12.2 hereof.
2.25 "Restricted Stock" means shares of Stock, awarded to a Grantee
pursuant to SECTION 12 hereof, that are subject to restrictions and to a risk of
forfeiture.
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<PAGE>
2.26 "Restricted Stock Unit" means a unit awarded to a Grantee pursuant to
SECTION 12 hereof, which represents a conditional right to receive a share of
Stock in the future, and which is subject to restrictions and to a risk of
forfeiture.
2.27 "Securities Act" means the Securities Act of 1933, as now in effect
or as hereafter amended.
2.28 "Service Provider" means a consultant or adviser to the Company, a
manager of the Company's properties or affairs, or other similar service
provider or affiliate of the Company, and employees of any of the foregoing, as
such persons may be designated from time to time by the Board pursuant to
SECTION 6 hereof.
2.29 "Stock" means the common stock, par value $0.01 per share, of the
Company.
2.30 "Subsidiary" means any "subsidiary corporation" of the Company within
the meaning of Section 424(f) of the Code.
2.31 "Termination Date" shall be the date upon which an Option shall
terminate or expire, as set forth in SECTION 10.2 hereof.
3. ADMINISTRATION OF THE PLAN
3.1. BOARD.
The Board shall have such powers and authorities related to the
administration of the Plan as are consistent with the Company's certificate of
incorporation and by-laws and applicable law. The Board shall have full power
and authority to take all actions and to make all determinations required or
provided for under the Plan, any Grant or any Award Agreement, and shall have
full power and authority to take all such other actions and make all such other
determinations not inconsistent with the specific terms and provisions of the
Plan that the Board deems to be necessary or appropriate to the administration
of the Plan, any Grant or any Award Agreement. All such actions and
determinations shall be by the affirmative vote of a majority of the members of
the Board present at a meeting or by unanimous consent of the Board executed in
writing in accordance with the Company's certificate of incorporation and by-
laws and applicable law. The interpretation and construction by the Board of
any provision of the Plan, any Grant or any Award Agreement shall be final and
conclusive. As permitted by law, the Board may delegate its authority under the
Plan to a member of the Board of Directors or an executive officer of the
Company.
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<PAGE>
3.2. COMMITTEE.
The Board from time to time may delegate to a Committee such powers and
authorities related to the administration and implementation of the Plan, as set
forth in SECTION 3.1 above and in other applicable provisions, as the Board
shall determine, consistent with the certificate of incorporation and by-laws of
the Company and applicable law. In the event that the Plan, any Grant or any
Award Agreement entered into hereunder provides for any action to be taken by or
determination to be made by the Board, such action may be taken by or such
determination may be made by the Committee if the power and authority to do so
has been delegated to the Committee by the Board as provided for in this
Section. Unless otherwise expressly determined by the Board, any such action or
determination by the Committee shall be final, binding and conclusive. As
permitted by law, the Committee may delegate the authority delegated to it under
the Plan to a member of the Board of Directors or an executive officer of the
Company.
3.3. GRANTS.
Subject to the other terms and conditions of the Plan, the Board shall have
full and final authority (i) to designate Grantees, (ii) to determine the type
or types of Grant to be made to a Grantee, (iii) to determine the number of
shares of Stock to be subject to a Grant, (iv) to establish the terms and
conditions of each Grant (including, but not limited to, the exercise price of
any Option, the nature and duration of any restriction or condition (or
provision for lapse thereof) relating to the vesting, exercise, transfer, or
forfeiture of a Grant or the shares of Stock subject thereto, and any terms or
conditions that may be necessary to qualify Options as Incentive Stock Options),
(v) to prescribe the form of each Award Agreement evidencing a Grant, and (vi)
to amend, modify, or supplement the terms of any outstanding Grant. Such
authority specifically includes the authority, in order to effectuate the
purposes of the Plan but without amending the Plan, to modify Grants to eligible
individuals who are foreign nationals or are individuals who are employed
outside the United States to recognize differences in local law, tax policy, or
custom. As a condition to any subsequent Grant, the Board shall have the right,
at its discretion, to require Grantees to return to the Company Grants
previously awarded under the Plan. Subject to the terms and conditions of the
Plan, any such new Grant shall be upon such terms and conditions as are
specified by the Board at the time the new Grant is made.
3.4. NO LIABILITY.
No member of the Board or of the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any Grant or
Award Agreement.
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<PAGE>
3.5. APPLICABILITY OF RULE 16b-3.
Those provisions of the Plan that make express reference to Rule 16b-3
under the Exchange Act shall apply only to Reporting Persons.
4. STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in SECTION 16 hereof, the number of
shares of Stock available for issuance under the Plan shall be 1,820,000, no
more than 600,000 of which may be issued pursuant to awards of Restricted Stock
or Restricted Stock Units. Stock issued or to be issued under the Plan shall be
authorized but unissued shares. If any shares covered by a Grant are not
purchased or are forfeited, or if a Grant otherwise terminates without delivery
of any Stock subject thereto, then the number of shares of Stock counted against
the aggregate number of shares available under the Plan with respect to such
Grant shall, to the extent of any such forfeiture or termination, again be
available for making Grants under the Plan.
5. EFFECTIVE DATE AND TERM OF THE PLAN
5.1. EFFECTIVE DATE.
The Plan shall be effective as of the Effective Date, subject to approval
of the Plan within one year of the Effective Date, by a majority of the votes
cast on the proposal at a meeting of stockholders, provided that the total votes
cast represent a majority of all shares entitled to vote or by the written
consent of the holders of a majority of the Company's shares entitled to vote.
Upon approval of the Plan by the stockholders of the Company as set forth above,
all Grants made under the Plan on or after the Effective Date shall be fully
effective as if the stockholders of the Company had approved the Plan on the
Effective Date. If the stockholders fail to approve the Plan within one year
after the Effective Date, any Grants made hereunder shall be null and void and
of no effect.
5.2. TERM.
The Plan has no termination date; however, no Incentive Stock Option may be
granted under the Plan on or after the tenth anniversary of the Effective Date.
6. OPTION GRANTS
6.1. COMPANY OR SUBSIDIARY EMPLOYEES.
Grants (including Grants of Incentive Stock Options) may be made under the
Plan to any employee of, or Service Provider or employee of a Service Provider
providing, or who has provided, services to, the Company or any Subsidiary,
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<PAGE>
including any such employee who is an officer or director of the Company or of
any Subsidiary, as the Board shall determine and designate from time to time.
6.2. SUCCESSIVE GRANTS.
An eligible person may receive more than one Grant, subject to such
restrictions as are provided herein.
7. LIMITATIONS ON GRANTS
7.1. LIMITATION ON SHARES OF STOCK SUBJECT TO GRANTS.
During any time when the Company has a class of equity security registered
under Section 12 of the Exchange Act, no person eligible for a Grant under
SECTION 6 hereof may be awarded Options in any calendar year exercisable for
greater than 400,000 shares of Stock (subject to adjustment as provided in
SECTION 16 hereof). During any time when the Company has a class of equity
security registered under Section 12 of the Exchange Act, the maximum number of
shares of Restricted Stock that can be awarded under the Plan (including for
this purpose any shares of Stock represented by Restricted Stock Units) to any
person eligible for a Grant under SECTION 6 hereof is 400,000 per calendar year
(subject to adjustment as provided in SECTION 16 hereof).
7.2. LIMITATIONS ON INCENTIVE STOCK OPTIONS.
An Option shall constitute an Incentive Stock Option only (i) if the
Grantee of such Option is an employee of the Company or any Subsidiary of the
Company; (ii) to the extent specifically provided in the related Award
Agreement; and (iii) to the extent that the aggregate Fair Market Value
(determined at the time the Option is granted) of the shares of Stock with
respect to which all Incentive Stock Options held by such Grantee become
exercisable for the first time during any calendar year (under the Plan and all
other plans of the Grantee's employer and its affiliates) does not exceed
$100,000. This limitation shall be applied by taking Options into account in the
order in which they were granted.
8. AWARD AGREEMENT
Each Grant pursuant to the Plan shall be evidenced by an Award Agreement,
in such form or forms as the Board shall from time to time determine. Award
Agreements granted from time to time or at the same time need not contain
similar provisions but shall be consistent with the terms of the Plan. Each
Award Agreement evidencing a Grant of Options shall specify whether such Options
are intended to be non-qualified stock options or Incentive Stock Options, and
in the
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<PAGE>
absence of such specification such options shall be deemed non-qualified stock
options.
9. OPTION PRICE
The Option Price of each Option shall be fixed by the Board and stated in
the Award Agreement evidencing such Option. The Option Price shall be the Fair
Market Value on the Grant Date of a share of Stock; provided, however, that in
-------- -------
the event that a Grantee would otherwise be ineligible to receive an Incentive
Stock Option by reason of the provisions of Sections 422(b)(6) and 424(d) of the
Code (relating to ownership of more than ten percent of the Company's
outstanding Stock), the Option Price of an Option granted to such Grantee that
is intended to be an Incentive Stock Option shall be not less than the greater
of the par value or 110 percent of the Fair Market Value of a share of Stock on
the Grant Date. In no case shall the Option Price of any Option be less than
the par value of a share of Stock.
10. VESTING, TERM AND EXERCISE OF OPTIONS
10.1. VESTING AND OPTION PERIOD.
Subject to SECTIONS 10.2 and 16.3 hereof, each Option granted under the
Plan shall become exercisable at such times and under such conditions as shall
be determined by the Board and stated in the Award Agreement. For purposes of
this SECTION 10.1, fractional numbers of shares of Stock subject to an Option
shall be rounded down to the next nearest whole number. The period during which
any Option shall be exercisable shall constitute the "Option Period" with
respect to such Option.
10.2. TERM.
Each Option granted under the Plan shall terminate, and all rights to
purchase shares of Stock thereunder shall cease, upon the expiration of ten
years from the date such Option is granted, or under such circumstances and on
such date prior thereto as is set forth in the Plan or as may be fixed by the
Board and stated in the Award Agreement relating to such Option (the
"Termination Date"); provided, however, that in the event that the Grantee would
-------- -------
otherwise be ineligible to receive an Incentive Stock Option by reason of the
provisions of Sections 422(b)(6) and 424(d) of the Code (relating to ownership
of more than ten percent of the outstanding Stock), an Option granted to such
Grantee that is intended to be an Incentive Stock Option shall not be
exercisable after the expiration of five years from its Grant Date.
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10.3. ACCELERATION.
Any limitation on the exercise of an Option contained in any Award
Agreement may be rescinded, modified or waived by the Board, in its sole
discretion, at any time and from time to time after the Grant Date of such
Option, so as to accelerate the time at which the Option may be exercised.
Notwithstanding any other provision of the Plan, no Option shall be exercisable
in whole or in part prior to the date the Plan is approved by the stockholders
of the Company as provided in SECTION 5.1 hereof.
10.4. TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP.
Upon the termination of a Grantee's employment or other relationship with
the Company other than by reason of death or "permanent and total disability"
(within the meaning of Section 22(e)(3) of the Code), any Option or portion
thereof held by such Grantee that has not vested in accordance with the
provisions of SECTION 10.1 hereof shall terminate immediately, and any Option or
portion thereof that has vested in accordance with the provisions of SECTION
10.1 hereof but has not been exercised shall terminate at the close of business
on the 90th day following the Grantee's termination of employment or other
relationship (or, if such 90th day is a Saturday, Sunday or holiday, at the
close of business on the next preceding day that is not a Saturday, Sunday or
holiday), unless the Board, in its discretion, extends the period during which
the Option may be exercised (which period may not be extended beyond the
original term of the Option). Upon termination of an Option or portion thereof,
the Grantee shall have no further right to purchase shares of Stock pursuant to
such Option or portion thereof. Whether a leave of absence or leave on military
or government service shall constitute a termination of employment or other
relationship for purposes of the Plan shall be determined by the Board, which
determination shall be final and conclusive. For purposes of the Plan, a
termination of employment, service or other relationship shall not be deemed to
occur if the Grantee is immediately thereafter employed with the Company or any
other Service Provider, or is engaged as a Service Provider or an Outside
Director of the Company. Whether a termination of a Service Provider's or an
Outside Director's relationship with the Company shall have occurred shall be
determined by the Committee, which determination shall be final and conclusive.
10.5. RIGHTS IN THE EVENT OF DEATH.
If a Grantee dies while employed by or providing services to the Company,
all Options granted to such Grantee shall fully vest on the date of death, and
the executors or administrators or legatees or distributees of such Grantee's
estate shall have the right, at any time within one year after the date of such
Grantee's death (or such longer period as the Board, in its discretion, may
determine prior to the expiration of such one-year period) and prior to
termination of the Option pursuant
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to SECTION 10.2 above, to exercise any Option held by such Grantee at the date
of such Grantee's death.
10.6. RIGHTS IN THE EVENT OF DISABILITY.
If a Grantee's employment or other relationship with the Company is
terminated by reason of the "permanent and total disability" (within the meaning
of Section 22(e)(3) of the Code) of such Grantee, such Grantee's Options shall
continue to vest, and shall be exercisable to the extent that they are vested,
for a period of one year after such termination of employment or service (or
such longer period as the Board, in its discretion, may determine prior to the
expiration of such one-year period), subject to earlier termination of the
Option as provided in SECTION 10.2 above. Whether a termination of employment
or service is to be considered by reason of "permanent and total disability" for
purposes of the Plan shall be determined by the Board, which determination shall
be final and conclusive.
10.7. LIMITATIONS ON EXERCISE OF OPTION.
Notwithstanding any other provision of the Plan, in no event may any Option
be exercised, in whole or in part, prior to the date the Plan is approved by the
stockholders of the Company as provided herein, or after ten years following the
date upon which the Option is granted, or after the occurrence of an event
referred to in SECTION 16 hereof which results in termination of the Option.
10.8. METHOD OF EXERCISE.
An Option that is exercisable may be exercised by the Grantee's delivery to
the Company of written notice of exercise on any business day, at the Company's
principal office, addressed to the attention of the Board. Such notice shall
specify the number of shares of Stock with respect to which the Option is being
exercised and shall be accompanied by payment in full of the Option Price of the
shares for which the Option is being exercised. The minimum number of shares of
Stock with respect to which an Option may be exercised, in whole or in part, at
any time shall be the lesser of (i) 100 shares or such lesser number set forth
in the applicable Award Agreement and (ii) the maximum number of shares
available for purchase under the Option at the time of exercise. Payment of the
Option Price for the shares purchased pursuant to the exercise of an Option
shall be made (i) in cash or in cash equivalents; (ii) through the tender to the
Company of shares of Stock, which shares, if acquired from the Company, shall
have been held for at least six months and which shall be valued, for purposes
of determining the extent to which the Option Price has been paid thereby, at
their Fair Market Value on the date of exercise; or (iii) by a combination of
the methods described in (i) and (ii). The Board may provide, by inclusion of
appropriate language in an Award Agreement, that payment in full of the Option
Price need not accompany the written notice of
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<PAGE>
exercise provided that the notice of exercise directs that the certificate or
certificates for the shares of Stock for which the Option is exercised be
delivered to a licensed broker acceptable to the Company as the agent for the
individual exercising the Option and, at the time such certificate or
certificates are delivered, the broker tenders to the Company cash (or cash
equivalents acceptable to the Company) equal to the Option Price for the shares
of Stock purchased pursuant to the exercise of the Option plus the amount (if
any) of federal and/or other taxes which the Company may in its judgment, be
required to withhold with respect to the exercise of the Option. An attempt to
exercise any Option granted hereunder other than as set forth above shall be
invalid and of no force and effect. Unless otherwise stated in the applicable
Award Agreement, an individual holding or exercising an Option shall have none
of the rights of a stockholder (for example, the right to receive cash or
dividend payments or distributions attributable to the subject shares of Stock
or to direct the voting of the subject shares of Stock) until the shares of
Stock covered thereby are fully paid and issued to such individual. Except as
provided in SECTION 16 hereof, no adjustment shall be made for dividends,
distributions or other rights for which the record date is prior to the date of
such issuance.
10.9. DELIVERY OF STOCK CERTIFICATES.
Promptly after the exercise of an Option by a Grantee and the payment in
full of the Option Price, such Grantee shall be entitled to the issuance of a
stock certificate or certificates evidencing his or her ownership of the shares
of Stock subject to the Option.
11. TRANSFERABILITY OF OPTIONS
11.1. GENERAL RULE
Except as provided in SECTION 11.2, during the lifetime of a Grantee, only
the Grantee (or, in the event of legal incapacity or incompetency, the Grantee's
guardian or legal representative) may exercise an Option. Except as provided in
SECTION 11.2, no Option shall be assignable or transferable by the Grantee to
whom it is granted, other than by will or the laws of descent and distribution.
11.2. FAMILY TRANSFERS.
If authorized in the applicable Award Agreement, a Grantee may transfer all
or part of an Option that is not an Incentive Stock Option to (i) any Immediate
Family Member, (ii) a trust or trusts for the exclusive benefit of any Immediate
Family Member, or (iii) a partnership in which Immediate Family Members are the
only partners, provided that (x) there may be no consideration for any such
transfer, and (y) subsequent transfers of transferred Options are prohibited
except those in
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accordance with this SECTION 11.2 or by will or the laws of descent and
distribution. Following transfer, any such Option shall continue to be subject
to the same terms and conditions as were applicable immediately prior to
transfer, provided that for purposes of SECTION 11.2 hereof the term "Grantee"
shall be deemed to refer to the transferee. The events of termination of the
employment or other relationship of SECTION 10.4 hereof shall continue to be
applied with respect to the original Grantee, following which the Option shall
be exercisable by the transferee only to the extent and for the periods
specified in SECTIONS 10.4, 10.5 or 10.6.
12. RESTRICTED STOCK
12.1. GRANT OF RESTRICTED STOCK OR RESTRICTED STOCK UNITS.
The Board may from time to time grant Restricted Stock or Restricted Stock
Units to persons eligible to receive Grants under SECTION 6 hereof, subject to
such restrictions, conditions and other terms as the Board may determine.
12.2. RESTRICTIONS.
At the time a Grant of Restricted Stock or Restricted Stock Units is made,
the Board shall establish a period of time (the "Restricted Period") applicable
to such Restricted Stock or Restricted Stock Units. Each Grant of Restricted
Stock or Restricted Stock Units may be subject to a different Restricted Period.
The Board may, in its sole discretion, at the time a Grant of Restricted Stock
or Restricted Stock Units is made, prescribe restrictions in addition to or
other than the expiration of the Restricted Period, including the satisfaction
of corporate or individual performance objectives, which may be applicable to
all or any portion of the Restricted Stock or Restricted Stock Units. Such
performance objectives shall be established in writing by the Board prior to the
ninetieth day of the year in which the Grant is made and while the outcome is
substantially uncertain. Performance objectives shall be based on Stock price,
market share, sales, earnings per share, return on equity or costs. Performance
objectives may include positive results, maintaining the status quo or limiting
economic losses. Subject to the second sentence of this SECTION 12.2, the Board
also may, in its sole discretion, shorten or terminate the Restricted Period or
waive any other restrictions applicable to all or a portion of the Restricted
Stock or Restricted Stock Units. Neither Restricted Stock nor Restricted Stock
Units may be sold, transferred, assigned, pledged or otherwise encumbered or
disposed of during the Restricted Period or prior to the satisfaction of any
other restrictions prescribed by the Board with respect to such Restricted Stock
or Restricted Stock Units.
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<PAGE>
12.3. RESTRICTED STOCK CERTIFICATES.
The Company shall issue, in the name of each Grantee to whom Restricted
Stock has been granted, stock certificates representing the total number of
shares of Restricted Stock granted to the Grantee, as soon as reasonably
practicable after the Grant Date. The Secretary of the Company shall hold such
certificates for the Grantee's benefit until such time as the Restricted Stock
is forfeited to the Company, or the restrictions lapse.
12.4. RIGHTS OF HOLDERS OF RESTRICTED STOCK.
Unless the Board otherwise provides in an Award Agreement, holders of
Restricted Stock shall have the right to vote such Stock and the right to
receive any dividends declared or paid with respect to such Stock. The Board
may provide that any dividends paid on Restricted Stock must be reinvested in
shares of Stock, which may or may not be subject to the same vesting conditions
and restrictions applicable to such Restricted Stock. All distributions, if
any, received by a Grantee with respect to Restricted Stock as a result of any
stock split, stock dividend, combination of shares, or other similar transaction
shall be subject to the restrictions applicable to the original Grant.
12.5. RIGHTS OF HOLDERS OF RESTRICTED STOCK UNITS.
Unless the Board otherwise provides in an Award Agreement, holders of
Restricted Stock Units shall have no rights as stockholders of the Company. The
Board may provide in an Award Agreement evidencing a Grant of Restricted Stock
Units that the holder of such Restricted Stock Units shall be entitled to
receive, upon the Company's payment of a cash dividend on its outstanding Stock,
a cash payment for each Restricted Stock Unit held equal to the per-share
dividend paid on the Stock. Such Award Agreement may also provide that such
cash payment will be deemed reinvested in additional Restricted Stock Units at a
price per unit equal to the Fair Market Value of a share of Stock on the date
that such dividend is paid.
12.6. TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP.
Upon the termination of the employment of a Grantee with the Company or a
Service Provider or of a Service Provider's relationship with the Company, in
either case other than, in the case of individuals, by reason of death or
"permanent and total disability" (within the meaning of Section 22(e)(3) of the
Code), any shares of Restricted Stock or Restricted Stock Units held by such
Grantee that have not vested, or with respect to which all applicable
restrictions and conditions have not lapsed, shall immediately be deemed
forfeited, unless the Board, in its discretion, determines otherwise. Upon
forfeiture of Restricted Stock or Restricted Stock Units, the Grantee shall have
no further rights with respect to such Grant,
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including but not limited to any right to vote Restricted Stock or any right to
receive dividends with respect to shares of Restricted Stock or Restricted Stock
Units. Whether a leave of absence or leave on military or government service
shall constitute a termination of employment or other relationship for purposes
of the Plan shall be determined by the Board, which determination shall be final
and conclusive. For purposes of the Plan, a termination of employment, service
or other relationship shall not be deemed to occur if the Grantee is immediately
thereafter employed with the Company or any other Service Provider, or is
engaged as a Service Provider or an Outside Director of the Company. Whether a
termination of a Service Provider's or an Outside Director's relationship with
the Company shall have occurred shall be determined by the Committee, which
determination shall be final and conclusive.
12.7. RIGHTS IN THE EVENT OF DEATH.
If a Grantee dies while employed by the Company or a Service Provider, or
while serving as a Service Provider, all Restricted Stock or Restricted Stock
Units granted to such Grantee shall fully vest on the date of death, and the
shares of Stock represented thereby shall be deliverable in accordance with the
terms of the Plan to the executors, administrators, legatees or distributees of
the Grantee's estate.
12.8. RIGHTS IN THE EVENT OF DISABILITY.
If a Grantee's employment or other relationship with the Company or a
Service Provider, or while serving as a Service Provider, is terminated by
reason of the "permanent and total disability" (within the meaning of Section
22(e)(3) of the Code) of such Grantee, such Grantee's Restricted Stock or
Restricted Stock Units shall continue to vest in accordance with the applicable
Award Agreement for a period of one year after such termination of employment or
service (or such longer period as the Board, in its discretion, may determine
prior to the expiration of such one-year period), subject to the earlier
forfeiture of such Restricted Stock or Restricted Stock Units in accordance with
the terms of the applicable Award Agreement. Whether a termination of
employment or service is to be considered by reason of "permanent and total
disability" for purposes of the Plan shall be determined by the Board, which
determination shall be final and conclusive.
12.9. DELIVERY OF STOCK AND PAYMENT THEREFOR.
Upon the expiration or termination of the Restricted Period and the
satisfaction of any other conditions prescribed by the Board, the restrictions
applicable to shares of Restricted Stock or Restricted Stock Units shall lapse,
and, upon payment by the Grantee to the Company, in cash or by check, of the
aggregate par value of the shares of Stock represented by such Restricted Stock
or Restricted
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Stock Units, a stock certificate for such shares shall be delivered, free of all
such restrictions, to the Grantee or the Grantee's beneficiary or estate, as the
case may be.
13. PARACHUTE LIMITATIONS
Notwithstanding any other provision of this Plan or of any other agreement,
contract, or understanding heretofore or hereafter entered into by a Grantee
with the Company or any Subsidiary, except an agreement, contract, or
understanding hereafter entered into that expressly modifies or excludes
application of this paragraph (an "Other Agreement"), and notwithstanding any
formal or informal plan or other arrangement for the direct or indirect
provision of compensation to the Grantee (including groups or classes of
participants or beneficiaries of which the Grantee is a member), whether or not
such compensation is deferred, is in cash, or is in the form of a benefit to or
for the Grantee (a "Benefit Arrangement"), if the Grantee is a "disqualified
individual," as defined in Section 280G(c) of the Code, any Option, Restricted
Stock or Restricted Stock Unit held by that Grantee and any right to receive any
payment or other benefit under this Plan shall not become exercisable or vested
(i) to the extent that such right to exercise, vesting, payment, or benefit,
taking into account all other rights, payments, or benefits to or for the
Grantee under this Plan, all Other Agreements, and all Benefit Arrangements,
would cause any payment or benefit to the Grantee under this Plan to be
considered a "parachute payment" within the meaning of Section 280G(b)(2) of the
Code as then in effect (a "Parachute Payment") and (ii) if, as a result of
---
receiving a Parachute Payment, the aggregate after-tax amounts received by the
Grantee from the Company under this Plan, all Other Agreements, and all Benefit
Arrangements would be less than the maximum after-tax amount that could be
received by the Grantee without causing any such payment or benefit to be
considered a Parachute Payment. In the event that the receipt of any such right
to exercise, vesting, payment, or benefit under this Plan, in conjunction with
all other rights, payments, or benefits to or for the Grantee under any Other
Agreement or any Benefit Arrangement would cause the Grantee to be considered to
have received a Parachute Payment under this Plan that would have the effect of
decreasing the after-tax amount received by the Grantee as described in clause
(ii) of the preceding sentence, then the Grantee shall have the right, in the
Grantee's sole discretion, to designate those rights, payments, or benefits
under this Plan, any Other Agreements, and any Benefit Arrangements that should
be reduced or eliminated so as to avoid having the payment or benefit to the
Grantee under this Plan be deemed to be a Parachute Payment.
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14. REQUIREMENTS OF LAW
14.1. GENERAL.
The Company shall not be required to sell or issue any shares of Stock
under any Grant if the sale or issuance of such shares would constitute a
violation by the Grantee, any other individual exercising an Option, or the
Company of any provision of any law or regulation of any governmental authority,
including without limitation any federal or state securities laws or
regulations. If at any time the Company shall determine, in its discretion,
that the listing, registration or qualification of any shares subject to a Grant
upon any securities exchange or under any governmental regulatory body is
necessary or desirable as a condition of, or in connection with, the issuance or
purchase of shares hereunder, no shares of Stock may be issued or sold to the
Grantee or any other individual exercising an Option pursuant to such Grant
unless such listing, registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to the Company,
and any delay caused thereby shall in no way affect the date of termination of
the Grant. Specifically, in connection with the Securities Act, upon the
exercise of any Option or the delivery of any shares of Restricted Stock or
Stock underlying Restricted Stock Units, unless a registration statement under
such Act is in effect with respect to the shares of Stock covered by such Grant,
the Company shall not be required to sell or issue such shares unless the Board
has received evidence satisfactory to it that the Grantee or any other
individual exercising an Option may acquire such shares pursuant to an exemption
from registration under the Securities Act. Any determination in this
connection by the Board shall be final, binding, and conclusive. The Company
may, but shall in no event be obligated to, register any securities covered
hereby pursuant to the Securities Act. The Company shall not be obligated to
take any affirmative action in order to cause the exercise of an Option or the
issuance of shares of Stock pursuant to the Plan to comply with any law or
regulation of any governmental authority. As to any jurisdiction that expressly
imposes the requirement that an Option shall not be exercisable until the shares
of Stock covered by such Option are registered or are exempt from registration,
the exercise of such Option (under circumstances in which the laws of such
jurisdiction apply) shall be deemed conditioned upon the effectiveness of such
registration or the availability of such an exemption.
14.2. RULE 16B-3.
During any time when the Company has a class of equity security registered
under Section 12 of the Exchange Act, it is the intent of the Company that
Grants pursuant to the Plan and the exercise of Options granted hereunder will
qualify for the exemption provided by Rule 16b-3 under the Exchange Act. To the
extent that any provision of the Plan or action by the Board does not comply
with the requirements of Rule 16b-3, it shall be deemed inoperative to the
extent permitted
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by law and deemed advisable by the Board, and shall not affect the validity of
the Plan. In the event that Rule 16b-3 is revised or replaced, the Board may
exercise its discretion to modify this Plan in any respect necessary to satisfy
the requirements of, or to take advantage of any features of, the revised
exemption or its replacement.
15. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend, suspend, or
terminate the Plan as to any shares of Stock as to which Grants have not been
made; provided, however, that the Board shall not, without approval of the
-------- -------
Company's stockholders, amend the Plan such that it does not comply with the
Code. The Company may retain the right in an Award Agreement to cause a
forfeiture of the gain realized by a Grantee on account of the Grantee taking
actions in "competition with the Company," as defined in the applicable Award
Agreement. Furthermore, the Company may annul a Grant if the Grantee is an
employee of the Company or an affiliate and is terminated "for cause" as defined
in the applicable Award Agreement. Except as permitted under this SECTION 15 or
SECTION 16 hereof, no amendment, suspension, or termination of the Plan shall,
without the consent of the Grantee, alter or impair rights or obligations under
any Grant theretofore awarded under the Plan.
16. EFFECT OF CHANGES IN CAPITALIZATION
16.1. CHANGES IN STOCK.
If the number of outstanding shares of Stock is increased or decreased or
the shares of Stock are changed into or exchanged for a different number or kind
of shares or other securities of the Company on account of any recapitalization,
reclassification, stock split, reverse split, combination of shares, exchange of
shares, stock dividend or other distribution payable in capital stock, or other
increase or decrease in such shares effected without receipt of consideration by
the Company occurring after the Effective Date, the number and kinds of shares
for which Grants of Options, Restricted Stock and Restricted Stock Units may be
made under the Plan shall be adjusted proportionately and accordingly by the
Company. In addition, the number and kind of shares for which Grants are
outstanding shall be adjusted proportionately and accordingly so that the
proportionate interest of the Grantee immediately following such event shall, to
the extent practicable, be the same as immediately before such event. Any such
adjustment in outstanding Options shall not change the aggregate Option Price
payable with respect to shares that are subject to the unexercised portion of an
Option outstanding but shall include a corresponding proportionate adjustment in
the Option Price per share. The conversion of any convertible securities of the
Company shall not be treated as an increase in shares effected without receipt
of consideration.
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16.2. REORGANIZATION IN WHICH THE COMPANY IS THE SURVIVING ENTITY AND IN
WHICH NO CHANGE OF CONTROL OCCURS.
Subject to SECTION 16.3 hereof, if the Company shall be the surviving
entity in any reorganization, merger, or consolidation of the Company with one
or more other entities in which no Change in Control occurs, any Option
theretofore granted pursuant to the Plan shall pertain to and apply to the
securities to which a holder of the number of shares of Stock subject to such
Option would have been entitled immediately following such reorganization,
merger, or consolidation, with a corresponding proportionate adjustment of the
Option Price per share so that the aggregate Option Price thereafter shall be
the same as the aggregate Option Price of the shares remaining subject to the
Option immediately prior to such reorganization, merger, or consolidation.
Subject to any contrary language in an Award Agreement evidencing a Grant of
Restricted Stock, any restrictions applicable to such Restricted Stock shall
apply as well to any replacement shares received by the Grantee as a result of
the reorganization, merger or consolidation.
16.3. REORGANIZATION, SALE OF ASSETS OR SALE OF STOCK WHICH INVOLVES A
CHANGE OF CONTROL.
Subject to the exceptions set forth in the last sentence of this SECTION
16.3, (i) upon the occurrence of a Change of Control, all outstanding shares of
Restricted Stock and Restricted Stock Units shall be deemed to have vested, and
all restrictions and conditions applicable to such shares of Restricted Stock
and Restricted Stock Units shall be deemed to have lapsed, immediately prior to
the occurrence of such Change of Control, and (ii) fifteen days prior to the
scheduled consummation of a Change of Control, all Options outstanding hereunder
shall become immediately exercisable and shall remain exercisable for a period
of fifteen days. Any exercise of an Option during such fifteen-day period shall
be conditioned upon the consummation of the event and shall be effective only
immediately before the consummation of the event. Upon consummation of any
Change of Control, the Plan and all outstanding but unexercised Options shall
terminate. The Board shall send written notice of an event that will result in
such a termination to all individuals who hold Options not later than the time
at which the Company gives notice thereof to its stockholders. This SECTION
16.3 shall not apply to any Change of Control to the extent that (A) provision
is made in writing in connection with such Change of Control for the
continuation of the Plan or the assumption of the Options, Restricted Stock and
Restricted Stock Units theretofore granted, or for the substitution for such
Options, Restricted Stock and Restricted Stock Units of new options, restricted
stock and restricted stock units covering the stock of a successor entity, or a
parent or subsidiary thereof, with appropriate adjustments as to the number and
kinds of shares or units and exercise prices, in which event the Plan and
Options, Restricted Stock and Restricted Stock Units theretofore granted shall
continue in the manner and under the terms so provided or (B) a majority of the
full
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Board determines that such Change of Control shall not trigger application of
the provisions of this SECTION 16.3 subject to SECTION 24.
16.4. ADJUSTMENTS.
Adjustments under this SECTION 16 related to shares of Stock or securities
of the Company shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. No fractional shares or other
securities shall be issued pursuant to any such adjustment, and any fractions
resulting from any such adjustment shall be eliminated in each case by rounding
downward to the nearest whole share.
16.5. NO LIMITATIONS ON COMPANY.
The making of Grants pursuant to the Plan shall not affect or limit in any
way the right or power of the Company to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure or to merge,
consolidate, dissolve, or liquidate, or to sell or transfer all or any part of
its business or assets.
17. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Grant or Award Agreement shall be
construed to confer upon any individual the right to remain in the employ or
service of the Company or any affiliate, or to interfere in any way with any
contractual or other right or authority of the Company or Service Provider
either to increase or decrease the compensation or other payments to any
individual at any time, or to terminate any employment or other relationship
between any individual and the Company. In addition, notwithstanding anything
contained in the Plan to the contrary, unless otherwise stated in the applicable
Award Agreement, no Grant awarded under the Plan shall be affected by any change
of duties or position of the Optionee, so long as such Grantee continues to be a
director, officer, consultant or employee of the Company. The obligation of the
Company to pay any benefits pursuant to this Plan shall be interpreted as a
contractual obligation to pay only those amounts described herein, in the manner
and under the conditions prescribed herein. The Plan shall in no way be
interpreted to require the Company to transfer any amounts to a third party
trustee or otherwise hold any amounts in trust or escrow for payment to any
participant or beneficiary under the terms of the Plan. No Grantee shall have
any of the rights of a stockholder with respect to the shares of Stock subject
to an Option except to the extent the certificates for such shares of Stock
shall have been issued upon the exercise of the Option.
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18. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the Plan to the
stockholders of the Company for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or particular individuals) as the Board in its discretion determines
desirable, including, without limitation, the granting of stock options
otherwise than under the Plan.
19. WITHHOLDING TAXES
The Company or a Subsidiary, as the case may be, shall have the right to
deduct from payments of any kind otherwise due to a Grantee any Federal, state,
or local taxes of any kind required by law to be withheld with respect to the
vesting of or other lapse of restrictions applicable to Restricted Stock or
Restricted Stock Units or upon the issuance of any shares of Stock upon the
exercise of an Option. At the time of such vesting, lapse, or exercise, the
Grantee shall pay to the Company or the Subsidiary, as the case may be, any
amount that the Company or the Subsidiary may reasonably determine to be
necessary to satisfy such withholding obligation. Subject to the prior approval
of the Company or the Subsidiary, which may be withheld by the Company or the
Subsidiary, as the case may be, in its sole discretion, the Grantee may elect to
satisfy such obligations, in whole or in part, (i) by causing the Company or the
Subsidiary to withhold shares of Stock otherwise issuable to the Grantee or (ii)
by delivering to the Company or the Subsidiary shares of Stock already owned by
the Grantee. The shares of Stock so delivered or withheld shall have an
aggregate Fair Market Value equal to such withholding obligations. The Fair
Market Value of the shares of Stock used to satisfy such withholding obligation
shall be determined by the Company or the Subsidiary as of the date that the
amount of tax to be withheld is to be determined. A Grantee who has made an
election pursuant to this SECTION 19 may satisfy his or her withholding
obligation only with shares of Stock that are not subject to any repurchase,
forfeiture, unfulfilled vesting, or other similar requirements.
20. CAPTIONS
The use of captions in this Plan or any Award Agreement is for the
convenience of reference only and shall not affect the meaning of any provision
of the Plan or such Award Agreement.
21. OTHER PROVISIONS
Each Grant awarded under the Plan may contain such other terms and
conditions not inconsistent with the Plan as may be determined by the Board, in
its sole discretion.
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22. NUMBER AND GENDER
With respect to words used in this Plan, the singular form shall include
the plural form, the masculine gender shall include the feminine gender, etc.,
as the context requires.
23. SEVERABILITY
If any provision of the Plan or any Award Agreement shall be determined to
be illegal or unenforceable by any court of law in any jurisdiction, the
remaining provisions hereof and thereof shall be severable and enforceable in
accordance with their terms, and all provisions shall remain enforceable in any
other jurisdiction.
24. POOLING
Notwithstanding anything in the Plan to the contrary, if any right under or
feature of the Plan would cause to be ineligible for pooling of interest
accounting a transaction that would, but for the right or feature hereunder, be
eligible for such accounting treatment, the Board may modify or adjust the right
or feature so that the transaction will be eligible for pooling of interest
accounting. Such modification or adjustment may include payment of cash or
issuance to a Grantee of Stock having a Fair Market Value equal to the cash
value of such right or feature.
25. GOVERNING LAW
The validity and construction of this Plan and the instruments evidencing
the Grants awarded hereunder shall be governed by the laws of the State of
Delaware.
* * *
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The Plan was duly adopted and approved by the Board of Directors of the
Company as of the 9th day of April, 1998.
/S/
----------------------------------------
Raymond Schilling
Vice President, Chief Financial Officer,
Secretary and Treasurer
The Plan was duly approved by the stockholders of the Company on the __ day
of April, 1998.
/S/
----------------------------------------
Raymond Schilling
Vice President, Chief Financial Officer,
Secretary and Treasurer
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EXHIBIT 10.17
STOCK PURCHASE AGREEMENT
BY AND AMONG
GLOBAL IMAGING SYSTEMS INC.,
COPY SERVICE & SUPPLY, INC.,
OFFICE FURNITURE CONCEPTS, INC.,
CSS LEASING, L.L.C.
AND
TERRY K. SMITH
and
CRYSTAL E. SMITH
DATED JUNE 27, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
DEFINITIONS
<S> <C>
1.1 Definitions.............................................................. 1
ARTICLE II
AGREEMENT OF PURCHASE AND SALE; CLOSING
2.1 Agreement to Sell and Purchase........................................... 5
2.2 Purchase Price........................................................... 5
2.3 Payment of Purchase Price................................................ 5
2.4 Closing.................................................................. 5
2.5 Purchase Price Adjustments............................................... 5
2.6 Closing Audit............................................................ 5
2.7 Post-Closing Purchase Price Adjustment................................... 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANIES AND SELLER
3.1 Capitalization........................................................... 6
3.2 No Liens on Shares....................................................... 6
3.3 Other Rights to Acquire Capital Stock or Membership Interests............ 7
3.4 Due Organization......................................................... 7
3.5 No Subsidiaries.......................................................... 7
3.6 Due Authorization........................................................ 7
3.7 Financial Statements..................................................... 7
3.8 Certain Actions.......................................................... 8
3.9 Properties............................................................... 9
3.10 Licenses and Permits..................................................... 9
3.11 Intellectual Property.................................................... 10
3.12 Compliance with Laws..................................................... 10
3.13 Insurance................................................................ 10
3.14 Employee Benefit Plans................................................... 11
(a) Employee Welfare Benefit Plans...................................... 11
(b) Employee Pension Benefit Plans...................................... 11
(c) Employment and Non-Tax Qualified Deferred Compensation Arrangements. 11
3.15 Contracts and Agreements................................................. 11
3.16 Claims and Proceedings................................................... 12
3.17 Taxes.................................................................... 12
3.18 Personnel................................................................ 13
3.19 Business Relations....................................................... 13
</TABLE>
<PAGE>
<TABLE>
<S> <C>
3.20 Accounts Receivable........................................................ 14
3.21 Bank Accounts.............................................................. 14
3.22 Warranties................................................................. 14
3.23 Brokers.................................................................... 14
3.24 Interest in Competitors, Suppliers, Customers, Etc......................... 14
3.25 Indebtedness To and From Officers, Directors, Shareholders, and Employees.. 14
3.26 Undisclosed Liabilities.................................................... 15
3.27 Information Furnished...................................................... 15
ARTICLE IV
GLOBAL'S REPRESENTATIONS AND WARRANTIES
4.1 Due Organization........................................................... 15
4.2 Due Authorization.......................................................... 15
4.3 No Brokers................................................................. 16
ARTICLE V
COVENANTS OF THE COMPANIES AND SELLER
5.1 Consents of Others......................................................... 16
5.2 Seller's Efforts........................................................... 16
5.3 Powers of Attorney......................................................... 16
ARTICLE VI
POST-CLOSING COVENANTS
6.1 General.................................................................... 16
6.2 Transition................................................................. 17
6.3 Confidentiality............................................................ 17
6.4 Covenant Not to Compete.................................................... 17
ARTICLE VII
CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING
7.1 Conditions to Global's Obligations......................................... 18
(a) Covenants, Representations and Warranties............................. 18
(b) Consents.............................................................. 18
(c) Leases................................................................ 18
(d) Discharge of Indebtedness and Liens................................... 18
(e) Material Adverse Change............................................... 19
(f) Transfer Taxes........................................................ 19
(g) Financial Condition................................................... 19
(h) Documents to be Delivered by Sellers and the Companies................ 19
(i) Opinion of Sellers' Counsel...................................... 19
</TABLE>
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<TABLE>
<S> <C>
(ii) Certificates............................................................. 19
(iii) Release.................................................................. 19
(iv) Employment Agreement..................................................... 19
(v) Office Lease............................................................. 19
(vi) Stock Certificates....................................................... 20
7.2 Conditions to Sellers and the Companies' Obligations................................... 20
(a) Covenants, Representations and Warranties......................................... 20
(b) Consents.......................................................................... 20
(c) Documents to be Delivered by Global............................................... 20
(i) Opinion of Global's Counsel.............................................. 20
(ii) Certificates............................................................. 20
(iii) Employment Agreement..................................................... 20
(iv) Office Lease............................................................. 21
(v) Purchase Price........................................................... 21
(d) .................................................................................. 21
Right of Reinvestment............................................................. 21
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification of Global.............................................................. 21
8.2 Defense of Claims...................................................................... 21
8.3 Tax Audits, Etc........................................................................ 22
8.4 Indemnification of Seller.............................................................. 22
8.5 General Right of Offset................................................................ 22
8.6 Limits on Indemnification.............................................................. 22
ARTICLE IX
MISCELLANEOUS
9.1 Modifications.......................................................................... 23
9.2 Notices................................................................................ 23
9.3 Counterparts........................................................................... 24
9.4 Expenses............................................................................... 24
9.5 Binding Effect; Assignment............................................................. 24
9.6 Entire and Sole Agreement.............................................................. 24
9.7 Governing Law.......................................................................... 25
9.8 Survival of Representations, Warranties and Covenants.................................. 25
9.9 Invalid Provisions..................................................................... 25
9.10 Public Announcements................................................................... 25
9.11 Remedies Cumulative.................................................................... 25
9.12 Waiver................................................................................. 25
9.13 DISPUTE RESOLUTION..................................................................... 25
</TABLE>
-4-
<PAGE>
LIST OF EXHIBITS
Exhibit A Form of Seller Note
Exhibit B [RESERVED]
Exhibit C-1 Form of Office Leases
Exhibit C-2 Form of OFC Office Lease
Exhibit D Opinion of Sellers' Counsel
Exhibit E Sellers' Certificates
Exhibit F Release
Exhibit G Terry K. Smith Executive Agreement
Exhibit H Global Certificates
Exhibit I Opinion of Global's Counsel
LIST OF SCHEDULES
Schedule 2.3 Sellers' Accounts
Schedule 2.6 Holders of Funded Indebtedness
Schedule 3.1 Ownership of Shares
Schedule 3.4 Articles and Bylaws
Schedule 3.7 Financial Statements
Schedule 3.8A Certain Actions
Schedule 3.8B Material Changes
Schedule 3.9 Properties
Schedule 3.10 Licenses and Permits
Schedule 3.11 Patents and Trademarks
Schedule 3.13 Insurance
Schedule 3.14 Employee Benefit Plans
Schedule 3.15 Contracts and Agreements
Schedule 3.16 Claims and Proceedings
Schedule 3.18 Personnel
Schedule 3.20 Accounts Receivable
Schedule 3.21 Bank Accounts
Schedule 3.22 Warranties
Schedule 3.25 Indebtedness with Officers, Directors and Shareholders
Schedule 3.26 Undisclosed Liabilities
Schedule 3.27 Information Furnished
Schedule 7.1(d) Indebtedness
The Exhibits and Schedules to this Stock Purchase Agreement are not included
with this Registration Statement on Form S-1. Global will provide these
exhibits and schedules upon the request of the Securities and Exchange
Commission.
-5-
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "AGREEMENT") is entered into as of
June 27, 1996, and effective as of June 1, 1996, by and among GLOBAL IMAGING
SYSTEMS INC., a Delaware corporation ("GLOBAL"), COPY SERVICE & SUPPLY, INC., a
North Carolina corporation ("COPY SERVICE"); OFFICE FURNITURE CONCEPTS, INC., a
North Carolina corporation ("OFC"); and CSS LEASING, L.L.C., a North Carolina
limited liability company ("CSS"), (Copy Service, OFC and CSS are sometimes
referred to collectively as the "COMPANIES") and TERRY K. SMITH and CRYSTAL E.
SMITH (each individually a "SELLER" and collectively "SELLERS").
W I T N E S S E T H:
WHEREAS, the Companies are engaged in the office equipment dealer and
service industry in the State of North Carolina (the "BUSINESS"); and
WHEREAS, Sellers own an aggregate of (i) 10,000 shares of the
outstanding Common Stock, par value $1.00 per share, of Copy Service, (ii) 1,000
shares of the outstanding Common Stock, no par value per share, of OFC; and
(iii) all of the outstanding membership interests of CSS consisting of 1,000
units (collectively, the "SHARES"), which Shares constitute all of the issued
and outstanding capital stock or membership interests of the Companies; and
WHEREAS, Global desires to purchase from Sellers and Sellers desire to
sell to Global hereby all of the Shares owned by Sellers, all on the terms and
subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto covenant and agree
as follows:
ARTICLE I
DEFINITIONS
-----------
1.1 DEFINITIONS. In this Agreement, the following terms have the
-----------
meanings specified or referred to in this Section 1.1 and shall be equally
-----------
applicable to both the singular and plural forms. Any agreement referred to
below shall mean such agreement as amended, supplemented and modified from time
to time to the extent permitted by the applicable provisions thereof and by this
Agreement.
"AFFILIATE" means, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by or is under common control
with such Person.
<PAGE>
"AUDITED CLOSING BALANCE SHEET" has the meaning specified in
Section 2.6.
- -----------
"BUILDINGS" shall mean the Companies' office buildings and
warehouses located in Statesville, Salisbury, Charlotte, Hickory, and
Wilkesboro, North Carolina.
"BUSINESS" has the meaning specified in the first recital of the
Agreement
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. (S)(S) 9601 et seq., any amendments
-- ---
thereto, any successor statutes, and any regulations promulgated thereunder.
"CLOSING" means the closing of the transfer of the Shares from
the Sellers to Global.
"CLOSING DATE" has the meaning specified in Section 2.4.
-----------
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANIES" has the meaning specified in the first paragraph of
this Agreement.
"CONFIDENTIAL INFORMATION" means all confidential information and
trade secrets of the Companies including, without limitation, the identity,
lists or descriptions of any customers, referral sources or organizations;
financial statements, cost reports or other financial information; contract
proposals, or bidding information; business plans and training and operations
methods and manuals; personnel records; fee structure; and management systems,
policies or procedures, including related forms and manuals. Confidential
Information shall not include any information (i) which is disclosed pursuant to
subpoena or other legal process, (ii) which has been publicly disclosed, (iii)
which subsequently becomes known to a third party not subject to a
confidentiality agreement with Global or the Companies, or (iv) which is
subsequently disclosed by any third party not in breach of a confidentiality
agreement.
"CONTRACTS" has the meaning specified in Section 3.15.
------------
"COURT ORDER" means any judgment, order, award or decree of any
foreign, federal, state, local or other court or tribunal and any award in any
arbitration proceeding.
"EMPLOYMENT AGREEMENT" shall mean the executive agreement with
Terry K. Smith to be entered into at Closing in the form of Exhibit G.
---------
-2-
<PAGE>
"ENCUMBRANCE" means any lien, claim, charge, security interest,
mortgage, pledge, easement, conditional sale or other title retention agreement,
defect in title, covenant or other restrictions of any kind.
"ENVIRONMENTAL OBLIGATIONS" has the meaning specified in Section
-------
3.12.
- ----
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"FINANCIAL STATEMENTS" has the meaning specified in Section 3.7.
-----------
"FUNDED INDEBTEDNESS" means all (i) indebtedness of such Person
for borrowed money or other interest-bearing indebtedness; (ii) capital lease
obligations of such Person; (iii) obligations of such Person to pay the deferred
purchase or acquisition price for goods or services, other than trade accounts
payable or accrued expenses in the ordinary course of business; (iv)
indebtedness of others guaranteed by such Person or secured by an Encumbrance on
such Person's property; or (v) extended credit terms from manufacturers provided
to such Person.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"GLOBAL" has the meaning specified in the first paragraph of this
Agreement.
"GOVERNMENTAL BODY" means any foreign, federal, state, local or
other governmental authority or regulatory body.
"GOVERNMENTAL PERMITS" has meaning specified in Section 3.10.
------------
"INDEMNIFIABLE COSTS" has the meaning specified in Section 8.1.
-----------
"INDEMNIFIED PARTIES" has the meaning specified in Section 8.1.
-----------
"INDEPENDENT ACCOUNTANTS" has the meaning specified in Section
-------
2.6.
- ---
"INTELLECTUAL PROPERTY" has the meaning specified in Section
-------
3.11.
"IRS" means the Internal Revenue Service.
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means a
material adverse change or effect on the assets, properties, Business or the
operations, liabilities, or conditions (financial or otherwise) of the
Companies.
-3-
<PAGE>
"OSHA" means the Occupational Safety and Health Act, 29 U.S.C.
(S)(S) 651 et seq., any amendment thereto, and any regulations promulgated
-- ---
thereunder.
"PERMITTED EXCEPTION" means (a) liens for Taxes and other
governmental charges and assessments which are not yet due and payable, (b)
liens of landlords and liens of carriers, warehousemen, mechanics and
materialmen and other like liens arising in the ordinary course of business for
sums not yet due and payable, (c) other liens or imperfections on property which
are not material in amount or do not materially detract from the value of or
materially the existing use of the property affected by such lien or
imperfection and (d) such statement of facts shown on any title insurance
policies delivered to Global.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or Governmental Body.
"PRELIMINARY CLOSING BALANCE SHEET" shall mean the Companies'
best estimate of the Companies' balance sheet as of the Closing Date. The
Preliminary Closing Balance Sheet shall be delivered to Global not less than two
(2) nor more than seven (7) days prior to the Closing Date.
"PURCHASE PRICE" has the meaning specified in Section 2.2.
-----------
"RCRA" means the Resource Conservation and Recovery Act, 42
U.S.C. (S)(S) 6901 et seq., and any successor statute, and any regulations
-- ---
promulgated thereunder.
"REQUIREMENTS OF LAWS" means any foreign, federal, state and
local laws, statutes, regulations, rules, codes or ordinances enacted, adopted,
issued or promulgated by any Governmental Body (including, without limitation,
those pertaining to electrical, building, zoning, environmental and occupational
safety and health requirements) or common law.
"SELLER" or "SELLERS" have the meanings set forth in the first
paragraph of this Agreement.
"SELLER NOTE" has the meaning specified in Section 2.3(c).
--------------
"SHARES" means all of the issued and outstanding shares of the
capital stock or membership interests of the Companies.
"TAX" or "TAXES" means any federal, state, local or foreign
income, alternative or add-on minimum, gross income, gross receipts, windfall
profits, severance, property, production, sales, use, transfer, gains, license,
excise, employment, payroll, withholding or minimum tax, transfer, goods and
services, or any other tax, custom, duty,
-4-
<PAGE>
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or any penalty, addition to tax or additional amount
imposed by any Governmental Body.
"TAX RETURN" means any return, report or similar statement
required to be filed with respect to any Taxes (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return and declaration of estimated Tax.
"WORKING CAPITAL" shall mean the difference between the
Companies' current assets and its current liabilities as calculated in
accordance with GAAP, and as adjusted pursuant to the terms of this Agreement.
ARTICLE II
AGREEMENT OF PURCHASE AND SALE; CLOSING
2.1 AGREEMENT TO SELL AND PURCHASE. Upon the basis of the
------------------------------
representations and warranties, for the consideration, and subject to the terms
and conditions set forth in this Agreement, Sellers agree to sell the Shares to
Global and Global agrees to purchase the Shares from Sellers.
2.2 PURCHASE PRICE. The total purchase price for the Shares (the
--------------
"PURCHASE PRICE") shall be equal to $3,263,000 and as otherwise adjusted
pursuant to Section 2.5 below.
-----------
2.3 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be payable
-------------------------
by Global at the Closing (hereinafter defined) as follows:
(A) $2,347,200 of the Purchase Price will be paid in cash by wire
transfer of funds or by cashier's checks to the Sellers' accounts specified in
Schedule 2.3 (including the payment of $159,000 for the covenant not to compete
- ------------
provided in Section 6.4);
------------
(B) $425,000 of the Purchase Price will be paid in cash by wire
transfer of funds to the Companies' lenders;
(C) $300,000 of the Purchase Price shall be paid in the form of a
seller note (the "SELLER NOTE") in the form of Exhibit A hereto, which bears
interest at the rate of 8% per annum for a period of one year; and
(D) $190,800 of the Purchase Price shall be paid in the form of
2,067 shares of Global's Class A Common Stock and 456.24 shares of Global's
Class B Common Stock in exchange for all of the outstanding capital stock of
OFC.
2.4 CLOSING. The Closing of the purchase and sale of the Shares
-------
contemplated by this Agreement shall take place at 11:00 a.m., North Carolina
time, at the offices of Albert E.
-5-
<PAGE>
Walser, 150 East Sharpe Street, Statesville, North Carolina, on July 3, 1996, or
at such other date and time as the parties shall agree (the "CLOSING DATE").
2.5 PURCHASE PRICE ADJUSTMENTS. The Purchase Price will be reduced
--------------------------
by a sum equal to the amount, if any, by which the adjusted Working Capital as
reflected on the Preliminary Closing Balance Sheet is less than $440,000 (the
amount which is $25,000 less than the average Working Capital balances of the
Companies at the end of each of the six months ending December 31, 1995).
2.6 CLOSING AUDIT. Within ninety (90) days following the Closing
-------------
Date, there shall be delivered to Global and to Sellers an audit of the
Preliminary Closing Balance Sheet (the "AUDITED CLOSING BALANCE SHEET") of the
Companies at and as of the Closing Date. The Preliminary Closing Balance Sheet
shall be audited by Ernst & Young in accordance with GAAP. The cost of the
Audited Closing Balance Sheet shall be paid by Global. In the event that
Sellers dispute any items on such Audited Closing Balance Sheet within ten days
after Sellers' receipt thereof, the parties shall jointly select and retain an
independent "Big Six" accounting firm (the "INDEPENDENT ACCOUNTANTS") to review
the disputed item(s) on the Audited Closing Balance Sheet. The final
determination of such disputed item(s) by the Independent Accountants shall be
reflected on the Audited Closing Balance Sheet. The cost of retaining the
Independent Accountants shall be borne equally by Sellers and Global.
2.7 POST-CLOSING PURCHASE PRICE ADJUSTMENT. In the event that the
--------------------------------------
Working Capital as reflected on the Audited Closing Balance Sheet is less than
$440,000, then the Purchase Price will be adjusted downward, on a dollar-for-
dollar basis, to reflect the lesser of (i) the decrease, if any, in the total
Working Capital as reflected on the Audited Closing Balance Sheet from the
amount of Working Capital reflected on the Preliminary Closing Balance Sheet or
(ii) the amount by which the Working Capital reflected on the Audited Closing
Balance Sheet is less than $440,000. Conversely, the Purchase Price will be
adjusted upward, on a dollar-for dollar basis, to reflect the increase if any,
in the total Working Capital as reflected on the Audited Closing Balance Sheet
from the amount of Working Capital reflected on the Preliminary Closing Balance
Sheet, provided, however, that in no event shall such adjustment exceed the
total amount of any adjustment to the Purchase Price made pursuant to Section
-------
2.5 above. The post-closing adjustment to the Purchase Price, if any, shall be
- ---
paid by Sellers to Global or by Global to Sellers, as the case may be, in
immediately available funds within ten (10) days of delivery of the Audited
Closing Balance Sheet.
-6-
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANIES AND SELLERS
The Companies and Sellers, jointly and severally, represent and
warrant to Global that:
3.1 CAPITALIZATION. The authorized capital stock of (i) Copy Service
--------------
consists of 100,000 shares of Common Stock, $1.00 par value, 10,000 of which are
issued and outstanding and (ii) OFC consists of 1,000 shares of Common Stock, no
par value, 1,000 of which are issued and outstanding. All of the Shares are
duly authorized, validly issued, fully paid, and nonassessable. All of the
Shares are owned of record and beneficially by Sellers in the amounts specified
in Schedule 3.1 hereto. None of the Shares was issued or will be transferred
------------
under this Agreement in violation of any preemptive or preferential rights of
any Person. The Sellers own all of the issued and outstanding capital stock of
Copy Service and OFC and all of the membership interests of CSS.
3.2 NO LIENS ON SHARES. Sellers collectively own the Shares, free
------------------
and clear of any Encumbrances other than the rights and obligations arising
under this Agreement, and none of the Shares is subject to any outstanding
option, warrant, call, or similar right of any other Person to acquire the same,
and none of the Shares is subject to any restriction on transfer thereof except
for restrictions imposed by applicable federal and state securities laws.
Sellers have full power and authority to convey good and marketable title to the
Shares, free and clear of any Encumbrances.
3.3 OTHER RIGHTS TO ACQUIRE CAPITAL STOCK OR MEMBERSHIP INTERESTS.
-------------------------------------------------------------
Except as set forth in this Agreement, there are no authorized or outstanding
warrants, options, or rights of any kind to acquire from the Companies any
equity or debt securities of the Companies, or securities convertible into or
exchangeable for equity or debt securities of the Companies, and there are no
shares of capital stock or membership interests of the Companies reserved for
issuance for any purpose nor any contracts, commitments, understandings or
arrangements which require the Companies to issue, sell or deliver any
additional shares of its capital stock.
3.4 DUE ORGANIZATION. Copy Service and OFC are each a corporation
----------------
duly organized, validly existing and in good standing, under the laws of the
State of North Carolina and CSS is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of North
Carolina and each has full corporate or company power and authority to carry on
the Business as now conducted and as proposed to be conducted through Closing.
Complete and correct copies of the Certificate of Incorporation and Bylaws of
the Companies, and all amendments thereto, have been heretofore delivered to
Global and are attached hereto as Schedule 3.4. The Companies are duly
------------
qualified to do business in each jurisdiction in which the nature of the
Business or the ownership of its properties requires such
-7-
<PAGE>
qualification except where the failure to be so qualified does not and would not
have a Material Adverse Effect.
3.5 NO SUBSIDIARIES. The Companies do not directly or indirectly
---------------
have any subsidiaries or any direct or indirect ownership interests in any
Person. The Sellers do not own any other Person engaged in the Business.
3.6 DUE AUTHORIZATION. The Companies and the Sellers each has full
-----------------
power and authority to execute, deliver and perform this Agreement and to carry
out the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action of the Companies.
This Agreement has been duly and validly executed and delivered by the Companies
and Sellers and constitutes the valid and binding obligations of the Companies
and Sellers, enforceable in accordance with its terms. The execution, delivery,
and performance of this Agreement (as well as all other instruments, agreements,
certificates, or other documents contemplated hereby) by the Companies and
Sellers, do not (a) violate any Requirements of Laws or any Court Order of any
Governmental Body applicable to the Companies or Sellers, or their respective
property, (b) violate or conflict with, or permit the cancellation of, or
constitute a default under, any agreement to which the Companies or Sellers are
a party, or by which any of them or any of their respective property is bound,
(c) permit the acceleration of the maturity of any indebtedness of, or
indebtedness secured by the property of, the Companies or Sellers, or (d)
violate or conflict with any provision of the charter, certificate of formation,
operating agreement or bylaws of the Companies.
3.7 FINANCIAL STATEMENTS. The following Financial Statements (herein
--------------------
so called) of the Companies have been delivered to Global by Sellers and the
Companies:
balance sheets of the Companies as of December 31, 1993, December
31, 1994, December 31, 1995, and May 31, 1996, and
statements of income of the Companies for the fiscal years ended
December 31, 1993, December 31, 1994 and December 31, 1995 and for the
five month period ending May 31, 1996.
Except as disclosed on Schedule 3.7, the Financial Statements have been prepared
------------
in accordance with GAAP throughout the periods indicated and fairly present the
financial position, results of operations and changes in financial position of
the Companies as of the indicated dates and for the indicated periods, subject
(in the case of the five month Financial Statements) to year end accruals made
in the ordinary course of the Business which are not adversely material and
which are consistent with past practices. Except to the extent reflected or
provided for in the Financial Statements or the notes thereto and except as
disclosed in Schedule 3.7, the Companies have no liabilities, nor any
------------
obligations (whether absolute, contingent, or otherwise) which are (individually
or in the aggregate) material (in amount or to the conduct of the Business); and
neither the Companies nor Sellers have knowledge of any basis for the assertion
of any such
-8-
<PAGE>
liability or obligation. Since December 31, 1995, there has been no Material
Adverse Change, and neither the Companies nor Seller have any reason to believe
there has been any Material Adverse Change in the prospects of the Companies.
3.8 CERTAIN ACTIONS. Since December 31, 1995, the Companies have
---------------
not, except as disclosed on Schedule 3.8A hereto: (a) discharged or satisfied
-------------
any Encumbrance or paid any obligation or liability, absolute or contingent,
other than current liabilities incurred and paid in the ordinary course of the
Business; (b) paid or declared any dividends or distributions, or purchased,
redeemed, acquired, or retired any stock or indebtedness from any stockholder or
member other than (i) the personal vehicles listed on Schedule 3.8A hereto and
-------------
(ii) the office furniture listed on Schedule 3.8A hereto, each as agreed to by
-------------
Global; (c) made or agreed to make any loans or advances or guaranteed or agreed
to guarantee any loans or advances to any party whatsoever; (d) suffered or
permitted any Encumbrance to arise or be granted or created against or upon any
of its assets, real or personal, tangible or intangible; (e) cancelled, waived,
or released or agreed to cancel, waive, or release any of its debts, rights, or
claims against third parties in excess of $10,000 individually or $50,000 in the
aggregate; (f) sold, assigned, pledged, mortgaged, or otherwise transferred, or
suffered any damage, destruction, or loss (whether or not covered by insurance)
to, any assets (except in the ordinary course of the Business); (g) amended its
charter or bylaws; (h) paid or made a commitment to pay any severance or
termination payment to any employee or consultant; (i) made any change in its
method of management or operation or method of accounting; (j) made any capital
expenditures, including, without limitation, replacements of equipment in the
ordinary course of the Business, or entered into commitments therefor, except
for capital expenditures or commitments therefor which do not, in the aggregate,
exceed $50,000; (k) made any investment or commitment therefor in any Person;
(l) made any payment or contracted for the payment of any bonus, gratuity, or
other compensation or personal expenses, other than (A) wages and salaries and
business expenses paid in the ordinary course of the Business, and (B) wage and
salary adjustments made in the ordinary course of the Business for employees who
are not officers, directors, members or shareholders of the Companies; (m) made,
amended, or entered into any written employment contract or created or made any
material change in any bonus, stock option, pension, retirement, profit sharing
or other employee benefit plan or arrangement; (n) amended or experienced a
termination of any material contract, agreement, lease, franchise or license to
which the Companies are a party, except in the ordinary course of the Business;
or (o) entered into any other material transactions except in the ordinary
course of the Business. Since December 31, 1995, except as disclosed on
Schedule 3.8B hereto, there has not been (a) any Material Adverse Change
- -------------
including, but not limited to, the loss of any material customers or suppliers
of the Companies, or in any material assets of the Companies, (b) any
extraordinary contracts, commitments, orders or rebates, (c) any strike,
material slowdown, or demand for recognition by a labor organization by or with
respect to any of the employees of the Companies, or (d) any shutdown, material
slow-down, or cessation of any material operations conducted by, or constituting
part of, the Companies, nor have the Companies agreed to do any of the
foregoing.
3.9 PROPERTIES. Attached hereto as Schedule 3.9 is a list containing
---------- ------------
a description of all interests in real property (including, without limitation,
leasehold interests) and
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<PAGE>
personal property utilized by the Companies in the conduct of the Business
having a book value in excess of $10,000 as of the date hereof. Except as
expressly set forth on Schedule 3.9, such real and personal properties are free
------------
and clear of Encumbrances. Sellers and the Companies have delivered to Global a
central UCC lien search of all of the Companies' real and personal property in
the State of North Carolina from the State of North Carolina. All of the
properties and assets necessary in the Business as currently conducted
(including, without limitation, all books, records, computers and computer
software and data processing systems) are owned, leased or licensed by the
Companies and are suitable for the purposes for which they are currently being
used. With the exception of used equipment and inventory valued at no more than
$1.00 on the Companies' Financial Statements, the physical properties of the
Companies, including the real properties leased by the Companies, are in good
operating condition and repair, normal wear and tear excepted, and are free from
any defects of a material nature. Except as otherwise set forth on Schedule 3.9,
------------
the Companies have full and unrestricted legal and equitable title to all such
properties and assets. The operation of the properties and Business of the
Companies in the manner in which they are now and have been operated does not
violate any zoning ordinances, municipal regulations, or other Requirements of
Laws, except for any such violations which would not, individually or in the
aggregate, have a Material Adverse Effect. Except as set forth on Schedule 3.9,
------------
no covenants, easements, rights-of-way, or regulations of record impair the uses
of the properties of the Companies for the purposes for which they are now
operated. All leases of real or personal property by the Companies are legal,
valid, binding, enforceable and in full force and effect and will remain legal,
valid, binding, enforceable and in full force and effect on identical terms
immediately following the Closing. All facilities owned or leased by the
Companies have received all approvals of any Governmental Body (including
Governmental Permits) required in connection with the operation thereof and have
been operated and maintained in accordance with all Requirements of Laws.
3.10 LICENSES AND PERMITS. Attached hereto as Schedule 3.10 is a list
-------------------- -------------
of all licenses, certificates, privileges, immunities, approvals, franchises,
authorizations and permits held or applied for by the Companies from any
Governmental Body (herein collectively called "GOVERNMENTAL PERMITS") the
absence of which to the best knowledge of Sellers could have a Material Adverse
Effect. The Companies have complied in all material respects with the terms and
conditions of all such Governmental Permits, and no violation of any such
Governmental Permit or the Requirements of Laws governing the issuance or
continued validity thereof has occurred other than violations (if any) which
would not individually or in the aggregate have a Material Adverse Effect. No
additional Government Permit is required from any Governmental Body thereof in
connection with the conduct of the Business which Governmental Permit, if not
obtained, would have a Material Adverse Effect.
3.11 INTELLECTUAL PROPERTY. Attached hereto as Schedule 3.11 is a
--------------------- -------------
list and brief description of all patents, trademarks, tradenames, copyrights,
licenses, computer software or data (other than general commercial software),
trade secrets, or applications therefor owned by or registered in the name of
the Companies or in which the Companies have any rights, licenses, or immunities
(collectively, the "INTELLECTUAL PROPERTY"). The Companies have furnished
Global with copies of all license agreements to which the Companies are a party,
either as licensor or
-10-
<PAGE>
licensee, with respect to any Intellectual Property. Except as described on
Schedule 3.11 hereto, the Companies have good and marketable title to or the
- -------------
right to use such Intellectual Property and all inventions, processes, designs,
formulae, trade secrets and know-how necessary for the conduct of their
Business, in their Business as presently conducted without the payment of any
royalty or similar payment, and the Companies are not infringing on any patent
right, tradename, copyright or trademark right or other Intellectual Property
right of others, and neither the Companies nor Sellers are aware of any
infringement by others of any such rights owned by the Companies.
3.12 COMPLIANCE WITH LAWS. The Companies have (i) complied in all
--------------------
material respects with all Requirements of Laws, Governmental Permits and Court
Orders applicable to the Business and have filed with the proper Governmental
Bodies all statements and reports required by all Requirements of Laws,
Governmental Permits and Court Orders to which the Companies or any of its
employees (because of their activities on behalf of the Companies) are subject
and (ii) conducted the Business and are in compliance in all material respects
with all federal, state and local energy, public utility, health, safety and
environmental Requirements of Laws, Governmental Permits and Court Orders
including the Clean Air Act, the Clean Water Act, RCRA, the Safe Drinking Water
Act, CERCLA, OSHA, the Toxic Substances Control Act and any similar state, local
or foreign laws (collectively "ENVIRONMENTAL OBLIGATIONS") and all other
federal, state, local or foreign governmental and regulatory requirements,
except where any such failure to comply would not, in the aggregate, have a
Material Adverse Effect. No claim has been made by any Governmental Body (and,
to the best knowledge of the Companies and Sellers, no such claim is
anticipated) to the effect that the Business fails to comply, in any respect,
with any Requirements of Laws, Governmental Permit or Environmental Obligation
or that a Governmental Permit or Court Order is necessary in respect thereto.
3.13 INSURANCE. Attached hereto as Schedule 3.13 is a list of all
--------- -------------
policies of fire, liability, or other forms of insurance and all fidelity bonds
held by or applicable to the Companies, which Schedule sets forth in respect of
each such policy the policy name, policy number, carrier, term, type of
coverage, deductible amount or self-insured retention amount, limits of coverage
and annual premium. Copies of all such insurance policies have been delivered
to Global. No event relating to the Companies have occurred which will result
in (i) cancellation of any such insurance policies; (ii) a retroactive upward
adjustment of premiums under any such insurance policies; or (iii) any
prospective upward adjustment in such premiums. All of such insurance policies
will remain in full force and effect following the Closing.
-11-
<PAGE>
3.14 EMPLOYEE BENEFIT PLANS.
----------------------
(A) EMPLOYEE WELFARE BENEFIT PLANS. Except as disclosed on
------------------------------
Schedule 3.14, the Companies do not maintain or contribute to any "employee
- -------------
welfare benefit plan" as such term is defined in Section 3(1) of ERISA. With
respect to each such plan, (i) the plan is in material compliance with ERISA;
(ii) the plan has been administered in accordance with its governing documents;
(iii) neither the plan, nor any fiduciary with respect to the plan, has engaged
in any "prohibited transaction" as defined in Section 406 of ERISA other than
any transaction subject to a statutory or administrative exemption; (iv) except
for the processing of routine claims in the ordinary course of administration,
there is no material litigation, arbitration or disputed claim outstanding; and
(v) all premiums due on any insurance contract through which the plan is funded
have been paid.
(B) EMPLOYEE PENSION BENEFIT PLANS. Except as disclosed in
------------------------------
Schedule 3.14, the Companies do not maintain or contribute to any arrangement
- -------------
that is or may be an "employee pension benefit plan" relating to employees, as
such term is defined in Section 3(2) of ERISA. With respect to each such plan:
(i) the plan is qualified under Section 401(a) of the Code, and any trust
through which the plan is funded meets the requirements to be exempt from
federal income tax under Section 501(a) of the Code; (ii) the plan is in
material compliance with ERISA; (iii) the plan has been administered in
accordance with its governing documents as modified by applicable law; (iv) the
plan has not suffered an "accumulated funding deficiency" as defined in Section
412(a) of the Code; (v) the plan has not engaged in, nor has any fiduciary with
respect to the plan engaged in, any "prohibited transaction" as defined in
Section 406 of ERISA or Section 4975 of the Code other than a transaction
subject to statutory or administrative exemption; (vi) the plan has not been
subject to a "reportable event" (as defined in Section 4043(b) of ERISA), the
reporting of which has not been waived by regulation of the Pension Benefit
Guaranty Corporation; (vii) no termination or partial termination of the plan
has occurred within the meaning of Section 411(d)(3) of the Code; (viii) all
contributions required to be made to the plan or under any applicable collective
bargaining agreement have been made to or on behalf of the plan; (ix) there is
no material litigation, arbitration or disputed claim outstanding; and (x) all
applicable premiums due to the Pension Benefit Guaranty Corporation for plan
termination insurance have been paid in full on a timely basis.
(C) EMPLOYMENT AND NON-TAX QUALIFIED DEFERRED COMPENSATION
------------------------------------------------------
ARRANGEMENTS. Except as disclosed in Schedule 3.14, the Companies do not
- ------------ -------------
maintain or contribute to any retirement or deferred or incentive compensation
or stock purchase, stock grant or stock option arrangement entered into between
the Companies and any current or former officer, consultant, director or
employee of the Companies that is not intended to be a tax qualified arrangement
under Section 401(a) of the Code.
3.15 CONTRACTS AND AGREEMENTS. Attached hereto as Schedule 3.15 is a
------------------------ -------------
list and brief description of all written or oral contracts, commitments,
leases, and other agreements (including, without limitation, promissory notes,
loan agreements, and other evidences of
-12-
<PAGE>
indebtedness, guarantees, agreements with distributors, suppliers, dealers,
franchisors and customers, and service agreements) to which the Companies are a
party or by which the Companies or its properties are bound pursuant to which
the obligations thereunder of either party thereto are, or are contemplated as
being, $25,000 or greater (collectively, the "CONTRACTS"). The Companies are not
and, to the best knowledge of Sellers and the Companies, no other party thereto
is in default (and no event has occurred which, with the passage of time or the
giving of notice, or both, would constitute a default) under any of the
Contracts, and the Companies have not waived any right under any of the
Contracts. All of the Contracts to which the Companies are a party are legal,
valid, binding, enforceable and in full force and effect and will remain legal,
valid, binding, enforceable and in full force and effect on identical terms
immediately after the Closing. Except as set forth in Schedule 3.15, the
-------------
Companies have not guaranteed any obligations of any other Person.
3.16 CLAIMS AND PROCEEDINGS. Attached hereto as Schedule 3.16 is a
---------------------- -------------
list and brief description of all claims, actions, suits, proceedings, or
investigations pending or threatened against or affecting the Companies or any
of their properties or assets, at law or in equity, or before or by any court,
municipality or other Governmental Body. Except as set forth on Schedule 3.16,
-------------
none of such claims, actions, suits, proceedings, or investigations will result
in any liability or loss to the Companies. The Companies have not been and the
Companies are not now, subject to any Court Order, stipulation, or consent of or
with any court or Governmental Body. No inquiry, action or proceeding has been
asserted, threatened or instituted to restrain or prohibit the carrying out of
the transactions contemplated by this Agreement or to challenge the validity of
such transactions or any part thereof or seeking damages on account thereof. To
the best knowledge of the Companies and Sellers, except as set forth on Schedule
--------
3.16, there is no basis for any such valid claim or action.
- ----
3.17 TAXES.
-----
(A) All Federal, foreign, state, county and local income, gross
receipts, excise, property, franchise, license, sales, use, withholding, and
other Taxes and all Tax Returns which are required to be filed by the Companies
or Sellers on or before the date hereof have been filed within the time and in
the manner provided by law, and all such Tax Returns are true and correct and
accurately reflect the Tax liabilities of the Companies. Except for the 1995 Tax
Return of Sellers, no Tax Returns of the Companies or any of the Sellers are
presently subject to an extension of the time to file. All Taxes, assessments,
penalties, and interest of the Companies which have become due pursuant to such
Tax Returns or any assessments received have been paid or adequately accrued on
the Companies' Financial Statements. The provisions for Taxes reflected on the
balance sheets contained in the Financial Statements are adequate to cover all
of the Companies' Tax liabilities for the respective periods then ended and all
prior periods. The Companies have not executed any presently effective waiver or
extension of any statute of limitations against assessments and collection of
Taxes, and there are no pending or threatened claims, assessments, notices,
proposals to assess, deficiencies, or audits with respect to any such Taxes. For
Governmental Bodies with respect to which the Companies do not file Tax Returns,
no such government body has claimed that any of the
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<PAGE>
Companies are or may be subject to taxation by that government body. The
Companies have withheld and paid all Taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee, shareholder,
creditor, independent contractor or other party. There are no tax liens on any
of the property or assets of the Companies.
(B) Neither the Companies nor any other corporation has filed an
election under Section 341(f) of the Code that is applicable to the Companies or
any assets held by the Companies. The Companies have not made any payments, is
not obligated to make any payments, and is not a party to any agreement that
under certain circumstances could obligate it to make any payments that will not
be deductible under Code Sec. 280G. The Companies have not been a United States
real property holding corporation within the meaning of Code Sec. 897(c)(2)
during the applicable period specified in Code Sec. 897(c)(1)(A)(ii). The
Companies are not a party to any Tax allocation or sharing agreement. The
Companies have not and have never been (nor does the Companies have any
liability for unpaid Taxes because it once was) a member of an affiliated group
during any part of which return year any corporation other than the Companies
also was a member of the affiliated group. Except for OFC, which has made an
election to be taxed under subchapter S of the Code (which election is valid and
in full force and effect), none the Companies have never made an election to be
taxed under subchapter S of the Code.
(C) No transaction contemplated by this Agreement is subject to
withholding under Section 1445 of the Code and no stock transfer taxes, real
estate transfer taxes or similar taxes will be imposed upon the transfer and
sale of the Shares pursuant to this Agreement.
3.18 PERSONNEL. Attached hereto as Schedule 3.18 is a list of the
--------- -------------
names and annual rates of compensation of the directors and executive officers
of the Companies, and of the employees of the Companies whose annual rates of
compensation during the fiscal year ended December 31, 1995 (including base
salary, bonus and incentive pay) exceed (or by December 31, 1996 are expected to
exceed) $50,000. Schedule 3.18 also summarizes the bonus, profit sharing,
-------------
percentage compensation, company automobile, club membership, and other like
benefits, if any, paid or payable to such directors, officers, member and
employees during the Companies' fiscal year ended December 31, 1995 and to the
date hereof. Schedule 3.18 also contains a brief description of all material
-------------
terms of employment agreements to which the Companies are a party and all
severance benefits which any director, officer or employee of the Companies are
or may be entitled to receive. The employee relations of the Companies are good
and there is no pending or, to the best knowledge of Sellers or the Companies,
threatened labor dispute or union organization campaign. None of the employees
of the Companies are represented by any labor union or organization. The
Companies are in compliance in all material respects with all Requirements of
Laws respecting employment and employment practices, terms and conditions of
employment, and wages and hours, and are not engaged in any unfair labor
practices. Neither the Companies or Sellers have been advised, or has any
reason to believe, that any of the persons whose names are set forth on Schedule
--------
3.18 or any other employee will not agree to remain employed by the Companies
- ----
after the consummation of the
-14-
<PAGE>
transactions contemplated hereby. There is no unfair labor practice claim
against the Companies before the National Labor Relations Board, or any strike,
dispute, slowdown, or stoppage pending or, to the best knowledge of the
Companies and Sellers, threatened against or involving the Companies, and none
has occurred.
3.19 BUSINESS RELATIONS. Neither the Companies nor Sellers knows or
------------------
has any reason to believe that any customer or supplier of the Companies will
cease to do business with the Companies after the consummation of the
transactions contemplated hereby in the same manner and at the same levels as
previously conducted with the Companies except for any reductions which do not
result in a Material Adverse Change. Neither Sellers or the Companies have
received any notice of any material disruption (including delayed deliveries or
allocations by suppliers) in the availability of any material portion of the
materials used by the Companies nor are the Companies or Sellers aware of any
facts which could lead them to believe that the Business will be subject to any
such material disruption.
3.20 ACCOUNTS RECEIVABLE. All of the accounts, notes, and loans
-------------------
receivable that have been recorded on the books of the Companies are bona fide
and represent amounts validly due for goods sold or services rendered and all
such amounts (net of any allowance for doubtful accounts) will be collected in
full within 180 days following the Closing Date. Except as disclosed on
Schedule 3.20 hereto (a) all of such accounts, notes, and loans receivable are
- -------------
free and clear of any Encumbrances; (b) none of such accounts, notes, or loans
receivable is subject to any offsets or claims of offset; and (c) none of the
obligors of such accounts, notes, or loans receivable has given notice that it
will or may refuse to pay the full amount or any portion thereof.
3.21 BANK ACCOUNTS. Attached hereto as Schedule 3.21 is a list of all
------------- -------------
banks or other financial institutions with which the Companies have an account
or maintain a safe deposit box, showing the type and account number of each such
account and safe deposit box and the names of the persons authorized as
signatories thereon or to act or deal in connection therewith.
3.22 WARRANTIES. Except as set forth on Schedule 3.22 and except for
---------- -------------
warranty claims that are typical and in the ordinary course of the Business, no
claim for breach of product or service warranty to any customer has been made
against the Companies since January 1, 1996. To the best knowledge of Sellers
and the Companies, no state of facts exists, and no event has occurred, which
may form the basis of any present claim against the Companies for liability on
account of any express or implied warranty to any third party in connection with
products sold or services rendered by the Companies.
3.23 BROKERS. Neither the Companies nor Sellers have engaged, or
-------
caused to be incurred any liability to any finder, broker, or sales agent in
connection with the origin, negotiation, execution, delivery, or performance of
this Agreement or the transactions contemplated hereby.
-15-
<PAGE>
3.24 INTEREST IN COMPETITORS, SUPPLIERS, CUSTOMERS, ETC. No officer,
--------------------------------------------------
director, or shareholder of the Companies or any affiliate of any such officer,
director, or shareholder, has any ownership interest in any competitor,
supplier, or customer of the Companies (other than ownership of securities of a
publicly-held corporation of which such Person owns, or has real or contingent
rights to own, less than one percent of any class of outstanding securities) or
any property used in the operation of the Business.
3.25 INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS, SHAREHOLDERS, AND
---------------------------------------------------------------
EMPLOYEES. Attached hereto as Schedule 3.25 is a list and brief description of
- --------- -------------
the payment terms of all indebtedness of the Companies to officers, directors,
shareholders, members and employees of the Companies and all indebtedness of
officers, directors, shareholders, and employees of the Companies to the
Companies, excluding indebtedness for travel advances or similar advances for
expenses incurred on behalf of and in the ordinary course of the Business,
consistent with past practices.
3.26 UNDISCLOSED LIABILITIES. Except as indicated in Schedule 3.26
----------------------- -------------
and the other Schedules hereto, the Companies do not have any material
liabilities (whether absolute, accrued, contingent or otherwise), of a nature
required by GAAP to be reflected on a corporate balance sheet or disclosed in
the notes thereto, except such liabilities which are accrued or reserved against
in the Financial Statements or disclosed in the notes thereto, including without
limitation any accounts payable or service liabilities of the Companies incurred
prior to the Closing Date.
3.27 INFORMATION FURNISHED. The Companies and Sellers have made
---------------------
available to Global true and correct copies of all material corporate records of
the Companies and all agreements, documents, and other items listed on the
Schedules to this Agreement or referred to in Section 2 of this Agreement and
---------
except as disclosed in Schedule 3.27 hereto, neither this Agreement, the
-------------
Schedules hereto, nor any information, instrument, or document delivered to
Global pursuant to this Agreement contains any untrue statement of a material
fact or omits any material fact necessary to make the statements herein or
therein, as the case may be, not misleading.
In making the representations and warranties set forth above, the term
"material" shall be deemed to mean an amount of money greater than $10,000, the
terms "material adverse change," "material adverse trend," "material adverse
effect," or any other term of like import shall mean the occurrence of any
single event, or any series of related events, or set of related circumstances,
which proximately causes an actual, direct economic loss to the Companies, taken
as a whole, in excess of $10,000 per occurrence or $15,000 in the aggregate.
The term "knowledge" shall mean actual knowledge after reasonable investigation.
-16-
<PAGE>
ARTICLE IV
GLOBAL'S REPRESENTATIONS AND WARRANTIES
Global represents and warrants to Sellers as follows:
4.1 DUE ORGANIZATION. Global is a corporation duly organized,
----------------
validly existing, and in good standing under the laws of the State of Delaware
and has full corporate power and authority to enter into and perform this
Agreement.
4.2 DUE AUTHORIZATION. The execution, delivery and performance of
-----------------
this Agreement has been duly authorized by all necessary corporate action of
Global, and the Agreement has been duly and validly executed and delivered by
Global and constitutes the valid and binding obligation of Global, enforceable
in accordance with its terms. The execution, delivery, and performance of this
Agreement (as well as all other instruments, agreements, certificates or other
documents contemplated hereby) by Global, shall not (a) violate any Requirements
of Laws or Court Order of any Governmental Body applicable to Global or its
property, (b) violate or conflict with, or permit the cancellation of, or
constitute a default under any agreement to which Global is a party or by which
it or its property is bound, (c) permit the acceleration of the maturity of any
indebtedness of, or any indebtedness secured by the property of, Global, or (d)
violate or conflict with any provision of the charter or bylaws of Global.
4.3 NO BROKERS. Global has not engaged, or caused to be incurred any
----------
liability to any finder, broker or sales agent in connection with the origin,
negotiation, execution, delivery, or performance of this Agreement or the
transactions contemplated hereby.
4.4 INVESTMENT. Global will acquire the Shares for investment and
----------
for its own account and not with a view to the distribution thereof.
ARTICLE V
COVENANTS OF THE COMPANIES AND SELLERS
5.1 CONSENTS OF OTHERS. Prior to the Closing, the Companies and
------------------
Sellers shall use their best efforts to obtain and to cause the Companies to
obtain all authorizations, consents and permits required of the Companies and
Sellers to permit them to consummate the transactions contemplated by this
Agreement.
5.2 SELLER'S EFFORTS. The Companies and Sellers shall use all
----------------
reasonable efforts to cause all conditions for the Closing to be met.
5.3 POWERS OF ATTORNEY. The Companies and Sellers shall cause the
------------------
Companies to terminate at or prior to Closing all powers of attorney granted by
the Companies, other than those relating to service of process, qualification or
pursuant to governmental
-17-
<PAGE>
regulatory or licensing agreements, or representation before the IRS or other
government agencies.
ARTICLE VI
POST-CLOSING COVENANTS
6.1 GENERAL. In case at any time after the Closing any further
-------
action is legally necessary or reasonably desirable to carry out the purposes of
this Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
party reasonably may request, all at the sole cost and expense of the requesting
party (unless the requesting party is entitled to indemnification therefor under
Article VIII below). The Sellers acknowledge and agree that from and after the
Closing Global will be entitled to possession of all documents, books, records,
agreements, and financial data of any sort relating to the Companies, which
shall be maintained at the chief executive office of the Companies; provided,
--------
however, that Sellers shall be entitled to reasonable access to and to make
- -------
copies of such books and records at their sole cost and expense and Global will
maintain the books, records and material financial data relating to the
Companies for a period of at least three (3) years. After such date, the
Companies will offer such documentation to Sellers before disposal thereof.
6.2 TRANSITION. For a period of three (3) years following Closing,
----------
the Sellers will not take any action that primarily is designed or intended to
have the effect of discouraging any lessor, licensor, customer, supplier, or
other business associate of the Companies from maintaining the same business
relations with the Companies after the Closing as it maintained with the
Companies prior to the Closing. For a period of three (3) years following
Closing, the Sellers will refer all customer inquiries relating to the Business
to the Companies or Global.
6.3 CONFIDENTIALITY. The Sellers will treat and hold as such all
---------------
Confidential Information, refrain from using any of the Confidential Information
except in connection with this Agreement for a period of three (3) years from
the Closing, and deliver promptly to Global or destroy, at the request and
option of Global, all tangible embodiments (and all copies) of the Confidential
Information which are in its possession except as otherwise permitted herein.
In the event that any Seller is requested or required (by oral question or
request for information or documents in any legal proceeding, interrogatory,
subpoena, civil investigative demand, or similar process) to disclose any
Confidential Information, that Seller will notify Global promptly of the request
or requirement.
6.4 COVENANT NOT TO COMPETE. For and in consideration of the
-----------------------
allocation of $159,000 of the Purchase Price paid to the Sellers by Global,
Sellers each covenant and agree, for a period of three years from and after the
Closing Date, that they will not, individually or jointly, directly or
indirectly, nor with any member of their immediate family, without the prior
written consent of Global, for or on behalf of any entity:
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<PAGE>
(A) become interested or engaged in any manner, directly or
indirectly, or become a shareholder, bondholder, creditor, officer, director,
partner, agent, contractor with, employer or representative of, or in any manner
associated with, or give financial, technical or other assistance to, any
Person, firm or corporation for the purpose of engaging in the copier/ office
equipment dealer or service business within the greater of (i) a 100 mile radius
of the Companies' existing office facilities in North Carolina or (ii) in any
geographic area in which the Companies and/or its subsidiaries currently conduct
business; provided, however, that no owner of less than 1% of the outstanding
-------- -------
stock of any publicly-traded corporation (other than Global) shall be deemed to
be so engaged solely by reason thereof in the copier/office equipment dealer or
service business;
(B) enter into any agreement with, service, assist or solicit
the business of any customers of the Companies for the purpose of providing
office equipment sales or service to such customers or to cause them to reduce
or end their business with the Companies; or
(C) enter into any agreement with, or solicit the employment of
employees, consultants or representatives of the Companies for the purpose of
causing them to leave the employment of the Companies.
ARTICLE VII
CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING
7.1 CONDITIONS TO GLOBAL'S OBLIGATIONS. The obligation of Global
----------------------------------
under this Agreement to consummate the closing is subject to the conditions
that:
(A) COVENANTS, REPRESENTATIONS AND WARRANTIES. The Companies
-----------------------------------------
and Seller shall have performed in all material respects all obligations and
agreements and complied in all material respects with all covenants contained in
this Agreement to be performed and complied with by each of them prior to or at
the Closing Date. The representations and warranties of the Companies and
Sellers set forth in this Agreement shall be accurate in all material respects
at and as of the Closing Date with the same force and effect as though made on
and as of the Closing Date except for any changes resulting from activities or
transactions which may have taken place after the date hereof and which are
permitted or contemplated by the Agreement or which have been entered into in
the ordinary course of business and except to the extent that such
representations and warranties are expressly made as of another specified date
and, as to such representation, the same shall be true as of such specified
date.
(B) CONSENTS. All statutory requirements for the valid
--------
consummation by the Companies and Sellers of the transactions contemplated by
this Agreement shall have been fulfilled and all authorizations, consents and
approvals, including those of all federal, state, local and foreign governmental
agencies and regulatory authorities required to be obtained in order to permit
the consummation of the transactions contemplated hereby shall have been
obtained in
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<PAGE>
form and substance reasonably satisfactory to Global unless such failure shall
not have a Material Adverse Effect. All approvals of the Board of Directors and
shareholders of the Companies necessary for the consummation of this Agreement
and the transactions contemplated hereby shall have been obtained.
(C) LEASES. The Companies and Terry K. Smith shall have entered
------
into (i) a three-year lease of the Buildings on lease terms acceptable to Global
in the form of Exhibit C-1 hereto and (ii) a one-year lease of the OFC building
-----------
at current market rates in the form of Exhibit C-2 hereto. All other leases of
-----------
buildings and equipment by the Companies shall be on terms reasonably acceptable
to Global and shall remain valid and in full force and effect without the
occurrence of any event of default following the Closing.
(D) DISCHARGE OF INDEBTEDNESS AND LIENS. Sellers and the
-----------------------------------
Companies shall have provided for the payment in full of all Funded Indebtedness
of the Companies and all extended credit from vendors at the Closing (other than
customary accounts payable of the Companies in accordance with past practices).
Such Funded Indebtedness as of May 31, 1996, is listed on Schedule 7.1(d)
---------------
hereto. Sellers shall have also provided for the termination of all
Encumbrances of record on the properties of the Companies, except for Permitted
Encumbrances. Also, prior to the Closing, Terry K. Smith shall take title to
the Mercedes, the John Deere Tractor, the Toyota Camary and the Chevrolet
Suburban, and Terry K. Smith shall assume all vehicle loans totaling
approximately $22,000, for which he will pay Copy Service $9,000. In addition,
the following indebtedness shall be paid at closing, and all security interests
thereon shall be released as of the Closing:
(i) the $355,000 shareholder note of Terry K. Smith; and
(ii) the $83,000 note owed by Terry K. Smith in connection
with the transfer to him of the Danka stock.
(E) MATERIAL ADVERSE CHANGE. There has been no Material Adverse
-----------------------
Change.
(F) TRANSFER TAXES. Sellers shall be responsible for and shall
--------------
have paid or set aside sufficient funds to pay all stock transfer or gains taxes
incurred in connection with this Agreement.
(G) FINANCIAL CONDITION. The Companies' total adjusted Net
-------------------
Worth as projected at the Closing shall be greater than $580,000 and the
Companies shall continue to have sufficient cash on hand (included in Working
Capital) at the Closing (in an amount not less than $100,000 excluding any
repayment of the shareholder debt and the repayment of the Danka stock note
referred in Section 7.1(d) above), to continue to operate the Business in the
--------------
ordinary course.
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<PAGE>
(H) DOCUMENTS TO BE DELIVERED BY SELLERS AND THE COMPANIES. The
------------------------------------------------------
following documents shall be delivered at the Closing by Sellers and the
Companies:
(I) OPINION OF SELLERS' COUNSEL. Global shall have
---------------------------
received an opinion of Albert F. Walser, Esq. counsel to Sellers,
dated the Closing Date, in substantially the same form as the form of
opinion that is Exhibit D hereto.
---------
(II) CERTIFICATES. Global shall have received an officer's
------------
certificate and a secretary's certificate of the Companies executed by
officers of the Companies, dated the Closing Date, in substantially
the same forms as the forms of certificates that are Exhibit E hereto.
---------
(III) RELEASE. Sellers shall have furnished the Companies
-------
with a general release of liabilities, excluding compensation and
employee benefits as well as obligations pursuant to this Agreement,
in the form attached as Exhibit F hereto.
---------
(IV) EMPLOYMENT AGREEMENT. Terry K. Smith shall have duly
--------------------
executed and delivered the Employment Agreement in substantially the
same form attached as Exhibit G hereto, pursuant to which he will be
---------
employed by the Companies following the Closing.
(V) OFFICE LEASE. The Companies and Terry K. Smith shall
------------
have entered into (i) a three-year lease of the Buildings on lease
terms acceptable to Global in the form of Exhibit C-1 hereto and (ii)
-----------
a one-year lease of the OFC building at current market rates in the
form of Exhibit C-2 hereto.
-----------
(VI) STOCK CERTIFICATES. Sellers shall have delivered the
------------------
Shares accompanied by duly executed stock powers, together with any
stock transfer stamps or receipts for any transfer taxes required to
be paid thereon.
7.2 CONDITIONS TO SELLERS AND THE COMPANIES' OBLIGATIONS. The
----------------------------------------------------
obligation of Sellers and the Companies under this Agreement to consummate the
Closing is subject to the conditions that:
(A) COVENANTS, REPRESENTATIONS AND WARRANTIES. Global shall
-----------------------------------------
have performed in all material respects all obligations and agreements and
complied in all material respects with all covenants contained in this Agreement
to be performed and complied with by Global prior to or at the Closing and the
representations and warranties of Global set forth in Article IV hereof shall be
accurate in all material respects, at and as of the Closing Date, with the same
force and effect as though made on and as of the Closing Date except for any
changes resulting from activities or transactions which may have taken place
after the date hereof and which are permitted or contemplated by the Agreement
or which have been entered into in the ordinary course of the Business and
except to the extent that such representations and warranties
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<PAGE>
are expressly made as of another specified date and, as to such representations,
the same shall be true as of such specified date.
(B) CONSENTS. All statutory requirements for the valid
--------
consummation by Global of the transactions contemplated by this Agreement shall
have been fulfilled and all authorizations, consents and approvals, including
those of all federal, state, local and foreign governmental agencies and
regulatory authorities required to be obtained in order to permit the
consummation by Global of the transactions contemplated hereby shall have been
obtained unless such failure shall not have a material adverse effect on the
Business. Global shall have used its reasonable best efforts to have obtained
the release of the Seller from all personal guarantees with respect to the
Companies.
(C) DOCUMENTS TO BE DELIVERED BY GLOBAL. The following
-----------------------------------
documents shall be delivered at the Closing by Global:
(I) OPINION OF GLOBAL'S COUNSEL. Sellers shall have
---------------------------
received an opinion of Davis, Graham & Stubbs, L.L.C., counsel to
Global, dated the Closing Date, in substantially the same form as the
form of opinion that is Exhibit H hereto.
---------
(II) CERTIFICATES. Sellers shall have received an
------------
officers' certificate and a secretary's certificate executed by
officers of Global, dated the Closing Date, in substantially the same
forms as the forms of certificates that are Exhibit I hereto.
---------
(III) EMPLOYMENT AGREEMENT. Global shall have caused the
--------------------
Companies to duly execute and deliver the Employment Agreement with
Terry K. Smith in substantially the same form attached as Exhibit G
---------
hereto, pursuant to which he will be employed by the Companies
following the Closing.
(IV) OFFICE LEASE. Global shall have caused the Companies
------------
to duly execute and deliver to Terry K. Smith the lease for the
Buildings in substantially the same forms attached as Exhibit C-1 and
-----------
C-2 hereto.
---
(V) PURCHASE PRICE. Sellers shall have received the
--------------
Purchase Price for the Shares.
(D) RIGHT OF REINVESTMENT. Bruce Cook shall have been offered
---------------------
the right to invest up to $50,000 in cash in the capital stock of Global on the
same terms provided to other outside investors in Global.
-22-
<PAGE>
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION OF GLOBAL. Sellers agree to jointly and
-------------------------
severally indemnify and hold harmless Global and each officer, director, and
affiliate of Global, including without limitation the Companies or any successor
of the Companies (collectively, the "INDEMNIFIED PARTIES") from and against any
and all damages, losses, claims, liabilities, demands, charges, suits,
penalties, costs and expenses (including court costs and reasonable attorneys'
fees and expenses incurred in investigating and preparing for any litigation or
proceeding) (collectively, the "INDEMNIFIABLE COSTS"), which any of the
Indemnified Parties may sustain, or to which any of the Indemnified Parties may
be subjected, arising out of (A) any misrepresentation, breach or default by
Sellers or the Companies of or under any of the representations, covenants,
agreements or other provisions of this Agreement or any agreement or document
executed in connection herewith; (B) the assertion and final determination of
any claim or liability against the Companies or any of the Indemnified Parties
by any Person based upon the facts which form the alleged basis for any
litigation to the extent it should have been, but was not, reserved for in the
Financial Statements in accordance with GAAP; and (C) the Companies' tortious
acts or omissions to act prior to Closing for which the Companies did not carry
liability insurance for themselves as the insured party, whether or not such
acts or omissions to act result in a breach or violation of any representation
or warranty.
8.2 DEFENSE OF CLAIMS. If any legal proceeding shall be instituted,
-----------------
or any claim or demand made, against any Indemnified Party in respect of which
Sellers may be liable hereunder, such Indemnified Party shall give prompt
written notice thereof to Sellers and, except as otherwise provided in Section
-------
8.3 below, Sellers shall have the right to defend, or cause the Companies or its
- ---
successors to defend, any litigation, action, suit, demand, or claim for which
it may seek indemnification unless, in the reasonable judgment of Global, such
litigation, action, suit, demand, or claim, or the resolution thereof, would
have an ongoing effect on Global, the Companies or its successors, and such
Indemnified Party shall extend reasonable cooperation in connection with such
defense, which shall be at Sellers' expense. In the event Sellers fail or
refuse to defend the same within a reasonable length of time, the Indemnified
Parties shall be entitled to assume the defense thereof, and Sellers shall be
jointly and severally liable to repay the Indemnified Parties for all expenses
reasonably incurred in connection with said defense (including reasonable
attorneys' fees and settlement payments) if it is determined that such request
for indemnification was proper. If Sellers shall not have the right to assume
the defense of any litigation, action, suit, demand, or claim in accordance with
either of the two preceding sentences, the Indemnified Parties shall have the
absolute right to control the defense of and to settle, in their sole discretion
and without the consent of Sellers, such litigation, action, suit, demand, or
claim, but Sellers shall be entitled, at their own expense, to participate in
such litigation, action, suit, demand, or claim.
8.3 TAX AUDITS, ETC. In the event of an audit of a Tax Return of the
---------------
Companies with respect to which an Indemnified Party might be entitled to
indemnification
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<PAGE>
pursuant to this Article VIII, Global shall have the right to control any and
all such audits which may result in the assessment of additional Taxes against
the Companies and any and all subsequent proceedings in connection therewith,
including appeals (subject to the prior written consent of Sellers, which shall
not unreasonably be withheld and subject to the right of Sellers to have their
accountant consult with Global on such audits or procedures at Sellers'
expense). Sellers shall cooperate fully in all matters relating to any such
audit or other Tax proceeding (including according access to all records
pertaining thereto), and will execute and file any and all consents, powers of
attorney, and other documents as shall be reasonably necessary in connection
therewith. If additional Taxes are payable by the Companies as a result of any
such audit or other proceeding, Seller shall be responsible for and shall
promptly pay all Taxes, interest, and penalties to which any of the Indemnified
Parties shall be entitled to indemnification.
8.4 INDEMNIFICATION OF SELLERS. Global agrees to indemnify and hold
--------------------------
harmless Sellers and the Companies and each officer, director, stockholder or
affiliate of the Companies, from and against any Indemnifiable Costs arising out
of (A) any material misrepresentation, breach or default by Global of or under
any of the covenants, agreements or other provisions of this Agreement or any
agreement or document executed in connection herewith and (B) any tortious acts
or omissions by Global or the Companies after the Closing. In addition, the
Companies and Global shall indemnify the Sellers for any payment or satisfaction
of any guarantees by Sellers of the Companies' obligations occurring after the
Closing Date.
8.5 GENERAL RIGHT OF OFFSET. In lieu of receiving a cash payment
-----------------------
from the Sellers, Global, in good faith, may elect to offset against payments
under the Seller Note, the amount of any Indemnifiable Costs or any other
payments to which Global may become entitled to by reason of the provisions of
this Agreement. In the event that Global offsets more than the amount of any
Indemnifiable Costs (as finally determined), Global shall be responsible to
Sellers for such sums which should not have been subject to an offset, together
with interest at the rate of 8% per annum.
8.6 LIMITS ON INDEMNIFICATION. All Indemnifiable Costs sought by any
-------------------------
party hereunder shall be net of any insurance proceeds received by such Person
with respect to such claim (less the present value of any premium increases
occurring as a result of such claim). Except for any claims for breach of the
representations and warranties of the Sellers under Sections 3.1, 3.2, 3.3 or
-------------------------
3.17 hereof (the indemnification for which shall expire on the expiration of the
- ----
applicable statute of limitations), the indemnification provided under this
Article VIII shall expire on the third anniversary of the Closing Date. The
Sellers shall not be obligated to pay any amounts for indemnification under this
Article VIII until the aggregate indemnification obligation hereunder exceeds
$10,000, whereupon Sellers shall be liable for all amounts for which
indemnification may be sought. Notwithstanding the foregoing, in no event shall
the aggregate liability of Sellers to Global exceed the Purchase Price (except
for claims made for any breach of the representations and warranties of Sellers
under Sections 3.1, 3.2, 3.3, or 3.17 hereof). However nothing in this Article
---------------------- ----
VIII shall limit Global in any way in exercising or securing any remedies
provided by applicable common law with respect to the
-24-
<PAGE>
conduct of Sellers in connection with this Agreement or in the amount of damages
that it can recover from the Sellers in the event that Global successfully
proves intentional fraud or intentional fraudulent conduct in connection with
this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 MODIFICATIONS. Any amendment, change or modification of this
-------------
Agreement shall be void unless in writing and signed by all parties hereto. No
failure or delay by any party hereto in exercising any right, power or privilege
hereunder (and no course of dealing between or among any of the parties) shall
operate as a waiver of any such right, power or privilege. No waiver of any
default on any one occasion shall constitute a waiver of any subsequent or other
default. No single or partial exercise of any such right, power or privilege
shall preclude the further or full exercise thereof.
9.2 NOTICES. All notices and other communications hereunder shall be
-------
in writing and shall be deemed to have been duly given when personally
delivered, or 48 hours after deposited in the United States mail, first-class,
postage prepaid, or by facsimile addressed to the respective parties hereto as
follows:
Global:
------
Global Imaging Systems Inc.
P.O. Box 273478
Tampa, Florida 33688-3478
Attention: Thomas Johnson, President
Fax No.: (813) 264-7877
Tel No.: (813) 960-5508
With a copy to:
Davis, Graham & Stubbs, L.L.C.
Suite 1200
1225 New York Avenue, N.W.
Washington, D.C. 20005-3919
Attention: Christopher J. Hagan
Fax No.: (202) 293-4794
Tel No.: (202) 822-8660
-25-
<PAGE>
The Companies or Sellers:
------------------------
Copy Service & Supply, Inc.
730 Salisbury Road
Statesville, North Carolina 28687-5129
Attention: Terry K. Smith, President
Fax No.: (704) 872-1227
Tel No.: (704) 873-5281
With a copy to:
Law Offices of Albert F. Walser
150 East Sharpe Street
Statesville, North Carolina 28677
Attention: Albert Walser, Esq.
Fax No.: (704) 873-1753
Tel No.: (704) 873-1751
or to such other address as to any party hereto as such party shall designate by
like notice to the other parties hereto.
9.3 COUNTERPARTS. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original but all of which
counterparts collectively shall constitute one instrument, and in making proof
of this Agreement, it shall never be necessary to produce or account for more
than one such counterpart.
9.4 EXPENSES. Each of the parties hereto will bear all costs,
--------
charges and expenses incurred by such party in connection with this Agreement
and the consummation of the transactions contemplated herein, provided, however,
that Sellers shall bear all costs and expenses of (i) any broker involved in
this transaction and (ii) all legal expenses of Sellers or the Companies with
respect to this Agreement and the transactions contemplated hereby.
9.5 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon
--------------------------
and inure to the benefit of the Companies, Global and Sellers, their heirs,
representatives, successors, and permitted assigns, in accordance with the
terms hereof. This Agreement shall not be assignable by the Companies or
Sellers without the prior written consent of Global. This Agreement shall be
assignable by Global to a wholly-owned subsidiary of Global without the prior
written consent of Sellers.
9.6 ENTIRE AND SOLE AGREEMENT. This Agreement and the other
-------------------------
schedules and agreements referred to herein, constitute the entire agreement
between the parties hereto and supersede all prior agreements, representations,
warranties, statements, promises, information,
-26-
<PAGE>
arrangements and understandings, whether oral or written, express or implied,
with respect to the subject matter hereof.
9.7 GOVERNING LAW. This Agreement and its validity, construction,
-------------
enforcement, and interpretation shall be governed by the substantive laws of the
State of North Carolina.
9.8 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
-----------------------------------------------------
Regardless of any investigation at any time made by or on behalf of any party
hereto or of any information any party may have in respect thereof, all
covenants, agreements, representations, and warranties and the related
indemnities made hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall survive the Closing for a period of three
years, provided (a) the representations and warranties contained in Section 3.17
------------
of this Agreement, and the related indemnities, shall survive the Closing until
the expiration of the applicable statutes of limitations for determining or
contesting Tax liabilities and (b) the representations and warranties contained
in Sections 3.1, 3.2 and 3.3 of this Agreement, and the related indemnities,
-------------------------
shall survive the Closing indefinitely.
9.9 INVALID PROVISIONS. If any provision of this Agreement is deemed
------------------
or held to be illegal, invalid or unenforceable, this Agreement shall be
considered divisible and inoperative as to such provision to the extent it is
deemed to be illegal, invalid or unenforceable, and in all other respects this
Agreement shall remain in full force and effect; provided, however, that if any
provision of this Agreement is deemed or held to be illegal, invalid or
unenforceable there shall be added hereto automatically a provision as similar
as possible to such illegal, invalid or unenforceable provision and be legal,
valid and enforceable. Further, should any provision contained in this
Agreement ever be reformed or rewritten by any judicial body of competent
jurisdiction, such provision as so reformed or rewritten shall be binding upon
all parties hereto.
9.10 PUBLIC ANNOUNCEMENTS. Neither party shall make any public
--------------------
announcement of the transactions contemplated hereby without the prior written
consent of the other party, which consent shall not be unreasonably withheld.
9.11 REMEDIES CUMULATIVE. The remedies of the parties under this
-------------------
Agreement are cumulative and shall not exclude any other remedies to which any
party may be lawfully entitled.
9.12 WAIVER. No failure or delay on the part of any party in
------
exercising any right, power, or privilege hereunder or under any of the
documents delivered in connection with this Agreement shall operate as a waiver
of such right, power, or privilege; nor shall any single or partial exercise of
any such right, power, or privilege preclude any other or further exercise
thereof or the exercise of any other right, power, or privilege.
9.13 DISPUTE RESOLUTION. ALL DISPUTES BETWEEN SELLERS AND GLOBAL WITH
------------------
RESPECT TO ANY PROVISION OF THIS AGREEMENT OR
-27-
<PAGE>
THE RIGHTS AND OBLIGATIONS OF SELLERS AND GLOBAL HEREUNDER (OTHER THAN DISPUTES
INVOLVING ALLEGATIONS OF INTENTIONAL FRAUD), WHICH CANNOT BE RESOLVED BY MUTUAL
AGREEMENT, WILL BE RESOLVED BY BINDING ARBITRATION IN ACCORDANCE WITH THE RULES
OF THE AMERICAN ARBITRATION ASSOCIATION IN THE STATE OF NORTH CAROLINA OR BY ANY
OTHER MEANS OF ALTERNATIVE DISPUTE RESOLUTION MUTUALLY AGREED UPON BY THE
PARTIES.
* * * *
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed as of the date and year first above written.
GLOBAL:
------
GLOBAL IMAGING SYSTEMS INC.
By: /s/ Thomas S. Johnson
---------------------
Thomas S. Johnson
President and Chief Executive Officer
THE COMPANIES:
-------------
COPY SERVICE & SUPPLY, INC.
Attest:
/s/ Crystal E. Smith By: /s/ Terry K. Smith
- ---------------------- ---------------------
Secretary Title: President
---------------------
OFFICE FURNITURE CONCEPTS, INC.
Attest:
/s/ Terry K. Smith By: /s/ Crystal E. Smith
- ---------------------- ---------------------
Secretary Title: President
---------------------
CSS LEASING, L.L.C.
/s/ Terry K. Smith By: /s/ Crystal E. Smith
- ---------------------- ---------------------
Member Manager Title: Member-Manager
---------------------
SELLERS:
-------
/s/ Terry K. Smith
------------------
TERRY K. SMITH
/s/ Crystal E. Smith
--------------------
CRYSTAL E. SMITH
-29-
<PAGE>
EXHIBIT 10.18
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[**]") OR OTHERWISE IDENTIFIED
HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. A COMPLETE
VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.***
STOCK PURCHASE AGREEMENT
By and Among
GLOBAL IMAGING SYSTEMS INC.,
SOUTHERN BUSINESS COMMUNICATIONS, INC.
and
MARK M. LLOYD
and
ARTHUR E. KREPS
Dated November 13, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
DEFINITIONS
<S> <C>
1.1 Definitions................................................................. 1
ARTICLE II
AGREEMENT OF PURCHASE AND SALE; CLOSING
2.1 Agreement to Sell and Purchase.............................................. 5
2.2 Purchase Price.............................................................. 6
2.3 Payment of Purchase Price................................................... 6
2.4 Closing..................................................................... 6
2.5 Escrow Arrangements......................................................... 6
2.6 Purchase Price Adjustments.................................................. 7
2.7 Closing Audit............................................................... 7
2.8 Post-Closing Purchase Price Adjustment...................................... 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND SELLER
3.1 Capitalization.............................................................. 8
3.2 No Liens on Shares.......................................................... 8
3.3 Other Rights to Acquire Capital Stock....................................... 8
3.4 Due Organization............................................................ 8
3.5 No Subsidiaries............................................................. 8
3.6 Due Authorization........................................................... 9
3.7 Financial Statements........................................................ 9
3.8 Certain Actions............................................................. 9
3.9 Properties.................................................................. 10
3.10 Licenses and Permits........................................................ 11
3.11 Intellectual Property....................................................... 11
3.12 Compliance with Laws........................................................ 12
3.13 Insurance................................................................... 12
3.14 Employee Benefit Plans...................................................... 12
(a) Employee Welfare Benefit Plans......................................... 12
(b) Employee Pension Benefit Plans......................................... 12
(c) Employment and Non-Tax Qualified Deferred Compensation
Arrangements........................................................... 13
3.15 Contracts and Agreements.................................................... 13
3.16 Claims and Proceedings...................................................... 13
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
3.17 Taxes....................................................................... 14
3.18 Personnel................................................................... 15
3.19 Business Relations.......................................................... 15
3.20 Accounts Receivable......................................................... 15
3.21 Bank Accounts............................................................... 16
3.22 Warranties.................................................................. 16
3.23 Brokers..................................................................... 16
3.24 Interest in Competitors, Suppliers, Customers, Etc.......................... 16
3.25 Indebtedness To and From Officers, Directors, Shareholders, and Employees... 16
3.26 Undisclosed Liabilities..................................................... 16
3.27 Information Furnished....................................................... 17
ARTICLE IV
GLOBAL'S REPRESENTATIONS AND WARRANTIES
4.1 Due Organization............................................................ 17
4.2 Due Authorization........................................................... 17
4.3 No Brokers.................................................................. 17
ARTICLE V
COVENANTS OF THE COMPANY AND SELLER
5.1 Consents of Others.......................................................... 18
5.2 Seller's Efforts............................................................ 18
5.3 Powers of Attorney.......................................................... 18
ARTICLE VI
POST-CLOSING COVENANTS
6.1 General..................................................................... 18
6.2 Transition.................................................................. 18
6.3 Confidentiality............................................................. 19
6.4 Covenant Not to Compete..................................................... 19
6.5 Section 338(h)(10) Election................................................. 19
ARTICLE VII
CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING
7.1 Conditions to Global's Obligations.......................................... 20
(a) Covenants, Representations and Warranties.............................. 20
(b) Consents............................................................... 20
(c) Lease.................................................................. 21
(d) Discharge of Indebtedness and Liens.................................... 21
(e) Material Adverse Change................................................ 21
(f) Transfer Taxes......................................................... 21
(g) Financial Conditions................................................... 21
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
(h) Documents to be Delivered by Sellers and the Company................... 21
(i) Opinion of Seller's Counsel................................... 21
(ii) Certificates.................................................. 21
(iii) Release....................................................... 21
(iv) Escrow Agreement.............................................. 22
(v) Employment Agreements......................................... 22
(vi) Consulting Agreement.......................................... 22
(vii) Office Lease.................................................. 22
(viii) Stock Certificates............................................ 22
7.2 Conditions to Sellers and the Company's Obligations......................... 22
(a) Covenants, Representations and Warranties.............................. 22
(b) Consents............................................................... 22
(c) Documents to be Delivered by Global.................................... 23
(i) Opinion of Global's Counsel................................... 23
(ii) Certificates.................................................. 23
(iii) Escrow Agreement.............................................. 23
(iv) Employment Agreements......................................... 23
(v) Consulting Agreement.......................................... 23
(vi) Office Lease.................................................. 23
(vii) Purchase Price................................................ 23
(d) Right of Reinvestment.................................................. 23
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification of Global................................................... 24
8.2 Defense of Claims........................................................... 24
8.3 Escrow Claim................................................................ 25
8.4 Tax Audits, Etc............................................................. 25
8.5 Indemnification of Seller................................................... 25
8.6 Limits on Indemnification................................................... 25
ARTICLE IX
MISCELLANEOUS
9.1 Modifications............................................................... 26
9.2 Notices..................................................................... 27
9.3 Counterparts................................................................ 28
9.4 Expenses.................................................................... 28
9.5 Binding Effect; Assignment.................................................. 28
9.6 Entire and Sole Agreement................................................... 28
9.7 Governing Law............................................................... 28
9.8 Survival of Representations, Warranties and Covenants....................... 28
9.9 Invalid Provisions.......................................................... 29
9.10 Public Announcements........................................................ 29
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
9.11 Remedies Cumulative......................................................... 29
9.12 Waiver...................................................................... 29
9.13 DISPUTE RESOLUTION.......................................................... 29
</TABLE>
LIST OF EXHIBITS
Exhibit A Form of Escrow Agreement
Exhibit B Form of Office Lease
Exhibit C Opinion of Sellers' Counsel
Exhibit D Sellers' Certificates
Exhibit E Release
Exhibit F Mark M. Lloyd Executive Agreement
Exhibit G Executive Agreement for other Executives
Exhibit H Arthur E. Kreps Consulting Agreement
Exhibit I Global Certificates
Exhibit J Opinion of Global's Counsel
LIST OF SCHEDULES
Schedule 2.3 Sellers' Accounts
Schedule 2.6 Holders of Funded Indebtedness
Schedule 3.1 Ownership of Shares
Schedule 3.4 Articles and Bylaws
Schedule 3.7 Financial Statements
Schedule 3.8A Certain Actions
Schedule 3.8B Material Changes
Schedule 3.9 Properties
Schedule 3.10 Licenses and Permits
Schedule 3.11 Patents and Trademarks
Schedule 3.13 Insurance
Schedule 3.14 Employee Benefit Plans
Schedule 3.15 Contracts and Agreements
Schedule 3.16 Claims and Proceedings
Schedule 3.18 Personnel
Schedule 3.20 Accounts Receivable
Schedule 3.21 Bank Accounts
Schedule 3.22 Warranties
Schedule 3.25 Indebtedness with Officers, Directors and Shareholders
Schedule 3.26 Undisclosed Liabilities
Schedule 3.27 Information Furnished
Schedule 7.1(d) Indebtedness
The Exhibits and Schedules to this Stock Purchase Agreement are not included
with this Registration Statement on Form S-1. Global will provide these exhibits
and schedules upon the request of the Securities and Exchange Commission.
-iv-
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "AGREEMENT") is entered into as of
November 13, 1996 but effective as of September 30, 1996, by and among GLOBAL
IMAGING SYSTEMS INC., a Delaware corporation ("GLOBAL"), SOUTHERN BUSINESS
COMMUNICATIONS, INC., a Georgia corporation (the "COMPANY") and MARK M. LLOYD
and ARTHUR E. KREPS (each individually a "SELLER" and collectively "SELLERS").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the electronic presentation, image
processing, and network services industry in Atlanta, Georgia, Nashville,
Tennessee, Knoxville, Tennessee and the State of Florida (the "BUSINESS"); and
WHEREAS, Sellers own an aggregate of 99,999 shares of the outstanding
Common Stock, par value $1.00 per share, of the Company (the "SHARES"), which
Shares constitute all of the issued and outstanding capital stock of the
Company; and
WHEREAS, Global desires to purchase from Sellers and Sellers desire to
sell to Global hereby all of the Shares owned by Sellers, all on the terms and
subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto covenant and agree
as follows:
ARTICLE I
DEFINITIONS
-----------
1.1 DEFINITIONS. In this Agreement, the following terms have the
-----------
meanings specified or referred to in this Section 1.1 and shall be equally
-----------
applicable to both the singular and plural forms. Any agreement referred to
below shall mean such agreement as amended, supplemented and modified from time
to time to the extent permitted by the applicable provisions thereof and by this
Agreement.
"AFFILIATE" means, with respect to any Person, any other Person
which directly or indirectly controls, is controlled by or is under common
control with such Person.
"ATS" means ATS-Atlanta One, L.L.C., a Georgia limited liability
company.
<PAGE>
"AUDITED CLOSING BALANCE SHEET" has the meaning specified in
Section 2.7.
- -----------
"BUILDING" shall mean the Company's office building and warehouse
located at 3175 Corners North Court, Norcross, Georgia.
"BUSINESS" has the meaning specified in the first recital of the
Agreement.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. (S)(S) 9601 et seq., any amendments
-- ---
thereto, any successor statutes, and any regulations promulgated thereunder.
"CLOSING" means the closing of the transfer of the Shares from
the Sellers to Global.
"CLOSING DATE" has the meaning specified in Section 2.4.
-----------
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning specified in the first paragraph of
this Agreement.
"COMPANIES" shall mean collectively, the Company, SBCDC and ATS.
"CONFIDENTIAL INFORMATION" means all confidential information and
trade secrets of the Company including, without limitation, the identity, lists
or descriptions of any customers, referral sources or organizations; financial
statements, cost reports or other financial information; contract proposals, or
bidding information; business plans and training and operations methods and
manuals; personnel records; fee structure; and management systems, policies or
procedures, including related forms and manuals. Confidential Information shall
not include any information (i) which is disclosed pursuant to subpoena or other
legal process, (ii) which has been publicly disclosed, (iii) which subsequently
becomes known to a third party not subject to a confidentiality agreement with
Global or the Company, or (iv) which is subsequently disclosed by any third
party not in breach of a confidentiality agreement.
"CONSULTING AGREEMENT" shall mean that certain Consulting
Agreement in the form of Exhibit H to be entered into between the Company and
---------
Arthur E. Kreps.
"CONTRACTS" has the meaning specified in Section 3.15.
------------
"COURT ORDER" means any judgment, order, award or decree of any
foreign, federal, state, local or other court or tribunal and any award in any
arbitration proceeding.
"EMPLOYMENT AGREEMENTS" shall mean collectively the executive
agreements of the Company with Mark M. Lloyd in the form of Exhibit F and with
---------
John
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<PAGE>
Boyette, Allan Small, Scott Lloyd and Kevin Godwin to be entered into at Closing
in the form of Exhibit G.
---------
"ENCUMBRANCE" means any lien, claim, charge, security interest,
mortgage, pledge, easement, conditional sale or other title retention agreement,
defect in title, covenant or other restrictions of any kind.
"ENVIRONMENTAL OBLIGATIONS" has the meaning specified in Section
-------
3.12.
- ----
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ESCROW AGENT" means _______________________________.
"ESCROW AGREEMENT" means the Escrow Agreement to be executed by
and among the Sellers, Global and the Escrow Agent in the form of Exhibit A.
---------
"ESCROW PERIOD" has the meaning specified in Section 2.5.
-----------
"ESCROW SUM" has the meaning specified in Section 2.5.
-----------
"EXECUTIVES" shall mean collectively John Boyette, Allan Small,
Kevin Godwin and Scott Lloyd.
"FINANCIAL STATEMENTS" has the meaning specified in Section 3.7.
-----------
"FUNDED INDEBTEDNESS" means all (i) indebtedness of such Person
for borrowed money or other interest-bearing indebtedness; (ii) capital lease
obligations of such Person; (iii) obligations of such Person to pay the deferred
purchase or acquisition price for goods or services, other than trade accounts
payable or accrued expenses in the ordinary course of business; or (iv)
indebtedness of other guaranteed by such Person or secured by an Encumbrance on
such Person's property.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"GLOBAL" has the meaning specified in the first paragraph of this
Agreement.
"GLOBAL STOCK" means the 6,370 shares of Global's Class A Common
Stock and 1,129.552 shares of Global's Class B Common Stock to be issued to the
Sellers, Executives and Dewey Suddeth at the Closing.
"GOVERNMENTAL BODY" means any foreign, federal, state, local or
other governmental authority or regulatory body.
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<PAGE>
"GOVERNMENTAL PERMITS" has the meaning specified in Section 3.10.
------------
"INDEMNIFIABLE COSTS" has the meaning specified in Section 8.1.
-----------
"INDEMNIFIED PARTIES" has the meaning specified in Section 8.1.
-----------
"INDEPENDENT ACCOUNTANTS" has the meaning specified in Section
-------
2.7.
- ---
"INTELLECTUAL PROPERTY" has the meaning specified in Section
-------
3.11.
- ----
"IRS" means the Internal Revenue Service.
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means a
material adverse change or effect on the assets, properties, Business or the
operations, liabilities, or conditions (financial or otherwise) of the Company.
"OSHA" means the Occupational Safety and Health Act, 29 U.S.C.
(S)(S) 651 et seq., any amendment thereto, and any regulations promulgated
-- ---
thereunder.
"PERMITTED EXCEPTION" means (a) liens for Taxes and other
governmental charges and assessments which are not yet due and payable, (b)
liens of landlords and liens of carriers, warehousemen, mechanics and
materialmen and other like liens arising in the ordinary course of business for
sums not yet due and payable, (c) other liens or imperfections on property which
are not material in amount or do not materially detract from the value of or
materially the existing use of the property affected by such lien or
imperfection, (d) such statement of facts shown on any customary title insurance
policies delivered to Global and (e) purchase money security interest liens in
favor of Canon U.S.A., Inc..
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or Governmental Body.
"PRELIMINARY CLOSING BALANCE SHEET" shall mean the Company's best
estimate of the Companies' balance sheet as of the Closing Date or October 31,
1996, at the option of the Sellers, that consists of (i) combining the Adjusted
Balance Sheets (as hereinafter defined) of the Company and SBCDC, plus (ii) the
assets acquired, and liabilities assumed, by an Affiliate of Global from ATS
pursuant to the ATS Asset Purchase Agreement of even date herewith between such
Affiliate, ATS and the members of ATS. As used herein, the term "Adjusted
Balance Sheets" means the estimated balance sheets of the Company and SBCDC as
of the Closing Date or October 31, 1996, as the case may be, excluding, in each
case, from the liability side of such balance sheet, all of such entity's Funded
Indebtedness. The Preliminary Closing Balance Sheet shall have been delivered
prior to the date of this Agreement.
"PURCHASE AGREEMENTS" shall mean collectively, this Agreement and
each of the other stock or asset purchase agreements of even date herewith
whereby Global shall acquire all of the capital stock or assets of the
Companies.
-4-
<PAGE>
"PURCHASE PRICE" has the meaning specified in Section 2.2.
-----------
"RCRA" means the Resource Conservation and Recovery Act, 42 U.S.C. (S)
(S) 6901 et seq., and any successor statue, and any regulations promulgated
-- ---
thereunder.
"REQUIREMENTS OF LAWS" means any foreign, federal, state and local
laws, statues, regulations, rules, codes or ordinances enacted, adopted, issued
or promulgated by any Governmental Body (including, without limitation, those
pertaining to electrical, building, zoning, environmental and occupational
safety and health requirements) or common law.
"SBCDC" means Southern Business Communications of D.C., Inc., a
Georgia corporation.
"SELLER" or "SELLERS" have the meanings set forth in the first
paragraph of this Agreement.
"SHARES" means all of the issued and outstanding shares of the capital
stock of the Company.
"TAX" or "TAXES" means any federal, state local or foreign income,
alternative or add-on minimum, gross income, gross receipts, windfall profits,
severance, property, production, sales, use, transfer, gains, license, excise,
employment, payroll, withholding or minimum tax, transfer, goods and services,
or any other tax, custom, duty, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest or any penalty,
addition to tax or additional amount imposed by any Governmental Body.
"TAX RETURN" means any return, report or similar statement required to
be filed with respect to any Taxes (including any attached schedules),
including, without limitation, any information return, claim for refund, amended
return and declaration of estimated Tax.
"WORKING CAPITAL" shall mean the difference between the Companies'
current assets and their current liabilities as calculated in accordance with
GAAP, and as adjusted pursuant to the terms of this Agreement.
ARTICLE II
AGREEMENT OF PURCHASE AND SALE; CLOSING
2.1 AGREEMENT TO SELL AND PURCHASE. Upon the basis of the representations
------------------------------
and warranties, for the consideration, and subject to the terms and conditions
set forth in this Agreement, Sellers agree to sell the Shares to Global and
Global agrees to purchase the Shares from Sellers.
-5-
<PAGE>
2.2 PURCHASE PRICE. The total purchase price for the Company (the
--------------
"PURCHASE PRICE") shall be equal to $8,148,134 (of which $7,728,134 shall
represent the purchase price for the Shares and $420,000 shall represent the
purchase price for certain phantom stock interests in the Company) and as
otherwise adjusted pursuant to Section 2.6 below.
-----------
2.3 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be payable by
-------------------------
Global at the Closing (hereinafter defined) as follows:
(A) $6,748,134 will be paid in cash by wire transfer of funds or
by cashier's checks to the Sellers' accounts specified in Schedule 2.3
------------
(including the payment of $372,000 for the covenant not to compete provided in
Section 6.4); and
- -----------
(B) $980,000 will be paid in cash by wire transfer of funds to
the Escrow Agent to be held in escrow for satisfaction of Sellers'
indemnification obligations specified in Section 8.1 and Sellers' obligations
-----------
specified in Section 2.8 in accordance with the terms of Section 2.5 below.
----------- -----------
Sellers shall have the right to contribute all of their shares of Global Stock
as part of such escrow fund in lieu of cash; and
(C) $420,000 will be paid in cash by check to the those certain
Persons in the amounts listed on Schedule 2.3(c) in order to satisfy certain
------------
phantom stock equity interests of such persons in the Companies.
2.4 CLOSING. The Closing of the purchase and sale of the Shares
-------
contemplated by this Agreement shall take place at the offices of Rowe, Foltz, &
Martin, P.C. in Atlanta, Georgia. For purposes of this Agreement and the
transactions contemplated hereby, the Closing shall be deemed to take place on
September 30, 1996 (the "CLOSING DATE").
2.5 ESCROW ARRANGEMENTS. Pursuant to the Escrow Agreement to be
-------------------
entered into among Sellers, Global and Escrow Agent, $980,000 of the Purchase
Price shall be delivered to the Escrow Agent at Closing. Such monies (which,
together with all interest accrued thereon, is hereinafter referred to as the
"ESCROW SUM") shall be held pursuant to the terms of the Escrow Agreement for
payment from such Escrow Sum of amounts, if any, owing by Sellers to Global in
accordance with Article VIII or Section 2.8 below. At the conclusion of the
------------ -----------
period ending on September 30, 1997 (such period being referred to herein as the
"ESCROW PERIOD"), such remaining portion of the Escrow Sum not theretofore
claimed by or paid to Global in accordance with the terms of the Escrow
Agreement and this Agreement shall be disbursed to Sellers in such manner as to
cause the aggregate value of the monies and Global Stock distributed to each to
be in the same relative proportions as the payment under Section 2.3(a) above;
--------------
provided, however, that shares of Global Stock held as part of the Escrow Sum
shall be distributed one-half to Mark M. Lloyd and one-half to Arthur E. Kreps.
Sellers and Global agree that each will execute and deliver such instruments and
documents as are furnished by any other party to enable such furnishing party to
receive those portions of the Escrow Sum to which the furnishing party is
entitled under the provisions of the Escrow Agreement and this Agreement.
-6-
<PAGE>
2.6 PURCHASE PRICE ADJUSTMENTS.
--------------------------
(A) The Purchase Price payable pursuant to Section 2.3(a) above
--------------
will be reduced by the total amount of Funded Indebtedness assumed (except for
capital lease payables of $6,460, a note payable for a voicemail system of up to
$13,921 and the lease for a new phone system) or paid in cash by wire transfer
of funds to the accounts of the holders of Funded Indebtedness listed on
Schedule 2.6 hereto to satisfy the Company's Funded Indebtedness with such
- ------------
institutions.
(B) The Purchase Price will be reduced by a sum equal to the
amount, if any, by which adjusted Working Capital as reflected on the
Preliminary Closing Balance Sheet is than $2,500,000.
2.7 CLOSING AUDIT. Within ninety (90) days following the date hereof,
-------------
there shall be delivered to Global and to Sellers an audit of the Preliminary
Closing Balance Sheet (the "AUDITED CLOSING BALANCE SHEET") of the Companies at
and as of the Closing Date or as of October 31, 1996 at the option of the
Sellers. The Preliminary Closing Balance Sheet shall be audited by Ernst &
Young in accordance with GAPP. The cost of the Audited Closing Balance Sheet
shall be paid by Global. In the event that Sellers dispute any items on such
Audited Closing Balance Sheet within ten days after Sellers' receipt thereof,
the parties shall jointly select and retain an independent "Big Six" accounting
firm (the "INDEPENDENT ACCOUNTANTS") to review the disputed items(s) on the
Audited Closing Balance Sheet. The final determination of such disputed item(s)
by the Independent Accountants shall be reflected on the Audited Closing
Balance Sheet. The cost of retaining the Independent Accountants shall be borne
by Sellers; provided, however, that Global shall reimburse Sellers for the cost
of the Independent Accountants in the event that such review results in an
increase of more than $25,000 in the Companies' Working Capital as reflected on
the Audited Closing Balance prepared by Ernst & Young.
2.8 POST-CLOSING PURCHASE PRICE ADJUSTMENT. In the event that the
--------------------------------------
Working Capital as reflected on the Audited Closing Balance Sheet is less than
$2,500,000, then the Purchase Price will be adjusted downward, on a
dollar-for-dollar basis, to reflect the lesser of (i) the decrease, if any, in
the total Working Capital as reflected on the Audited Closing Balance Sheet from
the amount of Working Capital reflected on the Preliminary Closing Balance Sheet
or (ii) the amount by which the Working Capital reflected on the Audited Closing
Balance Sheet is less than $2,500,000. Conversely, the Purchase Price will be
adjusted upward, on a dollar-for dollar basis, to reflect the increase if any,
in the total Working Capital as reflected on the Audited Closing Balance Sheet
from the amount of Working Capital reflected on the Preliminary Closing Balance
Sheet, provided, however, that in no event shall such adjustment exceed the
total amount of any adjustment to the Purchase Price made pursuant to Section
-------
2.6(b) above. The post-closing adjustment to the Purchase Price, if any, shall
- -----
be paid by Sellers to Global or by Global to Sellers, as the case may be, in
immediately available funds within ten (10) days of delivery of the Audited
Closing Balance Sheet. Sellers may pay any post-Closing Purchase Price
adjustment under this Section 2.8 from the Escrow Sum in accordance with Section
----------- -------
2.5 hereof.
- ---
-7-
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND SELLERS
The Company and Sellers, jointly and severally, represent and warrant
to Global that:
3.1 CAPITALIZATION. The authorized capital stock of the Company
--------------
consists of 1,000,000 shares of Common Stock, $1.00 par value, 99,999 of which
are issued and outstanding. All of the Shares are duly authorized, validly
issued, fully paid, and nonassessable. All of the Shares are owned of record and
beneficially by Sellers in the amounts specified in Schedule 3.1 hereto. None of
------------
the Shares was issued or will be transferred under this Agreement in violation
of any preemptive or preferential rights of any Person. The Sellers own all of
the issued and outstanding capital stock of the Company.
3.2 NO LIENS ON SHARES. Sellers collectively own the Shares, free and
------------------
clear of any Encumbrances other than the rights and obligations arising under
this Agreement, and none of the Shares is subject to any outstanding option,
warrant, call, or similar right of any other Person to acquire the same, and
none of the Shares is subject to any restriction on transfer thereof except for
restrictions imposed by applicable federal and state securities laws. Sellers
have full power and authority to convey good and marketable title to the Shares,
free and clear of any Encumbrances.
3.3 OTHER RIGHTS TO ACQUIRE CAPITAL STOCK. Except as set forth in
-------------------------------------
this Agreement, there are no authorized or outstanding warrants, options, or
rights of any kind to acquire from the Company any equity to debt securities of
the Company, or securities convertible into or exchangeable for equity or debt
securities of the Company, and there are no shares of capital stock of the
Company reserved for issuance for any purpose nor any contracts, commitments,
understandings or arrangements which require the Company to issue, sell or
deliver any additional shares of its capital stock.
3.4 DUE ORGANIZATION. The Company is a corporation duly organized,
----------------
validly existing, and in good standing under the laws of the State of Georgia
and has full corporate power and authority to carry on the Business as now
conducted and as proposed to be conducted through the date hereof. Complete and
correct copies of the Certificate of Incorporation and Bylaws of the Company,
and all amendments thereto, have been heretofore delivered to Global and are
attached hereto as Schedule 3.4. The Company is qualified to do business in
------------
Tennessee, Florida and in each other jurisdiction in which the nature of the
Business or the ownership of its properties requires such qualification except
where the failure to be so qualified does not and would not have a Material
Adverse Effect.
3.5 NO SUBSIDIARIES. The Company does not directly or indirectly have
---------------
any subsidiaries or any direct or indirect ownership interests in any Person.
Except for SBCDC and ATS, the Sellers do not own any other Person engaged in the
Business.
-8-
<PAGE>
3.6 DUE AUTHORIZATION. The Company and the Sellers each has full
-----------------
power and authority to execute, deliver and perform this Agreement and to carry
out the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action of the Company.
This Agreement has been duly and validly executed and delivered by the Company
and Sellers and constitutes the valid and binding obligations of the Company and
Sellers, enforceable in accordance with its terms. The execution, delivery, and
performance of this Agreement (as well as all other instruments, agreements,
certificates, or other documents contemplated hereby) by the Company and
Sellers, do not (a) violate any Requirements of Laws or any Court Order of any
Governmental Body applicable to the Company or Sellers, or their respective
property, (b) violate or conflict with, or permit the cancellation of, or
constitute a default under, any agreement to which the Company or Sellers are a
party, or by which any of them or any of their respective property is bound, (c)
permit the acceleration of the maturity of any indebtedness of, or indebtedness
secured by the property of, the Company or Sellers, or (d) violate or conflict
with any provision of the charter or bylaws of the Company.
3.7 FINANCIAL STATEMENTS. The following Financial Statements (herein
--------------------
so called) of the Company have been delivered to Global by Sellers and the
Company:
Reviewed balance sheets of the Company as of December 31, 1993,
December 31, 1994 and December 31, 1995 and internally prepared
monthly balance sheets for each month end from August 31, 1995 to
August 31, 1996, and
Reviewed statements of income of the Company for the fiscal years
ended December 31, 1993, December 31, 1994 and December 31, 1995 and
internally prepared income statements for month and year-to-date for
each month commencing August 31, 1995 through the month ending August
31, 1996.
Except as disclosed in Schedule 3.7, the Financial Statements have been prepared
------------
in accordance with GAAP throughout the periods indicated and fairly present the
financial position, results of operations and changes in financial position of
the Company as of the indicated dates and for the indicated periods, subject (in
the case of the monthly internally prepared Financial Statements) to year end
accruals made in the ordinary course of the Business which are not adversely
material and which are consistent with past practices. Except to the extent
reflected or provided for in the Financial Statements or the notes thereto and
except as disclosed in Schedule 3.7, the Company has no liabilities, nor any
------------
obligations (whether absolute, contingent, or otherwise) which are (individually
or in the aggregate) material (in amount or to the conduct of the Business); and
neither the Company nor Sellers have knowledge of any basis for the assertion of
any such liability or obligation. Since August 31, 1996, there has been no
Material Adverse Change, and neither the Company nor Seller have any reason to
believe there has been any Material Adverse Change in the prospects of the
Company.
3.8 CERTAIN ACTIONS. Since August 31, 1996, the Company has not,
---------------
expect as disclosed on Schedule 3.8A hereto: (a) discharged or satisfied any
-------------
Encumbrance or paid any obligation or liability, absolute or contingent, other
than current liabilities incurred and paid in
-9-
<PAGE>
the ordinary course of the Business; (b) paid or declared any dividends or
distributions, or purchased, redeemed, acquired, or retired any stock or
indebtedness from any stockholder other than (i) the personal vehicles listed on
Schedule 3.8A hereto and (ii) the office furniture listed on Schedule 3.8A
- ------------- -------------
hereto, each as agreed to by Global; (c) made or agreed to make any loans or
advances or guaranteed or agreed to guarantee any loans or advances to any party
whatsoever; (d) suffered or permitted any Encumbrance to arise or be granted or
created against or upon any of its assets, real or personal, tangible or
intangible; (e) cancelled, waived, or released or agreed to cancel, waive, or
release any of its debts, rights, or claims against third parties in excess of
$10,000 individually or $50,000 in the aggregate; (f) sold, assigned, pledged,
mortgaged, or otherwise transferred, or suffered any damage, destruction, or
loss (whether or not covered by insurance) to, any assets (except in the
ordinary course of the Business); (g) amended its charter or bylaws; (h) paid or
made a commitment to pay any severance or termination payment to any employee or
consultant; (i) made any change in its method of management or operation or
method of accounting; (j) made any capital expenditures, including, without
limitation, replacements of equipment in the ordinary course of the Business, or
entered into commitments therefor, except for capital expenditures or
commitments therefor which do not, in the aggregate, exceed $50,000; (k) made
any investment or commitment therefor in any Person; (l) made any payment or
contracted for the payment of any bonus, gratuity, or other compensation or
personal expenses, other than (A) wages and salaries and business expenses paid
in the ordinary course of the Business, and (B) wage and salary adjustments made
in the ordinary course of the Business for employees who are not officers,
directors, or shareholders of the Company; (m) made, amended, or entered into
any written employment contract or created or made any material change in any
bonus, stock option, pension, retirement, profit sharing or other employee
benefit plan or arrangement; (n) amended or experienced a termination of any
material contract, agreement, lease, franchise or license to which the Company
is a party, except in the ordinary course of the Business; or (o) entered into
any other material transactions except in the ordinary course of the Business.
Since August 31, 1996, except as disclosed on Schedule 3.8B hereto, there has
-------------
not been (a) any Material Adverse Change including, but not limited to, the loss
of any customer of the Company who paid the Company in excess of $50,000 during
the twelve months ended August 31, 1996, or the loss of any supplier of the
Company to whom the Company paid more than $40,000 during the twelve months
ended August 31, 1996, or in any material assets of the Company, (b) any
extraordinary contracts, commitments, orders or rebates, (c) any strike,
material slowdown, or demand for recognition by a labor organization by or with
respect to any of the employees of the Company, or (d) any shutdown, material
slow-down, or cessation of any material operations conducted by, or constituting
part of, the Company, nor has the Company agreed to do any of the foregoing.
3.9 PROPERTIES. Attached hereto as Schedule 3.9 is a list containing
---------- ------------
a description of all interests in real property (including, without limitation,
leasehold interests) and personal property utilized by the Company in the
conduct of the Business having a book value in excess of $15,000 as of the date
hereof. Except as expressly set forth on Schedule 3.9, such real and personal
------------
properties are free and clear of Encumbrances. Sellers and the Company have
delivered to Global a lien search of all of the Company's real and personal
property in the State of Georgia, Tennessee and Florida. All of the properties
and assets necessary in the Business as currently conducted (including, without
limitation, all books, records, computers and computer software and data
processing systems) are owned, leased or licensed by the Company
-10-
<PAGE>
and are suitable for the purposes for which they are currently being used. With
the exception of used equipment and inventory valued at no more than $1.00 on
the Company's Financial Statements, the physical properties of the Company,
including the real properties leased by the Company, are in good operating
condition and repair, normal wear and tear excepted, and are free from any
defects of a material nature. Except as otherwise set forth on Schedule 3.9, the
------------
Company has full and unrestricted legal and equitable title to all such
properties and assets. The operation of the properties and Business of the
Company in the manner in which they are now and have been operated does not
violate any zoning ordinances, municipal regulations, or other Requirements of
Laws, except for any such violations which would not, individually or in the
aggregate, have a Material Adverse Effect. Except as set forth on Schedule 3.9,
------------
no covenants, easements, right-of-way, or regulations of record impair the uses
of the properties of the Company for the purposes for which they are now
operated. All leases of real or personal property by the Company are legal,
valid, binding, enforceable and in full force and effect and will remain legal,
valid, binding, enforceable and in full force and effect on identical terms
immediately following the date hereof. All facilities owned or leased by the
Company have received all approvals of any Governmental Body (including
Governmental Permits) required in connection with the operation thereof and have
operated and maintained in accordance with all Requirements of Laws.
3.10 LICENSES AND PERMITS. Attached hereto as Schedule 3.10 is a list
-------------------- -------------
of all licenses, certificates, privileges, immunities, approvals, franchises,
authorizations and permits held or applied for by the Company from any
Governmental Body (herein collectively called "GOVERNMENTAL PERMITS") the
absence of which to the best knowledge of Sellers could have a Material Adverse
Effect. The Company has complied in all material respects with the terms and
conditions of all such Governmental Permits, and no violation of any such
Governmental Permit or the Requirements of Laws governing the issuance or
continued validity thereof has occurred other than violations (if any) which
would not individually or in the aggregate have a Material Adverse Effect. No
additional Government Permit is required from any Governmental Body thereof in
connection with the conduct of the Business which Governmental Permit, if not
obtained, would have a Material Adverse Effect.
3.11 INTELLECTUAL PROPERTY. Attached hereto as Schedule 3.11 is a
--------------------- -------------
list and brief description of all patents, trademarks, tradenames, copyrights,
licenses, computer software or data (other than general commercial software),
trade secrets, or applications therefor owned by or registered in the name of
the Company or in which the Company has any rights, licenses, or immunities
(collectively, the "INTELLECTUAL PROPERTY"). The Company has furnished Global
with copies of all license agreements to which the Company is a party, either as
licensor or licensee, with respect to any Intellectual Property. Except as
described on Schedule 3.11 hereto, the Company has good and marketable title to
-------------
or the right to use such Intellectual Property and all inventions, processes,
designs, formulae, trade secrets and know-how necessary for the conduct of their
Business, in their Business as presently conducted without the payment of any
royalty or similar payment, and the Company is not infringing on any patent
right, tradename, copyright or trademark right or other Intellectual Property
right of others, and neither the Company nor Sellers are aware of any
infringement by others of any such rights owned by the Company.
-11-
<PAGE>
3.12 COMPLIANCE WITH LAWS. The Company has (i) complied in all
--------------------
material respects with all Requirements of Laws. Governmental Permits and Court
Orders applicable to the Business and has filed with the proper Governmental
Bodies all statements and reports required by all Requirements of Laws,
Governmental Permits and Court Orders to which the Company or any of its
employees (because of their activities on behalf of the Company) are subject and
(ii) conducted the Business and are in compliance in all material respects with
all federal, state and local energy, public utility, health, safety and
environmental Requirements of Laws, Governmental Permits and Court Orders
including the Clean Air Act, the Clean Water Act, RCRA, the Safe Drinking Water
Act, CERCLA, OSHA, the Toxic Substances Control Act and any similar state, local
or foreign governmental and regulatory requirements, except where any such
failure to comply would not, in the aggregate, have a Material Adverse Effect.
No claim has been made by any Governmental Body (and, to the best knowledge of
the Company and Sellers, no such claim is anticipated) to the effect that the
Business fails to comply, in any respect, with any Requirements of Laws,
Governmental Permit or Environmental Obligation or that a Governmental Permit or
Court Order is necessary in respect thereto.
3.13 INSURANCE. Attached hereto as Schedule 3.13 is a list of all
--------- -------------
policies of fire, or other forms of insurance and all fidelity bonds held by or
applicable to the Company, which Schedule sets forth in respect of each such
policy the policy name, policy number, carrier, term, type of coverage,
deductible amount or self-insured retention amount, limits of coverage and
annual premium. Copies of all such insurance policies have been delivered to
Global. To the best of Sellers' and the Company's knowledge, no event relating
to the Company has occurred which will result in (i) cancellation of any such
insurance policies; (ii) a retroactive upward adjustment of premiums under any
such insurance policies; or (iii) any prospective upward adjustment in such
premiums. To the best of Sellers' and the Company's knowledge after due inquiry,
all of such insurance policies will remain in full force and effect following
the Closing.
3.14 EMPLOYEE BENEFIT PLANS.
----------------------
(A) EMPLOYEE WELFARE BENEFIT PLANS. Except as disclosed on
------------------------------
Schedule 3.14, the Company does not maintain or contribute to any "employee
- -------------
welfare benefit plan" as such term is defined in Section 3(1) of ERISA. With
respect to each such plan, (i) the plan is in material compliance with ERISA;
(ii) the plan has been administered in accordance with its governing documents;
(iii) neither the plan, nor any fiduciary with respect to the plan, has engaged
in any "prohibited transaction" as defined in Section 406 of ERISA other than
any transaction subject to a statutory or administrative exemption; (iv) except
for the processing of routine claims in the ordinary course of administration,
there is no material litigation, arbitration or disputed claim outstanding; and
(v) all premiums due on any insurance contract through which the plan is funded
have been paid.
(B) EMPLOYEE PENSION BENEFIT PLANS. Except as disclosed in
------------------------------
Schedule 3.14, the Company does not maintain or contribute to any arrangement
- -------------
that is or may be an "employee pension benefit plan" relating to employees, as
such term is defined in Section 3(2) of ERISA. With respect to each such plan:
(i) the plan is qualified under Section 401(a) of the
-12-
<PAGE>
Code, and any trust through which the plan is funded meets the requirements to
be exempt from federal income tax under Section 501(a) of the Code; (ii) the
plan is in material compliance with ERISA; (iii) the plan has been administered
in accordance with its governing documents as modified by applicable law; (iv)
the plan has not suffered an "accumulated funding deficiency" as defined in
Section 412(a) of the Code; (v) the plan has not engaged in, nor has any
fiduciary with respect to the plan engaged in, any "prohibited transaction" as
defined in Section 406 of ERISA or Section 4975 of the Code other than a
transaction subject to statutory or administrative exemption; (vi) the plan has
not been subject to a "reportable event" (as defined in Section 4043(b) of
ERISA), the reporting of which has not been waived by regulation of the Pension
Benefit Guaranty Corporation; (vii) no termination or partial termination of the
plan has occurred within the meaning of Section 411(d)(3) of the Code; (viii)
all contributions required to be made to the plan or under any applicable
collective bargaining agreement have been made to or on behalf of the plan; (ix)
there is no material litigation, arbitration or disputed claim outstanding; and
(x) all applicable premiums due to the Pension Benefit Guaranty Corporation for
plan termination insurance have been paid in full on a timely basis.
(C) EMPLOYMENT AND NON-TAX QUALIFIED DEFERRED COMPENSATION
------------------------------------------------------
ARRANGEMENTS. Except as disclosed in Schedule 3.14, the Company does not
- ------------ -------------
maintain or contribute to any retirement or deferred or incentive compensation
or stock purchase, stock grant or stock option arrangement entered into between
the Company and any current or former officer, consultant, director or employee
of the Company that is not intended to be a tax qualified arrangement under
Section 401(a) of the Code.
3.15 CONTRACTS AND AGREEMENTS. Attached hereto as Schedule 3.15 is a
------------------------ -------------
list and brief description of all written or oral contracts, commitments,
leases, and other agreements (including, without limitation, promissory notes,
loan agreements, and other evidences of indebtedness, guarantees, agreements
with distributors, suppliers, dealers, franchisors and customers, and service
agreements) to which the Company is a party or by which the Company or its
properties are bound which either (i) require performance by either party
exceeding one year; (ii) are contracts (other than vendor contracts) pursuant to
which the Company shall pay or receive more than $10,000 over the life of such
contract, or (iii) are vendor contracts pursuant to which the Company's sales of
products obtained pursuant to such contract exceeds $100,000 (collectively, the
"CONTRACTS"). The Company is not and, to the best knowledge of Sellers and the
Company, no other party thereto is in default (and no event has occurred which,
with the passage of time or the giving of notice, or both, would constitute a
default) under any of the Contracts, and the Company has not waived any right
under any of the Contracts. Except as set forth on Schedule 3.15, all of the
-------------
Contracts to which the Company is a party are legal, valid, binding and
enforceable against the Company and, to the best of the Company's and Sellers'
knowledge, against each other party thereto, and in full force and effect and
will remain legal, valid, binding and enforceable against the Company and, to
the best of the Company's and Sellers' knowledge, against each other party
thereto, and in full force and effect on identical terms immediately after the
Closing. Except as set forth in Schedule 3.15, the Company has not guaranteed
-------------
any obligations of any other Person.
3.16 CLAIMS AND PROCEEDINGS. Attached hereto as Schedule 3.16 is a
---------------------- -------------
list and brief description of all claims, actions, suits, proceedings, or
investigations pending or, to
-13-
<PAGE>
Sellers' and the Company's knowledge, threatened against or affecting the
Company or any of its properties or assets, at law or in equity, or before or
by any court, municipality or other Governmental Body. Except as set forth on
Schedule 3.16, none of such claims, actions, suits, proceedings, or
- -------------
investigations is presently expected by Sellers to result in any liability or
loss to the Company. The Company has not been and the Company is not now,
subject to any Court Order, stipulation, or consent of or with any court or
Governmental Body. No inquiry, action or proceeding has been asserted,
threatened or instituted to restrain or prohibit the carrying out of the
transactions contemplated by this Agreement or to challenge the validity of such
transactions or any part thereof or seeking damages on account thereof. To the
best knowledge of the Company and Sellers, except as set forth on Schedule 3.16,
-------------
there is no basis for any such valid claim or action.
3.17 TAXES
-----
(A) All Federal, foreign, state, county and local income, gross
receipts, excise, property, franchise, license, sales, use, withholding, and
other Taxes and all other Tax Returns which are required to be filed by the
Company on or before the date hereof have been filed within the time and in the
manner provided by law, and all such Tax Returns are true and correct and
accurately reflect the Tax liabilities of the Company. No Tax Returns of the
Company or any of the Sellers are presently subject to an extension of the time
to file. All Taxes, assessments, penalties, and interest of the Company which
have become due as shown on such Tax Returns or any assessments received have
been paid or adequately accrued on the Company's Financial Statements. The
provisions for Taxes reflected on the balance sheets contained in the Financial
Statements are adequate to cover all of the Company's Tax liabilities for the
respective periods then ended and all prior periods. The Company has not
executed any presently effective waiver or extension of any statute of
limitations against assessments and collection of Taxes, and there are no
pending or threatened claims, assessments, notices, proposals to assess,
deficiencies, or audits with respect to any such Taxes. For Governmental Bodies
with respect to which the Company does not file Tax Returns, to Sellers' and the
Company's knowledge, no such government body has claimed that any of the Company
is or may be subject to taxation by that government body. The Company has
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, shareholder, creditor,
independent contractor or other party. There are no tax liens on any of the
property or assets of the Company.
(B) Neither the Company nor any other corporation has filed an
election under Section 341(f) of the Code that is applicable to the Company or
any assets held by the Company. The Company has not made any payments, is not
obligated to make any payments, and is not a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Code Sec. 280G. The Company has not been a United States real
property holding corporation within the meaning of Code Sec. 897(c)(2) during
the applicable period specified in Code Sec. 897(c)(1)(A)(ii). The Company is
not a party to any Tax allocation or sharing agreement. The Company has not and
has never been (nor does the Company have any liability for unpaid Taxes because
it once was) a member of an affiliated group during any part of which return
year any corporation other than the Company
-14-
<PAGE>
also was a member of the affiliated group. The Company has made an election to
be taxed under subchapter S of the Code and such election is valid, binding and
in full force and effect.
(C) No transaction contemplated by this Agreement is subject to
withholding under Section 1445 of the Code and no stock transfer taxes, real
estate transfer taxes or similar taxes will be imposed upon the transfer and
sale of the Shares pursuant to this Agreement.
3.18 PERSONNEL. Attached hereto as Schedule 3.18 is a list of the
--------- -------------
names and annual rates of compensation of the directors and executive officers
of the Company, and of the employees of the Company whose annual rates of
compensation during the fiscal year ended December 31, 1995 (including base
salary, bonus and incentive pay) exceed (or by December 31, 1996 are expected to
exceed) $60,000. Schedule 3.18 also summarizes the bonus, profit sharing,
-------------
percentage compensation, company automobile, club membership, and other like
benefits, if any, paid or payable to such directors, officers, and employees
during the Company's fiscal year ended October 31, 1995 and to the date hereof.
Schedule 3.18 also contains a brief description of all material terms of
- -------------
employment agreements to which the Company is a party and all severance benefits
which any director, officer or employee of the Company is or may be entitled to
receive. The employee relations of the Company are good and there is no pending
or, to the best knowledge of Sellers or the Company, threatened labor dispute or
union organization campaign. None of the employees of the Company are
represented by any labor union or organization. The Company is in compliance in
all material respects with all Requirements of Laws respecting employment
and employment practices, terms and conditions of employment, and wages and
hours, and are not engaged in any unfair labor practices. Neither the Company or
Sellers have been advised, or has any reason to believe, that any of the persons
whose names are set forth on Schedule 3.18 or any other employee will not agree
-------------
to remain employed by the Company after the consummation of the transactions
contemplated hereby. There is no unfair labor practice claim against the Company
before the National Labor Relations Board, or any strike, dispute, slowdown, or
stoppage pending or, to the best knowledge of the Company and Sellers,
threatened against or involving the Company, and none has occurred.
3.19 BUSINESS RELATIONS. Neither the Company nor Sellers knows or has
------------------
any reason to believe that any customer or supplier of the Company will cease to
do business with the Company after the consummation of the transactions
contemplated hereby in the same manner and at the same level as previously
conducted with the Company except for any reductions which do not result in a
Material Adverse Change. Except for disruptions in deliveries from suppliers in
the ordinary course of business, neither Sellers or the Company have received
any notice of any notice of any material disruption (including delayed
deliveries or allocations by suppliers) in the availability of any material
portion of the materials used by the Company nor are the Company or Sellers
aware of any facts which could lead them to believe that the Business will be
subject to any such material disruption.
3.20 ACCOUNTS RECEIVABLE. All of the accounts, notes, and loans
--------------------
receivable that have been recorded on the books of the Company are bona fide
and represent amounts validly due for goods sold or services rendered. Except as
disclosed on Schedule 3.20 hereto (a) all of
-------------
-15-
<PAGE>
such accounts, notes, and loans receivable are free and clear of any
Encumbrances; (b) none of such accounts, notes, or loans receivable is subject
to any offsets or claims of offsets; and (c) none of the obligors of such
accounts, notes, or loans receivable has given notice that it will or may refuse
to pay the full amount or any portion thereof.
3.21 BANK ACCOUNTS. Attached hereto as Schedule 3.21 is a list of all
------------- -------------
banks or other financial institutions with which the Company have an account
or maintain a safe deposit box, showing the type and account number of each such
account and safe deposit box and the names of the persons authorized as
signatories thereon or to act or deal in connection therewith.
3.22 WARRANTIES. Except as set forth on Schedule 3.22 and except for
---------- -------------
warranty claims that are typical and in the ordinary course of the Business, no
claim for breach of product or service warranty to any customer has been made
against the Company since January 1, 1996. To the best knowledge of Sellers and
the Company, no state of facts exists, and no event has occurred, which may form
the basis of any present claim against the Company for liability on account of
any express or implied warranty to any third party in connection with products
sold or services rendered by the Company.
3.23 BROKERS. Neither the Company nor Sellers have engaged, or caused
-------
to be incurred any liability to any finder, broker, or sales agent in connection
with the origin, negotiation, execution, delivery, or performance of this
Agreement or the transactions contemplated hereby.
3.24 INTEREST IN COMPETITORS, SUPPLIERS, CUSTOMERS, ETC. No officer,
--------------------------------------------------
director, or shareholder of the Company or any affiliate of any such officer,
director, or shareholder, has any ownership interest in any competitor,
supplier, or customer of the Company (other than ownership of securities of a
publicly-held corporation of which such Person owns, or has real or contingent
rights to own, less than one percent of any class of outstanding securities) or
any property used in the operation of the Business.
3.25 INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS, SHAREHOLDERS, AND
---------------------------------------------------------------
EMPLOYEES. Attached hereto as Schedule 3.25 is a list and brief description of
- --------- -------- ----
the payment terms of all indebtedness of the Company to officers, directors,
shareholders, and employees of the Company and all indebtedness of officers,
directors, shareholders, and employees of the Company to the Company, excluding
indebtedness for travel advances or similar advances for expenses incurred on
behalf of and in the ordinary course of the Business, consistent with past
practices.
3.26 UNDISCLOSED LIABILITIES. As of August 31, 1996, except as
-----------------------
indicated in Schedule 3.26 and the other Schedules hereto, the Company did not
-------------
have any material liabilities (whether absolute, accrued, contingent or
otherwise), of a nature required by GAAP to be reflected on a corporate balance
sheet or disclosed in the notes thereto, except such liabilities which were
accrued or reserved against in the Company's financial statements as of such
date or disclosed in the notes thereto, including without limitation any
accounts payable or service liabilities of the Company incurred prior to August
31, 1996.
-16-
<PAGE>
3.27 INFORMATION FURNISHED. The Company and Sellers have made
---------------------
available to Global true and correct copies of all material corporate records of
the Company and all agreements, documents, and other items listed on the
Schedules to this Agreement or referred to in Article III of this Agreement.
-----------
In making the representations and warranties set forth above, the term
"material" shall be deemed to mean an amount of money greater than $20,000, the
terms "material adverse change," "material adverse trend," "material adverse
effect," or any other term of like import shall mean the occurrence of any
single event, or any series of related events, or set of related circumstances,
which proximately causes an actual, direct economic loss to the Company, taken
as a whole, in excess $20,000 per occurrence or $35,000 in the aggregate. The
term "knowledge" shall mean actual knowledge after reasonable investigation.
ARTICLE IV
GLOBAL'S REPRESENTATIONS AND WARRANTIES
Global represents and warrants to Sellers as follows:
4.1 DUE ORGANIZATION. Global is a corporation duly organized,
----------------
validly existing, and in good standing under the laws of the State of Delaware
and has full corporate power and authority to enter into and perform this
Agreement.
4.2 DUE AUTHORIZATION. The execution, delivery and performance of
-----------------
this Agreement has been duly authorized by all necessary corporate action of
Global, and the Agreement, and all other agreements or instruments contemplated
hereby which have been or will be executed by Global, have been duly and validly
executed and delivered by Global and constitute the valid and binding obligation
of Global, enforceable in accordance with their respective terms. The execution,
delivery, and performance of this Agreement (as well as all other instruments,
agreements, certificates or other documents contemplated hereby) by Global, will
not (a) violate any Requirements of Laws or Court Order of any Governmental Body
applicable to Global or its property, (b) violate or conflict with, or permit
the cancellation of, or constitute a default under any agreement to which Global
is a party or by which it or its property is bound, (c) permit the acceleration
of the maturity of any indebtedness of, or any indebtedness secured by the
property of, Global, or (d) violate or conflict with any provision of the
charter or bylaws of Global.
4.3 NO BROKERS. Global has not engaged, or caused to be incurred any
----------
liability to any finder, broker or sales agent in connection with the origin,
negotiation, execution, delivery, or performance of this Agreement or the
transactions contemplated hereby.
4.4 INVESTMENT. Global will acquire the Shares for investment and
----------
for its own account and not with a view to the distribution thereof.
4.5 GLOBAL STOCK. Upon receipt of the payment in cash therefor, and
------------
assuming the truth of the representations and warranties of the purchasers of
Global Stock set
-17-
<PAGE>
forth in the Equity Subscription Agreement of even date herewith between Global
and such purchasers, each of the shares of the Global Stock to be issued at the
Closing will be legally and validly issued, fully paid and non-assessable.
ARTICLE V
COVENANTS OF THE COMPANY AND SELLERS
5.1 CONSENTS OF OTHERS. Prior to the Closing, the Company and Sellers
------------------
shall use their best efforts to obtain and to cause the Company to obtain all
authorizations, consents and permits required of the Company and Sellers to
permit them to consummate the transactions contemplated by this Agreement.
5.2 SELLER'S EFFORTS. The Company and Sellers shall use all
----------------
reasonable efforts to cause all conditions for the Closing to be met.
5.3 POWERS OF ATTORNEY. The Company and Sellers shall cause the
------------------
Company to terminate at or prior to Closing all powers of attorney granted by
the Company, other than those relating to service of process, qualification or
pursuant to governmental regulatory or licensing agreements, or representation
before the IRS or other government agencies.
ARTICLE VI
POST-CLOSING COVENANTS
6.1 GENERAL. In case at any time after the Closing any further action
-------
is legally necessary or reasonably desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
party reasonably may request, all at the sole cost and expense of the requesting
party (unless the requesting party is entitled to indemnification therefor under
Article VIII below). The Sellers acknowledge and agree that from and after the
- ------------
Closing Global will be entitled to possession of all documents, books, records,
agreements, and financial data of any sort relating to the Company, which shall
be maintained at the chief executive office of the Company; provided, however,
-------- -------
that Sellers shall be entitled to reasonable access to and to make copies of
such books and records at their sole cost and expense and Global will maintain
the books, records and material financial data relating to the Company for a
period of at least three (3) years. After such date, the Company will offer such
documentation to Sellers before disposal thereof.
6.2 TRANSITION. For a period of three (3) years following Closing,
----------
the Sellers will not take any action that primarily is designed or intended to
have the effect of discouraging any lessor, licensor, customer, supplier, or
other business associate of the Company from maintaining the same business
relations with the Company after the Closing as it maintained with the Company
prior to the Closing. For a period of three (3) years following Closing, the
Sellers will refer all customer inquiries relating to the Business to the
Company or Global.
-18-
<PAGE>
6.3 Confidentiality. The Sellers will treat and hold as such all
---------------
Confidential Information, refrain from using any of the Confidential Information
except in connection with this Agreement for a period of three (3) years from
the Closing, and deliver promptly to Global or destroy, at the request and
option of Global, all tangible embodiments (and all copies) of the Confidential
Information which are in its possession except as otherwise permitted herein. In
the event that any Seller is requested or required (by oral question or request
for information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process) to disclose any Confidential
Information, that Seller will notify Global promptly of the request or
requirement.
6.4 Covenant Not to Compete. For and in consideration of the
-----------------------
allocation of $372,000 of the Purchase Price paid to the Sellers by Global,
Sellers each covenant and agree, for a period of three years from and after the
Closing Date, that they will not, individually or jointly, directly or
indirectly, nor with any member of their immediate family, without the prior
written consent of Global, for or on behalf of any entity:
(a) become interested or engaged in any manner, directly or
indirectly, or become a shareholder, bondholder, creditor, officer, director,
partner, agent, contractor with, employer or representative of, or in any manner
associated with, or give financial, technical or other assistance to, any
Person, firm or corporation for the purpose of engaging in the Business within
the greater of (i) a 100 mile radius of the Company's office facilities in
Norcross, Georgia, Nashville, Tennessee, Knoxville, Tennessee, and the State of
Florida or (ii) in any geographic area in which the Company and/or its
subsidiaries currently conduct business; provided, however, that no owner of
-------- -------
less than 1% of the outstanding stock of any publicly-traded corporation (other
than Global) shall be deemed to be so engaged solely by reason thereof in the
Business;
(b) enter into any agreement with, service, assist or solicit
the business of any customers of the Company for the purpose of providing
equipment sales, systems or service related to the Business to such customers or
to cause them to reduce or end their business with the Company; or
(c) enter into any agreement with, or solicit the employment
of employees, consultants or representatives of the Company for the purpose of
causing them to leave the employment of the Company.
Notwithstanding the foregoing, nothing herein shall prevent Arthur E. Kreps from
fulfilling the terms of his Consulting Agreement or Mark M. Lloyd from
fulfilling the terms of his Executive Agreement.
6.5 Section 338(h)(10) Election. At Global's option, Sellers and
---------------------------
Global shall join in making a timely election (but in no event later than 150
days following the Closing) under Section 338(h)(10) of the Code (including the
prerequisite election under Section 338 of the Code) and any similar state law
provisions in all applicable states, with respect to the sale and purchase of
the Shares pursuant to this Agreement, and each party shall provide to the other
all necessary information to permit such elections to be made. Global and
Sellers shall, as
-19-
<PAGE>
promptly as practicable following the Closing Date, take all actions necessary
and appropriate (including filing such forms, returns, schedules and other
documents as may be required) to effect and preserve timely elections. Sellers
shall be made whole by Global for any additional Taxes or other costs associated
with the Section 338(h)(10) elections. In connection with such elections, within
150 days following the Closing Date, Global and Sellers shall act together in
good faith to determine and agree upon the "deemed sales price" to be allocated
to each asset of the Company in accordance with Treasury Regulation Section
1.338(h)(10)-1(f) and the other regulations of Section 338 of the Code. Both
Global and Sellers shall report the tax consequences of the transactions
contemplated by this Agreement consistently with such allocations and shall not
take any position inconsistent with such allocations in any Tax Return or
otherwise. In the event that Global and Sellers are unable to agree as to such
allocation, Global's reasonable positions with respect to such allocations shall
control. Sellers shall be liable for, and shall indemnify and hold Global and
the Company harmless against, any Taxes or other costs attributable to a failure
on the part of Sellers to take all actions required of them under this Section
-------
6.5.
- ---
ARTICLE VII
CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING
7.1 Conditions to Global's Obligations. The obligation of
----------------------------------
Global under this Agreement to consummate the closing is subject to the
conditions that:
(a) Covenants, Representations and Warranties. The
-----------------------------------------
Company and Seller have performed in all material respects all obligations and
agreements and complied in all material respects with all covenants contained in
this Agreement to be performed and complied with by each of them prior to or at
the Closing Date or the date hereof.
(b) Consents. All statutory requirements for the valid
--------
consummation by the Company and Sellers of the transactions contemplated by this
Agreement shall have been fulfilled and all authorizations, consents and
approvals, including those of all federal, state, local and foreign governmental
agencies and regulatory authorities required to be obtained in order to permit
the consummation of the transactions contemplated hereby shall have been
obtained in form and substance reasonably satisfactory to Global unless such
failure shall not have a Material Adverse Effect. All approvals of the Board of
Directors and shareholders of the Company necessary for the consummation of this
Agreement and the transactions contemplated hereby shall have been obtained.
(c) Lease. The Company and Arthur E. Kreps (or an entity
-----
controlled by Arthur E. Kreps) shall have entered into a three-year lease of the
Building on lease terms acceptable to Global in the form of Exhibit B hereto.
---------
(d) Discharge of Indebtedness and Liens. Sellers and the
-----------------------------------
Company shall have provided for the payment in full of all Funded Indebtedness
of the Company and all extended credit from vendors at the Closing (other than
customary accounts payable of the Company in accordance with past practices, up
to $13,921 in a note payable for a voicemail
-20-
<PAGE>
system, up to $6,460 in capital leases and for a lease for a new phone system)
or such indebtedness shall be assumed by Global and the Purchase Price shall be
reduced in accordance with Section 2.6(a) hereof. Such Funded Indebtedness as of
--------------
September 30, 1996, is listed on Schedule 7.1(d) hereto. Sellers shall have also
---------------
provided for the termination of all Encumbrances of record on the properties of
the Company, except for Permitted Encumbrances (other than a modification of the
Canon UCC filing as required by Global).
(3) Material Adverse Change. There has been no Material
-----------------------
Adverse Change.
(f) Transfer Taxes. Sellers shall be responsible for
--------------
and shall have paid or set aside sufficient funds to pay all stock transfer
taxes incurred in connection with this Agreement.
(g) Financial Condition. The Company's total adjusted
-------------------
Working Capital as projected at the Closing shall be greater than $2,200,000 and
the Company shall continue to have sufficient cash on hand (included in Working
Capital) at the Closing (in an amount not less than $150,000).
(h) Documents to be Delivered by Sellers and the
--------------------------------------------
Company. the following documents shall be delivered at the Closing by Sellers
- -------
and the Company;
(i) Opinion of Seller's Counsel. Global shall
---------------------------
have received an opinion of Rowe, Foltz & Martin. P.C., counsel to
Sellers, dated the date hereof, in substantially the same form as the
form of opinion that is Exhibit C hereto.
---------
(ii) Certificates. Global shall have received an
------------
officer's certificate and a secretary's certificate of the Company
executed by officers of the Company, dated as of the date hereof, in
substantially the same forms as the forms of certificates that are
Exhibit D hereto.
---------
(iii) Release. Sellers shall have furnished the
-------
Company with a general release of liabilities, excluding compensation
and employee benefits as well as obligations pursuant to this
Agreement, in form attached as Exhibit E hereto.
---------
(iv) Escrow Agreement. Sellers shall have
----------------
delivered to Global at the Closing the duly executed Escrow Agreement
required pursuant to Section 2.5 hereof.
-----------
(v) Employment Agreements. Mark M. Lloyd and
---------------------
each of the Executives shall have duly executed and delivered the
Employment Agreements, pursuant to which each of them will be
employed by the Company following the Closing.
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<PAGE>
(vi) Consulting Agreement. Arthur E. Kreps shall have duly
--------------------
executed and delivered the Consulting Agreement, pursuant to which he
will be a consultant to the Company following the Closing.
(vii) Office Lease. Arthur E. Kreps (or an entity controlled
------------
by Arthur E. Kreps) shall have duly executed and delivered to the
Company a lease for the Building (with a rental rate $38,000), in
substantially the same form attached as Exhibit B hereto, pursuant to
---------
which the Company shall be provided with a three year lease for the
Building with the right to renew such lease on terms mutually agreeable
to the Company and Arthur E. Kreps.
(viii) Stock Certificates. Sellers shall have delivered the
------------------
Shares accompanied by duly executed stock powers, together with any
stock transfer stamps or receipts for any transfer taxes required to be
paid thereon.
7.2 Conditions to Sellers and the Company's Obligations. The obligation
--------------------------------------------------
of Sellers and the Company under this Agreement to consummate the Closing is
subject to the conditions that:
(a) Covenants, Representations and Warranties. Global shall have
-----------------------------------------
performed in all material respects all obligations and agreements and complied
in all material respects with all covenants contained in this Agreement to be
performed and complied with by Global prior to or at the Closing.
(b) Consents. All statutory requirements for the valid
--------
consummation by Global of the transactions contemplated by this Agreement shall
have been fulfilled and all authorizations, consents and approvals, including
those of all federal, state, local and foreign governmental agencies and
regulatory authorities required to be obtained in order to permit the
consummation by Global of the transactions contemplated hereby shall have been
obtained unless such failure shall not have a material adverse effect on the
Business. Global shall have used its reasonable best efforts to have obtained
the release of the Seller from all personal guarantees with respect to the
Company.
(c) Documents to be Delivered by Global. The following documents
-----------------------------------
shall be delivered at the Closing by Global:
(i) Opinion of Global's Counsel. Sellers shall have
---------------------------
received an opinion of Davis, Graham & Stubbs LLP, counsel to Global,
dated as of the date hereof, in substantially the same form as the form
of opinion that is Exhibit I hereto.
---------
(ii) Certificates. Sellers shall have received an officers'
------------
certificate and a secretary's certificate executed by officers of
Global, dated as of the date hereof, in substantially the same forms as
the forms of certificates that are Exhibit J hereto.
---------
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<PAGE>
(iii) Escrow Agreement. Global shall have delivered to
----------------
Sellers at the Closing the duly executed Escrow Agreement required pursuant to
Section 2.5 hereof.
- -----------
(iv) Employment Agreements. Global shall have caused the
---------------------
Company to duly execute and deliver the Employment Agreements, pursuant to
which the Executives and Mark M. Lloyd will be employed by the Company following
the Closing.
(v) Consulting Agreement. Global shall have caused the
--------------------
Company to duly execute and deliver the Consulting Agreement, pursuant to which
Arthur E. Kreps will be a consultant to the Company following the Closing.
(vi) Office Lease. Global shall have caused the Company to
------------
duly execute and deliver to Arthur E. Kreps (or an entity controlled by Arthur
E. Kreps) a lease for the Building in substantially the same form attached as
Exhibit B hereto.
- ---------
(vii) Purchase Price. Sellers shall have received the
--------------
Purchase Price for the Shares.
(d) Right of Reinvestment. Sells and Executives and Dewey Suddeth
---------------------
shall have been offered the right collectively to invest up to $588,000 in cash
in the Global Stock on the same terms provided to other recent outside investors
in Global.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification of Global. Sellers agree to jointly and severally
-------------------------
indemnify and hold harmless Global and each officer, director, and affiliate of
Global, including without limitation the Company or any successor of the Company
(collectively, the "Indemnified Parties") from and against any and all damages,
losses, claims, liabilities, demands, charges, suits penalties, costs and
expenses (including court costs and reasonable attorneys' fees and expenses
actually incurred in investigating and preparing for any litigation or
proceeding) (collectively, the "Indemnifiable Costs"), which any of the
Indemnified Parties may sustain, or to which any of the Indemnified Parties may
be subjected, arising out of (A) any misrepresentation, breach or default by
Sellers or the Company of or under any of the representations, covenants,
agreements or other provisions of this Agreement or any agreement or document
executed in connection herewith; (B) any misrepresentation, breach or default by
Sellers or the other Companies of or under any of the representations,
covenants, agreements or other provisions of any Purchase Agreement or any
agreement or document executed in connection therewith; (C) the assertion and
final determination of any claim or liability against the Companies or any of
the Indemnified Parties by any Person based upon the facts which form the
alleged basis for any litigation to the extent it should have been, but was not,
reserved for
-23-
<PAGE>
in the financial statements of such Company in accordance with GAAP; (D) the
Companies' tortious acts or omissions to act prior to Closing for which the
Companies did not carry liability insurance for themselves as the insured party,
whether or not such acts or omissions to act result in a breach or violation of
any representation or warranty; and (E) any litigation or claim disclosed on or
required to be disclosed on Schedule 3.16 hereto.
-------------
8.2 Defense of Claims. In any legal proceeding shall be instituted, or
-----------------
any claim or demand made, against any Indemnified Party in respect of which
Sellers may be liable hereunder, such Indemnified Party shall give prompt
written notice thereof to Sellers and, except as otherwise provided in Section
-------
8.4 below. Sellers shall have the right to defend, or cause the Companies or
- ---
other successors to defend, any litigation, action, suit, demand, or claim for
which it may seek indemnification unless, in the reasonable judgment of Global,
such litigation, action, suit, demand, or claim, or the resolution thereof,
would have an ongoing effect on Global, the Companies or their successors, and
such Indemnified Party shall extend reasonable cooperation in connection with
such defense, which shall be at Seller's expense. In the event Sellers fail or
refuse to defend the same within a reasonable length of time, the Indemnified
Parties shall be entitled to assume the defense thereof, the Sellers shall be
jointly and severally liable to repay the Indemnified Parties for all expenses
reasonably incurred in connection with said defense (including reasonable
attorneys' fees and settlement payments) if it is determined that such request
for indemnification was proper. If Sellers shall not have the right to assume
the defense of any litigation, action, suit, demand, or claim in accordance with
either of the two preceding sentences, the Indemnified Parties shall have the
absolute right to control the defense of and to settle, in their sole discretion
and without the consent of Sellers, such litigation, action, suit, demand, or
claim but Sellers shall be entitled, at their own expense, to participate in
such litigation, action, suit, demand, or claim.
8.3 Escrow Claim. If any claim for indemnification is made by an
------------
Indemnified Party pursuant to this Article VIII prior to the expiration of the
------------
Escrow Period, such Indemnified Party may apply to the Escrow Agent provided in
Section 2.5 of this Agreement for reimbursement of such claim in accordance with
- -----------
the provisions of the Escrow Agreement.
8.4 Tax Audits, Etc. In the event of an audit of a Tax Return of the
---------------
Companies with respect to which an Indemnified Party might be entitled to
indemnification pursuant to this Article VIII, Global shall have the right to
------------
control any and all such audits which may result in the assessment of additional
Taxes against the Companies and any and all subsequent proceedings in connection
therewith, including appeals (subject to the prior written consent of Sellers,
which shall not unreasonably be withheld and subject to the right of Sellers to
have their accountant consult with Global on such audits or other Tax proceeding
(including according access to all records pertaining thereto), and will execute
and file any and all consents, powers of attorney, and other documents as shall
be reasonably necessary in connection therewith. If additional Taxes are payable
by the Companies as a result of any such audit or other proceeding. Sellers
shall be responsible for and shall promptly pay all Taxes, interest, and
penalties to which any of the Indemnified Parties shall be entitled to
indemnification.
-24-
<PAGE>
[****** Certain information on this page has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.]
8.5 Indemnification of Sellers. Global agrees to indemnify and hold
--------------------------
harmless Sellers and the Company and each officer, director, stockholder or
affiliate of the Company, from and against any Indemnifiable Costs which any of
the Sellers or the Company may sustain, or to which any of them may be subject,
arising out of (A) any material misrepresentation, breach or default by Global
of or under any of the covenants, agreements or other provisions of this
Agreement or any other Purchase Agreement or any agreement or document executed
in connection herewith or therewith and (B) any tortious acts or omissions by
Global or the Companies after the Closing. In addition, the Company and Global
shall indemnify the Sellers for any payment or satisfaction of any guarantees by
Sellers of the Companies' obligations occurring after the Closing Date.
8.6 Limits on Indemnification. All Indemnifiable Costs sought by any
-------------------------
party hereunder shall be net of any insurance proceeds received by such Person
with respect to such claim (less the present value of any premium increases
occurring as a result of such claim). Except for any claims for breach of the
representations and warranties of the Sellers under (i) Sections 3.1, 3.2, 3.3,
------------ --- ---
3.14, or 3.17 hereof (the indemnification for which shall expire on the
- ---- ----
expiration of the applicable statute of limitations) or (ii) Section 3.26 hereof
------------
(the indemnification for which shall expire on June 30, 1998), the
indemnification provided under this Article VIII for breaches of representations
------------
and warranties contained in Article III hereof shall expire on the first
-----------
anniversary of the Closing Date. The Sellers shall not be obligated to pay any
amounts for indemnification under this Article VIII until the aggregate
------------
indemnification obligation hereunder exceeds $50,000, whereupon Sellers shall be
liable for all amounts in excess of such amount of which indemnification may be
sought. Notwithstanding the foregoing, in no event shall the aggregate liability
of Sellers to Global exceed [**] except for claims made for any breach of
representations and warranties of Sellers under Section 3.1, 3.2, 3.3, 3.14 or
----------- --- --- ----
3.17 hereof). However nothing in this Article VIII shall limit Global in any way
- ---- ------------
in exercising or securing any remedies provided by applicable common law with
respect to the conduct of Sellers in connection with this Agreement or in the
amount of damages that it can recover from the Sellers in the event that Global
successfully proves intentional fraud or intentional fraudulent conduct in
connection with this Agreement.
Notwithstanding anything to the contrary contained herein, the parties
hereto acknowledge and agree that the business engaged in by the Companies may
be adversely affected by numerous factors that are outside the control of
Sellers and the Companies including, but not limited to, the following:
(i) Product lines handled by the Companies could be made obsolete
by another manufacturer/vendor and the Companies may not have access to
the new technology.
(ii) A competitor in the Companies' markets may at any time
interrupt or take business from the Companies by offering lower costs,
different technology or better services than the Companies.
-25-
<PAGE>
(iii) The business equipment industry is sensitive to
changes in the economy and, as a result, could be adversely affected by
changes in general economics conditions.
(iv) A manufacturer/vendor can incur difficulties
delivering products which could adversely affect Companies' ability to
meet sales and profit objectives.
(v) Any customer of the Companies could be lost for
at least a 12-month period because the Companies are underbid in price
competitive situations.
(vi) Sales personnel could resign at any time and have
a negative effect on meeting sales and profit objectives.
The parties acknowledge and agree, further, that it is not their intent
for Global to be entitled to Indemnification for Indemnifiable Costs which arise
out of adverse effects on the Companies' business resulting from any such
factors. Notwithstanding the foregoing, Sellers have no knowledge that any of
the events listed above have occurred or will occur following the Closing which
could result in a Material Adverse Effect on the Company.
ARTICLE IX
MISCELLANEOUS
9.1 Modifications. Any amendment, change or modification of this
-------------
Agreement shall be void unless in writing and signed by all parties hereto. No
failure or delay by any party hereto in exercising any right, power or
privilege hereunder (and no course of dealing between or among any of the
parties) shall operate as a waiver of any such right, power or privilege. No
waiver of any default on any one occasion shall constitute a waiver of any
subsequent or other default. No single or partial exercise of any such right,
power or privilege shall preclude the further or full exercise thereof.
9.2 Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed to have been duly given when personally
delivered, or 72 hours after deposited in the United States mail, first-class,
postage prepaid, or 24 hours after transmission by facsimile addressed to the
respective parties hereto as follows:
-26-
<PAGE>
Global:
------
Global Imaging Systems, Inc.
P.O. Box 273478
Tampa, Florida 33688-3478
Attention: Thomas S. Johnson, President
Fax No.: (813) 264-7877
Tel No.: (813) 960-5508
With a copy to:
Davis, Graham & Stubbs LLP
1314 Nineteenth Street, N.W.
Washington, D.C. 20036
Attention: Christopher J. Hagan
Fax No.: (202) 293-4794
Tel No.: (202) 822-8660
The Company or Sellers:
----------------------
c/o Southern Business Communications, Inc.
3175 Corners North Court
Norcross, Georgia 30071
Attention: Mark M. Lloyd
Arthur E. Kreps
Fax No.: (770) 449-0188
Tel No.: (770) 449-4088
With a copy to:
Rowe, Foltz & Martin, P.C.
Five Piedmont Center, Suite 750
Atlanta, Georgia 30305-1509
Attention: Paul Shlanta, Esq.
Fax No.: (404) 237-1659
Tel No.: (404) 231-9397
or to such other address as to any party hereto as such party shall designate by
like notice to the other parties hereto.
9.3 Counterparts. This Agreement may be executed in several counterparts,
------------
each of which shall be deemed an original but all of which counterparts
collectively shall constitute one instrument, and in making proof of this
Agreement, it shall never be necessary to produce or account for more than one
such counterpart.
-27-
<PAGE>
9.4 Expenses. Each of the parties hereto will bear all costs,
--------
charges and expenses incurred by such party in connection with this Agreement
and the consummation of the transactions contemplated herein, provided, however,
that Sellers shall bear all costs and expenses of any broker involved in this
transaction and the Company shall bear all legal expense of Sellers or the
Company with respect to this Agreement and the transactions contemplated hereby.
9.5 Binding Effect; Assignment. This Agreement shall be binding
--------------------------
upon and inure to the benefit of the Company, Global and Sellers, their heirs,
representatives, successors, and permitted assigns, in accordance with the terms
hereof. This Agreement shall not be assignable by the Company or Sellers
without the prior written consent of Global. This Agreement shall be assignable
by Global to a wholly-owned subsidiary of Global without the prior written
consent of Sellers; provided, however, that Global may not assign its obligation
to issue shares of Global Stock to any other Person.
9.6 Entire and Sole Agreement. This Agreement and the other
-------------------------
schedules and agreements referred to herein, constitute the entire agreement
between the parties hereto and supersede all prior agreements, representations,
warranties, statements, promises, information, arrangements and understandings,
whether oral or written express or implied, with respect to the subject matter
hereof.
9.7 Governing Law. This Agreement and its validity, construction,
-------------
enforcement, and interpretation shall be governed by the substantive laws of the
State of Georgia.
9.8 Survival of Representations, Warranties and Covenants.
-----------------------------------------------------
Regardless any investigation at any time made by or on behalf of any party
hereto or of any information any party may have in respect thereof, all
covenants, agreements, representations, and warranties and the related
indemnities made hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall survive the Closing for a period of one
year, provided (a) the representations and warranties contained in Sections 3.14
-------------
and 3.17 of this Agreement, and the related indemnities, shall survive the
----
Closing until the expiration of the applicable statutes of limitations for
determining or contesting Tax liabilities; (b) the representations and
warranties contained in Sections 3.1, 3.2, and 3.3 of this Agreement, and the
--------------------------
related indemnities, shall survive the Closing indefinitely; and (c) the
representations and warranties contained in Section 3.26 of the Agreement, and
------------
the related indemnities, shall survive the Closing until June 30, 1998.
9.9 Invalid Provisions. If any provision of this Agreement is
------------------
deemed or held to be illegal, invalid or unenforceable, this Agreement shall be
considered divisible and inoperative as to such provision to the extent it is
deemed to be illegal, invalid or unenforceable, and in all other respects this
Agreement shall remain in full force and effect; provided, however, that if any
provision of this Agreement is deemed or held to be illegal, invalid or
unenforceable there shall be added hereto automatically a provision as similar
as possible to such illegal, invalid or unenforceable provision and be legal,
valid and enforceable. Further, should any provision contained in this Agreement
ever be reformed or rewritten by any judicial body of
-28-
<PAGE>
competent jurisdiction, such provision as so reformed or rewritten shall be
binding upon all parties hereto.
9.10 Public Announcements. Neither party shall make any public announcement
--------------------
of the transactions contemplated hereby without the prior written consent of the
other party, which consent shall not be unreasonably withheld.
9.11 Remedies Cumulative. The remedies of the parties under this Agreement
-------------------
are cumulative and shall not exclude any other remedies to which any party may
be lawfully entitled.
9.12 Waiver. No failure or delay on the part of any party in exercising any
------
right, power, or privilege hereunder or under any of the documents delivered in
connection with this Agreement shall operate as a waiver of such right, power,
or privilege: nor shall any single or partial exercise of any such right, power,
or privilege preclude any other or further exercise thereof or the exercise of
any other right, power, or privilege.
9.13 DISPUTE RESOLUTION. ALL DISPUTES BETWEEN SELLERS AND GLOBAL WITH
------------------
RESPECT TO ANY PROVISION OF THIS AGREEMENT OR THE RIGHTS AND OBLIGATIONS OF
SELLERS AND GLOBAL HEREUNDER (OTHER THAN DISPUTES INVOLVING ALLEGATIONS OF
INTERNATIONAL FRAUD), WHICH CANNOT BE RESOLVED BY MUTUAL AGREEMENT, WILL BE
RESOLVED BY BINDING ARBITRATION IN ACCORDANCE WITH THE RULES OF THE AMERICAN
ARBITRATION ASSOCIATION ATTACHED AS ANNEX A HERETO IN ATLANTA, GEORGIA OR BY ANY
-------
OTHER MEANS OF ALTERNATIVE DISPUTE RESOLUTION MUTUALLY AGREED UPON BY THE
PARTIES.
[THIS SPACE INTENTIONALLY LEFT BLANK]
-29-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed as of the date and year first above written.
GLOBAL:
------
GLOBAL IMAGING SYSTEMS INC.
By: /s/ Ray Schilling, Attorney-in-Fact
------------------------------------
Thomas S. Johnson
President and Chief Executive Officer
THE COMPANY:
-----------
SOUTHERN BUSINESS COMMUNICATIONS, INC.
By: /s/ Mark M. Lloyd
-------------------------------------
Title: President
-------------------------------
SELLERS:
-------
/s/ Mark M. Lloyd
----------------------------------------
Mark M. Lloyd
/s/ Arthur E. Kreps
----------------------------------------
Arthur E. Kreps
-30-
<PAGE>
EXHIBIT 10.19
ASSET PURCHASE AGREEMENT
DATED AS OF NOVEMBER 13, 1996
BY AND AMONG
ATS-ATLANTA ONE, L.L.C.,
A GEORGIA LIMITED LIABILITY COMPANY,
ATS-ATLANTA ONE, INC.,
A DELAWARE CORPORATION,
AND
ATS-ATLANTA, INC.,
MARK M. LLOYD
AND
ARTHUR E. KREPS
COVERING THE PURCHASE OF CERTAIN ASSETS OF
ATS-ATLANTA ONE, L.L.C.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. GENERAL DEFINITIONS..................................................... 1
2. PURCHASE AND SALE OF THE ASSETS; CLOSING DATE........................... 2
2.1 Purchase and Sale.................................................. 2
2.2 Delivery of Assets and Transfer Documents.......................... 3
2.3 Closing; Closing Date.............................................. 3
3. PURCHASE PRICE.......................................................... 3
3.1 Price and Payment.................................................. 3
3.2 Excluded Assets.................................................... 3
3.3 Assumed Obligations................................................ 3
3.4 Excluded Liabilities and Obligations............................... 3
3.5 Transfer Taxes..................................................... 4
3.6 Allocation of Purchase Price....................................... 4
4. REPRESENTATIONS AND WARRANTIES OF SELLER................................ 4
4.1 Organization....................................................... 4
4.2 Ownership.......................................................... 4
4.3 Financial Statements............................................... 4
4.4 Events Since the Balance Sheet Date................................ 5
4.5 Competing Interests................................................ 6
4.6 Taxes and Governmental Returns..................................... 6
4.7 Employee Matters................................................... 7
4.8 Contracts and Agreements........................................... 7
4.9 Effect of Agreement................................................ 8
4.10 Properties, Assets and Leasehold Estates........................... 9
4.11 Intangible Property................................................ 9
4.12 Suits, Actions and Claims.......................................... 9
4.13 Licenses and Permits; Compliance with
Governmental Regulations........................................... 10
4.14 Authorization...................................................... 10
4.15 No Untrue Statements............................................... 10
4.16 Records............................................................ 10
4.17 Brokers and Finders................................................ 10
4.18 Deposits........................................................... 11
4.19 Telephone Numbers.................................................. 11
4.20 Customer List...................................................... 11
4.21 No Royalties....................................................... 11
4.22 Subsidiaries....................................................... 11
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER....................... 12
5.1 Incorporation................................................ 12
5.2 Authorization................................................ 12
5.3 Brokers and Finders.......................................... 12
6. PRE-CLOSING COVENANTS............................................. 12
6.1 General...................................................... 12
6.2 Notices and Consents......................................... 12
6.3 Operation of Business........................................ 13
6.4 Preservation of Business..................................... 13
6.5 Full Access.................................................. 13
6.6 Notice of Developments....................................... 13
6.7 Exclusivity.................................................. 13
7. CONDITIONS TO OBLIGATION TO CLOSE................................. 13
7.1 Conditions to Obligation of the Purchaser.................... 13
7.2 Conditions to Obligation of the Seller....................... 15
8. TERMINATION....................................................... 16
8.1 Termination of Agreement..................................... 16
8.2 Effect of Termination........................................ 16
9. NATURE OF STATEMENTS AND SURVIVAL OF REPRESENTATIONS
AND WARRANTIES OF SELLER.......................................... 16
10. SPECIAL CLOSING AND POST-CLOSING COVENANTS........................ 16
10.1 Delivery of Funds and Other Assets Collected by Seller;
Power of Attorney............................................ 16
10.2 Change of Name of Seller..................................... 17
11. LEASE AGREEMENT................................................... 17
12. NON-COMPETITION AGREEMENTS........................................ 17
13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION......................... 18
14. ASSIGNMENT OF CONTRACTS........................................... 18
15. SPECIAL PROVISIONS REGARDING EMPLOYEES OF SELLER.................. 19
15.1 New Employees of Purchaser................................... 19
15.2 Hiring of Employees.......................................... 19
15.2 Indemnity Concerning Accrued Benefits........................ 19
16. EXPENSES.......................................................... 19
17. FURTHER ACTIONS................................................... 19
</TABLE>
-ii-
<PAGE>
18. NOTICES............................................................. 19
19. GENERAL PROVISIONS.................................................. 20
19.1 GOVERNING LAW; INTERPRETATION; SECTION HEADINGS................ 20
19.2 Severability................................................... 21
19.3 Entire Agreement............................................... 21
19.5 Assignment..................................................... 21
19.6 Amendment; Waiver.............................................. 21
19.7 Gender; Numbers................................................ 22
19.8 Counterparts................................................... 22
19.9 Telecopy Execution and Delivery................................ 22
-iii-
<PAGE>
LIST OF SCHEDULES AND ATTACHMENTS
SCHEDULES
- ---------
Schedule 2.1 List of Assets
Schedule 3.3 Assumed Liabilities
Schedule 3.6 Allocation of Purchase Price
Schedule 4.2 Ownership of Seller
Schedule 4.3(A) Financial Statements
Schedule 4.3(B) Exceptions to GAAP on Financial Statements
Schedule 4.4 Events Since the Balance Sheet Date
Schedule 4.5 Competing Interests
Schedule 4.6 Tax Returns, Information Returns and Governmental Reports
Pending
Schedule 4.7(A) Employees
Schedule 4.7(B) Employee Benefit Plans
Schedule 4.8(A) Contracts and Agreements
Schedule 4.8(B) Non-Assignable Contracts and Agreement
Schedule 4.11 Intangible Property
Schedule 4.12 Suits, Actions and Claims
Schedule 4.13 Licenses and Permits
Schedule 4.20 Customer List
ATTACHMENTS
- -----------
Attachment 2.2 General Warranty, Bill of Sale
The Exhibits and Schedules to this Asset Purchase Agreement are not included
with this Registration Statement on Form S-1. Global will provide these exhibits
and schedules upon the request of the Securities and Exchange Commission.
-iv-
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made and entered into
this 13th day of November, 1996, by and among ATS-ATLANTA ONE, L.L.C., a Georgia
limited liability company ("SELLER"), ATS-ATLANTA ONE, INC., a Delaware
corporation ("PURCHASER"), and ATS-ATLANTA, INC., a Georgia corporation ("AAI"),
MARK M. LLOYD ("LLOYD") and ARTHUR E. KREPS ("KREPS;" collectively, AAI, Lloyd
and Kreps are referred to as the "MEMBERS").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, Seller is the owner of all right, title and interest in and to the
assets described on Schedule 2.1 hereto (the "ASSETS"), with such assets being
------------
substantially all of the assets currently used in the network consulting and
management business operated by the Seller (the "BUSINESS");
WHEREAS, Seller desires to sell the Assets to Purchaser and Purchaser
desires to acquire the Assets from Seller, all pursuant to this Agreement as
hereinafter provided; and
WHEREAS, the parties hereto desire to set forth certain representations,
warranties and covenants made by each to the other as an inducement to the
execution and delivery of this Agreement, and to set forth certain additional
agreements related to the transactions contemplated hereby;
AGREEMENT
---------
NOW, THEREFORE, for and in consideration of the premises, the mutual
representations, warranties and covenants herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. GENERAL DEFINITIONS. For purposes of this Agreement, the following
-------------------
terms shall have the respective meanings set forth below:
1.1 GOVERNMENTAL AUTHORITY shall mean any and all foreign, federal,
----------------------
state or local governments, governmental institutions, public authorities and
governmental entities of any nature whatsoever, and any subdivisions or
instrumentalities thereof, including, but not limited to, departments, boards,
bureaus, commissions, agencies, courts, administrations and panels, and any
divisions or instrumentalities thereof, whether permanent or ad hoc and whether
now or hereafter constituted and/or existing.
<PAGE>
1.2 GOVERNMENTAL REQUIREMENT shall mean any and all laws (including,
------------------------
but not limited to, applicable common law principles), statutes, ordinances,
codes, rules, regulations, interpretations, guidelines, directions, orders,
judgments, writs, injunctions, decrees, decisions or similar items or
pronouncements, promulgated, issued, passed or set forth by any Governmental
Authority.
1.3 PERMITTED EXCEPTION means (a) liens for Taxes and other
-------------------
governmental charges and assessments which are not yet due and payable, (b)
liens of landlords and liens of carriers, warehousemen, mechanics and
materialmen and other like liens arising in the ordinary course of business for
sums not yet due and payable, (c) other liens or imperfections on property which
are not material in amount or do not materially detract from the value of or
materially the existing use of the property affected by such lien or
imperfection, (d) such statement of facts shown on any customary title insurance
policies delivered to Purchaser, (e) purchase money security interest liens in
favor of Canon U.S.A., Inc. and (f) those encumbrances identified on Exhibit A
---------
hereto.
1.4 PERSON shall mean any natural person, any Governmental Authority
------
and any entity the separate existence of which is recognized by any Governmental
Authority or Governmental Requirement, including, but not limited to,
corporations, partnerships, joint ventures, joint stock companies, trusts,
estates, companies and associations, whether organized for profit or otherwise.
1.5 TAXES. "TAX" and "TAXES" shall mean any and all income, excise,
-----
franchise or other taxes and all other charges or fees imposed or collected by
any Governmental Authority or pursuant to any Governmental Requirement, and
shall also include any and all penalties, interest, deficiencies, assessments
and other charges with respect thereto.
1.6 AFFILIATE of any Person shall mean any Person Controlling,
---------
Controlled by or under common Control with such Person.
1.7 CONTROL and all derivations thereof shall mean the possession,
-------
direct or indirect, of either (i) the ownership of or ability to direct the
voting of, as the case may be, fifty percent (50%) or more of the equity
interests, value or voting power in any Person or (ii) the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.
2. PURCHASE AND SALE OF THE ASSETS; CLOSING DATE.
---------------------------------------------
2.1 PURCHASE AND SALE. Seller hereby sells, assigns, transfers and
-----------------
delivers to Purchaser all right, title and interest in and to the Assets (as
more fully described on Schedule 2.1 hereto), free and clear of any liens or
------------
encumbrances of any nature whatsoever (except for Permitted Exceptions and any
liens, encumbrances or obligations, if any, expressly assumed by Purchaser
hereunder). Purchaser hereby purchases from Seller the Assets in consideration
for the Purchase Price (as hereinafter defined) payable as set forth in Section
-------
3 below.
- -
-2-
<PAGE>
2.2 DELIVERY OF ASSETS AND TRANSFER DOCUMENTS. At the Closing
-----------------------------------------
(hereinafter defined in Section 2.3), Seller shall have taken all steps
-----------
necessary to put Purchaser in possession of the Assets, free and clear of any
liens or encumbrances of any nature whatsoever (except for Permitted Exceptions
and liens, encumbrances or obligations, if any, expressly assumed by Purchaser
hereunder), and have delivered to Purchaser (i) a duly executed general warranty
bill of sale covering the Assets, in the form of and containing the same terms
and provisions as the General Warranty Bill of Sale attached hereto as
Attachment 2.2, (ii) duly executed assignments for all accounts receivable,
- --------------
patents, trademarks, trade names and similar intangible property included in the
Assets, in form and substance acceptable to Purchaser and in recordable form as
appropriate, and (iii) such other duly executed transfer and release documents
which Purchaser has reasonably requested to evidence the transfer of the Assets
to Purchaser free and clear of any liens or encumbrances of any nature
whatsoever (except for Permitted Exceptions and liens, encumbrances or
obligations, if any, expressly assumed by Purchaser hereunder).
2.3 CLOSING; CLOSING DATE. Subject to the terms and conditions herein
---------------------
contained, the consummation of the transactions referred to above shall take
place (the "CLOSING") at the offices of Rowe, Foltz & Martin in Atlanta,
Georgia, commencing at 9:00 a.m. local time on November __, 1996, or such other
date as the parties may mutually determine (the "CLOSING DATE").
3. PURCHASE PRICE.
--------------
3.1 PRICE AND PAYMENT. The aggregate consideration for the Assets and
-----------------
the Non-Competition Provisions (set forth in Section 12 below) shall be an
----------
amount equal to $600,000 payable by wire transfer or delivery of other
immediately available funds (the "PURCHASE PRICE"). At the Closing, the
Purchaser shall cause the Purchase Price to be paid as directed by the Seller.
3.2 EXCLUDED ASSETS. The Purchased Assets shall not include any of
---------------
the assets listed on Exhibit A-1 to Schedule 2.1 hereto (collectively, the
----------- ------------
"EXCLUDED ASSETS").
3.3 ASSUMED OBLIGATIONS. Purchaser hereby assumes the obligations of
-------------------
Seller that are listed and described on Schedule 3.3 hereto (the "ASSUMED
------------
LIABILITIES AND OBLIGATIONS"); provided that Purchaser specifically does not
assume any liabilities of Seller under such contracts or agreements with respect
to any breaches of such contracts or agreements occurring on or before the
Closing Date or any damages to third parties resulting from acts, events or
omissions occurring on or before the Closing Date or any liability for any
funded indebtedness of the Seller.
3.4 EXCLUDED LIABILITIES AND OBLIGATIONS.
------------------------------------
(A) Except as expressly set forth in Section 3.3 above, the
-----------
Purchase shall not assume and shall not be liable or responsible for any debt,
obligation or liability of the Business or the Seller, or any claim against any
of the foregoing parties, of any kind, whether known or unknown, contingent,
absolute or otherwise.
-3-
<PAGE>
(B) Except for the Assumed Liabilities and Obligations expressly
provided for in Section 3.4 hereof, the Seller and the Members shall jointly and
-----------
severally forever defend, indemnify and hold harmless the Purchaser from and
against any and all liabilities, obligations, losses, claims, damages (including
incidentals and consequential damages), costs and expenses (including court
costs and reasonable attorney's fees) related to or arising from the Business
prior to the Closing Date.
3.5 TRANSFER TAXES. Purchaser and Seller acknowledge and agree that
--------------
the consideration (including, without limitation, the Purchase Price and any
adjustments thereto) is deemed to have been paid for any sales, use, transfer or
other similar tax purposes by Purchaser to Seller, pursuant to this Agreement,
includes and is inclusive of any and all sales, use, transfer or other similar
tax imposed as a result of the consummation of the transactions contemplated by
this Agreement, and Seller and the Members hereby agree to pay and discharge,
and to indemnify Purchaser against, and protect, save and hold Purchaser
harmless, from, any liability, obligation, claim, assessment or deficiency
(whether or not ultimately successful) for any and all sales, use, transfer or
other similar taxes (and any and all interest, penalties, additions to tax and
fines thereon or related thereto) resulting or arising from or incurred in
connection with the consummation of the transactions contemplated by this
Agreement.
3.6 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
----------------------------
allocated as set forth in Schedule 3.6 attached hereto, and made a part hereof.
------------
4. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller and the Members,
----------------------------------------
jointly and severally, hereby represent and warrant to Purchaser as
follows:
4.1 ORGANIZATION. Seller is a limited liability company duly
------------
organized, validly existing and in good standing under the laws of the state of
Georgia, and is duly authorized, qualified and licensed under all applicable
Governmental Requirements to carry on its business in the places and in the
manner as now conducted. Seller is qualified to do business in every
jurisdiction in which the failure to so qualify might reasonably be excepted to
have a material adverse effect on the financial condition, operation results,
assets, or business prospects of Seller.
4.2 OWNERSHIP. The Members own, in the aggregate, all of the
---------
outstanding membership interests of Seller. Except as listed on Schedule 4.2
------------
hereto, there are no options, rights or other grants currently outstanding for
the acquisition or purchase of any membership interests of the Seller.
4.3 FINANCIAL STATEMENTS. Seller has delivered to Purchaser copies
--------------------
of the following financial statements for Seller, all of which financial
statements are included in Schedule 4.3(A) hereto:
---------------
(a) Reviewed Balance Sheet of Seller (the "REFERENCE BALANCE
SHEET") as of December 31, 1995 (the "BALANCE SHEET DATE") and Reviewed Income
Statements of Seller for the twelve-month period ended on the Balance Sheet
Date;
-4-
<PAGE>
(B) Reviewed Balance Sheet and Income Statement of Seller for
Seller's three (3) most recent fiscal years; and
(C) Unaudited Balance Sheet and Income Statement of Seller as of
and for the nine (9) months ended September 30, 1996.
All financial statements supplied to Purchaser by Seller, whether or not
included in Schedule 4.3(A) hereto, are true and accurate in all respects and,
---------------
except as set forth on Schedule 4.3(B) hereto, have been prepared in all
---------------
material respects in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated, and present
fairly the financial condition of Seller as of the dates and for the periods
indicated thereon. The Reference Balance Sheet reflects, as of the Balance
Sheet Date, all liabilities, debts and obligations of any nature of Seller,
whether accrued, absolute, contingent or otherwise, and whether due, or to
become due, including, but not limited to, liabilities, debts or obligations on
account of Taxes or other governmental charges, or penalties, interest or fines
thereon or in respect thereof, to the extent such items are required to be
reflected on such balance sheet under generally acceptable accounting
principles, consistently applied.
4.4 EVENTS SINCE THE BALANCE SHEET DATE. Except as set forth on
-----------------------------------
Schedule 4.4 hereto, since the Balance Sheet Date, there has not been:
- ------------
(A) any material change in the condition (financial or
otherwise) or in the properties, assets, liabilities, business or prospects of
the Business, except normal and usual changes in the ordinary course of
business, none of which has been adverse and all of which in the aggregate have
not been adverse;
(B) any labor trouble, strike or any other occurrence, event or
condition affecting the employees of Seller that adversely affects the condition
(financial or otherwise) of the Assets or the Business.
(C) any breach or default by Seller or, to the best knowledge
of Seller and the Members, by and other party, under any agreement or obligation
included in the Assets or by which any of the Assets are bound;
(D) any damage, destruction or loss (whether or not covered by
insurance) adversely affecting the Assets or the Business;
(E) any change in the types, nature, composition or quality of
the services of the Business, any material adverse change in the contributions
of any of the service lines of the Business to the revenues or net income of
such Business, or any material adverse change in the sales, revenue or net
income of the Business;
(F) any transaction related to or affecting the Assets or the
Business other the transactions in the ordinary course of business of Seller; or
-5-
<PAGE>
(g) any other occurrence, event or condition that has
materially and adversely affected (or can reasonably be expected to adversely
affect) the Assets or the Business.
4.5 COMPETING INTERESTS. Except as set forth on Schedule 4.5
------------------- ------------
hereto and except for interests in Southern Business Communications, Inc.
("SBC") and Southern Business Communications of D.C., Inc. and except for
interests in real estate and related improvements leased by Seller, neither
Seller nor the Members, nor, to the best knowledge of Seller and the Members,
any member, manager or officer of, or consultant to, Seller, and no Associate
(as hereinafter defined) of Seller:
(A) owns, directly or indirectly, any equity interests in,
or is a director, officer or employee of, or consultant to, any entity which is
a competitor, supplier or customer of the Business, or, to the best knowledge of
Seller and the Members, a competitor, supplier or customer of Purchaser or an
Associate of Purchaser (except for ownership, if any, of less than one percent
(1%) by value of the outstanding capital stock of any corporation the capital
stock of which is traded on a nationally recognized securities exchange); or,
(B) owns, directly or indirectly, in whole or in part, any
property, asset or right which is associated with the Assets or the Business,
or which Seller is presently operating or using in connection with or the use of
which is necessary for or material to the operation of the Business.
For purposes of this Agreement, the term "Associate" shall mean:
(i) with respect to an individual:
(A) the spouse of the individual and all
ancestors and lineal descendants of the individual and the
spouse,
(B) any trust in which the individual or any
person described in (i) above has an interest or any trustee
of such a trust, and
(C) any Person which is directly or indirectly
Controlled by any of the foregoing; and
(ii) with respect to a Person (other than an
individual), any Person Controlling, Controlled by or under
common Control with such Person, and any director or officer of
such Person and any Associate of any such Person.
4.6 TAXES AND GOVERNMENTAL RETURNS. Except as set forth on
------------------------------
Schedule 4.6 hereto, as of the date hereof, all Tax returns, information returns
- ------------
and governmental reports of every nature required by any Governmental Authority
or Governmental Requirement to be filed by Seller or which include or should
include Seller, including, but not limited to, those relating to Taxes of any
nature to which Seller, the Members or any of the Business is subject
("GOVERNMENTAL RETURNS"), have been filed for all periods ending on or before
the date hereof, and all Taxes shown to be due and payable on such Governmental
Returns or on any assessments
-6-
<PAGE>
related to such Governmental Returns have been paid. All such Governmental
Returns and reports and the information and data contained therein have been
properly and accurately compiled and completed, fairly present the information
purported to be shown therein, and reflect all Tax liabilities of Seller and
Members for the periods covered by such Governmental Returns. Except as
specifically disclosed in this Agreement or the Schedules hereto, Seller and/or
Members have no material unpaid liability for any Taxes of any nature whatsoever
for any period prior to the date hereof. The Governmental Returns of Seller or
that include Seller have not been audited, and are now under audit, by any
Governmental Authority. There are not agreements, waivers or other arrangements
providing for an extension of time with respect to the assessment of any Taxes
of any nature against Seller or Members or with respect to any Taxes filed
Seller or Members or that include Seller, or any suits or other actions,
proceedings, investigations or claims now pending or threatened against Seller
or Members with respect to any Taxes or any matters under discussion with any
Governmental Authority relating to any Taxes, or any claims for additional Taxes
asserted by any Governmental Authority.
4.7 EMPLOYEE MATTERS. Schedule 4.7(A) hereto set forth a true and
---------------- ---------------
complete list of the names of and current annual compensation paid by Seller to
each corporate or administrative (non-temporary) employee of Seller utilized in
connection with the operation of the Business. Except as specifically described
on Schedule 4.7(B) hereto, Seller has no employee benefit plans (including, but
---------------
not limited to, pension plans and health or welfare plans), arrangements or
understandings, whether formal or informal. Purchaser will have no liability
with respect to any such plans as a result of the transactions contemplated by
this Agreement. Seller does not now and has never contributed to a "multi-
employer plan" as defined in section 4001(a)(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). Seller has complied in all
material respects with all applicable provisions of ERISA and all rules and
regulations promulgated thereunder and neither Seller nor any trustee,
administrator, fiduciary, agent or employee thereof has at any time been
involved in a transaction that would constitute a "prohibited transaction"
within the meaning of Section 406 of ERISA. Seller is not a party to any
collective bargaining or other union agreements. Seller has not, within the last
five (5) years, had or been threatened with any union activities, work stoppage
or other labor trouble with respect to its employees which had nor might have
had a material adverse effect on the Business. Other than wage increases in the
ordinary course of business, since the Balance Sheet Date, Seller has not made
any commitment or agreement to increase the wages or modify the conditions or
terms of employment of any of the corporate or administrative (non-temporary)
employees of Seller used in connection with the Business.
4.8 CONTRACTS AND AGREEMENTS. Schedule 4.8(A) hereto, sets forth a
------------------------ ---------------
true and complete list of and briefly describes (including termination date)
all of the "Contracts" (as such term is defined in Section 3.15 of that certain
Stock Purchase Agreement (the "SBC Agreement") among Global Imaging Systems
Inc., SBC and the stockholders of SBC) that relate to the Assets or the Business
(including all amendments, supplements and modifications thereto), together with
the following:
(A) all profit-sharing, pension, stock option, severance pay,
retirement, bonus, deferred compensation, group life and health insurance or
other employee benefit plans,
-7-
<PAGE>
agreements, arrangements or commitments of any nature whatsoever, whether or
not legally binding, and all agreements with any present or former officer,
member or manager of Seller;
(B) all loan or credit agreements, indentures, guarantees
(other than endorsements made for collection), mortgages, pledges, conditional
sales or other title retention agreements, and all equipment financing
obligations, lease and lease-purchase agreements relating to or affecting the
Assets or the Business;
(C) all leases related to the Assets or the Business, and
all other contracts, agreements or legally enforceable commitments relating to
or affecting the Assets or the Business;
(D) all performance bonds, surety bonds and the like, all
contracts and bids covered by such bonds, and all letters of credit and
guaranties; and
(E) all consent decrees and other judgments, decrees or
orders, settlement agreements and agreements relating to competitive activities,
requiring or prohibiting and future action.
All of such contracts, agreements, leases, licenses, plans, arrangements, and
commitments and all other such items included in the Assets, but not
specifically described above, (collectively, the "CONTRACTS") are valid, binding
and in full force and effect in accordance with their terms and conditions and
there is no existing default thereunder or breach thereof by Seller, or, to the
best knowledge of Seller and the Members, by any other party to the Contracts,
or any conditions which, with the passage of time or the giving of notice or
both, might constitute such a default by Seller, or, to the best knowledge of
Seller and the Members, by any other party to the Contracts, and, except as set
forth in Schedule 4.8(B), the Contracts will not be breached by or give any
---------------
other party a right of termination as a result of the transactions contemplated
by this Agreement. Seller is not aware of any reason why any of the Contracts
(i) will result in a material loss to Purchaser on completion by performance or
(ii) cannot readily be fulfilled or performed by Purchaser with the Assets on
time without undue or unusual expenditure of money or effort. Copies of all the
documents (or in the case of oral commitments, descriptions of the material
terms thereof) relevant to the Contracts listed in Schedule 4.8(A) hereto, have
---------------
been delivered by Seller to Purchaser, and such copies and descriptions are
true, complete and accurate and include all amendments, supplements or
modifications thereto. All of the Contracts, other than the Seller's operating
agreement, as amended, and Seller's loan agreements with SunTrust Bank and the
Small Business Administration, are and shall be included in the Assets. To the
best knowledge of Seller, no purchaser of services under any Contract will stop
or decrease its rate of buying services (on an annualized basis) from Seller
prior to the Closing Date, or under any Contract assigned to Purchaser by
Seller pursuant to the transactions contemplated by this Agreement, from
Purchaser after the Closing Date. Except as set forth on Schedule 4.8(B)
---------------
hereto, all of the Contracts may be assigned to Purchaser without the approval
or consent of any Person.
4.9 EFFECT OF AGREEMENT. Except as set forth on Schedule
------------------- --------
4.8(B), the execution and delivery of this Agreement and the consummation of the
- ------
transactions contemplated
-8-
<PAGE>
hereby will not (i) result in any breach of any of the terms or conditions of,
or constitute a default under, the Seller's certificate of limited liability
company or its operating agreement or other governing documents of Seller, or
any commitment, mortgage, note, bond, debenture, deed of trust, contract,
agreement, license or other instrument or obligation to which Seller is now a
party or by which Seller or any of its properties or assets may be bound or
affected; (ii) result in any violation of any Governmental Requirement; (iii)
cause Purchaser to lose the benefit of any right or privilege included in the
Assets; (iv) relieve any Person of any obligation (whether contractual or
otherwise) or enable any Person to terminate any such obligation or any right or
benefit enjoyed by Seller or to exercise any right under any agreement in
respect of the Assets or the Business; or (v) require notice to or the consent,
authorization, approval or order of any Person. To the best knowledge of Seller
and the Members, the business relationships of clients, customers and suppliers
of the Business will not be adversely affected by the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby.
4.10 PROPERTIES, ASSETS AND LEASEHOLD ESTATES. Seller has good
----------------------------------------
and marketable title to all the Assets, free and clear of all mortgages, liens,
pledges, conditional sales agreements, charges, easements, covenants,
assessments, options, restrictions and encumbrances of any nature whatsoever
other than Permitted Exceptions and liens, encumbrances or obligations expressly
assumed by Purchaser hereunder. All leases to which real property is leased in
connection with the Business are in good standing, valid and enforceable with
respect to their terms.
4.11 INTANGIBLE PROPERTY. Except as set forth on Schedule 4.11
------------------- -------------
hereto, the operation of the Business as now conducted by Seller does not
require the use of or consist of any rights under any patents, inventions,
trademarks, trade names, brand names or copyrights. Seller owns or licenses and
has the full and exclusive right to use in connection with the Business all of
the items listed on Schedule 4.11 hereto, which items are in full force and
-------------
effect. Except for Permitted Exceptions, Seller has not transferred, encumbered
or licensed to any Person any rights to own or use any portion of the items
listed on Schedule 4.11 hereto or any other intangible property included in the
-------------
Assets. None of (i) the items listed on Schedule 4.11, (ii) any other
-------------
intangible property included in the Assets, or (iii) the operation of the
Business as presently conducted, violates or infringes upon any patents,
inventions, trademarks, trade names, brand names or copyrights owned by others.
To the best knowledge of Seller and the Members, none of the items listed on
Schedule 4.11 hereto or any other intangible property included in the Assets is
- -------------
being infringed upon by any Person.
4.12 SUITS, ACTIONS AND CLAIMS. Except as set forth in Schedule
------------------------- --------
4.12 hereto, (i) there are no suits, actions, claims, inquires or investigations
- ----
by any Person, or any legal, administrative or arbitrative proceedings in which
Seller is engaged or which are pending or, to the best knowledge of Seller and
the Members, threatened against or affecting Seller or any of its properties,
assets or business, or to which Seller is or might become a party, or which
question the validity or legality of the transactions contemplated hereby, (ii)
to the best knowledge of Seller and the Members, no basis or grounds for any
such suit, action, claim, inquiry, investigation or proceeding exists, and (iii)
there is no outstanding order, writ, injunction or decree of any Governmental
Authority against or affecting Seller or its properties, assets or business.
-9-
<PAGE>
4.13 LICENSES AND PERMITS; COMPLIANCE WITH GOVERNMENTAL
--------------------------------------------------
REGULATIONS. Schedule 4.13 hereto, sets forth a true and complete list of all
- ----------- -------------
licenses and permits necessary for the conduct of the Business. Seller has all
such licenses and permits validly issued to it and in its name, and all such
licenses and permits are in full force and effect. True and correct copies of
all such licenses and permits are included in Schedule 4.13 hereto. No
-------------
violations are or have been recorded in respect of such licenses or permits and
no proceeding is pending or, to the best knowledge of Seller and the Members,
threatened seeking the revocation or limitation of any of such licenses or
permits. All such licenses and permits that are subject to transfer are included
in the Assets. Seller has complied with all Governmental Requirements applicable
to the Business, and all Governmental Requirements with respect to the
distribution and sale of products and services by it.
4.14 AUTHORIZATION. Seller has full legal right, power and
-------------
authority to enter into and deliver this Agreement and to consummate the
transactions set forth herein and to perform all the terms and conditions hereto
to be performed by it. The execution and delivery of this Agreement by Seller
and the performance by it of the transactions contemplated herein has been duly
and validly authorized by all requisite action of Seller, and this Agreement has
been duly and validly executed and delivered by Seller and is the legal, valid
and binding obligation of Seller, enforceable against it in accordance with its
terms, except as limited by applicable bankruptcy, moratorium, insolvency or
other similar laws affecting generally the rights of creditors or by principles
of equity.
4.15 NO UNTRUE STATEMENTS. There is no fact that is not
--------------------
disclosed to Purchaser in this Agreement or the Schedules hereto that materially
and adversely affects or, so far as Seller and the Members can now reasonably
foresee, could materially and adversely affect the condition (financial or
otherwise) of any of the Assets or the Business or the ability of Seller to
perform its obligations under the Agreement.
4.16 RECORDS. The books, records and minutes kept by Seller
-------
with respect to the Assets and the Business, including, but not limited to, all
customer files, service agreements quotations, correspondence and historic
revenue data of Seller since November 1, 1993, have been kept properly and
contain records of all matters required to be included therein by any
Governmental Requirement, and such books, records and minutes are true, accurate
and complete in all material respects and (except for corporate minute books and
stock records) are included in the Assets. Purchaser agrees to store for a
period of at least three (3) years from the Closing Date all of Seller's tax and
accounting records for the three (3) year period prior to the Closing Date. Such
records shall be made available for inspection and copying by Seller to Members
upon reasonable advance notice and during reasonable business hours. Purchaser
further agrees that if Purchaser intends to destroy any of such tax or
accounting records during the period ending six (6) years after the Closing
Date, Purchaser will fist notify Seller and Members and provide Seller and
Members with an opportunity to take possession of such records within a period
of not less than thirty (30) days following such notice.
4.17 BROKERS AND FINDERS. No broker or finder has acted for
-------------------
Seller or the Members in connection with this Agreement or the transactions
contemplated by this Agreement and no broker or finder is entitled to any
brokage or finder's fee or to any commission in
-10-
<PAGE>
respect thereof based in any way on agreements, arrangements or understandings
made by or on behalf of Seller or the Members.
4.18 DEPOSITS. Except as disclosed on Schedule 4.18, Seller does not
-------- -------------
now hold, nor does Seller expect to receive between the date hereof and the
Closing Date, any deposits or prepayments by third parties with respect to any
of the Assets or the Business which are not reflected as liabilities on August
31, 1996.
4.19 TELEPHONE NUMBERS. All telephone numbers used by Seller in
-----------------
connection with the Business are included in the Assets and are fully
transferable to Purchaser.
4.20 CUSTOMER LIST. Schedule 4.20 hereto sets forth a true, correct
------------- -------------
and complete list of the 20 largest customers of the Business to which the
Seller has sold products or provided services during the fiscal year ending
December 31, 1995. This list provides an accurate statement of the gross
revenues received from each such customer by the Business during fiscal year
ended December 31, 1995. To the Best Knowledge of Seller, no customer listed on
Schedule 4.20 hereto currently intends to stop or decrease its rate of buying
- -------------
products or services (on an annualized basis) from Seller prior to the Closing
Date, or to the extent any such customer becomes a customer of Purchaser
pursuant to the transactions contemplated by this Agreement, from Purchaser
after the Closing Date.
4.21 NO ROYALTIES. No royalty or similar item or amount is being paid
------------
or is owing by Seller, nor is any such item accruing, with respect to the
operation, ownership or use of the Business of the Assets.
4.22 SUBSIDIARIES. The Seller does not own any Subsidiaries. As used
------------
in this Agreement, the word "SUBSIDIARY" means any corporation or other
organization, whether incorporated or unincorporated, of which such party or any
other Subsidiary of such party is a general partner, or at least a majority of
the securities or other interests having by their terms ordinary voting power to
elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries. The Members
have good and marketable title to all of the membership interests of the Seller,
free and clear of all mortgages, liens, pledges, equity, security interests,
restrictions and charges of any nature whatsoever.
In making the representations and warranties set forth above, the term
"material" shall be deemed to mean an amount of money greater than $15,000, the
terms "material adverse change," "material adverse trend," "material adverse
effect," or any other term of like import, shall mean the occurrence of any
single event, or any series of related events, or set of related circumstances,
which proximately causes an actual, direct economic loss to the Company, taken
as a whole, in excess of $15,000 per occurrence or $20,000 in the aggregate. The
term "knowledge" shall mean actual knowledge after reasonable investigation.
-11-
<PAGE>
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and
-------------------------------------------
warrants to Seller and the Members as follows:
5.1 INCORPORATION. Purchaser is a corporation duly organized, validly
-------------
existing and in good standing under the laws of the State of Delaware.
5.2 AUTHORIZATION. Purchaser has full legal right and corporate power
-------------
to enter into and deliver this Agreement and to consummate the transactions set
forth herein and to perform all the terms and conditions hereof to be performed
by it. This Agreement, and all of the agreements, documents and instruments
contemplated herby which have been or will be executed by Purchaser, have been
duly executed and delivered by Purchaser and constitute the legal, valid and
binding obligation of Purchaser enforceable in accordance with their respective
terms, except as limited by applicable bankruptcy, moratorium, insolvency, or
other laws affecting generally the rights of creditors or by principals of
equity. The execution and delivery of this Agreement by Purchaser and the
performance by Purchaser of the transactions contemplated herein have been duly
and validly authorized by all requisite corporate action of Purchaser. The
execution, delivery, and performance of this Agreement (as well as all other
instruments, agreements, certificates or other documents contemplated hereby) by
Purchaser, will not (a) violate any material requirements of laws or court order
of any Governmental Authority applicable to Purchaser or its property, (b)
violate or conflict with, or permit the cancellation of, or constitute a default
under any agreement to which Purchaser is a party or by which it or its property
is bound, (c) permit the acceleration of the maturity of any indebtedness of, or
any indebtedness secured by the property of, Purchaser, or (d) violate or
conflict with any provision of the charter or bylaws of Purchaser.
5.3 BROKERS AND FINDERS. No broker or finder has acted for Purchaser
-------------------
in connection with this Agreement or the transactions contemplated by this
Agreement and, no broker or finder is entitled to any brokerage or finder's
fee or to any commission in respect thereof based in any way on agreements,
arrangements or understandings made by or on behalf of Purchaser.
6. PRE-CLOSING COVENANTS. The parties agree as follows with respect to
----------------------
the period between the execution of this Agreement and the Closing.
6.1 GENERAL. Each of the parties will use its best efforts to take
-------
all action and to do all things necessary, proper, or advisable to consummate
and make effective the transactions contemplated by this Agreement (including
satisfying the closing conditions set forth in Section 7 below).
---------
6.2 NOTICES AND CONSENTS. The Seller will give any notices to third
--------------------
parties, and the Seller will use its best efforts to obtain any third party
consents that the Purchaser may request in connection with the matters
pertaining to the Seller disclosed or required to be disclosed by this
Agreement. Each of the parties will take any additional action that may be
necessary, proper or advisable in connection with any other notices to, filings
with, and
-12-
<PAGE>
authorizations, consents, and approvals of governments, governmental agencies,
and third parties that it may be required to give, make or obtain.
6.3 OPERATION OF BUSINESS. The Seller will not engage in any practice,
---------------------
take any action, embark on any course of inaction, or enter into any transaction
outside the ordinary course of business. Without limiting the generality of the
foregoing, the Seller will not engage in any practice, take any action, embark
on any course of inaction, or enter into any transaction of the sort described
in Section 4.4 hereof.
-----------
6.4 PRESERVATION OF BUSINESS. The Seller will keep the business and
------------------------
properties substantially intact, including its present operations, physical
facilities, working conditions, and relationships with lessors, licensors,
suppliers, customers, and employees.
6.5 FULL ACCESS. The Seller will permit representatives of the Purchaser
-----------
to have full access at all reasonable times, and in a manner so as not to
interfere with the normal business operations of the Seller, to all premises,
properties, books, records, contracts, tax records, and documents of or
pertaining to the Seller.
6.6 NOTICE OF DEVELOPMENTS. The Seller will give prompt written notice to
----------------------
the Purchaser of any material development affecting the assets, liabilities,
business, financial condition, operations, results of operations, or future
prospects of the Seller taken as a whole. Each party will give prompt written
notice to the other of any material development affecting the ability of the
parties to consummate the transactions contemplated by this Agreement. No
disclosure by any party pursuant to this Section 6.6, however, shall be deemed
-----------
to amend or supplement the Schedules or Attachments hereto, or to prevent or
cure any misrepresentation, breach of warranty, or breach of covenant.
6.7 EXCLUSIVITY. The Seller and the Members will not (i) solicit,
-----------
initiate or encourage the submission of any proposal or offer from any person
relating to any (A) liquidation, dissolution, or recapitalization, (B) merger or
consolidation, (C) acquisition or purchase of securities or assets, or (D)
similar transaction or business combination involving Seller or SBC, or (ii)
participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any person to do or seek any of the
foregoing. The Seller and the Members will notify the Purchaser immediately if
any person makes any proposal, offer, inquiry, or contact with respect to any of
the foregoing.
7. CONDITIONS TO OBLIGATION TO CLOSE.
---------------------------------
7.1 CONDITIONS TO OBLIGATION OF THE PURCHASER. The obligations of
-----------------------------------------
the Purchaser to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(A) the representations and warranties set forth in Section 4
---------
hereof shall be true and correct in all material respects at and as of the
Closing Date;
-13-
<PAGE>
(B) the Seller and Members shall have performed and complied
with all of their covenants hereunder in all material respects through the
Closing;
(C) the Seller shall have procured all of the third party
consents specified in Section 6 above;
---------
(D) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction wherein an unfavorable judgment,
order, decree, stipulation, injunction, or charge would (i) prevent consummation
of any of the transactions contemplated by this Agreement, (ii) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, or (iii) affect adversely the right of the Purchaser to own,
operate, or control the Assets (and no such judgment, order decree, stipulation,
injunction, or charge shall be in effect):
(E) the Seller shall have delivered to the Purchaser a
certificate (without qualification as to knowledge or materiality or otherwise
except for Section 7.1(d) above) to the effect that each of the conditions
--------------
specified above in Sections 7.1 (a), (b) and (d) is satisfied in all respects;
---------------- --- ---
(F) the Purchaser shall have received all other authorizations,
consents, and approvals of governments and governmental agencies set forth in
this Agreement;
(G) the Purchaser shall have received from Dewey Suddeth an
executed Employment Agreement in substantially the form and substance attached
hereto as Attachment 7.1(g);
-----------------
(H) all actions and approvals to be taken by the Seller or
Members in connection with consummation of the transactions contemplated hereby
and all certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be satisfactory in form and
substance to the Purchaser;
(I) the Purchaser shall have received from Rowe, Foltz & Martin,
P.C., counsel for the Seller, an opinion addressed to Purchaser dated the date
of the Closing, and in form and substance attached hereto as Attachment 7.1(i);
-----------------
(J) the Purchaser shall have obtained the approval of its Board
of Directors and lenders for the transactions contemplated by this Agreement;
(K) the Purchaser shall have obtained a satisfactory three-year
lease for the Atlanta facility from the Seller on terms which would have no
adverse effect on the operations of the Purchaser or the current expense level
of the Business (such monthly rent to be initially equivalent to the monthly
depreciation rate on such facility);
(L) the Purchaser shall have received from the Seller its
reviewed financial statements (balance sheets and income statements for fiscal
years 1993, 1994 and 1995) and federal income tax returns for the same period
that have been prepared and/or filed; and
-14-
<PAGE>
(M) the Purchaser shall have received evidence that the Seller will
change its name to one without the name "ATS-Atlanta One."
The Purchaser may waive any condition specified in this Section 7 if it
---------
executes a writing so stating at or prior to the Closing.
7.2 CONDITIONS TO OBLIGATION OF THE SELLER. The obligation of the Seller
--------------------------------------
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(A) the representations and warranties set forth in Section 5 above
shall be true and correct in all material respects at and as of the Closing
Date;
(B) the Purchaser shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(C) no action, suit, or proceeding shall be pending before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction wherein an unfavorable judgment, order, decree,
stipulation, injunction, or charge would (i) prevent consummation of any of the
transactions contemplated by this Agreement or (ii) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such judgment, order, decree, stipulation, injunction, or
charge shall be in effect);
(D) the Purchaser shall have delivered to Seller a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified above in Section 7.2(a)-(c) is
------------------
satisfied in all respects;
(E) the Seller shall have received from Davis, Graham & Stubbs LLP,
an opinion addressed to Seller and dated as of the Closing Date in form and
substance attached hereto as Schedule 7.2(e);
---------------
(F) Dewey Suddeth shall have been given the option to invest up to
$75,000 on substantially the same terms provided to other recent outside
investors in Global; and
(G) the Purchaser shall have delivered to Dewey Suddeth an executed
Employment Agreement in substantially the form and substance attached hereto as
Attachment 7.1(g).
- -----------------
The Seller may waive any condition specified in this Section 7 if it
---------
executes a writing so stating at or prior to the Closing.
-15-
<PAGE>
8. TERMINATION.
-----------
8.1 TERMINATION OF AGREEMENT. Certain of the parties may terminate
------------------------
this Agreement as provided below:
(A) the Purchaser and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(B) the Purchaser may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing in the event the Seller
are in breach.
(C) the Purchaser may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing if the Closing shall not
have occurred on or before November 30, 1996 by reason of the failure of any
condition precedent under Section 7 hereof (unless the failure results
---------
primarily from the Purchaser itself breaching any representation, warranty, or
covenant contained in this Agreement); and
(D) the Seller may terminate this Agreement by giving written
notice to the Purchaser at any time prior to the Closing if the Closing shall
not have occurred on or before November 30, 1996 by reason of the failure of any
condition precedent under Section 7 hereof (unless the failure results primarily
---------
from the Seller or Members breaching any representation, warranty, or covenant
contained in this Agreement).
8.2 EFFECT OF TERMINATION. If any party terminates this Agreement
---------------------
pursuant to Section 8.1 above, all obligations of the parties hereunder shall
-----------
terminate without any liability of any party to any other party (except for any
liability of any party then in breach of this Agreement.
9. NATURE OF STATEMENTS AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF
----------------------------------------------------------------------
SELLER. All statements of fact contained in this Agreement or in any written
- ------
statement (including financial statements), certificate, schedule or other
document delivered by or on behalf of Seller pursuant to this Agreement or in
connection with the transactions contemplated hereby shall be deemed
representations and warranties of Seller and/or the Members hereunder. Except
for the provisions of Sections 4.2, 4.6 and 4.7 which shall survive until the
statute of limitations, all representations and warranties made by Seller and/or
the Member hereunder or pursuant hereto or in connection with the transactions
contemplated hereby shall survive the Closing for a period of one year and one
day from the Closing Date, regardless of any investigation at any time made by
on or behalf of Purchaser.
10. SPECIAL CLOSING AND POST-CLOSING COVENANTS.
------------------------------------------
10.1 DELIVERY OF FUNDS AND OTHER ASSETS COLLECTED BY SELLER: POWER OF
-----------------------------------------------------------------
ATTORNEY. To the extent Seller receives any funds or other assets in payment
- --------
of receivables or work-in-process incurred on or after the Closing Date, or in
connection with any other Assets being sold to Purchaser hereto, Seller shall
immediately deliver such funds and assets to SBC
-16-
<PAGE>
and take all steps necessary to vest title to such funds and assets in SBC.
Seller hereby designates SBC and its officers as Seller's true and lawful
attorney-in-fact, with full power of substitution, to execute or endorse for the
benefit of SBC any checks, notes or other documents received by SBC in payment
of or in substitution or exchange for any of the Assets. Seller hereby
acknowledges and agrees that the power of attorney set forth in the preceding
sentence is coupled with an interest, and further agrees to execute and deliver
to SBC from time to time any documents or instruments reasonably requested by
Purchaser to evidence such power of attorney.
10.2 CHANGE OF NAME OF SELLER. Immediately upon the occurrence of the
------------------------
Closing, Seller shall cease using the phrase "ATS-Atlanta One" and all
derivations thereof. Seller and the Members each covenant and each agree that
after the Closing it will not, directly or indirectly, use the name "ATS-Atlanta
One" or any derivations thereof in connection with any business enterprise.
11. LEASE AGREEMENT. Purchaser shall assume the leases for the office
---------------
space currently used by Seller in Atlanta, Georgia in connection with the
operation of the Business on the terms set forth in Section 7.1 (l) hereto.
---------------
Purchaser will, from and after Closing, hold harmless Seller and Members from
any liability thereunder accruing after Closing.
12. NON-COMPETITION AGREEMENT. As an inducement for Purchaser to enter
-------------------------
into this Agreement and in return for the payment of $30,000 as provided by
Section 3.1(a), the parties hereby agree to the provisions of this Section 12.
- ------------- ----------
For a period commencing on the date hereof through the second anniversary of
the Closing Date, neither Seller nor any affiliate of Seller (including the
Members and Dewey Suddeth), shall (i) within the territorial boundaries of the
continental United States, where the Business of Seller is now conducted,
compete directly or indirectly with any business engaged in by Purchaser or its
Affiliates to the extent it is similar to any business engaged in by the Seller
as of the date hereof, (ii) solicit directly or indirectly any of the Accounts
(as hereinafter defined) of Seller or of Purchaser or its Affiliates, or (iii)
be employed by or otherwise render services to, or own any interest in, any
Person that directly or indirectly (a) competes with any business engaged in by
Purchaser or its Affiliates within the United States, to the extent it is
similar to any business engaged in by Seller as of the date hereof, or (b)
solicits directly or indirectly any of the Accounts of Seller or of Purchaser or
its Affiliates. For purposes of this Section 12, the term "ACCOUNTS" shall
----------
mean any Person located in the United States of America for which Seller has
performed services or Purchaser or its Affiliates does perform services during
the period beginning three (3) years prior to the date hereof and ending on the
second anniversary of the Closing Date. Seller and Members agree that the
limitations set forth herein on the rights of them and their Affiliates to
compete with Purchaser and its Affiliates are reasonable and necessary for the
protection of the Purchaser. In this regard, Seller and Members specifically
agree that the limitations as to period of time and geographic area, as well as
all other restrictions on its activities specified herein, are reasonable and
necessary for the protection of the Purchaser. Seller and Members further
recognize and agree that violation of any of the agreements contained in this
Section 12 will cause irreparable damage or injury to Purchaser, the exact
amount of which may be impossible to ascertain, and that, for such reason, among
others, Purchaser and its Affiliates shall be
-17-
<PAGE>
entitled to an injunction, without the necessity of posting a bond, restraining
any further violation of such agreements. Such rights to any injunction shall
be in addition to, and not in limitation of, any other rights and remedies
Purchaser and its Affiliates may have against Seller, the Members or their
Affiliates, including, but not limited to, the recovery of damages. Further, it
is agreed by Seller and the Members that in the event the provisions of this
Agreement should ever be deemed to exceed the time or geographic limitations
permitted by applicable law, then such provisions shall be reformed to the
maximum time or geographic limitations permitted.
13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Seller and Members
-----------------------------------------
recognize and acknowledge that they have and will have access to certain
confidential information of Seller that is included in the Assets (including,
but not limited to, list of customers, and costs and financial information) that
after the consummation of the transactions contemplated hereby will be
valuable, special and unique property of Purchaser. Seller and Members each
agree that it will not disclose, and it will use its best efforts to prevent
disclosure by any other Person of, any such confidential information to any
Person, except to authorized representatives of Purchaser. Seller and Members
recognize and agree that violation of any of the agreements contained in this
Section 13 will cause irreparable damage or injury to Purchaser, the exact
- ----------
amount of which may be impossible to ascertain, and that, for such reason, among
others, Purchaser shall be entitled to an injunction, without the necessity of
posting bond, therefor, restraining any further violation of such agreements.
Such rights to any injunction shall be in addition to, and not in limitation of,
any other rights and remedies Purchaser may have against Seller or the Members.
14. ASSIGNMENTS OF CONTRACTS. Notwithstanding any other provision of this
------------------------
Agreement, nothing in this Agreement or any related document shall be construed
as an attempt to assign (i) any contract which, as a matter of law or by its
terms, is nonassignable without the consent of the other parties thereto unless
such consent has been given, or (ii) any contract or claims as to which all of
the remedies for the enforcement thereof enjoyed by Seller would not, as a
matter of law or by its terms, pass to Purchaser as an incident of the transfers
and assignments to be made under this Agreement. In order, however, that the
full value of every contract and claim of the character described in clauses (i)
and (ii) above and all claims and demands on such contracts may be realized for
the benefit of Purchaser, Seller, at the request and expense and under the
direction of Purchaser, shall take all such action and do or cause to be done
all such things as will, in the opinion of Purchaser, be necessary or proper in
order that the obligations of Seller under such contracts may be performed in
such manner that the value of such contract will be preserved and will inure to
the benefit of Purchaser, and for, and to facilitate, the collection of the
monies due and payable and to become due and payable thereunder to Purchaser in
and under every such contract and claim incurred after the Closing. Seller shall
promptly pay over to Purchaser all monies collected by or paid to it in respect
of every such contract, claim or demand to the extent such monies are earned by
the Purchaser on or after the Closing Date. Nothing in this Section 14 shall
----------
relieve Seller of its obligation to obtain any consents required for the
transfer of the Assets and all rights thereunder to Purchaser.
-18-
<PAGE>
15. SPECIAL PROVISIONS REGARDING EMPLOYEES OF SELLER.
------------------------------------------------
15.1 NEW EMPLOYEES OF PURCHASER. It is the intention of Purchaser to
--------------------------
hire all employees of seller, and Seller hereby acknowledges and agrees with
such position and that any employees of Seller that Purchaser hires will be new
employees of Purchaser as of the Closing Date or the date of hire, whichever is
later. Such new employees shall initially be entitled to the same compensation
and employee benefits as provided by Seller.
15.2 HIRING OF EMPLOYEES.
-------------------
(A) Purchaser through Mark M. Lloyd will use its reasonable
efforts to hire the existing employees of Seller in connection with its
purchase of the Assets: provided however, that Purchaser shall be entitled to
review employee records, conduct employee interviews and employee screening
procedures used by Purchaser in its business, and may refuse to offer employment
to any employee of Seller if such employee fails to meet the hiring criteria of
Purchaser as determined by Mark M. Lloyd in good faith.
(B) As a condition to their employment by Purchaser, all
existing key employees of Seller shall execute and deliver to Purchaser a
confidentiality and non-competition agreement in a form and substance
acceptable to Purchaser.
15.3 INDEMNITY CONCERNING ACCRUED BENEFITS. Seller and the Members
-------------------------------------
agree to indemnify and hold harmless Purchaser from and against any and all
accrued and outstanding employee benefits, salary, vacation pay, bonuses,
commissions and other emoluments of its employees and from any other employee
related matters or liabilities with respect to its employees but only to the
extent not reserved for in the Seller's financial statements delivered to
Purchaser hereunder or in the working capital adjustment made pursuant to the
SBC Agreement.
16. EXPENSES. Whether or not the transactions contemplated hereby are
--------
consummated, Seller will pay all of its costs and expenses and Purchaser will
pay all of its costs and expenses, incurred in connection with the preparation
of and execution of this Agreement and the consummation of the transactions
contemplated hereby.
17. FURTHER ACTIONS. From time to time, at the request of any party
---------------
hereto, the other parties hereto shall execute and deliver such instruments and
take such action as may be reasonably request to evidence the transactions
contemplated hereby.
18. NOTICES. All notices, requests, demands and other communications
-------
required or permitted to be given hereunder shall be writing and shall be deemed
to have been duly given if delivered personally, given by prepaid telex or
telegram or by facsimile or other similar instantaneous electronic transmission
device or mailing first class, postage prepaid, certified United States mail,
return receipt requested, as follows:
-19-
<PAGE>
(A) If to Purchaser, at:
c/o Global Imaging Systems Inc.
14499 North Dale Mabry Highway, Suite 280
Tampa, Florida 33618
Attention: Mr. Thomas S. Johnson
Facsimile No.: (813) 264-7877
With a copy to:
Davis, Graham & Stubbs LLP
1314 Nineteenth Street
Washington, D.C. 20036
Attention: Christopher J. Hagan, Esq.
Facsimile No.: (202) 293-4794
(B) If to Seller, at:
Southern Business Communications, Inc.
3175 Corners North Court
Norcross, Georgia 30071
Attention: Mark M. Lloyd
Facsimile No.: (770) 449-0188
With a copy to
Paul Shlanta, Esq.
Rowe, Foltz & Martin
Five Piedmont Center, Suite 750
Atlanta, Georgia 30305
Facsimile No.: (404) 237-1659
provided that any party may change its address for notice by giving to the other
party written notice of such change. Any notice given under this Section 19
----------
shall be effective (i) if delivered personally, when delivered, (ii) if sent by
telex or telegram or by facsimile or other similar instantaneous electronic
transmission device, twenty-four (24) hours after sending, and (iii) if mailed,
seventy-two (72) hours after mailing.
19. GENERAL PROVISIONS
------------------
19.1 GOVERNING LAW: INTERPRETATION: SECTION HEADINGS. THIS AGREEMENT
-----------------------------------------------
SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF GEORGIA, WITHOUT REGARD TO CONFLICT-OF-LAWS RULES AS APPLIED IN
GEORGIA. THE SECTION HEADINGS CONTAINED HEREIN ARE FOR PURPOSES OF
-20-
<PAGE>
CONVENIENCE ONLY, AND SHALL NOT BE DEEMED TO CONSTITUTE A PART OF THIS AGREEMENT
OR TO AFFECT THE MEANING OR INTERPRETATION OF THIS AGREEMENT IN ANY WAY.
19.2 SEVERABILITY. Should any provision of this Agreement be held
------------
unenforceable or invalid under the laws of the United States of America or the
State of Georgia, or under any other applicable laws of any other jurisdiction,
then the parties hereto agree that such provision shall be deemed modified for
purposes of performance of this Agreement in such jurisdiction to the extent
necessary to render it lawful and enforceable, or if such a modification is not
possible without materially altering the intention of the parties hereto, then
such provision shall be severed herefrom for purposes of performance of this
Agreement in such jurisdiction. The validity of the remaining provisions of this
Agreement shall not be affected by any such modification or severance, except
that if any severance materially alters the intentions of the parties hereto as
expressed herein (a modification being permitted only if there is no material
alteration), then the parties hereto shall use their best reasonable effort to
agree to appropriate equitable amendments to this Agreement in light of such
severance, and if no such agreement can be reached within a reasonable time, any
party hereto may initiate arbitration under the then current rules of the
American Arbitration Association to determine and effect such appropriate
equitable amendments.
19.3 ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
----------------
and understanding of the parties hereto with respect to the transactions
contemplated hereby and supersedes all prior agreements, arrangements and
understandings related to the subject matter hereof. No representation, promise,
inducement or statement of intention has been made by any party hereto which is
not embodied in this Agreement, and no party hereto shall be bound by or liable
for any alleged representation, promise, inducement or statement of intention
not so set forth.
19.4 BINDING EFFECT. All the terms, provisions, covenants and
--------------
conditions of this Agreement shall be binding upon and inure to the benefit of
and be enforceable by the parties hereto and their respective heirs, executors,
administrators, representatives, successors and assigns.
19.5 ASSIGNMENT. This Agreement and the rights and obligations of the
----------
parties hereto shall not be assigned or delegated by any party hereto without
the prior written consent of the other parties hereto.
19.6 AMENDMENT; WAIVER. This Agreement may be amended, modified,
-----------------
superseded or canceled, and any of the terms, provisions, representations,
warranties, covenants, or conditions hereof may be waived, only by a written
instrument executed by all parties hereto, or, in the case of a waiver, by the
party waiving compliance. The failure of any party at any time or times to
require performance of any provision hereof shall in no manner affect the right
to enforce the same. No waiver by any party of any condition contained in this
Agreement, or of the breach of any term, provisions, representation, warranty or
covenant contained in this Agreement, in any one or more instances, shall be
deemed to be or construed as a further or
-21-
<PAGE>
continuing waiver of any such condition or breach, or as a waiver of any other
condition or of the breach of any other term, provision, representation,
warranty or covenant.
19.7 GENDER; NUMBERS. All references on this Agreement to the
---------------
masculine, feminine or neuter genders shall, where appropriate, be deemed to
include all other genders. All plurals used in this Agreement shall, where
appropriate, be deemed to be singular, and vice versa.
19.8 COUNTERPARTS. This Agreement may be executed simultaneously in
-------------
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This Agreement
shall be binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of the parties reflected hereon as
signatories.
19.9 TELECOPY EXECUTION AND DELIVERY. A facsimile, telecopy or other
-------------------------------
reproduction of this Agreement may be executed by one or more parties hereto,
and an executed copy of this Agreement may be delivered by one or more parties
hereto by facsimile or similar instantaneous electronic transmission device
pursuant to which the signature of or on behalf of such party can be seen, and
such execution and delivery shall be considered valid, binding and effective for
all purposes. At the request of any party hereto, all parties hereto agree to
execute an original of this Agreement as well as any facsimile, telecopy or
other reproduction hereof.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
"PURCHASER"
ATS-ATLANTA ONE, INC.
--------------------
ATTEST:
By: /s/ Ray Schilling
-----------------------
/s/ Christopher J. Hagan Name: Ray Schilling
- ------------------------
Secretary: Title: V.P., Secretary and
Treasurer
[Corporate Seal]
"SELLER"
ATS-ATLANTA ONE, L.L.C.
ATTEST:
By: /s/ Dewey M. Suddeth
-------------------------
/s/ Dewey M. Suddeth Name: Dewey M. Suddeth
- ------------------------
Secretary: Title:
[Corporate Seal]
"MEMBERS"
ATS ATLANTA, INC.
ATTEST:
By: /s/ Dewey M. Suddeth
-------------------------
/s/ Dewey M. Suddeth Name: Dewey M. Suddeth
- ------------------------
Secretary: Title:
[Corporate Seal]
/s/ Mark M. Lloyd
-----------------------------
MARK M. LLOYD
/s/ Arthur E. Kreps
-----------------------------
ARTHUR E. KREPS
-23-
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT 10.20
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[**]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.***
STOCK PURCHASE AGREEMENT
BY AND AMONG
GLOBAL IMAGING SYSTEMS INC.,
ESI ACQUISITION CORPORATION,
ELECTRONIC SYSTEMS, INC.
AND
THE SHAREHOLDERS OF
ELECTRONIC SYSTEMS, INC.
DATED AUGUST 7, 1997
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
DEFINITIONS
<S> <C>
1.1 Definitions..................................................................... 1
ARTICLE II
AGREEMENT OF PURCHASE AND SALE; CLOSING
2.1 Agreement to Sell and Purchase.................................................. 6
2.2 Purchase Price.................................................................. 6
2.3 Payment of Purchase Price....................................................... 6
2.4 Closing......................................................................... 6
2.5 Escrow Arrangements............................................................. 7
2.6 Purchase Price Adjustments...................................................... 7
2.7 Closing Audit................................................................... 7
2.8 Post-Closing Purchase Price Adjustment.......................................... 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND SELLERS
3.1 Capitalization.................................................................. 8
3.2 No Liens on Shares.............................................................. 9
3.3 Other Rights to Acquire Capital Stock........................................... 9
3.4 Due Organization................................................................ 9
3.5 No Subsidiaries................................................................. 9
3.6 Due Authorization............................................................... 9
3.7 Financial Statements............................................................ 10
3.8 Certain Actions................................................................. 10
3.9 Properties...................................................................... 11
3.10 Licenses and Permits........................................................... 12
3.11 Intellectual Property.......................................................... 12
3.12 Compliance with Laws........................................................... 13
3.13 Insurance...................................................................... 13
3.14 Employee Benefit Plans......................................................... 13
(a) Employee Welfare Benefit Plans............................................. 13
(b) Employee Pension Benefit Plans............................................. 14
(c) Employment and Non-Tax Qualified Deferred Compensation
Arrangements............................................................... 14
3.15 Contracts and Agreements....................................................... 14
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
3.16 Claims and Proceedings.............................................................. 15
3.17 Taxes............................................................................... 15
3.18 Personnel........................................................................... 16
3.19 Business Relations.................................................................. 17
3.20 Accounts Receivable................................................................. 17
3.21 Bank Accounts....................................................................... 17
3.22 Warranties.......................................................................... 17
3.23 Brokers............................................................................. 17
3.24 Interest in Competitors, Suppliers, Customers, Etc.................................. 18
3.25 Indebtedness To and From Officers, Directors, Shareholders,
and Employees....................................................................... 18
3.26 Undisclosed Liabilities............................................................. 18
3.27 Information Furnished............................................................... 18
ARTICLE IV
GLOBAL'S AND ESIAC'S REPRESENTATIONS AND WARRANTIES
4.1 Due Organization..................................................................... 19
4.2 Due Authorization.................................................................... 19
4.3 No Brokers........................................................................... 19
ARTICLE V
COVENANTS OF THE COMPANY AND SELLERS
5.1 Consents of Others................................................................... 20
5.2 Sellers' Efforts..................................................................... 20
5.3 Powers of Attorney................................................................... 20
ARTICLE VI
POST-CLOSING COVENANTS
6.1 General.............................................................................. 20
6.2 Transition........................................................................... 20
6.3 Confidentiality...................................................................... 21
6.4 Covenant Not to Compete.............................................................. 21
6.5 Additional Matters................................................................... 22
ARTICLE VII
CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING
7.1 Conditions to Global's and ESIAC's Obligations....................................... 23
(a) Covenants, Representations and Warranties....................................... 24
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
(b) Consents....................................................................... 24
(c) Leases......................................................................... 24
(d) Discharge of Indebtedness and Liens............................................ 24
(e) Material Adverse Change........................................................ 24
(f) Transfer Taxes................................................................. 24
(g) Financial Condition............................................................ 25
(h) Relationship with ESR.......................................................... 25
(i) Documents to be Delivered by Sellers and the Company........................... 25
(i) Opinion of Sellers' Counsel............................................... 25
(ii) Certificates............................................................. 25
(iii) Release................................................................. 25
(iv) Escrow Agreement......................................................... 25
(v) Employment Agreement...................................................... 25
(vi) Office Lease............................................................. 25
(vii) Stock Certificates...................................................... 26
7.2 Conditions to Sellers and the Company's Obligations................................. 26
(a) Covenants, Representations and Warranties...................................... 26
(b) Consents....................................................................... 26
(c) Documents to be Delivered by Global and ESIAC.................................. 26
(i) Opinion of Global's and ESIAC's Counsel................................... 26
(ii) Certificates............................................................. 27
(iii) Escrow Agreement........................................................ 27
(iv) Employment Agreement..................................................... 27
(v) Lease..................................................................... 27
(vi) Purchase Price........................................................... 27
(d) Right of Reinvestment.......................................................... 27
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification of Global........................................................... 28
8.2 Defense of Claims................................................................... 28
8.3 Escrow Claim........................................................................ 29
8.4 Tax Audits, Etc..................................................................... 29
8.5 Indemnification of Sellers.......................................................... 29
8.6 Limits on Indemnification........................................................... 29
ARTICLE IX
MISCELLANEOUS
9.1 Modifications....................................................................... 30
9.2 Notices............................................................................. 30
9.3 Counterparts........................................................................ 31
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
9.4 Expenses.......................................................................... 32
9.5 Binding Effect; Assignment........................................................ 32
9.6 Entire and Sole Agreement......................................................... 32
9.7 Governing Law..................................................................... 32
9.8 Survival of Representations, Warranties and Covenants............................. 32
9.9 Invalid Provisions................................................................ 33
9.10 Public Announcements............................................................. 33
9.11 Remedies Cumulative.............................................................. 33
9.12 Waiver........................................................................... 33
9.13 DISPUTE RESOLUTION............................................................... 33
9.14 Building Leases.................................................................. 33
</TABLE>
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<PAGE>
LIST OF EXHIBITS
Exhibit A Form of Escrow Agreement
Exhibit B Form of Estoppel Certificate for Building Leases
Exhibit C Opinion of Sellers' Counsel
Exhibit D Sellers' Certificates
Exhibit E Release
Exhibit F Kamarek Executive Agreement
Exhibit G Opinion of Global's and ESIAC's Counsel
Exhibit H Global Certificate
Exhibit I Existing Building Lease
LIST OF SCHEDULES
Schedule 2.3 Sellers' Accounts
Schedule 2.6 Holders of Funded Indebtedness
Schedule 3.1 Ownership of Shares
Schedule 3.4 Articles and Bylaws
Schedule 3.7 Financial Statements
Schedule 3.8A Certain Actions
Schedule 3.8B Material Changes
Schedule 3.9 Properties
Schedule 3.10 Licenses and Permits
Schedule 3.11 Patents and Trademarks
Schedule 3.13 Insurance
Schedule 3.14 Employee Benefit Plans
Schedule 3.15 Contracts and Agreements
Schedule 3.16 Claims and Proceedings
Schedule 3.18 Personnel
Schedule 3.20 Accounts Receivable
Schedule 3.21 Bank Accounts
Schedule 3.22 Warranties
Schedule 3.25 Indebtedness with Officers, Directors and Shareholders
Schedule 3.26 Undisclosed Liabilities
Schedule 3.27 Information Furnished
Schedule 7.1(d) Indebtedness
The Exhibits and Schedules to this Stock Purchase Agreement are not included
with this Registration Statement on Form S-1. Global will provide these
exhibits and schedules upon the request of the Securities and Exchange
Commission
-v-
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "AGREEMENT") is entered into as of
August 7, 1997, by and among GLOBAL IMAGING SYSTEMS INC., a Delaware corporation
("GLOBAL"), ESI ACQUISITION CORPORATION, a Delaware corporation and wholly-owned
subsidiary of Global ("ESIAC"), ELECTRONIC SYSTEMS, INC., a Virginia corporation
(the "COMPANY") and THE SHAREHOLDERS OF ELECTRONIC SYSTEMS, INC. (each
individually, a "SELLER," and collectively, the "SELLERS").
W I T N E S S E T H:
WHEREAS, the Company is engaged in systems integration and the sales,
distribution and service of computer and networking equipment in the State of
Virginia (the "BUSINESS"); and
WHEREAS, Sellers collectively own 2,747 shares of the outstanding
Common Stock of the Company (the "SHARES"), which Shares constitute all of the
issued and outstanding capital stock of the Company; and
WHEREAS, ESIAC desires to purchase from Sellers and Sellers desire to
sell to ESIAC hereby all of the Shares owned by Sellers, all on the terms and
subject to the conditions hereinafter set forth; and
WHEREAS, immediately subsequent to the purchase of the Shares by
ESIAC, Global will cause ESIAC to be merged with and into the Company, all in
accordance with Virginia and Delaware law, with the Company being the surviving
corporation.
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto covenant and agree
as follows:
ARTICLE I
DEFINITIONS
-----------
1.1 DEFINITIONS. In this Agreement, the following terms have the
-----------
meanings specified or referred to in this Section 1.1 and shall be equally
-----------
applicable to both the singular and plural forms. Any agreement referred to
below shall mean such agreement as amended, supplemented and modified from time
to time to the extent permitted by the applicable provisions thereof and by this
Agreement.
<PAGE>
"AFFILIATE" means, with respect to any Person, any other Person
which directly or indirectly controls, is controlled by or is under common
control with such Person.
"AUDITED CLOSING BALANCE SHEET" has the meaning specified in
Section 2.7.
- -----------
"BUILDINGS" shall mean collectively (i) the Company's office,
showroom and warehouse facilities located at 361 Southport Circle, Virginia
Beach, Virginia (the "EXISTING BUILDING") and (ii) if and when built and
occupied by the Company, an additional building on property adjacent to the
Existing Building (the "NEW BUILDING").
"BUSINESS" has the meaning specified in the first recital of the
Agreement
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. (S)(S) 9601 et seq., any amendments
-- ---
thereto, any successor statutes, and any regulations promulgated thereunder.
"CLOSING" means the closing of the transfer of the Shares from
the Sellers to Global.
"CLOSING DATE" has the meaning specified in Section 2.4.
-----------
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning specified in the first paragraph of
this Agreement.
"CONFIDENTIAL INFORMATION" means all confidential information and
trade secrets of the Company including, without limitation, any of the same
comprising the identity, lists or descriptions of any customers, referral
sources or organizations; financial statements, cost reports or other financial
information; contract proposals, or bidding information; business plans and
training and operations methods and manuals; personnel records; fee structure;
and management systems, policies or procedures, including related forms and
manuals. Confidential Information shall not include any information (i) which
is disclosed pursuant to subpoena or other legal process, (ii) which has been
publicly disclosed, (iii) which subsequently becomes known to a third party not
subject to a confidentiality agreement with Global or the Company, or (iv) which
is subsequently disclosed by any third party not in breach of a confidentiality
agreement.
"CONTRACTS" has the meaning specified in Section 3.15.
------------
"COURT ORDER" means any judgment, order, award or decree of any
foreign, federal, state, local or other court or tribunal and any award in any
arbitration proceeding.
-2-
<PAGE>
"EFFECTIVE DATE" has the meaning specified in Section 2.4.
-----------
"EMPLOYMENT AGREEMENT" shall mean the executive agreement with
Mr. Kamarek to be entered into at Closing in the form of Exhibit F.
---------
"ENCUMBRANCE" means any lien, claim, charge, security interest,
mortgage, pledge, easement, conditional sale or other title retention agreement,
defect in title, restrictive covenant or other restrictions of any kind other
than Permitted Exceptions.
"ENVIRONMENTAL OBLIGATIONS" has the meaning specified in Section
-------
3.12.
- ----
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ESCROW AGENT" means the Norfolk Virginia office of Signet Bank,
N.A.
"ESCROW AGREEMENT" means the Escrow Agreement to be executed by
and among the Sellers, Global and the Escrow Agent in the form of Exhibit A.
---------
"ESCROW PERIOD" has the meaning specified in Section 2.5.
-----------
"ESCROW SUM" has the meaning specified in Section 2.5.
-----------
"ESIAC" has the meaning specified in the first paragraph of this
Agreement.
"ESR" means Electronic Systems of Richmond, Inc., a Virginia
corporation that is owned in part by certain of the Sellers.
"FINANCIAL STATEMENTS" has the meaning specified in Section 3.7.
-----------
"FUNDED INDEBTEDNESS" means all (i) indebtedness of the Company
for borrowed money or other interest-bearing indebtedness; (ii) capital lease
obligations of the Company; (iii) obligations of the Company to pay the deferred
purchase or acquisition price for goods or services, other than trade accounts
payable or accrued expenses in the ordinary course of business; (iv)
indebtedness of others guaranteed by the Company or secured by an Encumbrance on
the Company's property; or (v) indebtedness of the Company under extended credit
terms of more than 90 days from manufacturers provided to the Company.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
-3-
<PAGE>
"GLOBAL" has the meaning specified in the first paragraph of this
Agreement.
"GOVERNMENTAL BODY" means any foreign, federal, state, local or
other governmental authority or regulatory body.
"GOVERNMENTAL PERMITS" has meaning specified in Section 3.10.
------------
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"INDEPENDENT ACCOUNTANTS" has the meaning specified in Section
-------
2.7.
- ---
"IRS" means the Internal Revenue Service.
"INDEMNIFIABLE COSTS" has the meaning specified in Section 8.1.
-----------
"INDEMNIFIED PARTIES" has the meaning specified in Section 8.1.
-----------
"INTELLECTUAL PROPERTY" has the meaning specified in Section
-------
3.11.
- ----
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means a
material adverse change or effect on the assets, properties, Business,
operations, liabilities, or financial condition of the Company, taken as a
whole. In determining whether a "MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE
EFFECT" has occurred, the quantitative amounts set forth at the end of Article
-------
III shall be conclusive.
- ---
"MR. KAMAREK" means William G. Kamarek, the majority stockholder
of the company.
"OSHA" means the Occupational Safety and Health Act, 29 U.S.C.
(S)(S) 651 et seq., any amendment thereto, and any regulations promulgated
-- ---
thereunder.
"PERMITTED EXCEPTION" means (a) liens for Taxes and other
governmental charges and assessments which are not yet due and payable, (b)
liens of landlords and liens of carriers, warehousemen, mechanics and
materialmen and other like liens arising in the ordinary course of business for
sums not yet due and payable, (c) other liens or imperfections on property which
are not material in amount or do not materially detract from the value or the
existing use of the property affected by such lien or imperfection, (d) such
statements of fact and exceptions shown on any title insurance policies
delivered to Global.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or Governmental Body.
-4-
<PAGE>
"PRELIMINARY CLOSING BALANCE SHEET" shall mean the Company's best
estimate of the Company's balance sheet as of June 30, 1997 as adjusted upward
by the Company's earnings in July prior to the Effective Date. The Preliminary
Closing Balance Sheet shall be delivered to Global not less than one (1) nor
more than five (5) days prior to the Closing Date.
"PURCHASE PRICE" has the meaning specified in Section 2.2.
-----------
"RCRA" means the Resource Conservation and Recovery Act, 42
U.S.C. (S)(S) 6901 et seq., and any successor statute, and any regulations
-- ---
promulgated thereunder.
"REQUIREMENTS OF LAWS" means any foreign, federal, state and
local laws, statutes, regulations, rules, codes or ordinances enacted, adopted,
issued or promulgated by any Governmental Body (including, without limitation,
those pertaining to electrical, building, zoning, environmental and occupational
safety and health requirements).
"SELLER" has the meaning set forth in the first paragraph of this
Agreement.
"SELLERS" has the meaning set forth in the first paragraph of
this Agreement.
"SHARES" means all of the issued and outstanding shares of the
capital stock of the Company.
"TAX" or "TAXES" means any federal, state, local or foreign
income, alternative or add-on minimum, gross income, gross receipts, windfall
profits, severance, property, production, sales, use, transfer, gains, license,
excise, employment, payroll, withholding or minimum tax, transfer, goods and
services, or any other tax, custom, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or any
penalty, addition to tax or additional amount imposed thereon by an Governmental
Body.
"TAX RETURN" means any return, report or similar statement
required to be filed with respect to any Taxes (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return and declaration of estimated Tax.
"WORKING CAPITAL" shall mean the difference between the Company's
current assets and its current liabilities as calculated in accordance with
GAAP.
"WORKING CAPITAL ADJUSTMENT" means an amount equal to $80,548.
-5-
<PAGE>
"WORKING CAPITAL TARGET" means an amount equal to $3,325,000
minus the Working Capital Adjustment.
ARTICLE II
AGREEMENT OF PURCHASE AND SALE; CLOSING
2.1 AGREEMENT TO SELL AND PURCHASE. Upon the basis of the
------------------------------
representations and warranties, for the consideration, and subject to the terms
and conditions set forth in this Agreement, Sellers agree to sell the Shares to
ESIAC and ESIAC agrees to purchase the Shares from Sellers.
2.2 PURCHASE PRICE. The total purchase price for the Shares (the
--------------
"PURCHASE PRICE") shall be equal to $28,000,000, subject to any adjustment
required to be made pursuant to Section 2.6(a) or Section 2.8 below.
-------------- -----------
2.3 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be payable
-------------------------
by ESIAC at the Closing (hereinafter defined) as follows:
(A) $25,200,000 of the Purchase Price will be paid, at the
direction of each of the Sellers, in cash by wire transfer of funds as specified
in Schedule 2.3 (including the payment of $280,000 for the covenant not to
compete provided in Section 6.4); and
-----------
(B) $2,800,000 of the Purchase Price will be paid in cash by wire
transfer of funds to the Escrow Agent to be held in escrow for satisfaction of
Sellers' indemnification obligations specified in Section 8.1 or payment to the
-----------
Sellers in accordance with the terms of Section 2.5 below.
-----------
2.4 CLOSING. The Closing of the purchase and sale of the Shares
-------
contemplated by this Agreement shall take place at 11:00 a.m., Eastern time, at
the offices of Kaufman & Canoles in Norfolk, Virginia, on August 8, 1997, or at
such other date and time as the parties shall agree (the "CLOSING DATE"),
effective as of thirty-one (31) days prior to the Closing Date (the "EFFECTIVE
DATE"). If this Agreement is executed before Closing, all additional agreements
and instruments required for Closing shall be executed by the necessary parties
and placed in escrow with the Company's counsel, together with this Agreement,
pending receipt of the Purchase Price by Sellers, and Global shall immediately
take all actions necessary to cause the Purchase Price to be paid to Sellers on
the same day this Agreement is so executed (or, if funding on the same day such
execution occurs is impossible, prior to 2:00 pm on the second following
business day). Upon their receipt of the Purchase Price, Sellers shall cause
the Company's counsel to deliver executed documents to the appropriate parties.
Unless execution of this Agreement and payment of the Purchase Price occur
simultaneously, Global waives all conditions to their obligations to consummate
the Closing set forth in Section 7.1, except for the conditions set forth in
-----------
Section 7.1(i). Sellers shall have the absolute right to terminate this
- --------------
Agreement without any liability whatsoever to Global or ESIAC if the Purchase
Price is not paid
-6-
<PAGE>
to them in accordance with the provisions of this Section 2.4. If informed by
-----------
Mr. Kamarek that Sellers have terminated this Agreement pursuant to the
preceding sentence, the Company's counsel shall deliver to Mr. Kamarek all
documents being held in escrow by them pursuant to this Section 2.4, for
-----------
destruction or other disposal as Mr. Kamarek and the Sellers deem appropriate.
2.5 ESCROW ARRANGEMENTS. Pursuant to the Escrow Agreement to be
-------------------
entered into among Sellers, Global and the Escrow Agent, $2,800,000 of the
Purchase Price shall be delivered to the Escrow Agent at Closing. Such monies
(which, together with all interest accrued thereon, is hereinafter referred to
as the "ESCROW SUM") shall be held pursuant to the terms of the Escrow Agreement
for payment from such Escrow Sum of amounts, if any, owing by Sellers to Global
pursuant to Section 2.8 or Article VIII below. At the conclusion of the period
-----------
ending on the 365th day after the Closing Date (such period being referred to
herein as the "ESCROW PERIOD"), such remaining portion of the Escrow Sum not
theretofore claimed by or paid to Global in accordance with the terms of the
Escrow Agreement and this Agreement shall be disbursed to Sellers. Sellers and
Global agree that each will execute and deliver such reasonable instruments and
documents as are furnished by any other party to enable such furnishing party to
receive those portions of the Escrow Sum to which the furnishing party is
entitled under the provisions of the Escrow Agreement and this Agreement.
2.6 PURCHASE PRICE ADJUSTMENTS.
--------------------------
(A) The Purchase Price payable pursuant to Section 2.3(a) above
--------------
will be reduced by the total amount of Funded Indebtedness, if any, assumed or
paid by Global in cash by wire transfer of funds to the accounts of the holders
of Funded Indebtedness listed on Schedule 2.6 hereto to satisfy the Company's
------------
Funded Indebtedness with such institutions.
(B) The portion of the Purchase Price payable at Closing will be
reduced by the amount, if any, by which the adjusted Working Capital as
reflected on the Preliminary Closing Balance Sheet is less than the Working
Capital Target. Global shall notify Mr. Kamarek in writing at least two (2)
business days before Closing of all Funded Indebtedness, if any, Global will be
paying at Closing.
2.7 CLOSING AUDIT. Within 120 days following the Closing Date,
-------------
there shall be delivered to Global and to Sellers an audit of the Preliminary
Closing Balance Sheet (the "AUDITED CLOSING BALANCE SHEET") of the Company at
and as of June 30, 1997. The Preliminary Closing Balance Sheet shall be audited
by Ernst & Young, LLP in accordance with GAAP. The cost of the Audited Closing
Balance Sheet shall be paid by Global. In the event that the majority of the
Sellers or Mr. Kamarek dispute any items on the Audited Closing Balance Sheet
within ten days after Sellers' receipt thereof, the parties shall jointly select
and retain an independent "Big Six" accounting firm (the "INDEPENDENT
ACCOUNTANTS") to review the disputed item(s) on the Audited Closing Balance
Sheet. The final determination of such disputed item(s) by the Independent
Accountants shall be reflected on the Audited Closing Balance Sheet. The cost
of retaining the Independent Accountants shall be borne by Sellers; provided,
however,
-7-
<PAGE>
that Global shall reimburse Sellers for the cost of the Independent Accountants
in the event that such review results in an increase of more than $125,000 in
the Company's Working Capital as reflected on the Audited Closing Balance Sheet
prepared by Ernst & Young, LLP.
2.8 POST-CLOSING PURCHASE PRICE ADJUSTMENT. In the event that the
--------------------------------------
Working Capital as reflected on the Audited Closing Balance Sheet is less than
the Working Capital Target, then the Purchase Price will be adjusted downward,
on a dollar-for-dollar basis, to reflect the lesser of (i) the decrease, if any,
in Working Capital as reflected on the Audited Closing Balance Sheet from the
amount of Working Capital reflected on the Preliminary Closing Balance Sheet or
(ii) the amount, if any, by which the Working Capital reflected on the Audited
Closing Balance Sheet is less than the Working Capital Target. Conversely, the
Purchase Price will be adjusted upward, on a dollar-for dollar basis, to reflect
the increase, if any, in the total Working Capital as reflected on the Audited
Closing Balance Sheet from the amount of Working Capital reflected on the
Preliminary Closing Balance Sheet, provided, however, that in no event shall
such upward adjustment exceed the total amount of any adjustment to the Purchase
Price made pursuant to Section 2.6(b) above. The post-closing adjustment to the
--------------
Purchase Price, if any, shall be paid by Sellers to Global from the Escrow Sum
or by Global to Sellers, as the case may be, in immediately available funds
within ten (10) business days of delivery of the Audited Closing Balance Sheet,
unless Sellers or Mr. Kamarek dispute any items on the Audited Closing Balance
Sheet, in which case it shall be paid within ten (10) business days after the
Independent Accountants finally determine the disputed item(s), and Global
delivers to Sellers an Audited Closing Balance Sheet modified to reflect such
determination.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND SELLERS
The Company and Sellers, jointly and severally, represent and warrant
to Global and ESIAC that:
3.1 CAPITALIZATION. The authorized capital stock of the Company
--------------
consists of 5,000 shares of Common Stock, 2,747 of which are issued and
outstanding. All of the Shares are duly authorized, validly issued, fully paid,
and nonassessable. All of the Shares are owned of record and beneficially by
Sellers in the amounts set forth on Schedule 3.1 hereto. None of the Shares was
------------
issued or will be transferred under this Agreement in violation of any
preemptive or preferential rights of any Person. The Sellers collectively own
all of the issued and outstanding capital stock of the Company.
3.2 NO LIENS ON SHARES. Except as shown on Schedule 3.1, Sellers
------------------ ------------
collectively own the Shares, free and clear of any Encumbrances other than the
rights and obligations arising under this Agreement, and none of the Shares is
subject to any outstanding option, warrant, call, or similar right of any other
Person to acquire the same, and none of the Shares is subject to any restriction
on transfer thereof except for restrictions imposed by
-8-
<PAGE>
applicable federal and state securities laws. At Closing, Sellers will have full
power and authority to convey good and marketable title to the Shares, free and
clear of any Encumbrances.
3.3 OTHER RIGHTS TO ACQUIRE CAPITAL STOCK. Except as set forth in
-------------------------------------
this Agreement, there are no authorized or outstanding warrants, options, or
rights of any kind to acquire from the Company any equity or debt securities of
the Company, or securities convertible into or exchangeable for equity or debt
securities of the Company, and there are no shares of capital stock of the
Company reserved for issuance for any purpose nor any contracts, commitments,
understandings or arrangements which require the Company to issue, sell or
deliver any additional shares of its capital stock.
3.4 DUE ORGANIZATION. The Company is a corporation duly organized,
----------------
validly existing, and in good standing under the laws of the State of Virginia
and has full corporate power and authority to carry on the Business as now
conducted and as proposed to be conducted through Closing. Complete and correct
copies of the Articles of Incorporation and Bylaws of the Company, and all
amendments thereto, have been heretofore delivered to Global and are attached
hereto as Schedule 3.4. The Company is qualified to do business in Virginia
------------
and in each jurisdiction in which the nature of the Business or the ownership of
its properties requires such qualification except where the failure to be so
qualified does not and could not reasonably be expected to have a Material
Adverse Effect.
3.5 NO SUBSIDIARIES. The Company does not directly or indirectly
---------------
have any subsidiaries or any direct or indirect ownership interests in any
Person. The Sellers do not own any other Person engaged in the Business, except
for certain of the Sellers' ownership interests in ESR, as described in Schedule
--------
3.5.
- ---
3.6 DUE AUTHORIZATION. The Company and the Sellers each have full
-----------------
power and authority to execute, deliver and perform this Agreement and to carry
out the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action of the Company.
This Agreement has been duly and validly executed and delivered by the Company
and Sellers and constitutes the valid and binding obligations of the Company and
Sellers, enforceable in accordance with its terms, except to the extent that
enforceability may be limited by laws affecting creditors' rights and debtors'
obligations generally, and legal limitations relating to remedies of specific
performance and injunctive and other forms of equitable relief. The execution,
delivery, and performance of this Agreement (as well as all other instruments,
agreements, certificates, or other documents contemplated hereby) by the Company
and Sellers, do not (a) violate any Requirements of Laws or any Court Order of
any Governmental Body applicable to the Company or Sellers, or their respective
property, (b) violate or conflict with, or permit the cancellation of, or
constitute a default under, any material agreement to which the Company or
Sellers are a party, or by which any of them or any of their respective property
is bound, (c) permit the acceleration of the maturity of any material
indebtedness of, or indebtedness secured by the property of, the Company or
Sellers, or (d) violate or conflict with any provision of the charter or bylaws
of the Company.
-9-
<PAGE>
3.7 FINANCIAL STATEMENTS. The following Financial Statements
--------------------
(herein so called) of the Company have been delivered to Global by the Company:
balance sheets of the Company as of December 31, 1994, December 31, 1995,
December 31, 1996 and June 30, 1997, and statements of income of the Company for
the fiscal years ended December 31, 1994, December 31, 1995 and December 31,
1996 and for the 6 month period ending June 30, 1997.
The Financial Statements have been prepared in accordance with GAAP throughout
the periods indicated (except for variations from GAAP acceptable to the
Company's independent accountants which do not, in the aggregate, cause any of
the Financial Statements to materially understate the value or performance of
the Company, taken as a whole) and fairly present the financial position,
results of operations and changes in financial position of the Company as of the
indicated dates and for the indicated periods, subject (in the case of the 6
month Financial Statements) to year end accruals made in the ordinary course of
the Business which are not materially adverse and which are consistent with past
practices. Except to the extent reflected or provided for in the Financial
Statements or the notes thereto and obligations and liabilities incurred in the
ordinary course of business since the date of the last of such Financial
Statements, the Company has no liabilities required by GAAP to be reflected on
the Company's balance sheet or notes thereto that are not so reflected, nor any
other obligations (whether absolute, contingent, or otherwise) which are
(individually or in the aggregate) material (in amount or to the conduct of the
Business); and neither the Company nor Sellers have knowledge of any basis for
the assertion of any such liability or obligation. Since December 31, 1996,
there has been no Material Adverse Change except as disclosed on Schedule 3.8B
-------------
or any of the Financial Statements or notes thereunder.
3.8 CERTAIN ACTIONS. Since December 31, 1996, the Company has not,
---------------
except as disclosed on Schedule 3.8A hereto or any of the Financial Statements
-------------
or notes thereto: (a) discharged or satisfied any Encumbrance or paid any
obligation or liability, absolute or contingent, other than current liabilities
incurred and paid in the ordinary course of the Business; (b) paid or declared
any dividends or distributions, or purchased, redeemed, acquired, or retired any
stock or indebtedness from any stockholder; (c) made or agreed to make any loans
or advances or guaranteed or agreed to guarantee any loans or advances to any
party whatsoever; (d) suffered or permitted any Encumbrance to arise or be
granted or created against or upon any of its assets, real or personal, tangible
or intangible; (e) cancelled, waived, or released or agreed to cancel, waive, or
release any of its debts, rights, or claims against third parties in excess of
$25,000 individually or $50,000 in the aggregate; (f) sold, assigned, pledged,
mortgaged, or otherwise transferred, or suffered any material damage,
destruction, or loss (whether or not covered by insurance) to, any assets
(except in the ordinary course of the Business); (g) amended its charter or
bylaws; (h) paid or made a commitment to pay any severance or termination
payment to any employee or consultant; (i) made any material change in its
method of management or operation or method of accounting; (j) made any capital
expenditures, including, without limitation, replacements of equipment in the
ordinary course of the Business, or entered into commitments therefor, except
for capital expenditures or commitments therefor which do not, in the aggregate,
exceed $100,000; (k) made any investment or commitment therefor in any
-10-
<PAGE>
Person; (l) made any payment or contracted for the payment of any bonus or other
compensation or personal expenses, other than (A) wages and salaries and
business expenses paid in the ordinary course of the Business, and (B) wage and
salary adjustments made in the ordinary course of the Business for employees who
are not officers, directors, or shareholders of the Company; (m) made, amended,
or entered into any written employment contract or created or made any material
change in any bonus, stock option, pension, retirement, profit sharing or other
employee benefit plan or arrangement; (n) materially amended or experienced a
termination of any material contract, agreement, lease, franchise or license to
which the Company is a party that would or could reasonably be expected to have
a Material Adverse Effect, except in the ordinary course of the Business; or (o)
entered into any other material transactions that would or could reasonably be
expected to have a Material Adverse Effect except in the ordinary course of the
Business. Since December 31, 1996, except as disclosed on Schedule 3.8B hereto
-------------
or any of the Financial Statements or notes thereto, there has not been (a) any
Material Adverse Change including, but not limited to, the loss of any material
customers or suppliers of the Company, or in any material assets of the Company,
(b) any extraordinary contracts, commitments, orders or rebates, (c) any strike,
material slowdown, or demand for recognition by a labor organization by or with
respect to any of the employees of the Company, or (d) any shutdown, material
slow-down, or cessation of any material operations conducted by, or constituting
part of, the Company, nor has the Company agreed to do any of the foregoing.
3.9 PROPERTIES. Attached hereto as Schedule 3.9 is a list
---------- ------------
containing a description of each interest in real property (including, without
limitation, leasehold interests) and each item of personal property utilized by
the Company in the conduct of the Business having a book value in excess of
$25,000 as of the date hereof. Except for Permitted Exceptions or as expressly
set forth on Schedule 3.9, such real and personal properties are free and clear
------------
of Encumbrances other than Encumbrances (taken as a whole) which do not
materially detract from the value of such properties or materially interfere
with their intended use. Sellers and the Company have delivered to Global a
lien search obtained from the Virginia State Corporation Commission of all UCC
liens of record against the Company's personal property in the Commonwealth of
Virginia. All of the properties and assets necessary for continued operation of
the Business as currently conducted (including, without limitation, all books,
records, computers and computer software and data processing systems) are owned,
leased or licensed by the Company and are suitable for the purposes for which
they are currently being used. With the exception of used equipment and
inventory valued at no more than $10,000 on the Company's Financial Statements,
the physical properties of the Company, including the real properties leased by
the Company, are in good operating condition and repair, normal wear and tear
excepted, and are free from any defects of a material nature. Except for
Permitted Exceptions or as otherwise set forth on Schedule 3.9, the Company has
------------
full and unrestricted legal and equitable title to all such properties and
assets. The operation of the properties and Business of the Company in the
manner in which they are now and have been operated does not violate any zoning
ordinances, municipal regulations, or other Requirements of Laws, except for any
such violations which would not, individually or in the aggregate, have a
Material Adverse Effect. Except for Permitted Exceptions or as set forth on
Schedule 3.9, no restrictive covenants, easements, rights-of-way, or regulations
- ------------
of record impair the uses of the properties of the
-11-
<PAGE>
Company for the purposes for which they are now operated. All leases of real or
personal property by the Company are legal, valid, binding, enforceable and in
full force and effect and will remain legal, valid, binding, enforceable and in
full force and effect on identical terms immediately following the Closing,
except to the extent that enforceability may be limited by laws affecting
creditors' rights and debtors' obligations generally, and legal limitations
relating to remedies of specific performance and injunctive and other forms of
equitable relief. All facilities owned or leased by the Company have received
all approvals of any Governmental Body (including Governmental Permits) required
in connection with the operation thereof and have been operated and maintained
in accordance with all Requirements of Laws.
3.10 LICENSES AND PERMITS. Attached hereto as Schedule 3.10 is a
-------------------- -------------
list of all Material licenses, certificates, privileges, immunities, approvals,
franchises, authorizations and permits held or applied for by the Company from
any Governmental Body (herein collectively called "GOVERNMENTAL PERMITS") the
absence of which could have a Material Adverse Effect. The Company has complied
in all material respects with the terms and conditions of all such Governmental
Permits, and the Company has not received written notifications from any
Governmental Body of violation of any such Governmental Permit or the
Requirements of Laws governing the issuance or continued validity thereof other
than violations (if any) which would not individually or in the aggregate have a
Material Adverse Effect. To the best knowledge of Sellers and the Company, no
additional Governmental Permit is required from any Governmental Body thereof in
connection with the conduct of the Business which Governmental Permit, if not
obtained, would have a Material Adverse Effect.
3.11 INTELLECTUAL PROPERTY. Attached hereto as Schedule 3.11 is a
--------------------- -------------
list and brief description of all patents, trademarks, tradenames, copyrights,
licenses, computer software or data (other than general commercial software) or
applications therefor owned by or registered in the name of the Company or in
which the Company has any rights, licenses, or immunities, the loss of which
could have a Material Adverse Effect (collectively, the "INTELLECTUAL
PROPERTY"). The Company has furnished Global with copies of all license
agreements to which the Company is a party, either as licensor or licensee, with
respect to any Intellectual Property. Except as described on Schedule 3.11
-------------
hereto, the Company has good title to or the right to use such Intellectual
Property and all inventions, processes, designs, formulae, trade secrets and
know-how necessary for the conduct of their Business, in their Business as
presently conducted without the payment of any royalty or similar payment, and
the Company is not materially infringing on any patent right, tradename,
copyright or trademark right or other Intellectual Property right of others, and
neither the Company nor Sellers are aware of any infringement by others of any
such rights owned by the Company.
3.12 COMPLIANCE WITH LAWS. The Company has (i) complied in all
--------------------
material respects with all Requirements of Laws, Governmental Permits and Court
Orders applicable to the Business and has filed with the proper Governmental
Bodies all statements and reports required by all Requirements of Laws,
Governmental Permits and Court Orders to which the Company or any of its
employees (because of their activities on behalf of the Company) are subject and
(ii) conducted the Business and are in compliance in all material respects with
all
-12-
<PAGE>
federal, state and local energy, public utility, health, safety and
environmental Requirements of Laws, Governmental Permits and Court Orders
including the Clean Air Act, the Clean Water Act, RCRA, the Safe Drinking Water
Act, CERCLA, OSHA, the Toxic Substances Control Act and any similar state, local
or foreign laws (collectively "ENVIRONMENTAL OBLIGATIONS") and all other
federal, state, local or foreign governmental and regulatory requirements,
except where any such failure to comply or file would not, in the aggregate,
have a Material Adverse Effect. The Company has not received written
notification of any claim by any Governmental Body (and, to the best knowledge
of the Company and Sellers, no such claim is anticipated) to the effect that the
Business fails to comply, in any respect, with any Requirements of Laws,
Governmental Permit or Environmental Obligation or that a Governmental Permit or
Court Order is necessary in respect thereto.
3.13 INSURANCE. Attached hereto as Schedule 3.13 is a list of all
--------- -------------
coverages for fire, liability, or other forms of insurance and all fidelity
bonds held by or applicable to the Company. Copies of the binder for all such
insurance policies have been delivered to Global. To the best of the Company's
and Sellers' knowledge and belief, no event relating to the Company has occurred
which will result in (i) cancellation of any such insurance coverages; (ii) a
retroactive upward adjustment of premiums under any such insurance coverages; or
(iii) any prospective upward adjustment in such premiums. All of such insurance
coverages will remain in full force and effect following the Closing.
3.14 EMPLOYEE BENEFIT PLANS.
----------------------
(A) EMPLOYEE WELFARE BENEFIT PLANS. Except as disclosed on
------------------------------
Schedule 3.14, the Company does not maintain or contribute to any "employee
- -------------
welfare benefit plan" as such term is defined in Section 3(1) of ERISA. With
respect to each such plan, (i) the plan is in material compliance with ERISA;
(ii) the plan has been administered in accordance with its governing documents;
(iii) neither the plan, nor any fiduciary with respect to the plan, has engaged
in any "prohibited transaction" as defined in Section 406 of ERISA other than
any transaction subject to a statutory or administrative exemption; (iv) except
for the processing of routine claims in the ordinary course of administration,
there is no material litigation, arbitration or disputed claim outstanding; and
(v) all premiums due on any insurance contract through which the plan is funded
have been paid.
(B) EMPLOYEE PENSION BENEFIT PLANS. Except as disclosed in
------------------------------
Schedule 3.14, the Company does not maintain or contribute to any arrangement
- -------------
that is or may be an "employee pension benefit plan" relating to employees, as
such term is defined in Section 3(2) of ERISA. With respect to each such plan:
(i) the plan is qualified under Section 401(a) of the Code, and any trust
through which the plan is funded meets the requirements to be exempt from
federal income tax under Section 501(a) of the Code; (ii) the plan is in
material compliance with ERISA; (iii) the plan has been administered in
accordance with its governing documents as modified by applicable law; (iv) the
plan has not suffered an "accumulated funding deficiency" as defined in Section
412(a) of the Code; (v) the plan has not engaged in, nor has any fiduciary with
respect to the plan engaged in, any "prohibited transaction" as defined in
Section 406 of ERISA
-13-
<PAGE>
or Section 4975 of the Code other than a transaction subject to statutory or
administrative exemption; (vi) the plan has not been subject to a "reportable
event" (as defined in Section 4043(b) of ERISA), the reporting of which has not
been waived by regulation of the Pension Benefit Guaranty Corporation; (vii) no
termination or partial termination of the plan has occurred within the meaning
of Section 411(d)(3) of the Code; (viii) all contributions required to be made
to the plan or under any applicable collective bargaining agreement have been
made to or on behalf of the plan; (ix) there is no material litigation,
arbitration or disputed claim outstanding; and (x) all applicable premiums due
to the Pension Benefit Guaranty Corporation for plan termination insurance have
been paid in full on a timely basis.
(C) EMPLOYMENT AND NON-TAX QUALIFIED DEFERRED COMPENSATION
------------------------------------------------------
ARRANGEMENTS. Except as disclosed in Schedule 3.14, the Company does not
- ------------ -------------
maintain or contribute to any retirement or deferred or incentive compensation
or stock purchase, stock grant or stock option arrangement entered into between
the Company and any current or former officer, consultant, director or employee
of the Company that is not intended to be a tax qualified arrangement under
Section 401(a) of the Code.
3.15 CONTRACTS AND AGREEMENTS. Attached hereto as Schedule 3.15 is
------------------------ -------------
a list and brief description of all written or oral contracts, commitments,
leases, and other agreements (including, without limitation, promissory notes,
loan agreements, and other evidences of indebtedness, guarantees, agreements
with distributors, suppliers, dealers, franchisors and customers, and service
agreements) to which the Company is a party or by which the Company or its
properties are bound pursuant to which the obligations thereunder of either
party thereto are, or are contemplated as being, for any one contract $50,000 or
greater (collectively, the "CONTRACTS"). The Company is not and, to the best
knowledge of Sellers and the Company, no other party thereto is in default (and
no event has occurred which, with the passage of time or the giving of notice,
or both, would constitute a default by the Company) under any of the Contracts,
and the Company has not waived any right under any of the Contracts, except as
noted on Schedule 3.15. All of the Contracts to which the Company is a party
-------------
are legal, valid, binding, enforceable and in full force and effect and will
remain legal, valid, binding, enforceable and in full force and effect on
identical terms immediately after the Closing, except to the extent that
enforceability may be limited by laws affecting creditors' rights and debtors'
obligations generally, and legal limitations relating to remedies of specific
performance and injunctive and other forms of equitable relief. Except as set
forth in Schedule 3.15, the Company has not guaranteed any obligations of any
-------------
other Person. To the best of Seller's and the Company's Knowledge, no material
manufacturer of office equipment sold by the Company will cease doing business
with the Company immediately following the Closing.
3.16 CLAIMS AND PROCEEDINGS. Attached hereto as Schedule 3.16 is a
---------------------- -------------
list and brief description of all claims, actions, suits, proceedings, or
investigations pending or, to the best knowledge and belief of the Sellers or
the Company, threatened against or directly affecting the Company or any of its
properties or assets, at law or in equity, or before or by any court,
municipality or other Governmental Body. Except as set forth on Schedule 3.16,
-------------
none of such claims, actions, suits, proceedings, or investigations, if
adversely determined, will result in any
-14-
<PAGE>
liability or loss which will have a Material Adverse Effect on the Company. The
Company has not been and the Company is not now, subject to any Court Order,
stipulation, or consent of or with any court or Governmental Body. No inquiry,
action or proceeding has been instituted or, to the best knowledge and belief of
the Sellers or the Company, threatened or asserted against the Sellers or the
Company to restrain or prohibit the carrying out of the transactions
contemplated by this Agreement or to challenge the validity of such transactions
or any part thereof or seeking damages on account thereof. To the best knowledge
of the Company and Sellers, except as set forth on Schedule 3.16, there is no
-------------
basis for any such valid claim or action.
3.17 TAXES.
-----
(A) All Federal, foreign, state, county and local income, gross
receipts, excise, property, franchise, license, sales, use, withholding and
other Taxes due from the Company on or before the Closing have been paid and all
Tax Returns which are required to be filed by the Company on or before the date
hereof have been filed within the time and in the manner provided by law, and
all such Tax Returns are true and correct and accurately reflect the Tax
liabilities of the Company. No Tax Returns of the Company or any of the Sellers
are presently subject to an extension of the time to file, except for the
Company's 1996 income Tax Returns which are currently under extension. All
Taxes, assessments, penalties, and interest of the Company which have become due
pursuant to such Tax Returns or any assessments received have been paid or
adequately accrued on the Company's Financial Statements. The provisions for
Taxes reflected on the balance sheets contained in the Financial Statements are
adequate to cover all of the Company's Tax liabilities for the respective
periods then ended and all prior periods. The Company has not executed any
presently effective waiver or extension of any statute of limitations against
assessments and collection of Taxes, and there are no pending or threatened
claims, assessments, notices, proposals to assess, deficiencies, or audits with
respect to any such Taxes of which any of the Sellers or the Company are aware.
For Governmental Bodies with respect to which the Company does not file Tax
Returns, no such Governmental Body has given the Company written notification
that the Company is or may be subject to taxation by that Governmental Body.
The Company has withheld and paid all Taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee, shareholder,
creditor, independent contractor or other party. There are no Tax liens on any
of the property or assets of the Company.
(B) Neither the Company nor any other corporation has filed an
election under Section 341(f) of the Code that is applicable to the Company or
any assets held by the Company. The Company has not made any payments, is not
obligated to make any payments, and is not a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Code Sec. 280G. The Company has not been a United States real
property holding corporation within the meaning of Code Sec. 897(c)(2) during
the applicable period specified in Code Sec. 897(c)(1)(A)(ii). The Company is
not a party to any Tax allocation or sharing agreement. The Company has not and
has never been (nor does the Company have any liability for unpaid Taxes because
it once was) a member of an affiliated group during any part of which return
year any corporation other than the
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<PAGE>
Company also was a member of the affiliated group. The Company has made an
election to be taxed under subchapter S of the Code. The Company's election to
be taxed under subchapter S of the Code is valid, legally binding and in full
force and effect.
(C) No transaction contemplated by this Agreement is subject to
withholding under Section 1445 of the Code and no stock transfer taxes, real
estate transfer taxes or similar taxes will be imposed upon the transfer and
sale of the Shares pursuant to this Agreement.
3.18 PERSONNEL. Attached hereto as Schedule 3.18 is a list of the
--------- -------------
names and annual rates of compensation of the directors and executive officers
of the Company, and of the employees of the Company whose annual rates of
compensation during the fiscal year ended December 31, 1996 (including base
salary, bonus and incentive pay) exceed (or by December 31, 1997 are expected to
exceed) $60,000. Schedule 3.18 also summarizes the bonus, profit sharing,
-------------
percentage compensation, company automobile, club membership, and other like
benefits, if any, paid or payable to such directors, officers, and employees
during the Company's fiscal year ended December 31, 1996 and to the date hereof.
Schedule 3.18 also contains a brief description of all material terms of
- -------------
employment agreements to which the Company is a party and all severance benefits
which any director, officer or employee of the Company is or may be entitled to
receive. The employee relations of the Company are generally good and there is
no pending or, to the best knowledge of Sellers or the Company, threatened labor
dispute or union organization campaign. None of the employees of the Company
are represented by any labor union or organization. The Company is in
compliance in all material respects with all Requirements of Laws respecting
employment and employment practices, terms and conditions of employment, and
wages and hours, and are not engaged in any unfair labor practices. Neither the
Company or Sellers have been advised, or has good reason to believe, that any of
the persons whose names are set forth on Schedule 3.18 or any other employee
-------------
will not agree to remain employed by the Company after the consummation of the
transactions contemplated hereby. There is no unfair labor practice claim
against the Company before the National Labor Relations Board, or any strike,
dispute, slowdown, or stoppage pending or, to the best knowledge of the Company
and Sellers, threatened against or involving the Company, and none has occurred.
3.19 BUSINESS RELATIONS. Neither the Company nor Sellers knows or has
------------------
good reason to believe that any customer or supplier of the Company will cease
to do business with the Company after the consummation of the transactions
contemplated hereby in the same manner and at the same levels as previously
conducted with the Company except for any reductions which do not result in a
Material Adverse Change. Neither Sellers or the Company have received any
written notice of any material disruption (including delayed deliveries or
allocations by suppliers) in the availability of any material portion of the
materials used by the Company nor are the Company or Sellers aware of any facts
which could lead them to believe that the Business will be subject to any such
material disruption.
3.20 ACCOUNTS RECEIVABLE. All of the accounts, notes, and loans
-------------------
receivable that have been recorded on the books of the Company are bona fide and
represent amounts
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<PAGE>
validly due for goods sold or services rendered and except as disclosed on
Schedule 3.20 all such amounts (net of any allowance for doubtful accounts,
- -------------
plus an additional allowance of $25,000) will be collected in full within 180
days following the Closing Date. Except as disclosed on Schedule 3.20 hereto
-------------
(a) all of such accounts, notes, and loans receivable are free and clear of any
Encumbrances; (b) no claims of offset have been asserted in writing against any
of such accounts, notes, or loans receivable; and (c) none of the obligors of
such accounts, notes, or loans receivable has given written notice that it will
or may refuse to pay the full amount or any portion thereof.
3.21 BANK ACCOUNTS. Attached hereto as Schedule 3.21 is a list of
------------- -------------
all banks or other financial institutions with which the Company has an account
or maintains a safe deposit box, showing the type and account number of each
such account and safe deposit box and the names of the persons authorized as
signatories thereon or to act or deal in connection therewith.
3.22 WARRANTIES. Except for warranty claims that are typical and in
----------
the ordinary course of the Business, no written claim for breach of product or
service warranty to any customer has been made against the Company since January
1, 1997. To the best knowledge of Sellers and the Company, no state of facts
exists, and no event has occurred, which could reasonably be expected to form
the basis of any present claim against the Company for liability on account of
any express or implied warranty to any third party in connection with products
sold or services rendered by the Company.
3.23 BROKERS. Neither the Company nor Sellers have engaged, or caused
-------
to be incurred any liability to any finder, broker, or sales agent in connection
with the origin, negotiation, execution, delivery, or performance of this
Agreement or the transactions contemplated hereby.
3.24 INTEREST IN COMPETITORS, SUPPLIERS, CUSTOMERS, ETC. Except as
--------------------------------------------------
set forth in Schedule 3.5, no officer, director, or shareholder of the Company
------------
or any affiliate of any such officer, director, or shareholder, has any
ownership interest in any competitor, supplier, or customer of the Company
(other than ownership of securities of a publicly-held corporation of which such
Person owns, or has real or contingent rights to own, less than one percent of
any class of outstanding securities) or, except for the Existing Building, any
property used in the operation of the Business.
3.25 INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS, SHAREHOLDERS, AND
---------------------------------------------------------------
EMPLOYEES. Attached hereto as Schedule 3.25 is a list and brief description
- --------- -------------
of the payment terms of all indebtedness of the Company to officers, directors,
shareholders, and employees of the Company and all indebtedness of officers,
directors, shareholders, and employees of the Company to the Company, excluding
indebtedness for travel advances or similar advances for expenses incurred on
behalf of and in the ordinary course of the Business, consistent with past
practices.
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<PAGE>
3.26 UNDISCLOSED LIABILITIES. Except as indicated in the Schedules
-----------------------
hereto, the Company does not have any material liabilities (whether absolute,
accrued, contingent or otherwise), of a nature required by GAAP to be reflected
on a corporate balance sheet or disclosed in the notes thereto, except such
liabilities which are accrued or reserved against in the Financial Statements or
disclosed in the notes thereto, including without limitation any accounts
payable or service liabilities of the Company incurred prior to the Closing
Date, other than liabilities incurred in the ordinary course of business since
the date of the latest of such Financial Statements.
3.27 INFORMATION FURNISHED. The Company and Sellers have made
---------------------
available to Global true and correct copies of all material corporate records of
the Company and all material agreements, documents, and other items listed on
the Schedules to this Agreement or referred to in Section 2 of this Agreement,
---------
and neither this Agreement, the Schedules hereto, nor any written information,
instrument, or document delivered to Global or ESIAC pursuant to this Agreement
contains any untrue statement of a material fact or omits any material fact
necessary to make the statements herein or therein, as the case may be, not
misleading.
In making the representations and warranties set forth above, the term
"Material" or "material" shall, where appropriate in context of its use, be
deemed to mean an amount of money greater than $50,000, the terms "Material
Adverse Change," "material adverse trend," "Material Adverse Effect," or any
other term of like import shall mean the occurrence of any single event, or any
series of related events, or set of related circumstances, which proximately
causes an actual, direct economic loss to the Company, taken as a whole, in
excess of $25,000 per occurrence or $50,000 in the aggregate. The term
"knowledge" shall mean actual knowledge after reasonable inquiry of the
employees of the Company with responsibility for the applicable subject matter.
ARTICLE IV
GLOBAL'S AND ESIAC'S REPRESENTATIONS AND WARRANTIES
Global and ESIAC represent and warrant to Sellers as follows:
4.1 DUE ORGANIZATION. Each of Global and ESIAC is a corporation
----------------
duly organized, validly existing, and in good standing under the laws of the
State of Delaware and has full corporate power and authority to execute, deliver
and perform this Agreement and to carry out the transactions contemplated
hereby.
4.2 DUE AUTHORIZATION. The execution, delivery and performance of
-----------------
this Agreement has been duly authorized by all necessary corporate action of
Global and ESIAC, and the Agreement has been duly and validly executed and
delivered by Global and ESIAC and constitutes the valid and binding obligation
of Global and ESIAC, enforceable in accordance with its terms, except to the
extent that enforceability may be limited by laws affecting creditors' rights
and debtors' obligations generally, and legal limitations relating to remedies
of specific
-18-
<PAGE>
performance and injunctive and other forms of equitable relief. The execution,
delivery, and performance of this Agreement (as well as all other instruments,
agreements, certificates or other documents contemplated hereby) by Global and
ESIAC, do not (a) violate any Requirements of Laws or Court Order of any
Governmental Body applicable to Global or its property or ESIAC or its property,
(b) violate or conflict with, or permit the cancellation of, or constitute a
default under any agreement to which Global or ESIAC is a party or by which it
or its property is bound, (c) permit the acceleration of the maturity of any
indebtedness of, or any indebtedness secured by the property of, Global or
ESIAC, or (d) violate or conflict with any provision of the charter or bylaws of
Global or ESIAC.
4.3 NO BROKERS. Neither Global nor ESIAC has engaged, or caused to
----------
be incurred any liability to any finder, broker or sales agent in connection
with the origin, negotiation, execution, delivery, or performance of this
Agreement or the transactions contemplated hereby.
4.4 INVESTMENT. ESIAC will acquire the Shares for investment and for
----------
its own account and not with a view to the distribution thereof; provided,
however, that as sole stockholder of ESIAC, Global will cause ESIAC to merge
with and into the Company immediately subsequent to the Closing and Global will
hold the shares of the surviving corporation subsequent to such merger for
investment and for its own account and not with a view to the distribution
thereof.
ARTICLE V
COVENANTS OF THE COMPANY AND SELLERS
5.1 CONSENTS OF OTHERS. Prior to the Closing, the Company and
------------------
Sellers shall use their best efforts to obtain and to cause the Company to
obtain all authorizations, consents and permits required of the Company and
Sellers to permit them to consummate the transactions contemplated by this
Agreement. Sellers shall have obtained the written consent of the lessors of
the Buildings to the transactions contemplated by the Agreement.
5.2 SELLERS' EFFORTS. The Company and Sellers shall use all
----------------
reasonable efforts to cause all conditions for the Closing to be met.
5.3 POWERS OF ATTORNEY. The Company and Sellers shall cause the
------------------
Company to terminate at or prior to Closing all powers of attorney granted by
the Company, other than those relating to service of process, qualification or
pursuant to governmental regulatory or licensing agreements, or representation
before the IRS or other government agencies.
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<PAGE>
ARTICLE VI
POST-CLOSING COVENANTS
6.1 GENERAL. In case at any time after the Closing any further
-------
action is legally necessary or reasonably desirable (as determined by Global and
Mr. Kamarek) to carry out the purposes of this Agreement, each of the parties
will take such further action (including the execution and delivery of such
further instruments and documents) as any other party reasonably may request,
all at the sole cost and expense of the requesting party (unless the requesting
party is entitled to indemnification therefor under Article VIII below). The
Sellers acknowledge and agree that from and after the Closing Global will be
entitled to possession of all documents, books, records, agreements, and
financial data of any sort relating to the Company, which shall be maintained at
the chief executive office of the Company; provided, however, that each Seller
shall be entitled to reasonable access to and to make copies of such books and
records at his or her sole cost and expense and Global will maintain all of the
same for a period of at least three (3) years after Closing. Thereafter, the
Company will offer such documentation to Sellers before disposal thereof.
6.2 TRANSITION. For a period of four (4) years following Closing,
----------
the Sellers will not take any action that primarily is designed or intended to
have the effect of discouraging any lessor, licensor, customer, supplier, or
other business associate of the Company from maintaining the same business
relations with the Company after the Closing as it maintained with the Company
prior to the Closing, if such action could reasonably be expected to have a
Material Adverse Effect. For a period of four (4) years following Closing, the
Sellers will refer all customer inquiries relating to the Business to the
Company. The Company and certain of the Sellers shall continue to have a close
business relationship with ESR following the Closing, consistent with the
description of their relationship described in Schedule 3.5. It is expressly
------------
understood and agreed by the parties that certain of those relationships and
activities between the Company and ESR, and the relationships and activities
between ESR and those of the Sellers having ownership interests in ESR are not
at arms-length; provided, however, that the parties further agree that any new
relationships or activities among such parties after the Closing shall be
subject to Thomas S. Johnson's approval, provided that this provision shall not
be construed in any way to give Thomas S. Johnson any approval or other rights
with regard to any sale, transfer or other disposition of the stock or assets of
ESR.
6.3 CONFIDENTIALITY. The Sellers will treat and hold as such all
---------------
Confidential Information, refrain from using any of the Confidential Information
except in connection with this Agreement or otherwise for the benefit of the
Company or Global for a period of three (3) years from the Closing, and deliver
promptly to Global or destroy, at the written request and option of Global, all
tangible embodiments (and all copies) of the Confidential Information which are
in their possession except as otherwise permitted herein. In the event that any
Seller is requested or required (by oral question or written request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar legal proceeding) to disclose any Confidential
Information, that such Seller will notify Global promptly of the request or
requirement.
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<PAGE>
6.4 COVENANT NOT TO COMPETE. For and in consideration of the
-----------------------
allocation of $280,000 of the Purchase Price paid to the Sellers by Global, each
Seller covenants and agrees, for a period of four (4) years from and after the
Closing Date, that he or she will not, directly or indirectly without the prior
written consent of Global (which shall not be unreasonably withheld), for or on
behalf of any entity:
(A) become interested or engaged, directly or indirectly, as a
shareholder, bondholder, creditor, officer, director, partner, agent, contractor
with, employer or representative of, or in any manner associated with, or give
financial, technical or other assistance to, any Person, firm or corporation for
the purpose of engaging in the copier/ office equipment dealer or service
business, or the computer systems integration or computer equipment
manufacturing or distribution business in competition with the Company, within
the greater of (i) a 100 mile radius of the Company's office facilities in
Virginia Beach, Virginia and Newport News, Virginia (the "CURRENT TRADE AREA")
or (ii) in any geographic area in which the Company currently conducts business;
(B) enter into any agreement with, service, assist or solicit
the business of any customers of the Company for the purpose of providing office
equipment sales or service to such customers in competition with the Company or
to cause them to reduce or end their business with the Company; or
(C) enter into any agreement with, or solicit the employment of
employees, consultants or representatives of the Company for the purpose of
causing them to leave the employment of the Company;
Provided, however, that (i) no owner of less than one percent (1%) of the
outstanding stock of any publicly-traded corporation, and no owner of any amount
of Global stock, shall be deemed to be in a violation of this Section 6.4 solely
-----------
by reason thereof, and (ii) no relationship or activities of any of the Sellers
with ESR outside of the Current Trade Area, within the Richmond metropolitan
area or in any other area in which such Seller currently conducts business with
ESR that are consistent with the provisions of Section 6.2 above shall be deemed
-----------
to be in violation of these provisions.
6.5 ADDITIONAL MATTERS.
------------------
(A) The Sellers shall cause the Company to file with the
appropriate governmental authorities all Tax Returns required to be filed by it
for any taxable period ending prior to the Closing Date and the Company shall
remit any Taxes due in respect of such Tax Returns. In addition, Sellers shall
cause Edmondson, Ledbetter & Ballard, CPA to prepare a short period tax return
for the Company covering the period January 1, 1997 through the Effective Date.
The cost of preparation of such short period tax return shall be paid for by
Sellers.
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<PAGE>
(B) Global and Sellers recognize that each of them will need
access, from time to time, after the Closing Date, to certain accounting and Tax
records and information held by Global and/or the Company to the extent such
records and information pertain to events occurring on or prior to the Closing
Date; therefore, Global agrees to cause the Company to (A) use its best efforts
---------
to properly retain and maintain such records for a period of six (6) years from
the date the Tax Returns for the year in which the Closing occurs are filed or
until the expiration of the statute of limitations with respect to such year,
whichever is later, and (B) allow the Sellers and their agents and
representatives at times and dates mutually acceptable to the parties, to
inspect, review and make copies of such records as such other party may deem
necessary or appropriate from time to time, such activities to be conducted
during normal business hours and at the other party's expense.
(C) SECTION 338(H)(10) ELECTION. The Sellers (as requested by
---------------------------
Global at Global's expense) and Global shall join in making a timely election
(but in no event later than 180 days following the Closing) under Section
338(h)(10) of the Code (including the prerequisite election under Section 338 of
the Code) and any similar state law provisions in all applicable states which
permit corporations to make such elections, with respect to the sale and
purchase of the Shares pursuant to this Agreement, and each party shall exert
reasonable effort to provide the others all necessary information to permit such
elections to be made. Global and the Sellers (as requested by Global at
Global's expense) shall, as promptly as practicable following the Closing Date,
take all reasonable actions necessary and appropriate (including filing such
forms, returns, schedules and other documents as may be required) to effect and
preserve timely elections; provided, however, that Global shall be the party
responsible for preparing and filing the forms, returns, schedules and other
documents necessary for making an effective and timely election. All additional
Taxes attributable to the elections made pursuant to this Section 6.5(c) shall
--------------
be the liability of Global which shall (upon written notification from Sellers)
promptly reimburse Sellers (on a grossed up basis) for all such taxes that are
incurred by them as a result of such election. In connection with such
elections, within sixty (60) days following the Closing Date, Global and the
Sellers shall act together in good faith to determine and agree upon the "deemed
sales price" to be allocated to each asset of the Company in accordance with
Treasury Regulation Section 1.338(h)(10)-1(f) and the other regulations under
Section 338 of the Code. Notwithstanding the generality of the immediately
preceding sentence, Global and the Sellers agree that the "deemed sales price"
shall be allocated to the monetary assets of the Company at their fair market
value as of the Closing Date as determined as part of the determination of the
Working Capital of the Company in accordance with Article II hereof, $280,000
shall be allocated to the covenant not to compete contained in Section 6.4
-----------
hereof, and balance of the "deemed sales price" shall be allocated to the fixed
assets, good will and other intangible assets of the Company. Both Global and
Sellers shall report the tax consequences of the transactions contemplated by
this Agreement consistently with such allocations and shall not intentionally
take any position inconsistent with such allocations in any Tax Return or
otherwise. In the event that Global and the Sellers are unable to agree as to
such allocations, Global's reasonable positions with respect to such allocations
shall control.
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<PAGE>
(D) Global and ESIAC recognize and acknowledge that, in
connection with and as an integral part of, the sale to ESIAC of all of Seller's
Shares in the Company, prior to Closing, the Company will (i) transfer the
Existing Building (including the land on which it is situated) to Kamarek Group
I, LLC, and (ii) distribute, pro rata, to the Sellers 100% of the membership
interest in Kamarek Group I, LLC in partial redemption of the Sellers' Shares in
the Company (if necessary to achieve Sellers' desired tax result). Global and
ESIAC understand and agree that the Existing Building will not be an asset of
the Company at the time of the purchase by ESIAC of the Shares in the Company.
ARTICLE VII
CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING
7.1 CONDITIONS TO GLOBAL'S AND ESIAC'S OBLIGATIONS. Subject to
----------------------------------------------
Section 2.4 above, the obligation of Global and ESIAC under this Agreement to
- -----------
consummate the Closing is subject to the conditions that:
(A) COVENANTS, REPRESENTATIONS AND WARRANTIES. The Company
-----------------------------------------
and Sellers shall have performed in all material respects all obligations and
agreements and complied in all material respects with all covenants contained in
this Agreement to be performed and complied with by each of them prior to or at
the Closing Date. The material representations and warranties of the Company
and Sellers set forth in this Agreement shall be accurate in all material
respects at and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date except for any changes resulting from
activities or transactions which may have taken place after the date hereof and
which are permitted or contemplated by the Agreement or which have been entered
into in the ordinary course of business and except to the extent that such
representations and warranties are expressly made as of another specified date
and, as to such representation, the same shall be true in all material respects
as of such specified date.
(B) CONSENTS. All statutory requirements for the valid
--------
consummation by the Company and Sellers of the transactions contemplated by this
Agreement shall have been fulfilled and all authorizations, consents and
approvals, including expiration or early termination of all waiting periods
under the HSR Act and those of all federal, state, local and foreign
governmental agencies and regulatory authorities required to be obtained in
order to permit the consummation of the transactions contemplated hereby shall
have been obtained in form and substance reasonably satisfactory to Global
unless such failure could not reasonably be expected to have a Material Adverse
Effect. All approvals of the Board of Directors and shareholders of the Company
necessary for the consummation of this Agreement and the transactions
contemplated hereby shall have been obtained.
(C) LEASES. The lessors of the Buildings shall have provided
------
an Estoppel Certificate to Global's lenders in the form of Exhibit B hereto.
---------
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<PAGE>
(D) DISCHARGE OF INDEBTEDNESS AND LIENS. Sellers and the
-----------------------------------
Company shall have provided for the payment in full by the Company of all Funded
Indebtedness of the Company and all extended credit from vendors at the Closing
(other than customary accounts payable outstanding on 90 day or less payment
terms in accordance with past practices). Such Funded Indebtedness, if any, as
of August 1, 1997, is listed on Schedule 7.1(d) hereto. Sellers shall have also
---------------
provided for the termination of all Encumbrances of record on the properties of
the Company, except for those Encumbrances listed on Schedule 3.9 other than
------------
Signet Bank, N.A. and Permitted Exceptions. All liens or UCC filings of Signet
Bank, NA., shall have been terminated as of the Closing.
(E) MATERIAL ADVERSE CHANGE. There has been no Material
-----------------------
Adverse Change with respect to the Company since June 30, 1997.
(F) TRANSFER TAXES. Sellers shall be responsible for all
--------------
stock transfer or gains taxes imposed on Sellers incurred in connection with
this Agreement.
(G) FINANCIAL CONDITION. The Company's total adjusted Working
-------------------
Capital as projected at the Closing shall be greater than $3,000,000 and the
Company shall continue to have cash on hand (included in Working Capital) at the
Closing (in an amount not less than $600,000 or, if less than $600,000, the
Purchase Price will be reduced further by the amount of such deficiency), to
continue to operate the Business in the ordinary course.
(H) [INTENTIONALLY OMITTED]
(I) DOCUMENTS TO BE DELIVERED BY SELLERS AND THE COMPANY. The
----------------------------------------------------
following documents shall be delivered at the Closing by Sellers and the
Company:
(I) OPINION OF SELLERS' COUNSEL. Global shall have
---------------------------
received an opinion of counsel to the Company and Mr. Kamarek, dated
the Closing Date, in substantially the same form as the form of
opinion that is Exhibit C hereto.
---------
(II) CERTIFICATES. Global shall have received an
------------
officer's certificate and a secretary's certificate of the Company
executed by officers of the Company, dated the Closing Date, in
substantially the same forms as the forms of certificates that are
Exhibit D hereto.
---------
(III) RELEASE. Sellers shall have furnished the Company
-------
with a general release of liabilities, excluding compensation and
employee benefits as well as obligations pursuant to this Agreement,
in the form attached as Exhibit E hereto.
---------
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<PAGE>
(IV) ESCROW AGREEMENT. Sellers shall have delivered to
----------------
Global and ESIAC at the Closing the duly executed Escrow Agreement
required pursuant to Section 2.5 hereof.
-----------
(V) EMPLOYMENT AGREEMENT. Mr. Kamarek shall have duly
--------------------
executed and delivered the Employment Agreement in substantially the
same form attached as Exhibit F hereto, pursuant to which he will be
---------
employed by the Company following the Closing.
(VI) OFFICE LEASE. The lease of the Existing Building
------------
will be for a term of five (5) years following the Closing at the rate
of $11.95 per square foot, such lease shall have been executed and
delivered by the owner of the Existing Building, and Sellers shall
have delivered to Global an Estoppel Certificate of the Landlord of
the Existing Building to Global's lenders in the same form attached as
Exhibit B hereto.
---------
(VII) STOCK CERTIFICATES. Sellers shall have delivered
------------------
the Shares accompanied by duly executed stock powers, together with
any stock transfer stamps or receipts for any transfer taxes required
to be paid thereon.
7.2 CONDITIONS TO SELLERS AND THE COMPANY'S OBLIGATIONS. The
---------------------------------------------------
obligation of Sellers and the Company under this Agreement to consummate the
Closing is subject to the conditions that:
(A) COVENANTS, REPRESENTATIONS AND WARRANTIES. Global and
-----------------------------------------
ESIAC shall have performed in all material respects all obligations and
agreements and complied in all material respects with all covenants contained in
this Agreement to be performed and complied with by Global or ESIAC prior to or
at the Closing and the representations and warranties of Global and ESIAC set
forth in Article IV hereof shall be accurate in all material respects, at and as
of the Closing Date, with the same force and effect as though made on and as of
the Closing Date except for any changes resulting from activities or
transactions which may have taken place after the date hereof and which are
permitted or contemplated by the Agreement or which have been entered into in
the ordinary course of the Business and except to the extent that such
representations and warranties are expressly made as of another specified date
and, as to such representations, the same shall be true as of such specified
date.
(B) CONSENTS. All statutory requirements for the valid
--------
consummation by Global and ESIAC of the transactions contemplated by this
Agreement shall have been fulfilled and all authorizations, consents and
approvals, including expiration or early termination of all waiting periods
under the HSR Act and those of all federal, state, local and foreign
governmental agencies and regulatory authorities required to be obtained in
order to permit the consummation by Global and ESIAC of the transactions
contemplated hereby shall have been obtained unless such failure shall not have
a Material Adverse Effect on the Business. Global
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<PAGE>
shall have used its reasonable best efforts to have obtained the release of the
Sellers from all personal guarantees with respect to the Company.
(C) DOCUMENTS TO BE DELIVERED BY GLOBAL AND ESIAC. The
---------------------------------------------
following documents shall be delivered at the Closing by Global and ESIAC:
(I) OPINION OF GLOBAL'S AND ESIAC'S COUNSEL. Sellers
---------------------------------------
shall have received an opinion of Davis, Graham & Stubbs LLP, counsel
to Global and ESIAC, dated the Closing Date, in substantially the same
form as the form of opinion that is Exhibit G hereto.
---------
(II) CERTIFICATES. Sellers shall have received an
------------
officers' certificate and a secretary's certificate executed by
officers of Global and ESIAC, dated the Closing Date, in substantially
the same forms as the forms of certificates that are Exhibit H hereto.
---------
(III) ESCROW AGREEMENT. Global and ESIAC shall have
----------------
delivered to Sellers at the Closing the duly executed Escrow Agreement
required pursuant to Section 2.5 hereof.
-----------
(IV) EMPLOYMENT AGREEMENT. Global shall have caused the
--------------------
Company to duly execute and deliver the Employment Agreement with Mr.
Kamarek in the same form attached as Exhibit F hereto, pursuant to
---------
which he will be employed by the Company following the Closing.
(V) LEASE. Global shall have caused the Company to duly
-----
execute and deliver the lease for the Existing Building appended
hereto as Exhibit I.
---------
(VI) PURCHASE PRICE. Sellers shall have received the
--------------
Purchase Price for the Shares.
(D) RIGHT OF REINVESTMENT. The Persons designated by Mr.
---------------------
Kamarek including Sellers and others (not to exceed nine (9) Persons in addition
to the Sellers) shall have been offered the right to invest up to $1,680,000 in
the capital stock of Global on the same terms provided to other recent outside
investors in Global. The allocation of such capital stock shall be made by Mr.
Kamarek, subject to Global's prior written consent (not to be unreasonably
withheld).
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<PAGE>
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION OF GLOBAL. Except as provided in Section 8.6,
------------------------- -----------
as Global's and ESIAC'S sole and exclusive remedy for any breach by the Sellers
hereunder, Sellers agree to jointly and severally indemnify and hold harmless
Global and ESIAC and each officer, director, and affiliate of Global and ESIAC,
including without limitation the Company or any successor of the Company
(collectively, the "INDEMNIFIED PARTIES") from and against any and all damages
(excluding consequential, incidental and indirect damages), losses (excluding
lost profits), claims, liabilities, demands, charges, suits, penalties, costs
and expenses (including court costs and reasonable attorneys' fees and expenses
incurred in investigating and preparing for any litigation or proceeding)
(collectively, the "INDEMNIFIABLE COSTS"), which any of the Indemnified Parties
may sustain, or to which any of the Indemnified Parties may be subjected,
arising out of (A) any misrepresentation, breach or default by Sellers or the
Company prior to the Closing of or under any of the representations, covenants,
agreements or other provisions of this Agreement or any agreement or document
executed in connection herewith; (B) the assertion and final determination of
any claim or liability against the Company or any of the Indemnified Parties by
any Person based upon the facts which form the alleged basis for any litigation
to the extent it should have been, but was not, reserved for in the Financial
Statements in accordance with GAAP; (C) the Company's tortious acts or omissions
to act prior to Closing for which the Company did not carry liability insurance
for themselves as the insured party, whether or not such acts or omissions to
act result in a breach or violation of any representation or warranty; and (D)
any Taxes or other costs attributable solely to a failure on the part of the
Company to qualify, at or prior to the Closing, as an "S Corporation" for
federal and/or state income Tax purposes.
8.2 DEFENSE OF CLAIMS. If any legal proceeding shall be
-----------------
instituted, or any claim or demand made, against any Indemnified Party in
respect of which Sellers may be liable hereunder, such Indemnified Party shall
give prompt written notice thereof to Sellers and, except as otherwise provided
in Section 8.4 below, Sellers shall have the right to defend, or cause the
-----------
Company or its successors to defend, any litigation, action, suit, demand, or
claim for which it may seek indemnification unless, in the reasonable judgment
of Global, such litigation, action, suit, demand, or claim, or the resolution
thereof, would have an ongoing effect on Global, ESIAC, the Company or its
successors, and such Indemnified Party shall extend reasonable cooperation in
connection with such defense, which shall be at Sellers' expense if it is
determined that indemnification for such legal proceeding is required hereunder.
In the event Sellers fail or refuse to defend the same within a reasonable
length of time, the Indemnified Parties shall be entitled to assume the defense
thereof, and Sellers shall be liable to repay the Indemnified Parties for all
expenses reasonably incurred in connection with said defense (including
reasonable attorneys' fees and settlement payments) if it is determined that
such request for indemnification was proper. If Sellers shall not have the
right to assume the defense of any litigation, action, suit, demand, or claim in
accordance with either of the two preceding sentences, the Indemnified Parties
shall have the absolute right to control the defense of and to settle, in their
sole discretion and without the consent of Sellers, such litigation, action,
suit,
-27-
<PAGE>
demand, or claim, but Sellers shall be entitled, at their own expense, to
participate in such litigation, action, suit, demand, or claim.
8.3 ESCROW CLAIM. If any claim for indemnification is made by an
------------
Indemnified Party pursuant to this Article VIII prior to the expiration of the
Escrow Period, such Indemnified Party shall apply to the Escrow Agent provided
in Section 2.5 of this Agreement for reimbursement of such claim in accordance
-----------
with the provisions of the Escrow Agreement.
8.4 TAX AUDITS, ETC. In the event of an audit of a Tax Return
---------------
of the Company with respect to which an Indemnified Party might be entitled to
indemnification pursuant to this Article VIII, Global shall have the right to
control any and all such audits which may result in the assessment of additional
Taxes against the Company and any and all subsequent proceedings in connection
therewith, including appeals (subject to the prior written consent of Sellers,
which shall not unreasonably be withheld and subject to the right of Sellers to
have their accountants and attorneys consult with Global on such audits or
procedures at Sellers' expense). Sellers shall cooperate fully in all matters
relating to any such audit or other Tax proceeding (including according access
to all records pertaining thereto), and will execute and file any and all
consents, powers of attorney, and other documents as shall be reasonably
necessary in connection therewith; provided, however, that none of the Sellers
will be obligated to take any such action that would or could reasonably be
expected to result in incurrence of any liability by such Seller, except as
required by applicable Tax law (provided, however, that if such Tax law
specifies that more than one option may be made to comply with such law, nothing
contained herein shall require Sellers to make the option most adverse to them).
If additional Taxes are payable by the Company as a result of any such audit or
other proceeding, Sellers shall be responsible for and shall promptly pay all
Taxes, interest, and penalties to which any of the Indemnified Parties shall be
entitled to indemnification.
8.5 INDEMNIFICATION OF SELLERS. Global agrees to indemnify and
--------------------------
hold harmless Sellers and the Company and each officer, director, stockholder or
affiliate of the Company, from and against any Indemnifiable Costs arising out
of (A) any material misrepresentation, breach or default by Global or ESIAC of
or under any of the covenants, agreements or other provisions of this Agreement
or any agreement or document executed in connection herewith, and (B) any
tortious acts or omissions by Global or ESIAC before or after or the Company
after, the Closing. In addition, the Company and Global shall indemnify the
Sellers for (A) any payment or satisfaction of any guarantees by Sellers of the
Company's obligations occurring after the Closing Date and (B) any additional
income taxes (on a grossed-up basis) incurred by the Sellers, if any, arising
out of any inclusion of the activities of the Company during the period from the
Effective Date through the Closing Date on Sellers' income tax returns.
8.6 LIMITS ON INDEMNIFICATION. All Indemnifiable Costs sought by
-------------------------
any party hereunder shall be net of any insurance proceeds received by such
Person with respect to such claim (less the present value of any premium
increases occurring as a result of such claim). Except for any claims for
breach of the representations and warranties of the Sellers under
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<PAGE>
[******Certain information on this page has been omitted and filed
separately with the Securities and Exchange Commission. Confidential
treatment has been requested with respect to the omitted portions.]
Sections 3.1, 3.2, 3.3 or 3.17 hereof and except for the indemnification for
- ------------------------------
Taxes set forth in the last sentence of Section 8.5 hereof (the indemnification
-----------
for which shall expire on the expiration of the applicable statute of
limitations), the indemnification provided under this Article VIII shall expire
on the second anniversary of the Closing Date. The Sellers shall not be
obligated to pay any amounts for indemnification under this Article VIII until
the aggregate indemnification obligation hereunder exceeds $25,000, whereupon
Sellers shall be liable for all amounts in excess of $25,000 for which
indemnification may be sought. Notwithstanding the foregoing, in no event shall
the aggregate liability of Sellers to Global and ESIAC exceed [**] (except for
claims made for any breach of the representations and warranties of Sellers
under Sections 3.1, 3.2, 3.3, or 3.17 hereof, as to which the limit of
---------------------- ----
indemnification hereunder shall be the Purchase Price); nor shall any of the
Sellers be liable under this Article VIII or any other provision of this
------------
Agreement (or any instrument, agreement, certificate or other document
contemplated by or entered into pursuant to this Agreement) for any amount in
excess of the portion of the Purchase Price paid to such Seller, reduced by all
income taxes paid or payable by such Seller; provided, however, that the
limitation of such Seller's indemnification obligation to such Seller's portion
of the Purchase Price (described above) shall not apply if such Seller
individually breaches Section 3.1 or 3.2 hereof (in which case, the breaching
----------- ---
Seller shall be liable to the fullest extent described in this Section). However
nothing in this Article VIII shall limit Global, ESIAC or Sellers in exercising
or securing any remedies provided by applicable common law with respect to the
conduct of Sellers or Global in connection with this Agreement or in the amount
of damages that it can recover from the other in the event that Global
successfully proves intentional fraud or intentional fraudulent conduct in
connection with this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 MODIFICATIONS. Any amendment, change or modification of this
-------------
Agreement shall be void unless in writing and signed by all parties hereto. No
failure or delay by any party hereto in exercising any right, power or privilege
hereunder (and no course of dealing between or among any of the parties) shall
operate as a waiver of any such right, power or privilege. No waiver of any
default on any one occasion shall constitute a waiver of any subsequent or other
default. No single or partial exercise of any such right, power or privilege
shall preclude the further or full exercise thereof.
9.2 NOTICES. All notices and other communications hereunder shall
-------
be in writing and shall be deemed to have been duly given when personally
delivered, or 48 hours after deposited in the United States mail, first-class,
postage prepaid, or by facsimile addressed to the respective parties hereto as
follows:
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<PAGE>
Global or ESIAC:
---------------
Global Imaging Systems Inc.
P.O. Box 273478
Tampa, Florida 33688-3478
Attention: Thomas Johnson, President
Fax No.: (813) 264-7877
Tel No.: (813) 960-5508
With a copy to:
Davis, Graham & Stubbs LLP
1314 Nineteenth Street, N.W.
Washington, D.C. 20036
Attention: Christopher J. Hagan
Fax No.: (202) 293-4794
Tel No.: (202) 822-1035
The Company or Sellers:
----------------------
c/o Electronic Systems, Inc.
361 Southport Circle
Virginia Beach, Virginia 23452
Attention: William G. Kamarek
Fax No.: (757) 497-2095
Tel No.: (757) 497-8000
With a copy to:
Kaufman & Canoles
One Commercial Place
Norfolk, Virginia 23514-3037
Attention: Robert E. Smartschan
Fax No.: (757) 624-3169
Tel No.: (757) 624-3221
or to such other address as to any party hereto as such party shall designate by
like notice to the other parties hereto.
9.3 COUNTERPARTS. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original but all of which
counterparts collectively shall constitute one instrument, and in making proof
of this Agreement, it shall never be necessary to produce or account for more
than one such counterpart.
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<PAGE>
9.4 EXPENSES. Each of the parties hereto will bear all costs,
--------
charges and expenses incurred by such party in connection with this Agreement
and the consummation of the transactions contemplated herein, provided, however,
that Sellers shall bear all costs and expenses of (i) any broker involved in
this transaction and (ii) all legal expenses of Sellers or the Company with
respect to this Agreement and the transactions contemplated hereby.
9.5 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding
--------------------------
upon and inure to the benefit of the Company, Global, ESIAC and Sellers, their
heirs, representatives, successors, and permitted assigns, in accordance with
the terms hereof. This Agreement shall not be assignable by the Company or
Sellers without the prior written consent of Global. This Agreement shall be
assignable by Global to a wholly-owned subsidiary of Global without the prior
written consent of Sellers, but any such assignment shall not relieve Global or
ESIAC of its obligations hereunder.
9.6 ENTIRE AND SOLE AGREEMENT. This Agreement and the other
-------------------------
schedules and agreements referred to herein, constitute the entire agreement
between the parties hereto and supersede all prior agreements, representations,
warranties, statements, promises, information, arrangements and understandings,
whether oral or written, express or implied, with respect to the subject matter
hereof.
9.7 GOVERNING LAW. This Agreement and its validity, construction,
-------------
enforcement, and interpretation shall be governed by the substantive laws of the
Commonwealth of Virginia.
9.8 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
-----------------------------------------------------
Regardless of any investigation at any time made by or on behalf of any party
hereto or of any information any party may have in respect thereof, all
covenants, agreements, representations, and warranties and the related
indemnities made hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall survive the Closing for a period of two
(2) years, provided (a) the representations and warranties contained in Section
-------
3.17 of this Agreement, and the related indemnities, shall survive the Closing
- ----
until the expiration of the applicable statutes of limitations for determining
or contesting Tax liabilities and (b) the representations and warranties
contained in Sections 3.1, 3.2 and 3.3 of this Agreement, and the related
-------------------------
indemnities, shall survive the Closing until expiration of the applicable
statute of limitations. Notwithstanding the foregoing, it is understood and
agreed that all representations and warranties made by the parties in this
Agreement are made as of the date of execution of this Agreement only.
9.9 INVALID PROVISIONS. If any provision of this Agreement is
------------------
deemed or held to be illegal, invalid or unenforceable, this Agreement shall be
considered divisible and inoperative as to such provision to the extent it is
deemed to be illegal, invalid or unenforceable, and in all other respects this
Agreement shall remain in full force and effect; provided, however, that if any
provision of this Agreement is deemed or held to be illegal, invalid or
unenforceable there shall be added hereto automatically a provision as similar
as possible to such illegal, invalid
-31-
<PAGE>
or unenforceable provision and be legal, valid and enforceable. Further, should
any provision contained in this Agreement ever be reformed or rewritten by any
judicial body of competent jurisdiction, such provision as so reformed or
rewritten shall be binding upon all parties hereto.
9.10 PUBLIC ANNOUNCEMENTS. Neither party shall make any public
--------------------
announcement of the transactions contemplated hereby without the prior written
consent of the other party, which consent shall not be unreasonably withheld.
9.11 REMEDIES CUMULATIVE. The remedies of the parties under this
-------------------
Agreement are cumulative and shall not exclude any other remedies to which any
party may be lawfully entitled.
9.12 WAIVER. No failure or delay on the part of any party in
------
exercising any right, power, or privilege hereunder or under any of the
documents delivered in connection with this Agreement shall operate as a waiver
of such right, power, or privilege; nor shall any single or partial exercise of
any such right, power, or privilege preclude any other or further exercise
thereof or the exercise of any other right, power, or privilege.
9.13 DISPUTE RESOLUTION. ALL DISPUTES BETWEEN SELLERS AND GLOBAL
------------------
WITH RESPECT TO ANY PROVISION OF THIS AGREEMENT OR THE RIGHTS AND OBLIGATIONS OF
SELLERS AND GLOBAL HEREUNDER (OTHER THAN DISPUTES INVOLVING ALLEGATIONS OF
INTENTIONAL FRAUD), WHICH CANNOT BE RESOLVED BY MUTUAL AGREEMENT, WILL BE
RESOLVED BY BINDING ARBITRATION IN ACCORDANCE WITH THE RULES OF THE AMERICAN
ARBITRATION ASSOCIATION IN NORFOLK, VIRGINIA, OR BY ANY OTHER MEANS OF
ALTERNATIVE DISPUTE RESOLUTION MUTUALLY AGREED UPON BY THE PARTIES.
9.14 BUILDING LEASES. The lease for the Existing Building
---------------
appended hereto as Exhibit I shall be executed and delivered at Closing. If and
---------
when the New Building is constructed, the Company shall lease such Building on
substantially the same terms as it leases the Existing Building at Closing,
except that the lease for the New Building shall be for seven (7) years at fair
market rental.
9.15 WORKING CAPITAL ADJUSTMENT. At the request of Global and
--------------------------
ESIAC, the Company has made an adjustment to Working Capital on the Preliminary
Closing Balance Sheet in the amount of $57,168 (the "WC ADJUSTMENT"). Global and
ESIAC agree, notwithstanding anything to the contrary in this Agreement or any
other agreement, document or instrument entered into or delivered under or in
connection with this Agreement, that (i) none of the Sellers or the Company will
be deemed or held to be in violation or breach of any covenant, representation
or warranty contained in this Agreement or any other such agreement, document or
instrument, due to any actions of the Company or Sellers solely with respect to,
or any direct or indirect consequence or effect of, the WC Adjustment; provided,
however, that if any of the Sellers violate or breach any covenant,
representation or warranty in this Agreement or any other
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<PAGE>
agreement, document or instrument entered into or delivered under or in
connection with this Agreement for any reason other than the WC Adjustment, then
such Seller(s) will be liable for such violation or breach to the fullest extent
provided herein or therein and (ii) the WC Adjustment shall have no effect on
the Purchase Price otherwise payable to Sellers hereunder, and if necessary to
that end, shall be included in the Audited Closing Balance Sheet to the same
extent as it is included in the Preliminary Closing Balance Sheet.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
-34-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed as of the date and year first above written.
GLOBAL:
------
GLOBAL IMAGING SYSTEMS INC.
By: /s/ Thomas S. Johnson
--------------------------------------
Thomas S. Johnson
President and Chief Executive Officer
ESIAC:
-----
ESI ACQUISITION CORPORATION
By: /s/ Thomas S. Johnson
--------------------------------------
Thomas S. Johnson
President
THE COMPANY:
-----------
ELECTRONIC SYSTEMS, INC.
By: /s/ William G. Kamarek
--------------------------------------
Title: President
-----------------------------
SELLERS:
-------
/s/ William G. Kamarek
--------------------------------------------
William G. Kamarek
/s/ Steven Allosso
--------------------------------------------
Steven Allosso
-35-
<PAGE>
/s/ Benjamin E. Collier
--------------------------------------------
Benjamin E. Collier
/s/ Annette V. Wilkins
--------------------------------------------
Annette V. Wilkins
/s/ E. William Troiano
--------------------------------------------
E. William Troiano
/s/ N. Joyce Chapman
--------------------------------------------
N. Joyce Chapman
/s/ James R. Stroud
--------------------------------------------
James R. Stroud
-36-
<PAGE>
================================================================================
EXHIBIT 10.21
STOCK PURCHASE AGREEMENT
BY AND AMONG
GLOBAL IMAGING SYSTEMS INC.,
CONWAY OFFICE PRODUCTS, INC.,
EASTERN COPY PRODUCTS, INC.
AND
MICHAEL E. KLEINHANS
DATED AUGUST 29, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I............................................................................... 1
1.1 Definitions....................................................................... 1
ARTICLE II.............................................................................. 6
2.1 Agreement to Sell and Purchase.................................................... 6
2.2 Purchase Price.................................................................... 6
2.3 Payment of Purchase Price......................................................... 6
2.4 Closing........................................................................... 7
2.5 Escrow Arrangements............................................................... 7
2.6 Purchase Price Adjustments........................................................ 7
2.7 Closing Audit..................................................................... 8
2.8 Post-Closing Purchase Price Adjustment............................................ 8
ARTICLE III............................................................................. 9
3.1 Capitalization.................................................................... 9
3.2 No Liens on Shares................................................................ 9
3.3 Other Rights to Acquire Capital Stock............................................. 9
3.4 Due Organization.................................................................. 9
3.5 Subsidiaries...................................................................... 9
3.6 Due Authorization................................................................. 10
3.7 Financial Statements.............................................................. 10
3.8 Certain Actions................................................................... 11
3.9 Properties........................................................................ 12
3.10 Licenses and Permits.............................................................. 12
3.11 Intellectual Property............................................................. 13
3.12 Compliance with Laws.............................................................. 13
3.13 Insurance......................................................................... 14
3.14 Employee Benefit Plans............................................................ 14
(a) Employee Welfare Benefit Plans............................................. 14
(b) Employee Pension Benefit Plans............................................. 14
(c) Employment and Non-Tax Qualified Deferred Compensation Arrangements........ 14
3.15 Contracts and Agreements.......................................................... 15
3.16 Claims and Proceedings............................................................ 15
3.17 Taxes............................................................................. 15
3.18 Personnel......................................................................... 16
3.19 Business Relations................................................................ 17
3.20 Accounts Receivable............................................................... 17
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
3.21 Bank Accounts.................................................................... 17
3.22 Warranties....................................................................... 18
3.23 Brokers.......................................................................... 18
3.24 Interest in Competitors, Suppliers, Customers, Etc............................... 18
3.25 Indebtedness To and From Officers, Directors, Shareholders, and Employees........ 18
3.26 Undisclosed Liabilities.......................................................... 18
3.27 Information Furnished............................................................ 19
ARTICLE IV............................................................................. 19
4.1 Due Organization................................................................. 19
4.2 Due Authorization................................................................ 19
4.3 No Brokers....................................................................... 20
ARTICLE V.............................................................................. 20
5.1 Consents of Others............................................................... 20
5.2 Seller's Efforts................................................................. 20
5.3 Powers of Attorney............................................................... 20
ARTICLE VI............................................................................. 21
6.1 General.......................................................................... 21
6.2 Transition....................................................................... 21
6.3 Confidentiality.................................................................. 21
6.4 Covenant Not to Compete.......................................................... 21
ARTICLE VII............................................................................ 23
7.1 Conditions to Global's and Conway's Obligations.................................. 23
(a) Covenants, Representations and Warranties................................. 23
(b) Consents.................................................................. 23
(c) Leases.................................................................... 23
(d) Discharge of Indebtedness and Liens....................................... 24
(e) Material Adverse Change................................................... 24
(f) Transfer Taxes............................................................ 24
(g) Financial Condition....................................................... 24
(h) Documents to be Delivered by Seller and the Company....................... 24
(i) Opinion of Seller's Counsel....................................... 24
(ii) Certificates...................................................... 24
(iii) Release........................................................... 24
(iv) Escrow Agreement.................................................. 24
(v) Employment Agreement.............................................. 25
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
(vi) Building Leases................................. 25
(vii) Collateral Assignment of Rights................. 25
(viii) Stock Certificates.............................. 25
7.2 Conditions to Seller's and the Company's Obligations............ 25
(a) Covenants, Representations and Warranties................ 25
(b) Consents................................................. 26
(c) Documents to be Delivered by Global and Conway........... 26
(i) Opinion of Global's and Conway's Counsel........ 26
(ii) Certificates.................................... 26
(iii) Escrow Agreement................................ 26
(iv) Employment Agreement............................ 26
(v) Purchase Price.................................. 26
(d) Right of Reinvestment.................................... 26
ARTICLE VIII.......................................................... 27
8.1 Indemnification of Global....................................... 27
8.2 Defense of Claims............................................... 27
8.3 Escrow Claim.................................................... 28
8.4 Tax Audits, Etc................................................. 28
8.5 Indemnification of Seller....................................... 28
8.6 Limits on Indemnification....................................... 28
ARTICLE IX............................................................ 29
MISCELLANEOUS......................................................... 29
9.1 Modifications................................................... 29
9.2 Notices......................................................... 29
9.3 Counterparts.................................................... 30
9.4 Expenses........................................................ 30
9.5 Binding Effect; Assignment...................................... 31
9.6 Entire and Sole Agreement....................................... 31
9.7 Governing Law................................................... 31
9.8 Survival of Representations, Warranties and Covenants........... 31
9.9 Invalid Provisions.............................................. 31
9.10 Public Announcements............................................ 32
9.11 Remedies Cumulative............................................. 32
9.12 Waiver.......................................................... 32
9.13 DISPUTE RESOLUTION.............................................. 32
</TABLE>
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<PAGE>
LIST OF EXHIBITS
Exhibit A Form of Escrow Agreement
Exhibit B Form of Estoppel Certificate for Building Leases
Exhibit C Opinion of Seller's Counsel
Exhibit D Seller's Certificates
Exhibit E Release
Exhibit F Kleinhans Executive Agreement
Exhibit G Opinion of Global's and Conway's Counsel
Exhibit H Global Certificate
Exhibit I Collateral Assignment of Rights
Exhibit J Syracuse Building Lease
LIST OF SCHEDULES
Schedule 2.3 Seller's Accounts
Schedule 2.6 Holders of Funded Indebtedness
Schedule 3.1 Ownership of Shares
Schedule 3.4 Articles and Bylaws
Schedule 3.7 Financial Statements
Schedule 3.8A Certain Actions
Schedule 3.8B Material Changes
Schedule 3.9 Properties
Schedule 3.10 Licenses and Permits
Schedule 3.11 Patents and Trademarks
Schedule 3.13 Insurance
Schedule 3.14 Employee Benefit Plans
Schedule 3.15 Contracts and Agreements
Schedule 3.16 Claims and Proceedings
Schedule 3.18 Personnel
Schedule 3.20 Accounts Receivable
Schedule 3.21 Bank Accounts
Schedule 3.22 Warranties
Schedule 3.25 Indebtedness with Officers, Directors and Shareholders
Schedule 3.26 Undisclosed Liabilities
Schedule 3.27 Information Furnished
Schedule 7.1(d) Indebtedness
The Exhibits and Schedules to this Stock Purchase Agreement are not included
with this Registration Statement on Form S-1. Global will provide these exhibits
and schedules upon the request of the Securities and Exchange Commission.
-iv-
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "AGREEMENT") is entered into as of
August 29, 1997, by and among GLOBAL IMAGING SYSTEMS INC., a Delaware
corporation ("GLOBAL"), CONWAY OFFICE PRODUCTS, INC., a New Hampshire
corporation and wholly-owned subsidiary of Global ("CONWAY"), EASTERN COPY
PRODUCTS, INC., a New York corporation (the "COMPANY") and MICHAEL E. KLEINHANS
(the "SELLER").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the distribution, sale and services
of office equipment in 30 counties in the western part of the State of New York
and three counties in northern Pennsylvania (the "BUSINESS"); and
WHEREAS, Seller owns 90 shares of the outstanding Common Stock of the
Company (the "SHARES"), which Shares, together with the Konica Shares,
constitute all of the issued and outstanding capital stock of the Company; and
WHEREAS, Conway desires to purchase from Seller and Seller desires to
sell to Conway hereby all of the Shares owned by Sellers all on the terms and
subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto covenant and agree
as follows:
ARTICLE I
DEFINITIONS
-----------
1.1 DEFINITIONS. In this Agreement, the following terms have the
-----------
meanings specified or referred to in this Section 1.1 and shall be equally
-----------
applicable to both the singular and plural forms. Any agreement referred to
below shall mean such agreement as amended, supplemented and modified from time
to time to the extent permitted by the applicable provisions thereof and by this
Agreement.
"AFFILIATE" means, with respect to any Person, any other Person
which directly or indirectly controls, is controlled by or is under common
control with such Person.
"AUDITED CLOSING BALANCE SHEET" has the meaning specified in
Section 2.7.
- -----------
<PAGE>
"BUILDINGS" shall mean collectively (i) the Company's office,
showroom and warehouse facilities located at 1224 West Genesee Street, Syracuse,
New York 13204 (the "SYRACUSE BUILDING"); (ii) the Company's office facility
located at 89 Fox Street, Owego, New York 13827; (iii) the Company's building
facility located at 455 Commerce Drive, Amherst, New York 14228 (Buffalo
location); (iv) the Company's building located at 270 Commerce Drive, Rochester,
New York 14623; and (v) the Company's satellite sales office located at 95 Brown
Road #103, Ithaca, New York 14850.
"BUSINESS" has the meaning specified in the first recital of the
Agreement
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. (S)(S) 9601 et seq., any amendments
-- ---
thereto, any successor statutes, and any regulations promulgated thereunder.
"CLOSING" means the closing of the transfer of the Shares from
the Seller to Global.
"CLOSING DATE" has the meaning specified in Section 2.4.
-----------
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning specified in the first paragraph of
this Agreement.
"CONFIDENTIAL INFORMATION" means all confidential information and
trade secrets of the Company including, without limitation, any of the same
comprising the identity, lists or descriptions of any customers, referral
sources or organizations; financial statements, cost reports or other financial
information; contract proposals, or bidding information; business plans and
training and operations methods and manuals; personnel records; fee structure;
and management systems, policies or procedures, including related forms and
manuals. Confidential Information shall not include any information (i) which
is disclosed pursuant to subpoena or other legal process, (ii) which has been
publicly disclosed, (iii) which subsequently becomes known to a third party not
subject to a confidentiality agreement with Global or the Company, or (iv) which
is subsequently disclosed by any third party not in breach of a confidentiality
agreement.
"CONTRACTS" has the meaning specified in Section 3.15.
------------
"CONWAY" has the meaning specified in the first paragraph of this
Agreement.
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<PAGE>
"COURT ORDER" means any judgment, order, award or decree of any
foreign, federal, state, local or other court or tribunal and any award in any
arbitration proceeding.
"ECCCI" means Eastern Copy Credit Corporation, Inc., a New York
corporation and, prior to its merger into the Company, a wholly-owned subsidiary
of the Company.
"ECP VEND" means ECP Vend-a-Copy Division, Inc., a New York
corporation and, prior to its merger into the Company, a wholly-owned subsidiary
of the Company.
"EFFECTIVE DATE" has the meaning specified in Section 2.4.
-----------
"EMPLOYMENT AGREEMENT" shall mean the executive agreement with
Kleinhans to be entered into at Closing in the form of Exhibit F.
---------
"ENCUMBRANCE" means any lien, claim, charge, security interest,
mortgage, pledge, easement, conditional sale or other title retention agreement,
defect in title, restrictive covenant or other restrictions of any kind.
"ENVIRONMENTAL OBLIGATIONS" has the meaning specified in Section
-------
3.12.
- ----
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ESCROW AGENT" means the Skaneateles Savings Bank.
"ESCROW AGREEMENT" means the Escrow Agreement to be executed by
and among the Seller, Konica, Conway and the Escrow Agent in the form of Exhibit
-------
A.
- -
"ESCROW PERIOD" has the meaning specified in Section 2.5.
-----------
"ESCROW SUM" has the meaning specified in Section 2.5.
-----------
"FINANCIAL STATEMENTS" has the meaning specified in Section 3.7.
-----------
"FUNDED INDEBTEDNESS" means all (i) indebtedness of the Company
for borrowed money or other interest-bearing indebtedness; (ii) capital lease
obligations of the Company; (iii) obligations of the Company to pay the deferred
purchase or acquisition price for goods or services, other than trade accounts
payable or accrued expenses in the ordinary course of business; (iv)
indebtedness of others guaranteed by the Company or secured by an Encumbrance on
the Company's property; (v) indebtedness of the Company under extended
-3-
<PAGE>
credit terms of more than 30 days from manufacturers provided to the Company; or
(vi) any receivables owed by the Seller to the Company.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"GLOBAL" has the meaning specified in the first paragraph of this
Agreement.
"GOVERNMENTAL BODY" means any foreign, federal, state, local or
other governmental authority or regulatory body.
"GOVERNMENTAL PERMITS" has meaning specified in Section 3.10.
------------
"INDEPENDENT ACCOUNTANTS" has the meaning specified in Section
-------
2.7.
- ---
"IRS" means the Internal Revenue Service.
"INDEMNIFIABLE COSTS" has the meaning specified in Section 8.1.
-----------
"INDEMNIFIED PARTIES" has the meaning specified in Section 8.1.
-----------
"INTELLECTUAL PROPERTY" has the meaning specified in Section
-------
3.11.
- ----
"KLEINHANS" means Michael E. Kleinhans.
"KONICA" means Konica Business Machines U.S.A., Inc.
"KONICA PURCHASE AGREEMENT" means that certain Stock Purchase
Agreement dated August __, 1997 between Conway and Konica.
"KONICA SHARES" means the 10 shares of the Company's Common Stock
owned by Konica.
"L-T DEFERRED SERVICE LIABILITIES" means all long-term deferred
service liabilities owed to customers of the Company and/or its subsidiaries.
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means a
material adverse change or effect on the assets, properties, Business,
operations, liabilities, or financial condition of the Company and its
subsidiaries, taken as a whole. In determining whether a "MATERIAL ADVERSE
CHANGE" or "MATERIAL ADVERSE EFFECT" has occurred, the quantitative amounts set
forth at the end of Article III shall be conclusive.
-----------
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<PAGE>
"OSHA" means the Occupational Safety and Health Act, 29 U.S.C.
(S)(S) 651 et seq., any amendment thereto, and any regulations promulgated
-- ---
thereunder.
"PERMITTED EXCEPTION" means (a) liens for Taxes and other
governmental charges and assessments which are not yet due and payable, (b)
liens of landlords and liens of carriers, warehousemen, mechanics and
materialmen and other like liens arising in the ordinary course of business for
sums not yet due and payable, (c) other liens or imperfections on property which
are not material in amount or do not materially detract from the value or the
existing use of the property affected by such lien or imperfection, (d) such
statements of fact and exceptions shown on any title insurance policies
delivered to Conway.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or Governmental Body.
"PRELIMINARY CLOSING BALANCE SHEET" shall mean the Company's best
estimate of the Company's balance sheet as of the Effective Date. The
Preliminary Closing Balance Sheet shall be delivered to Conway not less than one
(1) nor more than five (5) days prior to the Closing Date.
"PURCHASE PRICE" has the meaning specified in Section 2.2.
-----------
"RCRA" means the Resource Conservation and Recovery Act, 42
U.S.C. (S)(S) 6901 et seq., and any successor statute, and any regulations
-- ---
promulgated thereunder.
"REQUIREMENTS OF LAWS" means any foreign, federal, state and
local laws, statutes, regulations, rules, codes or ordinances enacted, adopted,
issued or promulgated by any Governmental Body (including, without limitation,
those pertaining to electrical, building, zoning, environmental and occupational
safety and health requirements) or common law.
"SELLER" has the meaning set forth in the first paragraph of this
Agreement.
"SHARES" means all of the issued and outstanding shares of the
capital stock of the Company, excluding the Konica Shares.
"TAX" or "TAXES" means any federal, state, local or foreign
income, alternative or add-on minimum, gross income, gross receipts, windfall
profits, severance, property, production, sales, use, transfer, gains, license,
excise, employment, payroll, withholding or minimum tax, transfer, goods and
services, or any other tax, custom, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any
-5-
<PAGE>
interest or any penalty, addition to tax or additional amount imposed thereon by
any Governmental Body.
"TAX RETURN" means any return, report or similar statement
required to be filed with respect to any Taxes (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return and declaration of estimated Tax.
"WORKING CAPITAL" shall mean the difference between the Company's
current assets and its current liabilities as calculated in accordance with
GAAP.
"WORKING CAPITAL TARGET" shall have the meaning assigned to such
term in Section 2.6 hereof.
-----------
ARTICLE II
AGREEMENT OF PURCHASE AND SALE; CLOSING
2.1 AGREEMENT TO SELL AND PURCHASE. Upon the basis of the
------------------------------
representations and warranties, for the consideration, and subject to the terms
and conditions set forth in this Agreement, Seller agrees to sell the Shares to
Conway and Conway agrees to purchase the Shares from Seller.
2.2 PURCHASE PRICE. The total purchase price for the Shares and the
--------------
Konica Shares (the "PURCHASE PRICE") shall be equal to $7,084,598.68, subject
to any adjustment required to be made pursuant to Section 2.6 or Section 2.8
----------- -----------
below.
2.3 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be payable
-------------------------
by Conway at the Closing (hereinafter defined) as follows:
(A) $6,041,498 of the Purchase Price less the amounts set forth
in Section 2.6(a), (b), (c) and (d) will be paid, at the direction of the
-------------- --- --- ---
Seller, in cash by wire transfer of funds as specified in Schedule 2.3
------------
(including the payment of $135,000 for the covenant not to compete provided in
Section 6.4);
- -----------
(B) the assumption by Conway of all L-T Deferred Service
Liabilities; and
(C) $1,159,000 of the Seller's portion of the Purchase Price
less the amount set forth in Section 2.6(e) will be paid in cash by wire
--------------
transfer of funds to the Escrow Agent to be held in escrow for satisfaction of
Seller's indemnification obligations specified in Section 8.1 or payment to
-----------
the Seller in accordance with the terms of Section 2.5 below.
-----------
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<PAGE>
2.4 CLOSING. The Closing of the purchase and sale of the Shares
-------
contemplated by this Agreement shall take place at 11:00 a.m., Eastern time, at
the offices of Eastern Copy Products, Inc. in Syracuse, New York, on August 29,
1997, or at such other date and time as the parties shall agree (the "CLOSING
DATE"), effective as of August 1, 1997 (the "EFFECTIVE DATE").
2.5 ESCROW ARRANGEMENTS. Pursuant to the Escrow Agreement to be
-------------------
entered into among Seller, Konica, Conway and the Escrow Agent, $1,159,000 of
the Purchase Price (including the Konica portion) shall be delivered to the
Escrow Agent at Closing. Such monies (which, together with all interest accrued
thereon, is hereinafter referred to as the "ESCROW SUM") shall be held pursuant
to the terms of the Escrow Agreement for payment from such Escrow Sum of the
amounts, if any, owing by Seller and Konica to Conway pursuant to Section 2.8 or
-----------
Article VIII below. At the conclusion of the period ending on the third
anniversary of the Closing Date (such period being referred to herein as the
"ESCROW PERIOD"), 90% of such remaining portion of the Escrow Sum not
theretofore claimed by or paid to Conway or previously delivered to Seller and
Konica in accordance with the terms of the Escrow Agreement and this Agreement
shall be disbursed to Seller. Seller and Conway agree that each will execute
and deliver such reasonable instruments and documents as are furnished by any
other party to enable such furnishing party to receive those portions of the
Escrow Sum to which the furnishing party is entitled under the provisions of the
Escrow Agreement and this Agreement.
2.6 PURCHASE PRICE ADJUSTMENTS.
--------------------------
(A) The Purchase Price payable pursuant to Section 2.3(a) above
--------------
will be reduced by the total amount of Funded Indebtedness, if any, assumed or
paid by Conway in cash by wire transfer of funds to the accounts of the holders
of Funded Indebtedness listed on Schedule 2.6 hereto to satisfy the Company's
------------
Funded Indebtedness with such institutions.
(B) The Purchase Price payable pursuant to Section 2.3(a) above
--------------
will increased or decreased, as the case may be, by the amount by which L-T
Deferred Service Liabilities on the Closing Date are more or less than $710,000.
(C) The portion of the Purchase Price payable at Closing will be
reduced by the amount, if any, by which the adjusted Working Capital as
reflected on the Preliminary Closing Balance Sheet is less than $[971,000] (the
"WORKING CAPITAL TARGET").
(D) The Seller's portion of the Purchase Price payable pursuant
to Section 2.3(a) above will be reduced by an amount equal to ten percent (10%)
--------------
of the aggregate Purchase Price payable at Closing (after any adjustments
determined pursuant to Sections 2.6(a), (b) and (c) above), which amount shall
--------------- --- ---
be paid to Konica pursuant to the Konica Purchase Agreement.
-7-
<PAGE>
(E) The portion of the Purchase Price payable pursuant to
Section 2.3(c) above to the Escrow Sum will be reduced by $115,900, which amount
- --------------
shall be paid from the amount paid to Konica pursuant to the Konica Purchase
Agreement.
2.7 CLOSING AUDIT. Within 120 days following the Closing Date, there
-------------
shall be delivered to Conway and to Seller an audit of the Preliminary Closing
Balance Sheet (the "AUDITED CLOSING BALANCE SHEET") of the Company at and as of
the Effective Date. The Preliminary Closing Balance Sheet shall be audited by
Ernst & Young, LLP in accordance with GAAP. The cost of the Audited Closing
Balance Sheet shall be paid by Conway. In the event that the Seller disputes any
items on the Audited Closing Balance Sheet within thirty days after Seller's
receipt thereof, the parties shall jointly select and retain an independent "Big
Six" accounting firm (the "INDEPENDENT ACCOUNTANTS") to review the disputed
item(s) on the Audited Closing Balance Sheet. The final determination of such
disputed item(s) by the Independent Accountants shall be reflected on the
Audited Closing Balance Sheet. The cost of retaining the Independent Accountants
shall be borne by Seller; provided, however, that Conway shall reimburse Seller
for the cost of the Independent Accountants in the event that such review
results in an increase in the Company's Working Capital as reflected on the
Audited Closing Balance Sheet prepared by Ernst & Young, LLP.
2.8 POST-CLOSING PURCHASE PRICE ADJUSTMENT. In the event that the
--------------------------------------
Working Capital as reflected on the Audited Closing Balance Sheet is less than
the Working Capital Target, then the Purchase Price will be adjusted downward,
on a dollar-for-dollar basis, to reflect the lesser of (i) the decrease, if any,
in Working Capital as reflected on the Audited Closing Balance Sheet from the
amount of Working Capital reflected on the Preliminary Closing Balance Sheet or
(ii) the amount, if any, by which the Working Capital reflected on the Audited
Closing Balance Sheet is less than the Working Capital Target. Conversely, the
Purchase Price will be adjusted upward, on a dollar-for dollar basis, to reflect
the increase, if any, in the total Working Capital as reflected on the Audited
Closing Balance Sheet from the amount of Working Capital reflected on the
Preliminary Closing Balance Sheet, provided, however, that in no event shall
such upward adjustment exceed the total amount of any adjustment to the Purchase
Price made pursuant to Section 2.6(c) above. The post-closing adjustment to the
--------------
Purchase Price, if any, shall be paid by Seller to Conway from the Escrow Sum or
by Conway to Seller, as the case may be, in immediately available funds within
ten (10) business days of delivery of the Audited Closing Balance Sheet, unless
the Seller disputes any items on the Audited Closing Balance Sheet, in which
case it shall be paid within ten (10) business days after the Independent
Accountants finally determine the disputed item(s), and Conway delivers to
Seller an Audited Closing Balance Sheet modified to reflect such determination.
Notwithstanding the foregoing, Konica shall be responsible for or shall receive,
as the case may be, ten percent (10%) of any adjustment to the Purchase Price
made pursuant to this Section 2.8.
-----------
-8-
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND SELLER
The Company and Seller represent and warrant to Global and Conway
that:
3.1 CAPITALIZATION. The authorized capital stock of the Company
--------------
consists of 100 shares of Common Stock, all of which are issued and outstanding.
All of the Shares are duly authorized, validly issued, fully paid, and
nonassessable. All of the Shares are owned of record and beneficially by Seller
and Konica in the amounts set forth on Schedule 3.1 hereto. None of the Shares
------------
was issued or will be transferred under this Agreement in violation of any
preemptive or preferential rights of any Person. The Seller and Konica
collectively own all of the issued and outstanding capital stock of the Company.
3.2 NO LIENS ON SHARES. Except as shown on Schedule 3.1, Seller owns
------------------ ------------
the Shares, free and clear of any Encumbrances other than the rights and
obligations arising under this Agreement, and none of the Shares is subject to
any outstanding option, warrant, call, or similar right of any other Person to
acquire the same, and none of the Shares is subject to any restriction on
transfer thereof except for restrictions imposed by applicable federal and state
securities laws. At Closing, Seller will have full power and authority to convey
good and marketable title to the Shares, free and clear of any Encumbrances.
3.3 OTHER RIGHTS TO ACQUIRE CAPITAL STOCK. Except as set forth in
-------------------------------------
this Agreement, there are no authorized or outstanding warrants, options, or
rights of any kind to acquire from the Company any equity or debt securities of
the Company, or securities convertible into or exchangeable for equity or debt
securities of the Company, and there are no shares of capital stock of the
Company reserved for issuance for any purpose nor any contracts, commitments,
understandings or arrangements which require the Company to issue, sell or
deliver any additional shares of its capital stock.
3.4 DUE ORGANIZATION. The Company is a corporation duly organized,
----------------
validly existing, and in good standing under the laws of the State of New York
and has full corporate power and authority to carry on the Business as now
conducted and as proposed to be conducted through Closing. Complete and correct
copies of the Articles of Incorporation and Bylaws of the Company, and all
amendments thereto, have been heretofore delivered to Global and are attached
hereto as Schedule 3.4. The Company is qualified to do business in Pennsylvania
------------
and in each jurisdiction in which the nature of the Business or the ownership of
its properties requires such qualification except where the failure to be so
qualified does not and could not reasonably be expected to have a Material
Adverse Effect.
3.5 SUBSIDIARIES. If ECP Vend and/or ECCCI have not been merged into
------------
the Company, the Company is the owner of all of the outstanding shares of the
capital stock of each of ECP Vend and ECCCI (the "SUBSIDIARY SHARES") free and
clear of all Encumbrances, and none of the Subsidiary Shares is subject to any
outstanding option, warrant, call, or similar right
-9-
<PAGE>
of any other Person to acquire the same, and none of the Subsidiary Shares is
subject to any restriction on transfer thereof except for restrictions imposed
by applicable federal and state securities laws. There are no authorized or
outstanding warrants, options, or rights of any kind to acquire from the
Company, ECP Vend or ECCCI any equity or debt securities of either ECP Vend or
ECCCI, or securities convertible into or exchangeable for equity or debt
securities of either ECP Vend or ECCCI, and there are no Subsidiary Shares
reserved for issuance for any purpose nor any contracts, commitments,
understandings or arrangements which require the Company, ECP Vend or ECCCI to
issue, sell or deliver any additional Subsidiary Shares. Except for ECP Vend and
ECCCI, neither the Company, nor its subsidiaries, directly or indirectly have
any subsidiaries or any direct or indirect ownership interests in any Person.
The Seller does not own any other Person engaged in the Business.
3.6 DUE AUTHORIZATION. The Company and the Seller each have full
-----------------
power and authority to execute, deliver and perform this Agreement and to carry
out the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action of the Company.
This Agreement has been duly and validly executed and delivered by the Company
and Seller and constitutes the valid and binding obligations of the Company and
Seller, enforceable in accordance with its terms, except to the extent that
enforceability may be limited by laws affecting creditors' rights and debtors'
obligations generally, and legal limitations relating to remedies of specific
performance and injunctive and other forms of equitable relief. The execution,
delivery, and performance of this Agreement (as well as all other instruments,
agreements, certificates, or other documents contemplated hereby) by the Company
and Seller, do not (a) violate any Requirements of Laws or any Court Order of
any Governmental Body applicable to the Company or Seller, or their respective
property, (b) violate or conflict with, or permit the cancellation of, or
constitute a default under, any material agreement to which the Company or
Seller are a party, or by which any of them or any of their respective property
is bound, (c) permit the acceleration of the maturity of any material
indebtedness of, or indebtedness secured by the property of, the Company or
Seller, or (d) violate or conflict with any provision of the charter or bylaws
of the Company.
3.7 FINANCIAL STATEMENTS. The following Financial Statements
--------------------
(herein so called) of the Company have been delivered to Global and Conway by
the Company: consolidated balance sheets of the Company as of July 31, 1994,
July 31, 1995, July 31, 1996 and June 30, 1997, and consolidated statements of
income of the Company for the fiscal years ended July 31, 1994, July 31, 1995
and July 31, 1996 and for the 11 month period ending June 30, 1997.
The Financial Statements have been prepared in accordance with GAAP throughout
the periods indicated and fairly present the financial position, results of
operations and changes in financial position of the Company as of the indicated
dates and for the indicated periods, subject (in the case of the 6 month
Financial Statements) to year end accruals made in the ordinary course of the
Business which are not materially adverse and which are consistent with past
practices. Except to the extent reflected or provided for in the Financial
Statements or the notes thereto and
-10-
<PAGE>
obligations and liabilities incurred in the ordinary course of business since
the date of the last of such Financial Statements, the Company has no
liabilities required by GAAP to be reflected on the Company's balance sheet or
notes thereto that are not so reflected, nor any other obligations (whether
absolute, contingent, or otherwise) which are (individually or in the aggregate)
Material (in amount or to the conduct of the Business); and neither the Company
nor Seller has knowledge of any basis for the assertion of any such liability or
obligation. Since July 31, 1996, there has been no Material Adverse Change in
the prospects of the Company.
3.8 CERTAIN ACTIONS. Since July 31, 1996, the Company has not,
---------------
except as disclosed on Schedule 3.8A hereto or any of the Financial Statements
-------------
or notes thereto: (a) discharged or satisfied any Encumbrance or paid any
obligation or liability, absolute or contingent, other than current liabilities
incurred and paid in the ordinary course of the Business; (b) paid or declared
any dividends or distributions, or purchased, redeemed, acquired, or retired any
stock or indebtedness from any stockholder; (c) made or agreed to make any loans
or advances or guaranteed or agreed to guarantee any loans or advances to any
party whatsoever; (d) suffered or permitted any Encumbrance to arise or be
granted or created against or upon any of its assets, real or personal, tangible
or intangible; (e) cancelled, waived, or released or agreed to cancel, waive, or
release any of its debts, rights, or claims against third parties in excess of
$10,000 individually or $25,000 in the aggregate; (f) sold, assigned, pledged,
mortgaged, or otherwise transferred, or suffered any material damage,
destruction, or loss (whether or not covered by insurance) to, any assets
(except in the ordinary course of the Business); (g) amended its charter or
bylaws; (h) paid or made a commitment to pay any severance or termination
payment to any employee or consultant; (i) made any material change in its
method of management or operation or method of accounting; (j) made any capital
expenditures, including, without limitation, replacements of equipment in the
ordinary course of the Business, or entered into commitments therefor, except
for capital expenditures or commitments therefor which do not, in the aggregate,
exceed $50,000; (k) made any investment or commitment therefor in any Person;
(l) made any payment or contracted for the payment of any bonus or other
compensation or personal expenses, other than (A) wages and salaries and
business expenses paid in the ordinary course of the Business, and (B) wage and
salary adjustments made in the ordinary course of the Business for employees who
are not officers, directors, or shareholders of the Company; (m) made, amended,
or entered into any written employment contract or created or made any material
change in any bonus, stock option, pension, retirement, profit sharing or other
employee benefit plan or arrangement; (n) materially amended or experienced a
termination of any material contract, agreement, lease, franchise or license to
which the Company is a party that would or could reasonably be expected to have
a Material Adverse Effect, except in the ordinary course of the Business; or (o)
entered into any other material transactions that would or could reasonably be
expected to have a Material Adverse Effect except in the ordinary course of the
Business. Since July 31, 1996, except as disclosed on Schedule 3.8B hereto or
-------------
any of the Financial Statements or notes thereto, there has not been (a) any
Material Adverse Change including, but not limited to, the loss of any material
customers or suppliers of the Company, or in any material assets of the Company,
(b) any extraordinary contracts, commitments, orders or rebates, (c) any strike,
material slowdown, or demand for recognition by a labor organization by or with
respect to any of the employees of the Company, or (d) any shutdown, material
-11-
<PAGE>
slow-down, or cessation of any material operations conducted by, or constituting
part of, the Company, nor has the Company agreed to do any of the foregoing.
3.9 PROPERTIES. Attached hereto as Schedule 3.9 is a list containing
---------- ------------
a description of each interest in real property (including, without
limitation, leasehold interests) and each item of personal property utilized by
the Company in the conduct of the Business having a book value in excess of
$25,000 as of the date hereof. Except for Permitted Exceptions or as expressly
set forth on Schedule 3.9, such real and personal properties are free and clear
------------
of Encumbrances. Seller and the Company have delivered to Global a lien search
obtained from the New York Secretary of State of all UCC liens of record against
the Company's personal property in the State of New York. All of the properties
and assets necessary for continued operation of the Business as currently
conducted (including, without limitation, all books, records, computers and
computer software and data processing systems) are owned, leased or licensed by
the Company and are suitable for the purposes for which they are currently being
used. With the exception of used equipment and inventory valued at no more than
$10,000 on the Company's Financial Statements, the physical properties of the
Company, including the real properties leased by the Company, are in good
operating condition and repair, normal wear and tear excepted, and are free from
any defects of a material nature. Except for Permitted Exceptions or as
otherwise set forth on Schedule 3.9, the Company has full and unrestricted legal
------------
and equitable title to all such properties and assets. The operation of the
properties and Business of the Company in the manner in which they are now and
have been operated does not violate any zoning ordinances, municipal
regulations, or other Requirements of Laws, except for any such violations which
would not, individually or in the aggregate, have a Material Adverse Effect.
Except for Permitted Exceptions or as set forth on Schedule 3.9, no restrictive
------------
covenants, easements, rights-of-way, or regulations of record impair the uses of
the properties of the Company for the purposes for which they are now operated.
All leases of real or personal property by the Company are legal, valid,
binding, enforceable and in full force and effect and will remain legal, valid,
binding, enforceable and in full force and effect on identical terms immediately
following the Closing, except to the extent that enforceability may be limited
by laws affecting creditors' rights and debtors' obligations generally, and
legal limitations relating to remedies of specific performance and injunctive
and other forms of equitable relief. All facilities owned or leased by the
Company have received all approvals of any Governmental Body (including
Governmental Permits) required in connection with the operation thereof and have
been operated and maintained in accordance with all Requirements of Laws.
3.10 LICENSES AND PERMITS. Attached hereto as Schedule 3.10 is a
-------------------- -------------
list of all Material licenses, certificates, privileges, immunities, approvals,
franchises, authorizations and permits held or applied for by the Company from
any Governmental Body (herein collectively called "GOVERNMENTAL PERMITS") the
absence of which could have a Material Adverse Effect. The Company has complied
in all material respects with the terms and conditions of all such Governmental
Permits, and the Company has not received notification from any Governmental
Body of violation of any such Governmental Permit or the Requirements of Laws
governing the issuance or continued validity thereof other than violations (if
any) which would not individually or in the aggregate have a Material Adverse
Effect. No additional Governmental Permit is
-12-
<PAGE>
required from any Governmental Body thereof in connection with the conduct of
the Business which Governmental Permit, if not obtained, would have a Material
Adverse Effect.
3.11 INTELLECTUAL PROPERTY. Attached hereto as Schedule 3.11 is a
--------------------- -------------
list and brief description of all patents, trademarks, tradenames, copyrights,
licenses, computer software or data (other than general commercial software) or
applications therefor owned by or registered in the name of the Company or in
which the Company has any rights, licenses, or immunities (collectively, the
"INTELLECTUAL PROPERTY"). The Company has furnished Global with copies of all
license agreements to which the Company is a party, either as licensor or
licensee, with respect to any Intellectual Property. Except as described on
Schedule 3.11 hereto, the Company has good title to or the right to use such
- -------------
Intellectual Property and all inventions, processes, designs, formulae, trade
secrets and know-how necessary for the conduct of their Business, in their
Business as presently conducted without the payment of any royalty or similar
payment, and the Company is not infringing on any patent right, tradename,
copyright or trademark right or other Intellectual Property right of others, and
neither the Company nor Seller is aware of any infringement by others of any
such rights owned by the Company.
3.12 COMPLIANCE WITH LAWS. The Company has (i) complied in all
--------------------
material respects with all Requirements of Laws, Governmental Permits and Court
Orders applicable to the Business and has filed with the proper Governmental
Bodies all statements and reports required by all Requirements of Laws,
Governmental Permits and Court Orders to which the Company or any of its
employees (because of their activities on behalf of the Company) are subject and
(ii) conducted the Business and are in compliance in all material respects with
all federal, state and local energy, public utility, health, safety and
environmental Requirements of Laws, Governmental Permits and Court Orders
including the Clean Air Act, the Clean Water Act, RCRA, the Safe Drinking Water
Act, CERCLA, OSHA, the Toxic Substances Control Act and any similar state, local
or foreign laws (collectively "ENVIRONMENTAL OBLIGATIONS") and all other
federal, state, local or foreign governmental and regulatory requirements,
except where any such failure to comply or file would not, in the aggregate,
have a Material Adverse Effect. No claim has been made by any Governmental Body
(and, to the best knowledge of the Company and Seller, no such claim is
anticipated) to the effect that the Business fails to comply, in any respect,
with any Requirements of Laws, Governmental Permit or Environmental Obligation
or that a Governmental Permit or Court Order is necessary in respect thereto.
3.13 INSURANCE. Attached hereto as Schedule 3.13 is a list of all
--------- -------------
coverages for fire, liability, or other forms of insurance and all fidelity
bonds held by or applicable to the Company. Copies of the binder for all such
insurance policies have been delivered to Global. To the best of the Company's
and Seller's knowledge and belief, no event relating to the Company has occurred
which will result in (i) cancellation of any such insurance coverages; (ii) a
retroactive upward adjustment of premiums under any such insurance coverages; or
(iii) any prospective upward adjustment in such premiums. All of such insurance
coverages will remain in full force and effect following the Closing.
3.14 EMPLOYEE BENEFIT PLANS.
----------------------
-13-
<PAGE>
(A) EMPLOYEE WELFARE BENEFIT PLANS. Except as disclosed on
------------------------------
Schedule 3.14, the Company does not maintain or contribute to any "employee
- -------------
welfare benefit plan" as such term is defined in Section 3(1) of ERISA. With
respect to each such plan, (i) the plan is in material compliance with ERISA;
(ii) the plan has been administered in accordance with its governing documents;
(iii) neither the plan, nor any fiduciary with respect to the plan, has engaged
in any "prohibited transaction" as defined in Section 406 of ERISA other than
any transaction subject to a statutory or administrative exemption; (iv) except
for the processing of routine claims in the ordinary course of administration,
there is no material litigation, arbitration or disputed claim outstanding; and
(v) all premiums due on any insurance contract through which the plan is funded
have been paid.
(B) EMPLOYEE PENSION BENEFIT PLANS. Except as disclosed in
------------------------------
Schedule 3.14, the Company does not maintain or contribute to any arrangement
- -------------
that is or may be an "employee pension benefit plan" relating to employees, as
such term is defined in Section 3(2) of ERISA. With respect to each such plan:
(i) the plan is qualified under Section 401(a) of the Code, and any trust
through which the plan is funded meets the requirements to be exempt from
federal income tax under Section 501(a) of the Code; (ii) the plan is in
material compliance with ERISA; (iii) the plan has been administered in
accordance with its governing documents as modified by applicable law; (iv) the
plan has not suffered an "accumulated funding deficiency" as defined in Section
412(a) of the Code; (v) the plan has not engaged in, nor has any fiduciary with
respect to the plan engaged in, any "prohibited transaction" as defined in
Section 406 of ERISA or Section 4975 of the Code other than a transaction
subject to statutory or administrative exemption; (vi) the plan has not been
subject to a "reportable event" (as defined in Section 4043(b) of ERISA), the
reporting of which has not been waived by regulation of the Pension Benefit
Guaranty Corporation; (vii) no termination or partial termination of the plan
has occurred within the meaning of Section 411(d)(3) of the Code; (viii) all
contributions required to be made to the plan or under any applicable collective
bargaining agreement have been made to or on behalf of the plan; (ix) there is
no material litigation, arbitration or disputed claim outstanding; and (x) all
applicable premiums due to the Pension Benefit Guaranty Corporation for plan
termination insurance have been paid in full on a timely basis.
(C) EMPLOYMENT AND NON-TAX QUALIFIED DEFERRED COMPENSATION
------------------------------------------------------
ARRANGEMENTS. Except as disclosed in Schedule 3.14, the Company does not
- ------------ -------------
maintain or contribute to any retirement or deferred or incentive compensation
or stock purchase, stock grant or stock option arrangement entered into between
the Company and any current or former officer, consultant, director or employee
of the Company that is not intended to be a tax qualified arrangement under
Section 401(a) of the Code.
3.15 CONTRACTS AND AGREEMENTS. Attached hereto as Schedule 3.15 is
------------------------ -------------
a list and brief description of all written or oral contracts, commitments,
leases, and other agreements (including, without limitation, promissory notes,
loan agreements, and other evidences of indebtedness, guarantees, agreements
with distributors, suppliers, dealers, franchisors and customers, and service
agreements) to which the Company is a party or by which the Company
-14-
<PAGE>
or its properties are bound pursuant to which the obligations thereunder of
either party thereto are, or are contemplated as being, for any one contract
$25,000 or greater (collectively, the "CONTRACTS"). The Company is not and, to
the best knowledge of Seller and the Company, no other party thereto is in
default (and no event has occurred which, with the passage of time or the giving
of notice, or both, would constitute a default by the Company) under any of the
Contracts, and the Company has not waived any right under any of the Contracts.
All of the Contracts to which the Company is a party are legal, valid, binding,
enforceable and in full force and effect and will remain legal, valid, binding,
enforceable and in full force and effect on identical terms immediately after
the Closing, except to the extent that enforceability may be limited by laws
affecting creditors' rights and debtors' obligations generally, and legal
limitations relating to remedies of specific performance and injunctive and
other forms of equitable relief. Except as set forth in Schedule 3.15, the
-------------
Company has not guaranteed any obligations of any other Person. To the best of
Seller's and the Company's Knowledge, no manufacturer of office equipment sold
by the Company will cease doing business with the Company immediately following
the Closing.
3.16 CLAIMS AND PROCEEDINGS. Attached hereto as Schedule 3.16 is a
---------------------- -------------
list and brief description of all claims, actions, suits, proceedings, or
investigations pending or, to the best knowledge and belief of the Seller or the
Company, threatened against or affecting the Company or any of its properties or
assets, at law or in equity, or before or by any court, municipality or other
Governmental Body. Except as set forth on Schedule 3.16, none of such claims,
-------------
actions, suits, proceedings, or investigations, if adversely determined, will
result in any liability or loss to the Company. The Company has not been and
the Company is not now, subject to any Court Order, stipulation, or consent of
or with any court or Governmental Body. No inquiry, action or proceeding has
been instituted or, to the best knowledge and belief of the Seller or the
Company, threatened or asserted against the Seller or the Company to restrain or
prohibit the carrying out of the transactions contemplated by this Agreement or
to challenge the validity of such transactions or any part thereof or seeking
damages on account thereof. To the best knowledge of the Company and Seller,
except as set forth on Schedule 3.16, there is no basis for any such valid claim
-------------
or action.
3.17 TAXES.
-----
(A) All Federal, foreign, state, county and local income, gross
receipts, excise, property, franchise, license, sales, use, withholding and
other Taxes due from the Company on or before the Closing have been paid and all
Tax Returns which are required to be filed by the Company on or before the date
hereof have been filed within the time and in the manner provided by law, and
all such Tax Returns are true and correct and accurately reflect the Tax
liabilities of the Company. No Tax Returns of the Company or any of the Seller
are presently subject to an extension of the time to file. All Taxes,
assessments, penalties, and interest of the Company which have become due
pursuant to such Tax Returns or any assessments received have been paid or
adequately accrued on the Company's Financial Statements. The provisions for
Taxes reflected on the balance sheets contained in the Financial Statements are
adequate to cover all of the Company's Tax liabilities for the respective
periods
-15-
<PAGE>
then ended and all prior periods. The Company has not executed any presently
effective waiver or extension of any statute of limitations against assessments
and collection of Taxes, and there are no pending or threatened claims,
assessments, notices, proposals to assess, deficiencies, or audits with respect
to any such Taxes of which any of the Seller or the Company are aware. For
Governmental Bodies with respect to which the Company does not file Tax Returns,
no such Governmental Body has given the Company written notification that the
Company is or may be subject to taxation by that Governmental Body. The Company
has withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, shareholder, creditor,
independent contractor or other party. There are no Tax liens on any of the
property or assets of the Company.
(B) Neither the Company nor any other corporation has filed an
election under Section 341(f) of the Code that is applicable to the Company or
any assets held by the Company. The Company has not made any payments, is not
obligated to make any payments, and is not a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Code Sec. 280G. The Company has not been a United States real
property holding corporation within the meaning of Code Sec. 897(c)(2) during
the applicable period specified in Code Sec. 897(c)(1)(A)(ii). The Company is
not a party to any Tax allocation or sharing agreement. The Company has not and
has never been (nor does the Company have any liability for unpaid Taxes because
it once was) a member of an affiliated group during any part of which return
year any corporation other than the Company also was a member of the affiliated
group. The Company has never made an election to be taxed under subchapter S of
the Code.
(C) No transaction contemplated by this Agreement is subject to
withholding under Section 1445 of the Code and no stock transfer taxes, real
estate transfer taxes or similar taxes will be imposed upon the transfer and
sale of the Shares pursuant to this Agreement.
3.18 PERSONNEL. Attached hereto as Schedule 3.18 is a list of the
--------- -------------
names and annual rates of compensation of the directors and executive officers
of the Company, and of the employees of the Company whose annual rates of
compensation during the fiscal years ended July 31, 1996 or July 31, 1997
(including base salary, bonus and incentive pay) exceed (or by July 31, 1997 are
expected to exceed) $60,000. Schedule 3.18 also summarizes the bonus, profit
-------------
sharing, percentage compensation, company automobile, club membership, and other
like benefits, if any, paid or payable to such directors, officers, and
employees during the Company's fiscal years ended July, 1996, July 1997 and to
the date hereof. Schedule 3.18 also contains a brief description of all
-------------
material terms of employment agreements to which the Company is a party and all
severance benefits which any director, officer or employee of the Company is or
may be entitled to receive. The employee relations of the Company are generally
good and there is no pending or, to the best knowledge of Seller or the Company,
threatened labor dispute or union organization campaign. None of the employees
of the Company are represented by any labor union or organization. The Company
is in compliance in all material respects with all Requirements of Laws
respecting employment and employment practices, terms and conditions
-16-
<PAGE>
of employment, and wages and hours, and are not engaged in any unfair labor
practices. Neither the Company or Seller has been advised, or has good reason to
believe, that any of the persons whose names are set forth on Schedule 3.18 or
-------------
any other employee will not agree to remain employed by the Company after the
consummation of the transactions contemplated hereby. There is no unfair labor
practice claim against the Company before the National Labor Relations Board, or
any strike, dispute, slowdown, or stoppage pending or, to the best knowledge of
the Company and Seller, threatened against or involving the Company, and none
has occurred.
3.19 BUSINESS RELATIONS. Neither the Company nor Seller knows or has
------------------
good reason to believe that any customer or supplier of the Company will cease
to do business with the Company after the consummation of the transactions
contemplated hereby in the same manner and at the same levels as previously
conducted with the Company except for any reductions which do not result in a
Material Adverse Change. Neither Seller nor the Company has received any notice
of any material disruption (including delayed deliveries or allocations by
suppliers) in the availability of any material portion of the materials used by
the Company nor is the Company or Seller aware of any facts which could lead
them to believe that the Business will be subject to any such material
disruption.
3.20 ACCOUNTS RECEIVABLE. All of the accounts, notes, and loans
-------------------
receivable that have been recorded on the books of the Company are bona fide and
represent amounts validly due for goods sold or services rendered and except as
disclosed on Schedule 3.20 all such amounts (net of any allowance for doubtful
-------------
accounts) will be collected in full within 180 days following the Closing Date.
Except as disclosed on Schedule 3.20 hereto (a) all of such accounts, notes, and
-------------
loans receivable are free and clear of any Encumbrances; (b) no claims of offset
have been asserted in writing against any of such accounts, notes, or loans
receivable; and (c) none of the obligors of such accounts, notes, or loans
receivable has given written notice that it will or may refuse to pay the full
amount or any portion thereof.
3.21 BANK ACCOUNTS. Attached hereto as Schedule 3.21 is a list of
------------- -------------
all banks or other financial institutions with which the Company has an account
or maintains a safe deposit box, showing the type and account number of each
such account and safe deposit box and the names of the persons authorized as
signatories thereon or to act or deal in connection therewith.
3.22 WARRANTIES. Except for warranty claims that are typical and in
----------
the ordinary course of the Business, no written claim for breach of product or
service warranty to any customer has been made against the Company since January
1, 1997. To the best knowledge of Seller and the Company, no state of facts
exists, and no event has occurred, which could reasonably be expected to form
the basis of any present claim against the Company for liability on account of
any express or implied warranty to any third party in connection with products
sold or services rendered by the Company.
3.23 BROKERS. Neither the Company nor Seller has engaged, or caused
-------
to be incurred any liability to any finder, broker, or sales agent in connection
with the origin,
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<PAGE>
negotiation, execution, delivery, or performance of this Agreement or the
transactions contemplated hereby.
3.24 INTEREST IN COMPETITORS, SUPPLIERS, CUSTOMERS, ETC. No
--------------------------------------------------
officer, director, or shareholder of the Company or any affiliate of any such
officer, director, or shareholder, has any ownership interest in any competitor,
supplier, or customer of the Company (other than ownership of securities of a
publicly-held corporation of which such Person owns, or has real or contingent
rights to own, less than one percent of any class of outstanding securities) or
any property used in the operation of the Business.
3.25 INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS, SHAREHOLDERS, AND
---------------------------------------------------------------
EMPLOYEES. Attached hereto as Schedule 3.25 is a list and brief description of
- --------- -------------
the payment terms of all indebtedness of the Company to officers, directors,
shareholders, and employees of the Company and all indebtedness of officers,
directors, shareholders, and employees of the Company to the Company, excluding
indebtedness for travel advances or similar advances for expenses incurred on
behalf of and in the ordinary course of the Business, consistent with past
practices.
3.26 UNDISCLOSED LIABILITIES. Except as indicated in Schedule 3.26
----------------------- -------------
hereto, the Company does not have any material liabilities (whether absolute,
accrued, contingent or otherwise), of a nature required by GAAP to be reflected
on a corporate balance sheet or disclosed in the notes thereto, except such
liabilities which are accrued or reserved against in the Financial Statements or
disclosed in the notes thereto, including without limitation any accounts
payable or service liabilities of the Company incurred prior to the Closing
Date, other than liabilities incurred in the ordinary course of the Business
since the date of the latest of such Financial Statements.
3.27 INFORMATION FURNISHED. The Company and Seller have made
---------------------
available to Global true and correct copies of all material corporate records of
the Company and all material agreements, documents, and other items listed on
the Schedules to this Agreement or referred to in Section 2 of this Agreement,
---------
and neither this Agreement, the Schedules hereto, nor any written information,
instrument, or document delivered to Global or Conway pursuant to this Agreement
contains any untrue statement of a material fact or omits any material fact
necessary to make the statements herein or therein, as the case may be, not
misleading.
In making the representations and warranties set forth above, the term
"Material" or "material" shall, where appropriate in context of its use, be
deemed to mean an amount of money greater than $25,000, the terms "Material
Adverse Change," "material adverse trend," "Material Adverse Effect," or any
other term of like import shall mean the occurrence of any single event, or any
series of related events, or set of related circumstances, which proximately
causes an actual, direct economic loss to the Company, taken as a whole, in
excess of $25,000 per occurrence or $50,000 in the aggregate. The term
"knowledge" shall mean actual knowledge after reasonable inquiry of the
employees of the Company with responsibility for the applicable
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<PAGE>
subject matter. All references to the "COMPANY" in Sections 3.6 through 3.27
------------ ----
shall include the Companies' subsidiaries.
ARTICLE IV
GLOBAL'S AND CONWAY'S REPRESENTATIONS AND WARRANTIES
Global and Conway represent and warrant to Seller as follows:
4.1 DUE ORGANIZATION. Each of Global and Conway is a corporation
----------------
duly organized, validly existing, and in good standing under the laws of the
State of Delaware and New Hampshire, respectively, and each has full corporate
power and authority to execute, deliver and perform this Agreement and to carry
out the transactions contemplated hereby.
4.2 DUE AUTHORIZATION. The execution, delivery and performance of
-----------------
this Agreement has been duly authorized by all necessary corporate action of
Global and Conway, and the Agreement has been duly and validly executed and
delivered by Global and Conway and constitutes the valid and binding obligation
of Global and Conway, enforceable in accordance with its terms, except to the
extent that enforceability may be limited by laws affecting creditors' rights
and debtors' obligations generally, and legal limitations relating to remedies
of specific performance and injunctive and other forms of equitable relief. The
execution, delivery, and performance of this Agreement (as well as all other
instruments, agreements, certificates or other documents contemplated hereby) by
Global and Conway, do not (a) violate any Requirements of Laws or Court Order of
any Governmental Body applicable to Global or its property or Conway or its
property, (b) violate or conflict with, or permit the cancellation of, or
constitute a default under any agreement to which Global or Conway is a party or
by which it or its property is bound, (c) permit the acceleration of the
maturity of any indebtedness of, or any indebtedness secured by the property of,
Global or Conway, or (d) violate or conflict with any provision of the charter
or bylaws of Global or Conway.
4.3 NO BROKERS. Neither Global nor Conway has engaged, or caused to
----------
be incurred any liability to any finder, broker or sales agent in connection
with the origin, negotiation, execution, delivery, or performance of this
Agreement or the transactions contemplated hereby.
4.4 INVESTMENT. Conway will acquire the Shares for investment and
----------
for its own account and not with a view to the distribution thereof.
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<PAGE>
ARTICLE V
COVENANTS OF THE COMPANY AND SELLER
5.1 CONSENTS OF OTHERS. Prior to the Closing, the Company and
------------------
Seller shall use their best efforts to obtain and to cause the Company to obtain
all authorizations, consents and permits required of the Company and Seller to
permit them to consummate the transactions contemplated by this Agreement.
Seller shall have obtained the written consent of (i) Konica and the Company's
other Material office equipment suppliers and (ii) the lessors of the Buildings
to the transactions contemplated by the Agreement.
5.2 SELLER'S EFFORTS. The Company and Seller shall use all
----------------
reasonable efforts to cause all conditions for the Closing to be met.
5.3 POWERS OF ATTORNEY. The Company and Seller shall cause the
------------------
Company to terminate at or prior to Closing all powers of attorney granted by
the Company, other than those relating to service of process, qualification or
pursuant to governmental regulatory or licensing agreements, or representation
before the IRS or other government agencies.
ARTICLE VI
POST-CLOSING COVENANTS
6.1 GENERAL. In case at any time after the Closing any further
-------
action is legally necessary or reasonably desirable (as determined by Global and
Kleinhans) to carry out the purposes of this Agreement, each of the parties will
take such further action (including the execution and delivery of such further
instruments and documents) as any other party reasonably may request, all at the
sole cost and expense of the requesting party (unless the requesting party is
entitled to indemnification therefor under Article VIII below). The Seller
acknowledges and agrees that from and after the Closing, Conway will be entitled
to possession of all documents, books, records, agreements, and financial data
of any sort relating to the Company, which shall be maintained at the chief
executive office of the Company; provided, however, that Seller shall be
entitled to reasonable access to and to make copies of such books and records at
his sole cost and expense and Conway will maintain all of the same for a period
of at least three (3) years after Closing. Thereafter, the Company will offer
such documentation to Seller before disposal thereof.
6.2 TRANSITION. For a period of four (4) years following Closing,
----------
the Seller will not take any action that primarily is designed or intended to
have the effect of discouraging any lessor, licensor, customer, supplier, or
other business associate of the Company from maintaining the same business
relations with the Company after the Closing as it maintained with the Company
prior to the Closing. For a period of four (4) years following Closing, the
Seller will refer all customer inquiries relating to the Business to the
Company.
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<PAGE>
6.3 CONFIDENTIALITY. The Seller will treat and hold as such all
---------------
Confidential Information, refrain from using any of the Confidential Information
except in connection with this Agreement or otherwise for the benefit of the
Company or Conway for a period of three (3) years from the Closing, and deliver
promptly to Conway or destroy, at the written request and option of Conway, all
tangible embodiments (and all copies) of the Confidential Information which are
in their possession except as otherwise permitted herein. In the event that
Seller is requested or required (by oral question or written request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar legal proceeding) to disclose any Confidential
Information, Seller will notify Conway promptly of the request or requirement.
6.4 COVENANT NOT TO COMPETE. For and in consideration of the
-----------------------
allocation of $135,000 of the Purchase Price paid to the Seller by Conway,
Seller covenants and agrees, for a period of four (4) years from and after the
Closing Date, that he will not, directly or indirectly without the prior written
consent of Conway, for or on behalf of any entity:
(A) become interested or engaged, directly or indirectly, as a
shareholder, bondholder, creditor, officer, director, partner, agent, contractor
with, employer or representative of, or in any manner associated with, or give
financial, technical or other assistance to, any Person, firm or corporation for
the purpose of engaging in the copier/office equipment dealer, service or
distribution business in competition with the Company, within the greater of (i)
a 100 mile radius of the Company's office facilities in Ithaca, Rochester,
Oswego, Buffalo and Syracuse, New York (the "CURRENT TRADE AREA") or (ii) in any
geographic area in which the Company currently conducts business;
(B) enter into any agreement with, service, assist or solicit
the business of any customers of the Company for the purpose of providing office
equipment sales or service to such customers in competition with the Company in
the Current Trade Area or to cause them to reduce or end their business with the
Company; or
(C) enter into any agreement with, or solicit the employment of
employees, consultants or representatives of the Company for the purpose of
causing them to leave the employment of the Company;
Provided, however, that no owner of less than one percent (1%) of the
outstanding stock of any publicly-traded corporation, and no owner of any amount
of Global stock, shall be deemed to be in a violation of this Section 6.4 solely
-----------
by reason thereof.
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<PAGE>
6.5 ADDITIONAL MATTERS.
------------------
(A) The Seller shall cause the Company to file with the
appropriate governmental authorities all Tax Returns required to be filed by it
for any taxable period ending prior to the Closing Date and the Company shall
remit any Taxes due in respect of such Tax Returns. In addition, Seller shall
cause Pasquale & Bowers, CPA to prepare a short period tax return for the
Company covering the period July 31, 1997 through the Effective Date. The cost
of preparation of such short period tax return shall be paid for by Seller.
(B) Conway and Seller recognize that each of them will need
access, from time to time, after the Closing Date, to certain accounting and Tax
records and information held by Conway and/or the Company to the extent such
records and information pertain to events occurring on or prior to the Closing
Date; therefore, Conway agrees to cause the Company to (A) use its best efforts
---------
to properly retain and maintain such records for a period of six (6) years from
the date the Tax Returns for the year in which the Closing occurs are filed or
until the expiration of the statute of limitations with respect to such year,
whichever is later, and (B) allow the Seller and his agents and representatives
at times and dates mutually acceptable to the parties, to inspect, review and
make copies of such records as such other party may deem necessary or
appropriate from time to time, such activities to be conducted during normal
business hours and at the other party's expense.
ARTICLE VII
CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING
7.1 CONDITIONS TO GLOBAL'S AND CONWAY'S OBLIGATIONS. Subject to
-----------------------------------------------
Section 2.4 above, the obligation of Global and Conway under this Agreement to
- -----------
consummate the Closing is subject to the conditions that:
(A) COVENANTS, REPRESENTATIONS AND WARRANTIES. The Company and
-----------------------------------------
Seller shall have performed in all material respects all obligations and
agreements and complied in all material respects with all covenants contained in
this Agreement to be performed and complied with by each of them prior to or at
the Closing Date. The representations and warranties of the Company and Seller
set forth in this Agreement shall be accurate in all material respects at and as
of the Closing Date with the same force and effect as though made on and as of
the Closing Date except for any changes resulting from activities or
transactions which may have taken place after the date hereof and which are
permitted or contemplated by the Agreement or which have been entered into in
the ordinary course of business and except to the extent that such
representations and warranties are expressly made as of another specified date
and, as to such representation, the same shall be true in all material respects
as of such specified date.
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<PAGE>
(B) CONSENTS. All statutory requirements for the valid
--------
consummation by the Company and Seller of the transactions contemplated by this
Agreement shall have been fulfilled and all authorizations, consents and
approvals, including expiration or early termination of all waiting periods
under the HSR Act and those of all federal, state, local and foreign
governmental agencies and regulatory authorities required to be obtained in
order to permit the consummation of the transactions contemplated hereby shall
have been obtained in form and substance reasonably satisfactory to Conway
unless such failure could not reasonably be expected to have a Material Adverse
Effect. All approvals of the Board of Directors and shareholders of the Company
necessary for the consummation of this Agreement and the transactions
contemplated hereby shall have been obtained.
(C) LEASES. The lessors of the Buildings shall have provided an
------
Estoppel Certificate to Global's lenders in the form of Exhibit B hereto, except
---------
as specifically waived by Global and Conway. The leases for all of such
Buildings shall provide that such leases (i) survive the Closing for the term of
such leases, copies of which have been provided to Global and Conway; provided,
however, that the lease for the Syracuse Building shall be for a term of five
(5) years after the Closing on the terms of Exhibit J hereof and (ii) the annual
---------
rent for the lease of the Syracuse Building shall be for no more than $120,000.
In addition, the lease for the Syracuse Building attached hereto in the form of
Exhibit J shall be executed at Closing.
- ---------
(D) DISCHARGE OF INDEBTEDNESS AND LIENS. Seller and the Company
-----------------------------------
shall have provided for the payment in full by the Company of all Funded
Indebtedness of the Company and all extended credit from vendors at the Closing
(other than customary accounts payable outstanding on 90 day or less payment
terms in accordance with past practices). Such Funded Indebtedness, if any, as
of August 15, 1997, is listed on Schedule 7.1(d) hereto. Seller shall have also
---------------
provided for the termination of all Encumbrances of record on the properties of
the Company, except for Permitted Exceptions. All liens or UCC filings against
the Company and each of the Subsidiaries or Affiliates of the Company which
engaged in the Business, shall have been terminated as of the Closing.
(E) MATERIAL ADVERSE CHANGE. There has been no Material Adverse
-----------------------
Change with respect to the Company since June 30, 1997.
(F) TRANSFER TAXES. Seller shall be responsible for all stock
--------------
transfer or gains taxes imposed on Seller incurred in connection with this
Agreement.
(G) FINANCIAL CONDITION. The Company's total adjusted Working
-------------------
Capital as projected at the Closing shall be greater than $971,000.00 and the
Company shall continue to have cash on hand (included in Working Capital) at the
Closing (in an amount not less than $100,000 or, if less than $100,000, the
Purchase Price will be reduced further by the amount of such deficiency), to
continue to operate the Business in the ordinary course.
(H) DOCUMENTS TO BE DELIVERED BY SELLER AND THE COMPANY. The
---------------------------------------------------
following documents shall be delivered at the Closing by Seller and the Company:
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<PAGE>
(I) OPINION OF SELLER'S COUNSEL. Global and Conway shall
---------------------------
have received an opinion of counsel to the Company and Seller, dated
the Closing Date, in substantially the same form as the form of
opinion that is Exhibit C hereto.
---------
(II) CERTIFICATES. Conway shall have received an
------------
officer's certificate and a secretary's certificate of the Company
executed by officers of the Company, dated the Closing Date, in
substantially the same forms as the forms of certificates that are
Exhibit D hereto.
---------
(III) RELEASE. Seller shall have furnished the Company
-------
with a general release of liabilities, excluding compensation and
employee benefits as well as obligations pursuant to this Agreement,
in the form attached as Exhibit E hereto.
---------
(IV) ESCROW AGREEMENT. Seller shall have delivered to
----------------
Conway at the Closing the duly executed Escrow Agreement required
pursuant to Section 2.5 hereof.
-----------
(V) EMPLOYMENT AGREEMENT. Kleinhans shall have duly
--------------------
executed and delivered the Employment Agreement in substantially the
same form attached as Exhibit F hereto, pursuant to which he will be
---------
employed by the Company following the Closing.
(VI) BUILDING LEASES. The leases of the Buildings (other
---------------
than the Syracuse Building) will be for the terms and at the rates per
annum as are currently in effect in accordance with those leases
agreements provided to Global and Conway prior to the date hereof, and
the lease for the Syracuse Building attached hereto as Exhibit J,
---------
shall be executed and delivered by the Seller, as the owner of the
Syracuse Building. Seller shall have delivered to Conway an Estoppel
Certificate of the landlords of the Buildings to Global's lenders in
the same form attached as Exhibit B hereto, except as specifically
---------
waived by Global and Conway.
(VII) COLLATERAL ASSIGNMENT OF RIGHTS. Seller shall have
-------------------------------
executed and delivered to Jackson National Life Insurance Company a
Collateral Assignment of Rights in the form attached hereto as Exhibit
-------
I.
-
(VIII) STOCK CERTIFICATES. Seller shall have delivered the
------------------
Shares accompanied by duly executed stock powers, together with any
stock transfer stamps or receipts for any transfer taxes required to
be paid thereon.
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<PAGE>
(I) PURCHASE OF KONICA SHARES. Conway shall have
-------------------------
consummated the purchase of the Konica Shares from Konica and received
the Konica Shares from Konica.
7.2 CONDITIONS TO SELLER'S AND THE COMPANY'S OBLIGATIONS. The
----------------------------------------------------
obligation of Seller and the Company under this Agreement to consummate the
Closing is subject to the conditions that:
(A) COVENANTS, REPRESENTATIONS AND WARRANTIES. Global and
-----------------------------------------
Conway shall have performed in all material respects all obligations and
agreements and complied in all material respects with all covenants contained in
this Agreement to be performed and complied with by Global or Conway prior to or
at the Closing and the representations and warranties of Global and Conway set
forth in Article IV hereof shall be accurate in all material respects, at and as
of the Closing Date, with the same force and effect as though made on and as of
the Closing Date except for any changes resulting from activities or
transactions which may have taken place after the date hereof and which are
permitted or contemplated by the Agreement or which have been entered into in
the ordinary course of the Business and except to the extent that such
representations and warranties are expressly made as of another specified date
and, as to such representations, the same shall be true as of such specified
date.
(B) CONSENTS. All statutory requirements for the valid
--------
consummation by Global and Conway of the transactions contemplated by this
Agreement shall have been fulfilled and all authorizations, consents and
approvals, including expiration or early termination of all waiting periods
under the HSR Act and those of all federal, state, local and foreign
governmental agencies and regulatory authorities required to be obtained in
order to permit the consummation by Global and Conway of the transactions
contemplated hereby shall have been obtained unless such failure shall not have
a Material Adverse Effect on the Business. Global shall have used its
reasonable best efforts to have obtained the release of the Seller from all
personal guarantees with respect to the Company.
(C) DOCUMENTS TO BE DELIVERED BY GLOBAL AND CONWAY. The
----------------------------------------------
following documents shall be delivered at the Closing by Global and Conway:
(I) OPINION OF GLOBAL'S AND CONWAY'S COUNSEL. Seller
----------------------------------------
shall have received an opinion of Davis, Graham & Stubbs LLP, counsel
to Global and Conway, dated the Closing Date, in substantially the
same form as the form of opinion that is Exhibit G hereto.
---------
(II) CERTIFICATES. Seller shall have received an
------------
officers' certificate and a secretary's certificate executed by
officers of Conway and Global, dated the Closing Date, in
substantially the same forms as the forms of certificates that are
Exhibit H hereto.
---------
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<PAGE>
(III) ESCROW AGREEMENT. Conway shall have delivered to
----------------
Seller at the Closing the duly executed Escrow Agreement required
pursuant to Section 2.5 hereof.
-----------
(IV) EMPLOYMENT AGREEMENT. Conway shall have caused the
--------------------
Company to duly execute and deliver the Employment Agreement with
Kleinhans in the same form attached as Exhibit F hereto, pursuant to
---------
which he will be employed by the Company following the Closing.
(V) PURCHASE PRICE. Seller shall have received the
--------------
Purchase Price for the Shares.
(D) RIGHT OF REINVESTMENT. Kleinhans shall have been offered
---------------------
the right to invest up to $395,400 in the capital stock of Global on the same
terms provided to other recent outside investors in Global.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION OF GLOBAL. Except as provided in Section 8.6,
------------------------- -----------
as Global's and Conway's sole and exclusive remedy for any breach by the Seller
hereunder, Seller agrees to indemnify and hold harmless Global and Conway and
each officer, director, and affiliate of Global and Conway, including without
limitation the Company or any successor of the Company (collectively, the
"INDEMNIFIED PARTIES") from and against any and all damages, losses, claims,
liabilities, demands, charges, suits, penalties, costs and expenses (including
court costs and reasonable attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively, the
"INDEMNIFIABLE COSTS"), which any of the Indemnified Parties may sustain, or to
which any of the Indemnified Parties may be subjected, arising out of (A) any
misrepresentation, breach or default by Seller or the Company of or under any of
the representations, covenants, agreements or other provisions of this Agreement
or any agreement or document executed in connection herewith; (B) the assertion
and final determination of any claim or liability against the Company or any of
the Indemnified Parties by any Person based upon the facts which form the
alleged basis for any litigation to the extent it should have been, but was not,
reserved for in the Financial Statements in accordance with GAAP; and (C) the
Company's tortious acts or omissions to act prior to Closing for which the
Company did not carry liability insurance for themselves as the insured party,
whether or not such acts or omissions to act result in a breach or violation of
any representation or warranty.
8.2 DEFENSE OF CLAIMS. If any legal proceeding shall be instituted,
-----------------
or any claim or demand made, against any Indemnified Party in respect of which
Seller may be liable hereunder, such Indemnified Party shall give prompt written
notice thereof to Seller and, except as otherwise provided in Section 8.4 below,
-----------
Seller shall have the right to defend, or cause the
-26-
<PAGE>
Company or its successors to defend, any litigation, action, suit, demand, or
claim for which it may seek indemnification unless, in the reasonable judgment
of Global, such litigation, action, suit, demand, or claim, or the resolution
thereof, would have an ongoing effect on Global, Conway, the Company or its
successors, and such Indemnified Party shall extend reasonable cooperation in
connection with such defense, which shall be at Seller's expense. In the event
Seller fails or refuses to defend the same within a reasonable length of time,
the Indemnified Parties shall be entitled to assume the defense thereof, and
Seller shall be liable to repay the Indemnified Parties for all expenses
reasonably incurred in connection with said defense (including reasonable
attorneys' fees and settlement payments) if it is determined that such request
for indemnification was proper. If Seller shall not have the right to assume the
defense of any litigation, action, suit, demand, or claim in accordance with
either of the two preceding sentences, the Indemnified Parties shall have the
absolute right to control the defense of and to settle, in their sole discretion
and without the consent of Seller, such litigation, action, suit, demand, or
claim, but Seller shall be entitled, at his own expense, to participate in such
litigation, action, suit, demand, or claim.
8.3 ESCROW CLAIM. If any claim for indemnification is made by an
------------
Indemnified Party pursuant to this Article VIII prior to the expiration of the
Escrow Period, such Indemnified Party shall apply to the Escrow Agent provided
in Section 2.5 of this Agreement for reimbursement of such claim in accordance
-----------
with the provisions of the Escrow Agreement.
8.4 TAX AUDITS, ETC. In the event of an audit of a Tax Return of the
---------------
Company with respect to which an Indemnified Party might be entitled to
indemnification pursuant to this Article VIII, Global shall have the right to
control any and all such audits which may result in the assessment of additional
Taxes against the Company and any and all subsequent proceedings in connection
therewith, including appeals (subject to the prior written consent of Seller,
which shall not unreasonably be withheld and subject to the right of Seller to
have their accountants and attorneys consult with Global on such audits or
procedures at Seller's expense). Seller shall cooperate fully in all matters
relating to any such audit or other Tax proceeding (including according access
to all records pertaining thereto), and will execute and file any and all
consents, powers of attorney, and other documents as shall be reasonably
necessary in connection therewith. If additional Taxes are payable by the
Company as a result of any such audit or other proceeding, Seller shall be
responsible for and shall promptly pay all Taxes, interest, and penalties to
which any of the Indemnified Parties shall be entitled to indemnification, net
of the present value of any Tax benefits to Global as a result of any such audit
or other proceeding..
8.5 INDEMNIFICATION OF SELLER. Conway agrees to indemnify and hold
-------------------------
harmless Seller and the Company and each officer, director, stockholder or
affiliate of the Company, from and against any Indemnifiable Costs arising out
of (A) any material misrepresentation, breach or default by Global or Conway of
or under any of the covenants, agreements or other provisions of this Agreement
or any agreement or document executed in connection herewith, and (B) any
tortious acts or omissions by Global or Conway before or after or the Company
after, the Closing. In addition, the Company and Global shall indemnify the
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<PAGE>
Seller for any payment or satisfaction of any guarantees by Seller of the
Company's obligations occurring after the Closing Date.
8.6 LIMITS ON INDEMNIFICATION. All Indemnifiable Costs sought by
-------------------------
any party hereunder shall be net of any insurance proceeds received by such
Person with respect to such claim (less the present value of any premium
increases occurring as a result of such claim). Except for any claims for
breach of the representations and warranties of the Seller under Sections 3.1,
-------------
3.2, 3.3 or 3.17 hereof (the indemnification for which shall expire on the
- ----------------
expiration of the applicable statute of limitations), the indemnification
provided under this Article VIII shall expire on the third anniversary of the
Closing Date. The Seller shall not be obligated to pay any amounts for
indemnification under this Article VIII until the aggregate indemnification
obligation hereunder exceeds $25,000, whereupon Seller shall be liable for all
amounts for which indemnification may be sought. Notwithstanding the foregoing,
in no event shall the aggregate liability of Seller to Global and Conway exceed
$5,000,000 (except for claims made for any breach of the representations and
warranties of Seller under Sections 3.1, 3.2, 3.3, or 3.17 hereof, as to which
---------------------- ----
the limit of indemnification hereunder shall be the Purchase Price). However
nothing in this Article VIII shall limit Global, Conway or Seller in exercising
or securing any remedies provided by applicable common law with respect to the
conduct of Seller or Conway in connection with this Agreement or in the amount
of damages that it can recover from the other in the event that Conway
successfully proves intentional fraud or intentional fraudulent conduct in
connection with this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 MODIFICATIONS. Any amendment, change or modification of this
-------------
Agreement shall be void unless in writing and signed by all parties hereto. No
failure or delay by any party hereto in exercising any right, power or privilege
hereunder (and no course of dealing between or among any of the parties) shall
operate as a waiver of any such right, power or privilege. No waiver of any
default on any one occasion shall constitute a waiver of any subsequent or other
default. No single or partial exercise of any such right, power or privilege
shall preclude the further or full exercise thereof.
9.2 NOTICES. All notices and other communications hereunder shall
-------
be in writing and shall be deemed to have been duly given when personally
delivered, or 48 hours after deposited in the United States mail, first-class,
postage prepaid, or by facsimile addressed to the respective parties hereto as
follows:
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<PAGE>
Global or Conway:
----------------
Global Imaging Systems Inc.
P.O. Box 273478
Tampa, Florida 33688-3478
Attention: Thomas Johnson, President
Fax No.: (813) 264-7877
Tel No.: (813) 960-5508
With a copy to:
Davis, Graham & Stubbs LLP
1314 Nineteenth Street, N.W.
Washington, D.C. 20036
Attention: Christopher J. Hagan
Fax No.: (202) 293-4794
Tel No.: (202) 822-1035
or after September 1, 1997:
Hogan & Hartson L.L.P.
Columbia Square
555 Thirteenth Street, NW
Washington, DC 20004-1109
Attention: Christopher J. Hagan
Fax No.: (202) 637-5910
Tel No.: (202) 637-5771
The Company or Seller:
----------------------
c/o Eastern Copy Products, Inc.
1224 West Genesee Street
Syracuse, New York 13204
Attention: Michael Kleinhans
Fax No.: (315) 474-7000
Tel No.: (315) 474-6479
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<PAGE>
With a copy to:
Goldberg & Fabiano
1408 West Genesee Street
Syracuse, New York 13204
Attention: Harold Goldberg, Esq.
Fax No.: (315) 422-6191
Tel No.: (315) 426-9670
or to such other address as to any party hereto as such party shall designate by
like notice to the other parties hereto.
9.3 COUNTERPARTS. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original but all of which
counterparts collectively shall constitute one instrument, and in making proof
of this Agreement, it shall never be necessary to produce or account for more
than one such counterpart.
9.4 EXPENSES. Each of the parties hereto will bear all costs,
--------
charges and expenses incurred by such party in connection with this Agreement
and the consummation of the transactions contemplated herein, provided, however,
that Seller shall bear all costs and expenses of (i) any broker involved in this
transaction and (ii) all legal expenses of Seller or the Company with respect to
this Agreement and the transactions contemplated hereby.
9.5 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding
--------------------------
upon and inure to the benefit of the Company, Global, Conway and Seller, their
heirs, representatives, successors, and permitted assigns, in accordance with
the terms hereof. This Agreement shall not be assignable by the Company or
Seller without the prior written consent of Conway. This Agreement shall be
assignable by Conway to a wholly-owned subsidiary of Global without the prior
written consent of Seller, but any such assignment shall not relieve Global or
Conway of its obligations hereunder.
9.6 ENTIRE AND SOLE AGREEMENT. This Agreement and the other
-------------------------
schedules and agreements referred to herein, constitute the entire agreement
between the parties hereto and supersede all prior agreements, representations,
warranties, statements, promises, information, arrangements and understandings,
whether oral or written, express or implied, with respect to the subject matter
hereof.
9.7 GOVERNING LAW. This Agreement and its validity, construction,
-------------
enforcement, and interpretation shall be governed by the substantive laws of the
State of New York.
9.8 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
-----------------------------------------------------
Regardless of any investigation at any time made by or on behalf of any party
hereto or of any information any party may have in respect thereof, all
covenants, agreements, representations, and warranties and
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<PAGE>
the related indemnities made hereunder or pursuant hereto or in connection with
the transactions contemplated hereby shall survive the Closing for a period of
three (3) years, provided (a) the representations and warranties contained in
Section 3.17 of this Agreement, and the related indemnities, shall survive the
- ------------
Closing until the expiration of the applicable statutes of limitations for
determining or contesting Tax liabilities and (b) the representations and
warranties contained in Sections 3.1, 3.2 and 3.3 of this Agreement, and the
-------------------------
related indemnities, shall survive the Closing until expiration of the
applicable statute of limitations.
9.9 INVALID PROVISIONS. If any provision of this Agreement is deemed
------------------
or held to be illegal, invalid or unenforceable, this Agreement shall be
considered divisible and inoperative as to such provision to the extent it is
deemed to be illegal, invalid or unenforceable, and in all other respects this
Agreement shall remain in full force and effect; provided, however, that if any
provision of this Agreement is deemed or held to be illegal, invalid or
unenforceable there shall be added hereto automatically a provision as similar
as possible to such illegal, invalid or unenforceable provision and be legal,
valid and enforceable. Further, should any provision contained in this
Agreement ever be reformed or rewritten by any judicial body of competent
jurisdiction, such provision as so reformed or rewritten shall be binding upon
all parties hereto.
9.10 PUBLIC ANNOUNCEMENTS. Neither party shall make any public
--------------------
announcement of the transactions contemplated hereby without the prior written
consent of the other party, which consent shall not be unreasonably withheld.
9.11 REMEDIES CUMULATIVE. The remedies of the parties under this
-------------------
Agreement are cumulative and shall not exclude any other remedies to which any
party may be lawfully entitled.
9.12 WAIVER. No failure or delay on the part of any party in
------
exercising any right, power, or privilege hereunder or under any of the
documents delivered in connection with this Agreement shall operate as a waiver
of such right, power, or privilege; nor shall any single or partial exercise of
any such right, power, or privilege preclude any other or further exercise
thereof or the exercise of any other right, power, or privilege.
9.13 DISPUTE RESOLUTION. ALL DISPUTES BETWEEN SELLER AND GLOBAL WITH
------------------
RESPECT TO ANY PROVISION OF THIS AGREEMENT OR THE RIGHTS AND OBLIGATIONS OF
SELLER AND GLOBAL HEREUNDER (OTHER THAN DISPUTES INVOLVING ALLEGATIONS OF
INTENTIONAL FRAUD), WHICH CANNOT BE RESOLVED BY MUTUAL AGREEMENT, WILL BE
RESOLVED BY BINDING ARBITRATION IN ACCORDANCE WITH THE RULES OF THE AMERICAN
ARBITRATION ASSOCIATION IN SYRACUSE, NEW YORK, OR BY ANY OTHER MEANS OF
ALTERNATIVE DISPUTE RESOLUTION MUTUALLY AGREED UPON BY THE PARTIES.
-31-
<PAGE>
[THIS SPACE INTENTIONALLY LEFT BLANK]
-32-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed as of the date and year first above written.
GLOBAL:
------
GLOBAL IMAGING SYSTEMS INC.
By: /s/ Thomas S. Johnson
---------------------
Thomas S. Johnson
President and Chief Executive Officer
CONWAY:
------
CONWAY OFFICE PRODUCTS, INC.
By: /s/ Thomas S. Johnson
---------------------
Thomas S. Johnson
Chairman
THE COMPANY:
-----------
EASTERN COPY PRODUCTS, INC.
By: /s/ Michael E. Kleinhans
------------------------
Michael E. Kleinhans
President
SELLER:
------
/s/ Michael E. Kleinhans
------------------------
Michael E. Kleinhans
-33-
<PAGE>
EXHIBIT 10.22
[***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[**]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.***]
STOCK PURCHASE AGREEMENT
BY AND AMONG
GLOBAL IMAGING SYSTEMS INC.,
DUPLICATING SPECIALTIES, INC. (D/B/A
COPYTRONIX) (THE "COMPANY")
AND
THE SHAREHOLDERS OF THE COMPANY
DATED SEPTEMBER 30, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
DEFINITIONS
<S> <C>
1.1 Definitions..............................................................1
ARTICLE II
AGREEMENT OF PURCHASE AND SALE; CLOSING
2.1 Agreement to Sell and Purchase...........................................5
2.2 Purchase Price...........................................................5
2.3 Payment of Purchase Price................................................6
2.4 Closing..................................................................6
2.5 Escrow Arrangements......................................................6
2.6 Purchase Price Adjustments...............................................6
2.7 Closing Audit............................................................7
2.8 Post-Closing Purchase Price Adjustment...................................7
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND SELLER
3.1 Capitalization...........................................................8
3.2 No Liens on Shares.......................................................8
3.3 Other Rights to Acquire Capital Stock....................................8
3.4 Due Organization.........................................................8
3.5 Subsidiaries.............................................................8
3.6 Due Authorization........................................................9
3.7 Financial Statements.....................................................9
3.8 Certain Actions.........................................................10
3.9 Properties..............................................................11
3.10 Licenses and Permits....................................................12
3.11 Intellectual Property...................................................12
3.12 Compliance with Laws....................................................12
3.13 Insurance...............................................................13
3.14 Employee Benefit Plans..................................................13
(a) Employee Welfare Benefit Plans.....................................13
(b) Employee Pension Benefit Plans.....................................13
(c) Employment and Non-Tax Qualified Deferred Compensation
Arrangements......................................................14
3.15 Contracts and Agreements................................................14
3.16 Claims and Proceedings..................................................14
3.17 Taxes...................................................................15
3.18 Personnel...............................................................16
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
3.19 Business Relations......................................................16
3.20 Accounts Receivable.....................................................16
3.21 Bank Accounts...........................................................17
3.22 Warranties..............................................................17
3.23 Brokers.................................................................17
3.24 Interest in Competitors, Suppliers, Customers, Etc......................17
3.25 Indebtedness To and From Officers, Directors, Shareholders, and
Employees..............................................................17
3.26 Undisclosed Liabilities.................................................17
3.27 Information Furnished...................................................18
ARTICLE IV
GLOBAL'S REPRESENTATIONS AND WARRANTIES
4.1 Due Organization........................................................18
4.2 Due Authorization.......................................................18
4.3 No Brokers..............................................................19
ARTICLE V
COVENANTS OF THE COMPANY AND SELLER
5.1 Consents of Others......................................................19
5.2 Seller's Efforts........................................................19
5.3 Powers of Attorney......................................................19
ARTICLE VI
POST-CLOSING COVENANTS
6.1 General.................................................................20
6.2 Transition..............................................................20
6.3 Confidentiality.........................................................20
6.4 Covenant Not to Compete.................................................20
ARTICLE VII
CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING
7.1 Conditions to Global's Obligations......................................22
(a) Covenants, Representations and Warranties..........................22
(b) Consents...........................................................22
(c) Leases.............................................................23
(d) Discharge of Indebtedness and Liens................................23
(e) Material Adverse Change............................................23
(f) Transfer Taxes.....................................................23
(g) Financial Condition................................................23
(h) Documents to be Delivered by Seller and the Company................23
(i) Opinion of Seller's Counsel................................23
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
(ii) Certificates...............................................23
(iii) Release....................................................23
(iv) Escrow Agreement...........................................24
(v) Employment Agreement.......................................24
(vi) Building Leases............................................24
(vii) Collateral Assignment of Rights............................24
(viii) Stock Certificates.........................................24
7.2 Conditions to Seller's and the Company's Obligations....................24
(a) Covenants, Representations and Warranties..........................24
(b) Consents...........................................................24
(c) Documents to be Delivered by Global................................25
(ii) Certificates................................................25
(iii) Escrow Agreement............................................25
(iv) Employment Agreement........................................25
(iv) Purchase Price..............................................25
(d) Right of Reinvestment..............................................25
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification of Global...............................................26
8.2 Defense of Claims.......................................................26
8.3 Escrow Claim............................................................27
8.4 Tax Audits, Etc.........................................................27
8.5 Indemnification of Seller...............................................28
8.6 Limits on Indemnification...............................................28
ARTICLE IX
MISCELLANEOUS
9.1 Modifications...........................................................28
9.2 Notices.................................................................29
9.3 Counterparts............................................................30
9.4 Expenses................................................................30
9.5 Binding Effect; Assignment..............................................30
9.6 Entire and Sole Agreement...............................................30
9.7 Governing Law...........................................................30
9.8 Survival of Representations, Warranties and Covenants...................30
9.9 Invalid Provisions......................................................31
9.10 Public Announcements....................................................31
9.11 Remedies Cumulative.....................................................31
9.12 Waiver..................................................................31
9.13 Dispute Resolution......................................................31
</TABLE>
-iv-
<PAGE>
LIST OF EXHIBITS
Exhibit A Form of Escrow Agreement
Exhibit B Form of Estoppel Certificate for Building Leases
Exhibit C Opinion of Seller's Counsel
Exhibit D Seller's Certificates
Exhibit E Release
Exhibit F Groves Executive Agreement
Exhibit G Global Certificates
Exhibit H Collateral Assignment of Rights
LIST OF SCHEDULES
Schedule 2.3 Seller's Accounts
Schedule 2.6 Holders of Funded Indebtedness
Schedule 3.1 Ownership of Shares
Schedule 3.4 Articles and Bylaws
Schedule 3.8A Certain Actions
Schedule 3.8B Material Changes
Schedule 3.9 Properties
Schedule 3.10 Licenses and Permits
Schedule 3.11 Patents and Trademarks
Schedule 3.13 Insurance
Schedule 3.14 Employee Benefit Plans
Schedule 3.15 Contracts and Agreements
Schedule 3.16 Claims and Proceedings
Schedule 3.18 Personnel
Schedule 3.20 Accounts Receivable
Schedule 3.21 Bank Accounts
Schedule 3.25 Indebtedness with Officers, Directors and Shareholders
Schedule 3.26 Undisclosed Liabilities
Schedule 7.1(d) Indebtedness
The Exhibits and Schedules to this Stock Purchase Agreement are not included
with this Registration Statement on Form S-1. Global will provide these
exhibits and schedules upon the request of the Securities and Exchange
Commission.
-v-
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "AGREEMENT") is entered into as of
September 30, 1997, by and among GLOBAL IMAGING SYSTEMS INC., a Delaware
corporation ("GLOBAL"), DUPLICATING SPECIALTIES, INC. (d/b/a COPYTRONIX), an
Oregon corporation (the "COMPANY") and THE SHAREHOLDER OF THE COMPANY (the
"SELLER").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the distribution, sale and service
of office equipment in the State of Oregon and in the State of Washington (the
"BUSINESS"); and
WHEREAS, Seller owns all of the outstanding shares of capital stock of
the Company (the "SHARES"), which Shares constitute all of the issued and
outstanding capital stock of the Company; and
WHEREAS, Global desires to purchase from Seller and Seller desires to
sell to Global hereby all of the Shares owned by Seller all on the terms and
subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto covenant and agree
as follows:
ARTICLE I
DEFINITIONS
-----------
1.1 DEFINITIONS. In this Agreement, the following terms have the
-----------
meanings specified or referred to in this Section 1.1 and shall be equally
-----------
applicable to both the singular and plural forms. Any agreement referred to
below shall mean such agreement as amended, supplemented and modified from time
to time to the extent permitted by the applicable provisions thereof and by this
Agreement.
"AFFILIATE" means, with respect to any Person, any other Person
which directly or indirectly controls, is controlled by or is under common
control with such Person.
"AUDITED CLOSING BALANCE SHEET" has the meaning specified in
Section 2.7.
- -----------
"BUILDINGS" shall mean the Company's offices, showroom and
warehouse facilities located at 15860 SW Upper Boones Ferry Road, Lake Oswego,
Oregon 97035.
<PAGE>
"BUSINESS" has the meaning specified in the first recital of the
Agreement
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. (S)(S) 9601 et seq., any amendments
-- ---
thereto, any successor statutes, and any regulations promulgated thereunder.
"CLOSING" means the closing of the transfer of the Shares from
the Seller to Global.
"CLOSING DATE" has the meaning specified in Section 2.4.
-----------
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning specified in the first paragraph of
this Agreement.
"CONFIDENTIAL INFORMATION" means all confidential information and
trade secrets of the Company including, without limitation, any of the same
comprising the identity, lists or descriptions of any customers, referral
sources or organizations; financial statements, cost reports or other financial
information; contract proposals, or bidding information; business plans and
training and operations methods and manuals; personnel records; fee structure;
and management systems, policies or procedures, including related forms and
manuals. Confidential Information shall not include any information (i) which
is disclosed pursuant to subpoena or other legal process, (ii) which has been
publicly disclosed, (iii) which subsequently becomes known to a third party not
subject to a confidentiality agreement with Global or the Company, or (iv) which
is subsequently disclosed by any third party not in breach of a confidentiality
agreement.
"CONTRACTS" has the meaning specified in Section 3.15.
------------
"COURT ORDER" means any judgment, order, award or decree of any
foreign, federal, state, local or other court or tribunal and any award in any
arbitration proceeding.
"EFFECTIVE DATE" has the meaning specified in Section 2.4.
-----------
"EMPLOYMENT AGREEMENT" shall mean the executive agreement with
Dean Groves to be entered into at Closing in the form of Exhibit F.
---------
"ENCUMBRANCE" means any lien, claim, charge, security interest,
mortgage, pledge, easement, conditional sale or other title retention agreement,
defect in title, restrictive covenant or other restrictions of any kind.
-2-
<PAGE>
"ENVIRONMENTAL OBLIGATIONS" has the meaning specified in Section
-------
3.12.
- ----
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ESCROW AGENT" means the Key Bank of Oregon.
"ESCROW AGREEMENT" means the Escrow Agreement to be executed by
and among the Seller, Global and the Escrow Agent in the form of Exhibit A.
---------
"ESCROW PERIOD" has the meaning specified in Section 2.5.
-----------
"ESCROW SUM" has the meaning specified in Section 2.5.
-----------
"FINANCIAL STATEMENTS" has the meaning specified in Section 3.7.
-----------
"FUNDED INDEBTEDNESS" means all (i) indebtedness of the Company
for borrowed money or other interest-bearing indebtedness; (ii) capital lease
obligations of the Company; (iii) obligations of the Company to pay the deferred
purchase or acquisition price for goods or services, other than trade accounts
payable or accrued expenses in the ordinary course of business on no more than
90 day payment terms; (iv) indebtedness of others guaranteed by the Company or
secured by an Encumbrance on the Company's property; (v) indebtedness of the
Company under extended credit terms of more than 30 days from manufacturers
provided to the Company; or (vi) any receivables owed by the Seller to the
Company.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"GLOBAL" has the meaning specified in the first paragraph of this
Agreement.
"GOVERNMENTAL BODY" means any foreign, federal, state, local or
other governmental authority or regulatory body.
"GOVERNMENTAL PERMITS" has meaning specified in Section 3.10.
------------
"INDEPENDENT ACCOUNTANTS" has the meaning specified in Section
-------
2.7.
- ---
"IRS" means the Internal Revenue Service.
"INDEMNIFIABLE COSTS" has the meaning specified in Section 8.1.
-----------
"INDEMNIFIED PARTIES" has the meaning specified in Section 8.1.
-----------
-3-
<PAGE>
"INTELLECTUAL PROPERTY" has the meaning specified in Section
-------
3.11.
- ----
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means a
material adverse change or effect on the assets, properties, Business,
operations, liabilities, or financial condition of the Company and its
subsidiaries, taken as a whole. In determining whether a "MATERIAL ADVERSE
CHANGE" or "MATERIAL ADVERSE EFFECT" has occurred, the quantitative amounts set
forth at the end of Article III shall be conclusive.
-----------
"OSHA" means the Occupational Safety and Health Act, 29 U.S.C.
(S)(S) 651 et seq., any amendment thereto, and any regulations promulgated
-- ---
thereunder.
"PERMITTED EXCEPTION" means (a) liens for Taxes and other
governmental charges and assessments which are not yet due and payable, (b)
liens of landlords and liens of carriers, warehousemen, mechanics and
materialmen and other like liens arising in the ordinary course of business for
sums not yet due and payable, (c) other liens or imperfections on property which
are not material in amount or do not materially detract from the value or the
existing use of the property affected by such lien or imperfection, (d) such
statements of fact and exceptions shown on any title insurance policies
delivered to Global.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or Governmental Body.
"PRELIMINARY CLOSING BALANCE SHEET" shall mean the Company's best
estimate of the Company's balance sheet as of August 31, 1997. The Preliminary
Closing Balance Sheet shall be delivered to Global not less than five (5) days
prior to the Closing Date.
"PURCHASE PRICE" has the meaning specified in Section 2.2.
-----------
"RCRA" means the Resource Conservation and Recovery Act, 42
U.S.C. (S)(S) 6901 et seq., and any successor statute, and any regulations
-- ---
promulgated thereunder.
"REQUIREMENTS OF LAWS" means any foreign, federal, state and
local laws, statutes, regulations, rules, codes or ordinances enacted, adopted,
issued or promulgated by any Governmental Body (including, without limitation,
those pertaining to electrical, building, zoning, environmental and occupational
safety and health requirements) or common law.
"SELLER" has the meaning set forth in the first paragraph of this
Agreement.
"SHARES" means all of the issued and outstanding shares of the
capital stock of the Company.
-4-
<PAGE>
"SUBSIDIARY" has the meaning set forth in Section 3.5 of this
-----------
Agreement.
"SUBSIDIARY SHARES" has the meaning set forth in Section 3.5 of
-----------
this Agreement.
"TAX" or "TAXES" means any federal, state, local or foreign
income, alternative or add-on minimum, gross income, gross receipts, windfall
profits, severance, property, production, sales, use, transfer, gains, license,
excise, employment, payroll, withholding or minimum tax, transfer, goods and
services, or any other tax, custom, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or any
penalty, addition to tax or additional amount imposed thereon by any
Governmental Body.
"TAX RETURN" means any return, report or similar statement
required to be filed with respect to any Taxes (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return and declaration of estimated Tax.
"WORKING CAPITAL" shall mean the difference between the Company's
current assets and its current liabilities as calculated in accordance with
GAAP.
"WORKING CAPITAL TARGET" shall have the meaning assigned to such
term in Section 2.6 hereof.
-----------
ARTICLE II
AGREEMENT OF PURCHASE AND SALE; CLOSING
2.1 AGREEMENT TO SELL AND PURCHASE. Upon the basis of the
------------------------------
representations and warranties, for the consideration, and subject to the terms
and conditions set forth in this Agreement, Seller agrees to sell the Shares to
Global and Global agrees to purchase the Shares from Seller.
2.2 PURCHASE PRICE. The total purchase price for the Shares (the
--------------
"PURCHASE PRICE") shall be equal to $3,500,000 subject to any adjustment
required to be made pursuant to Section 2.6 or Section 2.8 below.
----------- -----------
2.3 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be payable
-------------------------
by Global at the Closing (hereinafter defined) as follows:
(A) $3,150,000 of the Purchase Price less the amounts set forth
in Section 2.6(a) and (b) will be paid, at the direction of the Seller, in cash
-------------- ---
by wire transfer of
-5-
<PAGE>
funds as specified in Schedule 2.3 (including the payment of $75,000 for the
covenant not to compete provided in Section 6.4); and
(B) $350,000 of the Purchase Price will be paid in cash by wire
transfer of funds to the Escrow Agent to be held in escrow for satisfaction of
Seller's indemnification obligations specified in Section 8.1 or payment to the
-----------
Seller in accordance with the terms of Section 2.5 below.
-----------
2.4 CLOSING. The Closing of the purchase and sale of the Shares
-------
contemplated by this Agreement shall take place at 9:00 a.m., Pacific Coast
time, at the offices of Draneas & Gregores in Portland, Oregon on September 30,
1997, or at such other date and time as the parties shall agree (the "CLOSING
DATE"), effective as of September 1, 1997 (the "EFFECTIVE DATE").
2.5 ESCROW ARRANGEMENTS. Pursuant to the Escrow Agreement to be
-------------------
entered into among Seller, Global and the Escrow Agent, $350,000 of the Purchase
Price shall be delivered to the Escrow Agent at Closing. Such monies (which,
together with all interest accrued thereon, is hereinafter referred to as the
"ESCROW SUM") shall be held pursuant to the terms of the Escrow Agreement for
payment from such Escrow Sum of the amounts, if any, owing by Seller to Global
pursuant to Section 2.8 or Article VIII below. At the conclusion of the period
-----------
ending on the first anniversary of the Closing Date (such period being referred
to herein as the "ESCROW PERIOD"), such remaining portion of the Escrow Sum not
theretofore claimed by or paid to Global in accordance with the terms of the
Escrow Agreement and this Agreement shall be disbursed to Seller. Seller and
Global agree that each will execute and deliver such reasonable instruments and
documents as are furnished by any other party to enable such furnishing party to
receive those portions of the Escrow Sum to which the furnishing party is
entitled under the provisions of the Escrow Agreement and this Agreement.
2.6 PURCHASE PRICE ADJUSTMENTS.
--------------------------
(A) The Purchase Price payable pursuant to Section 2.3(a) above
--------------
will be reduced by the total amount of Funded Indebtedness, if any, assumed or
paid by Global in cash by wire transfer of funds to the accounts of the holders
of Funded Indebtedness listed on Schedule 2.6 hereto to satisfy the Company's
------------
Funded Indebtedness with such institutions.
(B) The portion of the Purchase Price payable at Closing will be
reduced by the amount, if any, by which the adjusted Working Capital as
reflected on the Preliminary Closing Balance Sheet is less than $532,906 [THE
AMOUNT WHICH IS $50,000 LESS THAN THE AVERAGE OF THE WORKING CAPITAL BALANCES AT
THE END OF EACH OF THE FIRST SIX MONTHS OF 1997] (the "WORKING CAPITAL TARGET").
2.7 CLOSING AUDIT. Within 120 days following the Closing Date, there
-------------
shall be delivered to Global and to Seller an audit of the Preliminary Closing
Balance Sheet (the "AUDITED CLOSING BALANCE SHEET") of the Company at and as of
the Effective Date. The
-6-
<PAGE>
Preliminary Closing Balance Sheet shall be audited by Ernst & Young, LLP in
accordance with GAAP. The cost of the Audited Closing Balance Sheet shall be
paid by Global. In the event that the Seller disputes any items on the Audited
Closing Balance Sheet within ten days after Seller's receipt thereof, the
parties shall jointly select and retain an independent "Big Six" accounting firm
(the "INDEPENDENT ACCOUNTANTS") to review the disputed item(s) on the Audited
Closing Balance Sheet. The final determination of such disputed item(s) by the
Independent Accountants shall be reflected on the Audited Closing Balance Sheet.
The cost of retaining the Independent Accountants shall be borne by Seller;
provided, however, that Global shall reimburse Seller for the cost of the
Independent Accountants in the event that such review results in an increase of
more than $50,000 in the Company's Working Capital as reflected on the Audited
Closing Balance Sheet prepared by Ernst & Young, LLP.
2.8 POST-CLOSING PURCHASE PRICE ADJUSTMENT. In the event that the
--------------------------------------
Working Capital as reflected on the Audited Closing Balance Sheet is less than
the Working Capital Target, then the Purchase Price will be adjusted downward,
on a dollar-for-dollar basis, to reflect the lesser of (i) the decrease, if any,
in Working Capital as reflected on the Audited Closing Balance Sheet from the
amount of Working Capital reflected on the Preliminary Closing Balance Sheet or
(ii) the amount, if any, by which the Working Capital reflected on the Audited
Closing Balance Sheet is less than the Working Capital Target. Conversely, the
Purchase Price will be adjusted upward, on a dollar-for dollar basis, to reflect
the increase, if any, in the total Working Capital as reflected on the Audited
Closing Balance Sheet from the amount of Working Capital reflected on the
Preliminary Closing Balance Sheet, provided, however, that in no event shall
such upward adjustment exceed the total amount of any adjustment to the Purchase
Price made pursuant to Section 2.6(b) above. The post-closing adjustment to the
--------------
Purchase Price, if any, shall be paid by Seller to Global from the Escrow Sum or
by Global to Seller, as the case may be, in immediately available funds within
ten (10) business days of delivery of the Audited Closing Balance Sheet, unless
the Seller disputes any items on the Audited Closing Balance Sheet, in which
case it shall be paid within ten (10) business days after the Independent
Accountants finally determine the disputed item(s), and Global delivers to
Seller an Audited Closing Balance Sheet modified to reflect such determination.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND SELLER
The Company and Seller represent and warrant to Global that:
3.1 CAPITALIZATION. The authorized capital stock of the Company
--------------
consists of 20 shares of Common Stock, all of which are issued and outstanding.
All of the Shares are duly authorized, validly issued, fully paid, and
nonassessable. All of the Shares are owned of record and beneficially by Seller
in the amounts set forth on Schedule 3.1 hereto. None of the Shares was issued
------------
or will be transferred under this Agreement in violation of any preemptive or
preferential rights of any Person. The Seller owns all of the issued and
outstanding capital stock of the Company.
-7-
<PAGE>
3.2 NO LIENS ON SHARES. Except as shown on Schedule 3.1, Seller
------------------ ------------
owns the Shares, free and clear of any Encumbrances other than the rights and
obligations arising under this Agreement, and none of the Shares is subject to
any outstanding option, warrant, call, or similar right of any other Person to
acquire the same, and none of the Shares is subject to any restriction on
transfer thereof except for restrictions imposed by applicable federal and state
securities laws. At Closing, Seller will have full power and authority to
convey good and marketable title to the Shares, free and clear of any
Encumbrances.
3.3 OTHER RIGHTS TO ACQUIRE CAPITAL STOCK. Except as set forth in
-------------------------------------
this Agreement, there are no authorized or outstanding warrants, options, or
rights of any kind to acquire from the Company any equity or debt securities of
the Company, or securities convertible into or exchangeable for equity or debt
securities of the Company, and there are no shares of capital stock of the
Company reserved for issuance for any purpose nor any contracts, commitments,
understandings or arrangements which require the Company to issue, sell or
deliver any additional shares of its capital stock.
3.4 DUE ORGANIZATION. The Company is a corporation duly organized,
----------------
validly existing, and in good standing under the laws of the State of Oregon and
has full corporate power and authority to carry on the Business as now conducted
and as proposed to be conducted through Closing. Complete and correct copies of
the Articles of Incorporation and Bylaws of the Company, and all amendments
thereto, have been heretofore delivered to Global and are attached hereto as
Schedule 3.4. The Company is qualified to do business in the State of Oregon and
- ------------
in each jurisdiction in which the nature of the Business or the ownership of its
properties requires such qualification except where the failure to be so
qualified does not and could not reasonably be expected to have a Material
Adverse Effect.
3.5 SUBSIDIARIES. The Company is the owner of all of the outstanding
------------
shares of the capital stock of each subsidiary (individually, a "SUBSIDIARY" and
collectively, the "SUBSIDIARIES") of the Company listed on Schedule 3.5 (such
------------
shares shall be collectively referred to as the "SUBSIDIARY SHARES"), free and
clear of all Encumbrances, and none of the Subsidiary Shares is subject to any
outstanding option, warrant, call, or similar right of any other Person to
acquire the same, and none of the Subsidiary Shares is subject to any
restriction on transfer thereof except for restrictions imposed by applicable
federal and state securities laws. There are no authorized or outstanding
warrants, options, or rights of any kind to acquire from the Company, or any
Subsidiary of the Company, any equity or debt securities of any Subsidiary of
the Company, or securities convertible into or exchangeable for equity or debt
securities of any Subsidiary of the Company, and there are no Subsidiary Shares
reserved for issuance for any purpose nor any contracts, commitments,
understandings or arrangements which require the Company or any Subsidiary of
the Company to issue, sell or deliver any additional Subsidiary Shares. Except
for the Subsidiaries of the Company listed on Schedule 3.5, neither the Company,
------------
nor its subsidiaries, directly or indirectly have any subsidiaries or any direct
or indirect ownership interests in any Person. The Seller does not own any other
Person engaged in the Business.
-8-
<PAGE>
3.6 DUE AUTHORIZATION. The Company and the Seller each have full
-----------------
power and authority to execute, deliver and perform this Agreement and to carry
out the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action of the Company.
This Agreement has been duly and validly executed and delivered by the Company
and Seller and constitutes the valid and binding obligations of the Company and
Seller, enforceable in accordance with its terms, except to the extent that
enforceability may be limited by laws affecting creditors' rights and debtors'
obligations generally, and legal limitations relating to remedies of specific
performance and injunctive and other forms of equitable relief. The execution,
delivery, and performance of this Agreement (as well as all other instruments,
agreements, certificates, or other documents contemplated hereby) by the Company
and Seller, do not (a) violate any Requirements of Laws or any Court Order of
any Governmental Body applicable to the Company or Seller, or their respective
property, (b) violate or conflict with, or permit the cancellation of, or
constitute a default under, any material agreement to which the Company or
Seller are a party, or by which any of them or any of their respective property
is bound, (c) permit the acceleration of the maturity of any material
indebtedness of, or indebtedness secured by the property of, the Company or
Seller, or (d) violate or conflict with any provision of the charter or bylaws
of the Company.
3.7 FINANCIAL STATEMENTS. The following Financial Statements (herein
--------------------
so called) of the Company have been delivered to Global by the Company:
unaudited, reviewed balance sheets of the Company as of October 31, 1994,
October 31, 1995 and October 31, 1996 and unaudited balance sheet as of August
31, 1997, and unaudited reviewed statements of income of the Company for the
fiscal years ended October 31, 1994, October 31, 1995 and October 31, 1996 and
unaudited statement of income for the 10 month period ending August 31, 1997.
The Financial Statements have been prepared in accordance with GAAP throughout
the periods indicated and fairly present the financial position, results of
operations and changes in financial position of the Company as of the indicated
dates and for the indicated periods, subject (in the case of the 10 month
Financial Statements) to year end accruals made in the ordinary course of the
Business which are not materially adverse and which are consistent with past
practices. Except to the extent reflected or provided for in the Financial
Statements or the notes thereto and obligations and liabilities incurred in the
ordinary course of business since the date of the last of such Financial
Statements, the Company has no liabilities required by GAAP to be reflected on
the Company's balance sheet or notes thereto that are not so reflected, nor any
other obligations (whether absolute, contingent, or otherwise) which are
(individually or in the aggregate) Material (in amount or to the conduct of the
Business); and neither the Company nor Seller has knowledge of any basis for the
assertion of any such liability or obligation. Since October 31, 1996, there
has been no Material Adverse Change in the prospects of the Company.
3.8 CERTAIN ACTIONS. Since October 31, 1996, the Company has not,
---------------
except as disclosed on Schedule 3.8A hereto or any of the Financial Statements
-------------
or notes thereto: (a) discharged or satisfied any Encumbrance or paid any
obligation or liability, absolute or
-9-
<PAGE>
contingent, other than current liabilities incurred and paid in the ordinary
course of the Business; (b) paid or declared any dividends or distributions, or
purchased, redeemed, acquired, or retired any stock or indebtedness from any
stockholder; (c) made or agreed to make any loans or advances or guaranteed or
agreed to guarantee any loans or advances to any party whatsoever; (d) suffered
or permitted any Encumbrance to arise or be granted or created against or upon
any of its assets, real or personal, tangible or intangible; (e) canceled,
waived, or released or agreed to cancel, waive, or release any of its debts,
rights, or claims against third parties in excess of $10,000 individually or
$25,000 in the aggregate; (f) sold, assigned, pledged, mortgaged, or otherwise
transferred, or suffered any material damage, destruction, or loss (whether or
not covered by insurance) to, any assets (except in the ordinary course of the
Business); (g) amended its charter or bylaws; (h) paid or made a commitment to
pay any severance or termination payment to any employee or consultant; (i) made
any material change in its method of management or operation or method of
accounting; (j) made any capital expenditures, including, without limitation,
replacements of equipment in the ordinary course of the Business, or entered
into commitments therefor, except for capital expenditures or commitments
therefor which do not, in the aggregate, exceed $50,000; (k) made any investment
or commitment therefor in any Person; (l) made any payment or contracted for the
payment of any bonus or other compensation or personal expenses, other than (A)
wages and salaries and business expenses paid in the ordinary course of the
Business, and (B) wage and salary adjustments made in the ordinary course of the
Business for employees who are not officers, directors, or shareholders of the
Company; (m) made, amended, or entered into any written employment contract or
created or made any material change in any bonus, stock option, pension,
retirement, profit sharing or other employee benefit plan or arrangement; (n)
materially amended or experienced a termination of any material contract,
agreement, lease, franchise or license to which the Company is a party that
would or could reasonably be expected to have a Material Adverse Effect, except
in the ordinary course of the Business; or (o) entered into any other material
transactions that would or could reasonably be expected to have a Material
Adverse Effect except in the ordinary course of the Business. Since October 31,
1996, except as disclosed on Schedule 3.8B hereto or any of the Financial
-------------
Statements or notes thereto, there has not been (a) any Material Adverse Change
including, but not limited to, the loss of any material customers or suppliers
of the Company, or in any material assets of the Company, (b) any extraordinary
contracts, commitments, orders or rebates, (c) any strike, material slowdown, or
demand for recognition by a labor organization by or with respect to any of the
employees of the Company, or (d) any shutdown, material slow-down, or cessation
of any material operations conducted by, or constituting part of, the Company,
nor has the Company agreed to do any of the foregoing.
3.9 PROPERTIES. Attached hereto as Schedule 3.9 is a list containing
---------- ------------
a description of each interest in real property (including, without limitation,
leasehold interests) and each item of personal property utilized by the Company
in the conduct of the Business having a book value in excess of $15,000 as of
the date hereof. Except for Permitted Exceptions or as expressly set forth on
Schedule 3.9, such real and personal properties are free and clear of
- ------------
Encumbrances. Seller and the Company have delivered to Global a lien search
obtained from the counties where the Company conducts business and the Oregon
Secretary of State office of all UCC liens of record against the Company's
personal property in the State of Oregon. All of the
-10-
<PAGE>
properties and assets necessary for continued operation of the Business as
currently conducted (including, without limitation, all books, records,
computers and computer software and data processing systems) are owned, leased
or licensed by the Company and are suitable for the purposes for which they are
currently being used. With the exception of used equipment and inventory valued
at no more than $10,000 on the Company's Financial Statements, the physical
properties of the Company, including the real properties leased by the Company,
are in good operating condition and repair, normal wear and tear excepted, and
are free from any defects of a material nature. Except for Permitted Exceptions
or as otherwise set forth on Schedule 3.9, the Company has full and unrestricted
------------
legal and equitable title to all such properties and assets. The operation of
the properties and Business of the Company in the manner in which they are now
and have been operated does not violate any zoning ordinances, municipal
regulations, or other Requirements of Laws, except for any such violations which
would not, individually or in the aggregate, have a Material Adverse Effect.
Except for Permitted Exceptions or as set forth on Schedule 3.9, no restrictive
------------
covenants, easements, rights-of-way, or regulations of record impair the uses of
the properties of the Company for the purposes for which they are now operated.
All leases of real or personal property by the Company are legal, valid,
binding, enforceable and in full force and effect and will remain legal, valid,
binding, enforceable and in full force and effect on identical terms immediately
following the Closing, except to the extent that enforceability may be limited
by laws affecting creditors' rights and debtors' obligations generally, and
legal limitations relating to remedies of specific performance and injunctive
and other forms of equitable relief. All facilities owned or leased by the
Company have received all approvals of any Governmental Body (including
Governmental Permits) required in connection with the operation thereof and have
been operated and maintained in accordance with all Requirements of Laws.
3.10 LICENSES AND PERMITS. Attached hereto as Schedule 3.10 is a list
-------------------- -------------
of all Material licenses, certificates, privileges, immunities, approvals,
franchises, authorizations and permits held or applied for by the Company from
any Governmental Body (herein collectively called "GOVERNMENTAL PERMITS") the
absence of which could have a Material Adverse Effect. The Company has complied
in all material respects with the terms and conditions of all such Governmental
Permits, and the Company has not received notification from any Governmental
Body of violation of any such Governmental Permit or the Requirements of Laws
governing the issuance or continued validity thereof other than violations (if
any) which would not individually or in the aggregate have a Material Adverse
Effect. No additional Governmental Permit is required from any Governmental Body
thereof in connection with the conduct of the Business which Governmental
Permit, if not obtained, would have a Material Adverse Effect.
3.11 INTELLECTUAL PROPERTY. Attached hereto as Schedule 3.11 is a
--------------------- -------------
list and brief description of all patents, trademarks, tradenames, copyrights,
licenses, computer software or data (other than general commercial software) or
applications therefor owned by or registered in the name of the Company or in
which the Company has any rights, licenses, or immunities (collectively, the
"INTELLECTUAL PROPERTY"). The Company has furnished Global with copies of all
license agreements to which the Company is a party, either as licensor or
licensee, with respect to any Intellectual Property. Except as described on
Schedule 3.11 hereto, the Company
- -------------
-11-
<PAGE>
has good title to or the right to use such Intellectual Property and all
inventions, processes, designs, formulae, trade secrets and know-how necessary
for the conduct of their Business, in their Business as presently conducted
without the payment of any royalty or similar payment, and the Company is not
infringing on any patent right, tradename, copyright or trademark right or other
Intellectual Property right of others, and neither the Company nor Seller is
aware of any infringement by others of any such rights owned by the Company.
3.12 COMPLIANCE WITH LAWS. The Company has (i) complied in a
--------------------
material respects with all Requirements of Laws, Governmental Permits and Court
Orders applicable to the Business and has filed with the proper Governmental
Bodies all statements and reports required by all Requirements of Laws,
Governmental Permits and Court Orders to which the Company or any of its
employees (because of their activities on behalf of the Company) are subject and
(ii) conducted the Business and are in compliance in all material respects with
all federal, state and local energy, public utility, health, safety and
environmental Requirements of Laws, Governmental Permits and Court Orders
including the Clean Air Act, the Clean Water Act, RCRA, the Safe Drinking Water
Act, CERCLA, OSHA, the Toxic Substances Control Act and any similar state, local
or foreign laws (collectively "ENVIRONMENTAL OBLIGATIONS") and all other
federal, state, local or foreign governmental and regulatory requirements,
except where any such failure to comply or file would not, in the aggregate,
have a Material Adverse Effect. No claim has been made by any Governmental Body
(and, to the best knowledge of the Company and Seller, no such claim is
anticipated) to the effect that the Business fails to comply, in any respect,
with any Requirements of Laws, Governmental Permit or Environmental Obligation
or that a Governmental Permit or Court Order is necessary in respect thereto.
3.13 INSURANCE. Attached hereto as Schedule 3.13 is a list of all
--------- -------------
coverages for fire, liability, or other forms of insurance and all fidelity
bonds held by or applicable to the Company. Copies of the binder for all such
insurance policies have been delivered to Global. To the best of the Company's
and Seller's knowledge and belief, no event relating to the Company has occurred
which will result in (i) cancellation of any such insurance coverages; (ii) a
retroactive upward adjustment of premiums under any such insurance coverages; or
(iii) any prospective upward adjustment in such premiums. All of such insurance
coverages will remain in full force and effect following the Closing.
3.14 EMPLOYEE BENEFIT PLANS.
----------------------
(A) EMPLOYEE WELFARE BENEFIT PLANS. Except as disclosed on
------------------------------
Schedule 3.14, the Company does not maintain or contribute to any "employee
- -------------
welfare benefit plan" as such term is defined in Section 3(1) of ERISA. With
respect to each such plan, (i) the plan is in material compliance with ERISA;
(ii) the plan has been administered in accordance with its governing documents;
(iii) neither the plan, nor any fiduciary with respect to the plan, has engaged
in any "prohibited transaction" as defined in Section 406 of ERISA other than
any transaction subject to a statutory or administrative exemption; (iv) except
for the processing of routine claims in the ordinary course of administration,
there is no material litigation, arbitration
-12-
<PAGE>
or disputed claim outstanding; and (v) all premiums due on any insurance
contract through which the plan is funded have been paid.
(B) EMPLOYEE PENSION BENEFIT PLANS. Except as disclosed in
------------------------------
Schedule 3.14, the Company does not maintain or contribute to any arrangement
- -------------
that is or may be an "employee pension benefit plan" relating to employees, as
such term is defined in Section 3(2) of ERISA. With respect to each such plan:
(i) the plan is qualified under Section 401(a) of the Code, and any trust
through which the plan is funded meets the requirements to be exempt from
federal income tax under Section 501(a) of the Code; (ii) the plan is in
material compliance with ERISA; (iii) the plan has been administered in
accordance with its governing documents as modified by applicable law; (iv) the
plan has not suffered an "accumulated funding deficiency" as defined in Section
412(a) of the Code; (v) the plan has not engaged in, nor has any fiduciary with
respect to the plan engaged in, any "prohibited transaction" as defined in
Section 406 of ERISA or Section 4975 of the Code other than a transaction
subject to statutory or administrative exemption; (vi) the plan has not been
subject to a "reportable event" (as defined in Section 4043(b) of ERISA), the
reporting of which has not been waived by regulation of the Pension Benefit
Guaranty Corporation; (vii) no termination or partial termination of the plan
has occurred within the meaning of Section 411(d)(3) of the Code; (viii) all
contributions required to be made to the plan or under any applicable collective
bargaining agreement have been made to or on behalf of the plan; (ix) there is
no material litigation, arbitration or disputed claim outstanding; and (x) all
applicable premiums due to the Pension Benefit Guaranty Corporation for plan
termination insurance have been paid in full on a timely basis.
(C) EMPLOYMENT AND NON-TAX QUALIFIED DEFERRED COMPENSATION
------------------------------------------------------
ARRANGEMENTS. Except as disclosed in Schedule 3.14, the Company does not
- ------------ -------------
maintain or contribute to any retirement or deferred or incentive compensation
or stock purchase, stock grant or stock option arrangement entered into between
the Company and any current or former officer, consultant, director or employee
of the Company that is not intended to be a tax qualified arrangement under
Section 401(a) of the Code.
3.15 CONTRACTS AND AGREEMENTS. Attached hereto as Schedule 3.15 is
------------------------ -------------
a list and brief description of all written or oral contracts, commitments,
leases, and other agreements (including, without limitation, promissory notes,
loan agreements, and other evidences of indebtedness, guarantees, agreements
with distributors, suppliers, dealers, franchisors and customers, and service
agreements) to which the Company is a party or by which the Company or its
properties are bound pursuant to which the obligations thereunder of either
party thereto are, or are contemplated as being, for any one contract $25,000 or
greater (collectively, the "CONTRACTS"). The Company is not and, to the best
knowledge of Seller and the Company, no other party thereto is in default (and
no event has occurred which, with the passage of time or the giving of notice,
or both, would constitute a default by the Company) under any of the Contracts,
and the Company has not waived any right under any of the Contracts. All of the
Contracts to which the Company is a party are legal, valid, binding, enforceable
and in full force and effect and will remain legal, valid, binding, enforceable
and in full force and effect on identical terms immediately after the Closing,
except to the extent that enforceability may be
-13-
<PAGE>
limited by laws affecting creditors' rights and debtors' obligations generally,
and legal limitations relating to remedies of specific performance and
injunctive and other forms of equitable relief. Except as set forth in Schedule
--------
3.15, the Company has not guaranteed any obligations of any other Person. To the
- ----
best of Seller's and the Company's Knowledge, no manufacturer of office
equipment sold by the Company will cease doing business with the Company
immediately following the Closing.
3.16 CLAIMS AND PROCEEDINGS. Attached hereto as Schedule 3.16 is a
---------------------- -------------
list and brief description of all claims, actions, suits, proceedings, or
investigations pending or, to the best knowledge and belief of the Seller or the
Company, threatened against or affecting the Company or any of its properties or
assets, at law or in equity, or before or by any court, municipality or other
Governmental Body. Except as set forth on Schedule 3.16, none of such claims,
-------------
actions, suits, proceedings, or investigations, if adversely determined, will
result in any liability or loss to the Company. The Company has not been and
the Company is not now, subject to any Court Order, stipulation, or consent of
or with any court or Governmental Body. No inquiry, action or proceeding has
been instituted or, to the best knowledge and belief of the Seller or the
Company, threatened or asserted against the Seller or the Company to restrain or
prohibit the carrying out of the transactions contemplated by this Agreement or
to challenge the validity of such transactions or any part thereof or seeking
damages on account thereof. To the best knowledge of the Company and Seller,
except as set forth on Schedule 3.16, there is no basis for any such valid claim
-------------
or action.
3.17 TAXES.
-----
(A) All Federal, foreign, state, county and local income, gross
receipts, excise, property, franchise, license, sales, use, withholding and
other Taxes due from the Company on or before the Closing have been paid and all
Tax Returns which are required to be filed by the Company on or before the date
hereof have been filed within the time and in the manner provided by law, and
all such Tax Returns are true and correct and accurately reflect the Tax
liabilities of the Company. No Tax Returns of the Company or any of the Seller
are presently subject to an extension of the time to file. All Taxes,
assessments, penalties, and interest of the Company which have become due
pursuant to such Tax Returns or any assessments received have been paid or
adequately accrued on the Company's Financial Statements. The provisions for
Taxes reflected on the balance sheets contained in the Financial Statements are
adequate to cover all of the Company's Tax liabilities for the respective
periods then ended and all prior periods. The Company has not executed any
presently effective waiver or extension of any statute of limitations against
assessments and collection of Taxes, and there are no pending or threatened
claims, assessments, notices, proposals to assess, deficiencies, or audits with
respect to any such Taxes of which any of the Seller or the Company are aware.
For Governmental Bodies with respect to which the Company does not file Tax
Returns, no such Governmental Body has given the Company written notification
that the Company is or may be subject to taxation by that Governmental Body.
The Company has withheld and paid all Taxes required to have been withheld and
paid in connection with amounts paid or owing to any
-14-
<PAGE>
employee, shareholder, creditor, independent contractor or other party. There
are no Tax liens on any of the property or assets of the Company.
(B) Neither the Company nor any other corporation has filed an
election under Section 341(f) of the Code that is applicable to the Company or
any assets held by the Company. The Company has not made any payments, is not
obligated to make any payments, and is not a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Code Sec. 280G. The Company has not been a United States real
property holding corporation within the meaning of Code Sec. 897(c)(2) during
the applicable period specified in Code Sec. 897(c)(1)(A)(ii). The Company is
not a party to any Tax allocation or sharing agreement. The Company has not and
has never been (nor does the Company have any liability for unpaid Taxes because
it once was) a member of an affiliated group during any part of which return
year any corporation other than the Company also was a member of the affiliated
group. The Company has never made an election to be taxed under subchapter S of
the Code.
(C) No transaction contemplated by this Agreement is subject to
withholding under Section 1445 of the Code and no stock transfer taxes, real
estate transfer taxes or similar taxes will be imposed upon the transfer and
sale of the Shares pursuant to this Agreement.
3.18 PERSONNEL. Attached hereto as Schedule 3.18 is a list of
--------- -------------
the names and annual rates of compensation of the directors and executive
officers of the Company, and of the employees of the Company whose annual rates
of compensation during the fiscal year ended October 31, 1996 (including base
salary, bonus and incentive pay) exceed (or by October 31, 1997 are expected to
exceed) $60,000. Schedule 3.18 also summarizes the bonus, profit sharing,
-------------
percentage compensation, company automobile, club membership, and other like
benefits, if any, paid or payable to such directors, officers, and employees
during the Company's fiscal year ended October 31, 1996 and to the date hereof.
Schedule 3.18 also contains a brief description of all material terms of
- -------------
employment agreements to which the Company is a party and all severance benefits
which any director, officer or employee of the Company is or may be entitled to
receive. To the best knowledge of Seller and the Company, the employee
relations of the Company are generally good and there is no pending or, to the
best knowledge of Seller or the Company, threatened labor dispute or union
organization campaign. None of the employees of the Company are represented by
any labor union or organization. The Company is in compliance in all material
respects with all Requirements of Laws respecting employment and employment
practices, terms and conditions of employment, and wages and hours, and are not
engaged in any unfair labor practices. Neither the Company or Seller has been
advised, or has good reason to believe, that any of the persons whose names are
set forth on Schedule 3.18 or any other employee will not agree to remain
-------------
employed by the Company after the consummation of the transactions contemplated
hereby. There is no unfair labor practice claim against the Company before the
National Labor Relations Board, or any strike, dispute, slowdown, or stoppage
pending or, to the best knowledge of the Company and Seller, threatened against
or involving the Company, and none has occurred.
-15-
<PAGE>
3.19 BUSINESS RELATIONS. Neither the Company nor Seller knows that
------------------
any customer or supplier of the Company will cease to do business with the
Company after the consummation of the transactions contemplated hereby in the
same manner and at the same levels as previously conducted with the Company
except for any reductions which do not result in a Material Adverse Change.
Neither Seller nor the Company has received any notice of any material
disruption (including delayed deliveries or allocations by suppliers) in the
availability of any material portion of the materials used by the Company nor is
the Company or Seller aware of any facts which could lead them to believe that
the Business will be subject to any such material disruption.
3.20 ACCOUNTS RECEIVABLE. All of the accounts, notes, and loans
-------------------
receivable that have been recorded on the books of the Company are bona fide and
represent amounts validly due for goods sold or services rendered and except as
disclosed on Schedule 3.20 all such amounts (net of any allowance for doubtful
-------------
accounts) will be collected in full within 180 days following the Closing Date.
Except as disclosed on Schedule 3.20 hereto (a) all of such accounts, notes, and
-------------
loans receivable are free and clear of any Encumbrances; (b) no claims of offset
have been asserted in writing against any of such accounts, notes, or loans
receivable; and (c) none of the obligors of such accounts, notes, or loans
receivable has given written notice that it will or may refuse to pay the full
amount or any portion thereof.
3.21 BANK ACCOUNTS. Attached hereto as Schedule 3.21 is a list of
------------- -------------
all banks or other financial institutions with which the Company has an account
or maintains a safe deposit box, showing the type and account number of each
such account and safe deposit box and the names of the persons authorized as
signatories thereon or to act or deal in connection therewith.
3.22 WARRANTIES. Except for warranty claims that are typical and
----------
in the ordinary course of the Business, no written claim for breach of product
or service warranty to any customer has been made against the Company since
January 1, 1997. To the best knowledge of Seller and the Company, no state of
facts exists, and no event has occurred, which could reasonably be expected to
form the basis of any present claim against the Company for liability on account
of any express or implied warranty to any third party in connection with
products sold or services rendered by the Company.
3.23 BROKERS. Neither the Company nor Seller has engaged, or
-------
caused to be incurred any liability to any finder, broker, or sales agent in
connection with the origin, negotiation, execution, delivery, or performance of
this Agreement or the transactions contemplated hereby.
3.24 INTEREST IN COMPETITORS, SUPPLIERS, CUSTOMERS, ETC. No
--------------------------------------------------
officer, director, or shareholder of the Company or any affiliate of any such
officer, director, or shareholder, has any ownership interest in any competitor,
supplier, or customer of the Company (other than ownership of securities of a
publicly-held corporation of which such Person owns, or
-16-
<PAGE>
has real or contingent rights to own, less than one percent of any class of
outstanding securities) or any property used in the operation of the Business.
3.25 INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS, SHAREHOLDERS, AND
---------------------------------------------------------------
EMPLOYEES. Attached hereto as Schedule 3.25 is a list and brief description
- --------- -------------
of the payment terms of all indebtedness of the Company to officers, directors,
shareholders, and employees of the Company and all indebtedness of officers,
directors, shareholders, and employees of the Company to the Company, excluding
indebtedness for travel advances or similar advances for expenses incurred on
behalf of and in the ordinary course of the Business, consistent with past
practices.
3.26 UNDISCLOSED LIABILITIES. Except as indicated in Schedule 3.26
----------------------- -------------
hereto, the Company does not have any material liabilities (whether absolute,
accrued, contingent or otherwise), of a nature required by GAAP to be reflected
on a corporate balance sheet or disclosed in the notes thereto, except such
liabilities which are accrued or reserved against in the Financial Statements or
disclosed in the notes thereto, including without limitation any accounts
payable or service liabilities of the Company incurred prior to the Closing
Date, other than liabilities incurred in the ordinary course of the Business
since the date of the latest of such Financial Statements.
3.27 INFORMATION FURNISHED. The Company and Seller have made
---------------------
available to Global true and correct copies of all material corporate records of
the Company and all material agreements, documents, and other items listed on
the Schedules to this Agreement or referred to in Section 2 of this Agreement,
---------
and neither this Agreement, the Schedules hereto, nor any written information,
instrument, or document delivered to Global pursuant to this Agreement contains
any untrue statement of a material fact or omits any material fact necessary to
make the statements herein or therein, as the case may be, not misleading.
In making the representations and warranties set forth above, the term
"Material" or "material" shall, where appropriate in context of its use, be
deemed to mean an amount of money greater than $25,000, the terms "Material
Adverse Change," "material adverse trend," "Material Adverse Effect," or any
other term of like import shall mean the occurrence of any single event, or any
series of related events, or set of related circumstances, which proximately
causes an actual, direct economic loss to the Company, taken as a whole, in
excess of $25,000 per occurrence or $50,000 in the aggregate. The term
"knowledge" shall mean actual knowledge after reasonable inquiry of the
employees of the Company with responsibility for the applicable subject matter.
All references to the "COMPANY" in Sections 3.6 through 3.27 shall include the
------------ ----
Companies' subsidiaries.
-17-
<PAGE>
ARTICLE IV
GLOBAL'S REPRESENTATIONS AND WARRANTIES
Global represents and warrants to Seller as follows:
4.1 DUE ORGANIZATION. Global is a corporation duly organized,
----------------
validly existing, and in good standing under the laws of the State of Delaware
and has full corporate power and authority to execute, deliver and perform this
Agreement and to carry out the transactions contemplated hereby.
4.2 DUE AUTHORIZATION. The execution, delivery and performance
-----------------
of this Agreement has been duly authorized by all necessary corporate action of
Global and the Agreement has been duly and validly executed and delivered by
Global and constitutes the valid and binding obligation of Global, enforceable
in accordance with its terms, except to the extent that enforceability may be
limited by laws affecting creditors' rights and debtors' obligations generally,
and legal limitations relating to remedies of specific performance and
injunctive and other forms of equitable relief. The execution, delivery, and
performance of this Agreement (as well as all other instruments, agreements,
certificates or other documents contemplated hereby) by Global, do not (a)
violate any Requirements of Laws or Court Order of any Governmental Body
applicable to Global or its property, (b) violate or conflict with, or permit
the cancellation of, or constitute a default under any agreement to which Global
is a party or by which it or its property is bound, (c) permit the acceleration
of the maturity of any indebtedness of, or any indebtedness secured by the
property of, Global, or (d) violate or conflict with any provision of the
charter or bylaws of Global.
4.3 NO BROKERS. Global has not engaged, or caused to be incurred any
----------
liability to any finder, broker or sales agent in connection with the origin,
negotiation, execution, delivery, or performance of this Agreement or the
transactions contemplated hereby.
4.4 INVESTMENT. Global will acquire the Shares for investment and
----------
for its own account and not with a view to the distribution thereof.
ARTICLE V
COVENANTS OF THE COMPANY AND SELLER
5.1 CONSENTS OF OTHERS. Prior to the Closing, the Company and
------------------
Seller shall use their best efforts to obtain and to cause the Company to obtain
all authorizations, consents and permits required of the Company and Seller to
permit them to consummate the transactions contemplated by this Agreement.
Seller shall have obtained the written consent of (i) the Company's Material
office equipment suppliers and (ii) the lessors of the Buildings to the
transactions contemplated by the Agreement.
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<PAGE>
5.2 SELLER'S EFFORTS. The Company and Seller shall use all reasonable
----------------
efforts to cause all conditions for the Closing to be met.
5.3 POWERS OF ATTORNEY. The Company and Seller shall cause the
------------------
Company to terminate at or prior to Closing all powers of attorney granted by
the Company, other than those relating to service of process, qualification or
pursuant to governmental regulatory or licensing agreements, or representation
before the IRS or other government agencies.
ARTICLE VI
POST-CLOSING COVENANTS
6.1 GENERAL. In case at any time after the Closing any further
-------
action is legally necessary or reasonably desirable (as determined by Global and
Seller) to carry out the purposes of this Agreement, each of the parties will
take such further action (including the execution and delivery of such further
instruments and documents) as any other party reasonably may request, all at the
sole cost and expense of the requesting party (unless the requesting party is
entitled to indemnification therefor under Article VIII below). The Seller
acknowledges and agrees that from and after the Closing, Global will be entitled
to possession of all documents, books, records, agreements, and financial data
of any sort relating to the Company, which shall be maintained at the chief
executive office of the Company; provided, however, that Seller shall be
entitled to reasonable access to and to make copies of such books and records at
his sole cost and expense and Global will maintain all of the same for a period
of at least three (3) years after Closing. Thereafter, the Company will offer
such documentation to Seller before disposal thereof.
6.2 TRANSITION. For a period of three (3) years following
----------
Closing, the Seller will not take any action that primarily is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of the Company from maintaining the same
business relations with the Company after the Closing as it maintained with the
Company prior to the Closing. For a period of three (3) years following
Closing, the Seller will refer all customer inquiries relating to the Business
to the Company.
6.3 CONFIDENTIALITY. The Seller will treat and hold as such all
---------------
Confidential Information, refrain from using any of the Confidential Information
except in connection with this Agreement or otherwise for the benefit of the
Company or Global for a period of three (3) years from the Closing, and deliver
promptly to Global or destroy, at the written request and option of Global, all
tangible embodiments (and all copies) of the Confidential Information which are
in their possession except as otherwise permitted herein. In the event that
Seller is requested or required (by oral question or written request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar legal proceeding) to disclose any Confidential
Information, Seller will notify Global promptly of the request or requirement.
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<PAGE>
6.4 COVENANT NOT TO COMPETE. For and in consideration of the
-----------------------
allocation of $75,000 of the Purchase Price paid to the Seller by Global, Seller
covenants and agrees, for a period of three years from and after the Closing
Date, that he will not, directly or indirectly without the prior written consent
of Global for himself or on behalf or in conjunction with any other person,
partnership, corporation or other entity:
(A) own, maintain, engage in, render any services for, manage,
have any financial interest in, or permit his name to be used in connection with
as a shareholder, bondholder, creditor, officer, director, partner, agent,
contractor with, employer or representative of, or in any manner associated
with, or give financial, technical or other assistance to, any Person, firm or
corporation for the purpose of engaging in the copier/office equipment dealer,
distribution, sales or service business within the greater of (i) a 100 mile
radius of the Company's office facilities in Lake Oswego, Oregon (the "CURRENT
TRADE AREA") or (ii) in any geographic area in which the Company currently
conducts business;
(B) enter into any agreement with, service, assist or solicit
the business of any customers of the Company for the purpose of providing office
equipment sales or service to such customers in competition with the Company in
the Current Trade Area or to cause them to reduce or end their business with the
Company; or
(C) enter into any agreement with, or solicit the employment of
employees, consultants or representatives of the Company for the purpose of
causing them to leave the employment of the Company;
Provided, however, that no owner of less than one percent (1%) of the
outstanding stock of any publicly-traded corporation, and no owner of any amount
of Global stock, shall be deemed to be in a violation of this Section 6.4 solely
-----------
by reason thereof.
6.5 ADDITIONAL MATTERS.
------------------
(A) The Seller shall cause the Company to file with the
appropriate governmental authorities all Tax Returns required to be filed by it
for any taxable period ending prior to the Closing Date and the Company shall
remit any Taxes due in respect of such Tax Returns. In addition, Seller shall
cause Moss, Adams to prepare a short period tax return for the Company covering
the period from October 31, 1996 through the Effective Date. The cost of
preparation of such short period tax return shall be paid for by Seller.
(B) Global and Seller recognize that each of them will need
access, from time to time, after the Closing Date, to certain accounting and Tax
records and information held by Global and/or the Company to the extent such
records and information pertain to events occurring on or prior to the Closing
Date; therefore, Global agrees to cause the Company to (A) use its best efforts
---------
to properly retain and maintain such records for a period of six (6) years from
the date the Tax Returns for the year in which the Closing occurs are filed or
until the expiration of the statute of limitations with respect to such year,
whichever is later, and (B) allow
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<PAGE>
the Seller and his agents and representatives at times and dates mutually
acceptable to the parties, to inspect, review and make copies of such records as
such other party may deem necessary or appropriate from time to time, such
activities to be conducted during normal business hours and at the other party's
expense.
(C) Global and the Company hereby agree to cause the Company to
make a 7% profit sharing and 401(k) contribution to employees for the fiscal
year ending October 31, 1997 to the extent that such contribution has been
reserved as a current liability on the Preliminary Closing Balance Sheet.
(D) Seller has informed Global that the Company has earned two
trips for four people from Konica prior to the Closing Date. Global hereby
consents to the award of such trips to Seller and his spouse for their personal
use.
ARTICLE VII
CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING
7.1 CONDITIONS TO GLOBAL'S OBLIGATIONS. Subject to Section 2.4
---------------------------------- -----------
above, the obligation of Global under this Agreement to consummate the Closing
is subject to the conditions that:
(A) COVENANTS, REPRESENTATIONS AND WARRANTIES. The Company
-----------------------------------------
and Seller shall have performed in all material respects all obligations and
agreements and complied in all material respects with all covenants contained in
this Agreement to be performed and complied with by each of them prior to or at
the Closing Date. The representations and warranties of the Company and Seller
set forth in this Agreement shall be accurate in all material respects at and as
of the Closing Date with the same force and effect as though made on and as of
the Closing Date except for any changes resulting from activities or
transactions which may have taken place after the date hereof and which are
permitted or contemplated by the Agreement or which have been entered into in
the ordinary course of business and except to the extent that such
representations and warranties are expressly made as of another specified date
and, as to such representation, the same shall be true in all material respects
as of such specified date.
(B) CONSENTS. All statutory requirements for the valid
--------
consummation by the Company and Seller of the transactions contemplated by this
Agreement shall have been fulfilled and all authorizations, consents and
approvals, including expiration or early termination of all waiting periods
under the HSR Act and those of all federal, state, local and foreign
governmental agencies and regulatory authorities required to be obtained in
order to permit the consummation of the transactions contemplated hereby shall
have been obtained in form and substance reasonably satisfactory to Global
unless such failure could not reasonably be expected to have a Material Adverse
Effect. All approvals of the Board of Directors and shareholders of the Company
necessary for the consummation of this Agreement and the transactions
contemplated hereby shall have been obtained.
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<PAGE>
(C) LEASES. The lessors of the Buildings shall have provided an
------
Estoppel Certificate to Global's lenders in the form of Exhibit B hereto, except
---------
as specifically waived by Global. The leases for all of such Buildings shall
provide that such leases survive the Closing for the term of such leases, copies
of which have been provided to Global.
(D) DISCHARGE OF INDEBTEDNESS AND LIENS. Seller and the
-----------------------------------
Company shall have provided for the payment in full by the Company of all Funded
Indebtedness of the Company and all extended credit from vendors at the Closing
(other than customary accounts payable outstanding on 90 day or less payment
terms in accordance with past practices). Such Funded Indebtedness, if any, as
of August 31, 1997, is listed on Schedule 7.1(d) hereto. Seller shall have also
---------------
provided for the termination of all Encumbrances of record on the properties of
the Company, except for Permitted Exceptions. All liens or UCC filings against
the Company and each of the Subsidiaries or Affiliates of the Company which
engaged in the Business, shall have been terminated as of the Closing.
(E) MATERIAL ADVERSE CHANGE. There has been no Material Adverse
-----------------------
Change with respect to the Company since October 31, 1996.
(F) TRANSFER TAXES. Seller shall be responsible for all stock
--------------
transfer or gains taxes imposed on Seller incurred in connection with this
Agreement.
(G) FINANCIAL CONDITION. The Company's total adjusted Working
-------------------
Capital as projected at the Closing shall be greater than $532,406 and the
Company shall continue to have cash on hand (included in Working Capital) at the
Closing (in an amount not less than $50,000 or, if less than $50,000, the
Purchase Price will be reduced further by the amount of such deficiency), to
continue to operate the Business in the ordinary course.
(H) DOCUMENTS TO BE DELIVERED BY SELLER AND THE COMPANY.
---------------------------------------------------
The following documents shall be delivered at the Closing by Seller and the
Company:
(I) OPINION OF SELLER'S COUNSEL. Global shall have
---------------------------
received an opinion of counsel to the Company and Seller, dated the
Closing Date, in substantially the same form as the form of opinion
that is Exhibit C hereto.
---------
(II) CERTIFICATES. Global shall have received an officer's
------------
certificate and a secretary's certificate of the Company executed by
officers of the Company, dated the Closing Date, in substantially the
same forms as the forms of certificates that are Exhibit D hereto.
---------
(III) RELEASE. Seller shall have furnished the Company
-------
with a general release of liabilities, excluding compensation and
employee benefits as well as obligations pursuant to this Agreement,
in the form attached as Exhibit E hereto.
---------
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<PAGE>
(IV) ESCROW AGREEMENT. Seller shall have delivered to
----------------
Global at the Closing the duly executed Escrow Agreement required
pursuant to Section 2.5 hereof.
-----------
(V) EMPLOYMENT AGREEMENT. Dean Groves shall have duly
--------------------
executed and delivered the Employment Agreement in substantially the
same form attached as Exhibit F hereto, pursuant to which he will be
---------
employed by the Company following the Closing.
(VI) BUILDING LEASES. Global shall be reasonably satisfied
---------------
with the terms of the leases of the Buildings. Seller shall have
delivered to Global an Estoppel Certificate of the landlords of the
Buildings to Global's lenders in the same form attached as Exhibit B
---------
hereto, except as specifically waived by Global.
(VII) COLLATERAL ASSIGNMENT OF RIGHTS. Seller shall have
-------------------------------
executed and delivered to Jackson National Life Insurance Company a
Collateral Assignment of Rights in the form attached hereto as Exhibit
-------
H.
-
(VIII) STOCK CERTIFICATES. Seller shall have delivered
------------------
the Shares accompanied by duly executed stock powers, together with
any stock transfer stamps or receipts for any transfer taxes required
to be paid thereon.
7.2 CONDITIONS TO SELLER'S AND THE COMPANY'S OBLIGATIONS. The
----------------------------------------------------
obligation of Seller and the Company under this Agreement to consummate the
Closing is subject to the conditions that:
(A) COVENANTS, REPRESENTATIONS AND WARRANTIES. Global shall
-----------------------------------------
have performed in all material respects all obligations and agreements and
complied in all material respects with all covenants contained in this Agreement
to be performed and complied with by Global prior to or at the Closing and the
representations and warranties of Global set forth in Article IV hereof shall be
accurate in all material respects, at and as of the Closing Date, with the same
force and effect as though made on and as of the Closing Date except for any
changes resulting from activities or transactions which may have taken place
after the date hereof and which are permitted or contemplated by the Agreement
or which have been entered into in the ordinary course of the Business and
except to the extent that such representations and warranties are expressly made
as of another specified date and, as to such representations, the same shall be
true as of such specified date.
(B) CONSENTS. All statutory requirements for the valid
--------
consummation of the transaction contemplated by this Agreement shall have been
fulfilled and all authorizations, consents and approvals, including expiration
or early termination of all waiting periods under the HSR Act and those of all
federal, state, local and foreign governmental agencies and regulatory
authorities required to be obtained in order to permit the consummation
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<PAGE>
by Global of the transactions contemplated hereby shall have been obtained
unless such failure shall not have a Material Adverse Effect on the Business.
Global shall have used its reasonable best efforts to have obtained the release
of the Seller from all personal guarantees with respect to the Company.
(C) DOCUMENTS TO BE DELIVERED BY GLOBAL. The following documents
-----------------------------------
shall be delivered at the Closing by Global:
(II) CERTIFICATES. Seller shall have received an officers'
------------
certificate and a secretary's certificate executed by officers of
Global, dated the Closing Date, in substantially the same forms as the
forms of certificates that are Exhibit G hereto.
---------
(III) ESCROW AGREEMENT. Global shall have delivered to
----------------
Seller at the Closing the duly executed Escrow Agreement required
pursuant to Section 2.5 hereof.
-----------
(IV) EMPLOYMENT AGREEMENT. Global shall have caused the
--------------------
Company to duly execute and deliver the Employment Agreement with Dean
Groves in the same form attached as Exhibit F hereto, pursuant to
---------
which he will be employed by the Company following the Closing.
(IV) PURCHASE PRICE. Seller shall have received the
--------------
Purchase Price for the Shares.
(D) RIGHT OF REINVESTMENT. Seller shall have been offered the
---------------------
right to invest up to $210,000 in the capital stock of Global on the same terms
provided to other recent outside investors in Global.
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<PAGE>
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION OF GLOBAL. Except as provided in Section 8.6,
------------------------- -----------
as Global's sole and exclusive remedy for any breach by the Seller hereunder,
Seller agrees to indemnify and hold harmless Global and each officer, director,
and affiliate of Global, including without limitation the Company or any
successor of the Company (collectively, the "INDEMNIFIED PARTIES") from and
against any and all damages, losses, claims, liabilities, demands, charges,
suits, penalties, costs and expenses (including court costs and reasonable
attorneys' fees and expenses incurred in investigating and preparing for any
litigation or proceeding) (collectively, the "INDEMNIFIABLE COSTS"), which any
of the Indemnified Parties may sustain, or to which any of the Indemnified
Parties may be subjected, arising out of (A) any misrepresentation, breach or
default by Seller or the Company of or under any of the representations,
covenants, agreements or other provisions of this Agreement or any agreement or
document executed in connection herewith; (B) the assertion and final
determination of any claim or liability against the Company or any of the
Indemnified Parties by any Person based upon the facts which form the alleged
basis for any litigation to the extent it should have been, but was not,
reserved for in the Financial Statements in accordance with GAAP; and (C) the
Company's tortious acts or omissions to act prior to Closing for which the
Company did not carry liability insurance for themselves as the insured party,
whether or not such acts or omissions to act result in a breach or violation of
any representation or warranty.
8.2 DEFENSE OF CLAIMS.
-----------------
(a) If any third party shall notify any Indemnified Party with
respect to any matter (a "THIRD PARTY CLAIM") which may give rise to a claim for
indemnification against Seller under Section 8.1, then the Indemnified Party
-----------
shall promptly notify Seller in writing; provided, however, that no delay on the
part of the Indemnified Party in notifying Seller shall relieve Seller from any
obligation hereunder unless (and then solely to the extent) Seller thereby is
materially prejudiced.
(b) Seller will have the right to defend the Indemnified Party
against the Third Party Claim with counsel of its choice satisfactory to the
Indemnified Party so long as (i) Seller notifies the Indemnified Party in
writing within 15 days after the Indemnified Party has given notice of the Third
Party Claim that the Indemnifying Party will assume the defense of such claim,
(ii) Seller provides the Indemnified Party with evidence acceptable to the
Indemnified Party that the Seller will have the financial resources to defend
against the Third Party Claim and fulfill its indemnification obligations
hereunder, (iii) the Third Party Claim involves only money damages not in excess
of the limitations set forth in Section 8.6 hereof and does not seek an
-----------
injunction or other equitable relief, (iv) settlement of, or an adverse judgment
with respect to, the Third Party claim is not, in the good faith judgment of the
Indemnified Party, likely to establish a precedentual custom or practice adverse
to the continuing business interests of the Indemnified Party, and (v) Seller
conducts the defense of the Third Party Claim actively and diligently.
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<PAGE>
(c) So long as Seller is conducting the defense of the Third
Party claim in accordance with Section 8.2(b) above, (i) the Indemnified Party
--------------
may retain separate co-counsel at its sole cost and expense and participate in
the defense of the Third Party Claim, (ii) the Indemnified Party will not
consent to the entry of any judgment or enter into any settlement with respect
to the Third Party Claim without the prior written consent of Seller (not to be
withheld unreasonably), and (iii) Seller will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party (not to be withheld
unreasonably).
(d) In the event any of the conditions in Section 8.2(b) above
--------------
is or becomes unsatisfied, however, (i) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, Seller in connection therewith), (ii) Seller will reimburse the
Indemnified Party promptly and periodically for the costs of defending against
the Third Party Claim, including reasonable attorneys' fees and expenses (but
only if and to the extent they are required to do so under this Agreement), an
(iii) Seller will remain responsible for any Indemnifiable Costs the Indemnified
Party may suffer resulting from, arising out of, relating to, in the nature of,
or caused by the Third Party Claim to the fullest extent provided in this
Article VIII.
8.3 ESCROW CLAIM. If any claim for indemnification is made by an
------------
Indemnified Party pursuant to this Article VIII prior to the expiration of the
Escrow Period, such Indemnified Party shall apply to the Escrow Agent provided
in Section 2.5 of this Agreement for reimbursement of such claim in accordance
-----------
with the provisions of the Escrow Agreement.
8.4 TAX AUDITS, ETC. In the event of an audit of a Tax Return of the
---------------
Company with respect to which an Indemnified Party might be entitled to
indemnification pursuant to this Article VIII, Global shall have the right to
control any and all such audits which may result in the assessment of additional
Taxes against the Company for periods following the Closing Date (but not prior
periods, for which Seller shall have the right to control such proceedings in
accordance with the provisions of Section 8.2(b) above) and any and all
--------------
subsequent proceedings in connection therewith, including appeals (subject to
the prior written consent of Seller, which shall not unreasonably be withheld
and subject to the right of Seller to have their accountants and attorneys
consult with Global on such audits or procedures at Seller's expense). Seller
and Global shall each cooperate fully in all matters relating to any such audit
or other Tax proceeding (including according access to all records pertaining
thereto), and will execute and file any and all consents, powers of attorney,
and other documents as shall be reasonably necessary in connection therewith.
If additional Taxes are payable by the Company as a result of any such audit or
other proceeding, Seller shall be responsible for and shall promptly pay all
Taxes, interest, and penalties to which any of the Indemnified Parties shall be
entitled to indemnification.
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[******Certain information on this page has been omitted and filed
separately with the Securities and Exchange Commission. Confidential
treatment has been requested with respect to the omitted portions.]
8.5 INDEMNIFICATION OF SELLER. Global agrees to indemnify and hold
-------------------------
harmless Seller and the Company and each officer, director, stockholder or
affiliate of the Company, from and against any Indemnifiable Costs arising out
of (A) any material misrepresentation, breach or default by Global of or under
any of the covenants, agreements or other provisions of this Agreement or any
agreement or document executed in connection herewith, and (B) any tortious acts
or omissions by Global before or after or the Company after, the Closing. In
addition, the Company and Global shall indemnify the Seller for any payment or
satisfaction of any guarantees by Seller of the Company's obligations occurring
after the Closing Date.
8.6 LIMITS ON INDEMNIFICATION. All Indemnifiable Costs sought by
-------------------------
any party hereunder shall be net of any insurance proceeds received by such
Person with respect to such claim (less the present value of any premium
increases occurring as a result of such claim). Except for any claims for
breach of the representations and warranties of the Seller under Sections 3.1,
-------------
3.2, 3.3 or 3.17 hereof (the indemnification for which shall expire on the
- ----------------
expiration of the applicable statute of limitations), the indemnification
provided under this Article VIII shall expire on the third anniversary of the
Closing Date. The Seller shall not be obligated to pay any amounts for
indemnification under this Article VIII until the aggregate indemnification
obligation hereunder exceeds $50,000, whereupon Seller shall be liable for all
amounts for which indemnification may be sought. Notwithstanding the foregoing,
in no event shall the aggregate liability of Seller to Global exceed [**]
(except for claims made for any breach of the representations and warranties of
Seller under Sections 3.1, 3.2, 3.3, or 3.17 hereof, as to which the limit of
---------------------- ----
indemnification hereunder shall be the Purchase Price). However nothing in this
Article VIII shall limit Global or Seller in exercising or securing any remedies
provided by applicable common law with respect to the conduct of Seller or
Global in connection with this Agreement or in the amount of damages that it can
recover from the other in the event that Global successfully proves intentional
fraud or intentional fraudulent conduct in connection with this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 MODIFICATIONS. Any amendment, change or modification of this
-------------
Agreement shall be void unless in writing and signed by all parties hereto. No
failure or delay by any party hereto in exercising any right, power or privilege
hereunder (and no course of dealing between or among any of the parties) shall
operate as a waiver of any such right, power or privilege. No waiver of any
default on any one occasion shall constitute a waiver of any subsequent or other
default. No single or partial exercise of any such right, power or privilege
shall preclude the further or full exercise thereof.
9.2 NOTICES. All notices and other communications hereunder shall
-------
be in writing and shall be deemed to have been duly given when personally
delivered, or 48 hours after deposited in the United States mail, first-class,
postage prepaid, or by facsimile addressed to the respective parties hereto as
follows:
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<PAGE>
Global:
------
Global Imaging Systems Inc.
P.O. Box 273478
Tampa, Florida 33688-3478
Attention: Thomas Johnson, President
Fax No.: (813) 264-7877
Tel No.: (813) 960-5508
With a copy to:
Hogan & Hartson L.L.P.
Columbia Square
555 Thirteenth Street, NW
Washington, DC 20004-1109
Attention: Christopher J. Hagan
Fax No.: (202) 637-5910
Tel No.: (202) 637-5771
The Company or Seller:
---------------------
15860 SW Upper Boones Ferry Road
Lake Oswego, Oregon 97035
Attention: Mr. Dean Groves
Fax No.: (503) 620-1730
Tel No.: (503) 620-0202
With a copy to:
Draneas & Gregores
222 SW Columbia, Suite 1625
Portland, Oregon 97201-6618
Attention: George Gregores, Esq.
Fax No.: (503) 222-2089
Tel No.: (503) 221-1040
or to such other address as to any party hereto as such party shall designate by
like notice to the other parties hereto.
9.3 COUNTERPARTS. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original but all of which
counterparts collectively shall constitute one instrument, and in making proof
of this Agreement, it shall never be necessary to produce or account for more
than one such counterpart.
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<PAGE>
9.4 EXPENSES. Each of the parties hereto will bear all costs,
--------
charges and expenses incurred by such party in connection with this Agreement
and the consummation of the transactions contemplated herein, provided, however,
that Seller shall bear all costs and expenses of (i) any broker involved in this
transaction and (ii) all legal expenses of Seller or the Company with respect to
this Agreement and the transactions contemplated hereby.
9.5 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding
--------------------------
upon and inure to the benefit of the Company, Global and Seller, their heirs,
representatives, successors, and permitted assigns, in accordance with the
terms hereof. This Agreement shall not be assignable by the Company or Seller
without the prior written consent of Global. This Agreement shall be assignable
by Global to a wholly-owned subsidiary of Global without the prior written
consent of Seller, but any such assignment shall not relieve Global of its
obligations hereunder.
9.6 ENTIRE AND SOLE AGREEMENT. This Agreement and the other
-------------------------
schedules and agreements referred to herein, constitute the entire agreement
between the parties hereto and supersede all prior agreements, representations,
warranties, statements, promises, information, arrangements and understandings,
whether oral or written, express or implied, with respect to the subject matter
hereof.
9.7 GOVERNING LAW. This Agreement and its validity, construction,
-------------
enforcement, and interpretation shall be governed by the substantive laws of the
State of Oregon.
9.8 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
-----------------------------------------------------
Regardless of any investigation at any time made by or on behalf of any party
hereto or of any information any party may have in respect thereof, all
covenants, agreements, representations, and warranties and the related
indemnities made hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall survive the Closing for a period of three
(3) years, provided (a) the representations and warranties contained in Section
-------
3.17 of this Agreement, and the related indemnities, shall survive the Closing
- ----
until the expiration of the applicable statutes of limitations for determining
or contesting Tax liabilities and (b) the representations and warranties
contained in Sections 3.1, 3.2 and 3.3 of this Agreement, and the related
-------------------------
indemnities, shall survive the Closing until expiration of the applicable
statute of limitations.
9.9 INVALID PROVISIONS. If any provision of this Agreement is
------------------
deemed or held to be illegal, invalid or unenforceable, this Agreement shall be
considered divisible and inoperative as to such provision to the extent it is
deemed to be illegal, invalid or unenforceable, and in all other respects this
Agreement shall remain in full force and effect; provided, however, that if any
provision of this Agreement is deemed or held to be illegal, invalid or
unenforceable there shall be added hereto automatically a provision as similar
as possible to such illegal, invalid or unenforceable provision and be legal,
valid and enforceable. Further, should any provision contained in this
Agreement ever be reformed or rewritten by any judicial body of competent
jurisdiction, such provision as so reformed or rewritten shall be binding upon
all parties hereto.
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<PAGE>
9.10 PUBLIC ANNOUNCEMENTS. Neither party shall make any public
--------------------
announcement of the transactions contemplated hereby without the prior written
consent of the other party, which consent shall not be unreasonably withheld.
9.11 REMEDIES CUMULATIVE. The remedies of the parties under this
-------------------
Agreement are cumulative and shall not exclude any other remedies to which any
party may be lawfully entitled.
9.12 WAIVER. No failure or delay on the part of any party in
------
exercising any right, power, or privilege hereunder or under any of the
documents delivered in connection with this Agreement shall operate as a waiver
of such right, power, or privilege; nor shall any single or partial exercise of
any such right, power, or privilege preclude any other or further exercise
thereof or the exercise of any other right, power, or privilege.
9.13 DISPUTE RESOLUTION. ALL DISPUTES BETWEEN SELLER AND GLOBAL
------------------
WITH RESPECT TO ANY PROVISION OF THIS AGREEMENT OR THE RIGHTS AND OBLIGATIONS OF
SELLER AND GLOBAL HEREUNDER (OTHER THAN DISPUTES INVOLVING ALLEGATIONS OF
INTENTIONAL FRAUD), WHICH CANNOT BE RESOLVED BY MUTUAL AGREEMENT, WILL BE
RESOLVED BY BINDING ARBITRATION IN ACCORDANCE WITH THE RULES OF THE AMERICAN
ARBITRATION ASSOCIATION IN PORTLAND, OREGON, OR BY ANY OTHER MEANS OF
ALTERNATIVE DISPUTE RESOLUTION MUTUALLY AGREED UPON BY THE PARTIES.
[THIS SPACE INTENTIONALLY LEFT BLANK]
-30-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed as of the date and year first above written.
GLOBAL:
------
GLOBAL IMAGING SYSTEMS INC.
By: /s/ Thomas S. Johnson
---------------------------------------
Thomas S. Johnson
President and Chief Executive Officer
THE COMPANY:
-----------
DUPLICATING SPECIALTIES, INC.
By: /s/ Dean Groves
---------------------------------------
Name: Dean Groves
President
SELLER:
------
/s/ Dean Groves
---------------------------------------
Dean Groves
-31-
<PAGE>
EXHIBIT 10.23
[***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[**]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.***]
STOCK PURCHASE AGREEMENT
BY AND AMONG
GLOBAL IMAGING SYSTEMS INC.,
QUALITY BUSINESS SYSTEMS, INC. (THE "COMPANY")
AND
THE SHAREHOLDERS OF THE COMPANY
DATED SEPTEMBER 30, 1997
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
<S> <C>
1.1 Definitions..................................................... 1
ARTICLE II
AGREEMENT OF PURCHASE AND SALE; CLOSING
2.1 Agreement to Sell and Purchase.................................. 5
2.2 Purchase Price.................................................. 5
2.3 Payment of Purchase Price....................................... 5
2.4 Closing......................................................... 6
2.5 Escrow Arrangements............................................. 6
2.6 Purchase Price Adjustments...................................... 6
2.7 Closing Audit................................................... 6
2.8 Post-Closing Purchase Price Adjustment.......................... 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND SELLER
3.1 Capitalization.................................................. 7
3.2 No Liens on Shares.............................................. 8
3.3 Other Rights to Acquire Capital Stock........................... 8
3.4 Due Organization................................................ 8
3.5 Subsidiaries.................................................... 8
3.6 Due Authorization............................................... 8
3.7 Financial Statements............................................ 9
3.8 Certain Actions................................................. 9
3.9 Properties...................................................... 10
3.10 Licenses and Permits............................................ 11
3.11 Intellectual Property........................................... 11
3.12 Compliance with Laws............................................ 11
3.13 Insurance....................................................... 12
3.14 Employee Benefit Plans.......................................... 12
(a) Employee Welfare Benefit Plans............................. 12
(b) Employee Pension Benefit Plans............................. 12
(c) Employment and Non-Tax Qualified Deferred
Compensation Arrangements.................................. 13
3.15 Contracts and Agreements........................................ 13
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
3.16 Claims and Proceedings.......................................... 13
3.17 Taxes........................................................... 14
3.18 Personnel....................................................... 14
3.19 Business Relations.............................................. 15
3.20 Accounts Receivable............................................. 15
3.21 Bank Accounts................................................... 15
3.22 Warranties...................................................... 15
3.23 Brokers......................................................... 16
3.24 Interest in Competitors, Suppliers, Customers, Etc.............. 16
3.25 Indebtedness To and From Officers, Directors, Shareholders, and
Employees....................................................... 16
3.26 Undisclosed Liabilities......................................... 16
3.27 Information Furnished........................................... 16
ARTICLE IV
GLOBAL'S REPRESENTATIONS AND WARRANTIES
4.1 Due Organization................................................ 17
4.2 Due Authorization............................................... 17
4.3 No Brokers...................................................... 17
4.3 Investment...................................................... 17
ARTICLE V
COVENANTS OF THE COMPANY AND SELLER
5.1 Consents of Others.............................................. 18
5.2 Seller's Efforts................................................ 18
5.3 Powers of Attorney.............................................. 18
ARTICLE VI
POST-CLOSING COVENANTS
6.1 General......................................................... 18
6.2 Transition...................................................... 18
6.3 Confidentiality................................................. 18
6.4 Covenant Not to Compete......................................... 19
6.5 Additional Matters.............................................. 19
ARTICLE VII
CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING
7.1 Conditions to Global's Obligations.............................. 21
(a) Covenants, Representations and Warranties.................. 21
(b) Consents................................................... 21
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
(c) Leases..................................................... 21
(d) Discharge of Indebtedness and Liens........................ 21
(e) Material Adverse Change.................................... 22
(f) Transfer Taxes............................................. 22
(g) Financial Condition........................................ 22
(h) Documents to be Delivered by Seller and the Company........ 22
(i) Opinion of Seller's Counsel...................... 22
(ii) Certificates..................................... 22
(iii) Release.......................................... 22
(iv) Escrow Agreement................................. 22
(v) Employment Agreement............................. 22
(vi) Office Lease..................................... 22
(vii) Assignment of Rights............................. 22
(viii) Stock Certificates............................... 23
7.2 Conditions to Seller's and the Company's Obligations............ 23
(a) Covenants, Representations and Warranties.................. 23
(b) Consents................................................... 23
(c) Documents to be Delivered by Global........................ 23
(i) Certificates..................................... 23
(ii) Escrow Agreement................................. 23
(iii) Employment Agreement............................. 23
(iv) Purchase Price................................... 24
(d) Right of Reinvestment...................................... 24
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification of Global....................................... 24
8.2 Defense of Claims............................................... 24
8.3 Escrow Claim.................................................... 25
8.4 Tax Audits, Etc................................................. 25
8.5 Indemnification of Seller....................................... 25
8.6 Limits on Indemnification....................................... 25
ARTICLE IX
MISCELLANEOUS
9.1 Modifications................................................... 26
9.2 Notices......................................................... 26
9.3 Counterparts.................................................... 27
9.4 Expenses........................................................ 27
9.5 Binding Effect; Assignment...................................... 27
9.6 Entire and Sole Agreement....................................... 27
9.7 Governing Law................................................... 28
9.8 Survival of Representations, Warranties and Covenants........... 28
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
9.9 Invalid Provisions.............................................. 28
9.10 Public Announcements............................................ 28
9.11 Remedies Cumulative............................................. 28
9.12 Waiver.......................................................... 28
9.13 DISPUTE RESOLUTION.............................................. 28
</TABLE>
-v-
<PAGE>
LIST OF EXHIBITS
Exhibit A Form of Escrow Agreement
Exhibit B Form of Estoppel Certificate for Building Leases
Exhibit C Opinion of Seller's Counsel
Exhibit D Seller's Certificates
Exhibit E Release
Exhibit F Stevens Executive Agreement
Exhibit G Global Certificates
Exhibit H Collateral Assignment of Rights
LIST OF SCHEDULES
Schedule 2.3 Seller's Accounts
Schedule 2.6 Holders of Funded Indebtedness
Schedule 3.1 Ownership of Shares
Schedule 3.4 Articles and Bylaws
Schedule 3.8A Certain Actions
Schedule 3.8B Material Changes
Schedule 3.9 Properties
Schedule 3.10 Licenses and Permits
Schedule 3.11 Patents and Trademarks
Schedule 3.13 Insurance
Schedule 3.14 Employee Benefit Plans
Schedule 3.15 Contracts and Agreements
Schedule 3.16 Claims and Proceedings
Schedule 3.18 Personnel
Schedule 3.20 Accounts Receivable
Schedule 3.21 Bank Accounts
Schedule 3.25 Indebtedness with Officers, Directors and Shareholders
Schedule 3.26 Undisclosed Liabilities
Schedule 7.1(d) Indebtedness
The Exhibits and Schedules to this Stock Purchase Agreement are not included
with this Registration Statement on Form S-1. Global will provide these
exhibits and schedules upon the request of the Securities and Exchange
Commission.
-vi-
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "AGREEMENT") is entered into as of
September 30, 1997, by and among GLOBAL IMAGING SYSTEMS INC., a Delaware
corporation ("GLOBAL"), QUALITY BUSINESS SYSTEMS, INC., a Washington corporation
(the "COMPANY") and THE SHAREHOLDER OF THE COMPANY (the "SELLER").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the distribution, sale and service
of office equipment in the State of Washington (the "BUSINESS"); and
WHEREAS, Seller owns all of the outstanding shares of capital stock of
the Company (the "SHARES"), which Shares constitute all of the issued and
outstanding capital stock of the Company; and
WHEREAS, Global desires to purchase from Seller and Seller desires to
sell to Global hereby all of the Shares owned by Seller all on the terms and
subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto covenant and agree
as follows:
ARTICLE I
DEFINITIONS
-----------
1.1 DEFINITIONS. In this Agreement, the following terms have the
-----------
meanings specified or referred to in this Section 1.1 and shall be equally
-----------
applicable to both the singular and plural forms. Any agreement referred to
below shall mean such agreement as amended, supplemented and modified from time
to time to the extent permitted by the applicable provisions thereof and by this
Agreement.
"AFFILIATE" means, with respect to any Person, any other Person
which directly or indirectly controls, is controlled by or is under common
control with such Person.
"ASSUMED FUNDED INDEBTEDNESS" has the meaning specified in
Section 2.3(c).
- --------------
"AUDITED CLOSING BALANCE SHEET" has the meaning specified in
Section 2.7.
- -----------
<PAGE>
"BUILDINGS" shall mean collectively (i) the Company's offices,
showroom or warehouse facilities located at (i) 14648 Northeast 95th Street,
Redmond, Washington, 98052; (ii) 9840 Willows Road NE, Suite 100, Redmond, WA
98052; (iii) 5009 Pacific Hwy. E., Suite 1--0, Fife, WA 98424; and (iv) 2101
Fourth Avenue, Suite 900 (Demo Room), Seattle, WA 98121.
"BUSINESS" has the meaning specified in the first recital of the
Agreement
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. (S)(S) 9601 et seq., any amendments
-- ---
thereto, any successor statutes, and any regulations promulgated thereunder.
"CLOSING" means the closing of the transfer of the Shares from
the Seller to Global.
"CLOSING DATE" has the meaning specified in Section 2.4.
-----------
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning specified in the first paragraph of
this Agreement.
"CONFIDENTIAL INFORMATION" means all confidential information and
trade secrets of the Company including, without limitation, any of the same
comprising the identity, lists or descriptions of any customers, referral
sources or organizations; financial statements, cost reports or other financial
information; contract proposals, or bidding information; business plans and
training and operations methods and manuals; personnel records; fee structure;
and management systems, policies or procedures, including related forms and
manuals. Confidential Information shall not include any information (i) which
is disclosed pursuant to subpoena or other legal process, (ii) which has been
publicly disclosed, (iii) which subsequently becomes known to a third party not
subject to a confidentiality agreement with Global or the Company, or (iv) which
is subsequently disclosed by any third party not in breach of a confidentiality
agreement.
"CONTRACTS" has the meaning specified in Section 3.15.
------------
"COURT ORDER" means any judgment, order, award or decree of any
foreign, federal, state, local or other court or tribunal and any award in any
arbitration proceeding.
"EFFECTIVE DATE" has the meaning specified in Section 2.4.
-----------
"EMPLOYMENT AGREEMENT" shall mean the executive agreement with
Gary Stevens to be entered into at Closing in the form of Exhibit F.
---------
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<PAGE>
"ENCUMBRANCE" means any lien, claim, charge, security interest,
mortgage, pledge, easement, conditional sale or other title retention agreement,
defect in title, restrictive covenant or other restrictions of any kind.
"ENVIRONMENTAL OBLIGATIONS" has the meaning specified in Section
-------
3.12.
- ----
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ESCROW AGENT" means the Commerce Bank of Washington, N.A.
"ESCROW AGREEMENT" means the Escrow Agreement to be executed by
and among the Seller, Global and the Escrow Agent in the form of Exhibit A.
---------
"ESCROW PERIOD" has the meaning specified in Section 2.5.
-----------
"ESCROW SUM" has the meaning specified in Section 2.5.
-----------
"FINANCIAL STATEMENTS" has the meaning specified in Section 3.7.
-----------
"FUNDED INDEBTEDNESS" means all (i) indebtedness of the Company
for borrowed money or other interest-bearing indebtedness; (ii) capital lease
obligations of the Company; (iii) obligations of the Company to pay the deferred
purchase or acquisition price for goods or services, other than trade accounts
payable or accrued expenses in the ordinary course of business on no more than
90 day payment terms; (iv) indebtedness of others guaranteed by the Company or
secured by an Encumbrance on the Company's property; (v) indebtedness of the
Company under extended credit terms of more than 30 days from manufacturers
provided to the Company; or (vi) any receivables owed by the Seller to the
Company.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"GLOBAL" has the meaning specified in the first paragraph of this
Agreement.
"GOVERNMENTAL BODY" means any foreign, federal, state, local or
other governmental authority or regulatory body.
"GOVERNMENTAL PERMITS" has meaning specified in Section 3.10.
------------
"INDEPENDENT ACCOUNTANTS" has the meaning specified in Section
-------
2.7.
- ---
-3-
<PAGE>
"IRS" means the Internal Revenue Service.
"INDEMNIFIABLE COSTS" has the meaning specified in Section 8.1.
-----------
"INDEMNIFIED PARTIES" has the meaning specified in Section 8.1.
-----------
"INTELLECTUAL PROPERTY" has the meaning specified in Section
-------
3.11.
- ----
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means a
material adverse change or effect on the assets, properties, Business,
operations, liabilities, or financial condition of the Company and its
subsidiaries, taken as a whole. In determining whether a "MATERIAL ADVERSE
CHANGE" or "MATERIAL ADVERSE EFFECT" has occurred, the quantitative amounts set
forth at the end of Article III shall be conclusive.
-----------
"OSHA" means the Occupational Safety and Health Act, 29 U.S.C.
(S)(S) 651 et seq., any amendment thereto, and any regulations promulgated
-- ---
thereunder.
"PERMITTED EXCEPTION" means (a) liens for Taxes and other
governmental charges and assessments which are not yet due and payable, (b)
liens of landlords and liens of carriers, warehousemen, mechanics and
materialmen and other like liens arising in the ordinary course of business for
sums not yet due and payable, (c) other liens or imperfections on property which
are not material in amount or do not materially detract from the value or the
existing use of the property affected by such lien or imperfection, (d) such
statements of fact and exceptions shown on any title insurance policies
delivered to Global.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or Governmental Body.
"PRELIMINARY CLOSING BALANCE SHEET" shall mean the Company's best
estimate of the Company's balance sheet as of the Effective Date. The
Preliminary Closing Balance Sheet shall be delivered to Global not less than
five (5) days prior to the Closing Date.
"PURCHASE PRICE" has the meaning specified in Section 2.2.
-----------
"RCRA" means the Resource Conservation and Recovery Act, 42
U.S.C. (S)(S) 6901 et seq., and any successor statute, and any regulations
-- ---
promulgated thereunder.
"REQUIREMENTS OF LAWS" means any foreign, federal, state and
local laws, statutes, regulations, rules, codes or ordinances enacted, adopted,
issued or promulgated by any Governmental Body (including, without limitation,
those pertaining to electrical, building, zoning, environmental and occupational
safety and health requirements) or common law.
-4-
<PAGE>
"SELLER" has the meaning set forth in the first paragraph of this
Agreement.
"SHARES" means all of the issued and outstanding shares of the
capital stock of the Company.
"TAX" or "TAXES" means any federal, state, local or foreign
income, alternative or add-on minimum, gross income, gross receipts, windfall
profits, severance, property, production, sales, use, transfer, gains, license,
excise, employment, payroll, withholding or minimum tax, transfer, goods and
services, or any other tax, custom, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or any
penalty, addition to tax or additional amount imposed thereon by any
Governmental Body.
"TAX RETURN" means any return, report or similar statement
required to be filed with respect to any Taxes (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return and declaration of estimated Tax.
"WORKING CAPITAL" shall mean the difference between the Company's
current assets and its current liabilities as calculated in accordance with
GAAP.
"WORKING CAPITAL TARGET" shall have the meaning assigned to such
term in Section 2.6 hereof.
-----------
ARTICLE II
AGREEMENT OF PURCHASE AND SALE; CLOSING
2.1 AGREEMENT TO SELL AND PURCHASE. Upon the basis of the
------------------------------
representations and warranties, for the consideration, and subject to the terms
and conditions set forth in this Agreement, Seller agrees to sell the Shares to
Global and Global agrees to purchase the Shares from Seller.
2.2 PURCHASE PRICE. The total purchase price for the Shares (the
--------------
"PURCHASE PRICE") shall be equal to $2,770,000, subject to any adjustment
required to be made pursuant to Section 2.6 or Section 2.8 below.
----------- -----------
2.3 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be payable
-------------------------
by Global at the Closing (hereinafter defined) as follows:
(A) $1,766,000 of the Purchase Price as adjusted as set forth in
Section 2.6 below will be paid, at the direction of the Seller, in cash by wire
- -----------
transfer of funds as
-5-
<PAGE>
specified in Schedule 2.3 (including the payment of $60,000 for the covenant not
------------
to compete provided in Section 6.4);
-----------
(B) $274,000 of the Purchase Price will be paid in cash by wire
transfer of funds to the Escrow Agent to be held in escrow for satisfaction of
Seller's indemnification obligations specified in Section 8.1 or payment to the
-----------
Seller in accordance with the terms of Section 2.5 below; and
-----------
(C) the payment of $700,000 to Ronald Baker; and
(D) the assumption of up to $30,000 in Funded Indebtedness on
certain service vehicles acquired in 1997 (the "ASSUMED FUNDED
INDEBTEDNESS").
2.4 CLOSING. The Closing of the purchase and sale of the Shares
-------
contemplated by this Agreement shall take place at 9:00 a.m., Pacific Coast
time, at the offices of Lasher & Holzapfel in Seattle, Washington on September
30, 1997, or at such other date and time as the parties shall agree (the
"CLOSING DATE"), effective as of September 1, 1997 (the "EFFECTIVE DATE").
2.5 ESCROW ARRANGEMENTS. Pursuant to the Escrow Agreement to be
-------------------
entered into among Seller, Global and the Escrow Agent, $274,000 of the Purchase
Price shall be delivered to the Escrow Agent at Closing. Such monies (which,
together with all interest accrued thereon, is hereinafter referred to as the
"ESCROW SUM") shall be held pursuant to the terms of the Escrow Agreement for
payment from such Escrow Sum of the amounts, if any, owing by Seller to Global
pursuant to Section 2.8 or Article VIII below. At the conclusion of the period
-----------
ending on the first anniversary of the Closing Date (such period being referred
to herein as the "ESCROW PERIOD"), such remaining portion of the Escrow Sum not
theretofore claimed by or paid to Global in accordance with the terms of the
Escrow Agreement and this Agreement shall be disbursed to Seller. Seller and
Global agree that each will execute and deliver such reasonable instruments and
documents as are furnished by any other party to enable such furnishing party to
receive those portions of the Escrow Sum to which the furnishing party is
entitled under the provisions of the Escrow Agreement and this Agreement.
2.6 PURCHASE PRICE ADJUSTMENTS.
--------------------------
(A) Except (i) for the Assumed Funded Indebtedness (which
Assumed Funded Indebtedness shall continue to remain outstanding), the Purchase
Price payable pursuant to Section 2.3(a) above will be reduced by the total
--------------
amount of Funded Indebtedness, if any, assumed or paid by Global in cash by wire
transfer of funds to the accounts of the holders of Funded Indebtedness listed
on Schedule 2.6 hereto to satisfy the Company's Funded Indebtedness with such
------------
institutions.
(B) The portion of the Purchase Price payable at Closing will be
reduced by the amount, if any, by which the adjusted Working Capital as
reflected on the
-6-
<PAGE>
Preliminary Closing Balance Sheet is less than $91,472 the amount which is
$50,000 less than the average of the Working Capital balances at the end of each
of the first six months of 1997 (the "WORKING CAPITAL TARGET"). In calculating
"WORKING CAPITAL TARGET," 39.6% of all taxable income of the Company for the
period from January 1, 1997 through the Closing Date shall be excluded from the
Working Capital Target. In addition, the Working Capital Target will be adjusted
downward for all long-term fixed assets purchased with cash by the Company since
January 1, 1997.
(C) The Purchase Price payable pursuant to Section 2.3(a) above
--------------
will be decreased or increased, as the case may be, by the amount that the
Company's indebtedness on the Closing Date to Ronald Baker is more or less than
$700,000.
2.7 CLOSING AUDIT. Within 90 days following the Closing Date,
-------------
there shall be delivered to Global and to Seller an audit of the Preliminary
Closing Balance Sheet (the "AUDITED CLOSING BALANCE SHEET") of the Company at
and as of the Effective Date. The Preliminary Closing Balance Sheet shall be
audited by Ernst & Young, LLP in accordance with GAAP. The cost of the Audited
Closing Balance Sheet shall be paid by Global. In the event that the Seller
disputes any items on the Audited Closing Balance Sheet within ten days after
Seller's receipt thereof, the parties shall jointly select and retain an
independent "Big Six" accounting firm (the "INDEPENDENT ACCOUNTANTS") to review
the disputed item(s) on the Audited Closing Balance Sheet. The final
determination of such disputed item(s) by the Independent Accountants shall be
reflected on the Audited Closing Balance Sheet. The cost of retaining the
Independent Accountants shall be borne by Seller; provided, however, that Global
shall reimburse Seller for the cost of the Independent Accountants in the event
that such review results in an increase of more than $50,000 in the Company's
Working Capital as reflected on the Audited Closing Balance Sheet prepared by
Ernst & Young, LLP. In calculating the Working Capital as reflected on the
Audited Closing Balance Sheet, no adjustment will be made to conform inventory
to reflect Global's net costs or for adjustments of parts to a percentage of
service billing.
2.8 POST-CLOSING PURCHASE PRICE ADJUSTMENT. In the event that the
--------------------------------------
Working Capital as reflected on the Audited Closing Balance Sheet is less than
the Working Capital Target, then the Purchase Price will be adjusted downward,
on a dollar-for-dollar basis, to reflect the lesser of (i) the decrease, if any,
in Working Capital as reflected on the Audited Closing Balance Sheet from the
amount of Working Capital reflected on the Preliminary Closing Balance Sheet or
(ii) the amount, if any, by which the Working Capital reflected on the Audited
Closing Balance Sheet is less than the Working Capital Target. Conversely, the
Purchase Price will be adjusted upward, on a dollar-for dollar basis, to reflect
the increase, if any, in the total Working Capital as reflected on the Audited
Closing Balance Sheet from the amount of Working Capital reflected on the
Preliminary Closing Balance Sheet, provided, however, that in no event shall
such upward adjustment exceed the total amount of any adjustment to the Purchase
Price made pursuant to Section 2.6(b) above. The post-closing adjustment to the
--------------
Purchase Price, if any, shall be paid by Seller to Global from the Escrow Sum
(or, at Seller's option, in cash) or by Global to Seller, as the case may be, in
immediately available funds within ten (10) business days
-7-
<PAGE>
of delivery of the Audited Closing Balance Sheet, unless the Seller disputes any
items on the Audited Closing Balance Sheet, in which case it shall be paid
within ten (10) business days after the Independent Accountants finally
determine the disputed item(s), and Global delivers to Seller an Audited Closing
Balance Sheet modified to reflect such determination.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND SELLER
The Company and Seller represent and warrant to Global that:
3.1 CAPITALIZATION. The authorized capital stock of the Company
--------------
consists of 50,000 shares of Common Stock, 1,000 of which are issued and
outstanding. All of the Shares are duly authorized, validly issued, fully paid,
and nonassessable. All of the Shares are owned of record and beneficially by
Seller in the amounts set forth on Schedule 3.1 hereto. None of the Shares was
------------
issued or will be transferred under this Agreement in violation of any
preemptive or preferential rights of any Person. The Seller owns all of the
issued and outstanding capital stock of the Company.
3.2 NO LIENS ON SHARES. Except as shown on Schedule 3.1, Seller
------------------ ------------
owns the Shares, free and clear of any Encumbrances other than the rights and
obligations arising under this Agreement, and none of the Shares is subject to
any outstanding option, warrant, call, or similar right of any other Person to
acquire the same, and none of the Shares is subject to any restriction on
transfer thereof except for restrictions imposed by applicable federal and state
securities laws. At Closing, Seller will have full power and authority to
convey good and marketable title to the Shares, free and clear of any
Encumbrances.
3.3 OTHER RIGHTS TO ACQUIRE CAPITAL STOCK. Except as set forth in
-------------------------------------
this Agreement, there are no authorized or outstanding warrants, options, or
rights of any kind to acquire from the Company any equity or debt securities of
the Company, or securities convertible into or exchangeable for equity or debt
securities of the Company, and there are no shares of capital stock of the
Company reserved for issuance for any purpose nor any contracts, commitments,
understandings or arrangements which require the Company to issue, sell or
deliver any additional shares of its capital stock.
3.4 DUE ORGANIZATION. The Company is a corporation duly
----------------
organized, validly existing, and in good standing under the laws of the State of
Washington and has full corporate power and authority to carry on the Business
as now conducted and as proposed to be conducted through Closing. Complete and
correct copies of the Articles of Incorporation and Bylaws of the Company, and
all amendments thereto, have been heretofore delivered to Global and are
attached hereto as Schedule 3.4. The Company is qualified to do business in the
------------
State of Washington and in each jurisdiction in which the nature of the Business
or the ownership of its
-8-
<PAGE>
properties requires such qualification except where the failure to be so
qualified does not and could not reasonably be expected to have a Material
Adverse Effect.
3.5 SUBSIDIARIES. The Company has no subsidiaries or ownership in
------------
any Person.
3.6 DUE AUTHORIZATION. The Company and the Seller each have full
-----------------
power and authority to execute, deliver and perform this Agreement and to carry
out the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action of the Company.
This Agreement has been duly and validly executed and delivered by the Company
and Seller and constitutes the valid and binding obligations of the Company and
Seller, enforceable in accordance with its terms, except to the extent that
enforceability may be limited by laws affecting creditors' rights and debtors'
obligations generally, and legal limitations relating to remedies of specific
performance and injunctive and other forms of equitable relief. The execution,
delivery, and performance of this Agreement (as well as all other instruments,
agreements, certificates, or other documents contemplated hereby) by the Company
and Seller, do not (a) violate any Requirements of Laws or any Court Order of
any Governmental Body applicable to the Company or Seller, or their respective
property, (b) violate or conflict with, or permit the cancellation of, or
constitute a default under, any material agreement to which the Company or
Seller are a party, or by which any of them or any of their respective property
is bound, (c) permit the acceleration of the maturity of any material
indebtedness of, or indebtedness secured by the property of, the Company or
Seller, or (d) violate or conflict with any provision of the charter or bylaws
of the Company.
3.7 FINANCIAL STATEMENTS. The following Financial Statements
--------------------
(herein so called) of the Company have been delivered to Global by the Company:
compiled balance sheets of the Company as of December 31, 1994, December 31,
1995 and December 31, 1996 and unaudited consolidated balance sheet as of
August 31, 1997, and compiled statements of income of the Company for the fiscal
years ended December 31, 1994, December 31, 1995 and December 31, 1996 and
unaudited consolidated statement of income for the eight-month period ending
August 31, 1997.
The Financial Statements have been prepared in accordance with GAAP throughout
the periods indicated and fairly present the financial position, results of
operations and changes in financial position of the Company as of the indicated
dates and for the indicated periods, subject (in the case of the eight month
Financial Statements) to year end accruals made in the ordinary course of the
Business which are not materially adverse and which are consistent with past
practices. Except to the extent reflected or provided for in the Financial
Statements or the notes thereto and obligations and liabilities incurred in the
ordinary course of business since the date of the last of such Financial
Statements, the Company has no liabilities required by GAAP to be reflected on
the Company's balance sheet or notes thereto that are not so reflected, nor any
other obligations (whether absolute, contingent, or otherwise) which are
(individually or in the aggregate) Material (in amount or to the conduct of the
Business); and neither the Company nor Seller has knowledge
-9-
<PAGE>
of any basis for the assertion of any such liability or obligation. Since August
31, 1997, there has been no Material Adverse Change in the prospects of the
Company.
3.8 CERTAIN ACTIONS. Since August 31, 1997, the Company has not,
---------------
except as disclosed on Schedule 3.8A hereto or any of the Financial Statements
-------------
or notes thereto: (a) discharged or satisfied any Encumbrance or paid any
obligation or liability, absolute or contingent, other than current liabilities
incurred and paid in the ordinary course of the Business; (b) paid or declared
any dividends or distributions, or purchased, redeemed, acquired, or retired any
stock or indebtedness from any stockholder; (c) made or agreed to make any loans
or advances or guaranteed or agreed to guarantee any loans or advances to any
party whatsoever; (d) suffered or permitted any Encumbrance to arise or be
granted or created against or upon any of its assets, real or personal, tangible
or intangible; (e) canceled, waived, or released or agreed to cancel, waive, or
release any of its debts, rights, or claims against third parties in excess of
$10,000 individually or $25,000 in the aggregate; (f) sold, assigned, pledged,
mortgaged, or otherwise transferred, or suffered any material damage,
destruction, or loss (whether or not covered by insurance) to, any assets
(except in the ordinary course of the Business); (g) amended its charter or
bylaws; (h) paid or made a commitment to pay any severance or termination
payment to any employee or consultant; (i) made any material change in its
method of management or operation or method of accounting; (j) made any capital
expenditures, including, without limitation, replacements of equipment in the
ordinary course of the Business, or entered into commitments therefor, except
for capital expenditures or commitments therefor which do not, in the aggregate,
exceed $35,000; (k) made any investment or commitment therefor in any Person;
(l) made any payment or contracted for the payment of any bonus or other
compensation or personal expenses, other than (A) wages and salaries and
business expenses paid in the ordinary course of the Business, and (B) wage and
salary adjustments made in the ordinary course of the Business for employees who
are not officers, directors, or shareholders of the Company; (m) made, amended,
or entered into any written employment contract or created or made any material
change in any bonus, stock option, pension, retirement, profit sharing or other
employee benefit plan or arrangement; (n) materially amended or experienced a
termination of any material contract, agreement, lease, franchise or license to
which the Company is a party that would or could reasonably be expected to have
a Material Adverse Effect, except in the ordinary course of the Business; or (o)
entered into any other material transactions that would or could reasonably be
expected to have a Material Adverse Effect except in the ordinary course of the
Business. Since August 31, 1997, except as disclosed on Schedule 3.8B hereto or
-------------
any of the Financial Statements or notes thereto, there has not been (a) any
Material Adverse Change including, but not limited to, the loss of any material
customers or suppliers of the Company, or in any material assets of the Company,
(b) any extraordinary contracts, commitments, orders or rebates, (c) any strike,
material slowdown, or demand for recognition by a labor organization by or with
respect to any of the employees of the Company, or (d) any shutdown, material
slow-down, or cessation of any material operations conducted by, or constituting
part of, the Company, nor has the Company agreed to do any of the foregoing.
3.9 PROPERTIES. Attached hereto as Schedule 3.9 is a list
---------- ------------
containing a description of each interest in real property (including, without
limitation, leasehold interests)
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<PAGE>
and each item of personal property utilized by the Company in the conduct of the
Business having a book value in excess of $15,000 as of the date hereof. Except
for Permitted Exceptions or as expressly set forth on Schedule 3.9, such real
------------
and personal properties are free and clear of Encumbrances. Seller and the
Company have delivered to Global a lien search obtained from the counties where
the Company conducts business and the Washington Secretary of State office of
all UCC liens of record against the Company's personal property in the State of
Washington. All of the properties and assets necessary for continued operation
of the Business as currently conducted (including, without limitation, all
books, records, computers and computer software and data processing systems) are
owned, leased or licensed by the Company and are suitable for the purposes for
which they are currently being used. With the exception of used equipment and
inventory valued at no more than $10,000 on the Company's Financial Statements,
the physical properties of the Company, including the real properties leased by
the Company, are in good operating condition and repair, normal wear and tear
excepted, and are free from any defects of a material nature. Except for
Permitted Exceptions or as otherwise set forth on Schedule 3.9, the Company has
------------
full and unrestricted legal and equitable title to all such properties and
assets. The operation of the properties and Business of the Company in the
manner in which they are now and have been operated does not violate any zoning
ordinances, municipal regulations, or other Requirements of Laws, except for any
such violations which would not, individually or in the aggregate, have a
Material Adverse Effect. Except for Permitted Exceptions or as set forth on
Schedule 3.9, no restrictive covenants, easements, rights-of-way, or
- ------------
regulations of record impair the uses of the properties of the Company for the
purposes for which they are now operated. All leases of real or personal
property by the Company are legal, valid, binding, enforceable and in full force
and effect and will remain legal, valid, binding, enforceable and in full force
and effect on identical terms immediately following the Closing, except to the
extent that enforceability may be limited by laws affecting creditors' rights
and debtors' obligations generally, and legal limitations relating to remedies
of specific performance and injunctive and other forms of equitable relief. All
facilities owned or leased by the Company have received all approvals of any
Governmental Body (including Governmental Permits) required in connection with
the operation thereof and have been operated and maintained in accordance with
all Requirements of Laws.
3.10 LICENSES AND PERMITS. Attached hereto as Schedule 3.10 is a
-------------------- -------------
list of all Material licenses, certificates, privileges, immunities, approvals,
franchises, authorizations and permits held or applied for by the Company from
any Governmental Body (herein collectively called "GOVERNMENTAL PERMITS") the
absence of which could have a Material Adverse Effect. The Company has complied
in all material respects with the terms and conditions of all such Governmental
Permits, and the Company has not received notification from any Governmental
Body of violation of any such Governmental Permit or the Requirements of Laws
governing the issuance or continued validity thereof other than violations (if
any) which would not individually or in the aggregate have a Material Adverse
Effect. No additional Governmental Permit is required from any Governmental
Body thereof in connection with the conduct of the Business which Governmental
Permit, if not obtained, would have a Material Adverse Effect.
-11-
<PAGE>
3.11 INTELLECTUAL PROPERTY. Attached hereto as Schedule 3.11 is a
--------------------- -------------
list and brief description of all patents, trademarks, tradenames, copyrights,
licenses, computer software or data (other than general commercial software) or
applications therefor owned by or registered in the name of the Company or in
which the Company has any rights, licenses, or immunities (collectively, the
"INTELLECTUAL PROPERTY"). The Company has furnished Global with copies of all
license agreements to which the Company is a party, either as licensor or
licensee, with respect to any Intellectual Property. Except as described on
Schedule 3.11 hereto, the Company has good title to or the right to use such
- -------------
Intellectual Property and all inventions, processes, designs, formulae, trade
secrets and know-how necessary for the conduct of their Business, in their
Business as presently conducted without the payment of any royalty or similar
payment, and the Company is not infringing on any patent right, tradename,
copyright or trademark right or other Intellectual Property right of others, and
neither the Company nor Seller is aware of any infringement by others of any
such rights owned by the Company.
3.12 COMPLIANCE WITH LAWS. The Company has (i) complied in all
--------------------
material respects with all Requirements of Laws, Governmental Permits and Court
Orders applicable to the Business and has filed with the proper Governmental
Bodies all statements and reports required by all Requirements of Laws,
Governmental Permits and Court Orders to which the Company or any of its
employees (because of their activities on behalf of the Company) are subject and
(ii) conducted the Business and are in compliance in all material respects with
all federal, state and local energy, public utility, health, safety and
environmental Requirements of Laws, Governmental Permits and Court Orders
including the Clean Air Act, the Clean Water Act, RCRA, the Safe Drinking Water
Act, CERCLA, OSHA, the Toxic Substances Control Act and any similar state, local
or foreign laws (collectively "ENVIRONMENTAL OBLIGATIONS") and all other
federal, state, local or foreign governmental and regulatory requirements,
except where any such failure to comply or file would not, in the aggregate,
have a Material Adverse Effect. No claim has been made by any Governmental Body
(and, to the best knowledge of the Company and Seller, no such claim is
anticipated) to the effect that the Business fails to comply, in any respect,
with any Requirements of Laws, Governmental Permit or Environmental Obligation
or that a Governmental Permit or Court Order is necessary in respect thereto.
3.13 INSURANCE. Attached hereto as Schedule 3.13 is a list of all
--------- -------------
coverages for fire, liability, or other forms of insurance and all fidelity
bonds held by or applicable to the Company. Copies of the binder for all such
insurance policies have been delivered to Global. To the best of the Company's
and Seller's knowledge and belief, no event relating to the Company has occurred
which will result in (i) cancellation of any such insurance coverages; (ii) a
retroactive upward adjustment of premiums under any such insurance coverages; or
(iii) any prospective upward adjustment in such premiums. All of such insurance
coverages will remain in full force and effect following the Closing.
3.14 EMPLOYEE BENEFIT PLANS.
----------------------
(A) EMPLOYEE WELFARE BENEFIT PLANS. Except as disclosed on
------------------------------
Schedule 3.14, the Company does not maintain or contribute to any "employee
- -------------
welfare benefit
-12-
<PAGE>
plan" as such term is defined in Section 3(1) of ERISA. With respect to each
such plan, (i) the plan is in material compliance with ERISA; (ii) the plan has
been administered in accordance with its governing documents; (iii) neither the
plan, nor any fiduciary with respect to the plan, has engaged in any "prohibited
transaction" as defined in Section 406 of ERISA other than any transaction
subject to a statutory or administrative exemption; (iv) except for the
processing of routine claims in the ordinary course of administration, there is
no material litigation, arbitration or disputed claim outstanding; and (v) all
premiums due on any insurance contract through which the plan is funded have
been paid.
(B) EMPLOYEE PENSION BENEFIT PLANS. Except as disclosed in
------------------------------
Schedule 3.14, the Company does not maintain or contribute to any arrangement
- -------------
that is or may be an "employee pension benefit plan" relating to employees, as
such term is defined in Section 3(2) of ERISA. With respect to each such plan:
(i) the plan is qualified under Section 401(a) of the Code, and any trust
through which the plan is funded meets the requirements to be exempt from
federal income tax under Section 501(a) of the Code; (ii) the plan is in
material compliance with ERISA; (iii) the plan has been administered in
accordance with its governing documents as modified by applicable law; (iv) the
plan has not suffered an "accumulated funding deficiency" as defined in Section
412(a) of the Code; (v) the plan has not engaged in, nor has any fiduciary with
respect to the plan engaged in, any "prohibited transaction" as defined in
Section 406 of ERISA or Section 4975 of the Code other than a transaction
subject to statutory or administrative exemption; (vi) the plan has not been
subject to a "reportable event" (as defined in Section 4043(b) of ERISA), the
reporting of which has not been waived by regulation of the Pension Benefit
Guaranty Corporation; (vii) no termination or partial termination of the plan
has occurred within the meaning of Section 411(d)(3) of the Code; (viii) all
contributions required to be made to the plan or under any applicable collective
bargaining agreement have been made to or on behalf of the plan; (ix) there is
no material litigation, arbitration or disputed claim outstanding; and (x) all
applicable premiums due to the Pension Benefit Guaranty Corporation for plan
termination insurance have been paid in full on a timely basis.
(C) EMPLOYMENT AND NON-TAX QUALIFIED DEFERRED COMPENSATION
------------------------------------------------------
ARRANGEMENTS. Except as disclosed in Schedule 3.14, the Company does not
- ------------ -------------
maintain or contribute to any retirement or deferred or incentive compensation
or stock purchase, stock grant or stock option arrangement entered into between
the Company and any current or former officer, consultant, director or employee
of the Company that is not intended to be a tax qualified arrangement under
Section 401(a) of the Code.
3.15 CONTRACTS AND AGREEMENTS. Attached hereto as Schedule 3.15 is
------------------------ -------------
a list and brief description of all written or oral contracts, commitments,
leases, and other agreements (including, without limitation, promissory notes,
loan agreements, and other evidences of indebtedness, guarantees, agreements
with distributors, suppliers, dealers, franchisors and customers, and service
agreements) to which the Company is a party or by which the Company or its
properties are bound pursuant to which the obligations thereunder of either
party thereto are, or are contemplated as being, for any one contract $25,000 or
greater (collectively, the "CONTRACTS"). The Company is not and, to the best
knowledge of Seller and the Company, no
-13-
<PAGE>
other party thereto is in default (and no event has occurred which, with the
passage of time or the giving of notice, or both, would constitute a default by
the Company) under any of the Contracts, and the Company has not waived any
right under any of the Contracts. All of the Contracts to which the Company is a
party are legal, valid, binding, enforceable and in full force and effect and
will remain legal, valid, binding, enforceable and in full force and effect on
identical terms immediately after the Closing, except to the extent that
enforceability may be limited by laws affecting creditors' rights and debtors'
obligations generally, and legal limitations relating to remedies of specific
performance and injunctive and other forms of equitable relief. Except as set
forth in Schedule 3.15, the Company has not guaranteed any obligations of any
-------------
other Person. To the best of Seller's and the Company's Knowledge, no
manufacturer of office equipment sold by the Company will cease doing business
with the Company immediately following the Closing.
3.16 CLAIMS AND PROCEEDINGS. Attached hereto as Schedule 3.16 is a
---------------------- -------------
list and brief description of all claims, actions, suits, proceedings, or
investigations pending or, to the best knowledge and belief of the Seller or the
Company, threatened against or affecting the Company or any of its properties or
assets, at law or in equity, or before or by any court, municipality or other
Governmental Body. Except as set forth on Schedule 3.16, none of such claims,
-------------
actions, suits, proceedings, or investigations, if adversely determined, will
result in any liability or loss to the Company. The Company has not been and
the Company is not now, subject to any Court Order, stipulation, or consent of
or with any court or Governmental Body. No inquiry, action or proceeding has
been instituted or, to the best knowledge and belief of the Seller or the
Company, threatened or asserted against the Seller or the Company to restrain or
prohibit the carrying out of the transactions contemplated by this Agreement or
to challenge the validity of such transactions or any part thereof or seeking
damages on account thereof. To the best knowledge of the Company and Seller,
except as set forth on Schedule 3.16, there is no basis for any such valid claim
-------------
or action.
3.17 TAXES.
-----
(A) All Federal, foreign, state, county and local income, gross
receipts, excise, property, franchise, license, sales, use, withholding and
other Taxes due from the Company on or before the Closing have been paid and all
Tax Returns which are required to be filed by the Company on or before the date
hereof have been filed within the time and in the manner provided by law, and
all such Tax Returns are true and correct and accurately reflect the Tax
liabilities of the Company. No Tax Returns of the Company or any of the Seller
are presently subject to an extension of the time to file. All Taxes,
assessments, penalties, and interest of the Company which have become due
pursuant to such Tax Returns or any assessments received have been paid or
adequately accrued on the Company's Financial Statements. The provisions for
Taxes reflected on the balance sheets contained in the Financial Statements are
adequate to cover all of the Company's Tax liabilities for the respective
periods then ended and all prior periods. The Company has not executed any
presently effective waiver or extension of any statute of limitations against
assessments and collection of Taxes, and there are no pending or threatened
claims, assessments, notices, proposals to assess, deficiencies, or
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<PAGE>
audits with respect to any such Taxes of which any of the Seller or the Company
are aware. For Governmental Bodies with respect to which the Company does not
file Tax Returns, no such Governmental Body has given the Company written
notification that the Company is or may be subject to taxation by that
Governmental Body. The Company has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
shareholder, creditor, independent contractor or other party. There are no Tax
liens on any of the property or assets of the Company.
(B) Neither the Company nor any other corporation has filed an
election under Section 341(f) of the Code that is applicable to the Company or
any assets held by the Company. The Company has not made any payments, is not
obligated to make any payments, and is not a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Code Sec. 280G. The Company has not been a United States real
property holding corporation within the meaning of Code Sec. 897(c)(2) during
the applicable period specified in Code Sec. 897(c)(1)(A)(ii). The Company is
not a party to any Tax allocation or sharing agreement. The Company has not and
has never been (nor does the Company have any liability for unpaid Taxes because
it once was) a member of an affiliated group during any part of which return
year any corporation other than the Company also was a member of the affiliated
group. The Company's election to be taxed under subchapter S of the Code is
valid, legally binding and in full force and effect under all applicable Tax
laws.
(C) No transaction contemplated by this Agreement is subject to
withholding under Section 1445 of the Code and no stock transfer taxes, real
estate transfer taxes or similar taxes will be imposed upon the transfer and
sale of the Shares pursuant to this Agreement.
3.18 PERSONNEL. Attached hereto as Schedule 3.18 is a list of
--------- -------------
the names and annual rates of compensation of the directors and executive
officers of the Company, and of the employees of the Company whose annual rates
of compensation during the calendar year ended December 31, 1996 (including
base salary, bonus and incentive pay) exceed (or by December 31, 1997 are
expected to exceed) $60,000. Schedule 3.18 also summarizes the bonus, profit
-------------
sharing, percentage compensation, company automobile, club membership, and other
like benefits, if any, paid or payable to such directors, officers, and
employees during the Company's calendar year ended December 31, 1996 and to the
date hereof. Schedule 3.18 also contains a brief description of all material
-------------
terms of employment agreements to which the Company is a party and all severance
benefits which any director, officer or employee of the Company is or may be
entitled to receive. The employee relations of the Company are generally good
and there is no pending or, to the best knowledge of Seller or the Company,
threatened labor dispute or union organization campaign. None of the employees
of the Company are represented by any labor union or organization. The Company
is in compliance in all material respects with all Requirements of Laws
respecting employment and employment practices, terms and conditions of
employment, and wages and hours, and are not engaged in any unfair labor
practices. Neither the Company or Seller has been advised, or has good reason
to believe, that any of the persons
-15-
<PAGE>
whose names are set forth on Schedule 3.18 or any other employee will not agree
-------------
to remain employed by the Company after the consummation of the transactions
contemplated hereby. There is no unfair labor practice claim against the Company
before the National Labor Relations Board, or any strike, dispute, slowdown, or
stoppage pending or, to the best knowledge of the Company and Seller, threatened
against or involving the Company, and none has occurred.
3.19 BUSINESS RELATIONS. Neither the Company nor Seller knows or
------------------
has good reason to believe that any customer or supplier of the Company will
cease to do business with the Company after the consummation of the transactions
contemplated hereby in the same manner and at the same levels as previously
conducted with the Company except for any reductions which do not result in a
Material Adverse Change. Neither Seller nor the Company has received any notice
of any material disruption (including delayed deliveries or allocations by
suppliers) in the availability of any material portion of the materials used by
the Company nor is the Company or Seller aware of any facts which could lead
them to believe that the Business will be subject to any such material
disruption.
3.20 ACCOUNTS RECEIVABLE. All of the accounts, notes, and loans
-------------------
receivable that have been recorded on the books of the Company are bona fide and
represent amounts validly due for goods sold or services rendered and except as
disclosed on Schedule 3.20 all such amounts (net of any allowance for doubtful
-------------
accounts) will be collected in full within 180 days following the Closing Date.
Except as disclosed on Schedule 3.20 hereto (a) all of such accounts, notes, and
-------------
loans receivable are free and clear of any Encumbrances; (b) no claims of offset
have been asserted in writing against any of such accounts, notes, or loans
receivable; and (c) none of the obligors of such accounts, notes, or loans
receivable has given written notice that it will or may refuse to pay the full
amount or any portion thereof.
3.21 BANK ACCOUNTS. Attached hereto as Schedule 3.21 is a list of
------------- -------------
all banks or other financial institutions with which the Company has an account
or maintains a safe deposit box, showing the type and account number of each
such account and safe deposit box and the names of the persons authorized as
signatories thereon or to act or deal in connection therewith.
3.22 WARRANTIES. Except for warranty claims that are typical and in
----------
the ordinary course of the Business, no written claim for breach of product or
service warranty to any customer has been made against the Company since January
1, 1997. To the best knowledge of Seller and the Company, no state of facts
exists, and no event has occurred, which could reasonably be expected to form
the basis of any present claim against the Company for liability on account of
any express or implied warranty to any third party in connection with products
sold or services rendered by the Company.
3.23 BROKERS. Neither the Company nor Seller has engaged, or caused
-------
to be incurred any liability to any finder, broker, or sales agent in connection
with the origin, negotiation, execution, delivery, or performance of this
Agreement or the transactions contemplated hereby.
-16-
<PAGE>
3.24 INTEREST IN COMPETITORS, SUPPLIERS, CUSTOMERS, ETC. No
--------------------------------------------------
officer, director, or shareholder of the Company or any affiliate of any such
officer, director, or shareholder, has any ownership interest in any competitor,
supplier, or customer of the Company (other than ownership of securities of a
publicly-held corporation of which such Person owns, or has real or contingent
rights to own, less than one percent of any class of outstanding securities) or
any property used in the operation of the Business.
3.25 INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS, SHAREHOLDERS, AND
---------------------------------------------------------------
EMPLOYEES. Attached hereto as Schedule 3.25 is a list and brief description
- --------- -------------
of the payment terms of all indebtedness of the Company to officers, directors,
shareholders, and employees of the Company and all indebtedness of officers,
directors, shareholders, and employees of the Company to the Company, excluding
indebtedness for travel advances or similar advances for expenses incurred on
behalf of and in the ordinary course of the Business, consistent with past
practices.
3.26 UNDISCLOSED LIABILITIES. Except as indicated in Schedule 3.26
----------------------- -------------
hereto, the Company does not have any material liabilities (whether absolute,
accrued, contingent or otherwise), of a nature required by GAAP to be reflected
on a corporate balance sheet or disclosed in the notes thereto, except such
liabilities which are accrued or reserved against in the Financial Statements or
disclosed in the notes thereto, including without limitation any accounts
payable or service liabilities of the Company incurred prior to the Closing
Date, other than liabilities incurred in the ordinary course of the Business
since the date of the latest of such Financial Statements.
3.27 INFORMATION FURNISHED. The Company and Seller have made
---------------------
available to Global true and correct copies of all material corporate records of
the Company and all material agreements, documents, and other items listed on
the Schedules to this Agreement or referred to in Section 2 of this Agreement,
---------
and neither this Agreement, the Schedules hereto, nor any written information,
instrument, or document delivered to Global pursuant to this Agreement contains
any untrue statement of a material fact or omits any material fact necessary to
make the statements herein or therein, as the case may be, not misleading.
In making the representations and warranties set forth above, the term
"Material" or "material" shall, where appropriate in context of its use, be
deemed to mean an amount of money greater than $20,000, the terms "Material
Adverse Change," "material adverse trend," "Material Adverse Effect," or any
other term of like import shall mean the occurrence of any single event, or any
series of related events, or set of related circumstances, which proximately
causes an actual, direct economic loss to the Company, taken as a whole, in
excess of $20,000 per occurrence or $40,000 in the aggregate. The term
"knowledge" shall mean actual knowledge after reasonable inquiry of the
employees of the Company with responsibility for the applicable subject matter.
All references to the "COMPANY" in Sections 3.6 through 3.27 shall include the
------------ ----
Companies' subsidiaries.
-17-
<PAGE>
ARTICLE IV
GLOBAL'S REPRESENTATIONS AND WARRANTIES
Global represents and warrants to Seller as follows:
4.1 DUE ORGANIZATION. Global is a corporation duly organized, validly
----------------
existing, and in good standing under the laws of the State of Delaware and has
full corporate power and authority to execute, deliver and perform this
Agreement and to carry out the transactions contemplated hereby.
4.2 DUE AUTHORIZATION. The execution, delivery and performance of
-----------------
this Agreement has been duly authorized by all necessary corporate action of
Global and the Agreement has been duly and validly executed and delivered by
Global and constitutes the valid and binding obligation of Global, enforceable
in accordance with its terms, except to the extent that enforceability may be
limited by laws affecting creditors' rights and debtors' obligations generally,
and legal limitations relating to remedies of specific performance and
injunctive and other forms of equitable relief. The execution, delivery, and
performance of this Agreement (as well as all other instruments, agreements,
certificates or other documents contemplated hereby) by Global, do not (a)
violate any Requirements of Laws or Court Order of any Governmental Body
applicable to Global or its property, (b) violate or conflict with, or permit
the cancellation of, or constitute a default under any agreement to which Global
is a party or by which it or its property is bound, (c) permit the acceleration
of the maturity of any indebtedness of, or any indebtedness secured by the
property of, Global, or (d) violate or conflict with any provision of the
charter or bylaws of Global.
4.3 NO BROKERS. Global has not engaged, or caused to be incurred any
----------
liability to any finder, broker or sales agent in connection with the origin,
negotiation, execution, delivery, or performance of this Agreement or the
transactions contemplated hereby.
4.4 INVESTMENT. Global will acquire the Shares for investment and
----------
for its own account and not with a view to the distribution thereof.
4.5 FUTURE PERFORMANCE. Global acknowledges that it has had the
------------------
opportunity to inspect the Company's business and properties, and understands
that no warranties as to the future performance of the Business have been or are
being made by the Company or the Seller.
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<PAGE>
ARTICLE V
COVENANTS OF THE COMPANY AND SELLER
5.1 CONSENTS OF OTHERS. Prior to the Closing, the Company and Seller
------------------
shall use their best efforts to obtain and to cause the Company to obtain all
authorizations, consents and permits required of the Company and Seller to
permit them to consummate the transactions contemplated by this Agreement.
Seller shall have obtained the written consent of (i) the Company's Material
office equipment suppliers and (ii) the lessors of the Buildings to the
transactions contemplated by the Agreement.
5.2 SELLER'S EFFORTS. The Company and Seller shall use all reasonable
----------------
efforts to cause all conditions for the Closing to be met.
5.3 POWERS OF ATTORNEY. The Company and Seller shall cause the
------------------
Company to terminate at or prior to Closing all powers of attorney granted by
the Company, other than those relating to service of process, qualification or
pursuant to governmental regulatory or licensing agreements, or representation
before the IRS or other government agencies.
ARTICLE VI
POST-CLOSING COVENANTS
6.1 GENERAL. In case at any time after the Closing any further action
-------
is legally necessary or reasonably desirable (as determined by Global and
Seller) to carry out the purposes of this Agreement, each of the parties will
take such further action (including the execution and delivery of such further
instruments and documents) as any other party reasonably may request, all at the
sole cost and expense of the requesting party (unless the requesting party is
entitled to indemnification therefor under Article VIII below). The Seller
acknowledges and agrees that from and after the Closing, Global will be entitled
to possession of all documents, books, records, agreements, and financial data
of any sort relating to the Company, which shall be maintained at the chief
executive office of the Company; provided, however, that Seller shall be
entitled to reasonable access to and to make copies of such books and records at
his sole cost and expense and Global will maintain all of the same for a period
of at least three (3) years after Closing. Thereafter, the Company will offer
such documentation to Seller before disposal thereof.
6.2 TRANSITION. For a period of three (3) years following Closing,
----------
the Seller will not take any action that primarily is designed or intended to
have the effect of discouraging any lessor, licensor, customer, supplier, or
other business associate of the Company from maintaining the same business
relations with the Company after the Closing as it maintained with the Company
prior to the Closing. For a period of three (3) years following Closing, the
Seller will refer all customer inquiries relating to the Business to the
Company.
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<PAGE>
6.3 CONFIDENTIALITY. The Seller will treat and hold as such all
---------------
Confidential Information, refrain from using any of the Confidential Information
except in connection with this Agreement or otherwise for the benefit of the
Company or Global for a period of three (3) years from the Closing, and deliver
promptly to Global or destroy, at the written request and option of Global, all
tangible embodiments (and all copies) of the Confidential Information which are
in their possession except as otherwise permitted herein. In the event that
Seller is requested or required (by oral question or written request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar legal proceeding) to disclose any Confidential
Information, Seller will notify Global promptly of the request or requirement.
6.4 COVENANT NOT TO COMPETE. For and in consideration of the
-----------------------
allocation of $60,000 of the Purchase Price paid to the Seller by Global, Seller
covenants and agrees, for a period of three years from and after the Closing
Date, that he will not, directly or indirectly without the prior written consent
of Global, for or on behalf of any entity:
(A) become interested or engaged, directly or indirectly, as a
shareholder, bondholder, creditor, officer, director, partner, agent, contractor
with, employer or representative of, or in any manner associated with, or give
financial, technical or other assistance to, any Person, firm or corporation for
the purpose of engaging in the copier/office equipment dealer, service or
distribution business in competition with the Company, within the greater of (i)
a 100 mile radius of the Company's office facilities in the State of Washington
(the "CURRENT TRADE AREA") or (ii) in any geographic area in which the Company
currently conducts business;
(B) enter into any agreement with, service, assist or solicit
the business of any customers of the Company for the purpose of providing office
equipment sales or service to such customers in competition with the Company in
the Current Trade Area or to cause them to reduce or end their business with the
Company; or
(C) enter into any agreement with, or solicit the employment of
employees, consultants or representatives of the Company for the purpose of
causing them to leave the employment of the Company;
Provided, however, that no owner of less than one percent (1%) of the
outstanding stock of any publicly-traded corporation, and no owner of any amount
of Global stock, shall be deemed to be in a violation of this Section 6.4 solely
-----------
by reason thereof.
-20-
<PAGE>
6.5 ADDITIONAL MATTERS.
------------------
(A) The Seller shall cause the Company to file with the
appropriate governmental authorities all Tax Returns required to be filed by it
for any taxable period ending prior to the Closing Date and the Company shall
remit any Taxes due in respect of such Tax Returns. In addition, Seller shall
cause Seller's CPA to prepare a short period tax return for the Company covering
the period January 1, 1997 through the Effective Date. The cost of preparation
of such short period tax return shall be paid for by Seller.
(B) Global and Seller recognize that each of them will need
access, from time to time, after the Closing Date, to certain accounting and Tax
records and information held by Global and/or the Company to the extent such
records and information pertain to events occurring on or prior to the Closing
Date; therefore, Global agrees to cause the Company to (A) use its best efforts
---------
to properly retain and maintain such records for a period of six (6) years from
the date the Tax Returns for the year in which the Closing occurs are filed or
until the expiration of the statute of limitations with respect to such year,
whichever is later, and (B) allow the Seller and his agents and representatives
at times and dates mutually acceptable to the parties, to inspect, review and
make copies of such records as such other party may deem necessary or
appropriate from time to time, such activities to be conducted during normal
business hours and at the other party's expense.
(C) SECTION 338(H)(10) ELECTION. The Seller and Global shall
---------------------------
join in making a timely election (but in no event later than 180 days following
the Closing) under Section 338(h)(10) of the Code (including the prerequisite
election under Section 338 of the Code) and any similar state law provisions in
all applicable states which permit corporations to make such elections, with
respect to the sale and purchase of the Shares pursuant to this Agreement, and
each party shall provide the others all necessary information to permit such
elections to be made. Global and the Seller shall, as promptly as practicable
following the Closing Date, take all actions necessary and appropriate
(including filing such forms, returns, schedules and other documents as may be
required) to effect and preserve timely elections; provided, however, that
Global shall be the party responsible for preparing and filing the forms,
returns, schedules and other documents necessary for making an effective and
timely election. All Taxes attributable to the elections made pursuant to this
Section 6.5(c) shall be the liability of the Seller; provided, however, that
- --------------
Global shall reimburse Seller on a net after tax basis, for any additional Taxes
solely as a result of such election. In connection with such elections, within
sixty (60) days following the Closing Date, Global and the Seller shall act
together in good faith to determine and agree upon the "deemed sales price" to
be allocated to each asset of the Company in accordance with Treasury Regulation
Section 1.338(h)(10)-1(f) and the other regulations under Section 338 of the
Code. Notwithstanding the generality of the immediately preceding sentence,
Global and the Seller agree that the "deemed sales price" shall be allocated to
the monetary assets of the Company at their fair market value as of the Closing
Date as determined as part of the determination of the Working Capital of the
Company in accordance with Section 2.8 hereof, $60,000 shall be allocated to the
-----------
covenant not to compete contained in Section 6.4 hereof, and the balance of the
-----------
"deemed sales price" shall be allocated to the fixed
-21-
<PAGE>
assets, goodwill and other intangible assets of the Company. Both Global and
Seller shall report the tax consequences of the transactions contemplated by
this Agreement consistently with such allocations and shall not take any
position inconsistent with such allocations in any Tax Return or otherwise. In
the event that Global and the Seller are unable to agree as to such allocations,
Global's reasonable positions with respect to such allocations shall control.
The Seller, shall be liable for, and shall indemnify and hold Global and the
Company harmless against, any Taxes or other costs attributable solely to (i) a
failure on the part of the Seller to take all actions required of him under this
Section 6.5(c); or (ii) a failure on the part of the Company to qualify, at or
- --------------
prior to the Closing, as an "S corporation" for federal and/or state income Tax
purposes.
ARTICLE VII
CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING
7.1 CONDITIONS TO GLOBAL'S OBLIGATIONS. The obligation of Global
----------------------------------
under this Agreement to consummate the Closing is subject to the conditions
that:
(A) COVENANTS, REPRESENTATIONS AND WARRANTIES. The Company
-----------------------------------------
and Seller shall have performed in all material respects all obligations and
agreements and complied in all material respects with all covenants contained in
this Agreement to be performed and complied with by each of them prior to or at
the Closing Date. The representations and warranties of the Company and Seller
set forth in this Agreement shall be accurate in all material respects at and as
of the Closing Date with the same force and effect as though made on and as of
the Closing Date except for any changes resulting from activities or
transactions which may have taken place after the date hereof and which are
permitted or contemplated by the Agreement or which have been entered into in
the ordinary course of business and except to the extent that such
representations and warranties are expressly made as of another specified date
and, as to such representation, the same shall be true in all material respects
as of such specified date.
(B) CONSENTS. All statutory requirements for the valid
--------
consummation by the Company and Seller of the transactions contemplated by this
Agreement shall have been fulfilled and all authorizations, consents and
approvals, including expiration or early termination of all waiting periods
under the HSR Act and those of all federal, state, local and foreign
governmental agencies and regulatory authorities required to be obtained in
order to permit the consummation of the transactions contemplated hereby shall
have been obtained in form and substance reasonably satisfactory to Global
unless such failure could not reasonably be expected to have a Material Adverse
Effect. All approvals of the Board of Directors and shareholders of the Company
necessary for the consummation of this Agreement and the transactions
contemplated hereby shall have been obtained.
(C) LEASES. The lessors of the Buildings shall have provided an
------
Estoppel Certificate to Global's lenders in the form of Exhibit B hereto, except
---------
as specifically
-22-
<PAGE>
waived by Global. The leases for all of such Buildings shall provide that such
leases survive the Closing for the term of such leases, copies of which have
been provided to Global.
(D) DISCHARGE OF INDEBTEDNESS AND LIENS. Seller and the Company
-----------------------------------
shall have provided for the payment in full by the Company of all Funded
Indebtedness of the Company (other than Assumed Funded Indebtedness) and all
extended credit from vendors at the Closing (other than customary accounts
payable outstanding on 90 day or less payment terms in accordance with past
practices). Such Funded Indebtedness, if any, as of August 31, 1997, is listed
on Schedule 7.1(d) hereto. Seller shall have also provided for the termination
---------------
of all Encumbrances of record on the properties of the Company, except for
Permitted Exceptions. All liens or UCC filings against the Company and each of
the Subsidiaries or Affiliates of the Company which engaged in the Business,
shall have been terminated as of the Closing.
(E) MATERIAL ADVERSE CHANGE. There has been no Material Adverse
-----------------------
Change with respect to the Company since April 30, 1997.
(F) TRANSFER TAXES. Seller shall be responsible for all stock
--------------
transfer or gains taxes imposed on Seller incurred in connection with this
Agreement.
(G) FINANCIAL CONDITION. The Company's total adjusted Working
-------------------
Capital as projected at the Closing shall be greater than $91,472 and the
Company shall continue to have cash on hand (included in Working Capital) at the
Closing (in an amount not less than $50,000 or, if less than $50,000, the
Purchase Price will be reduced further by the amount of such deficiency), to
continue to operate the Business in the ordinary course.
(H) DOCUMENTS TO BE DELIVERED BY SELLER AND THE COMPANY.
---------------------------------------------------
The following documents shall be delivered at the Closing by Seller and the
Company:
(I) OPINION OF SELLER'S COUNSEL. Global shall have
---------------------------
received an opinion of counsel to the Company and Seller, dated the
Closing Date, in substantially the same form as the form of opinion
that is Exhibit C hereto.
---------
(II) CERTIFICATES. Global shall have received an officer's
------------
certificate and a secretary's certificate of the Company executed by
officers of the Company, dated the Closing Date, in substantially the
same forms as the forms of certificates that are Exhibit D hereto.
---------
(III) RELEASE. Seller shall have furnished the Company
-------
with a general release of liabilities, excluding compensation and
employee benefits as well as obligations pursuant to this Agreement,
in the form attached as Exhibit E hereto.
---------
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<PAGE>
(IV) ESCROW AGREEMENT. Seller shall have delivered to
----------------
Global at the Closing the duly executed Escrow Agreement required
pursuant to Section 2.5 hereof.
-----------
(V) EMPLOYMENT AGREEMENT. Gary Stevens shall have duly
--------------------
executed and delivered the Employment Agreement in substantially the
same form attached as Exhibit F hereto, pursuant to which he will be
---------
employed by the Company following the Closing.
(VI) BUILDING LEASES. Global shall be reasonably
---------------
satisfied with the terms of the leases of the Buildings. Seller shall
have delivered to Global an Estoppel Certificate of the landlords of
the Buildings to Global's lenders in the same form attached as Exhibit
-------
B hereto, except as specifically waived by Global.
-
(VII) COLLATERAL ASSIGNMENT OF RIGHTS. Seller shall have
-------------------------------
executed and delivered to Jackson National Life Insurance Company a
Collateral Assignment of Rights in the form attached hereto as Exhibit
-------
H.
-
(VIII) STOCK CERTIFICATES. Seller shall have delivered
------------------
the Shares accompanied by duly executed stock powers, together with
any stock transfer stamps or receipts for any transfer taxes required
to be paid thereon.
7.2 CONDITIONS TO SELLER'S AND THE COMPANY'S OBLIGATIONS. The
----------------------------------------------------
obligation of Seller and the Company under this Agreement to consummate the
Closing is subject to the conditions that:
(A) COVENANTS, REPRESENTATIONS AND WARRANTIES. Global shall
-----------------------------------------
have performed in all material respects all obligations and agreements and
complied in all material respects with all covenants contained in this Agreement
to be performed and complied with by Global prior to or at the Closing and the
representations and warranties of Global set forth in Article IV hereof shall be
accurate in all material respects, at and as of the Closing Date, with the same
force and effect as though made on and as of the Closing Date except for any
changes resulting from activities or transactions which may have taken place
after the date hereof and which are permitted or contemplated by the Agreement
or which have been entered into in the ordinary course of the Business and
except to the extent that such representations and warranties are expressly made
as of another specified date and, as to such representations, the same shall be
true as of such specified date.
(B) CONSENTS. All statutory requirements for the valid
--------
consummation by Global of the transactions contemplated by this Agreement shall
have been fulfilled and all authorizations, consents and approvals, including
expiration or early termination of all waiting periods under the HSR Act and
those of all federal, state, local and foreign governmental agencies and
regulatory authorities required to be obtained in order to permit the
consummation by Global of the transactions contemplated hereby shall have been
obtained unless such failure
-24-
<PAGE>
shall not have a Material Adverse Effect on the Business. Global shall have used
its reasonable best efforts to have obtained the release of the Seller from all
personal guarantees with respect to the Company.
(C) DOCUMENTS TO BE DELIVERED BY GLOBAL. The following
-----------------------------------
documents shall be delivered at the Closing by Global:
(I) CERTIFICATES. Seller shall have received an officers'
------------
certificate and a secretary's certificate executed by officers of
Global, dated the Closing Date, in substantially the same forms as the
forms of certificates that are Exhibit G hereto.
---------
(II) ESCROW AGREEMENT. Global shall have delivered to
----------------
Seller at the Closing the duly executed Escrow Agreement required
pursuant to Section 2.5 hereof.
-----------
(III) EMPLOYMENT AGREEMENT. Global shall have caused the
--------------------
Company to duly execute and deliver the Employment Agreement with Gary
Stevens in the same form attached as Exhibit F hereto, pursuant to
---------
which he will be employed by the Company following the Closing.
(IV) PURCHASE PRICE. Seller shall have received the
--------------
Purchase Price for the Shares.
(D) RIGHT OF REINVESTMENT. Seller shall have been offered
---------------------
the right to invest up to $164,400 in the capital stock of Global on the same
terms provided to other recent outside investors in Global.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION OF GLOBAL. Except as provided in Section 8.6,
------------------------- -----------
as Global's sole and exclusive remedy for any breach by the Seller hereunder,
Seller agrees to indemnify and hold harmless Global and each officer, director,
and affiliate of Global, including without limitation the Company or any
successor of the Company (collectively, the "INDEMNIFIED PARTIES") from and
against any and all damages, losses, claims, liabilities, demands, charges,
suits, penalties, costs and expenses (including court costs and reasonable
attorneys' fees and expenses incurred in investigating and preparing for any
litigation or proceeding) (collectively, the "INDEMNIFIABLE COSTS"), which any
of the Indemnified Parties may sustain, or to which any of the Indemnified
Parties may be subjected, arising out of (A) any misrepresentation, breach or
default by Seller or the Company of or under any of the representations,
covenants, agreements or other provisions of this Agreement or any agreement or
document executed in connection herewith; (B) the assertion and final
determination of any
-25-
<PAGE>
claim or liability against the Company or any of the Indemnified Parties by any
Person based upon the facts which form the alleged basis for any litigation to
the extent it should have been, but was not, reserved for in the Financial
Statements in accordance with GAAP; and (C) the Company's tortious acts or
omissions to act prior to Closing for which the Company did not carry liability
insurance for themselves as the insured party, whether or not such acts or
omissions to act result in a breach or violation of any representation or
warranty.
8.2 DEFENSE OF CLAIMS. If any legal proceeding shall be instituted,
-----------------
or any claim or demand made, against any Indemnified Party in respect of which
Seller may be liable hereunder, such Indemnified Party shall give prompt written
notice thereof to Seller and, except as otherwise provided in Section 8.4 below,
-----------
Seller shall have the right to defend, or cause the Company or its successors to
defend, any litigation, action, suit, demand, or claim for which it may seek
indemnification unless, in the reasonable judgment of Global, such litigation,
action, suit, demand, or claim, or the resolution thereof, would have an ongoing
effect on Global, the Company or its successors, and such Indemnified Party
shall extend reasonable cooperation in connection with such defense, which shall
be at Seller's expense. In the event Seller fails or refuses to defend the same
within a reasonable length of time, the Indemnified Parties shall be entitled to
assume the defense thereof, and Seller shall be liable to repay the Indemnified
Parties for all expenses reasonably incurred in connection with said defense
(including reasonable attorneys' fees and settlement payments) if it is
determined that such request for indemnification was proper. If Seller shall not
have the right to assume the defense of any litigation, action, suit, demand, or
claim in accordance with either of the two preceding sentences, the Indemnified
Parties shall have the absolute right to control the defense of and to settle,
in their sole discretion and without the consent of Seller, such litigation,
action, suit, demand, or claim, but Seller shall be entitled, at his own
expense, to participate in such litigation, action, suit, demand, or claim.
8.3 ESCROW CLAIM. If any claim for indemnification is made by an
------------
Indemnified Party pursuant to this Article VIII prior to the expiration of the
Escrow Period, such Indemnified Party shall apply to the Escrow Agent provided
in Section 2.5 of this Agreement for reimbursement of such claim in accordance
-----------
with the provisions of the Escrow Agreement.
8.4 TAX AUDITS, ETC. In the event of an audit of a Tax Return of the
---------------
Company with respect to which an Indemnified Party might be entitled to
indemnification pursuant to this Article VIII, Global shall have the right to
control any and all such audits which may result in the assessment of additional
Taxes against the Company and any and all subsequent proceedings in connection
therewith, including appeals (subject to the prior written consent of Seller,
which shall not unreasonably be withheld and subject to the right of Seller to
have their accountants and attorneys consult with Global on such audits or
procedures at Seller's expense). Seller shall cooperate fully in all matters
relating to any such audit or other Tax proceeding (including according access
to all records pertaining thereto), and will execute and file any and all
consents, powers of attorney, and other documents as shall be reasonably
necessary in connection therewith. If additional Taxes are payable by the
Company as a result of any such audit or other proceeding, Seller shall be
responsible for and shall promptly pay all Taxes,
-26-
<PAGE>
[******Certain information on this page has been omitted and filed
separately with the Securities and Exchange Commission. Confidential
treatment has been requested with respect to the omitted portions.]
interest, and penalties to which any of the Indemnified Parties shall be
entitled to indemnification.
8.5 INDEMNIFICATION OF SELLER. Global agrees to indemnify and hold
-------------------------
harmless Seller and the Company and each officer, director, stockholder or
affiliate of the Company, from and against any Indemnifiable Costs arising out
of (A) any material misrepresentation, breach or default by Global of or under
any of the covenants, agreements or other provisions of this Agreement or any
agreement or document executed in connection herewith, and (B) any tortious acts
or omissions by Global before or after or the Company after, the Closing. In
addition, the Company and Global shall indemnify the Seller for any payment or
satisfaction of any guarantees by Seller of the Company's obligations occurring
after the Closing Date.
8.6 LIMITS ON INDEMNIFICATION. All Indemnifiable Costs sought by
-------------------------
any party hereunder shall be net of any insurance proceeds received by such
Person with respect to such claim (less the present value of any premium
increases occurring as a result of such claim). Except for any claims for
breach of the representations and warranties of the Seller under Sections 3.1,
-------------
3.2, 3.3 or 3.17 hereof (the indemnification for which shall expire on the
- ----------------
expiration of the applicable statute of limitations), the indemnification
provided under this Article VIII shall expire on the third anniversary of the
Closing Date. The Seller shall not be obligated to pay any amounts for
indemnification under this Article VIII until the aggregate indemnification
obligation hereunder exceeds $25,000, whereupon Seller shall be liable for all
amounts for which indemnification may be sought. Notwithstanding the foregoing,
in no event shall the aggregate liability of Seller to Global exceed [**]
(except for claims made for any breach of the representations and warranties of
Seller under Sections 3.1, 3.2, 3.3, or 3.17 hereof, as to which the limit of
---------------------- ----
indemnification hereunder shall be the Purchase Price). However nothing in this
Article VIII shall limit Global or Seller in exercising or securing any remedies
provided by applicable common law with respect to the conduct of Seller or
Global in connection with this Agreement or in the amount of damages that it can
recover from the other in the event that Global successfully proves intentional
fraud or intentional fraudulent conduct in connection with this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 MODIFICATIONS. Any amendment, change or modification of this
-------------
Agreement shall be void unless in writing and signed by all parties hereto. No
failure or delay by any party hereto in exercising any right, power or privilege
hereunder (and no course of dealing between or among any of the parties) shall
operate as a waiver of any such right, power or privilege. No waiver of any
default on any one occasion shall constitute a waiver of any subsequent or other
default. No single or partial exercise of any such right, power or privilege
shall preclude the further or full exercise thereof.
-27-
<PAGE>
9.2 NOTICES. All notices and other communications hereunder shall
-------
be in writing and shall be deemed to have been duly given when personally
delivered, or 48 hours after deposited in the United States mail, first-class,
postage prepaid, or by facsimile addressed to the respective parties hereto as
follows:
Global:
------
Global Imaging Systems Inc.
P.O. Box 273478
Tampa, Florida 33688-3478
Attention: Thomas Johnson, President
Fax No.: (813) 264-7877
Tel No.: (813) 960-5508
With a copy to:
Hogan & Hartson L.L.P.
Columbia Square
555 Thirteenth Street, NW
Washington, DC 20004-1109
Attention: Christopher J. Hagan
Fax No.: (202) 637-5910
Tel No.: (202) 637-5771
The Company or Seller:
---------------------
9840 Willows Road, NE
Suite 100
Redmond, Washington 98052
Attention: Mr. Gary Stevens
Fax No.: ===============
Tel No.: ===============
With a copy to:
Lasher & Holzapfel
2600 Two Union Square
601 Union Street
Seattle, Washington 98101
Attention: Paul A. Tonella, Esq.
Fax No.: (206) 340-2563
Tel No.: (206) 624-1230
-28-
<PAGE>
or to such other address as to any party hereto as such party shall designate by
like notice to the other parties hereto.
9.3 COUNTERPARTS. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original but all of which
counterparts collectively shall constitute one instrument, and in making proof
of this Agreement, it shall never be necessary to produce or account for more
than one such counterpart.
9.4 EXPENSES. Each of the parties hereto will bear all costs,
--------
charges and expenses incurred by such party in connection with this Agreement
and the consummation of the transactions contemplated herein, provided, however,
that Seller shall bear all costs and expenses of (i) any broker involved in this
transaction and (ii) all legal expenses of Seller or the Company with respect to
this Agreement and the transactions contemplated hereby.
9.5 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding
--------------------------
upon and inure to the benefit of the Company, Global and Seller, their heirs,
representatives, successors, and permitted assigns, in accordance with the
terms hereof. This Agreement shall not be assignable by the Company or Seller
without the prior written consent of Global. This Agreement shall be assignable
by Global to a wholly-owned subsidiary of Global without the prior written
consent of Seller, but any such assignment shall not relieve Global of its
obligations hereunder.
9.6 ENTIRE AND SOLE AGREEMENT. This Agreement and the other
-------------------------
schedules and agreements referred to herein, constitute the entire agreement
between the parties hereto and supersede all prior agreements, representations,
warranties, statements, promises, information, arrangements and understandings,
whether oral or written, express or implied, with respect to the subject matter
hereof.
9.7 GOVERNING LAW. This Agreement and its validity, construction,
-------------
enforcement, and interpretation shall be governed by the substantive laws of the
State of Washington.
9.8 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
-----------------------------------------------------
Regardless of any investigation at any time made by or on behalf of any party
hereto or of any information any party may have in respect thereof, all
covenants, agreements, representations, and warranties and the related
indemnities made hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall survive the Closing for a period of three
(3) years, provided (a) the representations and warranties contained in Section
-------
3.17 of this Agreement, and the related indemnities, shall survive the Closing
- ----
until the expiration of the applicable statutes of limitations for determining
or contesting Tax liabilities and (b) the representations and warranties
contained in Sections 3.1, 3.2 and 3.3 of this Agreement, and the related
-------------------------
indemnities, shall survive the Closing until expiration of the applicable
statute of limitations.
-29-
<PAGE>
9.9 INVALID PROVISIONS. If any provision of this Agreement is
------------------
deemed or held to be illegal, invalid or unenforceable, this Agreement shall be
considered divisible and inoperative as to such provision to the extent it is
deemed to be illegal, invalid or unenforceable, and in all other respects this
Agreement shall remain in full force and effect; provided, however, that if any
provision of this Agreement is deemed or held to be illegal, invalid or
unenforceable there shall be added hereto automatically a provision as similar
as possible to such illegal, invalid or unenforceable provision and be legal,
valid and enforceable. Further, should any provision contained in this
Agreement ever be reformed or rewritten by any judicial body of competent
jurisdiction, such provision as so reformed or rewritten shall be binding upon
all parties hereto.
9.10 PUBLIC ANNOUNCEMENTS. Neither party shall make any public
--------------------
announcement of the transactions contemplated hereby without the prior written
consent of the other party, which consent shall not be unreasonably withheld.
9.11 REMEDIES CUMULATIVE. The remedies of the parties under this
-------------------
Agreement are cumulative and shall not exclude any other remedies to which any
party may be lawfully entitled.
9.12 WAIVER. No failure or delay on the part of any party in
------
exercising any right, power, or privilege hereunder or under any of the
documents delivered in connection with this Agreement shall operate as a waiver
of such right, power, or privilege; nor shall any single or partial exercise of
any such right, power, or privilege preclude any other or further exercise
thereof or the exercise of any other right, power, or privilege.
9.13 DISPUTE RESOLUTION. ALL DISPUTES BETWEEN SELLER AND GLOBAL
------------------
WITH RESPECT TO ANY PROVISION OF THIS AGREEMENT OR THE RIGHTS AND OBLIGATIONS OF
SELLER AND GLOBAL HEREUNDER (OTHER THAN DISPUTES INVOLVING ALLEGATIONS OF
INTENTIONAL FRAUD), WHICH CANNOT BE RESOLVED BY MUTUAL AGREEMENT, WILL BE
RESOLVED BY BINDING ARBITRATION IN ACCORDANCE WITH THE RULES OF THE AMERICAN
ARBITRATION ASSOCIATION IN SEATTLE, WASHINGTON, OR BY ANY OTHER MEANS OF
ALTERNATIVE DISPUTE RESOLUTION MUTUALLY AGREED UPON BY THE PARTIES.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed as of the date and year first above written.
GLOBAL:
------
GLOBAL IMAGING SYSTEMS INC.
By: /s/ Thomas S. Johnson
---------------------------------
Thomas S. Johnson
President and Chief Executive Officer
THE COMPANY:
-----------
QUALITY BUSINESS SYSTEMS, INC.
By: /s/ Gary Stevens
---------------------------------
Name: Gary Stevens
President
SELLER:
------
/s/ Gary Stevens
-------------------------------------
Gary Stevens
-31-
<PAGE>
EXHIBIT 10.24
[***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[**]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
STOCK PURCHASE AGREEMENT
BY AND AMONG
GLOBAL IMAGING SYSTEMS INC.,
CASCADE OFFICE SYSTEMS, INC. (THE "COMPANY")
AND
THE SHAREHOLDERS OF THE COMPANY
DATED SEPTEMBER 30, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I 1
1.1 Definitions............................................... 1
ARTICLE II........................................................... 5
2.1 Agreement to Sell and Purchase............................ 5
2.2 Purchase Price............................................ 5
2.3 Payment of Purchase Price................................. 5
2.4 Closing................................................... 6
2.5 Escrow Arrangements....................................... 6
2.6 Purchase Price Adjustments................................ 6
2.7 Closing Audit............................................. 7
2.8 Post-Closing Purchase Price Adjustment.................... 7
ARTICLE III.......................................................... 8
3.1 Capitalization............................................ 8
3.2 No Liens on Shares........................................ 8
3.3 Other Rights to Acquire Capital Stock..................... 8
3.4 Due Organization.......................................... 8
3.5 Subsidiaries.............................................. 9
3.6 Due Authorization......................................... 9
3.7 Financial Statements...................................... 9
3.8 Certain Actions........................................... 10
3.9 Properties................................................ 11
3.10 Licenses and Permits...................................... 11
3.11 Intellectual Property..................................... 12
3.12 Compliance with Laws...................................... 12
3.13 Insurance................................................. 12
3.14 Employee Benefit Plans.................................... 13
(a) Employee Welfare Benefit Plans...................... 13
(b) Employee Pension Benefit Plans...................... 13
(c) Employment and Non-Tax Qualified Deferred
Compensation Arrangements......................... 13
3.15 Contracts and Agreements.................................. 13
3.16 Claims and Proceedings.................................... 14
3.17 Taxes..................................................... 14
3.18 Personnel................................................. 15
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
3.19 Business Relations............................................................ 16
3.20 Accounts Receivable........................................................... 16
3.21 Bank Accounts................................................................. 16
3.22 Warranties.................................................................... 17
3.23 Brokers....................................................................... 17
3.24 Interest in Competitors, Suppliers, Customers, Etc............................ 17
3.25 Indebtedness To and From Officers, Directors, Shareholders, and Employees..... 17
3.26 Undisclosed Liabilities....................................................... 17
3.27 Information Furnished......................................................... 17
ARTICLE IV............................................................................... 18
4.1 Due Organization.............................................................. 18
4.2 Due Authorization............................................................. 18
4.3 No Brokers.................................................................... 18
4.5 Due Diligence Review.......................................................... 19
4.7 Investment Intent............................................................. 19
4.9 Qualification as a Sophisticated Investor..................................... 19
4.11 Legend........................................................................ 19
ARTICLE V................................................................................ 20
5.1 Consents of Others............................................................ 20
5.2 Seller's Efforts.............................................................. 20
5.3 Powers of Attorney............................................................ 20
ARTICLE VI............................................................................... 20
6.1 General....................................................................... 20
6.2 Transition.................................................................... 20
6.3 Confidentiality............................................................... 21
6.4 Covenant Not to Compete....................................................... 21
6.6 Additional Matters............................................................ 22
ARTICLE VII.............................................................................. 23
7.1 Conditions to Global's Obligations............................................ 23
(a) Covenants, Representations and Warranties.............................. 23
(b) Consents............................................................... 24
(c) Leases................................................................. 24
(d) Discharge of Indebtedness and Liens.................................... 24
(e) Material Adverse Change................................................ 24
(f) Transfer Taxes......................................................... 24
(g) Financial Condition.................................................... 24
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
(h) Documents to be Delivered by Seller and the Company..... 25
(i) Opinion of Seller's Counsel...................... 25
(ii) Certificates..................................... 25
(iii) Release.......................................... 25
(iv) Escrow Agreement................................. 25
(v) Consulting Agreement............................. 25
(vi) Building Leases.................................. 25
(vii) Collateral Assignment of Rights.................. 25
(viii) Stock Certificates............................... 25
7.2 Conditions to Seller's and the Company's Obligations........... 25
(a) Covenants, Representations and Warranties............... 26
(b) Consents................................................ 26
(c) Documents to be Delivered by Global..................... 26
(ii) Certificates..................................... 26
(iii) Escrow Agreement................................. 26
(iv) Consulting Agreement............................. 26
(iv) Purchase Price................................... 27
(d) Right of Reinvestment................................... 27
ARTICLE VIII.............................................................. 27
8.1 Indemnification of Global...................................... 27
8.2 Defense of Claims.............................................. 27
8.3 Escrow Claim................................................... 28
8.4 Tax Audits, Etc................................................ 28
8.5 Indemnification of Seller...................................... 28
8.6 Limits on Indemnification...................................... 28
ARTICLE IX................................................................ 29
MISCELLANEOUS............................................................. 29
9.1 Modifications.................................................. 29
9.2 Notices........................................................ 29
9.3 Counterparts................................................... 30
9.4 Expenses....................................................... 30
9.5 Binding Effect; Assignment..................................... 30
9.6 Entire and Sole Agreement...................................... 30
9.7 Governing Law.................................................. 31
9.8 Survival of Representations, Warranties and Covenants.......... 31
9.9 Invalid Provisions............................................. 31
9.10 Public Announcements........................................... 31
9.11 Remedies Cumulative............................................ 31
9.12 Waiver......................................................... 31
9.13 DISPUTE RESOLUTION............................................. 32
</TABLE>
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<PAGE>
LIST OF EXHIBITS
Exhibit A Form of Escrow Agreement
Exhibit B Form of Estoppel Certificate for Building Leases
Exhibit C Opinion of Seller's Counsel
Exhibit D Seller's Certificates
Exhibit E Release
Exhibit F Woodard Consulting Agreement
Exhibit G Global Certificates
Exhibit H Collateral Assignment of Rights
LIST OF SCHEDULES
Schedule 2.3 Seller's Accounts
Schedule 2.6 Holders of Funded Indebtedness
Schedule 3.1 Ownership of Shares
Schedule 3.4 Articles and Bylaws
Schedule 3.8A Certain Actions
Schedule 3.8B Material Changes
Schedule 3.9 Properties
Schedule 3.10 Licenses and Permits
Schedule 3.11 Patents and Trademarks
Schedule 3.13 Insurance
Schedule 3.14 Employee Benefit Plans
Schedule 3.15 Contracts and Agreements
Schedule 3.16 Claims and Proceedings
Schedule 3.18 Personnel
Schedule 3.20 Accounts Receivable
Schedule 3.21 Bank Accounts
Schedule 3.25 Indebtedness with Officers, Directors and Shareholders
Schedule 3.26 Undisclosed Liabilities
Schedule 7.1(d) Indebtedness
The Exhibits and Schedules to this Stock Purchase Agreement are not included
with this Registration Statement on Form S-1. Global will provide these
exhibits and schedules upon the request of the Securities and Exchange
Commission.
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<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "AGREEMENT") is entered into as of
September 30, 1997, by and among GLOBAL IMAGING SYSTEMS INC., a Delaware
corporation ("GLOBAL"), CASCADE OFFICE SYSTEMS, INC., a Washington corporation
(the "COMPANY") and THE SHAREHOLDER OF THE COMPANY (the "SELLER").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the distribution, sale and service
of office equipment in the State of Washington (the "BUSINESS"); and
WHEREAS, Seller owns all of the outstanding shares of capital stock of
the Company (the "SHARES"), which Shares constitute all of the issued and
outstanding capital stock of the Company; and
WHEREAS, Global desires to purchase from Seller and Seller desires to
sell to Global hereby all of the Shares owned by Seller all on the terms and
subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto covenant and agree
as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. In this Agreement, the following terms have the
meanings specified or referred to in this Section 1.1 and shall be equally
applicable to both the singular and plural forms. Any agreement referred to
below shall mean such agreement as amended, supplemented and modified from time
to time to the extent permitted by the applicable provisions thereof and by this
Agreement.
"AFFILIATE" means, with respect to any Person, any other Person
which directly or indirectly controls, is controlled by or is under common
control with such Person.
"AUDITED CLOSING BALANCE SHEET" has the meaning specified in
Section 2.7.
"BUILDINGS" shall mean the Company's offices, showroom and
warehouse facilities located at 3810 148th Avenue, NE, Redmond, Washington.
<PAGE>
"BUSINESS" has the meaning specified in the first recital of the
Agreement
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. (S)(S) 9601 et seq., any amendments
thereto, any successor statutes, and any regulations promulgated thereunder.
"CLOSING" means the closing of the transfer of the Shares from
the Seller to Global.
"CLOSING DATE" has the meaning specified in Section 2.4.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning specified in the first paragraph of
this Agreement.
"CONFIDENTIAL INFORMATION" means all confidential information and
trade secrets of the Company including, without limitation, any of the same
comprising the identity, lists or descriptions of any customers, referral
sources or organizations; financial statements, cost reports or other financial
information; contract proposals, or bidding information; business plans and
training and operations methods and manuals; personnel records; fee structure;
and management systems, policies or procedures, including related forms and
manuals. Confidential Information shall not include any information (i) which
is disclosed pursuant to subpoena or other legal process, (ii) which has been
publicly disclosed, (iii) which subsequently becomes known to a third party not
subject to a confidentiality agreement with Global or the Company, or (iv) which
is subsequently disclosed by any third party not in breach of a confidentiality
agreement.
"CONSULTING AGREEMENT" shall mean the consulting agreement with
Fred Woodard to be entered into at Closing in the form of Exhibit F.
"CONTRACTS" has the meaning specified in Section 3.15.
"COURT ORDER" means any judgment, order, award or decree of any
foreign, federal, state, local or other court or tribunal and any award in any
arbitration proceeding.
"EFFECTIVE DATE" has the meaning specified in Section 2.4.
"ENCUMBRANCE" means any bona fide lien, security interest,
mortgage, pledge, easement, conditional sale or other title retention agreement,
defect in title, or restrictive covenant.
"ENVIRONMENTAL OBLIGATIONS" has the meaning specified in Section
3.12.
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<PAGE>
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ESCROW AGENT" means the First Trust National Association.
"ESCROW AGREEMENT" means the Escrow Agreement to be executed by
and among the Seller, Global and the Escrow Agent in the form of Exhibit A.
"ESCROW PERIOD" has the meaning specified in Section 2.5.
"ESCROW SUM" has the meaning specified in Section 2.5.
"FINANCIAL STATEMENTS" has the meaning specified in Section 3.7.
"FUNDED INDEBTEDNESS" means all (i) indebtedness of the Company
for borrowed money or other interest-bearing indebtedness; (ii) capital lease
obligations of the Company; (iii) obligations of the Company to pay the deferred
purchase or acquisition price for goods or services, other than trade accounts
payable or accrued expenses in the ordinary course of business on no more than
90 day payment terms; (iv) indebtedness of others guaranteed by the Company or
secured by an Encumbrance on the Company's property; (v) indebtedness of the
Company under extended credit terms of more than 30 days from manufacturers
provided to the Company; or (vi) any receivables owed by the Seller to the
Company. Funded Indebtedness does not include the officer loan which is being
paid off at Closing.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"GLOBAL" has the meaning specified in the first paragraph of this
Agreement.
"GOVERNMENTAL BODY" means any foreign, federal, state, local or
other governmental authority or regulatory body.
"GOVERNMENTAL PERMITS" has meaning specified in Section 3.10.
"INDEPENDENT ACCOUNTANTS" has the meaning specified in Section
2.7.
"IRS" means the Internal Revenue Service.
"INDEMNIFIABLE COSTS" has the meaning specified in Section 8.1.
"INDEMNIFIED PARTIES" has the meaning specified in Section 8.1.
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<PAGE>
"INTELLECTUAL PROPERTY" has the meaning specified in Section
3.11.
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means a
material adverse change or effect on the assets, properties, Business,
operations, liabilities, or financial condition of the Company and its
subsidiaries, taken as a whole. In determining whether a "MATERIAL ADVERSE
CHANGE" or "MATERIAL ADVERSE EFFECT" has occurred, the quantitative amounts set
forth at the end of Article III shall be conclusive.
"OSHA" means the Occupational Safety and Health Act, 29 U.S.C.
(S)(S) 651 et seq., any amendment thereto, and any regulations promulgated
thereunder.
"PERMITTED EXCEPTION" means (a) liens for Taxes and other
governmental charges and assessments which are not yet due and payable, (b)
liens of landlords and liens of carriers, warehousemen, mechanics and
materialmen and other like liens arising in the ordinary course of business for
sums not yet due and payable, (c) other liens or imperfections on property which
are not material in amount or do not materially detract from the value or the
existing use of the property affected by such lien or imperfection, (d) such
statements of fact and exceptions shown on any title insurance policies
delivered to Global.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or Governmental Body.
"PRELIMINARY CLOSING BALANCE SHEET" shall mean the Company's best
estimate of the Company's balance sheet as of the Effective Date. The
Preliminary Closing Balance Sheet shall be delivered to Global not less than
five (5) days prior to the Closing Date.
"PURCHASE PRICE" has the meaning specified in Section 2.2.
"RCRA" means the Resource Conservation and Recovery Act, 42
U.S.C. (S)(S) 6901 et seq., and any successor statute, and any regulations
promulgated thereunder.
"REQUIREMENTS OF LAWS" means any foreign, federal, state and
local laws, statutes, regulations, rules, codes or ordinances enacted, adopted,
issued or promulgated by any Governmental Body (including, without limitation,
those pertaining to electrical, building, zoning, environmental and occupational
safety and health requirements) or common law.
"SELLER" has the meaning set forth in the first paragraph of this
Agreement.
"SHARES" means all of the issued and outstanding shares of the
capital stock of the Company.
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<PAGE>
"TAX" or "TAXES" means any federal, state, local or foreign
income, alternative or add-on minimum, gross income, gross receipts, windfall
profits, severance, property, production, sales, use, transfer, gains, license,
excise, employment, payroll, withholding or minimum tax, transfer, goods and
services, or any other tax, custom, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or any
penalty, addition to tax or additional amount imposed thereon by any
Governmental Body.
"TAX RETURN" means any return, report or similar statement
required to be filed with respect to any Taxes (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return and declaration of estimated Tax.
"WORKING CAPITAL" shall mean the difference between the Company's
current assets and its current liabilities (excluding Funded Indebtedness) as
calculated in accordance with GAAP.
"WORKING CAPITAL TARGET" shall have the meaning assigned to such
term in Section 2.6 hereof.
ARTICLE II
AGREEMENT OF PURCHASE AND SALE; CLOSING
2.1 AGREEMENT TO SELL AND PURCHASE. Upon the basis of the
representations and warranties, for the consideration, and subject to the terms
and conditions set forth in this Agreement, Seller agrees to sell the Shares to
Global and Global agrees to purchase the Shares from Seller.
2.2 PURCHASE PRICE. The total purchase price for the Shares (the
"PURCHASE PRICE") shall be equal to $1,056,371 and the note payable to Seller of
$373,829 and $19,800 for the payments due under the Consulting Agreement,
subject to any adjustment required to be made pursuant to Section 2.6 or Section
2.8 below.
2.3 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be payable
by Global at the Closing (hereinafter defined) as follows:
(A) $926,371 of the Purchase Price as adjusted downward as set
forth in Section 2.6 below will be paid, at the direction of the Seller, in cash
by wire transfer of funds as specified in Schedule 2.3 (including the payment of
$30,000 for the covenant not to compete provided in Section 6.4 and in addition
$19,800 for the payments due under the Consulting Agreement);
-5-
<PAGE>
(B) $130,000 of the Purchase Price will be paid in cash by wire
transfer of funds to the Escrow Agent to be held in escrow for satisfaction of
Seller's indemnification obligations specified in Section 8.1 or payment to the
Seller in accordance with the terms of Section 2.5 below; and
(C) $373,829 shall be paid to Seller for repayment of a loan
owed to Seller by Company.
2.4 CLOSING. The Closing of the purchase and sale of the Shares
contemplated by this Agreement shall take place at 9:00 a.m., Pacific Coast
time, at the offices of Lasher & Holzapfel in Seattle, Washington on September
30, 1997, or at such other date and time as the parties shall agree (the
"CLOSING DATE"), effective as of September 1, 1997 (the "EFFECTIVE DATE").
2.5 ESCROW ARRANGEMENTS. Pursuant to the Escrow Agreement in the
form attached as Exhibit A hereto to be entered into among Seller, Global and
the Escrow Agent, $130,000 of the Purchase Price shall be delivered to the
Escrow Agent at Closing. Such monies (which, together with all interest accrued
thereon, is hereinafter referred to as the "ESCROW SUM") shall be held pursuant
to the terms of the Escrow Agreement for payment from such Escrow Sum of the
amounts, if any, owing by Seller to Global pursuant to Section 2.8 or Article
VIII below. At the conclusion of the period ending on the first anniversary of
the Closing Date (such period being referred to herein as the "ESCROW PERIOD"),
such remaining portion of the Escrow Sum not theretofore claimed by or paid to
Global in accordance with the terms of the Escrow Agreement and this Agreement
shall be disbursed to Seller. Seller and Global agree that each will execute and
deliver such reasonable instruments and documents as are furnished by any other
party to enable such furnishing party to receive those portions of the Escrow
Sum to which the furnishing party is entitled under the provisions of the Escrow
Agreement and this Agreement.
2.6 PURCHASE PRICE ADJUSTMENTS.
(A) The Purchase Price payable pursuant to Section 2.3(a) above
will be reduced by the total amount of Funded Indebtedness (excluding $373,829
paid to Seller pursuant to Section 2.3(c) above), if any, assumed or paid by
Global in cash by wire transfer of funds to the accounts of the holders of
Funded Indebtedness listed on Schedule 2.6 hereto to satisfy the Company's
Funded Indebtedness with such institutions.
(b) The portion of the Purchase Price payable at Closing will be
reduced by $41,021, which is the amount by which the adjusted Working Capital as
reflected on the Preliminary Closing Balance Sheet is less than $527,156 [the
amount which is $25,000 less than the average of the Working Capital balances at
the end of each of the first six months of 1997] (the "WORKING CAPITAL TARGET").
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<PAGE>
2.7 CLOSING AUDIT. Within 90 days following the Closing Date,
there shall be delivered to Global and to Seller an audit of the Preliminary
Closing Balance Sheet (the "AUDITED CLOSING BALANCE SHEET") of the Company at
and as of the Effective Date. The Preliminary Closing Balance Sheet shall be
audited by Ernst & Young, LLP in accordance with GAAP. The cost of the Audited
Closing Balance Sheet shall be paid by Global. In the event that the Seller
disputes any items on the Audited Closing Balance Sheet within ten days after
Seller's receipt thereof, the parties shall jointly select and retain an
independent "Big Six" accounting firm (the "INDEPENDENT ACCOUNTANTS") to review
the disputed item(s) on the Audited Closing Balance Sheet. The final
determination of such disputed item(s) by the Independent Accountants shall be
reflected on the Audited Closing Balance Sheet. The cost of retaining the
Independent Accountants shall be borne equally by Seller and Global.
2.8 POST-CLOSING PURCHASE PRICE ADJUSTMENT. In the event that the
Working Capital as reflected on the Audited Closing Balance Sheet is less than
the Working Capital Target, then the Purchase Price will be adjusted downward,
on a dollar-for-dollar basis, to reflect the lesser of (i) the decrease, if any,
in Working Capital as reflected on the Audited Closing Balance Sheet from the
amount of Working Capital reflected on the Preliminary Closing Balance Sheet or
(ii) the amount, if any, by which the Working Capital reflected on the Audited
Closing Balance Sheet is less than the Working Capital Target. Conversely, the
Purchase Price will be adjusted upward, on a dollar-for dollar basis, to reflect
the increase, if any, in the total Working Capital as reflected on the Audited
Closing Balance Sheet from the amount of Working Capital reflected on the
Preliminary Closing Balance Sheet, provided, however, that in no event shall
such upward adjustment exceed the total amount of any adjustment to the Purchase
Price made pursuant to Section 2.6(b) above. The post-closing adjustment to the
Purchase Price, if any, shall be paid by Seller to Global from the Escrow Sum
(or, at Seller's option, in cash) or by Global to Seller, as the case may be, in
immediately available funds within ten (10) business days of delivery of the
Audited Closing Balance Sheet, unless the Seller disputes any items on the
Audited Closing Balance Sheet, in which case it shall be paid within ten (10)
business days after the Independent Accountants finally determine the disputed
item(s), and Global delivers to Seller an Audited Closing Balance Sheet modified
to reflect such determination.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND SELLER
The Company and Seller represent and warrant to Global that:
3.1 CAPITALIZATION. The authorized capital stock of the Company
consists of 1,098 shares of Common Stock, all of which are issued and
outstanding. All of the Shares are duly authorized, validly issued, fully paid,
and nonassessable. All of the Shares are owned of record and beneficially by
Seller in the amounts set forth on Schedule 3.1 hereto. None of the Shares was
issued or will be transferred under this Agreement in violation of any
preemptive or
-7-
<PAGE>
preferential rights of any Person. The Seller owns all of the issued and
outstanding capital stock of the Company.
3.2 NO LIENS ON SHARES. Except as shown on Schedule 3.1, Seller
owns the Shares, free and clear of any Encumbrances other than the rights and
obligations arising under this Agreement, and none of the Shares is subject to
any outstanding option, warrant, call, or similar right of any other Person to
acquire the same, and none of the Shares is subject to any restriction on
transfer thereof except for restrictions imposed by applicable federal and state
securities laws. At Closing, Seller will have full power and authority to
convey good and marketable title to the Shares, free and clear of any
Encumbrances.
3.3 OTHER RIGHTS TO ACQUIRE CAPITAL STOCK. Except as set forth in
this Agreement, there are no authorized or outstanding warrants, options, or
rights of any kind to acquire from the Company any equity or debt securities of
the Company, or securities convertible into or exchangeable for equity or debt
securities of the Company, and there are no shares of capital stock of the
Company reserved for issuance for any purpose nor any contracts, commitments,
understandings or arrangements which require the Company to issue, sell or
deliver any additional shares of its capital stock, except for the right of
first refusal granted to Quality Business Systems, Inc. (the "QBS RIGHT").
3.4 DUE ORGANIZATION. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Washington and has full corporate power and authority to carry on the Business
as now conducted and as proposed to be conducted through Closing. Complete and
correct copies of the Articles of Incorporation and Bylaws of the Company, and
all amendments thereto, have been heretofore delivered to Global and are
attached hereto as Schedule 3.4. Except as set forth on Schedule 3.10, the
Company is qualified to do business in the State of Washington and in each
jurisdiction in which the nature of the Business or the ownership of its
properties requires such qualification except where the failure to be so
qualified does not and could not reasonably be expected to have a Material
Adverse Effect.
3.5 SUBSIDIARIES. The Company has no subsidiaries or ownership
interest in any Person.
3.6 DUE AUTHORIZATION. The Company and the Seller each have full
power and authority to execute, deliver and perform this Agreement and to carry
out the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action of the Company.
This Agreement has been duly and validly executed and delivered by the Company
and Seller and constitutes the valid and binding obligations of the Company and
Seller, enforceable in accordance with its terms, except to the extent that
enforceability may be limited by laws affecting creditors' rights and debtors'
obligations generally, and legal limitations relating to remedies of specific
performance and injunctive and other forms of equitable relief. The execution,
delivery, and performance of this Agreement (as
-8-
<PAGE>
well as all other instruments, agreements, certificates, or other documents
contemplated hereby) by the Company and Seller, do not (a) violate any
Requirements of Laws or any Court Order of any Governmental Body applicable to
the Company or Seller, or their respective property, (b) violate or conflict
with, or permit the cancellation of, or constitute a default under, any material
agreement to which the Company or Seller are a party, or by which any of them or
any of their respective property is bound (other than the consent of the
Company's landlord), (c) permit the acceleration of the maturity of any material
indebtedness of, or indebtedness secured by the property of, the Company or
Seller, or (d) violate or conflict with any provision of the charter or bylaws
of the Company.
3.7 FINANCIAL STATEMENTS. The following Financial Statements
(herein so called) of the Company have been delivered to Global by the Company:
compiled balance sheets of the Company as of December 31, 1994, December 31,
1995 and December 31, 1996 and unaudited balance sheet as of August 31, 1997,
and compiled statements of income of the Company for the fiscal years ended
December 31, 1994, December 31, 1995 and December 31, 1996 and unaudited
statement of income for the eight (8) month period ending August 31, 1997.
The Financial Statements have been prepared in accordance with GAAP except for
built-in gain tax liability as described on Schedule 3.7, throughout the periods
indicated and fairly present the financial position, results of operations and
changes in financial position of the Company as of the indicated dates and for
the indicated periods, subject (in the case of the eight (8) month Financial
Statements) to year end accruals made in the ordinary course of the Business
which are not materially adverse and which are consistent with past practices.
Except to the extent reflected or provided for in the Financial Statements or
the notes thereto and obligations and liabilities incurred in the ordinary
course of business since the date of the last of such Financial Statements, the
Company has no liabilities required by GAAP to be reflected on the Company's
balance sheet or notes thereto that are not so reflected, nor any other
obligations (whether absolute, contingent, or otherwise) which are (individually
or in the aggregate) Material (in amount or to the conduct of the Business); and
neither the Company nor Seller has knowledge of any basis for the assertion of
any such liability or obligation. Since April 30, 1997, there has been no
Material Adverse Change in the prospects of the Company except for the slowdown
in deliveries by Konica (the "KONICA SLOWDOWN").
3.8 CERTAIN ACTIONS. Since April 30, 1997, the Company has not,
except as disclosed on Schedule 3.8A hereto or any of the Financial Statements
or notes thereto: (a) discharged or satisfied any Encumbrance or paid any
obligation or liability, absolute or contingent, other than current liabilities
incurred and paid in the ordinary course of the Business; (b) paid or declared
any dividends or distributions, or purchased, redeemed, acquired, or retired any
stock or indebtedness from any stockholder; (c) made or agreed to make any loans
or advances or guaranteed or agreed to guarantee any loans or advances to any
party whatsoever; (d) suffered or permitted any Encumbrance to arise or be
granted or created against or upon any of its assets, real or personal, tangible
or intangible; (e) canceled, waived, or released or agreed to cancel, waive, or
release any of its debts, rights, or claims against third parties in excess of
$10,000 individually or $25,000 in the aggregate; (f) sold, assigned, pledged,
mortgaged, or
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otherwise transferred, or suffered any material damage, destruction, or loss
(whether or not covered by insurance) to, any assets (except in the ordinary
course of the Business); (g) amended its charter or bylaws; (h) paid or made a
commitment to pay any severance or termination payment to any employee or
consultant; (i) made any material change in its method of management or
operation or method of accounting; (j) made any capital expenditures, including,
without limitation, replacements of equipment in the ordinary course of the
Business, or entered into commitments therefor, except for capital expenditures
or commitments therefor which do not, in the aggregate, exceed $35,000; (k) made
any investment or commitment therefor in any Person; (l) made any payment or
contracted for the payment of any bonus or other compensation or personal
expenses, other than (A) wages and salaries and business expenses paid in the
ordinary course of the Business, and (B) wage and salary adjustments made in the
ordinary course of the Business for employees who are not officers, directors,
or shareholders of the Company; (m) made, amended, or entered into any written
employment contract or created or made any material change in any bonus, stock
option, pension, retirement, profit sharing or other employee benefit plan or
arrangement; (n) materially amended or experienced a termination of any material
contract, agreement, lease, franchise or license to which the Company is a party
that would or could reasonably be expected to have a Material Adverse Effect,
except in the ordinary course of the Business; or (o) entered into any other
material transactions that would or could reasonably be expected to have a
Material Adverse Effect except in the ordinary course of the Business. Since
April 30, 1997, except as disclosed on Schedule 3.8B hereto or any of the
Financial Statements or notes thereto, there has not been (a) any Material
Adverse Change including, but not limited to, the loss of any material customers
or suppliers of the Company, or in any material assets of the Company, (b) any
extraordinary contracts, commitments, orders or rebates, (c) any strike,
material slowdown, or demand for recognition by a labor organization by or with
respect to any of the employees of the Company other than the Konica Slowdown,
or (d) any shutdown, material slow-down, or cessation of any material operations
conducted by, or constituting part of, the Company, nor has the Company agreed
to do any of the foregoing.
3.9 PROPERTIES. Attached hereto as Schedule 3.9 is a list containing
a description of each interest in real property (including, without limitation,
leasehold interests) and each item of personal property utilized by the Company
in the conduct of the Business having a book value in excess of $25,000 as of
the date hereof. Except for Permitted Exceptions or as expressly set forth on
Schedule 3.9, such real and personal properties are free and clear of
Encumbrances. Global has performed a lien search obtained from the counties
where the Company conducts business and the Washington Secretary of State office
of all UCC liens of record against the Company's personal property in the State
of Washington. All of the properties and assets necessary for continued
operation of the Business as currently conducted (including, without limitation,
all books, records, computers and computer software and data processing systems)
are owned, leased or licensed by the Company and are suitable for the purposes
for which they are currently being used. With the exception of used equipment
and inventory valued at no more than $10,000 on the Company's Financial
Statements, the physical properties of the Company, including the real
properties leased by the Company, are in good operating condition and repair,
normal wear and tear excepted, and are free from any defects of a material
nature. Except for Permitted Exceptions or as otherwise set forth on Schedule
3.9,
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the Company has full and unrestricted legal and equitable title to all such
properties and assets. The operation of the properties and Business of the
Company in the manner in which they are now and have been operated does not
violate any zoning ordinances, municipal regulations, or other Requirements of
Laws, except for any such violations which would not, individually or in the
aggregate, have a Material Adverse Effect except as set forth in Schedule 3.10.
Except for Permitted Exceptions or as set forth on Schedule 3.9, no restrictive
covenants, easements, rights-of-way, or regulations of record impair the uses of
the properties of the Company for the purposes for which they are now operated.
All leases of real or personal property by the Company are legal, valid,
binding, enforceable and in full force and effect and will remain legal, valid,
binding, enforceable and in full force and effect on identical terms immediately
following the Closing (except for the consent of the Company's landlord), except
to the extent that enforceability may be limited by laws affecting creditors'
rights and debtors' obligations generally, and legal limitations relating to
remedies of specific performance and injunctive and other forms of equitable
relief. All facilities owned or leased by the Company have received all
approvals of any Governmental Body (including Governmental Permits) required in
connection with the operation thereof and have been operated and maintained in
accordance with all Requirements of Laws.
3.10 LICENSES AND PERMITS. Attached hereto as Schedule 3.10 is a
list of all Material licenses, certificates, privileges, immunities, approvals,
franchises, authorizations and permits held or applied for by the Company from
any Governmental Body (herein collectively called "GOVERNMENTAL PERMITS") the
absence of which could have a Material Adverse Effect. Except as set forth in
Schedule 3.10, the Company has complied in all material respects with the terms
and conditions of all such Governmental Permits, and the Company has not
received notification from any Governmental Body of violation of any such
Governmental Permit or the Requirements of Laws governing the issuance or
continued validity thereof other than violations (if any) which would not
individually or in the aggregate have a Material Adverse Effect. No additional
Governmental Permit is required from any Governmental Body thereof in connection
with the conduct of the Business which Governmental Permit, if not obtained,
would have a Material Adverse Effect.
3.11 INTELLECTUAL PROPERTY. Attached hereto as Schedule 3.11 is a
list and brief description of all patents, trademarks, tradenames, copyrights,
licenses, computer software or data (other than general commercial software) or
applications therefor owned by or registered in the name of the Company or in
which the Company has any rights, licenses, or immunities (collectively, the
"INTELLECTUAL PROPERTY"). The Company has furnished Global with copies of all
license agreements to which the Company is a party, either as licensor or
licensee, with respect to any Intellectual Property. Except as described on
Schedule 3.11 hereto, the Company has good title to or the right to use such
Intellectual Property and all inventions, processes, designs, formulae, trade
secrets and know-how necessary for the conduct of their Business, in their
Business as presently conducted without the payment of any royalty or similar
payment, and the Company is not infringing on any patent right, tradename,
copyright or trademark right or other Intellectual Property right of others, and
neither the Company nor Seller is aware of any
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infringement by others of any such rights owned by the Company, except as
disclosed on Schedule 3.11 hereto.
3.12 COMPLIANCE WITH LAWS. The Company has (i) complied in all
material respects with all Requirements of Laws, Governmental Permits and Court
Orders applicable to the Business and has filed with the proper Governmental
Bodies all statements and reports required by all Requirements of Laws,
Governmental Permits and Court Orders to which the Company or any of its
employees (because of their activities on behalf of the Company) are subject and
(ii) conducted the Business and are in compliance in all material respects with
all federal, state and local energy, public utility, health, safety and
environmental Requirements of Laws, Governmental Permits and Court Orders
including the Clean Air Act, the Clean Water Act, RCRA, the Safe Drinking Water
Act, CERCLA, OSHA, the Toxic Substances Control Act and any similar state, local
or foreign laws (collectively "ENVIRONMENTAL OBLIGATIONS") and all other
federal, state, local or foreign governmental and regulatory requirements,
except where any such failure to comply or file would not, in the aggregate,
have a Material Adverse Effect. No claim has been made by any Governmental Body
(and, to the best knowledge of the Company and Seller, no such claim is
anticipated) to the effect that the Business fails to comply, in any respect,
with any Requirements of Laws, Governmental Permit or Environmental Obligation
or that a Governmental Permit or Court Order is necessary in respect thereto.
3.13 INSURANCE. Attached hereto as Schedule 3.13 is a list of all
coverages for fire, liability, or other forms of insurance and all fidelity
bonds held by or applicable to the Company. Copies of the binder for all such
insurance policies have been delivered to Global. To the best of the Company's
and Seller's knowledge and belief, no event relating to the Company has occurred
which will result in (i) cancellation of any such insurance coverages; (ii) a
retroactive upward adjustment of premiums under any such insurance coverages; or
(iii) any prospective upward adjustment in such premiums. To the best of
Seller's and the Company's knowledge after due inquiry, all of such insurance
coverages will remain in full force and effect following the Closing.
3.14 EMPLOYEE BENEFIT PLANS.
(A) EMPLOYEE WELFARE BENEFIT PLANS. Except as disclosed on
Schedule 3.14, the Company does not maintain or contribute to any "employee
welfare benefit plan" as such term is defined in Section 3(1) of ERISA. With
respect to each such plan, (i) the plan is in material compliance with ERISA;
(ii) the plan has been administered in accordance with its governing documents;
(iii) neither the plan, nor any fiduciary with respect to the plan, has engaged
in any "prohibited transaction" as defined in Section 406 of ERISA other than
any transaction subject to a statutory or administrative exemption; (iv) except
for the processing of routine claims in the ordinary course of administration,
there is no material litigation, arbitration or disputed claim outstanding; and
(v) all premiums due on any insurance contract through which the plan is funded
have been paid.
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(B) EMPLOYEE PENSION BENEFIT PLANS. Except as disclosed in
Schedule 3.14, the Company does not maintain or contribute to any arrangement
that is or may be an "employee pension benefit plan" relating to employees, as
such term is defined in Section 3(2) of ERISA. With respect to each such plan:
(i) the plan is qualified under Section 401(a) of the Code, and any trust
through which the plan is funded meets the requirements to be exempt from
federal income tax under Section 501(a) of the Code; (ii) the plan is in
material compliance with ERISA; (iii) the plan has been administered in
accordance with its governing documents as modified by applicable law; (iv) the
plan has not suffered an "accumulated funding deficiency" as defined in Section
412(a) of the Code; (v) the plan has not engaged in, nor has any fiduciary with
respect to the plan engaged in, any "prohibited transaction" as defined in
Section 406 of ERISA or Section 4975 of the Code other than a transaction
subject to statutory or administrative exemption; (vi) the plan has not been
subject to a "reportable event" (as defined in Section 4043(b) of ERISA), the
reporting of which has not been waived by regulation of the Pension Benefit
Guaranty Corporation; (vii) no termination or partial termination of the plan
has occurred within the meaning of Section 411(d)(3) of the Code; (viii) all
contributions required to be made to the plan or under any applicable collective
bargaining agreement have been made to or on behalf of the plan; (ix) there is
no material litigation, arbitration or disputed claim outstanding; and (x) all
applicable premiums due to the Pension Benefit Guaranty Corporation for plan
termination insurance have been paid in full on a timely basis.
(C) EMPLOYMENT AND NON-TAX QUALIFIED DEFERRED COMPENSATION
ARRANGEMENTS. Except as disclosed in Schedule 3.14, the Company does not
maintain or contribute to any retirement or deferred or incentive compensation
or stock purchase, stock grant or stock option arrangement entered into between
the Company and any current or former officer, consultant, director or employee
of the Company that is not intended to be a tax qualified arrangement under
Section 401(a) of the Code.
3.15 CONTRACTS AND AGREEMENTS. Attached hereto as Schedule 3.15 is a
list and brief description of all written or oral contracts, commitments,
leases, and other agreements (including, without limitation, promissory notes,
loan agreements, and other evidences of indebtedness, guarantees, agreements
with distributors, suppliers, dealers, franchisors and customers, and service
agreements) to which the Company is a party or by which the Company or its
properties are bound pursuant to which the obligations thereunder of either
party thereto are, or are contemplated as being, for any one contract $25,000 or
greater (collectively, the "CONTRACTS"). The Company is not and, to the best
knowledge of Seller and the Company, no other party thereto is in default (and
no event has occurred which, with the passage of time or the giving of notice,
or both, would constitute a default by the Company) under any of the Contracts,
and the Company has not waived any right under any of the Contracts. All of the
Contracts to which the Company is a party are legal, valid, binding, enforceable
and in full force and effect and will remain legal, valid, binding, enforceable
and in full force and effect on identical terms immediately after the Closing,
except to the extent that enforceability may be limited by laws affecting
creditors' rights and debtors' obligations generally, and legal limitations
relating to remedies of specific performance and injunctive and other forms of
equitable relief. Except as set forth in Schedule 3.15, the Company has not
guaranteed any obligations of any
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other Person. To the best of Seller's and the Company's Knowledge, no
manufacturer of office equipment sold by the Company will cease doing business
with the Company immediately following the Closing.
3.16 CLAIMS AND PROCEEDINGS. Attached hereto as Schedule 3.16 is a
list and brief description of all claims, actions, suits, proceedings, or
investigations pending or, to the best knowledge and belief of the Seller or the
Company, threatened against or affecting the Company or any of its properties or
assets, at law or in equity, or before or by any court, municipality or other
Governmental Body. Except as set forth on Schedule 3.16, none of such claims,
actions, suits, proceedings, or investigations, if adversely determined, will
result in any liability or loss to the Company. The Company has not been and the
Company is not now, subject to any Court Order, stipulation, or consent of or
with any court or Governmental Body. No inquiry, action or proceeding has been
instituted or, to the best knowledge and belief of the Seller or the Company,
threatened or asserted against the Seller or the Company to restrain or prohibit
the carrying out of the transactions contemplated by this Agreement or to
challenge the validity of such transactions or any part thereof or seeking
damages on account thereof. To the best knowledge of the Company and Seller,
except as set forth on Schedule 3.16, there is no basis for any such valid claim
or action.
3.17 TAXES.
(A) All Federal, foreign, state, county and local income, gross
receipts, excise, property, franchise, license, sales, use, withholding and
other Taxes due from the Company on or before the Closing have been paid and all
Tax Returns which are required to be filed by the Company on or before the date
hereof have been filed within the time and in the manner provided by law, and
all such Tax Returns are true and correct and accurately reflect the Tax
liabilities of the Company. No Tax Returns of the Company or any of the Seller
are presently subject to an extension of the time to file. All Taxes,
assessments, penalties, and interest of the Company which have become due
pursuant to such Tax Returns or any assessments received have been paid or
adequately accrued on the Company's Financial Statements. The provisions for
Taxes reflected on the balance sheets contained in the Financial Statements are
adequate to cover all of the Company's Tax liabilities for the respective
periods then ended and all prior periods. The Company has not executed any
presently effective waiver or extension of any statute of limitations against
assessments and collection of Taxes, and there are no pending or threatened
claims, assessments, notices, proposals to assess, deficiencies, or audits with
respect to any such Taxes of which any of the Seller or the Company are aware.
For Governmental Bodies with respect to which the Company does not file Tax
Returns, no such Governmental Body has given the Company written notification
that the Company is or may be subject to taxation by that Governmental Body. The
Company has withheld and paid all Taxes required to have been withheld and paid
in connection with amounts paid or owing to any employee, shareholder, creditor,
independent contractor or other party. There are no Tax liens on any of the
property or assets of the Company.
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(B) Neither the Company nor any other corporation has filed an
election under Section 341(f) of the Code that is applicable to the Company or
any assets held by the Company. The Company has not made any payments, is not
obligated to make any payments, and is not a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Code Sec. 280G. The Company has not been a United States real
property holding corporation within the meaning of Code Sec. 897(c)(2) during
the applicable period specified in Code Sec. 897(c)(1)(A)(ii). The Company is
not a party to any Tax allocation or sharing agreement. The Company has not and
has never been (nor does the Company have any liability for unpaid Taxes because
it once was) a member of an affiliated group during any part of which return
year any corporation other than the Company also was a member of the affiliated
group. The Company's election to be taxed under subchapter S of the Code is
valid, legally binding and in full force and effect under all applicable Tax
laws.
(C) No transaction contemplated by this Agreement is subject to
withholding under Section 1445 of the Code and no stock transfer taxes, real
estate transfer taxes or similar taxes will be imposed upon the transfer and
sale of the Shares pursuant to this Agreement.
3.18 PERSONNEL. Attached hereto as Schedule 3.18 is a list of the
names and annual rates of compensation of the directors and executive officers
of the Company, and of the employees of the Company whose annual rates of
compensation during the fiscal year ended December 31, 1996 (including base
salary, bonus and incentive pay) exceed (or by December 31, 1997 are expected to
exceed) $60,000. Schedule 3.18 also summarizes the bonus, profit sharing,
percentage compensation, company automobile, club membership, and other like
benefits, if any, paid or payable to such directors, officers, and employees
during the Company's fiscal year ended December 31, 1996 and to the date hereof.
Schedule 3.18 also contains a brief description of all material terms of
employment agreements to which the Company is a party and all severance benefits
which any director, officer or employee of the Company is or may be entitled to
receive. The employee relations of the Company are generally good and there is
no pending or, to the best knowledge of Seller or the Company, threatened labor
dispute or union organization campaign. None of the employees of the Company are
represented by any labor union or organization. The Company is in compliance in
all material respects with all Requirements of Laws respecting employment and
employment practices, terms and conditions of employment, and wages and hours,
and are not engaged in any unfair labor practices. Neither the Company or Seller
has been advised, or has good reason to believe, that any of the persons whose
names are set forth on Schedule 3.18 or any other employee will not agree to
remain employed by the Company after the consummation of the transactions
contemplated hereby. There is no unfair labor practice claim against the Company
before the National Labor Relations Board, or any strike, dispute, slowdown, or
stoppage pending or, to the best knowledge of the Company and Seller, threatened
against or involving the Company, and none has occurred.
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3.19 BUSINESS RELATIONS. Neither the Company nor Seller knows or
has good reason to believe that any customer or supplier of the Company will
cease to do business with the Company after the consummation of the transactions
contemplated hereby in the same manner and at the same levels as previously
conducted with the Company except for any reductions which do not result in a
Material Adverse Change. Neither Seller nor the Company has received any notice
of any material disruption (including delayed deliveries or allocations by
suppliers) other than the Konica Slowdown, in the availability of any material
portion of the materials used by the Company nor is the Company or Seller aware
of any facts which could lead them to believe that the Business will be subject
to any such material disruption.
3.20 ACCOUNTS RECEIVABLE. All of the accounts, notes, and loans
receivable that have been recorded on the books of the Company are bona fide and
represent amounts validly due for goods sold or services rendered and except as
disclosed on Schedule 3.20 all such amounts (net of any allowance for doubtful
accounts) will be collected in full within 180 days following the Closing Date
except for such failures which would not in the aggregate have a Material
Adverse Effect. Except as disclosed on Schedule 3.20 hereto (a) all of such
accounts, notes, and loans receivable are free and clear of any Encumbrances;
(b) no claims of offset have been asserted in writing against any of such
accounts, notes, or loans receivable; and (c) none of the obligors of such
accounts, notes, or loans receivable has given written notice that it will or
may refuse to pay the full amount or any portion thereof.
3.21 BANK ACCOUNTS. Attached hereto as Schedule 3.21 is a list of
all banks or other financial institutions with which the Company has an account
or maintains a safe deposit box, showing the type and account number of each
such account and safe deposit box and the names of the persons authorized as
signatories thereon or to act or deal in connection therewith.
3.22 WARRANTIES. Except for warranty claims that are typical and
in the ordinary course of the Business, no written claim for breach of product
or service warranty to any customer has been made against the Company since
January 1, 1997. To the best knowledge of Seller and the Company, no state of
facts exists, and no event has occurred, which could reasonably be expected to
form the basis of any present claim against the Company for liability on account
of any express or implied warranty to any third party in connection with
products sold or services rendered by the Company.
3.23 BROKERS. Neither the Company nor Seller has engaged, or
caused to be incurred any liability to any finder, broker, or sales agent in
connection with the origin, negotiation, execution, delivery, or performance of
this Agreement or the transactions contemplated hereby.
3.24 INTEREST IN COMPETITORS, SUPPLIERS, CUSTOMERS, ETC. No officer,
director, or shareholder of the Company or any affiliate of any such officer,
director, or shareholder, has any ownership interest in any competitor,
supplier, or customer of the Company (other than ownership of securities of a
publicly-held corporation of which such Person owns, or
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has real or contingent rights to own, less than one percent of any class of
outstanding securities) or any property used in the operation of the Business,
except for the QBS Right.
3.25 INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS, SHAREHOLDERS, AND
EMPLOYEES. Attached hereto as Schedule 3.25 is a list and brief description
of the payment terms of all indebtedness of the Company to officers, directors,
shareholders, and employees of the Company and all indebtedness of officers,
directors, shareholders, and employees of the Company to the Company, excluding
indebtedness for travel advances or similar advances for expenses incurred on
behalf of and in the ordinary course of the Business, consistent with past
practices.
3.26 UNDISCLOSED LIABILITIES. To the best of Seller's and the
Company's knowledge, except as indicated in Schedule 3.26 hereto, the Company
does not have any material liabilities (whether absolute, accrued, contingent or
otherwise), of a nature required by GAAP to be reflected on a corporate balance
sheet or disclosed in the notes thereto, except such liabilities which are
accrued or reserved against in the Financial Statements or disclosed in the
notes thereto, including without limitation any accounts payable or service
liabilities of the Company incurred prior to the Closing Date, other than
liabilities incurred in the ordinary course of the Business since the date of
the latest of such Financial Statements.
3.27 INFORMATION FURNISHED. The Company and Seller have made
available to Global true and correct copies of all material corporate records of
the Company and all material agreements, documents, and other items listed on
the Schedules to this Agreement or referred to in Section 2 of this Agreement,
and neither this Agreement, the Schedules hereto, nor any written information,
instrument, or document delivered to Global pursuant to this Agreement contains
any knowingly untrue statement of a material fact or knowingly omits any
material fact necessary to make the statements herein or therein, as the case
may be, not misleading.
In making the representations and warranties set forth above, the term
"Material" or "material" shall, where appropriate in context of its use, be
deemed to mean an amount of money greater than $25,000, the terms "Material
Adverse Change," "material adverse trend," "Material Adverse Effect," or any
other term of like import shall mean the occurrence of any single event, or any
series of related events, or set of related circumstances, which proximately
causes an actual, direct economic loss to the Company, taken as a whole, in
excess of $25,000 per occurrence or $40,000 in the aggregate. The term
"knowledge" shall mean actual knowledge after reasonable inquiry of the
employees of the Company with responsibility for the applicable subject matter.
All references to the "COMPANY" in Sections 3.6 through 3.27 shall include the
Companies' subsidiaries.
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ARTICLE IV
GLOBAL'S REPRESENTATIONS AND WARRANTIES
Global represents and warrants to Seller as follows:
4.1 DUE ORGANIZATION. Global is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware
and has full corporate power and authority to execute, deliver and perform this
Agreement and to carry out the transactions contemplated hereby.
4.2 DUE AUTHORIZATION. The execution, delivery and performance
of this Agreement has been duly authorized by all necessary corporate action of
Global and the Agreement has been duly and validly executed and delivered by
Global and constitutes the valid and binding obligation of Global, enforceable
in accordance with its terms, except to the extent that enforceability may be
limited by laws affecting creditors' rights and debtors' obligations generally,
and legal limitations relating to remedies of specific performance and
injunctive and other forms of equitable relief. The execution, delivery, and
performance of this Agreement (as well as all other instruments, agreements,
certificates or other documents contemplated hereby) by Global, do not (a)
violate any Requirements of Laws or Court Order of any Governmental Body
applicable to Global or its property, (b) violate or conflict with, or permit
the cancellation of, or constitute a default under any agreement to which Global
is a party or by which it or its property is bound, (c) permit the acceleration
of the maturity of any indebtedness of, or any indebtedness secured by the
property of, Global, or (d) violate or conflict with any provision of the
charter or bylaws of Global.
4.3 NO BROKERS. Global has not engaged, or caused to be
incurred any liability to any finder, broker or sales agent in connection with
the origin, negotiation, execution, delivery, or performance of this Agreement
or the transactions contemplated hereby.
4.4 DUE DILIGENCE REVIEW. This transaction has been structured as a
sale of stock to accommodate the desires of Global. Global has conducted its own
due diligence review of all aspects of this stock purchase transaction, and has
a full and complete opportunity as it deems necessary to ask questions of, and
obtain information from, the Seller in order to evaluate the merits and risks of
purchasing the Shares. Global can afford a complete loss of the value of the
Shares and is able to bear the economic risk of holding the Shares for an
indefinite period. Global understands that in the future it will be precluded
from selling the Shares, except in a private placement transaction, and that
there is no assurance Global will be able to locate prospective purchasers in
order to dispose of the Shares even in a private placement transaction. Neither
Seller nor the Company has made any representation or warranty to Global other
than as set forth in this Agreement and except for the representations and
warranties expressly set forth herein, Global has relied exclusively on its own
investigation of the Company in deciding to purchase the shares.
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4.5 INVESTMENT INTENT. Global represents and warrants that the stock
being acquired by it is being acquired for its own account for investment and
without the view to, or for re-sale in connection with, any distribution or
public offering thereof within the meaning of the Securities Act of 1933 (the
"SECURITIES ACT"). Global understands that the stock has not been registered
under the Securities Act or any state securities act, and therefore, the shares
must be held indefinitely unless they are registered under the Securities Act or
an exemption from registration is available.
4.6 QUALIFICATION AS A SOPHISTICATED INVESTOR. Global represents
and warrants that it has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the investment
being made by Global hereunder.
4.7 LEGEND. Each Share shall will be endorsed with the following
legend:
The securities evidenced hereby have not been registered
under the Securities Act of 1933 and may not be sold,
transferred, assigned, pledged or otherwise distributed for
value unless there is an effective registration statement
under such Act covering such securities or unless such sale,
transfer, assignment, pledge or distribution is exempt from
the registration and prospectus delivery requirements of
such Act.
ARTICLE V
COVENANTS OF THE COMPANY AND SELLER
5.1 CONSENTS OF OTHERS. Prior to the Closing, the Company and
Seller shall use their best efforts to obtain and to cause the Company to obtain
all authorizations, consents and permits required of the Company and Seller to
permit them to consummate the transactions contemplated by this Agreement.
Seller shall have obtained the written consent of (i) the Company's Material
office equipment suppliers and (ii) the lessors of the Buildings to the
transactions contemplated by the Agreement.
5.2 SELLER'S EFFORTS'. The Company and Seller shall use all
reasonable efforts to cause all conditions for the Closing to be met.
5.3 POWERS OF ATTORNEY. The Company and Seller shall cause the
Company to terminate at or prior to Closing all powers of attorney granted by
the Company, other than those relating to service of process, qualification or
pursuant to governmental regulatory or licensing agreements, or representation
before the IRS or other government agencies.
ARTICLE VI
POST-CLOSING COVENANTS
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6.1 GENERAL. In case at any time after the Closing any further
action is legally necessary or reasonably desirable (as determined by Global and
Seller) to carry out the purposes of this Agreement, each of the parties will
take such further action (including the execution and delivery of such further
instruments and documents) as any other party reasonably may request, all at the
sole cost and expense of the requesting party (unless the requesting party is
entitled to indemnification therefor under Article VIII below). The Seller
acknowledges and agrees that from and after the Closing, Global will be entitled
to possession of all documents, books, records, agreements, and financial data
of any sort relating to the Company, which shall be maintained at the chief
executive office of the Company; provided, however, that Seller shall be
entitled to reasonable access to and to make and keep copies of such books and
records at his sole cost and expense and Global will maintain all of the same
for a period of at least three (3) years after Closing. Thereafter, the Company
will offer such documentation to Seller before disposal thereof.
6.2 TRANSITION. For a period of four (4) years following Closing,
the Seller will not take any action that primarily is designed or intended to
have the effect of discouraging any lessor, licensor, customer, supplier, or
other business associate of the Company from maintaining the same business
relations with the Company after the Closing as it maintained with the Company
prior to the Closing. For a period of four (4) years following Closing, the
Seller will refer all customer inquiries relating to the Business to the
Company.
6.3 CONFIDENTIALITY. The Seller will treat and hold as such
all Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement or otherwise for the
benefit of the Company or Global for a period of three (3) years from the
Closing, and deliver promptly to Global or destroy, at the written request and
option of Global, all tangible embodiments (and all copies) of the Confidential
Information which are in their possession except as otherwise permitted herein.
In the event that Seller is requested or required (by oral question or written
request for information or documents in any legal proceeding, interrogatory,
subpoena, civil investigative demand, or similar legal proceeding) to disclose
any Confidential Information, Seller will notify Global promptly of the request
or requirement.
6.4 COVENANT NOT TO COMPETE. For and in consideration of the
allocation of $30,000 of the Purchase Price paid to the Seller by Global, Seller
covenants and agrees, for a period of three years from and after the Closing
Date, that he will not, directly or indirectly without the prior written consent
of Global, for or on behalf of any entity:
(A) become interested or engaged, directly or indirectly, as a
shareholder, bondholder, creditor, officer, director, partner, agent, contractor
with, employer or representative of, or in any manner associated with, or give
financial, technical or other assistance to, any Person, firm or corporation for
the purpose of engaging in the copier/office equipment dealer, service or
distribution business in competition with the Company, within the greater of (i)
a 100 mile radius of the Company's office facilities in the State of Washington
(the
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"CURRENT TRADE AREA") or (ii) in any geographic area in which the Company
currently conducts business;
(B) enter into any agreement with, service, assist or solicit
the business of any customers of the Company for the purpose of providing office
equipment sales or service to such customers in competition with the Company in
the Current Trade Area or to cause them to reduce or end their business with the
Company; or
(C) enter into any agreement with, or solicit the employment of
employees, consultants or representatives of the Company for the purpose of
causing them to leave the employment of the Company;
Provided, however, that no owner of less than one percent (1%) of the
outstanding stock of any publicly-traded corporation, and no owner of any amount
of Global stock, shall be deemed to be in a violation of this Section 6.4 solely
by reason thereof.
6.5 ADDITIONAL MATTERS.
(A) The Seller shall cause the Company to file with the
appropriate governmental authorities all Tax Returns required to be filed by it
for any taxable period ending prior to the Closing Date and the Company shall
remit any Taxes due in respect of such Tax Returns. In addition, Seller shall
cause Seller's CPA to prepare a short period tax return for the Company covering
the period January 1, 1997 through the Effective Date. The cost of preparation
of such short period tax return shall be paid for by Seller. Global will pay for
all reasonable services incurred by Seller's CPA in preparation of the short
year return that pertain to the Section 338 election, including consultations
with Global and Global's CPAs related to same. Seller's CPA will invoice Global
based on Seller's CPA's reasonable allocation of costs incurred.
(B) Global and Seller recognize that each of them will need
access, from time to time, after the Closing Date, to certain accounting and Tax
records and information held by Global and/or the Company to the extent such
records and information pertain to events occurring on or prior to the Closing
Date; therefore, Global agrees to cause the Company to (A) use its best efforts
to properly retain and maintain such records for a period of six (6) years from
the date the Tax Returns for the year in which the Closing occurs are filed or
until the expiration of the statute of limitations with respect to such year,
whichever is later, and (B) allow the Seller and his agents and representatives
at times and dates mutually acceptable to the parties, to inspect, review and
make copies of such records as such other party may deem necessary or
appropriate from time to time, such activities to be conducted during normal
business hours and at the other party's expense.
(C) SECTION 338(H)(10) ELECTION. Seller and Global shall join
in making a timely election (but in no event later than 180 days following the
Closing) under Section 338(h)(10) of the Code (including the prerequisite
election under Section 338 of the
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Code) and any similar state law provisions in all applicable states which permit
corporations to make such elections, with respect to the sale and purchase of
the Shares pursuant to this Agreement, and each party shall provide the others
all necessary information to permit such elections to be made. Global and the
Seller shall, as promptly as practicable following the Closing Date, take all
actions necessary and appropriate (including filing such forms, returns,
schedules and other documents as may be required) to effect and preserve timely
elections; provided, however, that Global shall be the party responsible for
preparing and filing the forms, returns, schedules and other documents necessary
for making an effective and timely election. All Taxes attributable to the
elections made pursuant to this Section 6.5(c) shall be the liability of the
Seller; provided, however, that Global shall reimburse Seller for any additional
Taxes solely as a result of such election. In connection with such elections,
within sixty (60) days following the Closing Date, Global and the Seller shall
act together in good faith to determine and agree upon the "deemed sales price"
to be allocated to each asset of the Company in accordance with Treasury
Regulation Section 1.338(h)(10)-1(f) and the other regulations under Section 338
of the Code. Notwithstanding the generality of the immediately preceding
sentence, Global and the Seller agree that the "deemed sales price" shall be
allocated to the monetary assets of the Company at their fair market value as of
the Closing Date as determined as part of the determination of the Working
Capital of the Company in accordance with Section 2.8 hereof, $30,000 shall be
allocated to the covenant not to compete contained in Section 6.4 hereof, and
the balance of the "deemed sales price" shall be allocated to the fixed assets,
goodwill and other intangible assets of the Company. Both Global and Seller
shall report the tax consequences of the transactions contemplated by this
Agreement consistently with such allocations and shall not take any position
inconsistent with such allocations in any Tax Return or otherwise. In the event
that Global and the Seller are unable to agree as to such allocations, Global's
reasonable positions with respect to such allocations shall control. The Seller,
shall be liable for, and shall indemnify and hold Global and the Company
harmless against, any Taxes or other costs attributable solely to (i) a failure
on the part of the Seller to take all reasonable actions at Global's timely
request required of him under this Section 6.5(c); or (ii) a failure on the part
of the Company to qualify, at or prior to the Closing, as an "S corporation" for
federal and/or state income Tax purposes. Global's reimbursement to Seller shall
include the amount necessary to provide Seller with the same net proceeds (after
taxes) as would have resulted from the sale of stock by Seller for a price equal
to the Purchase Price stated in Section 2.2 of this Agreement (including the
officer loan repayment and the fees payable under the Consulting Agreement).
Seller's marginal tax rate, for purposes of "grossing-up" the reimbursement (to
net the appropriate amount) shall be 39.6%. The Seller shall further be
reimbursed by Global, if, in the future, an audit of the sale results in
additional taxes due by the Seller solely as a result of a deemed asset sale
resulting from the 338(h)(10) election. An example of this would be an
adjustment, upward, of the Built-in Gain tax. Global's reimbursement will again
be "grossed-up" by Seller's proven marginal tax rate to negate any tax impact to
Seller. This indemnification by Global shall remain in effect for all open tax
years. Global shall pay all incremental costs, legal/accounting, etc.,
associated with the Section 338(h)(10) election that may be incurred by Seller.
Such reimbursement shall be made to Seller by Global within fifteen (15) days
after written notice to Global, which notice shall be given pursuant to Section
9.2 herein.
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ARTICLE VII
CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING
7.1 CONDITIONS TO GLOBAL'S OBLIGATIONS. The obligation of Global
under this Agreement to consummate the Closing is subject to the conditions
that:
(A) COVENANTS, REPRESENTATIONS AND WARRANTIES. The Company
and Seller shall have performed in all material respects all obligations and
agreements and complied in all material respects with all covenants contained in
this Agreement to be performed and complied with by each of them prior to or at
the Closing Date. The representations and warranties of the Company and Seller
set forth in this Agreement shall be accurate in all material respects at and as
of the Closing Date with the same force and effect as though made on and as of
the Closing Date except for any changes resulting from activities or
transactions which may have taken place after the date hereof and which are
permitted or contemplated by the Agreement or which have been entered into in
the ordinary course of business and except to the extent that such
representations and warranties are expressly made as of another specified date
and, as to such representation, the same shall be true in all material respects
as of such specified date.
(B) CONSENTS. All statutory requirements for the valid
consummation by the Company and Seller of the transactions contemplated by this
Agreement shall have been fulfilled and all authorizations, consents and
approvals, including expiration or early termination of all waiting periods
under all federal, state, local and foreign governmental agencies and regulatory
authorities required to be obtained in order to permit the consummation of the
transactions contemplated hereby shall have been obtained in form and substance
reasonably satisfactory to Global unless such failure could not reasonably be
expected to have a Material Adverse Effect. All approvals of the Board of
Directors and shareholders of the Company necessary for the consummation of this
Agreement and the transactions contemplated hereby shall have been obtained.
(C) LEASES. The Company, Global and Seller shall each use
their reasonable best efforts to cintinue in full force and effect the leases
for all of such Buildings as provided in Schedule 7.1(c) hereto.
(D) DISCHARGE OF INDEBTEDNESS AND LIENS. Seller and the
Company shall have provided for the payment in full by the Company of all Funded
Indebtedness of the Company and all extended credit from vendors at the Closing
(other than customary accounts payable outstanding on 90 day or less payment
terms in accordance with past practices). Such Funded Indebtedness, if any, as
of August 31, 1997, is listed on Schedule 7.1(d) hereto. Seller shall have also
provided for the termination of all Encumbrances of record on the properties of
the Company, except for Permitted Exceptions. All liens or UCC filings against
the Company and each of the Subsidiaries or Affiliates of the Company which
engaged in the Business, shall have been terminated as of the Closing.
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(E) MATERIAL ADVERSE CHANGE. There has been no Material Adverse
Change with respect to the Company since April 30, 1997 except for the Konica
Slowdown.
(F) TRANSFER TAXES. Except as noted in Section 6.5(c), Seller
shall be responsible for all stock transfer or gains taxes imposed on Seller
incurred in connection with this Agreement.
(G) FINANCIAL CONDITION. The Company's total adjusted Working
Capital as projected at the Closing shall be greater than $527,156 and the
Company shall continue to have cash on hand (included in Working Capital) at the
Closing (in an amount not less than $25,000 or, if less than $25,000, the
Purchase Price will be reduced further by the amount of such deficiency), to
continue to operate the Business in the ordinary course.
(H) DOCUMENTS TO BE DELIVERED BY SELLER AND THE COMPANY. The
following documents shall be delivered at the Closing by Seller and the Company
or their attorney:
(I) OPINION OF SELLER'S COUNSEL. [Intentionally Left
Blank.]
(II) CERTIFICATES. Global shall have received an officer's
certificate and a secretary's certificate of the Company executed by
officers of the Company, dated the Closing Date, in the forms that are
attached as Exhibit D hereto.
(III) RELEASE. Seller shall have furnished the Company with
a general release of liabilities, excluding compensation and employee
benefits as well as obligations pursuant to this Agreement, in the
form attached as Exhibit E hereto.
(IV) ESCROW AGREEMENT. Seller shall have delivered to
Global at the Closing the duly executed Escrow Agreement required
pursuant to Section 2.5 hereof.
(V) CONSULTING AGREEMENT. Fred Woodard shall have duly
executed and delivered the Consulting Agreement in substantially the
same form attached as Exhibit F hereto, pursuant to which he will be
engaged by the Company, pursuant to the Consulting Agreement.
(VI) BUILDING LEASES. Global is reasonably satisfied with
the terms of the leases of the Buildings.
(VII) COLLATERAL ASSIGNMENT OF RIGHTS. Seller shall have
executed and delivered to Jackson National Life Insurance Company a
Collateral Assignment of Rights in the form attached hereto as Exhibit
H.
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(VIII) STOCK CERTIFICATES. Seller shall have delivered
the Shares accompanied by duly executed stock powers, together with
any stock transfer stamps or receipts for any transfer taxes required
to be paid thereon.
7.2 CONDITIONS TO SELLER'S AND THE COMPANY'S OBLIGATIONS. The
obligation of Seller and the Company under this Agreement to consummate the
Closing is subject to the conditions that:
(A) COVENANTS, REPRESENTATIONS AND WARRANTIES. Global shall have
performed in all material respects all obligations and agreements and complied
in all material respects with all covenants contained in this Agreement to be
performed and complied with by Global prior to or at the Closing and the
representations and warranties of Global set forth in Article IV hereof shall be
accurate in all material respects, at and as of the Closing Date, with the same
force and effect as though made on and as of the Closing Date except for any
changes resulting from activities or transactions which may have taken place
after the date hereof and which are permitted or contemplated by the Agreement
or which have been entered into in the ordinary course of the Business and
except to the extent that such representations and warranties are expressly made
as of another specified date and, as to such representations, the same shall be
true as of such specified date.
(B) CONSENTS. All statutory requirements for the valid
consummation by Global of the transactions contemplated by this Agreement shall
have been fulfilled and all authorizations, consents and approvals, including
expiration or early termination of all waiting periods under all federal, state,
local and foreign governmental agencies and regulatory authorities required to
be obtained in order to permit the consummation by Global of the transactions
contemplated hereby shall have been obtained unless such failure shall not have
a Material Adverse Effect on the Business. Global shall have used its
reasonable best efforts to have obtained the release of the Seller from all
personal guarantees with respect to the Company.
(C) DOCUMENTS TO BE DELIVERED BY GLOBAL. The following documents
shall be delivered at the Closing by Global:
(II) CERTIFICATES. Seller shall have received an officers'
certificate and a secretary's certificate executed by officers of
Global, dated the Closing Date, in substantially the same forms as the
forms of certificates that are Exhibit G hereto.
(III) ESCROW AGREEMENT. Global shall have delivered to
Seller at the Closing the duly executed Escrow Agreement required
pursuant to Section 2.5 hereof.
(IV) CONSULTING AGREEMENT. Global shall have caused the
Company to duly execute and deliver the Consulting Agreement with Fred
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Woodard in the same form attached as Exhibit F hereto, pursuant to
which he will be engaged by the Company pursuant to the Consulting
Agreement.
(IV) PURCHASE PRICE. Seller shall have received the
Purchase Price for the Shares and the repayment of the officer loan
and the consulting fees due to Consultant.
(D) RIGHT OF REINVESTMENT. Seller shall have been offered the
right to invest up to $20,000 in the capital stock of Global on the same terms
provided to other recent outside investors in Global.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION OF GLOBAL. Except as provided in Section 8.6,
as Global's sole and exclusive remedy for any breach by the Seller hereunder,
Seller agrees to indemnify and hold harmless Global and each officer, director,
and affiliate of Global, including without limitation the Company or any
successor of the Company (collectively, the "INDEMNIFIED PARTIES") from and
against any and all material damages, losses, claims, liabilities, demands,
charges, suits, penalties, costs and expenses (including court costs and
reasonable attorneys' fees and expenses incurred in investigating and preparing
for any litigation or proceeding) (collectively, the "INDEMNIFIABLE COSTS"),
which any of the Indemnified Parties may sustain, or to which any of the
Indemnified Parties may be subjected, arising out of (A) any Material
misrepresentation, breach or default by Seller or the Company of or under any of
the representations, covenants, agreements or other provisions of this Agreement
or any agreement or document executed in connection herewith; (B) the assertion
and final determination of any claim or liability against the Company or any of
the Indemnified Parties by any Person based upon the facts which form the
alleged basis for any litigation to the extent it should have been, but was not,
reserved for in the Financial Statements in accordance with GAAP; and (C) the
Company's Material tortious acts or omissions to act prior to Closing for which
the Company did not carry liability insurance for themselves as the insured
party.
8.2 DEFENSE OF CLAIMS. If any legal proceeding shall be instituted,
or any claim or demand made, against any Indemnified Party in respect of which
Seller may be liable hereunder, such Indemnified Party shall give prompt written
notice thereof to Seller and, except as otherwise provided in Section 8.4 below,
Seller shall have the right to defend, or cause the Company or its successors to
defend, any litigation, action, suit, demand, or claim for which it may seek
indemnification unless, in the reasonable judgment of Global, such litigation,
action, suit, demand, or claim, or the resolution thereof, would have an ongoing
effect on Global, the Company or its successors, and such Indemnified Party
shall extend reasonable cooperation in connection with such defense, which shall
be at Seller's expense. In the event Seller fails or refuses to defend the same
within a reasonable length of time, the Indemnified Parties shall be entitled to
assume the defense thereof, and Seller shall be liable to repay the Indemnified
Parties
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for all expenses reasonably incurred in connection with said defense (including
reasonable attorneys' fees and settlement payments) if it is determined that
such request for indemnification was proper. If Seller shall not have the right
to assume the defense of any litigation, action, suit, demand, or claim in
accordance with either of the two preceding sentences, the Indemnified Parties
shall have the absolute right to control the defense of and to settle, in their
sole discretion and without the consent of Seller, such litigation, action,
suit, demand, or claim, but Seller shall be entitled, at his own expense, to
participate in such litigation, action, suit, demand, or claim.
8.3 ESCROW CLAIM. If any claim for indemnification is made by an
Indemnified Party pursuant to this Article VIII prior to the expiration of the
Escrow Period, such Indemnified Party shall apply to the Escrow Agent provided
in Section 2.5 of this Agreement for reimbursement of such claim in accordance
with the provisions of the Escrow Agreement.
8.4 TAX AUDITS, ETC. In the event of an audit of a Tax Return of the
Company with respect to which an Indemnified Party might be entitled to
indemnification pursuant to this Article VIII, Seller shall have the right to
control any and all such audits which may result in the assessment of additional
Taxes against the Company and any and all subsequent proceedings in connection
therewith, including appeals (subject to the prior written consent of Global,
which shall not unreasonably be withheld and subject to the right of Global to
have their accountants and attorneys consult with Seller on such audits or
procedures at Global's expense). Global shall cooperate fully in all matters
relating to any such audit or other Tax proceeding (including according access
to all records pertaining thereto), and will execute and file any and all
consents, powers of attorney, and other documents as shall be reasonably
necessary in connection therewith. Subject to the limitations set forth in
Article VIII hereof, if additional Taxes are payable by the Company as a result
of any such audit or other proceeding, Seller shall be responsible for and shall
promptly pay all material Taxes, interest, and penalties to which any of the
Indemnified Parties shall be entitled to indemnification.
8.5 INDEMNIFICATION OF SELLER. Global agrees to indemnify and hold
harmless Seller and the Company and each officer, director, stockholder or
affiliate of the Company, from and against any Indemnifiable Costs arising out
of (A) any material misrepresentation, breach or default by Global of or under
any of the covenants, agreements or other provisions of this Agreement or any
agreement or document executed in connection herewith, and (B) any tortious acts
or omissions by Global before or after or the Company after, the Closing. In
addition, the Company and Global shall indemnify the Seller for any payment or
satisfaction of any guarantees by Seller of the Company's obligations occurring
after the Closing Date including the lease of the Buildings.
8.6 LIMITS ON INDEMNIFICATION. All Indemnifiable Costs sought by
any party hereunder shall be net of any insurance proceeds received by such
Person with respect to such claim (less the present value of any premium
increases occurring as a result of such claim). Except for any claims for
breach of the representations and warranties of the Seller under Sections 3.1,
3.2, 3.3 or 3.17 hereof (the indemnification for which shall expire on the
expiration of the applicable statute of limitations), the indemnification
provided under this Article
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[******Certain information on this page has been omitted and filed
separately with the Securities and Exchange Commission. Confidential
treatment has been requested with respect to the omitted portions.]
VIII shall expire on the third anniversary of the Closing Date. The Seller shall
not be obligated to pay any amounts for indemnification under this Article VIII
until the aggregate indemnification obligation hereunder exceeds $15,000,
whereupon Seller shall be liable for all amounts for which indemnification may
be sought. Notwithstanding the foregoing, in no event shall the aggregate
liability of Seller to Global exceed [**] (including the Escrow Amount) (except
for successful claims made for any breach of the representations and warranties
of Seller under Sections 3.1, 3.2, 3.3, or 3.17 hereof, as to which the limit of
indemnification hereunder shall be the Purchase Price). However nothing in this
Article VIII shall limit Global or Seller in exercising or securing any remedies
provided by applicable common law with respect to the conduct of Seller or
Global in connection with this Agreement or in the amount of damages that it can
recover from the other in the event that Global successfully proves intentional
fraud or intentional fraudulent conduct in connection with this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 MODIFICATIONS. Any amendment, change or modification of this
Agreement shall be void unless in writing and signed by all parties hereto. No
failure or delay by any party hereto in exercising any right, power or privilege
hereunder (and no course of dealing between or among any of the parties) shall
operate as a waiver of any such right, power or privilege. No waiver of any
default on any one occasion shall constitute a waiver of any subsequent or other
default. No single or partial exercise of any such right, power or privilege
shall preclude the further or full exercise thereof.
9.2 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given when personally
delivered, or 48 hours after deposited in the United States mail, first-class,
postage prepaid, or by facsimile addressed to the respective parties hereto as
follows:
Global:
Global Imaging Systems Inc.
P.O. Box 273478
Tampa, Florida 33688-3478
Attention: Thomas Johnson, President
Fax No.: (813) 264-7877
Tel No.: (813) 960-5508
With a copy to:
Hogan & Hartson L.L.P.
Columbia Square
555 Thirteenth Street, NW
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Washington, D.C. 20004-1109
Attention: Christopher J. Hagan
Fax No.: (202) 637-5910
Tel No.: (202) 637-5771
The Company or Seller:
10315 163rd Avenue NE
Redmond, Washington 98052
Attention: Mr. Fred Woodard
Fax No.: ____________________
Tel No.: (425) 885-0840
or to such other address as to any party hereto as such party shall designate by
like notice to the other parties hereto.
9.3 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which
counterparts collectively shall constitute one instrument, and in making proof
of this Agreement, it shall never be necessary to produce or account for more
than one such counterpart.
9.4 EXPENSES. Each of the parties hereto will bear all costs,
charges and expenses incurred by such party in connection with this Agreement
and the consummation of the transactions contemplated herein, provided, however,
that Seller shall bear all costs and expenses of (i) any broker involved in this
transaction and (ii) all legal expenses of Seller or the Company with respect to
this Agreement and the transactions contemplated hereby.
9.5 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the Company, Global and Seller, their heirs,
representatives, successors, and permitted assigns, in accordance with the
terms hereof. This Agreement shall not be assignable by the Company or Seller
without the prior written consent of Global. This Agreement shall be assignable
by Global to a wholly-owned subsidiary of Global without the prior written
consent of Seller, but any such assignment shall not relieve Global of its
obligations hereunder.
9.6 ENTIRE AND SOLE AGREEMENT. This Agreement and the other
schedules and agreements referred to herein, constitute the entire agreement
between the parties hereto and supersede all prior agreements, representations,
warranties, statements, promises, information, arrangements and understandings,
whether oral or written, express or implied, with respect to the subject matter
hereof.
9.7 GOVERNING LAW. This Agreement and its validity, construction,
enforcement, and interpretation shall be governed by the substantive laws of the
State of Washington.
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9.8 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
Regardless of any investigation at any time made by or on behalf of any party
hereto or of any information any party may have in respect thereof, all
covenants, agreements, representations, and warranties and the related
indemnities made hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall survive the Closing for a period of three
(3) years, provided (a) the representations and warranties contained in Section
3.17 of this Agreement, and the related indemnities, shall survive the Closing
until the expiration of the applicable statutes of limitations for determining
or contesting Tax liabilities and (b) the representations and warranties
contained in Sections 3.1, 3.2 and 3.3 of this Agreement, and the related
indemnities, shall survive the Closing until expiration of the applicable
statute of limitations.
9.9 INVALID PROVISIONS. If any provision of this Agreement is deemed
or held to be illegal, invalid or unenforceable, this Agreement shall be
considered divisible and inoperative as to such provision to the extent it is
deemed to be illegal, invalid or unenforceable, and in all other respects this
Agreement shall remain in full force and effect; provided, however, that if any
provision of this Agreement is deemed or held to be illegal, invalid or
unenforceable there shall be added hereto automatically a provision as similar
as possible to such illegal, invalid or unenforceable provision and be legal,
valid and enforceable. Further, should any provision contained in this Agreement
ever be reformed or rewritten by any judicial body of competent jurisdiction,
such provision as so reformed or rewritten shall be binding upon all parties
hereto.
9.10 PUBLIC ANNOUNCEMENTS. Neither party shall make any public
announcement of the transactions contemplated hereby without the prior written
consent of the other party, which consent shall not be unreasonably withheld.
9.11 REMEDIES CUMULATIVE. The remedies of the parties under this
Agreement are cumulative and shall not exclude any other remedies to which any
party may be lawfully entitled.
9.12 WAIVER. No failure or delay on the part of any party in
exercising any right, power, or privilege hereunder or under any of the
documents delivered in connection with this Agreement shall operate as a waiver
of such right, power, or privilege; nor shall any single or partial exercise of
any such right, power, or privilege preclude any other or further exercise
thereof or the exercise of any other right, power, or privilege.
9.13 DISPUTE RESOLUTION. ALL DISPUTES BETWEEN SELLER AND GLOBAL WITH
RESPECT TO ANY PROVISION OF THIS AGREEMENT OR THE RIGHTS AND OBLIGATIONS OF
SELLER AND GLOBAL HEREUNDER (OTHER THAN DISPUTES INVOLVING ALLEGATIONS OF
INTENTIONAL FRAUD), WHICH CANNOT BE RESOLVED BY MUTUAL AGREEMENT, WILL BE
RESOLVED BY BINDING ARBITRATION IN ACCORDANCE WITH THE RULES OF THE AMERICAN
ARBITRATION ASSOCIATION IN SEATTLE, WASHINGTON, OR BY ANY OTHER MEANS OF
ALTERNATIVE DISPUTE RESOLUTION MUTUALLY
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AGREED UPON BY THE PARTIES OR, IF NOT AGREED, THEN BY ARBITRATION AT JUDICIAL
ARBITRATION MEDIATION SERVICE IN SEATTLE, WASHINGTON.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed as of the date and year first above written.
GLOBAL:
GLOBAL IMAGING SYSTEMS INC.
By: /s/ Thomas S. Johnson
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Thomas S. Johnson
President and Chief Executive Officer
THE COMPANY:
CASCADE OFFICE SYSTEMS, INC.
By: /s/ Fred Woodard
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Fred Woodard
President
SELLER:
/s/ Fred Woodard
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Fred Woodard
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EXHIBIT 10.25
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[**]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.***
STOCK PURCHASE AGREEMENT
BY AND AMONG
GLOBAL IMAGING SYSTEMS INC.,
ELECTRONIC SYSTEMS, INC.,
ELECTRONIC SYSTEMS OF RICHMOND, INC.
AND
THE SHAREHOLDERS OF
ELECTRONIC SYSTEMS OF RICHMOND, INC.
DATED DECEMBER 23, 1997
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<PAGE>
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS................................................... 1
1.1 Definitions....................................................... 1
ARTICLE II AGREEMENT OF PURCHASE AND SALE; CLOSING....................... 6
2.1 Agreement to Sell and Purchase.................................... 6
2.2 Purchase Price.................................................... 6
2.3 Payment of Purchase Price......................................... 6
2.4 Closing........................................................... 7
2.5 Escrow Arrangements............................................... 7
2.6 Purchase Price Adjustments........................................ 8
2.7 Closing Audit..................................................... 8
2.8 Post-Closing Purchase Price Adjustment............................ 8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE SELLERS....................................................... 9
3.1 Capitalization.................................................... 9
3.2 No Liens on Shares................................................ 9
3.3 Other Rights to Acquire Capital Stock............................. 9
3.4 Due Organization.................................................. 10
3.5 No Subsidiaries................................................... 10
3.6 Due Authorization................................................. 10
3.7 Financial Statements.............................................. 10
3.8 Certain Actions................................................... 11
3.9 Properties........................................................ 12
3.10 Licenses and Permits............................................. 13
3.11 Intellectual Property............................................ 13
3.12 Compliance with Laws............................................. 13
3.13 Insurance........................................................ 14
3.14 Employee Benefit Plans........................................... 14
(a) Employee Welfare Benefit Plans............................... 14
(b) Employee Pension Benefit Plans............................... 14
(c) Employment and Non-Tax Qualified Deferred Compensation
Arrangements................................................ 15
3.15 Contracts and Agreements......................................... 15
3.16 Claims and Proceedings........................................... 15
3.17 Taxes............................................................ 16
3.18 Personnel........................................................ 17
3.19 Business Relations............................................... 17
3.20 Accounts Receivable.............................................. 17
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3.21 Bank Accounts.................................................... 18
3.22 Warranties....................................................... 18
3.23 Brokers.......................................................... 18
3.24 Interest in Competitors, Suppliers, Customers, Etc............... 18
3.25 Indebtedness To and From Officers, Directors, Shareholders,
and Employees.................................................... 18
3.26 Undisclosed Liabilities.......................................... 18
3.27 Information Furnished............................................ 19
ARTICLE IV GLOBAL'S AND ESI'S REPRESENTATIONS
AND WARRANTIES........................................................ 19
4.1 Due Organization.................................................. 19
4.2 Due Authorization................................................. 19
4.3 No Brokers........................................................ 20
ARTICLE V COVENANTS OF THE COMPANY AND SELLERS.......................... 20
5.1 Consents of Others................................................ 20
5.2 Sellers' Efforts.................................................. 20
5.3 Powers of Attorney................................................ 20
ARTICLE VI POST-CLOSING COVENANTS........................................ 20
6.1 General........................................................... 20
6.2 Transition........................................................ 21
6.3 Confidentiality................................................... 21
6.4 Covenant Not to Compete........................................... 21
ARTICLE VII CONDITIONS TO OBLIGATION OF PARTIES TO
CONSUMMATE CLOSING.................................................... 23
7.1 Conditions to Global's and ESI's Obligations...................... 23
(a) Covenants, Representations and Warranties.................... 23
(b) Consents..................................................... 24
(c) Leases....................................................... 24
(d) Discharge of Indebtedness and Liens.......................... 24
(e) Material Adverse Change...................................... 24
(f) Transfer Taxes............................................... 24
(g) Financial Condition.......................................... 24
(h) Documents to be Delivered by the Company and Sellers......... 25
(i) Opinion of Sellers' Counsel........................... 24
(ii) Certificates.......................................... 25
(iii) Release............................................... 25
(iv) Escrow Agreement...................................... 25
(v) Employment Agreement.................................. 25
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(vi) Office Lease.......................................... 25
(vii) Stock Certificates.................................... 25
(viii) Collateral Assignment of Rights....................... 25
7.2 Conditions to Sellers and the Company's Obligations................ 25
(a) Covenants, Representations and Warranties..................... 25
(b) Consents...................................................... 26
(c) Documents to be Delivered by Global and ESI................... 26
(i) Opinion of Global's and ESI's Counsel................. 26
(ii) Certificates.......................................... 26
(iii) Escrow Agreement...................................... 26
(iv) Employment Agreement.................................. 26
(vi) Purchase Price........................................ 26
(d) Right of Reinvestment......................................... 26
ARTICLE VIII INDEMNIFICATION............................................... 27
8.1 Indemnification of Global.......................................... 27
8.2 Defense of Claims.................................................. 27
8.3 Escrow Claim....................................................... 28
8.4 Tax Audits, Etc.................................................... 28
8.5 Indemnification of Sellers......................................... 28
8.6 Limits on Indemnification.......................................... 29
ARTICLE IX MISCELLANEOUS................................................. 30
9.1 Modifications...................................................... 29
9.2 Notices............................................................ 29
9.3 Counterparts....................................................... 31
9.4 Expenses........................................................... 31
9.5 Binding Effect; Assignment......................................... 31
9.6 Entire and Sole Agreement.......................................... 31
9.7 Governing Law...................................................... 31
9.8 Survival of Representations, Warranties and Covenants.............. 31
9.9 Invalid Provisions................................................. 32
9.10 Public Announcements.............................................. 32
9.11 Remedies Cumulative............................................... 32
9.12 Waiver............................................................ 32
9.13 DISPUTE RESOLUTION................................................ 32
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LIST OF EXHIBITS
Exhibit A Form of Escrow Agreement
Exhibit B Form of Estoppel Certificate for Building Leases
Exhibit C Opinion of Sellers' Counsel
Exhibit D Sellers' Certificates
Exhibit E Release
Exhibit F McCulloch Executive Agreement
Exhibit G Opinion of Global's and ESI's Counsel
Exhibit H Global Certificate
Exhibit I Collateral Assignment of Rights
LIST OF SCHEDULES AND ANNEXES
Annex I Determination of Adjusted EBIT
Schedule 2.3 Sellers' Accounts
Schedule 2.6 Holders of Funded Indebtedness
Schedule 3.1 Ownership of Shares
Schedule 3.4 Articles and Bylaws
Schedule 3.7 Financial Statements
Schedule 3.8A Certain Actions
Schedule 3.8B Material Changes
Schedule 3.9 Properties
Schedule 3.10 Licenses and Permits
Schedule 3.11 Patents and Trademarks
Schedule 3.13 Insurance
Schedule 3.14 Employee Benefit Plans
Schedule 3.15 Contracts and Agreements
Schedule 3.16 Claims and Proceedings
Schedule 3.18 Personnel
Schedule 3.20 Accounts Receivable
Schedule 3.21 Bank Accounts
Schedule 3.22 Warranties
Schedule 3.25 Indebtedness with Officers, Directors and Shareholders
Schedule 3.26 Undisclosed Liabilities
Schedule 3.27 Information Furnished
Schedule 7.1(d) Indebtedness
The Exhibits and Schedules to this Stock Purchase Agreement are not included
with this Registration Statement on Form S-1. Global will provide these
exhibits and schedules upon the request of the Securities and Exchange
Commission.
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "AGREEMENT") is entered into as of
December 23, 1997, by and among GLOBAL IMAGING SYSTEMS INC., a Delaware
corporation ("GLOBAL"), ELECTRONIC SYSTEMS, INC., a Virginia corporation and
wholly-owned subsidiary of Global ("ESI"), ELECTRONIC SYSTEMS OF RICHMOND, INC.,
a Virginia corporation (the "COMPANY") and THE SHAREHOLDERS OF ELECTRONIC
SYSTEMS OF RICHMOND, INC. (each individually, a "SELLER," and collectively, the
"SELLERS").
W I T N E S S E T H:
WHEREAS, the Company is engaged in systems integration and the sales,
distribution and service of computer and networking equipment in the State of
Virginia (the "BUSINESS"); and
WHEREAS, Sellers collectively own 1,071 shares of the outstanding
Common Stock of the Company (the "SHARES"), which Shares constitute all of the
issued and outstanding capital stock of the Company; and
WHEREAS, ESI desires to purchase from Sellers and Sellers desire to
sell to ESI hereby all of the Shares owned by Sellers, all on the terms and
subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto covenant and agree
as follows:
ARTICLE I
DEFINITIONS
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1.1 DEFINITIONS. In this Agreement, the following terms have the
-----------
meanings specified or referred to in this Section 1.1 and shall be equally
-----------
applicable to both the singular and plural forms. Any agreement referred to
below shall mean such agreement as amended, supplemented and modified from time
to time to the extent permitted by the applicable provisions thereof and by this
Agreement.
"AFFILIATE" means, with respect to any Person, any other Person
which directly or indirectly controls, is controlled by or is under common
control with such Person.
"ADJUSTED EBIT" has the meaning specified in Section 2.3(c).
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"AUDITED CLOSING BALANCE SHEET" has the meaning specified in
Section 2.7.
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"BUILDINGS" shall mean collectively (i) the Company's office,
showroom and warehouse facilities located at Three James Center, 1051 East Cary
Street, Suite 1150, Richmond, Virginia and (ii) 901 N. Stuart Street, Arlington,
Virginia.
"BUSINESS" has the meaning specified in the first recital of the
Agreement
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. (S)(S) 9601 et seq., any amendments
-- ---
thereto, any successor statutes, and any regulations promulgated thereunder.
"CLOSING" means the closing of the transfer of the Shares from
the Sellers to ESI.
"CLOSING DATE" has the meaning specified in Section 2.4.
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"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning specified in the first paragraph of
this Agreement.
"CONFIDENTIAL INFORMATION" means all confidential information and
trade secrets of the Company including, without limitation, any of the same
comprising the identity, lists or descriptions of any customers, referral
sources or organizations; financial statements, cost reports or other financial
information; contract proposals, or bidding information; business plans and
training and operations methods and manuals; personnel records; fee structure;
and management systems, policies or procedures, including related forms and
manuals. Confidential Information shall not include any information (i) which
is disclosed pursuant to subpoena or other legal process, (ii) which has been
publicly disclosed, (iii) which subsequently becomes known to a third party not
subject to a confidentiality agreement with Global, ESI or the Company, or (iv)
which is subsequently disclosed by any third party not in breach of a
confidentiality agreement.
"CONTRACTS" has the meaning specified in Section 3.15.
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"COURT ORDER" means any judgment, order, award or decree of any
foreign, federal, state, local or other court or tribunal and any award in any
arbitration proceeding.
"EARN-OUT PAYMENT" has the meaning specified in Section 2.3(c).
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"EFFECTIVE DATE" has the meaning specified in Section 2.4.
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"EMPLOYMENT AGREEMENT" shall mean the executive agreement with
Mr. McCulloch to be entered into at Closing in the form of Exhibit F.
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"ENCUMBRANCE" means any lien, claim, charge, security interest,
mortgage, pledge, easement, conditional sale or other title retention agreement,
defect in title, restrictive covenant or other restrictions of any kind other
than Permitted Exceptions.
"ENVIRONMENTAL OBLIGATIONS" has the meaning specified in Section
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3.12.
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"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ESCROW AGENT" means the Richmond office of First Union National
Bank.
"ESCROW AGREEMENT" means the Escrow Agreement to be executed by
and among the Sellers, ESI and the Escrow Agent in the form of Exhibit A.
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"ESCROW PERIOD" has the meaning specified in Section 2.5.
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"ESCROW SUM" has the meaning specified in Section 2.5.
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"ESI" has the meaning specified in the first paragraph of this
Agreement.
"FINAL ADJUSTMENT AMOUNT" has the meaning specified in Section
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2.8.
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"FINANCIAL STATEMENTS" has the meaning specified in Section 3.7.
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"FUNDED INDEBTEDNESS" means all (i) indebtedness of the Company
for borrowed money or other interest-bearing indebtedness; (ii) capital lease
obligations of the Company; (iii) obligations of the Company to pay the deferred
purchase or acquisition price for goods or services, other than trade accounts
payable or accrued expenses in the ordinary course of business; (iv)
indebtedness of others guaranteed by the Company or secured by an Encumbrance on
the Company's property; or (v) indebtedness of the Company under extended credit
terms of more than 90 days from manufacturers provided to the Company.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"GLOBAL" has the meaning specified in the first paragraph of this
Agreement.
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"GOVERNMENTAL BODY" means any foreign, federal, state, local or
other governmental authority or regulatory body.
"GOVERNMENTAL PERMITS" has meaning specified in Section 3.10.
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"INDEPENDENT ACCOUNTANTS" has the meaning specified in Section
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2.7.
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"IRS" means the Internal Revenue Service.
"INDEMNIFIABLE COSTS" has the meaning specified in Section 8.1.
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"INDEMNIFIED PARTIES" has the meaning specified in Section 8.1.
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"INTELLECTUAL PROPERTY" has the meaning specified in Section
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3.11.
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"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means a
material adverse change or effect on the assets, properties, Business,
operations, liabilities, or financial condition of the Company, taken as a
whole. In determining whether a "MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE
EFFECT" has occurred, the quantitative amounts set forth at the end of Article
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III shall be conclusive.
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"MR. MCCULLOCH" means Timothy D. McCulloch, the largest
stockholder of the Company.
"MR. KAMAREK" means William G. Kamarek, the second largest
stockholder of the Company.
"NET WORTH" shall mean the difference between the Company's total
assets and its total liabilities as calculated in accordance with GAAP.
"NET WORTH ESTIMATE" means the amount of Net Worth reflected on
the Company's Preliminary Closing Balance Sheet.
"OSHA" means the Occupational Safety and Health Act, 29 U.S.C.
(S)(S) 651 et seq., any amendment thereto, and any regulations promulgated
-- ---
thereunder.
"PERMITTED EXCEPTION" means (a) liens for Taxes and other
governmental charges and assessments which are not yet due and payable, (b)
liens of landlords and liens of carriers, warehousemen, mechanics and
materialmen and other like liens arising in the ordinary course of business for
sums not yet due and payable, (c) other liens or imperfections on property which
are not material in amount or do not materially detract from the value or the
existing use of the property affected by such lien or imperfection, (d) such
statements of fact and exceptions shown on any title insurance policies
delivered to Global and ESI.
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"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or Governmental Body.
"PRELIMINARY ADJUSTMENT AMOUNT" has the meaning specified in
Section 2.6(b).
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"PRELIMINARY CLOSING BALANCE SHEET" shall mean the Company's best
estimate of the Company's balance sheet as of November 30, 1997. The
Preliminary Closing Balance Sheet shall be delivered to Global and ESI not less
than one (1) nor more than five (5) days prior to the Closing Date.
"PURCHASE PRICE" has the meaning specified in Section 2.2.
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"RCRA" means the Resource Conservation and Recovery Act, 42
U.S.C. (S)(S) 6901 et seq., and any successor statute, and any regulations
-- ---
promulgated thereunder.
"REQUIREMENTS OF LAWS" means any foreign, federal, state and
local laws, statutes, regulations, rules, codes or ordinances enacted, adopted,
issued or promulgated by any Governmental Body (including, without limitation,
those pertaining to electrical, building, zoning, environmental and occupational
safety and health requirements).
"SELLER" has the meaning set forth in the first paragraph of this
Agreement.
"SELLERS" has the meaning set forth in the first paragraph of
this Agreement.
"SHARES" means all of the issued and outstanding shares of the
capital stock of the Company.
"TAX" or "TAXES" means any federal, state, local or foreign
income, alternative or add-on minimum, gross income, gross receipts, windfall
profits, severance, property, production, sales, use, transfer, gains, license,
excise, employment, payroll, withholding or minimum tax, transfer, goods and
services, or any other tax, custom, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or any
penalty, addition to tax or additional amount imposed thereon by an Governmental
Body.
"TAX RETURN" means any return, report or similar statement
required to be filed with respect to any Taxes (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return and declaration of estimated Tax.
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"WORKING CAPITAL" shall mean the difference between the Company's
current assets and its current liabilities as calculated in accordance with
GAAP.
"WORKING CAPITAL ESTIMATE" shall mean the amount of Working
Capital reflected on the Preliminary Closing Balance Sheet.
ARTICLE II
AGREEMENT OF PURCHASE AND SALE; CLOSING
2.1 AGREEMENT TO SELL AND PURCHASE. Upon the basis of the
------------------------------
representations and warranties, for the consideration, and subject to the terms
and conditions set forth in this Agreement, Sellers agree to sell the Shares to
ESI and ESI agrees to purchase the Shares from Sellers.
2.2 PURCHASE PRICE. The total purchase price for the Shares (the
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"PURCHASE PRICE") shall be equal to $9,000,000, plus the amount, if any, of the
actual Earn-Out Payment, subject to any adjustment required to be made pursuant
to Section 2.6 or Section 2.8 below.
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2.3 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be payable
-------------------------
by ESI as follows:
(A) $8,100,000 of the Purchase Price will be paid at the Closing
(hereinafter defined), at the direction of each of the Sellers, in cash by wire
transfer of funds or by cashier's checks to the Sellers' accounts specified in
Schedule 2.3 (including the payment of $100,000 for the covenant not to compete
- ------------
provided in Section 6.4);
-----------
(B) $900,000 of the Purchase Price will be paid at the Closing
in cash by wire transfer of funds to the Escrow Agent to be held in escrow for
satisfaction of Sellers' indemnification obligations specified in Section 8.1 or
-----------
payment to the Sellers in accordance with the terms of Section 2.5 below; and
-----------
(C) an amount, if any, equal to: (i) five (5) multiplied by (ii)
the amount by which the Adjusted EBIT (as defined herein) of the Company for the
fiscal years ending March 31, 1999, 2000, 2001 and 2002 in the aggregate exceeds
$9,635,000 (the "EARN-OUT PAYMENT"); provided, however, the Earn-out Payment
shall never exceed $3,000,000. The Earn-out Payment, if earned, shall be paid in
cash on or before June 30, 2002; provided, however, that (i) in the event the
Adjusted EBIT of the Company for the fiscal year ending March 31, 1999 exceeds
$2,066,000, the Sellers shall be entitled to receive on or before June 30, 1999
a portion of the Earn-out Payment equal to $250,000; (ii) in the event the
Adjusted EBIT of the Company for the fiscal years ending March 31, 1999 and 2000
in the aggregate exceeds $4,373,920, the Sellers shall be entitled to receive on
or before June 30, 2000 an additional portion of the Earn-out Payment equal to
$250,000; (iii) in the event the Adjusted EBIT of the Company for the fiscal
years ending March 31, 1999, 2000 and 2001 in the aggregate exceeds $6,952,790,
the Sellers
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shall be entitled to receive on or before June 30, 2001 an additional portion of
the Earn-out Payment equal to $250,000; and (iv) in the event the Adjusted EBIT
of the Company for the fiscal years ending March 31, 1999, 2000, 2001 and 2002
in the aggregate exceeds $9,635,000, the Sellers shall be entitled to receive on
or before June 30, 2002 the Earn-out Payment, minus any portion of the Earn-out
Payment previously paid to Sellers in accordance with this Section 2.3(c).
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"ADJUSTED EBIT" shall mean earnings before interest and taxes of the
Company (prepared on an accrual basis of accounting in accordance with GAAP,
consistently applied), plus mutually agreed upon "ADJUSTMENTS" and "ADDBACKS"
computed in accordance with Annex I hereto.
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2.4 CLOSING. The Closing of the purchase and sale of the Shares
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contemplated by this Agreement shall take place at 11:00 a.m., Eastern time, at
the offices of Kaufman & Canoles in Norfolk, Virginia, on December 23, 1997, or
at such other date and time as the parties shall agree (the "CLOSING DATE"),
effective as of the later of November 30, 1997 or thirty (30) days prior to the
Closing Date (the "EFFECTIVE DATE"). If this Agreement is executed before
Closing, all additional agreements and instruments required for Closing shall be
executed by the necessary parties and placed in escrow with the Company's
counsel, together with this Agreement, pending receipt of the Purchase Price by
Sellers, and Global and ESI shall immediately take all actions necessary to
cause the Purchase Price to be paid to Sellers on the same day this Agreement is
so executed (or, if funding on the same day such execution occurs is impossible,
prior to 2:00 pm on the second following business day). Upon their receipt of
the Purchase Price, Sellers shall cause the Company's counsel to deliver
executed documents to the appropriate parties. Unless execution of this
Agreement and payment of the Purchase Price occur simultaneously, Global and ESI
waive all conditions to their obligations to consummate the Closing set forth in
Section 7.1, except for the conditions set forth in Section 7.1(h). Sellers
- ----------- --------------
shall have the absolute right to terminate this Agreement without any liability
whatsoever to Global or ESI if the Purchase Price is not paid to them in
accordance with the provisions of this Section 2.4. If informed by Mr.
-----------
McCulloch or Mr. Kamarek that Sellers have terminated this Agreement pursuant to
the preceding sentence, the Company's counsel shall deliver to Mr. McCulloch and
Mr. Kamarek all documents being held in escrow by them pursuant to this Section
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2.4, for destruction or other disposal as Mr. McCulloch, Mr. Kamarek and the
- ---
other Sellers deem appropriate.
2.5 ESCROW ARRANGEMENTS. Pursuant to the Escrow Agreement to be
-------------------
entered into among Sellers, ESI and the Escrow Agent, $900,000 of the Purchase
Price shall be delivered to the Escrow Agent at Closing. Such monies (which,
together with all interest accrued thereon, is hereinafter referred to as the
"ESCROW SUM") shall be held pursuant to the terms of the Escrow Agreement for
payment from such Escrow Sum of amounts, if any, owing by Sellers to ESI
pursuant to Section 2.8 or Article VIII below. At the conclusion of the period
-----------
ending on the 365th day after the Closing Date (such period being
referred to herein as the "ESCROW PERIOD"), such remaining portion of the Escrow
Sum not theretofore claimed by or paid to ESI in accordance with the terms of
the Escrow Agreement and this Agreement shall be
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disbursed to Sellers. Sellers and ESI agree that each will execute and deliver
such reasonable instruments and documents as are furnished by any other party to
enable such furnishing party to receive those portions of the Escrow Sum to
which the furnishing party is entitled under the provisions of the Escrow
Agreement and this Agreement.
2.6 PURCHASE PRICE ADJUSTMENTS.
--------------------------
(A) The Purchase Price payable pursuant to Section 2.3(a) above
--------------
will be reduced by the total amount of Funded Indebtedness, if any, assumed or
paid by ESI in cash by wire transfer of funds to the accounts of the holders of
Funded Indebtedness listed on Schedule 2.6 hereto to satisfy the Company's
------------
Funded Indebtedness with such institutions. ESI shall notify Mr. McCulloch and
Mr. Kamarek in writing at least two (2) business days before Closing of all
Funded Indebtedness, if any, ESI will be paying at Closing.
(B) The portion of the Purchase Price payable at Closing will be
reduced by the amount (the "PRELIMINARY ADJUSTMENT AMOUNT"), if any, which is
the greater of (i) the amount by which the Working Capital Estimate is less than
$1,000,000 and (ii) the amount by which the Net Worth Estimate is less than
$1,200,000.
(C) If the Closing shall occur more than 30 days after the
Preliminary Closing Balance Sheet date, then Sellers shall be paid at Closing an
additional amount equal to the daily interest on $9,000,000 at a rate equal to
the prime rate of NationsBank, N.A. for each additional day thereafter.
2.7 CLOSING AUDIT. Within 120 days following the Closing Date,
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there shall be delivered to Global, ESI and to Sellers an audit of the
Preliminary Closing Balance Sheet (the "AUDITED CLOSING BALANCE SHEET") of the
Company at and as of November 30, 1997. The Preliminary Closing Balance Sheet
shall be audited by Ernst & Young, LLP in accordance with GAAP. The cost of the
Audited Closing Balance Sheet shall be paid by Global. In the event that the
majority of the Sellers or Mr. McCulloch or Mr. Kamarek dispute any items on the
Audited Closing Balance Sheet within ten days after Sellers' receipt thereof,
the parties shall jointly select and retain an independent "Big Six" accounting
firm (the "INDEPENDENT ACCOUNTANTS") to review the disputed item(s) on the
Audited Closing Balance Sheet. The final determination of such disputed item(s)
by the Independent Accountants shall be reflected on the Audited Closing Balance
Sheet. The cost of retaining the Independent Accountants shall be borne by
Sellers; provided, however, that Global shall reimburse Sellers for the cost of
the Independent Accountants in the event that such review results in an increase
of more than $75,000 in the Company's Working Capital as reflected on the
Audited Closing Balance Sheet prepared by Ernst & Young, LLP.
2.8 POST-CLOSING PURCHASE PRICE ADJUSTMENT. Upon final completion
--------------------------------------
of the Audited Closing Balance Sheet, Ernst & Young, LLP or the Independent
Accountants, as the case may be, shall determine the greater of (i) the amount,
if any, by which the Working Capital reflected on the Audited Closing Balance
Sheet is less than $1,000,000 and (ii) the amount, if
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any, by which the Net Worth reflected on the Audited Closing Balance Sheet is
less than $1,200,000 (the "FINAL ADJUSTMENT AMOUNT"). In the event that the
Final Adjustment Amount exceeds the Preliminary Adjustment Amount, then the
Purchase Price will be adjusted downward and Sellers shall pay to ESI the amount
of such excess. Conversely, in the event that the Final Adjustment Amount is
less than the Preliminary Adjustment Amount, then the Purchase Price shall be
adjusted upward and ESI shall pay Sellers the lesser of (i) amount by which the
Final Adjustment Amount is less than the Preliminary Adjustment Amount or (ii)
the Preliminary Adjustment Amount. The post-closing adjustment to the Purchase
Price, if any, shall be paid by Sellers to ESI from the Escrow Sum or by ESI to
Sellers, as the case may be, in immediately available funds within ten (10)
business days of delivery of the Audited Closing Balance Sheet, unless Sellers
or Mr. McCulloch or Mr. Kamarek dispute any items on the Audited Closing Balance
Sheet, in which case it shall be paid within ten (10) business days after the
Independent Accountants finally determine the disputed item(s), and ESI delivers
to Sellers an Audited Closing Balance Sheet modified to reflect such
determination.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND SELLERS
The Company and Sellers, jointly and severally, represent and warrant
to Global and ESI that:
3.1 CAPITALIZATION. The authorized capital stock of the Company
--------------
consists of 1500 shares of Common Stock, 1,071 of which are issued and
outstanding. All of the Shares are duly authorized, validly issued, fully paid,
and nonassessable. All of the Shares are owned of record and beneficially by
Sellers in the amounts set forth on Schedule 3.1 hereto. None of the Shares was
------------
issued or will be transferred under this Agreement in violation of any
preemptive or preferential rights of any Person. The Sellers collectively own
all of the issued and outstanding capital stock of the Company.
3.2 NO LIENS ON SHARES. Except as shown on Schedule 3.1, Sellers
------------------ ------------
collectively own the Shares, free and clear of any Encumbrances other than the
rights and obligations arising under this Agreement, and none of the Shares is
subject to any outstanding option, warrant, call, or similar right of any other
Person to acquire the same, and none of the Shares is subject to any restriction
on transfer thereof except for restrictions imposed by applicable federal and
state securities laws. At Closing, Sellers will have full power and authority
to convey good and marketable title to the Shares, free and clear of any
Encumbrances.
3.3 OTHER RIGHTS TO ACQUIRE CAPITAL STOCK. Except as set forth in
-------------------------------------
this Agreement, there are no authorized or outstanding warrants, options, or
rights of any kind to acquire from the Company any equity or debt securities of
the Company, or securities convertible into or exchangeable for equity or debt
securities of the Company, and there are no shares of capital stock of the
Company reserved for issuance for any purpose nor any contracts,
-9-
<PAGE>
commitments, understandings or arrangements which require the Company to issue,
sell or deliver any additional shares of its capital stock.
3.4 DUE ORGANIZATION. The Company is a corporation duly organized,
----------------
validly existing, and in good standing under the laws of the State of Virginia
and has full corporate power and authority to carry on the Business as now
conducted and as proposed to be conducted through Closing. Complete and correct
copies of the Articles of Incorporation and Bylaws of the Company, and all
amendments thereto, have been heretofore delivered to Global and are attached
hereto as Schedule 3.4. The Company is qualified to do business in Virginia and
------------
in each jurisdiction in which the nature of the Business or the ownership of its
properties requires such qualification except where the failure to be so
qualified does not and could not reasonably be expected to have a Material
Adverse Effect.
3.5 NO SUBSIDIARIES. The Company does not directly or indirectly
---------------
have any subsidiaries or any direct or indirect ownership interests in any
Person. The Sellers do not own any other Person engaged in the Business, except
for certain of the Sellers' ownership interests in Global and formerly in ESI,
as described in Schedule 3.5.
------------
3.6 DUE AUTHORIZATION. The Company and the Sellers each have full
-----------------
power and authority to execute, deliver and perform this Agreement and to carry
out the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action of the Company.
This Agreement has been duly and validly executed and delivered by the Company
and Sellers and constitutes the valid and binding obligations of the Company and
Sellers, enforceable in accordance with its terms, except to the extent that
enforceability may be limited by laws affecting creditors' rights and debtors'
obligations generally, and legal limitations relating to remedies of specific
performance and injunctive and other forms of equitable relief. The execution,
delivery, and performance of this Agreement (as well as all other instruments,
agreements, certificates, or other documents contemplated hereby) by the Company
and Sellers, do not (a) violate any Requirements of Laws or any Court Order of
any Governmental Body applicable to the Company or Sellers, or their respective
property, (b) violate or conflict with, or permit the cancellation of, or
constitute a default under, any material agreement to which the Company or
Sellers are a party, or by which any of them or any of their respective property
is bound, (c) permit the acceleration of the maturity of any material
indebtedness of, or indebtedness secured by the property of, the Company or
Sellers, or (d) violate or conflict with any provision of the charter or bylaws
of the Company.
3.7 FINANCIAL STATEMENTS. The following Financial Statements (herein
--------------------
so called) of the Company have been delivered to Global and ESI by the Company:
balance sheets of the Company as of December 31, 1994, December 31, 1995,
December 31, 1996 and October 31, 1997, and statements of income of the Company
for the fiscal years ended December 31, 1994, December 31, 1995 and December 31,
1996 and for the 10 month period ending October 31, 1997.
-10-
<PAGE>
The Financial Statements have been prepared in accordance with GAAP throughout
the periods indicated (except for variations from GAAP acceptable to the
Company's independent accountants which do not, in the aggregate, cause any of
the Financial Statements to materially understate the value or performance of
the Company, taken as a whole) and fairly present the financial position,
results of operations and changes in financial position of the Company as of the
indicated dates and for the indicated periods, subject to the matters set forth
in Schedule 3.7 and (in the case of the 6 month Financial Statements) to year
------------
end accruals made in the ordinary course of the Business which are not
materially adverse and which are consistent with past practices. Except to the
extent reflected or provided for in the Financial Statements or the notes
thereto and obligations and liabilities incurred in the ordinary course of
business since the date of the last of such Financial Statements, the Company
has no liabilities required by GAAP to be reflected on the Company's balance
sheet or notes thereto that are not so reflected, nor any other obligations
(whether absolute, contingent, or otherwise) which are (individually or in the
aggregate) material (in amount or to the conduct of the Business); and neither
the Company nor Sellers have knowledge of any basis for the assertion of any
such liability or obligation. Since December 31, 1996, there has been no
Material Adverse Change except as disclosed on Schedule 3.8B or any of the
-------------
Financial Statements or notes thereunder.
3.8 CERTAIN ACTIONS. Since June 30, 1997, the Company has not,
---------------
except as disclosed on Schedule 3.8A hereto or any of the Financial Statements
-------------
or notes thereto: (a) discharged or satisfied any Encumbrance or paid any
obligation or liability, absolute or contingent, other than current liabilities
incurred and paid in the ordinary course of the Business; (b) paid or declared
any dividends or distributions, or purchased, redeemed, acquired, or retired any
stock or indebtedness from any stockholder; (c) made or agreed to make any loans
or advances or guaranteed or agreed to guarantee any loans or advances to any
party whatsoever; (d) suffered or permitted any Encumbrance to arise or be
granted or created against or upon any of its assets, real or personal, tangible
or intangible; (e) canceled, waived, or released or agreed to cancel, waive, or
release any of its debts, rights, or claims against third parties in excess of
$25,000 individually or $50,000 in the aggregate; (f) sold, assigned, pledged,
mortgaged, or otherwise transferred, or suffered any material damage,
destruction, or loss (whether or not covered by insurance) to, any assets
(except in the ordinary course of the Business); (g) amended its charter or
bylaws; (h) paid or made a commitment to pay any severance or termination
payment to any employee or consultant; (i) made any material change in its
method of management or operation or method of accounting; (j) made any capital
expenditures, including, without limitation, replacements of equipment in the
ordinary course of the Business, or entered into commitments therefor, except
for capital expenditures or commitments therefor which do not, in the aggregate,
exceed $100,000; (k) made any investment or commitment therefor in any Person;
(l) made any payment or contracted for the payment of any bonus or other
compensation or personal expenses, other than (A) wages and salaries and
business expenses paid in the ordinary course of the Business, and (B) wage and
salary adjustments made in the ordinary course of the Business for employees who
are not officers, directors, or shareholders of the Company; (m) made, amended,
or entered into any written employment contract or created or made any material
change in any bonus, stock option, pension, retirement, profit sharing or other
employee benefit plan or arrangement; (n) materially amended or experienced a
termination
-11-
<PAGE>
of any material contract, agreement, lease, franchise or license to which the
Company is a party that would or could reasonably be expected to have a Material
Adverse Effect, except in the ordinary course of the Business; or (o) entered
into any other material transactions that would or could reasonably be expected
to have a Material Adverse Effect except in the ordinary course of the Business.
Since June 30, 1997, except as disclosed on Schedule 3.8B hereto or any of the
-------------
Financial Statements or notes thereto, there has not been (a) any Material
Adverse Change including, but not limited to, the loss of any material customers
or suppliers of the Company, or in any material assets of the Company, (b) any
extraordinary contracts, commitments, orders or rebates, (c) any strike,
material slowdown, or demand for recognition by a labor organization by or with
respect to any of the employees of the Company, or (d) any shutdown, material
slow-down, or cessation of any material operations conducted by, or constituting
part of, the Company, nor has the Company agreed to do any of the foregoing.
3.9 PROPERTIES. Attached hereto as Schedule 3.9 is a list containing
---------- ------------
a description of each interest in real property (including, without limitation,
leasehold interests) and each item of personal property utilized by the Company
in the conduct of the Business having a book value in excess of $25,000 as of
the date hereof. Except for Permitted Exceptions or as expressly set forth on
Schedule 3.9, such real and personal properties are free and clear of
- ------------
Encumbrances other than Encumbrances (taken as a whole) which do not materially
detract from the value of such properties or materially interfere with their
intended use. Sellers and the Company have delivered to Global a lien search
obtained from the Virginia State Corporation Commission of all UCC liens of
record against the Company's personal property in the Commonwealth of Virginia.
All of the properties and assets necessary for continued operation of the
Business as currently conducted are owned, leased or licensed by the Company and
are suitable for the purposes for which they are currently being used. With the
exception of used equipment and inventory valued at no more than $10,000 on the
Company's Financial Statements, the physical properties of the Company,
including the real properties leased by the Company, are in good operating
condition and repair, normal wear and tear excepted, and are free from any
defects of a material nature. Except for Permitted Exceptions or as otherwise
set forth on Schedule 3.9, the Company has full and unrestricted legal and
------------
equitable title to all such properties and assets. The operation of the
properties and Business of the Company in the manner in which they are now and
have been operated does not violate any zoning ordinances, municipal
regulations, or other Requirements of Laws, except for any such violations which
would not, individually or in the aggregate, have a Material Adverse Effect.
Except for Permitted Exceptions or as set forth on Schedule 3.9, no restrictive
------------
covenants, easements, rights-of-way, or regulations of record impair the uses of
the properties of the Company for the purposes for which they are now operated.
All leases of real or personal property by the Company are legal, valid,
binding, enforceable and in full force and effect and will remain legal, valid,
binding, enforceable and in full force and effect on identical terms immediately
following the Closing, except to the extent that enforceability may be limited
by laws affecting creditors' rights and debtors' obligations generally, and
legal limitations relating to remedies of specific performance and injunctive
and other forms of equitable relief. All facilities owned or leased by the
Company have received all approvals of any Governmental Body (including
Governmental
-12-
<PAGE>
Permits) required in connection with the operation thereof and have
been operated and maintained in accordance with all Requirements of Laws.
3.10 LICENSES AND PERMITS. Attached hereto as Schedule 3.10 is a
-------------------- -------------
list of all Material licenses, certificates, privileges, immunities, approvals,
franchises, authorizations and permits held or applied for by the Company from
any Governmental Body (herein collectively called "GOVERNMENTAL PERMITS") the
absence of which could have a Material Adverse Effect. The Company has complied
in all material respects with the terms and conditions of all such Governmental
Permits, and the Company has not received written notifications from any
Governmental Body of violation of any such Governmental Permit or the
Requirements of Laws governing the issuance or continued validity thereof other
than violations (if any) which would not individually or in the aggregate have a
Material Adverse Effect. To the best knowledge of Sellers and the Company, no
additional Governmental Permit is required from any Governmental Body thereof in
connection with the conduct of the Business which Governmental Permit, if not
obtained, would have a Material Adverse Effect.
3.11 INTELLECTUAL PROPERTY. Attached hereto as Schedule 3.11 is a
--------------------- -------------
list and brief description of all patents, trademarks, tradenames, copyrights,
licenses, computer software or data (other than general commercial software) or
applications therefor owned by or registered in the name of the Company or in
which the Company has any rights, licenses, or immunities, the loss of which
could have a Material Adverse Effect (collectively, the "INTELLECTUAL
PROPERTY"). The Company has furnished Global and ESI with copies of all license
agreements to which the Company is a party, either as licensor or licensee, with
respect to any Intellectual Property. Except as described on Schedule 3.11
-------------
hereto, the Company has good title to or the right to use such Intellectual
Property and all inventions, processes, designs, formulae, trade secrets and
know-how necessary for the conduct of their Business, in their Business as
presently conducted without the payment of any royalty or similar payment, and
the Company is not materially infringing on any patent right, tradename,
copyright or trademark right or other Intellectual Property right of others, and
neither the Company nor Sellers are aware of any infringement by others of any
such rights owned by the Company.
3.12 COMPLIANCE WITH LAWS. The Company has (i) complied in all
--------------------
material respects with all Requirements of Laws, Governmental Permits and Court
Orders applicable to the Business and has filed with the proper Governmental
Bodies all statements and reports required by all Requirements of Laws,
Governmental Permits and Court Orders to which the Company or any of its
employees (because of their activities on behalf of the Company) are subject and
(ii) conducted the Business and are in compliance in all material respects with
all federal, state and local energy, public utility, health, safety and
environmental Requirements of Laws, Governmental Permits and Court Orders
including the Clean Air Act, the Clean Water Act, RCRA, the Safe Drinking Water
Act, CERCLA, OSHA, the Toxic Substances Control Act and any similar state, local
or foreign laws (collectively "ENVIRONMENTAL OBLIGATIONS") and all other
federal, state, local or foreign governmental and regulatory requirements,
except where any such failure to comply or file would not, in the aggregate,
have a Material Adverse Effect. The Company has not received written
notification of any claim by any Governmental Body (and, to
-13-
<PAGE>
the best knowledge of the Company and Sellers, no such claim is anticipated) to
the effect that the Business fails to comply, in any respect, with any
Requirements of Laws, Governmental Permit or Environmental Obligation or that a
Governmental Permit or Court Order is necessary in respect thereto.
3.13 INSURANCE. Attached hereto as Schedule 3.13 is a list of all
--------- -------------
coverages for fire, liability, or other forms of insurance and all fidelity
bonds held by or applicable to the Company. Copies of the binder for all such
insurance policies have been delivered to Global. To the best of the Company's
and Sellers' knowledge and belief, no event relating to the Company has occurred
which will result in (i) cancellation of any such insurance coverages; (ii) a
retroactive upward adjustment of premiums under any such insurance coverages; or
(iii) any prospective upward adjustment in such premiums. All of such insurance
coverages will remain in full force and effect following the Closing.
3.14 EMPLOYEE BENEFIT PLANS.
----------------------
(A) EMPLOYEE WELFARE BENEFIT PLANS. Except as disclosed on
------------------------------
Schedule 3.14, the Company does not maintain or contribute to any "employee
- -------------
welfare benefit plan" as such term is defined in Section 3(1) of ERISA. With
respect to each such plan, (i) the plan is in material compliance with ERISA;
(ii) the plan has been administered in accordance with its governing documents;
(iii) neither the plan, nor any fiduciary with respect to the plan, has engaged
in any "prohibited transaction" as defined in Section 406 of ERISA other than
any transaction subject to a statutory or administrative exemption; (iv) except
for the processing of routine claims in the ordinary course of administration,
there is no material litigation, arbitration or disputed claim outstanding; and
(v) all premiums due on any insurance contract through which the plan is funded
have been paid.
(B) EMPLOYEE PENSION BENEFIT PLANS. Except as disclosed in
------------------------------
Schedule 3.14, the Company does not maintain or contribute to any arrangement
- -------------
that is or may be an "employee pension benefit plan" relating to employees, as
such term is defined in Section 3(2) of ERISA. With respect to each such plan:
(i) the plan is qualified under Section 401(a) of the Code, and any trust
through which the plan is funded meets the requirements to be exempt from
federal income tax under Section 501(a) of the Code; (ii) the plan is in
material compliance with ERISA; (iii) the plan has been administered in
accordance with its governing documents as modified by applicable law; (iv) the
plan has not suffered an "accumulated funding deficiency" as defined in Section
412(a) of the Code; (v) the plan has not engaged in, nor has any fiduciary with
respect to the plan engaged in, any "prohibited transaction" as defined in
Section 406 of ERISA or Section 4975 of the Code other than a transaction
subject to statutory or administrative exemption; (vi) the plan has not been
subject to a "reportable event" (as defined in Section 4043(b) of ERISA), the
reporting of which has not been waived by regulation of the Pension Benefit
Guaranty Corporation; (vii) no termination or partial termination of the plan
has occurred within the meaning of Section 411(d)(3) of the Code; (viii) all
contributions required to be made to the plan or under any applicable collective
bargaining agreement have been made to or on behalf of the plan; (ix) there is
no material litigation, arbitration or disputed claim outstanding;
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<PAGE>
and (x) all applicable premiums due to the Pension Benefit Guaranty Corporation
for plan termination insurance have been paid in full on a timely basis.
(C) EMPLOYMENT AND NON-TAX QUALIFIED DEFERRED COMPENSATION
------------------------------------------------------
ARRANGEMENTS. Except as disclosed in Schedule 3.14, the Company does not
- ------------ -------------
maintain or contribute to any retirement or deferred or incentive compensation
or stock purchase, stock grant or stock option arrangement entered into between
the Company and any current or former officer, consultant, director or employee
of the Company that is not intended to be a tax qualified arrangement under
Section 401(a) of the Code.
3.15 CONTRACTS AND AGREEMENTS. Attached hereto as Schedule 3.15 is
------------------------ -------------
a list and brief description of all written or oral contracts, commitments,
leases, and other agreements (including, without limitation, promissory notes,
loan agreements, and other evidences of indebtedness, guarantees, agreements
with distributors, suppliers, dealers, franchisors and customers, and service
agreements) to which the Company is a party or by which the Company or its
properties are bound pursuant to which the obligations thereunder of either
party thereto are, or are contemplated as being, for any one contract $50,000 or
greater (collectively, the "CONTRACTS"). The Company is not and, to the best
knowledge of Sellers and the Company, no other party thereto is in default (and
no event has occurred which, with the passage of time or the giving of notice,
or both, would constitute a default by the Company) under any of the Contracts,
and the Company has not waived any right under any of the Contracts, except as
noted on Schedule 3.15. All of the Contracts to which the Company is a party
-------------
are legal, valid, binding, enforceable and in full force and effect and will
remain legal, valid, binding, enforceable and in full force and effect on
identical terms immediately after the Closing, except to the extent that
enforceability may be limited by laws affecting creditors' rights and debtors'
obligations generally, and legal limitations relating to remedies of specific
performance and injunctive and other forms of equitable relief. Except as set
forth in Schedule 3.15, the Company has not guaranteed any obligations of any
-------------
other Person. To the best of Seller's and the Company's Knowledge, no material
manufacturer of office equipment sold by the Company will cease doing business
with the Company immediately following the Closing.
3.16 CLAIMS AND PROCEEDINGS. Attached hereto as Schedule 3.16 is a
---------------------- -------------
list and brief description of all claims, actions, suits, proceedings, or
investigations pending or, to the best knowledge and belief of the Sellers or
the Company, threatened against or directly affecting the Company or any of its
properties or assets, at law or in equity, or before or by any court,
municipality or other Governmental Body. Except as set forth on Schedule 3.16,
-------------
none of such claims, actions, suits, proceedings, or investigations, if
adversely determined, will result in any liability or loss which will have a
Material Adverse Effect on the Company. The Company has not been and the
Company is not now, subject to any Court Order, stipulation, or consent of or
with any court or Governmental Body. No inquiry, action or proceeding has been
instituted or, to the best knowledge and belief of the Sellers or the Company,
threatened or asserted against the Sellers or the Company to restrain or
prohibit the carrying out of the transactions contemplated by this Agreement or
to challenge the validity of such transactions or any part thereof or seeking
-15-
<PAGE>
damages on account thereof. To the best knowledge of the Company and Sellers,
except as set forth on Schedule 3.16, there is no basis for any such valid claim
-------------
or action.
3.17 TAXES.
-----
(A) All Federal, foreign, state, county and local income, gross
receipts, excise, property, franchise, license, sales, use, withholding and
other Taxes due from the Company on or before the Closing have been paid and all
Tax Returns which are required to be filed by the Company on or before the date
hereof have been filed within the time and in the manner provided by law, and
all such Tax Returns are true and correct and accurately reflect the Tax
liabilities of the Company. No Tax Returns of the Company or any of the Sellers
are presently subject to an extension of the time to file. All Taxes,
assessments, penalties, and interest of the Company which have become due
pursuant to such Tax Returns or any assessments received have been paid or
adequately accrued on the Company's Financial Statements. The provisions for
Taxes reflected on the balance sheets contained in the Financial Statements are
adequate to cover all of the Company's Tax liabilities for the respective
periods then ended and all prior periods. The Company has not executed any
presently effective waiver or extension of any statute of limitations against
assessments and collection of Taxes, and there are no pending or threatened
claims, assessments, notices, proposals to assess, deficiencies, or audits with
respect to any such Taxes of which any of the Sellers or the Company are aware.
For Governmental Bodies with respect to which the Company does not file Tax
Returns, no such Governmental Body has given the Company written notification
that the Company is or may be subject to taxation by that Governmental Body.
The Company has withheld and paid all Taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee, shareholder,
creditor, independent contractor or other party. There are no Tax liens on any
of the property or assets of the Company.
(B) Neither the Company nor any other corporation has filed an
election under Section 341(f) of the Code that is applicable to the Company or
any assets held by the Company. The Company has not made any payments, is not
obligated to make any payments, and is not a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Code Sec. 280G. The Company has not been a United States real
property holding corporation within the meaning of Code Sec. 897(c)(2) during
the applicable period specified in Code Sec. 897(c)(1)(A)(ii). The Company is
not a party to any Tax allocation or sharing agreement. The Company has not and
has never been (nor does the Company have any liability for unpaid Taxes because
it once was) a member of an affiliated group during any part of which return
year any corporation other than the Company also was a member of the affiliated
group. The Company has made an election to be taxed under subchapter S of the
Code. The Company's election to be taxed under subchapter S of the Code is
valid, legally binding and in full force and effect.
(C) No transaction contemplated by this Agreement is subject to
withholding under Section 1445 of the Code and no stock transfer taxes,
real estate transfer taxes
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<PAGE>
or similar taxes will be imposed upon the transfer and sale of the Shares
pursuant to this Agreement.
3.18 PERSONNEL. Attached hereto as Schedule 3.18 is a list of
--------- -------------
the names and annual rates of compensation of the directors and executive
officers of the Company, and of the employees of the Company whose annual rates
of compensation during the fiscal year ended December 31, 1996 (including base
salary, bonus and incentive pay) exceed (or by December 31, 1997 are expected to
exceed) $60,000. Schedule 3.18 also summarizes the bonus, profit sharing,
-------------
percentage compensation, company automobile, club membership, and other like
benefits, if any, paid or payable to such directors, officers, and employees
during the Company's fiscal year ended December 31, 1996 and to the date hereof.
Schedule 3.18 also contains a brief description of all material terms of
- -------------
employment agreements to which the Company is a party and all severance benefits
which any director, officer or employee of the Company is or may be entitled to
receive. The employee relations of the Company are generally good and there is
no pending or, to the best knowledge of Sellers or the Company, threatened labor
dispute or union organization campaign. None of the employees of the Company
are represented by any labor union or organization. The Company is in
compliance in all material respects with all Requirements of Laws respecting
employment and employment practices, terms and conditions of employment, and
wages and hours, and are not engaged in any unfair labor practices. Neither the
Company or Sellers have been advised, or has good reason to believe, that any of
the persons whose names are set forth on Schedule 3.18 or any other employee
-------------
will not agree to remain employed by the Company after the consummation of the
transactions contemplated hereby. There is no unfair labor practice claim
against the Company before the National Labor Relations Board, or any strike,
dispute, slowdown, or stoppage pending or, to the best knowledge of the Company
and Sellers, threatened against or involving the Company, and none has occurred.
3.19 BUSINESS RELATIONS. Neither the Company nor Sellers knows or
------------------
has good reason to believe that any customer or supplier of the Company will
cease to do business with the Company after the consummation of the transactions
contemplated hereby in the same manner and at the same levels as previously
conducted with the Company except for any reductions which do not result in a
Material Adverse Change. Neither Sellers or the Company have received any
written notice of any material disruption (including delayed deliveries or
allocations by suppliers) in the availability of any material portion of the
materials used by the Company nor are the Company or Sellers aware of any facts
which could lead them to believe that the Business will be subject to any such
material disruption.
3.20 ACCOUNTS RECEIVABLE. All of the accounts, notes, and loans
-------------------
receivable that have been recorded on the books of the Company are bona fide and
represent amounts validly due for goods sold or services rendered and except as
disclosed on Schedule 3.20 all such amounts (net of any allowance for doubtful
-------------
accounts, plus an additional allowance of $25,000) will be collected in full
within 180 days following the Closing Date. Except as disclosed on Schedule
--------
3.20 hereto (a) all of such accounts, notes, and loans receivable are free and
- ----
clear of any Encumbrances; (b) no claims of offset have been asserted in writing
against any of such accounts, notes, or loans receivable; and (c) none of the
obligors of such accounts, notes, or
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<PAGE>
loans receivable has given written notice that it will or may refuse to pay the
full amount or any portion thereof.
3.21 BANK ACCOUNTS. Attached hereto as Schedule 3.21 is a list of
------------- -------------
all banks or other financial institutions with which the Company has an account
or maintains a safe deposit box, showing the type and account number of each
such account and safe deposit box and the names of the persons authorized as
signatories thereon or to act or deal in connection therewith.
3.22 WARRANTIES. Except for warranty claims that are typical and
----------
in the ordinary course of the Business, no written claim for breach of product
or service warranty to any customer has been made against the Company since
January 1, 1997. To the best knowledge of Sellers and the Company, no state of
facts exists, and no event has occurred, which could reasonably be expected to
form the basis of any present claim against the Company for liability on account
of any express or implied warranty to any third party in connection with
products sold or services rendered by the Company.
3.23 BROKERS. Neither the Company nor Sellers have engaged, or
-------
caused to be incurred any liability to any finder, broker, or sales agent in
connection with the origin, negotiation, execution, delivery, or performance of
this Agreement or the transactions contemplated hereby.
3.24 INTEREST IN COMPETITORS, SUPPLIERS, CUSTOMERS, ETC. Except as
--------------------------------------------------
set forth in Schedule 3.5, no officer, director, or shareholder of the Company
------------
or any affiliate of any such officer, director, or shareholder, has any
ownership interest in any competitor, supplier, or customer of the Company
(other than ownership of securities of a publicly-held corporation of which such
Person owns, or has real or contingent rights to own, less than one percent of
any class of outstanding securities) or any property used in the operation of
the Business.
3.25 INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS, SHAREHOLDERS, AND
---------------------------------------------------------------
EMPLOYEES. Attached hereto as Schedule 3.25 is a list and brief description
- --------- -------------
of the payment terms of all indebtedness of the Company to officers, directors,
shareholders, and employees of the Company and all indebtedness of officers,
directors, shareholders, and employees of the Company to the Company, excluding
indebtedness for travel advances or similar advances for expenses incurred on
behalf of and in the ordinary course of the Business, consistent with past
practices.
3.26 UNDISCLOSED LIABILITIES. Except as indicated in the Schedules
-----------------------
hereto, the Company does not have any material liabilities (whether absolute,
accrued, contingent or otherwise), of a nature required by GAAP to be reflected
on a corporate balance sheet or disclosed in the notes thereto, except such
liabilities which are accrued or reserved against in the Financial Statements or
disclosed in the notes thereto, including without limitation any accounts
payable or service liabilities of the Company incurred prior to the Closing
Date, other than liabilities incurred in the ordinary course of business since
the date of the latest of such Financial Statements.
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<PAGE>
3.27 INFORMATION FURNISHED. The Company and Sellers have made
---------------------
available to Global and ESI true and correct copies of all material corporate
records of the Company and all material agreements, documents, and other items
listed on the Schedules to this Agreement or referred to in Section 2 of this
---------
Agreement, and neither this Agreement, the Schedules hereto, nor any written
information, instrument, or document delivered to Global and ESI pursuant to
this Agreement contains any untrue statement of a material fact or omits any
material fact necessary to make the statements herein or therein, as the case
may be, not misleading.
In making the representations and warranties set forth above, the term
"Material" or "material" shall, where appropriate in context of its use, be
deemed to mean an amount of money greater than $35,000, the terms "Material
Adverse Change," "material adverse trend," "Material Adverse Effect," or any
other term of like import shall mean the occurrence of any single event, or any
series of related events, or set of related circumstances, which proximately
causes an actual, direct economic loss to the Company, taken as a whole, in
excess of $20,000 per occurrence or $35,000 in the aggregate. The term
"knowledge" shall mean actual knowledge after reasonable inquiry of the
employees of the Company with responsibility for the applicable subject matter.
ARTICLE IV
GLOBAL'S AND ESI'S REPRESENTATIONS AND WARRANTIES
Global and ESI represent and warrant to Sellers as follows:
4.1 DUE ORGANIZATION. Each of Global and ESI is a corporation
----------------
duly organized, validly existing, and in good standing under the laws of the
State of Delaware and Virginia, respectively, and each has full corporate power
and authority to execute, deliver and perform this Agreement and to carry out
the transactions contemplated hereby.
4.2 DUE AUTHORIZATION. The execution, delivery and performance
-----------------
of this Agreement has been duly authorized by all necessary corporate action of
Global and ESI, and the Agreement has been duly and validly executed and
delivered by Global and ESI and constitutes the valid and binding obligation of
Global and ESI, enforceable in accordance with its terms, except to the extent
that enforceability may be limited by laws affecting creditors' rights and
debtors' obligations generally, and legal limitations relating to remedies of
specific performance and injunctive and other forms of equitable relief. The
execution, delivery, and performance of this Agreement (as well as all other
instruments, agreements, certificates or other documents contemplated hereby) by
Global and ESI, do not (a) violate any Requirements of Laws or Court Order of
any Governmental Body applicable to Global or its property or ESI or its
property, (b) violate or conflict with, or permit the cancellation of, or
constitute a default under any agreement to which Global or ESI is a party or by
which it or its property is bound, (c) permit the acceleration of the maturity
of any indebtedness of, or any indebtedness secured by the property
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of, Global or ESI, or (d) violate or conflict with any provision of the charter
or bylaws of Global or ESI.
4.3 NO BROKERS. Neither Global nor ESI has engaged, or caused
----------
to be incurred any liability to any finder, broker or sales agent in connection
with the origin, negotiation, execution, delivery, or performance of this
Agreement or the transactions contemplated hereby.
4.4 INVESTMENT. ESI will acquire the Shares for investment and for
----------
its own account and not with a view to the distribution thereof.
ARTICLE V
COVENANTS OF THE COMPANY AND SELLERS
5.1 CONSENTS OF OTHERS. Prior to the Closing, the Company and
------------------
Sellers shall use their best efforts to obtain and to cause the Company to
obtain all authorizations, consents and permits required of the Company and
Sellers to permit them to consummate the transactions contemplated by this
Agreement. The Sellers shall also use their best efforts to obtain the written
consent of the lessors of the Buildings to the transactions contemplated hereby.
5.2 SELLERS' EFFORTS. The Company and Sellers shall use all
----------------
reasonable efforts to cause all conditions for the Closing to be met.
5.3 POWERS OF ATTORNEY. The Company and Sellers shall cause the
------------------
Company to terminate at or prior to Closing all powers of attorney granted by
the Company, other than those relating to service of process, qualification or
pursuant to governmental regulatory or licensing agreements, or representation
before the IRS or other government agencies.
ARTICLE VI
POST-CLOSING COVENANTS
6.1 GENERAL. In case at any time after the Closing any further
-------
action is legally necessary or reasonably desirable (as determined by Global and
Mr. McCulloch and Mr. Kamarek) to carry out the purposes of this Agreement, each
of the parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other party
reasonably may request, all at the sole cost and expense of the requesting party
(unless the requesting party is entitled to indemnification therefor under
Article VIII below). The Sellers acknowledge and agree that from and after the
Closing Global and ESI will be entitled to possession of all documents, books,
records, agreements, and financial data of any sort relating to the Company,
which shall be maintained at the chief executive office of the Company;
provided, however, that each Seller shall be entitled to reasonable access to
and to make copies of such books and records at his or her sole cost and expense
and Global or ESI will
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<PAGE>
maintain all of the same for a period of at least three (3) years after Closing.
Thereafter, the Company will offer such documentation to Sellers before disposal
thereof.
6.2 TRANSITION. For a period of four (4) years following Closing,
----------
the Sellers will not take any action that primarily is designed or intended to
have the effect of discouraging any lessor, licensor, customer, supplier, or
other business associate of the Company from maintaining the same business
relations with the Company after the Closing as it maintained with the Company
prior to the Closing, if such action could reasonably be expected to have a
Material Adverse Effect. For a period of four (4) years following Closing, the
Sellers will refer all customer inquiries relating to the Business to the
Company.
6.3 CONFIDENTIALITY. The Sellers will treat and hold as such all
---------------
Confidential Information, refrain from using any of the Confidential Information
except in connection with this Agreement or otherwise for the benefit of the
Company or Global and ESI for a period of three (3) years from the Closing, and
deliver promptly to Global or ESI or destroy, at the written request and option
of Global or ESI, all tangible embodiments (and all copies) of the Confidential
Information which are in their possession except as otherwise permitted herein.
In the event that any Seller is requested or required (by oral question or
written request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar legal
proceeding) to disclose any Confidential Information, that such Seller will
notify Global and ESI promptly of the request or requirement.
6.4 COVENANT NOT TO COMPETE. For and in consideration of the
-----------------------
allocation of $100,000 of the Purchase Price paid to the Sellers by ESI, each
Seller covenants and agrees, for a period of four (4) years from and after the
Closing Date, that he or she will not, directly or indirectly without the prior
written consent of Global (which shall not be unreasonably withheld), for or on
behalf of any entity:
(A) become interested or engaged, directly or indirectly, as a
shareholder, bondholder, creditor, officer, director, partner, agent, contractor
with, employer or representative of, or in any manner associated with, or give
financial, technical or other assistance to, any Person, firm or corporation for
the purpose of engaging in the copier/ office equipment dealer or service
business, or the computer systems integration or computer equipment
manufacturing or distribution business in competition with the Company, within
the greater of (i) a 100 mile radius of the Company's office facilities in
Richmond, Virginia (the "CURRENT TRADE AREA") or (ii) in any geographic area in
which the Company currently conducts business;
(B) enter into any agreement with, service, assist or solicit
the business of any customers of the Company for the purpose of providing office
equipment sales or service to such customers in competition with the Company or
to cause them to reduce or end their business with the Company; or
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(C) enter into any agreement with, or solicit the employment of
employees, consultants or representatives of the Company for the purpose of
causing them to leave the employment of the Company;
Provided, however, that no owner of less than one percent (1%) of the
outstanding stock of any publicly-traded corporation, and no owner of any amount
of Global stock, shall be deemed to be in a violation of this Section 6.4 solely
-----------
by reason thereof and that the foregoing covenant shall remain effective as to
Mr. McCulloch for no longer than one year after termination of his employment
with the Company and as to Mr. Kamarek for no more than one year after
termination of his employment with ESI, in the event that the Company is no
longer "controlled" as such term is defined in Rule 405 of the Securities Act of
1933, as amended, by Global, or if Global undergoes a "Change in Control" during
the term of such individual's employment by the Company or ESI, as the case may
be, "Change in Control" having the same meaning for purposes of this provision
as in such individual's respective employment agreements with the Company and
ESI.
6.5 ADDITIONAL MATTERS.
------------------
(A) The Sellers shall cause the Company to file with the
appropriate governmental authorities all Tax Returns required to be filed by it
for any taxable period ending prior to the Closing Date and the Company shall
remit any Taxes due in respect of such Tax Returns. In addition, Sellers shall
cause Edmondson, Ledbetter & Ballard, CPA to prepare a short period tax return
for the Company covering the period January 1, 1997 through the Effective Date.
The cost of preparation of such short period tax return shall be paid for by
Sellers.
(B) Global, ESI and Sellers recognize that each of them will
need access, from time to time, after the Closing Date, to certain accounting
and Tax records and information held by Global, ESI and/or the Company to the
extent such records and information pertain to events occurring on or prior to
the Closing Date; therefore, Global and ESI agree to cause the Company to (A)
---------
use its best efforts to properly retain and maintain such records for a period
of six (6) years from the date the Tax Returns for the year in which the Closing
occurs are filed or until the expiration of the statute of limitations with
respect to such year, whichever is later, and (B) allow the Sellers and their
agents and representatives at times and dates mutually acceptable to the
parties, to inspect, review and make copies of such records as such other party
may deem necessary or appropriate from time to time, such activities to be
conducted during normal business hours and at the other party's expense.
(C) SECTION 338(H)(10) ELECTION. The Sellers (as requested by
---------------------------
Global at Global's expense) and ESI shall join in making a timely election (but
in no event later than 180 days following the Closing) under Section 338(h)(10)
of the Code (including the prerequisite election under Section 338 of the Code)
and any similar state law provisions in all applicable states which permit
corporations to make such elections, with respect to the sale and purchase of
the Shares pursuant to this Agreement, and each party shall exert reasonable
effort to provide the
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<PAGE>
others all necessary information to permit such elections to be made. Global,
ESI and the Sellers (as requested by ESI at Global's expense) shall, as promptly
as practicable following the Closing Date, take all reasonable actions necessary
and appropriate (including filing such forms, returns, schedules and other
documents as may be required) to effect and preserve timely elections; provided,
however, that Global and ESI shall be the party responsible for preparing and
filing the forms, returns, schedules and other documents necessary for making an
effective and timely election. All additional Taxes attributable to the
elections made pursuant to this Section 6.5(c) shall be the liability of
--------------
Global and ESI which shall (upon written notification from Sellers) promptly
reimburse Sellers (on a grossed up basis) for all such taxes that are incurred
by them as a result of such election. In connection with such elections, within
sixty (60) days following the Closing Date, Global, ESI and the Sellers shall
act together in good faith to determine and agree upon the "deemed sales price"
to be allocated to each asset of the Company in accordance with Treasury
Regulation Section 1.338(h)(10)-1(f) and the other regulations under Section 338
of the Code. Notwithstanding the generality of the immediately preceding
sentence, Global, ESI and the Sellers agree that the "deemed sales price" shall
be allocated to the monetary assets of the Company at their fair market value as
of the Closing Date as determined as part of the determination of the Working
Capital of the Company in accordance with Article II hereof, $100,000 shall be
allocated to the covenant not to compete contained in Section 6.4 hereof, and
-----------
the balance of the "deemed sales price" shall be allocated to the fixed assets,
good will and other intangible assets of the Company. Both Global (and ESI) and
Sellers shall report the tax consequences of the transactions contemplated by
this Agreement consistently with such allocations and shall not intentionally
take any position inconsistent with such allocations in any Tax Return or
otherwise. In the event that Global, ESI and the Sellers are unable to agree as
to such allocations, Global's reasonable positions with respect to such
allocations shall control.
ARTICLE VII
CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING
7.1 CONDITIONS TO GLOBAL'S AND ESI'S OBLIGATIONS. Subject to
--------------------------------------------
Section 2.4 above, the obligation of Global and ESI under this Agreement to
- -----------
consummate the Closing is subject to the conditions that:
(A) COVENANTS, REPRESENTATIONS AND WARRANTIES. The Company
-----------------------------------------
and Sellers shall have performed in all material respects all obligations and
agreements and complied in all material respects with all covenants contained in
this Agreement to be performed and complied with by each of them prior to or at
the Closing Date. The material representations and warranties of the Company
and Sellers set forth in this Agreement shall be accurate in all material
respects at and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date except for any changes resulting from
activities or transactions which may have taken place after the date hereof and
which are permitted or contemplated by the Agreement or which have been entered
into in the ordinary course of business and except to the extent that such
representations and warranties are expressly made as of another specified date
and, as to such representation, the same shall be true in all material respects
as of such specified date
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<PAGE>
and, as to such representation, the same shall be true in all material respects
as of such specified date.
(B) CONSENTS. All statutory requirements for the valid
--------
consummation by the Company and Sellers of the transactions contemplated by this
Agreement shall have been fulfilled and all authorizations, consents and
approvals of all federal, state, local and foreign governmental agencies and
regulatory authorities required to be obtained in order to permit the
consummation of the transactions contemplated hereby shall have been obtained in
form and substance reasonably satisfactory to Global and ESI unless such failure
could not reasonably be expected to have a Material Adverse Effect. All
approvals of the Board of Directors and shareholders of the Company necessary
for the consummation of this Agreement and the transactions contemplated hereby
shall have been obtained.
(C) INTENTIONALLY OMITTED.
(D) DISCHARGE OF INDEBTEDNESS AND LIENS. Sellers and the Company
-----------------------------------
shall have provided for the payment in full by the Company of all Funded
Indebtedness of the Company and all extended credit from vendors at the Closing
(other than customary accounts payable outstanding on 90 day or less payment
terms in accordance with past practices). Such Funded Indebtedness, if any, as
of December 1, 1997, is listed on Schedule 7.1(d) hereto. Sellers shall have
also provided for the termination of all Encumbrances of record on the
properties of the Company, except for those Encumbrances listed on Schedule 3.9
------------
other than Signet Bank, N.A. and Permitted Exceptions. All liens or UCC filings
of Signet Bank, NA., shall have been terminated as of the Closing.
(E) MATERIAL ADVERSE CHANGE. There has been no Material Adverse
-----------------------
Change with respect to the Company since September 30, 1997.
(F) TRANSFER TAXES. Sellers shall be responsible for all
--------------
stock transfer or gains taxes imposed on Sellers incurred in connection with
this Agreement.
(G) FINANCIAL CONDITION. The Company's total adjusted Working
-------------------
Capital as projected at the Closing shall be greater than $1,000,000 and the
Company shall continue to have cash on hand (included in Working Capital) at the
Closing in an amount satisfactory to continue to operate the Business in the
ordinary course consistent with past practice following the Closing.
(H) DOCUMENTS TO BE DELIVERED BY SELLERS AND THE COMPANY. The
----------------------------------------------------
following documents shall be delivered at the Closing by Sellers and the
Company:
(I) OPINION OF SELLERS' COUNSEL. Global and ESI shall
---------------------------
have received an opinion of counsel to the Company and Sellers, dated
the Closing Date, in substantially the same form as the form of
opinion that is Exhibit C hereto.
---------
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<PAGE>
(II) CERTIFICATES. Global and ESI shall have received an
------------
officer's certificate and a secretary's certificate of the Company
executed by officers of the Company, dated the Closing Date, in
substantially the same forms as the forms of certificates that are
Exhibit D hereto.
---------
(III) RELEASE. Sellers shall have furnished the Company
-------
with a general release of liabilities, excluding compensation and
employee benefits as well as obligations pursuant to this Agreement,
in the form attached as Exhibit E hereto.
---------
(IV) ESCROW AGREEMENT. Sellers shall have delivered to
----------------
Global and ESI at the Closing the duly executed Escrow Agreement
required pursuant to Section 2.5 hereof.
-----------
(V) EMPLOYMENT AGREEMENT. Mr. McCulloch shall have duly
--------------------
executed and delivered the Employment Agreement in substantially the
same form attached as Exhibit F hereto, pursuant to which he will be
---------
employed by the Company following the Closing.
(VI) OFFICE LEASE. The Sellers shall have delivered to
------------
Global an Estoppel Certificate of the Landlords of the Buildings to
Global's lenders in the same form attached as Exhibit B hereto.
---------
(VII) STOCK CERTIFICATES. Sellers shall have delivered
------------------
the Shares accompanied by duly executed stock powers, together with
any stock transfer stamps or receipts for any transfer taxes required
to be paid thereon.
(VIII) COLLATERAL ASSIGNMENT OF RIGHTS. Sellers and the
-------------------------------
Escrow Agent shall have executed and delivered the Collateral
Assignment of Rights in the form attached as Exhibit I hereto.
---------
7.2 CONDITIONS TO SELLERS AND THE COMPANY'S OBLIGATIONS. The
---------------------------------------------------
obligation of Sellers and the Company under this Agreement to consummate the
Closing is subject to the conditions that:
(A) COVENANTS, REPRESENTATIONS AND WARRANTIES. Global and ESI
-----------------------------------------
shall have performed in all material respects all obligations and agreements and
complied in all material respects with all covenants contained in this Agreement
to be performed and complied with by Global or ESI prior to or at the Closing
and the representations and warranties of Global and ESI set forth in Article IV
hereof shall be accurate in all material respects, at and as of the Closing
Date, with the same force and effect as though made on and as of the Closing
Date except for any changes resulting from activities or transactions which may
have taken place after the date hereof and which are permitted or contemplated
by the Agreement or which have been
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<PAGE>
entered into in the ordinary course of the Business and except to the extent
that such representations and warranties are expressly made as of another
specified date and, as to such representations, the same shall be true as of
such specified date.
(B) CONSENTS. All statutory requirements for the valid
--------
consummation by Global and ESI of the transactions contemplated by this
Agreement shall have been fulfilled and all authorizations, consents and
approvals of all federal, state, local and foreign governmental agencies and
regulatory authorities required to be obtained in order to permit the
consummation by Global and ESI of the transactions contemplated hereby shall
have been obtained unless such failure shall not have a Material Adverse Effect
on the Business. Global shall have used its reasonable best efforts to have
obtained the release of the Sellers from all personal guarantees with respect to
the Company.
(C) DOCUMENTS TO BE DELIVERED BY GLOBAL AND ESI. The following
-------------------------------------------
documents shall be delivered at the Closing by Global and ESI:
(I) OPINION OF GLOBAL'S AND ESI'S COUNSEL. Sellers shall
-------------------------------------
have received an opinion of Hogan & Hartson, LLP, counsel to Global
and ESI, dated the Closing Date, in substantially the same form as the
form of opinion that is Exhibit G hereto.
---------
(II) CERTIFICATES. Sellers shall have received an
------------
officers' certificate and a secretary's certificate executed by
officers of Global and ESI, dated the Closing Date, in substantially
the same forms as the forms of certificates that are Exhibit H hereto.
---------
(III) ESCROW AGREEMENT. ESI shall have delivered to
----------------
Sellers at the Closing the duly executed Escrow Agreement required
pursuant to Section 2.5 hereof.
-----------
(IV) EMPLOYMENT AGREEMENT. Global and ESI shall have
--------------------
caused the Company to duly execute and deliver the Employment
Agreement with Mr. McCulloch in the same form attached as Exhibit F
---------
hereto, pursuant to which he will be employed by the Company following
the Closing.
(VI) PURCHASE PRICE. Sellers shall have received the
--------------
Purchase Price for the Shares.
(D) RIGHT OF REINVESTMENT. The Persons designated by Mr.
---------------------
McCulloch and Mr. Kamarek including certain other Sellers and employees of the
Company (not to exceed ten (10) Persons in all) shall have been offered the
right to invest up to $540,000 in the capital stock of Global on the same terms
provided to other recent outside investors in Global.
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<PAGE>
The allocation of such capital stock shall be made by Mr. Kamarek and Mr.
McCulloch, subject to Global's prior written consent (not to be unreasonably
withheld).
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION OF GLOBAL AND ESI. Except as provided in
---------------------------------
Section 8.6, as Global's and ESI'S sole and exclusive remedy for any breach by
- -----------
the Sellers hereunder, Sellers agree to jointly and severally indemnify and hold
harmless Global and ESI and each officer, director, and affiliate of Global and
ESI, including without limitation the Company or any successor of the Company
(collectively, the "INDEMNIFIED PARTIES") from and against any and all damages
(excluding consequential, incidental and indirect damages), losses (excluding
lost profits), claims, liabilities, demands, charges, suits, penalties, costs
and expenses (including court costs and reasonable attorneys' fees and expenses
incurred in investigating and preparing for any litigation or proceeding)
(collectively, the "INDEMNIFIABLE COSTS"), which any of the Indemnified Parties
may sustain, or to which any of the Indemnified Parties may be subjected,
arising out of (A) any misrepresentation, breach or default by Sellers or the
Company prior to the Closing of or under any of the representations, covenants,
agreements or other provisions of this Agreement or any agreement or document
executed in connection herewith; (B) the assertion and final determination of
any claim or liability against the Company or any of the Indemnified Parties by
any Person based upon the facts which form the alleged basis for any litigation
to the extent it should have been, but was not, reserved for in the Financial
Statements in accordance with GAAP; (C) the Company's tortious acts or omissions
to act prior to Closing for which the Company did not carry liability insurance
for themselves as the insured party, whether or not such acts or omissions to
act result in a breach or violation of any representation or warranty; and (D)
any Taxes or other costs attributable solely to a failure on the part of the
Company to qualify, at or prior to the Closing, as an "S Corporation" for
federal and/or state income Tax purposes.
8.2 DEFENSE OF CLAIMS. If any legal proceeding shall be instituted,
-----------------
or any claim or demand made, against any Indemnified Party in respect of which
Sellers may be liable hereunder, such Indemnified Party shall give prompt
written notice thereof to Sellers and, except as otherwise provided in Section
-------
8.4 below, Sellers shall have the right to defend, or cause the Company or its
- ---
successors to defend, any litigation, action, suit, demand, or claim for which
it may seek indemnification unless, in the reasonable judgment of Global and
ESI, such litigation, action, suit, demand, or claim, or the resolution thereof,
would have an ongoing effect on Global, ESI, the Company or its successors, and
such Indemnified Party shall extend reasonable cooperation in connection with
such defense, which shall be at Sellers' expense if it is determined that
indemnification for such legal proceeding is required hereunder. In the event
Sellers fail or refuse to defend the same within a reasonable length of time,
the Indemnified Parties shall be entitled to assume the defense thereof, and
Sellers shall be liable to repay the Indemnified Parties for all expenses
reasonably incurred in connection with said defense (including reasonable
attorneys' fees and settlement payments) if it is determined that such
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<PAGE>
request for indemnification was proper. If Sellers shall not have the right to
assume the defense of any litigation, action, suit, demand, or claim in
accordance with either of the two preceding sentences, the Indemnified Parties
shall have the absolute right to control the defense of and to settle, in their
sole discretion and without the consent of Sellers, such litigation, action,
suit, demand, or claim, but Sellers shall be entitled, at their own expense, to
participate in such litigation, action, suit, demand, or claim.
8.3 ESCROW CLAIM. If any claim for indemnification is made by an
------------
Indemnified Party pursuant to this Article VIII prior to the expiration of the
Escrow Period, such Indemnified Party shall apply to the Escrow Agent provided
in Section 2.5 of this Agreement for reimbursement of such claim in accordance
-----------
with the provisions of the Escrow Agreement.
8.4 TAX AUDITS, ETC. In the event of an audit of a Tax Return of the
---------------
Company with respect to which an Indemnified Party might be entitled to
indemnification pursuant to this Article VIII, Global shall have the right to
control any and all such audits which may result in the assessment of additional
Taxes against the Company and any and all subsequent proceedings in connection
therewith, including appeals (subject to the prior written consent of Sellers,
which shall not unreasonably be withheld and subject to the right of Sellers to
have their accountants and attorneys consult with Global on such audits or
procedures at Sellers' expense). Sellers shall cooperate fully in all matters
relating to any such audit or other Tax proceeding (including according access
to all records pertaining thereto), and will execute and file any and all
consents, powers of attorney, and other documents as shall be reasonably
necessary in connection therewith; provided, however, that none of the Sellers
will be obligated to take any such action that would or could reasonably be
expected to result in incurrence of any liability by such Seller, except as
required by applicable Tax law (provided, however, that if such Tax law
specifies that more than one option may be made to comply with such law, nothing
contained herein shall require Sellers to make the option most adverse to them).
If additional Taxes are payable by the Company as a result of any such audit or
other proceeding, Sellers shall be responsible for and shall promptly pay all
Taxes, interest, and penalties to which any of the Indemnified Parties shall be
entitled to indemnification.
8.5 INDEMNIFICATION OF SELLERS. Global agrees to indemnify and
--------------------------
hold harmless Sellers and the Company and each officer, director, stockholder or
affiliate of the Company, from and against any Indemnifiable Costs arising out
of (A) any material misrepresentation, breach or default by Global or ESI of or
under any of the covenants, agreements or other provisions of this Agreement or
any agreement or document executed in connection herewith, (B) any tortious acts
or omissions by Global or ESI before or after or the Company after, the Closing,
and (C) any additional income taxes incurred by the Sellers, if any, arising out
of any attribution of the income of the Company to Sellers during the period
from the Effective Date through the Closing Date. In addition, the Company and
Global shall indemnify the Sellers for any payment or satisfaction of any
guarantees by Sellers of the Company's obligations occurring after the Closing
Date.
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[******Certain information on this page has been omitted and filed
separately with the Securities and Exchange Commission. Confidential
treatment has been requested with respect to the omitted portions.]
8.6 LIMITS ON INDEMNIFICATION. All Indemnifiable Costs sought by
-------------------------
any party hereunder shall be net of any insurance proceeds received by such
Person with respect to such claim (less the present value of any premium
increases occurring as a result of such claim). Except for any claims for
breach of the representations and warranties of the Sellers under Sections 3.1,
------------
3.2, 3.3 or 3.17 hereof (the indemnification for which shall expire on the
- --- --- ----
expiration of the applicable statute of limitations) and except for claims for
breaches of Sections 6.2, 6.3 and 6.4 hereunder (the indemnification for which
--- --- ---
shall expire on the date such Sections expire by their terms), the
--------
indemnification provided under this Article VIII shall expire on the second
anniversary of the Closing Date. The Sellers shall not be obligated to pay any
amounts for indemnification under this Article VIII until the aggregate
indemnification obligation hereunder exceeds $25,000, whereupon Sellers shall be
liable for all amounts in excess of $25,000 for which indemnification may be
sought. Notwithstanding the foregoing, in no event shall the aggregate
liability of Sellers to Global and ESI exceed [**] (except for claims made for
any breach of the representations and warranties of Sellers under Sections
--------
3.1, 3.2, 3.3, or 3.17 hereof, as to which the limit of indemnification
- ------------- ----
hereunder shall be the Purchase Price); nor shall any of the Sellers be liable
under this Article VIII or any other provision of this Agreement (or any
------------
instrument, agreement, certificate or other document contemplated by or entered
into pursuant to this Agreement) for any amount in excess of the portion of the
Purchase Price paid to such Seller, reduced by all income taxes paid or payable
by such Seller; provided, however, that the limitation of such Seller's
indemnification obligation to such Seller's portion of the Purchase Price
(described above) shall not apply if such Seller individually breaches Section
-------
3.1 or 3.2 hereof (in which case, the breaching Seller shall be liable to the
- --- ---
fullest extent described in this Section). However nothing in this Article VIII
shall limit Global, ESI or Sellers in exercising or securing any remedies
provided by applicable common law with respect to the conduct of Sellers or
Global and ESI in connection with this Agreement or in the amount of damages
that it can recover from the other in the event that Global or ESI successfully
proves intentional fraud or intentional fraudulent conduct in connection with
this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 MODIFICATIONS. Any amendment, change or modification of this
-------------
Agreement shall be void unless in writing and signed by all parties hereto. No
failure or delay by any party hereto in exercising any right, power or privilege
hereunder (and no course of dealing between or among any of the parties) shall
operate as a waiver of any such right, power or privilege. No waiver of any
default on any one occasion shall constitute a waiver of any subsequent or other
default. No single or partial exercise of any such right, power or privilege
shall preclude the further or full exercise thereof.
9.2 NOTICES. All notices and other communications hereunder shall
-------
be in writing and shall be deemed to have been duly given when personally
delivered, or 48 hours after deposited in the United States mail, first-class,
postage prepaid, or by facsimile addressed to the respective parties hereto as
follows:
-29-
<PAGE>
Global or ESI:
-------------
Global Imaging Systems Inc.
P.O. Box 273478
Tampa, Florida 33688-3478
Attention: Thomas Johnson, President
Fax No.: (813) 264-7877
Tel No.: (813) 960-5508
With a copy to:
Hogan & Hartson, LLP
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Attention: Christopher J. Hagan
Fax No.: (202) 637-5910
Tel No.: (202) 637-5771
The Company or Sellers:
----------------------
c/o Electronic Systems of Richmond, Inc.
Three James Center
1051 East Cary Street, Suite 1150
Richmond, Virginia 23219
Attention: Timothy D. McCulloch
Fax No.: (804) 849-1700
Tel No.: (804) 649-1800
and
c/o Electronic Systems, Inc.
361 Southport Circle
Virginia Beach, Virginia 23452
Attention: William G. Kamarek
Fax No.: (757) 497-2095
Tel No.: (757) 497-8000
-30-
<PAGE>
With a copy to:
Kaufman & Canoles
One Commercial Place
Norfolk, Virginia 23514-3037
Attention: Robert E. Smartschan
Fax No.: (757) 624-3169
Tel No.: (757) 624-3221
or to such other address as to any party hereto as such party shall designate by
like notice to the other parties hereto.
9.3 COUNTERPARTS. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original but all of which
counterparts collectively shall constitute one instrument, and in making proof
of this Agreement, it shall never be necessary to produce or account for more
than one such counterpart.
9.4 EXPENSES. Each of the parties hereto will bear all costs, charges
--------
and expenses incurred by such party in connection with this Agreement and the
consummation of the transactions contemplated herein, provided, however, that
Sellers shall bear all costs and expenses of any broker involved in this
transaction and the Company shall bear all of the Seller's and the Company's
legal costs and other transactional expenses associated with the transactions
contemplated hereby (which costs and expenses shall be included in determining
the Company's Net Worth and Net Working Capital).
9.5 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding
--------------------------
upon and inure to the benefit of the Company, Global, ESI and Sellers, their
heirs, representatives, successors, and permitted assigns, in accordance with
the terms hereof. This Agreement shall not be assignable by the Company or
Sellers without the prior written consent of Global.
9.6 ENTIRE AND SOLE AGREEMENT. This Agreement and the other schedules
-------------------------
and agreements referred to herein, constitute the entire agreement between the
parties hereto and supersede all prior agreements, representations, warranties,
statements, promises, information, arrangements and understandings, whether oral
or written, express or implied, with respect to the subject matter hereof.
9.7 GOVERNING LAW. This Agreement and its validity, construction,
-------------
enforcement, and interpretation shall be governed by the substantive laws of the
Commonwealth of Virginia.
9.8 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
-----------------------------------------------------
Regardless of any investigation at any time made by or on behalf of any party
hereto or of any information any party may have in respect thereof, all
covenants, agreements, representations, and warranties and the related
indemnities made hereunder or pursuant hereto or in connection with the
transactions
-31-
<PAGE>
contemplated hereby shall survive the Closing for a period of two (2) years,
provided (a) the representations and warranties contained in Section 3.17 of
------------
this Agreement, and the related indemnities, shall survive the Closing until the
expiration of the applicable statutes of limitations for determining or
contesting Tax liabilities and (b) the representations and warranties contained
in Sections 3.1, 3.2 and 3.3 of this Agreement, and the related indemnities,
------------ --- ---
shall survive the Closing until expiration of the applicable statute of
limitations. Notwithstanding the foregoing, it is understood and agreed that all
representations and warranties made by the parties in this Agreement are made as
of the date of execution of this Agreement only.
9.9 INVALID PROVISIONS. If any provision of this Agreement is
------------------
deemed or held to be illegal, invalid or unenforceable, this Agreement shall be
considered divisible and inoperative as to such provision to the extent it is
deemed to be illegal, invalid or unenforceable, and in all other respects this
Agreement shall remain in full force and effect; provided, however, that if any
provision of this Agreement is deemed or held to be illegal, invalid or
unenforceable there shall be added hereto automatically a provision as similar
as possible to such illegal, invalid or unenforceable provision and be legal,
valid and enforceable. Further, should any provision contained in this
Agreement ever be reformed or rewritten by any judicial body of competent
jurisdiction, such provision as so reformed or rewritten shall be binding upon
all parties hereto.
9.10 PUBLIC ANNOUNCEMENTS. Neither party shall make any public
--------------------
announcement of the transactions contemplated hereby without the prior written
consent of the other party, which consent shall not be unreasonably withheld.
9.11 REMEDIES CUMULATIVE. The remedies of the parties under this
-------------------
Agreement are cumulative and shall not exclude any other remedies to which any
party may be lawfully entitled.
9.12 WAIVER. No failure or delay on the part of any party in
------
exercising any right, power, or privilege hereunder or under any of the
documents delivered in connection with this Agreement shall operate as a waiver
of such right, power, or privilege; nor shall any single or partial exercise of
any such right, power, or privilege preclude any other or further exercise
thereof or the exercise of any other right, power, or privilege.
9.13 DISPUTE RESOLUTION. ALL DISPUTES BETWEEN SELLERS AND GLOBAL
------------------
AND ESI WITH RESPECT TO ANY PROVISION OF THIS AGREEMENT OR THE RIGHTS AND
OBLIGATIONS OF SELLERS AND GLOBAL AND ESI HEREUNDER (OTHER THAN DISPUTES
INVOLVING ALLEGATIONS OF INTENTIONAL FRAUD), WHICH CANNOT BE RESOLVED BY MUTUAL
AGREEMENT, WILL BE RESOLVED BY BINDING ARBITRATION IN ACCORDANCE WITH THE RULES
OF THE AMERICAN ARBITRATION ASSOCIATION IN NORFOLK, VIRGINIA, OR BY ANY OTHER
MEANS OF ALTERNATIVE DISPUTE RESOLUTION MUTUALLY AGREED UPON BY THE PARTIES.
[THIS SPACE INTENTIONALLY LEFT BLANK]
-32-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed as of the date and year first above written.
GLOBAL:
------
GLOBAL IMAGING SYSTEMS INC.
By: /s/ Thomas S. Johnson
----------------------------------------
Thomas S. Johnson
President and Chief Executive Officer
ESI:
---
ELECTRONIC SYSTEMS, INC.
By: /s/ Thomas S. Johnson
----------------------------------------
Thomas S. Johnson
Chairman
THE COMPANY:
-----------
ELECTRONIC SYSTEMS OF RICHMOND, INC.
By: /s/ Timothy D. McCulloch
----------------------------------------
Title: Vice President
-------------------------------
-33-
<PAGE>
SELLERS:
-------
/s/ Timothy D. McCulloch
---------------------------------------------
Timothy D. McCulloch
/s/ William G. Kamarek
---------------------------------------------
William G. Kamarek
/s/ Benjamin E. Collier
---------------------------------------------
Benjamin E. Collier
/s/ David M. Weaver
---------------------------------------------
David M. Weaver
/s/ James R. Stroud
---------------------------------------------
James R. Stroud
-34-
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT 10.26
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[**]") OR OTHERWISE IDENTIFIED
HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. A COMPLETE
VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.***
STOCK PURCHASE AGREEMENT
BY AND AMONG
GLOBAL IMAGING SYSTEMS INC.,
("GLOBAL")
CONNECTICUT BUSINESS SYSTEMS, INC.
(THE "COMPANY")
AND
THE SHAREHOLDERS OF THE COMPANY
(THE "SELLERS")
DATED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I DEFINITIONS.................................................. 1
1.1 Definitions................................................... 1
ARTICLE II AGREEMENT OF PURCHASE AND SALE; CLOSING..................... 6
2.1 Agreement to Sell and Purchase................................ 6
2.2 Purchase Price and Assumption of Indebtedness................. 6
2.3 Payment of Purchase Price and Assumption of Indebtedness...... 6
2.4 Closing....................................................... 6
2.5 Escrow Arrangements........................................... 7
2.6 Purchase Price Adjustments.................................... 7
2.7 Closing Audit................................................. 8
2.8 Post-Closing Purchase Price Adjustment........................ 8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLERS.. 9
3.1 Capitalization................................................ 9
3.2 No Liens on Shares............................................ 9
3.3 Other Rights to Acquire Capital Stock......................... 9
3.4 Due Organization.............................................. 9
3.5 Subsidiaries.................................................. 10
3.6 Due Authorization............................................. 10
3.7 Financial Statements.......................................... 11
3.8 Certain Actions............................................... 11
3.9 Properties.................................................... 12
3.10 Licenses and Permits.......................................... 13
3.11 Intellectual Property......................................... 13
3.12 Compliance with Laws.......................................... 14
3.13 Insurance..................................................... 14
3.14 Employee Benefit Plans........................................ 14
(a) Employee Welfare Benefit Plans......................... 14
(b) Employee Pension Benefit Plans......................... 15
(c) Employment and Non-Tax Qualified Deferred Compensation
Arrangements........................................ 15
3.15 Contracts and Agreements...................................... 15
3.16 Claims and Proceedings........................................ 16
3.17 Taxes......................................................... 16
3.18 Personnel..................................................... 17
3.19 Business Relations............................................ 18
3.20 Accounts Receivable........................................... 18
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
3.21 Bank Accounts................................................. 18
3.22 Warranties.................................................... 18
3.23 Brokers....................................................... 19
3.24 Interest in Competitors, Suppliers, Customers, Etc............ 19
3.25 Indebtedness To and From Officers, Directors, Shareholders,
and Employees.............................................. 19
3.26 Undisclosed Liabilities....................................... 19
3.27 Information Furnished......................................... 19
ARTICLE IV GLOBAL'S REPRESENTATIONS AND WARRANTIES..................... 20
4.1 Due Organization.............................................. 20
4.2 Due Authorization............................................. 20
4.3 No Brokers.................................................... 20
4.4 Investment.................................................... 20
4.5 Information Furnished......................................... 21
ARTICLE V COVENANTS OF THE COMPANY AND SELLERS......................... 21
5.1 Consents of Others............................................ 21
5.2 Best Efforts.................................................. 21
5.3 Powers of Attorney............................................ 21
ARTICLE VI POST-CLOSING COVENANTS...................................... 21
6.1 General....................................................... 21
6.2 Transition.................................................... 22
6.3 Confidentiality............................................... 22
6.4 Covenant Not to Compete....................................... 22
6.6 Additional Matters............................................ 23
ARTICLE VII CONDITIONS TO OBLIGATIONS OF PARTIES TO
CONSUMMATE CLOSING.................................................. 24
7.1 Conditions to Global's Obligations............................ 24
(a) Covenants, Representations and Warranties.............. 24
(b) Consents............................................... 25
(c) Suppliers/Leases....................................... 25
(d) Discharge of Indebtedness and Liens.................... 25
(e) Material Adverse Change................................ 25
(f) Transfer Taxes......................................... 25
(g) Intentionally Omitted.................................. 26
(h) Documents to be Delivered by Seller and the Company.... 26
(i) Opinion of Seller's Counsel..................... 26
(ii) Certificates................................... 26
(iii) Release....................................... 26
(iv) Escrow Agreement............................... 26
(v) Employment Agreement............................ 26
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
(vi) Building Leases................................ 26
(vii) Collateral Assignment of Rights............... 26
(viii) Stock Certificates........................... 27
7.2 Conditions to Seller's and the Company's Obligations............. 27
(a) Covenants, Representations and Warranties................. 27
(b) Consents.................................................. 27
(c) Documents to be Delivered by Global....................... 27
(i) Certificates.................................... 27
(ii) Escrow Agreement............................... 28
(iii) Employment Agreement.......................... 28
(iv) Payments to Sellers and the Company............ 28
(d) Right of Reinvestment..................................... 28
ARTICLE VIII INDEMNIFICATION........................................... 28
8.1 Indemnification of Global..................................... 28
8.2 Defense of Claims............................................. 29
8.3 Escrow Claim.................................................. 29
8.4 Tax Audits, Etc............................................... 29
8.5 Indemnification of Sellers.................................... 30
8.6 Limits on Indemnification..................................... 30
ARTICLE IX MISCELLANEOUS............................................... 30
9.1 Modifications................................................. 30
9.2 Notices....................................................... 31
9.3 Counterparts.................................................. 32
9.4 Expenses...................................................... 33
9.5 Binding Effect; Assignment.................................... 33
9.6 Entire and Sole Agreement..................................... 33
9.7 Governing Law................................................. 33
9.8 Survival of Representations, Warranties and Covenants......... 33
9.9 Invalid Provisions............................................ 33
9.10 Public Announcements.......................................... 34
9.11 Remedies Cumulative........................................... 34
9.12 Waiver........................................................ 34
9.13 DISPUTE RESOLUTION............................................ 34
</TABLE>
-iv-
<PAGE>
LIST OF EXHIBITS
EXHIBIT A FORM OF ESCROW AGREEMENT
EXHIBIT B FORM OF ESTOPPEL CERTIFICATE FOR BUILDING LEASES
EXHIBIT C OPINION OF THE COMPANY'S AND SELLERS' COUNSEL
EXHIBIT D SELLERS' CERTIFICATES
EXHIBIT E FORM OF RELEASE
EXHIBIT F SHEA EXECUTIVE AGREEMENT
EXHIBIT G GLOBAL CERTIFICATES
EXHIBIT H COLLATERAL ASSIGNMENT OF RIGHTS
LIST OF SCHEDULES
SCHEDULE 2.3 SELLER'S ACCOUNTS
SCHEDULE 2.6 HOLDERS OF FUNDED INDEBTEDNESS
SCHEDULE 3.1 OWNERSHIP OF SHARES
SCHEDULE 3.4 ARTICLES AND BYLAWS
SCHEDULE 3.5 SUBSIDIARIES
SCHEDULE 3.8A CERTAIN ACTIONS
SCHEDULE 3.8B MATERIAL CHANGES
SCHEDULE 3.9 PROPERTIES
SCHEDULE 3.10 LICENSES AND PERMITS
SCHEDULE 3.11 PATENTS AND TRADEMARKS
SCHEDULE 3.13 INSURANCE
SCHEDULE 3.14 EMPLOYEE BENEFIT PLANS
SCHEDULE 3.15 CONTRACTS AND AGREEMENTS
SCHEDULE 3.16 CLAIMS AND PROCEEDINGS
SCHEDULE 3.18 PERSONNEL
SCHEDULE 3.20 ACCOUNTS RECEIVABLE
SCHEDULE 3.21 BANK ACCOUNTS
SCHEDULE 3.25 INDEBTEDNESS WITH OFFICERS, DIRECTORS AND SHAREHOLDERS
SCHEDULE 3.26 UNDISCLOSED LIABILITIES
SCHEDULE 7.1(D) LIST OF INDEBTEDNESS
The Exhibits and Schedules to this Stock Purchase Agreement are not included
with this Registration Statement on Form S-1. Global will provide such exhibits
and schedules upon the request of the Securities and Exchange Commission.
-v-
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "AGREEMENT") is entered into as of
December 31, 1997, by and among GLOBAL IMAGING SYSTEMS INC., a Delaware
corporation ("GLOBAL"), CONNECTICUT BUSINESS SYSTEMS, INC., a Connecticut
corporation (the "COMPANY") and MICHAEL E. SHEA, JR. AND PETER WENZKE
(collectively, the "SELLERS").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the distribution, sale and service
of office equipment in the State of Connecticut (the "BUSINESS"); and
WHEREAS, Sellers own all of the outstanding shares of capital stock of
the Company (the "SHARES"), which Shares constitute all of the issued and
outstanding capital stock of the Company; and
WHEREAS, Global desires to purchase from Sellers and Sellers desire to
sell to Global hereby all of the Shares owned by Sellers all on the terms and
subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto covenant and agree
as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. In this Agreement, the following terms have the
-----------
meanings specified or referred to in this Section 1.1 and shall be equally
-----------
applicable to both the singular and plural forms. Any agreement referred to
below shall mean such agreement as amended, supplemented and modified from time
to time to the extent permitted by the applicable provisions thereof and by this
Agreement.
"AFFILIATE" means, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by or is under common control
with such Person.
"ASSUMED FUNDED INDEBTEDNESS" has the meaning specified in Section
-------
2.3(b).
-------
"AUDITED CLOSING BALANCE SHEET" has the meaning specified in Section
-------
2.7.
- -----
<PAGE>
"BUILDINGS" shall mean collectively (i) the Company's offices,
showroom and warehouse facilities located at 31 Inwood Road, Rocky Hill,
Connecticut, (ii) 1 Norwalk, West 40 Richards Avenue, Norwalk, Connecticut, and
(iii) 108 Corporate Drive, Harrison, New York.
"BUSINESS" has the meaning specified in the first recital of the
Agreement
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. (S)(S) 9601 et seq., any amendments thereto, any
-- ---
successor statutes, and any regulations promulgated thereunder.
"CLOSING" means the closing of the transfer of the Shares from the
Sellers to Global.
"CLOSING DATE" has the meaning specified in Section 2.4.
-----------
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning specified in the first paragraph of
this Agreement.
"CONFIDENTIAL INFORMATION" means all confidential information and
trade secrets of the Company including, without limitation, any of the same
comprising the identity, lists or descriptions of any customers, referral
sources or organizations; financial statements, cost reports or other financial
information; contract proposals, or bidding information; business plans and
training and operations methods and manuals; personnel records; fee structure;
and management systems, policies or procedures, including related forms and
manuals. Confidential Information shall not include any information (i) which
is disclosed pursuant to subpoena or other legal process, (ii) which has been
publicly disclosed, (iii) which subsequently becomes known to a third party not
subject to a confidentiality agreement with Global or the Company, or (iv) which
is subsequently disclosed by any third party not in breach of a confidentiality
agreement.
"CONTRACTS" has the meaning specified in Section 3.15.
------------
"COURT ORDER" means any judgment, order, award or decree of any
foreign, federal, state, local or other court or tribunal and any award in any
arbitration proceeding.
"EFFECTIVE DATE" has the meaning specified in Section 2.4.
-----------
"EMPLOYMENT AGREEMENT" shall mean the executive agreement with Michael
E. Shea, Jr. to be entered into at Closing in the form of Exhibit F.
---------
-2-
<PAGE>
"ENCUMBRANCE" means any lien, claim, charge, security interest,
mortgage, pledge, easement, conditional sale or other title retention agreement,
defect in title, restrictive covenant or other restrictions of any kind.
"ENVIRONMENTAL OBLIGATIONS" has the meaning specified in Section 3.12.
------------
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCROW AGENT" means Robinson & Cole LLP.
"ESCROW AGREEMENT" means the Escrow Agreement to be executed by and
among the Sellers, Global and the Escrow Agent in substantially the same form as
Exhibit A.
- ---------
"ESCROW PERIOD" has the meaning specified in Section 2.5.
-----------
"ESCROW SUM" has the meaning specified in Section 2.5.
-----------
"FINANCIAL STATEMENTS" has the meaning specified in Section 3.7.
-----------
"FUNDED INDEBTEDNESS" means all (i) indebtedness of the Company for
borrowed money or other interest-bearing indebtedness; (ii) capital lease
obligations of the Company which are accrued or required to be accrued under
GAAP; (iii) obligations of the Company to pay the deferred purchase or
acquisition price for goods or services, other than trade accounts payable or
accrued expenses in the ordinary course of business on no more than 90 day
payment terms; (iv) indebtedness of others guaranteed by the Company or secured
by an Encumbrance on the Company's property; (v) indebtedness of the Company
under extended credit terms of more than 30 days from manufacturers provided to
the Company; or (vi) any receivables owed by the Company to the Sellers;
provided, however, that Funded Indebtedness shall not include those certain
unsecured promissory notes in the aggregate amount of $90,000 issued by the
Company on December 31, 1997 to the Sellers in connection with the distributions
by the Company to the Sellers for payment of income taxes payable by the Sellers
attributable to the Company's net income for the period from October 1, 1997
through the Effective Date, the amount of which distrubutions was loaned by the
Sellers to the Company on December 31, 1997.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"GLOBAL" has the meaning specified in the first paragraph of this
Agreement.
"GLOBAL STOCK" has the meaning specified in Section 7.2(d).
--------------
"GOVERNMENTAL BODY" means any foreign, federal, state, local or
other governmental authority or regulatory body.
-3-
<PAGE>
"GOVERNMENTAL PERMITS" has the meaning specified in Section 3.10.
------------
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"IRS" means the Internal Revenue Service.
"INDEPENDENT ACCOUNTANTS" has the meaning specified in Section 2.7.
-----------
"INDEMNIFIABLE COSTS" has the meaning specified in Section 8.1.
-----------
"INDEMNIFIED PARTIES" has the meaning specified in Section 8.1.
-----------
"INTELLECTUAL PROPERTY" has the meaning specified in Section 3.11.
------------
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means a
material adverse change or effect on the assets, properties, Business,
operations, liabilities, or financial condition of the Company and its
subsidiaries, taken as a whole. In determining whether a "Material Adverse
Change" or "Material Adverse Effect" has occurred, the quantitative amounts set
forth at the end of Article III shall be conclusive.
-----------
"OSHA" means the Occupational Safety and Health Act, 29 U.S.C. (S)(S)
651 et seq., any amendment thereto, and any regulations promulgated thereunder.
-- ---
"PERMITTED EXCEPTION" means (a) liens for Taxes and other governmental
charges and assessments which are not yet due and payable, (b) liens of
landlords and liens of carriers, warehousemen, mechanics and materialmen and
other like liens arising in the ordinary course of business for sums not yet due
and payable, (c) other liens or imperfections on property which are not material
in amount or do not materially detract from the value or the existing use of the
property affected by such lien or imperfection, and (d) such statements of fact
and exceptions shown on any title insurance policies delivered to Global.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or Governmental Body.
"PRELIMINARY CLOSING BALANCE SHEET" shall mean the Company's best
estimate of the Company's balance sheet as of the Effective Date. The
Preliminary Closing Balance Sheet shall be delivered to Global not less than
three (3) nor more than five (5) days prior to the Closing Date.
"PURCHASE PRICE" has the meaning specified in Section 2.2.
-----------
"RCRA" means the Resource Conservation and Recovery Act, 42 U.S.C.
(S)(S) 6901 et seq., and any successor statute, and any regulations promulgated
-- ---
thereunder.
-4-
<PAGE>
"REQUIREMENTS OF LAWS" means any foreign, federal, state and local
laws, statutes, regulations, rules, codes or ordinances enacted, adopted, issued
or promulgated by any Governmental Body (including, without limitation, those
pertaining to electrical, building, zoning, environmental and occupational
safety and health requirements) or common law.
"SELLERS" has the meaning set forth in the first paragraph of this
Agreement.
"SHARES" means all of the issued and outstanding shares of the capital
stock of the Company.
"SUBSIDIARY" has the meaning set forth in Section 3.5 of this
-----------
Agreement.
"SUBSIDIARY SHARES" has the meaning set forth in Section 3.5 of this
-----------
Agreement.
"TAX" or "TAXES" means any federal, state, local or foreign income,
alternative or add-on minimum, gross income, gross receipts, windfall profits,
severance, property, production, sales, use, transfer, gains, license, excise,
employment, payroll, withholding or minimum tax, transfer, goods and services,
or any other tax, custom, duty, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest or any penalty,
addition to tax or additional amount imposed thereon by any Governmental Body.
"TAX RETURN" means any return, report or similar statement required to
be filed with respect to any Taxes (including any attached schedules),
including, without limitation, any information return, claim for refund, amended
return and declaration of estimated Tax.
"WORKING CAPITAL" shall mean the difference between the Company's
current assets and current liabilities as calculated in accordance with GAAP,
provided, that, (i) current assets shall include $84,150 in obsolete inventory
and (ii) for the purposes of calculating the Working Capital Target below (i.e.
for calculating the average working capital of the Company for the six month
period ended October 31, 1997), current liabilities shall include $168,837 in
deferred maintenance costs.
"WORKING CAPITAL TARGET" shall have the meaning assigned to such term
in Section 2.6 hereof.
-----------
ARTICLE II
AGREEMENT OF PURCHASE AND SALE; CLOSING
2.1 AGREEMENT TO SELL AND PURCHASE. Upon the basis of the
------------------------------
representations and warranties, for the consideration, and subject to the terms
and conditions set forth in this
-5-
<PAGE>
Agreement, Sellers agree to sell the Shares to Global and Global agrees to
purchase the Shares from Sellers.
2.2 PURCHASE PRICE AND ASSUMPTION OF INDEBTEDNESS. The total
---------------------------------------------
purchase price for the Shares (the "PURCHASE PRICE") shall be equal to
$9,394,386, subject to any adjustment required to be made pursuant to Section
-------
2.6 or Section 2.8 below. In addition, the redemption price for the Assumed
- --- -----------
Funded Indebtedness (as defined below) shall be equal to $1,405,614.
2.3 PAYMENT OF PURCHASE PRICE AND ASSUMPTION OF INDEBTEDNESS.
--------------------------------------------------------
(A) The Purchase Price shall be payable by Global at the Closing
(hereinafter defined) as follows:
(I) $8,314,386 of the Purchase Price as adjusted as set
forth in Section 2.6 below will be paid, at the direction of the
-----------
Sellers, in cash by wire transfer of funds as specified in
Schedule 2.3 (including the payment of $100,000 for the covenant not
to compete provided in Section 6.4); and
-----------
(II) $1,080,000 of the Purchase Price as adjusted as set
forth in Section 2.6(d) below will be paid in cash by wire transfer
--------------
of funds to the Escrow Agent to be held in escrow for satisfaction of
Sellers' indemnification obligations specified in Section 8.1 or
payment to the Sellers in accordance with the terms of Section 2.5
below.
(B) At the Closing, Global will pay in cash by wire transfer of
funds to an account as specified in Schedule 2.3, the sum of $1,405,614 in
------------
order to redeem certain Funded Indebtedness owed to Sellers (collectively, the
"ASSUMED FUNDED INDEBTEDNESS").
2.4 CLOSING. The Closing of the purchase and sale of the Shares
-------
contemplated by this Agreement shall take place at 10:00 a.m., Eastern Time, at
the offices of Robinson & Cole LLP in Hartford, Connecticut on January 9, 1998,
or at such other date and time as the parties shall agree (the "CLOSING DATE"),
effective as of December 31, 1997 (the "EFFECTIVE DATE"). Global, the Company
and the Sellers may terminate this Agreement at any time prior to the Closing
Date by mutual written consent. In addition, (i) Global may terminate this
Agreement at any time prior to the Closing by giving written notice to the
Sellers if the Closing shall not have occurred on or before January 31, 1998 by
reason of the failure of any condition precedent under Section 7.1 hereof
-----------
(unless the failure results primarily from Global itself breaching any
representation, warranty, or covenant contained in this Agreement) and (ii) the
Sellers may terminate this Agreement by giving written notice to Global at any
time prior to the Closing if the Closing shall not have occurred on or before
January 31, 1998 by reason of the failure of any condition precedent under
Section 7.2 hereof (unless the failure results primarily from either Sellers
- -----------
themselves or the Company itself breaching any representation, warranty, or
covenant contained in this Agreement).
-6-
<PAGE>
2.5 ESCROW ARRANGEMENTS. Pursuant to the Escrow Agreement to be
-------------------
entered into among Sellers, Global and the Escrow Agent, $1,080,000 of the
Purchase Price shall be delivered to the Escrow Agent at Closing. Such monies
(which, together with all interest accrued thereon, is hereinafter referred to
as the "ESCROW SUM") shall be held pursuant to the terms of the Escrow Agreement
for payment from such Escrow Sum of the amounts, if any, owing by Sellers to
Global pursuant to Section 2.8 or Article VIII below. At the conclusion of the
-----------
period ending on the first anniversary of the Closing Date (such period being
referred to herein as the "ESCROW PERIOD"), such remaining portion of the Escrow
Sum not theretofore claimed by or paid to Global in accordance with the terms of
the Escrow Agreement and this Agreement shall be disbursed to Sellers. Sellers
and Global agree that each will execute and deliver such reasonable instruments
and documents as are furnished by any other party to enable such furnishing
party to receive those portions of the Escrow Sum to which the furnishing party
is entitled under the provisions of the Escrow Agreement and this Agreement.
2.6 PURCHASE PRICE ADJUSTMENTS.
--------------------------
(A) Except for the Assumed Funded Indebtedness, the Purchase
Price payable pursuant to Section 2.3(a) above will be reduced by the total
--------------
amount of Funded Indebtedness as of the Closing, if any, assumed or
paid by Global in cash by wire transfer of funds to the accounts of the holders
of Funded Indebtedness listed on Schedule 2.6 hereto to satisfy the Company's
------------
Funded Indebtedness with such holders.
(B) The portion of the Purchase Price payable at Closing will be
reduced by the amount, if any, by which the Working Capital as reflected on the
Preliminary Closing Balance Sheet is less than the amount which is $50,000 less
than the average of the Working Capital balances at the end of each of the six
months ended October 31, 1997 (the "WORKING CAPITAL TARGET"); provided, however,
that the Working Capital Target will be adjusted downward by any income taxes
payable by the Sellers attributable to the Company's net income for the period
from October 1, 1997 through the Effective Date.
(C) The Purchase Price payable pursuant to Section 2.3(a) above
--------------
will be decreased or increased, as the case may be, by the amount
that the Company's Assumed Funded Indebtedness on the Closing Date is more or
less than $1,405,614.
(D) In the event that Sellers purchase any Global Stock, Sellers
shall have the right to contribute all or a portion of such Global Stock to the
Escrow Sum in lieu of cash (which contributed Global Stock shall be in the form
of both Class A Common and Class B Common shares based on the aggregate
investment by Sellers in each such class). The cash portion of the Purchase
Price payable to the Sellers pursuant to Section 2.3(a)(i) shall be increased
-----------------
and the cash portion of the Purchase Price payable to the Escrow
Agent pursuant to Section 2.3(a)(ii) shall be correspondingly decreased,
-----------------
by the aggregate purchase price of the contributed Global Stock.
-7-
<PAGE>
(E) The portion of the Purchase Price payable at Closing will be
reduced by the amount, if any, by which the cash on hand of the Company
(included in the Working Capital) at Closing is less than $50,000 (including the
"S" deposit; provided, that, the "S" deposit can be converted to cash of the
Company within five (5) days after the Closing Date).
2.7 CLOSING AUDIT. Within 120 days following the Closing Date, there
-------------
shall be delivered to Global and to Sellers an audited version of the
Preliminary Closing Balance Sheet (the "AUDITED CLOSING BALANCE SHEET") of the
Company at and as of the Effective Date. The Audited Closing Balance Sheet
shall be prepared in accordance with GAAP and audited by Ernst & Young, LLP in
accordance with generally accepted auditing standards as promulgated by the
American Institute of Certified Public Accountants at Global's expense. In the
event that both Sellers dispute any items on the Audited Closing Balance Sheet
within ten (10) days after Sellers' receipt thereof, the parties shall jointly
select and retain an independent "Big Six" accounting firm (the "INDEPENDENT
ACCOUNTANTS") to review the disputed item(s) on the Audited Closing Balance
Sheet. The final determination of such disputed item(s) by the Independent
Accountants shall be reflected on the Audited Closing Balance Sheet. The cost
of retaining the Independent Accountants shall be borne by Sellers; provided,
however, that Global shall reimburse Sellers for the cost of the Independent
Accountants in the event that such review results in an increase of more than
$87,500 in the Company's Working Capital as reflected on the Audited Closing
Balance Sheet prepared by Ernst & Young, LLP.
2.8 POST-CLOSING PURCHASE PRICE ADJUSTMENT. In the event that the
--------------------------------------
Working Capital as reflected on the Audited Closing Balance Sheet is less than
the Working Capital Target, then the Purchase Price will be adjusted downward,
on a dollar-for-dollar basis, to reflect the lesser of (i) the decrease, if any,
in Working Capital as reflected on the Audited Closing Balance Sheet from the
amount of Working Capital reflected on the Preliminary Closing Balance Sheet or
(ii) the amount, if any, by which the Working Capital reflected on the Audited
Closing Balance Sheet is less than the Working Capital Target. Conversely, the
Purchase Price will be adjusted upward, on a dollar-for dollar basis, to reflect
the increase, if any, in the total Working Capital as reflected on the Audited
Closing Balance Sheet from the amount of Working Capital reflected on the
Preliminary Closing Balance Sheet, provided, however, that in no event shall
such upward adjustment exceed the total amount of any adjustment to the Purchase
Price made pursuant to Section 2.6(b) above. The post-closing adjustment to the
--------------
Purchase Price, if any, shall be paid by Sellers to Global from the Escrow Sum
or by Global to Sellers, as the case may be, in immediately available funds
within ten (10) business days of delivery of the Audited Closing Balance Sheet,
unless both Sellers dispute any items on the Audited Closing Balance Sheet, in
which case it shall be paid within ten (10) business days after the Independent
Accountants finally determine the disputed item(s), and Global delivers to
Sellers an Audited Closing Balance Sheet modified to reflect such determination.
-8-
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND SELLERS
The Company and Sellers jointly and severally represent and warrant to
Global that:
3.1 CAPITALIZATION. The authorized capital stock of the Company
--------------
consists of 5,000 shares of Common Stock, 1,000 of which are issued and
outstanding. All of the Shares are duly authorized, validly issued, fully paid,
and nonassessable. All of the Shares are owned of record and beneficially by
Sellers in the amounts set forth on Schedule 3.1 hereto. None of the Shares was
------------
issued or will be transferred under this Agreement in violation of any
preemptive or preferential rights of any Person. The Sellers own all of the
issued and outstanding capital stock of the Company.
3.2 NO LIENS ON SHARES. Except as shown on Schedule 3.1, Sellers own
------------------ ------------
the Shares, free and clear of any Encumbrances other than the rights and
obligations arising under this Agreement, and none of the Shares is subject to
any outstanding option, warrant, call, or similar right of any other Person to
acquire the same, and none of the Shares is subject to any restriction on
transfer thereof except for restrictions imposed by applicable federal and state
securities laws. At Closing, Sellers will have full power and authority to
convey good and marketable title to the Shares, free and clear of any
Encumbrances.
3.3 OTHER RIGHTS TO ACQUIRE CAPITAL STOCK. Except as set forth in
-------------------------------------
this Agreement, there are no authorized or outstanding warrants, options, or
rights of any kind to acquire from the Company any equity or debt securities of
the Company, or securities convertible into or exchangeable for equity or debt
securities of the Company, and there are no shares of capital stock of the
Company reserved for issuance for any purpose nor any contracts, commitments,
understandings or arrangements which require the Company to issue, sell or
deliver any additional shares of its capital stock.
3.4 DUE ORGANIZATION. The Company is a corporation duly organized,
----------------
validly existing, and in good standing under the laws of the State of
Connecticut and has full corporate power and authority to carry on the Business
as now conducted and as proposed to be conducted through Closing. Complete and
correct copies of the Articles of Incorporation and Bylaws of the Company, and
all amendments thereto, have been heretofore delivered to Global and are
attached hereto as Schedule 3.4. The Company is qualified to do business in the
------------
State of Connecticut and in each jurisdiction in which the nature of the
Business or the ownership of its properties requires such qualification except
where the failure to be so qualified does not and could not reasonably be
expected to have a Material Adverse Effect.
3.5 SUBSIDIARIES. The Company is the owner of all of the outstanding
------------
shares of the capital stock of each subsidiary (individually, a "SUBSIDIARY" and
collectively, the "SUBSIDIARIES") of the Company listed on Schedule 3.5 (such
------------
shares shall be collectively
-9-
<PAGE>
referred to as the "SUBSIDIARY SHARES"), free and clear of all Encumbrances, and
none of the Subsidiary Shares is subject to any outstanding option, warrant,
call, or similar right of any other Person to acquire the same, and none of the
Subsidiary Shares is subject to any restriction on transfer thereof except for
restrictions imposed by applicable federal and state securities laws. There are
no authorized or outstanding warrants, options, or rights of any kind to acquire
from the Company, or any Subsidiary of the Company, any equity or debt
securities of any Subsidiary of the Company, or securities convertible into or
exchangeable for equity or debt securities of any Subsidiary of the Company, and
there are no Subsidiary Shares reserved for issuance for any purpose nor any
contracts, commitments, understandings or arrangements which require the Company
or any Subsidiary of the Company to issue, sell or deliver any additional
Subsidiary Shares. Except for the Subsidiaries of the Company listed on Schedule
--------
3.5, neither the Company, nor its subsidiaries, directly or
- ---
indirectly have any subsidiaries or any direct or indirect ownership interests
in any Person. The Sellers do not own any other Person engaged in the Business.
3.6 DUE AUTHORIZATION. The Company and the Sellers each have full
-----------------
power and authority to execute, deliver and perform this Agreement and to carry
out the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action of the Company.
This Agreement has been duly and validly executed and delivered by the Company
and Sellers and constitutes the valid and binding obligations of the Company and
Sellers, enforceable in accordance with its terms, except to the extent that
enforceability may be limited by laws affecting creditors' rights and debtors'
obligations generally, and legal limitations relating to remedies of specific
performance and injunctive and other forms of equitable relief. Except for the
enforceability exceptions specifically set forth on Schedule 3.15 and assuming
-------------
all necessary consents to the consummation of the transactions contemplated
hereby, as specifically set forth on Schedules 3.9 and 3.15, are obtained, the
------------- ----
execution, delivery, and performance of this Agreement (as well as all other
instruments, agreements, certificates, or other documents contemplated hereby)
by the Company and Sellers, do not (a) violate any Requirements of Laws or any
Court Order of any Governmental Body applicable to the Company or Sellers, or
their respective property, (b) violate or conflict with, or permit the
cancellation of, or constitute a default under, any material agreement to which
the Company or Sellers are a party, or by which any of them or any of their
respective property is bound, (c) permit the acceleration of the maturity of any
Material indebtedness of, or Material indebtedness secured by the property of,
the Company or Sellers, or (d) violate or conflict with any provision of the
charter or bylaws of the Company.
3.7 FINANCIAL STATEMENTS. The following Financial Statements (herein
--------------------
so called) of the Company have been delivered to Global by the Company:
reviewed, unaudited balance sheets of the Company as of September 30, 1995,
September 30, 1996 and September 30, 1997 and an unreviewed, unaudited balance
sheet as of November 30, 1997, and reviewed, unaudited statements of income of
the Company for the fiscal years ended September 30, 1995, September 30, 1996
and September 30, 1997 and an unreviewed, unaudited statement of income for the
two month period ending November 30, 1997.
-10-
<PAGE>
The Financial Statements have been prepared in accordance with GAAP throughout
the periods indicated and fairly present the financial position, results of
operations and changes in financial position of the Company as of the indicated
dates and for the indicated periods, subject (in the case of the two month
Financial Statements) to year end accruals made in the ordinary course of the
Business which are not materially adverse and which are consistent with past
practices and subject to the adjustment to Working Capital set forth in the
definition of Working Capital above. Except to the extent reflected or provided
for in the Financial Statements or the notes thereto and obligations and
liabilities incurred in the ordinary course of business since the date of the
last of such Financial Statements, the Company has no liabilities required by
GAAP to be reflected on the Company's balance sheet or notes thereto that are
not so reflected, nor any other obligations (whether absolute, contingent, or
otherwise) which are (individually or in the aggregate) Material (in amount or
to the conduct of the Business); and neither the Company nor Sellers have
knowledge of any basis for the assertion of any such liability or obligation.
Since September 30, 1997, there has been no Material Adverse Change in the
prospects of the Company.
3.8 CERTAIN ACTIONS. Since September 30, 1997, the Company has not,
---------------
except as disclosed on Schedule 3.8A hereto or any of the Financial Statements
-------------
or notes thereto: (a) discharged or satisfied any Encumbrance or paid any
obligation or liability, absolute or contingent, other than current liabilities
incurred and paid in the ordinary course of the Business; (b) paid or declared
any dividends or distributions, or purchased, redeemed, acquired, or retired any
stock or indebtedness from any stockholder (other than distributions to pay
estimated income taxes of the Sellers associated with the income of the
Company); (c) made or agreed to make any loans or advances or guaranteed or
agreed to guarantee any loans or advances to any party whatsoever; (d) suffered
or permitted any Encumbrance other than Permitted Exceptions to arise or be
granted or created against or upon any of its assets, real or personal, tangible
or intangible; (e) canceled, waived, or released or agreed to cancel, waive, or
release any of its receivables, rights, or claims against third parties in
excess of $15,000 individually or $35,000 in the aggregate; (f) sold, assigned,
pledged, mortgaged, or otherwise transferred, or suffered any material damage,
destruction, or loss (whether or not covered by insurance) to, any assets
(except in the ordinary course of the Business); (g) amended its charter or
bylaws; (h) paid or made a commitment to pay any severance or termination
payment to any employee or consultant; (i) made any material change in its
method of management or operation or method of accounting; (j) made any capital
expenditures, including, without limitation, replacements of equipment in the
ordinary course of the Business, or entered into commitments therefor, except
for capital expenditures or commitments therefor which do not, in the aggregate,
exceed $40,000; (k) made any investment or commitment therefor in any Person;
(l) made any payment or contracted for the payment of any bonus or other
compensation or personal expenses, other than (A) wages and salaries and
business expenses paid in the ordinary course of the Business, and (B) wage and
salary adjustments made in the ordinary course of the Business for employees who
are not officers, directors, or shareholders of the Company; (m) made, amended,
or entered into any written employment contract or created or made any material
change in any bonus, stock option, pension, retirement, profit sharing or other
employee benefit plan or arrangement; (n) materially amended or experienced a
termination of any material contract, agreement,
-11-
<PAGE>
lease, franchise or license to which the Company is a party that would or could
reasonably be expected to have a Material Adverse Effect, except in the ordinary
course of the Business; or (o) entered into any other material transactions that
would or could reasonably be expected to have a Material Adverse Effect except
in the ordinary course of the Business. Since September 30, 1997, except as
disclosed on Schedule 3.8B hereto or any of the Financial Statements
-------------
or notes thereto, there has not been (a) any Material Adverse Change including,
but not limited to, the loss of any material customers or suppliers of the
Company, or in any material assets of the Company, (b) any extraordinary
contracts, commitments, orders or rebates, (c) any strike, material slowdown, or
demand for recognition by a labor organization by or with respect to any of the
employees of the Company, or (d) any shutdown, material slow-down, or cessation
of any material operations conducted by, or constituting part of, the Company,
nor has the Company agreed to do any of the foregoing.
3.9 PROPERTIES. Attached hereto as Schedule 3.9 is a list containing
---------- ------------
a description of each interest in real property (including, without limitation,
leasehold interests) and each item of personal property utilized by the Company
in the conduct of the Business having a book value in excess of $20,000 as of
the date hereof. Except for Permitted Exceptions or as expressly set forth on
Schedule 3.9, such real and personal properties are free and clear of
- ------------
Encumbrances. Sellers and the Company have delivered to Global a lien search
obtained from the counties where the Company conducts business and the
Connecticut Secretary of State office of all UCC liens of record against the
Company's personal property in the State of Connecticut. All of the properties
and assets necessary for continued operation of the Business as currently
conducted (including, without limitation, all books, records, computers and
computer software and data processing systems) are owned, leased or licensed by
the Company and are reasonably suitable for the purposes for which they are
currently being used. With the exception of used equipment and inventory valued
at no more than $15,000 in the aggregate on the Company's Financial Statements,
the physical properties of the Company, including the real properties leased by
the Company, to the best knowledge of the Company and Sellers, are in good
operating condition and repair, normal wear and tear excepted, and are free from
any defects of a material nature. Except for Permitted Exceptions or as
otherwise set forth on Schedule 3.9, the Company has full and unrestricted legal
------------
and equitable title to all such properties and assets. The operation of the
properties and Business of the Company in the manner in which they are now and
have been operated does not violate any zoning ordinances, municipal
regulations, or other Requirements of Laws, except for any such violations which
would not, individually or in the aggregate, have a Material Adverse Effect.
Except for Permitted Exceptions or as set forth on Schedule 3.9, no restrictive
------------
covenants, easements, rights-of-way, or regulations of record impair the uses of
the properties of the Company for the purposes for which they are now operated.
All leases of real or personal property by the Company are legal, valid,
binding, enforceable and in full force and effect and, assuming all necessary
consents to the consummation of the transactions contemplated herein, as set
forth on Schedule 3.9, are obtained, will remain legal, valid, binding,
------------
enforceable and in full force and effect on essentially the same terms
immediately following the Closing, except to the extent that enforceability may
be limited by laws affecting creditors' rights and debtors' obligations
generally, and legal limitations relating to remedies of specific performance
and injunctive and other forms of equitable relief. All facilities owned
-12-
<PAGE>
or leased by the Company have received all material approvals of any
Governmental Body (including Governmental Permits) required in connection with
the operation thereof and have been operated and maintained in accordance with
all Requirements of Laws.
3.10 LICENSES AND PERMITS. Attached hereto as Schedule 3.10 is a list
-------------------- -------------
of all Material licenses, certificates, privileges, immunities, approvals,
franchises, authorizations and permits held or applied for by the Company from
any Governmental Body (herein collectively called "GOVERNMENTAL PERMITS") the
absence of which could have a Material Adverse Effect. The Company has complied
in all material respects with the terms and conditions of all such Governmental
Permits, and the Company has not received notification from any Governmental
Body of violation of any such Governmental Permit or the Requirements of Laws
governing the issuance or continued validity thereof other than violations (if
any) which would not individually or in the aggregate have a Material Adverse
Effect. No additional Governmental Permit is required from any Governmental
Body thereof in connection with the conduct of the Business which Governmental
Permit, if not obtained, would have a Material Adverse Effect.
3.11 INTELLECTUAL PROPERTY. Attached hereto as Schedule 3.11 is a
--------------------- -------------
list and brief description of all patents, trademarks, tradenames, copyrights,
licenses, computer software or data (other than general commercial software) or
applications therefor owned by or registered in the name of the Company or in
which the Company has any rights, licenses, or immunities (collectively, the
"INTELLECTUAL PROPERTY"). The Company has furnished Global with copies of all
license agreements to which the Company is a party, either as licensor or
licensee, with respect to any Intellectual Property. Except as described on
Schedule 3.11 hereto, the Company has good title to or the right to use such
- -------------
Intellectual Property and all inventions, processes, designs, formulae, trade
secrets and know-how necessary for the conduct of their Business, as presently
conducted without the payment of any royalty or similar payment, and the Company
is not infringing on any patent right, tradename, copyright or trademark right
or other Intellectual Property right of others, and neither the Company nor
Sellers are aware of any infringement by others of any such rights owned by the
Company.
3.12 COMPLIANCE WITH LAWS. The Company has (i) complied in all
--------------------
material respects with all Requirements of Laws, Governmental Permits and Court
Orders applicable to the Business and has filed with the proper Governmental
Bodies all statements and reports required by all Requirements of Laws,
Governmental Permits and Court Orders to which the Company or any of its
employees (because of their activities on behalf of the Company) are subject and
(ii) conducted the Business and is in compliance in all material respects with
all federal, state and local energy, public utility, health, safety and
environmental Requirements of Laws, Governmental Permits and Court Orders
including the Clean Air Act, the Clean Water Act, RCRA, the Safe Drinking Water
Act, CERCLA, OSHA, the Toxic Substances Control Act and any similar state, local
or foreign laws (collectively "ENVIRONMENTAL OBLIGATIONS") and all other
federal, state, local or foreign governmental and regulatory requirements,
except where any such failure to comply or file would not, in the aggregate,
have a Material Adverse Effect. No claim has been made by any Governmental Body
(and, to the best knowledge of the Company and Sellers, no such claim is
anticipated) to the effect that the Business fails to comply, in any respect,
with any Requirements of Laws, Governmental
-13-
<PAGE>
Permit or Environmental Obligation or that a Governmental Permit or Court Order
is necessary in respect thereto.
3.13 INSURANCE. Attached hereto as Schedule 3.13 is a list of all
--------- -------------
coverages for fire, liability, or other forms of insurance and all fidelity
bonds held by or applicable to the Company. Copies of the binder for all such
insurance policies have been delivered to Global. To the best of the Company's
and Sellers' knowledge and belief, no event relating to the Company has occurred
which will result in (i) cancellation of any such insurance coverages; (ii) a
retroactive upward adjustment of premiums under any such insurance coverages; or
(iii) any prospective upward adjustment in such premiums. All of such insurance
coverages will remain in full force and effect following the Closing.
3.14 EMPLOYEE BENEFIT PLANS.
----------------------
(A) EMPLOYEE WELFARE BENEFIT PLANS. Except as disclosed on
------------------------------
Schedule 3.14, the Company does not maintain or contribute to any "employee
- -------------
welfare benefit plan" as such term is defined in Section 3(1) of ERISA. With
respect to each such plan, (i) the plan is in material compliance with ERISA;
(ii) the plan has been administered in accordance with its governing documents;
(iii) neither the plan, nor any fiduciary with respect to the plan, has engaged
in any "prohibited transaction" as defined in Section 406 of ERISA other than
any transaction subject to a statutory or administrative exemption; (iv) except
for the processing of routine claims in the ordinary course of administration,
there is no material litigation, arbitration or disputed claim outstanding; and
(v) all premiums due on any insurance contract through which the plan is funded
have been paid.
(B) EMPLOYEE PENSION BENEFIT PLANS. Except as disclosed in
------------------------------
Schedule 3.14, the Company does not maintain or contribute to any arrangement
- ------------
that is or may be an "employee pension benefit plan" relating to employees, as
such term is defined in Section 3(2) of ERISA. With respect to each such plan:
(i) the plan is qualified under Section 401(a) of the Code, and any trust
through which the plan is funded meets the requirements to be exempt from
federal income tax under Section 501(a) of the Code; (ii) the plan is in
material compliance with ERISA; (iii) the plan has been administered in
accordance with its governing documents as modified by applicable law; (iv) the
plan has not suffered an "accumulated funding deficiency" as defined in Section
412(a) of the Code; (v) the plan has not engaged in, nor has any fiduciary with
respect to the plan engaged in, any "prohibited transaction" as defined in
Section 406 of ERISA or Section 4975 of the Code other than a transaction
subject to statutory or administrative exemption; (vi) the plan has not been
subject to a "reportable event" (as defined in Section 4043(b) of ERISA), the
reporting of which has not been waived by regulation of the Pension Benefit
Guaranty Corporation; (vii) no termination or partial termination of the plan
has occurred within the meaning of Section 411(d)(3) of the Code; (viii) all
contributions required to be made to the plan or under any applicable collective
bargaining agreement have been made to or on behalf of the plan; (ix) there is
no material litigation, arbitration or disputed claim outstanding; and (x) all
applicable premiums due to the Pension Benefit Guaranty Corporation for plan
termination insurance have been paid in full on a timely basis.
-14-
<PAGE>
(C) EMPLOYMENT AND NON-TAX QUALIFIED DEFERRED COMPENSATION
------------------------------------------------------
ARRANGEMENTS. Except as disclosed in Schedule 3.14, the Company does not
- ------------ -------------
maintain or contribute to any retirement or deferred or incentive compensation
or stock purchase, stock grant or stock option arrangement entered into between
the Company and any current or former officer, consultant, director or employee
of the Company that is not intended to be a tax qualified arrangement under
Section 401(a) of the Code.
3.15 CONTRACTS AND AGREEMENTS. Attached hereto as Schedule 3.15 is a
------------------------ -------------
list and brief description of all written or oral contracts, commitments,
leases, and other agreements (including, without limitation, promissory notes,
loan agreements, and other evidences of indebtedness, guarantees, agreements
with distributors, suppliers, dealers, franchisors and customers, and service
agreements) to which the Company is a party or by which the Company or its
properties are bound pursuant to which the obligations thereunder of either
party thereto are, or are contemplated as being, for any one contract $35,000 or
greater (collectively, the "CONTRACTS"). The Company is not and, to the best
knowledge of Sellers and the Company, no other party thereto is in default (and
no event has occurred which, with the passage of time or the giving of notice,
or both, would constitute a default by the Company) under any of the Contracts,
and the Company has not waived any right under any of the Contracts, except for
any such defaults or waivers, which would not have a Material Adverse Effect.
Except for the enforceability exceptions specifically set forth on Schedule
--------
3.15, all of the Contracts are legal, valid, binding, enforceable and in full
- ----
force and effect and, assuming all necessary consents to the consummation of the
transactions contemplated herein, as specifically set forth on Schedules 3.9 and
-------------
3.15, are obtained, will remain legal, valid, binding, enforceable and in full
- ----
force and effect on essentially the same terms immediately after the Closing,
except to the extent that enforceability may be limited by laws affecting
creditors' rights and debtors' obligations generally, and legal limitations
relating to remedies of specific performance and injunctive and other forms of
equitable relief. Except as set forth in Schedule 3.15, the Company has not
-------------
guaranteed any obligations of any other Person. To the best knowledge of the
Company and Sellers, no manufacturer of office equipment sold by the Company
will cease doing business with the Company immediately following the Closing.
3.16 CLAIMS AND PROCEEDINGS. Attached hereto as Schedule 3.16 is a
---------------------- -------------
list and brief description of all claims, actions, suits, proceedings, or
investigations pending or, to the best knowledge and belief of the Sellers or
the Company, threatened against or affecting the Company or any of its
properties or assets, at law or in equity, or before or by any court,
municipality or other Governmental Body. Except as set forth on Schedule 3.16,
-------------
none of such claims, actions, suits, proceedings, or investigations, if
adversely determined, will result in any Material liability or loss to the
Company. The Company has not been and the Company is not now, subject to any
Court Order, stipulation, or consent of or with any court or Governmental Body.
No inquiry, action or proceeding has been instituted or, to the best knowledge
and belief of the Sellers or the Company, threatened or asserted against the
Sellers or the Company to restrain or prohibit the carrying out of the
transactions contemplated by this Agreement or to challenge the validity of such
transactions or any part thereof or seeking damages on account thereof. To the
best knowledge of the Company and Sellers, except as set forth on Schedule 3.16,
-------------
there is no basis for any such valid claim or action.
-15-
<PAGE>
3.17 TAXES.
-----
(A) All Federal, foreign, state, county and local income, gross
receipts, excise, property, franchise, license, sales, use, withholding and
other Taxes due from the Company on or before the Closing will have been paid
and all Tax Returns which are required to be filed by the Company on or before
the Closing will have been filed within the time and in the manner provided by
law, and all such Tax Returns are true and correct and accurately reflect the
Tax liabilities of the Company. No Tax Returns of the Company or any of the
Sellers are presently subject to an extension of the time to file, except for
the September 30, 1997 federal and state corporate income tax returns which are
currently under an extension. All Taxes, assessments, penalties, and interest
of the Company which have become due pursuant to such Tax Returns or any
assessments received have been paid or adequately accrued on the Company's
Financial Statements. The provisions for Taxes reflected on the balance sheets
contained in the Financial Statements are adequate to cover all of the Company's
Tax liabilities for the respective periods then ended and all prior periods.
The Company has not executed any presently effective waiver or extension of any
statute of limitations against assessments and collection of Taxes, and there
are no pending or threatened claims, assessments, notices, proposals to assess,
deficiencies, or audits with respect to any such Taxes of which any of the
Sellers or the Company are aware. For Governmental Bodies with respect to which
the Company does not file Tax Returns, no such Governmental Body has given the
Company written notification that the Company is or may be subject to taxation
by that Governmental Body. The Company has withheld and paid all Taxes required
to have been withheld and paid in connection with amounts paid or owing to any
employee, shareholder, creditor, independent contractor or other party. There
are no Tax liens on any of the property or assets of the Company. The Company
presently is and will be a subchapter S corporation through the date of Closing.
(B) Neither the Company nor any other corporation has filed an
election under Section 341(f) of the Code that is applicable to the Company or
any assets held by the Company. The Company has not made any payments, is not
obligated to make any payments, and is not a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Code Sec. 280G. The Company has not been a United States real
property holding corporation within the meaning of Code Sec. 897(c)(2) during
the applicable period specified in Code Sec. 897(c)(1)(A)(ii). The Company is
not a party to any Tax allocation or sharing agreement. The Company has not and
has never been (nor does the Company have any liability for unpaid Taxes because
it once was) a member of an affiliated group during any part of which return
year any corporation other than the Company also was a member of the affiliated
group. The Company's election to be taxed under subchapter S of the Code is
valid, legally binding and in full force and effect under all applicable Tax
laws.
(C) No transaction contemplated by this Agreement is subject to
withholding under Section 1445 of the Code and no stock transfer taxes, real
estate transfer taxes or similar taxes will be imposed upon the transfer and
sale of the Shares pursuant to this Agreement.
-16-
<PAGE>
3.18 PERSONNEL. Attached hereto as Schedule 3.18 is a list of the
--------- -------------
names and annual rates of compensation of the directors and executive officers
of the Company, and of the employees of the Company whose annual rates of
compensation during the fiscal year ended September 30, 1997 (including base
salary, bonus and incentive pay) exceed (or by September 30, 1998 are expected
to exceed) $60,000. Schedule 3.18 also summarizes the bonus, profit sharing,
-------------
percentage compensation, company automobile, club membership, and other like
benefits, if any, paid or payable to such directors, officers, and employees
during the Company's fiscal year ended September 30, 1997 and to the date
hereof. Schedule 3.18 also contains a brief description of all material terms
-------------
of employment agreements to which the Company is a party and all severance
benefits which any director, officer or employee of the Company is or may be
entitled to receive. The employee relations of the Company are generally good
and there is no pending or, to the best knowledge of Sellers or the Company,
threatened labor dispute or union organization campaign. None of the employees
of the Company are represented by any labor union or organization. The Company
is in compliance in all material respects with all Requirements of Laws
respecting employment and employment practices, terms and conditions of
employment, and wages and hours, and are not engaged in any unfair labor
practices. Neither the Company or Sellers has been advised, or has good reason
to believe, that any of the persons whose names are set forth on Schedule 3.18
-------------
or any other employee other than Peter Wenzke will not agree to remain employed
by the Company after the consummation of the transactions contemplated hereby.
There is no unfair labor practice claim against the Company before the National
Labor Relations Board, or any strike, dispute, slowdown, or stoppage pending or,
to the best knowledge of the Company and Sellers, threatened against or
involving the Company, and none has occurred.
3.19 BUSINESS RELATIONS. Neither the Company nor Sellers know or has
------------------
good reason to believe that any customer or supplier of the Company will cease
to do business with the Company after the consummation of the transactions
contemplated hereby in the same manner and at the same levels as previously
conducted with the Company except for any reductions which do not result in a
Material Adverse Change. Neither Sellers nor the Company has received any
notice of any material disruption (including delayed deliveries or allocations
by suppliers) in the availability of any material portion of the materials used
by the Company nor is the Company or Sellers aware of any facts which could lead
them to believe that the Business will be subject to any such material
disruption.
3.20 ACCOUNTS RECEIVABLE. All of the accounts, notes, and loans
-------------------
receivable that have been recorded on the books of the Company are bona fide and
represent amounts validly due for goods sold or services rendered and except as
disclosed on Schedule 3.20 all such amounts (net of any allowance for doubtful
-------------
accounts) will be collected in full within 180 days following the Closing Date.
Except as disclosed on Schedule 3.20 hereto (a) all of such accounts, notes, and
-------------
loans receivable are free and clear of any Encumbrances; (b) no claims of offset
have been asserted in writing against any of such accounts, notes, or loans
receivable; and (c) none of the obligors of such accounts, notes, or loans
receivable has given written notice that it will or may refuse to pay the full
amount or any portion thereof.
-17-
<PAGE>
3.21 BANK ACCOUNTS. Attached hereto as Schedule 3.21 is a list of all
------------- -------------
banks or other financial institutions with which the Company has an account or
maintains a safe deposit box, showing the type and account number of each such
account and safe deposit box and the names of the persons authorized as
signatories thereon or to act or deal in connection therewith.
3.22 WARRANTIES. Except for warranty claims that are typical and in
----------
the ordinary course of the Business, no written claim for breach of product or
service warranty to any customer has been made against the Company since January
1, 1997. To the best knowledge of Sellers and the Company, no state of facts
exists, and no event has occurred, which could reasonably be expected to form
the basis of any present claim against the Company for liability on account of
any express or implied warranty to any third party in connection with products
sold or services rendered by the Company, except for warranty claims which are
typical and in the ordinary course of business, none of which individually or in
the aggregate would have a Material Adverse Effect.
3.23 BROKERS. Neither the Company nor Sellers have engaged, or caused
-------
to be incurred any liability to any finder, broker, or sales agent in connection
with the origin, negotiation, execution, delivery, or performance of this
Agreement or the transactions contemplated hereby.
3.24 INTEREST IN COMPETITORS, SUPPLIERS, CUSTOMERS, ETC. No officer,
--------------------------------------------------
director, or shareholder of the Company or any affiliate of any such officer,
director, or shareholder, has any ownership interest in any competitor,
supplier, or customer of the Company (other than ownership of securities of a
publicly-held corporation of which such Person owns, or has real or contingent
rights to own, less than one percent of any class of outstanding securities) or
any property used in the operation of the Business.
3.25 INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS, SHAREHOLDERS, AND
---------------------------------------------------------------
EMPLOYEES. Attached hereto as Schedule 3.25 is a list and brief description of
- --------- -------------
the payment terms of all indebtedness of the Company to officers, directors,
shareholders, and employees of the Company and all indebtedness of officers,
directors, shareholders, and employees of the Company to the Company, excluding
indebtedness for travel advances or similar advances for expenses incurred on
behalf of and in the ordinary course of the Business, consistent with past
practices.
3.26 UNDISCLOSED LIABILITIES. Except as indicated in Schedule 3.26
----------------------- -------------
hereto, the Company does not have any liabilities in excess of $10,000 in the
aggregate (whether absolute, accrued, contingent or otherwise), of a nature
required by GAAP to be reflected on a corporate balance sheet or disclosed in
the notes thereto, except such liabilities which are accrued or reserved against
in the Financial Statements or disclosed in the notes thereto, including without
limitation any accounts payable or service liabilities of the Company incurred
prior to the Closing Date, other than liabilities incurred in the ordinary
course of the Business since the date of the latest of such Financial
Statements.
-18-
<PAGE>
3.27 INFORMATION FURNISHED. The Company and Sellers have made
---------------------
available to Global true and correct copies of all material corporate records of
the Company and all material agreements, documents, and other items listed on
the Schedules to this Agreement or referred to in Section 2 of this Agreement,
---------
and neither this Agreement, the Schedules hereto, nor any written information,
instrument, or document delivered to Global pursuant to this Agreement contains
any untrue statement of a material fact or omits any material fact necessary to
make the statements herein or therein, as the case may be, not misleading.
In making the representations and warranties set forth above, the term
"Material" or "material" shall, where appropriate in context of its use, be
deemed to mean an amount of money greater than $25,000. The terms "Material
Adverse Change," "material adverse trend," "Material Adverse Effect," or any
other term of like import shall mean the occurrence of any single event, or any
series of related events, or set of related circumstances, which proximately
causes an actual, direct economic loss to the Company, taken as a whole, in
excess of $25,000 per occurrence or $50,000 in the aggregate. The term
"knowledge" shall mean actual knowledge after reasonable inquiry of the
employees of the Company with responsibility for the applicable subject matter.
All references to the "COMPANY" in Sections 3.6 through 3.27 shall include the
------------ ----
Companies' subsidiaries.
ARTICLE IV
GLOBAL'S REPRESENTATIONS AND WARRANTIES
Global represents and warrants to Sellers as follows:
4.1 DUE ORGANIZATION. Global is a corporation duly organized,
----------------
validly existing, and in good standing under the laws of the State of Delaware
and has full corporate power and authority to execute, deliver and perform this
Agreement and to carry out the transactions contemplated hereby.
4.2 DUE AUTHORIZATION. The execution, delivery and performance of
-----------------
this Agreement has been duly authorized by all necessary corporate action of
Global and the Agreement has been duly and validly executed and delivered by
Global and constitutes the valid and binding obligation of Global, enforceable
in accordance with its terms, except to the extent that enforceability may be
limited by laws affecting creditors' rights and debtors' obligations generally,
and legal limitations relating to remedies of specific performance and
injunctive and other forms of equitable relief. The execution, delivery, and
performance of this Agreement (as well as all other instruments, agreements,
certificates or other documents contemplated hereby) by Global, do not (a)
violate any Requirements of Laws or Court Order of any Governmental Body
applicable to Global or its property, (b) violate or conflict with, or permit
the cancellation of, or constitute a default under any agreement to which Global
is a party or by which it or its property is bound, (c) permit the acceleration
of the maturity of any indebtedness of, or any indebtedness secured by the
property of, Global, or (d) violate or conflict with any provision of the
charter or bylaws of Global.
-19-
<PAGE>
4.3 NO BROKERS. Global has not engaged, or caused to be incurred any
----------
liability to any finder, broker or sales agent in connection with the origin,
negotiation, execution, delivery, or performance of this Agreement or the
transactions contemplated hereby.
4.4 INVESTMENT. Global will acquire the Shares for investment and
----------
for its own account and not with a view to the distribution thereof.
4.5 INFORMATION FURNISHED. To the best knowledge of Global, neither
---------------------
this Agreement, nor any written information, instrument, or document delivered
to Sellers by Global pursuant to this Agreement contains any untrue statement of
a material fact or omits any material fact necessary to make the statements
herein or therein, as the case may be, not misleading.
ARTICLE V
PRE-CLOSING COVENANTS
5.1 CONSENTS OF OTHERS. Prior to the Closing, the Company and
------------------
Sellers shall use their best efforts to obtain and to cause the Company to
obtain all authorizations, consents and permits required of the Company and
Sellers to permit them to consummate the transactions contemplated by this
Agreement.
5.2 BEST EFFORTS. Global, the Company and the Sellers shall use all
------------
reasonable efforts to cause all conditions for the Closing to be met.
5.3 POWERS OF ATTORNEY. The Company and Sellers shall cause the
------------------
Company to terminate at or prior to Closing all powers of attorney granted by
the Company other than those limited powers of attorney in favor of Automated
Data Processing, Inc., Copelco Capital, Inc. and Tokai Financial Services, Inc.
and other than those relating to service of process, qualification or pursuant
to governmental regulatory or licensing agreements, or representation before the
IRS or other government agencies.
ARTICLE VI
POST-CLOSING COVENANTS
6.1 GENERAL. In case at any time after the Closing any further
-------
action is legally necessary or reasonably desirable (as determined by Global and
Sellers) to carry out the purposes of this Agreement, each of the parties will
take such further action (including the execution and delivery of such further
instruments and documents) as any other party reasonably may request, all at the
sole cost and expense of the requesting party (unless the requesting party is
entitled to indemnification therefor under Article VIII below). The Sellers and
Global acknowledge and agree that from and after the Closing, Global will be
entitled to possession of all documents, books, records, agreements, and
financial data of any sort
-20-
<PAGE>
relating to the Company, which shall be maintained at the chief executive office
of the Company; provided, however, that Sellers shall be entitled to reasonable
access to and to make copies of such books and records at their sole cost and
expense and Global will maintain all of the same for a period of at least six
(6) years after Closing. Thereafter, the Company will offer such documentation
to Sellers before disposal thereof.
6.2 TRANSITION. For a period of three (3) years following Closing,
----------
the Sellers will not take any action that primarily is designed or intended to
have the effect of discouraging any lessor, licensor, customer, supplier, or
other business associate of the Company from maintaining the same business
relations with the Company after the Closing as it maintained with the Company
prior to the Closing. For a period of three (3) years following Closing, the
Sellers will refer all customer inquiries relating to the Business to the
Company.
6.3 CONFIDENTIALITY. The Sellers will treat and hold as such all
---------------
Confidential Information, refrain from using any of the Confidential Information
except in connection with this Agreement or otherwise for the benefit of the
Company or Global for a period of three (3) years from the Closing, and deliver
promptly to Global or destroy, at the written request and option of Global, all
tangible embodiments (and all copies) of the Confidential Information which are
in their possession except as otherwise permitted herein. In the event that any
Seller is requested or required (by oral question or written request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar legal proceeding) to disclose any Confidential
Information, such Seller will notify Global promptly of the request or
requirement.
6.4 COVENANT NOT TO COMPETE. For and in consideration of the
-----------------------
allocation of $100,000 of the Purchase Price paid to the Sellers by Global, each
Seller covenants and agrees, for a period of three years from and after the
Closing Date, that he will not, directly or indirectly without the prior written
consent of Global, for or on behalf of any entity:
(A) become interested or engaged, directly or indirectly, as a
shareholder, bondholder, creditor, officer, director, partner, agent, contractor
with, employer or representative of, or in any manner associated with, or give
financial, technical or other assistance to, any Person, firm or corporation for
the purpose of engaging in the copier/office equipment dealer, service or
distribution business in competition with the Company, within the greater of (i)
a 100 mile radius of the Company's office facilities in the State of Connecticut
(the "CURRENT TRADE AREA") or (ii) in any geographic area in which the Company
currently conducts business;
(B) enter into any agreement with, service, assist or solicit the
business of any customers of the Company for the purpose of providing office
equipment sales or service to such customers in competition with the Company in
the Current Trade Area or to cause them to reduce or end their business with the
Company; or
-21-
<PAGE>
(C) enter into any agreement with, or solicit the employment of
employees, consultants or representatives of the Company for the purpose of
causing them to leave the employment of the Company;
Provided, however, that no owner of less than one percent (1%) of the
outstanding stock of any publicly-traded corporation, and no owner of any amount
of Global stock, shall be deemed to be in a violation of this Section 6.4 solely
-----------
by reason thereof.
6.5 ADDITIONAL MATTERS.
------------------
(A) The Sellers shall cause the Company to file with the
appropriate governmental authorities all Tax Returns required to be filed by it
for any taxable period ending prior to the Closing Date and the Company shall
remit any Taxes due in respect of such Tax Returns. In addition, Sellers shall
cause Arthur Andersen, LLP to prepare a short period tax return for the Company
covering the period from October 1, 1997 through the Effective Date. The cost of
preparation of such short period tax return shall be paid for by the Sellers.
(B) Global and Sellers recognize that each of them will need
access, from time to time, after the Closing Date, to certain accounting and Tax
records and information held by Global and/or the Company to the extent such
records and information pertain to events occurring on or prior to the Closing
Date; therefore, Global agrees to cause the Company to (A) use its best efforts
---------
to properly retain and maintain such records for a period of six (6) years from
the date the Tax Returns for the year in which the Closing occurs are filed or
until the expiration of the statute of limitations with respect to such year,
whichever is later, and (B) allow each Seller and his agents and representatives
at times and dates mutually acceptable to the parties, to reasonably inspect,
review and make copies of such records from time to time, such activities to be
conducted during normal business hours and at the inspecting party's expense.
(C) SECTION 338(H)(10) ELECTION. The Sellers and Global shall
---------------------------
join in making a timely election (but in no event later than 180 days following
the Closing) under Section 338(h)(10) of the Code (including the prerequisite
election under Section 338 of the Code) and any similar state law provisions in
all applicable states which permit corporations to make such elections, with
respect to the sale and purchase of the Shares pursuant to this Agreement, and
each party shall provide the others all necessary information to permit such
elections to be made. Global and the Sellers shall, as promptly as practicable
following the Closing Date, take all actions necessary and appropriate
(including filing such forms, returns, schedules and other documents as may be
required) to effect and preserve timely elections; provided, however, that
Global shall be the party responsible for preparing and filing the forms,
returns, schedules and other documents necessary for making an effective and
timely election. All Taxes attributable to the elections made pursuant to this
Section 6.5(c) shall be the liability of the Sellers; provided, however, that
- --------------
(i) Global shall make a one-time payment prior to such election to reimburse
Sellers for any additional Taxes and other costs solely as a result of such
election, (ii) said reimbursement shall be grossed up so that the Sellers will
be
-22-
<PAGE>
[******Certain information on this page has been omitted and filed
separately with the Securities and Exchange Commission. Confidential
treatment has been requested with respect to the omitted portions.]
made whole, after taxes, for the additional Taxes to be paid, and (iii) the
one-time reimbursement payment shall be mutually agreed upon by Sellers and
Ernst & Young. In connection with such elections, within sixty (60) days
following the Closing Date, Global and the Sellers shall act together in good
faith to determine and agree upon the "deemed sales price" to be allocated to
each asset of the Company in accordance with Treasury Regulation Section
1.338(h)(10)-1(f) and the other regulations under Section 338 of the Code.
Notwithstanding the generality of the immediately preceding sentence, Global and
the Sellers agree that the "deemed sales price" shall be allocated to the
monetary assets of the Company at their fair market value as of the Closing Date
as determined as part of the determination of the Working Capital of the Company
in accordance with Section 2.8 hereof, [**] shall be allocated to the
-----------
covenant not to compete contained in Section 6.4 hereof, and the balance of the
-----------
"deemed sales price" shall be allocated to the fixed assets, goodwill and other
intangible assets of the Company. Both Global and Sellers shall report the tax
consequences of the transactions contemplated by this Agreement consistently
with such allocations and shall not take any position inconsistent with such
allocations in any Tax Return or otherwise. In the event that Global and the
Sellers are unable to agree as to such allocations, Global's reasonable
positions with respect to such allocations shall control. The Sellers shall be
liable for, and shall indemnify and hold Global and the Company harmless
against, any Taxes or other costs attributable solely to (i) a failure on the
part of any Seller to take all actions required of him under this Section
-------
6.5(c); or (ii) a failure on the part of the Company to qualify, at or prior to
- ------
the Closing, as an "S corporation" for federal and/or state income Tax
purposes.
ARTICLE VII
CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING
7.1 CONDITIONS TO GLOBAL'S OBLIGATIONS. The obligation of Global
----------------------------------
under this Agreement to consummate the Closing is subject to the conditions
that:
(A) COVENANTS, REPRESENTATIONS AND WARRANTIES. The Company and
-----------------------------------------
Sellers shall have performed in all material respects all obligations and
agreements and complied in all material respects with all covenants contained in
this Agreement to be performed and complied with by each of them prior to or at
the Closing Date. The representations and warranties of the Company and Sellers
set forth in this Agreement shall be accurate in all material respects at and as
of the Closing Date with the same force and effect as though made on and as of
the Closing Date except for any changes resulting from activities or
transactions which may have taken place after the date hereof and which are
permitted or contemplated by the Agreement or which have been entered into in
the ordinary course of business and except to the extent that such
representations and warranties are expressly made as of another specified date
and, as to such representation, the same shall be true in all material respects
as of such specified date. In addition, Global shall have determined from its
due diligence review of the Company that no Material Adverse Change or Material
adverse effect shall have occurred in the financial condition, business,
operations or prospects of the Company from those presented to Global.
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<PAGE>
(B) CONSENTS. All statutory requirements for the valid
--------
consummation by the Company and Sellers of the transactions contemplated by this
Agreement shall have been fulfilled and all authorizations, consents and
approvals, including expiration or early termination of all waiting periods
under the HSR Act and those of all federal, state, local and foreign
governmental agencies and regulatory authorities required to be obtained in
order to permit the consummation of the transactions contemplated hereby shall
have been obtained in form and substance reasonably satisfactory to Global
unless such failure could not reasonably be expected to have a Material Adverse
Effect. All approvals of the Board of Directors and shareholders of the Company
necessary for the consummation of this Agreement and the transactions
contemplated hereby shall have been obtained.
(C) SUPPLIERS/LEASES. Sellers shall have obtained, where
----------------
necessary, the written consent of (i) the Company's Material office equipment
suppliers and (ii) the lessors of the Buildings to the transactions contemplated
by the Agreement. The lessors of the Buildings shall have provided an Estoppel
Certificate to Global's lenders in substantially the same form as Exhibit B
---------
hereto, except as specifically waived by Global.
(D) DISCHARGE OF INDEBTEDNESS AND LIENS. Sellers and the Company
-----------------------------------
shall have provided for the payment in full by the Company of all Funded
Indebtedness of the Company (other than Assumed Funded Indebtedness). Such
Funded Indebtedness, if any, as of October 31, 1997, is listed on Schedule
--------
7.1(d) hereto. Sellers shall have also provided for the termination of all
- ------
Encumbrances of record on the properties of the Company, except for Permitted
Exceptions and except for the security interests set forth on the schedules to
this Agreement; provided, however, that such security interests in favor of
Tokai Financial Services, Inc. and Copelco Capital, Inc. are modified to the
satisfaction of Global's lender prior to Closing. All liens or UCC filings
against the Company and each of the Subsidiaries or Affiliates of the Company
which engaged in the Business other than Permitted Exceptions and except for the
security interests set forth on the schedules to this Agreement, shall have been
terminated as of the Closing; provided, however, that such security interests in
favor of Tokai Financial Services, Inc. and Copelco Capital, Inc. are adjusted
to the satisfaction of Global's lender prior to Closing.
(E) MATERIAL ADVERSE CHANGE. There has been no Material Adverse
-----------------------
Change with respect to the Company since September 30, 1997.
(F) TRANSFER TAXES. Sellers shall be responsible for all stock
--------------
transfer or gains taxes imposed on Sellers incurred in connection with this
Agreement.
(G) INTENTIONALLY OMITTED..
---------------------
(H) DOCUMENTS TO BE DELIVERED BY SELLERS AND THE COMPANY. The
----------------------------------------------------
following documents shall be delivered at the Closing by Sellers and the
Company:
(I) OPINION OF SELLERS' COUNSEL. Global shall have
---------------------------
received an opinion of counsel to the Company and Sellers, dated the
Closing Date, in substantially the same form as the form of opinion
that is Exhibit C hereto.
---------
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<PAGE>
(II) CERTIFICATES. Global shall have received an
------------
officer's certificate and a secretary's certificate of the Company
executed by officers of the Company, dated the Closing Date, in
substantially the same forms as the forms of certificates that are
Exhibit D hereto.
---------
(III) RELEASE. Sellers shall have furnished the Company
-------
with a general release of liabilities, excluding compensation and
employee benefits as well as obligations pursuant to this Agreement,
in substantially the same form as the form attached as Exhibit E
---------
hereto.
(IV) ESCROW AGREEMENT. Sellers shall have delivered to
----------------
Global at the Closing the duly executed Escrow Agreement required
pursuant to Section 2.5 hereof.
-----------
(V) EMPLOYMENT AGREEMENT. Michael E. Shea, Jr. shall
--------------------
have duly executed and delivered the Employment Agreement in
substantially the same form attached as Exhibit F hereto, pursuant to
---------
which he will be employed by the Company following the Closing.
(VI) BUILDING LEASES. Global shall be reasonably
---------------
satisfied with the terms of the leases of the Buildings. Sellers shall
have delivered to Global an Estoppel Certificate of the landlords of
the Buildings to Global's lenders in substantially the same form as
the form attached as Exhibit B hereto, except as specifically waived
---------
by Global.
(VII) COLLATERAL ASSIGNMENT OF RIGHTS. Sellers shall have
-------------------------------
executed and delivered to Jackson National Life Insurance Company a
Collateral Assignment of Rights in substantially the same form as the
form attached hereto as Exhibit H.
---------
(VIII) STOCK CERTIFICATES. Sellers shall have delivered
------------------
the Shares accompanied by duly executed stock powers, together with
any stock transfer stamps or receipts for any transfer taxes required
to be paid thereon.
7.2 CONDITIONS TO SELLERS' AND THE COMPANY'S OBLIGATIONS. The
----------------------------------------------------
obligation of Sellers and the Company under this Agreement to consummate the
Closing is subject to the conditions that:
(A) COVENANTS, REPRESENTATIONS AND WARRANTIES. Global shall have
-----------------------------------------
performed in all material respects all obligations and agreements and complied
in all material respects with all covenants contained in this Agreement to be
performed and complied with by Global prior to or at the Closing and the
representations and warranties of Global set forth in Article IV hereof shall be
accurate in all material respects, at and as of the Closing Date, with the same
force and effect as though made on and as of the Closing Date except for any
changes resulting from activities or transactions which may have taken place
after the date hereof and which are permitted or contemplated by the Agreement
or which have been entered
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<PAGE>
into in the ordinary course of the Business and except to the extent that such
representations and warranties are expressly made as of another specified date
and, as to such representations, the same shall be true as of such specified
date.
(B) CONSENTS. All statutory requirements for the valid
--------
consummation by Global of the transactions contemplated by this Agreement shall
have been fulfilled and all authorizations, consents and approvals, including
expiration or early termination of all waiting periods under the HSR Act and
those of all federal, state, local and foreign governmental agencies and
regulatory authorities required to be obtained in order to permit the
consummation by Global of the transactions contemplated hereby shall have been
obtained unless such failure shall not have a Material Adverse Effect on the
Business. Global shall have used its reasonable best efforts to have obtained
the release of the Sellers from all personal guarantees with respect to the
Company.
(C) DOCUMENTS TO BE DELIVERED BY GLOBAL. The following documents
-----------------------------------
shall be delivered at the Closing by Global:
(I) CERTIFICATES. Sellers shall have received an officers'
------------
certificate and a secretary's certificate executed by officers of
Global, dated the Closing Date, in substantially the same forms as the
forms of certificates that are Exhibit G hereto.
---------
(II) ESCROW AGREEMENT. Global shall have delivered to
----------------
Sellers at the Closing the duly executed Escrow Agreement required
pursuant to Section 2.5 hereof.
-----------
(III) EMPLOYMENT AGREEMENT. Global shall have caused the
--------------------
Company to duly execute and deliver the Employment Agreement with
Michael E. Shea, Jr. in the same form attached as Exhibit F hereto,
---------
pursuant to which he will be employed by the Company following the
Closing.
(IV) PAYMENTS TO SELLERS AND THE COMPANY AND THE ESCROW
--------------------------------------------------
AGENT. Sellers shall have received the Purchase Price for the Shares.
-----
The Sellers shall have been repaid in full by Global for the aggregate
amount of all Assumed Funded Indebtedness. The Escrow Agent shall
have received the Escrow Sum from Global.
(D) RIGHT OF REINVESTMENT. Michael E. Shea, Jr. shall have been
---------------------
offered the right to invest up to $648,000 in the capital stock of Global on the
same terms provided to other recent outside investors in Global (the "GLOBAL
STOCK").
-26-
<PAGE>
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION OF GLOBAL. Except as provided in Section 8.6, as
------------------------- -----------
Global's sole and exclusive remedy for any breach by the Sellers hereunder,
Sellers agree to jointly and severally indemnify and hold harmless Global and
each officer, director, and affiliate of Global, including without limitation
the Company or any successor of the Company (collectively, the "INDEMNIFIED
PARTIES") from and against any and all damages, losses, claims, liabilities,
demands, charges, suits, penalties, costs and expenses (including court costs
and reasonable attorneys' fees and expenses incurred in investigating and
preparing for any litigation or proceeding) (collectively, the "INDEMNIFIABLE
COSTS"), which any of the Indemnified Parties may sustain, or to which any of
the Indemnified Parties may be subjected, arising out of (A) any
misrepresentation, breach or default by Sellers or the Company of or under any
of the representations, covenants, agreements or other provisions of this
Agreement or any agreement or document executed in connection herewith; (B) the
assertion and final determination of any claim or liability against the Company
or any of the Indemnified Parties by any Person based upon the facts which form
the alleged basis for any litigation to the extent it should have been, but was
not, reserved for in the Financial Statements in accordance with GAAP; and (C)
the Company's tortious acts or omissions to act prior to Closing for which the
Company did not carry liability insurance for themselves as the insured party,
whether or not such acts or omissions to act result in a breach or violation of
any representation or warranty. Notwithstanding the foregoing, (i) a Seller
will not incur any indemnification obligation to any other party to this
Agreement for Indemnifiable Costs incurred solely in connection with a breach of
the provisions of Sections , 6.2, 6.3 and 6.4 hereof by the other Seller and
--------- --- --- ---
(ii) Peter Wenzke will not incur any indemnification obligation to any other
party to this Agreement for Indemnifiable Costs incurred solely in connection
with a breach of the Employment Agreement with Michael E. Shea, Jr.
8.2 DEFENSE OF CLAIMS. If any legal proceeding shall be instituted,
-----------------
or any claim or demand made, against any Indemnified Party in respect of which
Sellers may be liable hereunder, such Indemnified Party shall give prompt
written notice thereof to Sellers and, except as otherwise provided in Section
-------
8.4 below, Sellers shall have the right to defend, or cause the Company or its
- ---
successors to defend, any litigation, action, suit, demand, or claim for which
it may seek indemnification unless, in the reasonable judgment of Global, such
litigation, action, suit, demand, or claim, or the resolution thereof, would
have an ongoing effect on Global, the Company or its successors, and such
Indemnified Party shall extend reasonable cooperation in connection with such
defense, which shall be at Sellers' expense. In the event Sellers fail or
refuse to defend the same within a reasonable length of time, the Indemnified
Parties shall be entitled to assume the defense thereof, and Sellers shall be
jointly and severally liable to repay the Indemnified Parties for all expenses
reasonably incurred in connection with said defense (including reasonable
attorneys' fees and settlement payments) if it is determined that such request
for indemnification was proper. If Sellers shall not have the right to assume
the defense of any litigation, action, suit, demand, or claim in accordance with
either of the two preceding sentences, the Indemnified Parties shall have the
absolute right to control the defense of and to settle, in Indemnified Parties'
sole discretion
-27-
<PAGE>
after obtaining the written consent of the Sellers (such consent not to be
unreasonably withheld), such litigation, action, suit, demand, or claim, but
each Seller shall be entitled, at his own expense, to participate in such
litigation, action, suit, demand, or claim.
8.3 ESCROW CLAIM. If any claim for indemnification is made by an
------------
Indemnified Party or a Seller pursuant to this Article VIII prior to the
expiration of the Escrow Period, such Indemnified Party or Seller shall first
apply to the Escrow Agent provided in Section 2.5 of this Agreement for
-----------
reimbursement of such claim in accordance with the provisions of the Escrow
Agreement prior to seeking reimbursement for such claim.
8.4 TAX AUDITS, ETC. In the event of an audit of a Tax Return of the
---------------
Company with respect to which an Indemnified Party might be entitled to
indemnification pursuant to this Article VIII, Global shall have the right to
control any and all such audits which may result in the assessment of additional
Taxes against the Company and any and all subsequent proceedings in connection
therewith, including appeals (subject to the prior written consent of Sellers,
which shall not unreasonably be withheld and subject to the right of Sellers to
have their accountants and attorneys consult with Global on such audits or
procedures at Sellers' expense). Sellers shall cooperate fully in all matters
relating to any such audit or other Tax proceeding (including according access
to all records pertaining thereto), and will execute and file any and all
consents, powers of attorney, and other documents as shall be reasonably
necessary in connection therewith. If additional Taxes are payable by the
Company as a result of any such audit or other proceeding, Sellers shall be
responsible for and shall promptly pay all Taxes, interest, and penalties to
which any of the Indemnified Parties shall be entitled to indemnification.
8.5 INDEMNIFICATION OF SELLERS. Global agrees to indemnify and hold
--------------------------
harmless Sellers and the Company and each officer, director, stockholder or
affiliate of the Company, from and against any Indemnifiable Costs arising out
of (A) any material misrepresentation, breach or default by Global of or under
any of the covenants, agreements or other provisions of this Agreement or any
agreement or document executed in connection herewith, and (B) any tortious acts
or omissions by Global before or after or the Company after, the Closing. In
addition, the Company and Global shall indemnify the Sellers for any payment or
satisfaction of any guarantees by Sellers of the Company's obligations occurring
after the Closing Date.
8.6 LIMITS ON INDEMNIFICATION. All Indemnifiable Costs sought by any
-------------------------
party hereunder shall be net of any insurance proceeds received by such Person
with respect to such claim (less the present value of any premium increases
occurring as a result of such claim). Except for any claims for breach of the
representations and warranties of the Sellers under Sections 3.1, 3.2, 3.3 or
-------------------------
3.17 hereof (the indemnification for which shall expire on the expiration of the
- ----
applicable statute of limitations), the indemnification provided under this
Article VIII shall expire on the third anniversary of the Closing Date. The
Sellers shall not be obligated to pay any amounts for indemnification under this
Article VIII until the aggregate indemnification obligation hereunder exceeds
$50,000, whereupon Sellers shall be liable for all amounts for which
indemnification may be sought in excess of $25,000. Notwithstanding the
-28-
<PAGE>
[******Certain information on this page has been omitted and filed
separately with the Securities and Exchange Commission. Confidential
treatment has been requested with respect to the omitted portions.]
foregoing, in no event shall the aggregate liability of Sellers to Global exceed
[**] (except for claims made for any breach of the representations and
warranties of Sellers under Sections 3.1, 3.2, 3.3, or 3.17 hereof, as to which
---------------------- ----
the limit of indemnification hereunder shall be the Purchase Price). However
nothing in this Article VIII shall limit Global or Sellers in exercising or
securing any remedies provided by applicable common law with respect to the
conduct of Sellers or Global in connection with this Agreement or in the amount
of damages that it can recover from the other in the event that Global or
Sellers successfully proves intentional fraud or intentional fraudulent conduct
in connection with this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 MODIFICATIONS. Any amendment, change or modification of this
-------------
Agreement shall be void unless in writing and signed by all parties hereto. No
failure or delay by any party hereto in exercising any right, power or privilege
hereunder (and no course of dealing between or among any of the parties) shall
operate as a waiver of any such right, power or privilege. No waiver of any
default on any one occasion shall constitute a waiver of any subsequent or other
default. No single or partial exercise of any such right, power or privilege
shall preclude the further or full exercise thereof.
9.2 NOTICES. All notices and other communications hereunder shall be
-------
in writing and shall be deemed to have been duly given when personally
delivered, or 48 hours after deposited in the United States mail, first-class,
postage prepaid, or by facsimile addressed to the respective parties hereto as
follows:
Global:
------
Global Imaging Systems Inc.
P.O. Box 273478
Tampa, Florida 33688-3478
Attention: Thomas Johnson, President
Fax No.: (813) 264-7877
Tel No.: (813) 960-5508
With a copy to:
---------------
Hogan & Hartson L.L.P.
Columbia Square
555 Thirteenth Street, NW
Washington, DC 20004-1109
Attention: Christopher J. Hagan
Fax No.: (202) 637-5910
Tel No.: (202) 637-5771
-29-
<PAGE>
The Company:
------------
31 Inwood Road
Rocky Hill, Connecticut 06067
Attention: President
Fax No.: (860) 529-6866
Tel No.: (860) 529-7757
With a copy to:
---------------
Robinson & Cole LLP
One Commercial Plaza
Hartford, Connecticut 06103-3597
Attention: Richard G. Shechtman, Esq.
Fax No.: (860) 275-8299
Tel No.: (860) 275-8230
Seller: Michael E. Shea, Jr.:
------------------------------
Michael E. Shea, Jr.
68 Pheasant Hill Road
Weston, Connecticut 06883
Fax No.: ______________
Tel No.: (203) 222-1291
With a copy to:
---------------
Robinson & Cole LLP
One Commercial Plaza
Hartford, Connecticut 06103-3597
Attention: Richard G. Shechtman, Esq.
Fax No.: (860) 275-8299
Tel No.: (860) 275-8230
Seller: Peter Wenzke:
----------------------
Peter Wenzke
7 Emily Road
Marlborough, Connecticut 06447
Fax No.: ______________
Tel No.: (860) 295-0411
-30-
<PAGE>
With a copy to:
---------------
Sorokin Gross & Hyde, P.C.
One Corporate Center
Hartford, Connecticut 06103
Attention: Barry Greene, Esq.
Fax No.: (860) 525-9099
Tel No.: (860) 525-6645
or to such other address as to any party hereto as such party shall designate by
like notice to the other parties hereto.
9.3 COUNTERPARTS. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original but all of which
counterparts collectively shall constitute one instrument, and in making proof
of this Agreement, it shall never be necessary to produce or account for more
than one such counterpart.
9.4 EXPENSES. Each of the parties hereto will bear all costs,
--------
charges and expenses incurred by such party in connection with this Agreement
and the consummation of the transactions contemplated herein, provided, however,
that Sellers shall bear all costs and expenses of (i) any broker involved in
this transaction and (ii) all legal expenses of Sellers or the Company with
respect to this Agreement and the transactions contemplated hereby.
9.5 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon
--------------------------
and inure to the benefit of the Company, Global and Sellers, their heirs,
representatives, successors, and permitted assigns, in accordance with the
terms hereof. This Agreement shall not be assignable by the Company or Sellers
without the prior written consent of Global. This Agreement shall be assignable
by Global to a wholly-owned subsidiary of Global without the prior written
consent of Sellers, but any such assignment shall not relieve Global of its
obligations hereunder.
9.6 ENTIRE AND SOLE AGREEMENT. This Agreement and the other
-------------------------
schedules and agreements referred to herein, constitute the entire agreement
between the parties hereto and supersede all prior agreements, representations,
warranties, statements, promises, information, arrangements and understandings,
whether oral or written, express or implied, with respect to the subject matter
hereof.
9.7 GOVERNING LAW. This Agreement and its validity, construction,
-------------
enforcement, and interpretation shall be governed by the substantive laws of the
State of Connecticut.
9.8 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
-----------------------------------------------------
Regardless of any investigation at any time made by or on behalf of any party
hereto or of any information any party may have in respect thereof, all
covenants, agreements, representations, and warranties and the related
indemnities made hereunder or pursuant hereto or in connection
-31-
<PAGE>
with the transactions contemplated hereby shall survive the Closing for a period
of three (3) years, provided (a) the representations and warranties contained in
Section 3.17 of this Agreement, and the related indemnities, shall survive the
- ------------
Closing until the expiration of the applicable statutes of limitations for
determining or contesting Tax liabilities and (b) the representations and
warranties contained in Sections 3.1, 3.2 and 3.3 of this Agreement, and the
-------------------------
related indemnities, shall survive the Closing until expiration of the
applicable statute of limitations.
9.9 INVALID PROVISIONS. If any provision of this Agreement is deemed
------------------
or held to be illegal, invalid or unenforceable, this Agreement shall be
considered divisible and inoperative as to such provision to the extent it is
deemed to be illegal, invalid or unenforceable, and in all other respects this
Agreement shall remain in full force and effect; provided, however, that if any
provision of this Agreement is deemed or held to be illegal, invalid or
unenforceable there shall be added hereto automatically a provision as similar
as possible to such illegal, invalid or unenforceable provision and be legal,
valid and enforceable. Further, should any provision contained in this
Agreement ever be reformed or rewritten by any judicial body of competent
jurisdiction, such provision as so reformed or rewritten shall be binding upon
all parties hereto.
9.10 PUBLIC ANNOUNCEMENTS. Neither party shall make any public
--------------------
announcement of the transactions contemplated hereby without the prior written
consent of the other party, which consent shall not be unreasonably withheld.
9.11 REMEDIES CUMULATIVE. The remedies of the parties under this
-------------------
Agreement are cumulative and shall not exclude any other remedies to which any
party may be lawfully entitled.
9.12 WAIVER. No failure or delay on the part of any party in
------
exercising any right, power, or privilege hereunder or under any of the
documents delivered in connection with this Agreement shall operate as a waiver
of such right, power, or privilege; nor shall any single or partial exercise of
any such right, power, or privilege preclude any other or further exercise
thereof or the exercise of any other right, power, or privilege.
9.13 DISPUTE RESOLUTION. ALL DISPUTES BETWEEN SELLERS AND GLOBAL WITH
------------------
RESPECT TO ANY PROVISION OF THIS AGREEMENT OR THE RIGHTS AND OBLIGATIONS OF
SELLERS AND GLOBAL HEREUNDER (OTHER THAN DISPUTES INVOLVING ALLEGATIONS OF
INTENTIONAL FRAUD), WHICH CANNOT BE RESOLVED BY MUTUAL AGREEMENT, WILL BE
RESOLVED BY BINDING ARBITRATION IN ACCORDANCE WITH THE RULES OF THE AMERICAN
ARBITRATION ASSOCIATION IN HARTFORD, CONNECTICUT, OR BY ANY OTHER MEANS OF
ALTERNATIVE DISPUTE RESOLUTION MUTUALLY AGREED UPON BY THE PARTIES. EACH PARTY
SHALL BE ENTITLED TO DISCOVERY PURSUANT TO THE FEDERAL RULES OF CIVIL PROCEDURE
AND FEDERAL RULES OF EVIDENCE.
-32-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed as of the date and year first above written.
GLOBAL:
------
GLOBAL IMAGING SYSTEMS INC.
By: /s/ Thomas S. Johnson
--------------------------------------
Thomas S. Johnson
President and Chief Executive Officer
THE COMPANY:
-----------
CONNECTICUT BUSINESS SYSTEMS, INC.
By: /s/ Michael E. Shea, Jr.
--------------------------------------
Michael E. Shea, Jr.
President
SELLERS:
-------
/s/ Michael E. Shea, Jr.
-------------------------------------------
Michael E. Shea, Jr.
/s/ Peter Wenzke
-------------------------------------------
Peter Wenzke
-33-
<PAGE>
January 7, 1998
CBSI Acquisition Corporation
110 Perimeter Road
Nashua, New Hampshire 03063
RE: ASSIGNMENT OF RIGHTS UNDER AGREEMENT TO CBSIAC
Ladies and Gentlemen:
Reference is made to that certain stock purchase agreement (the
"AGREEMENT"), dated as of December 31, 1997, by and among Global Imaging Systems
Inc., a Delaware corporation ("GLOBAL"), Connecticut Business Systems, Inc., a
Connecticut corporation ("CBSI") and certain shareholders of CBSI (the
"SELLERS").
Pursuant to Section 9.5 of the Agreement, the Agreement is assignable
-----------
by Global to a wholly-owned subsidiary of Global without the prior written
consent of the Sellers, but any such assignment shall not relieve Global of its
obligations under the Agreement.
Global hereby assigns all its rights and interests in the Agreement to
CBSI Acquisition Corporation, a Delaware corporation and wholly-owned subsidiary
of Global ("CBSIAC"). Notwithstanding the foregoing, Global acknowledges that
it is not relieved of its obligations under the Agreement.
By signing below, CBSIAC agrees to assume and be bound by all
obligations of Global under the agreement and all provisions of the Agreement
and ratifies and confirms the Agreement as if an original party to it.
Very truly yours,
GLOBAL IMAGING SYSTEMS INC.
By: /s/ Thomas S. Johnson
------------------------------
Thomas S. Johnson
President
Accepted and Agreed:
CBSI ACQUISITION CORPORATION
By: /s/ Thomas S. Johnson
----------------------------
Thomas S. Johnson
President
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT 10.27
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[**]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.***
ASSET PURCHASE AGREEMENT
BY AND AMONG
CONNECTICUT BUSINESS SYSTEMS, INC.
AND
BLOOM'S INCORPORATED
DATED FEBRUARY 26, 1998
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I DEFINITIONS............................................... 1
1.1 DEFINITIONS.................................................... 1
------------
ARTICLE II AGREEMENT OF PURCHASE AND SALE; CLOSING................... 6
2.1 PURCHASED ASSETS............................................... 6
----------------
(a) ACCOUNTS RECEIVABLE....................................... 6
-------------------
(b) REAL PROPERTY............................................. 6
-------------
(c) INVENTORY................................................. 7
---------
(d) BUSINESS, EQUIPMENT AND SUPPLIES.......................... 7
--------------------------------
(e) CONTRACTS AND OTHER AGREEMENTS RELATING TO THE BUSINESS... 7
-------------------------------------------------------
(f) BOOKS, RECORDS, LISTS AND OTHER DATA...................... 7
------------------------------------
(g) EMPLOYMENT AGREEMENTS AND EMPLOYEE RELATIONSHIPS.......... 7
------------------------------------------------
(h) LICENSES, PERMITS......................................... 7
-----------------
(i) INTELLECTUAL PROPERTY..................................... 7
---------------------
(j) GENERAL INTANGIBLES....................................... 8
-------------------
2.2 ASSUMED LIABILITIES............................................ 8
-------------------
2.3 EXCLUDED LIABILITIES........................................... 8
--------------------
2.4 TITLE TO THE PURCHASED ASSETS: DOCUMENTS OF CONVEYANCE........ 9
-------------------------------------------------------
2.5 PURCHASE PRICE; ALLOCATION OF PURCHASE PRICE................... 10
--------------------------------------------
2.6 PAYMENT OF PURCHASE PRICE...................................... 10
-------------------------
2.7 REDEMPTION PRICE AND STOCK PURCHASE PRICE ADJUSTMENTS.......... 10
-----------------------------------------------------
(A) FUNDED INDEBTEDNESS ADJUSTMENT............................ 10
------------------------------
(B) WORKING CAPITAL ADJUSTMENT................................ 10
--------------------------
2.8 CLOSING........................................................ 11
-------
2.9 ESCROW ARRANGEMENTS............................................ 11
-------------------
2.10 CLOSING AUDIT................................................. 11
-------------
2.11 POST-CLOSING PURCHASE PRICE ADJUSTMENT........................ 11
--------------------------------------
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER................ 12
3.1 DUE ORGANIZATION............................................... 12
----------------
3.2 SUBSIDIARIES................................................... 12
------------
3.3 DUE AUTHORIZATION.............................................. 13
-----------------
3.4 FINANCIAL STATEMENTS........................................... 13
--------------------
3.5 CERTAIN ACTIONS................................................ 13
---------------
3.6 PROPERTIES..................................................... 14
----------
3.7 LICENSES AND PERMITS........................................... 15
--------------------
3.8 INTELLECTUAL PROPERTY.......................................... 15
---------------------
3.9 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS..................... 16
------------------------------------------
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
3.10 INSURANCE.......................................................... 16
---------
3.11 EMPLOYEE BENEFIT PLANS............................................. 16
----------------------
3.12 CONTRACTS AND AGREEMENTS........................................... 18
------------------------
3.13 CLAIMS AND PROCEEDINGS............................................. 19
----------------------
3.14 TAXES.............................................................. 19
-----
3.15 PERSONNEL.......................................................... 20
---------
3.16 BUSINESS RELATIONS................................................. 20
------------------
3.17 ACCOUNTS RECEIVABLE................................................ 20
-------------------
3.18 CUSTOMER CLAIMS.................................................... 20
3.19 BROKERS............................................................ 21
-------
3.20 AFFILIATED TRANSACTIONS............................................ 21
3.21 FUNDED INDEBTEDNESS; LETTERS OF CREDIT; UNDISCLOSED LIABILITIES.... 21
---------------------------------------------------------------
(A) FUNDED INDEBTEDNESS............................................ 21
-------------------
(B) UNDISCLOSED LIABILITIES........................................ 21
-----------------------
3.22 INDEBTEDNESS TO AND FROM EMPLOYEES................................. 21
----------------------------------
3.24 INFORMATION FURNISHED.............................................. 22
---------------------
ARTICLE IV BUYER'S REPRESENTATIONS AND WARRANTIES........................ 22
4.1 DUE ORGANIZATION.................................................... 22
----------------
4.2 DUE AUTHORIZATION................................................... 22
-----------------
4.3 NO BROKERs.......................................................... 22
--- ---------
ARTICLE V COVENANTS OF SELLER............................................ 23
5.1 CONSENTS OF OTHERS.................................................. 23
----------------------
5.2 SELLER'S EFFORTS.................................................... 23
--------------------
5.3 POWERS OF ATTORNEY.................................................. 23
----------------------
5.4 CONDUCT OF BUSINESS PENDING CLOSING................................. 23
-----------------------------------
5.5 ACCESS TO RECORDS BEFORE CLOSING.................................... 24
--------------------------------
ARTICLE VI POST-CLOSING COVENANTS......................................... 24
6.1 GENERAL............................................................. 24
--------
6.2 TRANSITION.......................................................... 24
----------
6.3 CONFIDENTIALITY..................................................... 25
---------------
6.4 COVENANT NOT TO COMPETE............................................. 25
-----------------------
6.5 ACCESS TO RECORDS AFTER CLOSING..................................... 26
-------------------------------
6.6 LITIGATION SUPPORT.................................................. 26
-------------------
6.7 HIRING OF EMPLOYEES................................................. 26
-------------------
6.8 ASSIGNMENT OF CONTRACTS............................................. 26
-----------------------
ARTICLE VII CONDITIONS TO OBLIGATIONS OF PARTIES TO CONSUMMATE CLOSING... 27
7.1 CONDITIONS TO BUYER'S OBLIGATIONS................................... 27
---------------------------------
(A) COVENANTS, REPRESENTATIONS AND WARRANTIES...................... 27
-----------------------------------------
(B) CONSENTS....................................................... 27
--------
(C) LEASES......................................................... 28
------
(D) FINANCIAL CONDITION............................................ 28
-------------------
(E) DOCUMENTS TO BE DELIVERED BY SELLER............................ 28
-----------------------------------
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
(I) CONVEYANCE DOCUMENTS..................................... 28
--------------------
(II) OPINION OF SELLER'S COUNSEL............................. 28
---------------------------
(III) CERTIFICATES........................................... 28
------------
(IV) RESOLUTIONS............................................. 28
-----------
(V) UCC MATTERS.............................................. 29
-----------
(VI) ESCROW AGREEMENT........................................ 29
----------------
(VII) SELLER MANAGEMENT SERVICES AGREEMENT................... 29
------------------------------------
(VIII) NON-COMPETE AGREEMENT................................. 29
---------------------
(IX) COLLATERAL ASSIGNMENT OF RIGHTS......................... 29
-------------------------------
(X) RECORDS OF SELLER........................................ 29
-----------------
(XI) AUDIT OF DIVISION....................................... 29
------------------
7.2 CONDITIONS TO SELLER'S AND SELLER'S OBLIGATIONS.................... 29
-----------------------------------------------
(A) COVENANTS, REPRESENTATIONS AND WARRANTIES..................... 29
-----------------------------------------
(B) CONSENTS...................................................... 30
--------
(C) DOCUMENTS TO BE DELIVERED BY BUYER............................ 30
----------------------------------
(I) ESCROW AGREEMENT......................................... 30
----------------
(II) ASSIGNMENT AND ASSUMPTION AGREEMENT..................... 30
-----------------------------------
(III) MANAGEMENT SERVICES AGREEMENT.......................... 30
-----------------------------
(D) PAYMENTS TO SELLER............................................ 30
------------------
ARTICLE VIII INDEMNIFICATION............................................ 31
8.1 INDEMNIFICATION OF BUYER........................................... 31
------------------------
8.2 DEFENSE OF CLAIMS.................................................. 31
-----------------
8.3 ESCROW CLAIM....................................................... 32
------------
8.4 TAX AUDITS, ETC.................................................... 32
---------------
8.5 INDEMNIFICATION OF SELLER.......................................... 32
-------------------------
8.6 LIMITS ON INDEMNIFICATION.......................................... 32
-------------------------
ARTICLE IX TERMINATION.................................................. 33
9.1 TERMINATION........................................................ 33
-----------
9.2 EFFECT OF TERMINATION.............................................. 33
---------------------
ARTICLE X MISCELLANEOUS................................................. 34
10.1 MODIFICATIONS; WAIVERS............................................ 34
----------------------
10.2 NOTICES........................................................... 34
--------
10.3 COUNTERPARTS; FACSIMILE TRANSMISSION.............................. 35
------------------------------------
10.4 EXPENSES.......................................................... 35
--------
10.5 BINDING EFFECT; ASSIGNMENT........................................ 35
--------------------------
10.6 ENTIRE AND SOLE AGREEMENT......................................... 35
-------------------------
10.7 GOVERNING LAW..................................................... 36
-------------
10.8 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS............. 36
-----------------------------------------------------
10.9 INVALID PROVISIONS................................................ 36
------------------
10.10 PUBLIC ANNOUNCEMENTS............................................. 36
--------------------
10.11 REMEDIES CUMULATIVE.............................................. 36
-------------------
10.12 THIRD PARTIES.................................................... 36
------------
10.13 NO STRICT CONSTRUCTION........................................... 36
----------------------
</TABLE>
-iii-
<PAGE>
LIST OF EXHIBITS
Exhibit A Form of Escrow Agreement
Exhibit B Form of General Assignment, Bill of Sale and
Assumption Agreement
Exhibit C Form of Opinion of Seller's Counsel
Exhibit D-1 Form of Seller's Officer Certificate
Exhibit D-2 Form of Seller's Secretary Certificate
Exhibit E Form of Management Services Agreement
Exhibit F Form of Non-Compete Agreement
Exhibit G Intentionally Omitted
Exhibit H Form of Collateral Assignment of Rights
Exhibit I Form of Landlord Waiver for Building Leases
LIST OF DISCLOSURE SCHEDULES
Schedule 2.1 Real Property (Leases)
Schedule 2.1(d) Business, Equipment and Supplies
Schedule 2.6 Seller's Account and Wire Transfer Instructions
Schedule 3.1-1 Articles of Incorporation
Schedule 3.1-2 Bylaws
Schedule 3.1-3 Qualified Jurisdictions
Schedule 3.5(k) Bonuses
Schedule 3.6 List of Properties
Schedule 3.7 List of Licenses and Permits
Schedule 3.8 List of Intellectual Property
Schedule 3.10 List of Insurance
Schedule 3.11 Employee Plans
Schedule 3.12 List of Contracts and Certain Exceptions
Schedule 3.15 List of Personnel and Employee Agreements and Benefits
Schedule 3.22 Payment and Indebtedness of Seller to Employees
The Exhibits and Schedules to this Asset Purchase Agreement are not included
with this Registration Statement on Form S-1. Global will provide these
exhibits and schedules upon the request of the Securities and Exchange
Commission.
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "AGREEMENT") is entered into as of
February 26, 1998 between CONNECTICUT BUSINESS SYSTEMS, INC., a Connecticut
corporation ("BUYER"), and BLOOMS INCORPORATED, a Massachusetts corporation
("SELLER").
RECITALS
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A. Seller, through its Bloom's Business Systems Division (the
"DIVISION"), is engaged in the sale and service of office equipment in the State
of Connecticut, the State of Rhode Island, and the Commonwealth of Massachusetts
(the "BUSINESS").
B. Seller owns and leases certain operating assets and properties,
real and personal, tangible and intangible, which are used by the Seller in the
conduct of the Business of the Division.
C. Buyer desires to purchase from Seller, and Seller desires to sell
to Buyer, substantially all of Seller's operating assets used in, or useful to
and related to the operation of the Business by the Division on the terms and
conditions set forth in this Agreement.
D. Buyer, in connection with such purchase, desires to assume
certain of the liabilities and obligations of Seller relating to the Business
(and none others), as more specifically set forth herein.
ARTICLE I
DEFINITIONS
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1.1 DEFINITIONS. In this Agreement, the following terms have the
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meanings specified or referred to in this Section 1.1 and shall be equally
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applicable to both the singular and plural forms. Any agreement referred to
below shall mean such agreement as amended, supplemented and modified from time
to time to the extent permitted by the applicable provisions thereof and by this
Agreement.
"AFFILIATE" means, with respect to any Person, any other Person
which directly or indirectly controls, is controlled by or is under common
control with such Person.
"ASSIGNMENT AND ASSUMPTION AGREEMENT" has the meaning specified
in Section 2.4.
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"ASSUMED LIABILITIES" has the meaning specified in Section 2.2.
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<PAGE>
"AUDITED CLOSING BALANCE SHEET" has the meaning specified in
Section 2.10.
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"BUILDINGS" shall mean the sites where the operations of the
Business are located at (i) 135 Freshwater Boulevard, Enfield, Connecticut, (ii)
299 North Street, Pittsfield, Massachusetts, (iii) 109 Pitkin Street, East
Hartford, Connecticut, and (iv) 457 Castle Avenue, Fairfield, Connecticut.
"BUSINESS" has the meaning specified in the first recital of the
Agreement.
"BUYER" has the meaning specified in the first paragraph of this
Agreement.
"CLOSING" means the closing of the transfer of the Purchased
Assets from Seller to Buyer.
"CLOSING DATE" has the meaning specified in Section 2.8.
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"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIAL INFORMATION" means all (i) terms and provisions of
this Agreement or the transactions to be consummated pursuant hereto (including
the Purchase Price), and (ii) confidential information and trade secrets of
Seller related to the Business including, without limitation, any of the same
comprising the identity, lists or descriptions of any customers, referral
sources or organizations; financial statements, cost reports or other financial
information; contract proposals, or bidding information; business plans and
training and operations methods and manuals; personnel records; fee structure;
and management systems, policies or procedures, including related forms and
manuals. Confidential Information shall not include any information (i) which is
disclosed pursuant to subpoena or other legal process, (ii) which has been
publicly disclosed, or (iii) which is subsequently disclosed by any third party
not in breach of a confidentiality agreement with Buyer.
"CONTRACTS" has the meaning specified in Section 3.12.
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"COURT ORDER" means any judgment, order, award or decree of any
foreign, federal, state, local or other court or tribunal and any award in any
arbitration proceeding.
"DISCLOSURE SCHEDULES" shall mean the Disclosure Schedules
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attached to this Agreement pursuant to which exceptions to the Seller's specific
representations and warranties set forth in Article III (and listed on a
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Section-by-Section basis) are disclosed to Buyer pursuant to said Article III.
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"EFFECTIVE DATE" has the meaning specified in Section 2.8.
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"EMPLOYEES" has the meaning specified in Section 3.11.
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"EMPLOYEE PLANS" has the meaning specified in Section 3.11.
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"ENCUMBRANCE" means any lien, claim, charge, security interest,
mortgage, pledge, easement, conditional sale or other title retention agreement,
defect in title, restrictive covenant or other restrictions of any kind.
"ENVIRONMENTAL AND OSHA OBLIGATIONS" has the meaning specified in
Section 3.9.
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"EQUITABLE EXCEPTIONS" shall have the meaning specified in
Section 3.3.
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"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ESCROW AGENT" means Cooley, Shrair, P.C.
"ESCROW AGREEMENT" means the Escrow Agreement to be executed by
and among Seller, Buyer and the Escrow Agent in the form of Exhibit A.
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"ESCROW PERIOD" has the meaning specified in Section 2.9
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"ESCROW SUM" has the meaning specified in Section 2.9
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"EQUIPMENT" has the meaning specified in Section 2.1(d).
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"EXCLUDED LIABILITIES" has the meaning specified in Section 2.3.
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"FINAL ADJUSTMENT AMOUNT" has the meaning specified in Section
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2.11.
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"FINANCIAL STATEMENTS" has the meaning specified in Section 3.4.
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"FUNDED INDEBTEDNESS" means with relation to the Division and the
Assumed Liabilities all (i) indebtedness of Seller related to the Business for
borrowed money or other interest-bearing indebtedness; (ii) capital lease
obligations of Seller; (iii) obligations of Seller to pay the deferred purchase
or acquisition price for goods or services, other than trade accounts payable or
accrued expenses in the ordinary course of business on no more than 90 day
payment terms; (iv) indebtedness of others guaranteed by Seller or secured by an
Encumbrance on Seller's property; and (v) indebtedness of Seller under extended
credit terms of more than 30 days from vendors provided to Seller; provided,
however, that the following will not be deemed to be Funded Indebtedness: any
shortfall under (i) commitments by Seller to Copelco Capital Corporation
("COPELCO") as described in agreements between Copelco and Seller dated January
19, 1996 and December 31, 1997 which is based on commitments from Connecticut
College to Seller under leases of equipment to Connecticut College dated January
4, 1996, April 23, 1996, November 5, 1996 and September 15, 1997 or (ii)
commitments by Seller to Ricoh Corporation ("RICOH") as described in that
certain Aficio 3 month Commitment Promotion executed by Seller on January 27,
1998.
"GAAP" shall mean generally accepted accounting principles,
consistently applied except the assets shall include (i) the advertising barter
receivables; provided such
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receivables do not exceed $50,000 in the aggregate, and (ii) used in-stock
inventory at wholesale value in the aggregate of $10,000.
"GLOBAL" has the meaning specified in Section 5.5
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"GOVERNMENTAL BODY" means any foreign, federal, state, local or
other governmental authority or regulatory body.
"GOVERNMENTAL PERMITS" has meaning specified in Section 3.7.
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"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended and the rules and regulations promulgated thereunder.
"IRS" means the Internal Revenue Service.
"INDEMNIFIABLE COSTS" has the meaning specified in Section 8.1.
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"INDEMNIFIED PARTIES" has the meaning specified in Section 8.1.
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"INDEPENDENT ACCOUNTANTS" has the meaning specified in Section
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2.10.
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"INTELLECTUAL PROPERTY" has the meaning specified in Section
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2.1(i).
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"KNOWLEDGE" (whether or not capitalized) with respect to Seller
shall mean actual knowledge after reasonable inquiry of the employees of Seller
with responsibility for the applicable subject matter.
"MANAGEMENT SERVICES AGREEMENT" has the meaning specified in
Section 7.1(e).
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"MATERIAL" (whether or not capitalized) shall, where appropriate
in context of its use in making the representations and warranties set forth in
Article III, be deemed to mean an amount of money greater than $25,000.
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"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means a
material adverse change or effect on the assets, properties, Business,
operations, liabilities, financial condition or prospects of Seller and its
subsidiaries, taken as a whole. In determining whether a "Material Adverse
Change" or "Material Adverse Effect" has occurred in the context of the use of
such terms in the Seller's representations and warranties set forth in Article
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III, such terms shall refer to the occurrence of any single event, or any series
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of related events or set of related circumstances, which results in or may
result in a loss to Seller or Buyer in excess of $25,000 per occurrence or
$75,000 in the aggregate.
"NET WORTH" shall mean the difference between the Purchased
Assets and the Assumed Liabilities (excluding Special Liabilities), as
determined in accordance with GAAP as modified in this Agreement.
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<PAGE>
"NON-COMPETE AGREEMENT" has the meaning specified in Section
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7.1(e).
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"OSHA" means the Occupational Safety and Health Act, 29 U.S.C.
(S)(S) 651 et seq., any amendment thereto, and any regulations promulgated
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thereunder.
"PERMITTED EXCEPTION" means (a) liens for Taxes and other
governmental charges and assessments which are not yet due and payable, (b)
liens of landlords and liens of carriers, warehousemen, mechanics and
materialmen and other like liens arising in the ordinary course of business for
sums not yet due and payable, or (c) other liens or imperfections on property
which are not material in amount or do not materially detract from the value or
the existing use of the property affected by such lien or imperfection.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or Governmental Body.
"PRELIMINARY ADJUSTMENT AMOUNT" has the meaning specified in
Section 2.7(b).
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"PRELIMINARY CLOSING BALANCE SHEET" has the meaning specified in
Section 2.1.
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"PURCHASE PRICE" has the meaning specified in Section 2.5.
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"PURCHASED ASSETS" has the meaning specified in Section 2.1.
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"REAL PROPERTY" has the meaning specified in Section 2.1(b)
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"REQUIREMENTS OF LAWS" means any foreign, federal, state and
local laws, statutes, regulations, rules, codes or ordinances enacted, adopted,
issued or promulgated by any Governmental Body (including, without limitation,
those pertaining to electrical, building, zoning, environmental and occupational
safety and health requirements) or any common law.
"SELLER" has the meaning set forth in the first paragraph of this
Agreement.
"SPECIAL LIABILITIES" mean the following: (i) the sick pay days
transferred to Buyer as set forth in item 5 on Schedule 3.11 and (ii) the cost
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of the yellow page advertisements of the Business for the telephone numbers
described in Section 2.2(i) herein after the Effective Date.
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"TAX" or "TAXES" means any federal, state, local or foreign
income, alternative or add-on minimum, gross income, gross receipts, windfall
profits, severance, property, production, sales, use, transfer, gains, license,
excise, employment, payroll, withholding or minimum tax, transfer, goods and
services, or any other tax, custom, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or any
penalty, addition to tax or additional amounts imposed thereon by any
Governmental Body.
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<PAGE>
"TAX RETURN" means any return, report or similar statement
required to be filed with respect to any Taxes (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return and declaration of estimated Tax.
"WORKING CAPITAL" shall mean the difference between the Seller's
current assets (other than cash and prepaid expenses) and its current
liabilities (other than the current portion of any long-term indebtedness);
provided, however, that for purposes hereof only the Business as it relates to
the Purchased Assets and Assumed Liabilities (if any) shall be taken into
account when measuring Working Capital.
ARTICLE II
AGREEMENT OF PURCHASE AND SALE; CLOSING
2.1 PURCHASED ASSETS. On the terms and subject to the conditions and
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exceptions contained herein, Seller agrees to sell to Buyer and Buyer agrees to
purchase from Seller at the Closing and on the Closing Date (each as hereinafter
defined), free and clear of all liens, claims and encumbrances except for
Permitted Exceptions of Seller's right, title and interest in and to all of the
operating assets of the Business, reflected on the Division's balance sheet as
of the Effective Date, prepared by Seller within five days of the Closing Date
in good faith in accordance with GAAP as modified in this Agreement (the
"PRELIMINARY CLOSING BALANCE SHEET"), together with all accounts (whether or not
evidenced by a written contract) and customer lists, and copies of all books,
records and files containing any information or documents relevant to any of the
foregoing, and all assets acquired by Seller, or which otherwise have been used,
in the ordinary course of Seller's operation of the Business since the Effective
Date (collectively, the "PURCHASED ASSETS"). Notwithstanding the foregoing, the
Purchased Assets shall not include cash and cash equivalents or prepaid
expenses. The Purchased Assets include, without limitation, the following as
they exist on the Effective Date (as hereinafter defined):
(A) ACCOUNTS RECEIVABLE. All accounts and notes receivable and
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other deposits, advances and suppliers' or vendors' rebates and all other
receivables of Seller solely related to the Business as reflected on the
Preliminary Closing Balance Sheet, and all such accounts receivable accrued
after the Preliminary Closing Balance Sheet, and existing on the Closing Date
(as hereinafter defined), in the ordinary course of the operation of the
Business.
(B) REAL PROPERTY. All real property and interests, options or
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rights therein leased by Seller with respect to the Business and reflected on
the Preliminary Closing Balance Sheet, and all office facilities, buildings,
easements, rights of way and appurtenances thereon and thereto and other
improvements and fixtures attached to such real property owned or leased by
Seller (collectively, the "REAL PROPERTY"). All Real Property is identified as
leased and described on Schedule 2.1 attached hereto; provided, however, that
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the 135 Freshwater Boulevard, Enfield, Connecticut location is excluded from the
Purchased Assets.
(C) INVENTORIES. All inventory items held by the Division and
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reflected on the Preliminary Closing Balance Sheet.
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<PAGE>
(D) BUSINESS, EQUIPMENT AND SUPPLIES. All tangible personal
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property, equipment, supplies, furniture, leasehold improvements, including but
not limited to, leases and subleases of personal property or equipment, all
automobiles and other vehicles, computers and peripherals and all maintenance
and other operating supplies and other miscellaneous tangible personal property
of Division used in the Business, whether or not located at or on the Real
Property at the Closing Date and reflected on the Preliminary or Audited Closing
Balance Sheet as listed on Schedule 2.1(d) attached hereto (collectively, the
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"EQUIPMENT"); excluding all furniture and equipment (but including inventory)
located at the 135 Freshwater Boulevard, Enfield, Connecticut location.
(E) CONTRACTS AND OTHER AGREEMENTS RELATING TO THE BUSINESS. All
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rights of Division as of and since the Effective Date under all contracts
(written or oral), licenses, leases, purchase orders and other agreements or
arrangements of the Division related to the Business.
(F) BOOKS, RECORDS, LISTS AND OTHER DATA. All files, books,
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records, invoices, accounts, surveys, customer lists and records, supplier
lists, catalogs, price lists, marketing and advertising information, purchasing
histories, profiles and materials, technical bulletins, books and records of
account and other financial, customer and credit data, and access to all
computer programs, software, hardware, firmware, tapes and other materials used
to store, record or produce such data, owned or leased by the Division used in
the Business; provided, however, that the following items are hereby excluded
from Purchased Assets: (i) corporate minute books of Seller, (ii) tax returns of
Seller, and (iii) any other information related to Seller's graphic arts
division.
(G) EMPLOYMENT AGREEMENTS AND EMPLOYEE RELATIONSHIPS. All rights
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of Seller and the Division as of the Closing Date under all employment and non-
compete agreements plus all relationships of Seller with any of its employees to
the extent any of the foregoing are used solely in the Business.
(H) LICENSES, PERMITS. All federal, state, local and other
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governmental licenses, permits, approvals and authorizations that relate solely
to the operation of the Business.
(I) INTELLECTUAL PROPERTY. All technology, computer software,
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data and documentation (including electronic media), trade secrets (technical
and non-technical), know-how, customer lists and other confidential business
information and proprietary rights, including, without limitation, inventions,
patents, patent disclosures, copyrights, mask works, trademarks, service marks,
trade dress, trade names, corporate names and licenses or other agreements to or
from third parties regarding the foregoing, which are solely used in the
Business (including applications and registrations) and including, without
limitation the non-exclusive right to use the tradename "Bloom's Business
Systems" and the non-exclusive right to use the Blooms trademark logo and the
right to use the telephone numbers of the Business and the goodwill associated
with any such patent, copyright, trademark, trade name or other such right
(collectively, the "INTELLECTUAL PROPERTY").
(J) GENERAL INTANGIBLES. All general intangibles used solely by
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the Business including, without limitation, all goodwill as a going concern and
any and all causes of
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<PAGE>
action or claims of Seller or the Division against any third party that arose or
will arise in connection with the Business prior to the Closing Date.
2.2 ASSUMED LIABILITIES. On the terms and subject to the conditions
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and exceptions contained herein, at Closing, Seller and Division shall assign
and delegate to Buyer, and Buyer shall assume and undertake to pay, defend,
discharge and perform in full when due the liabilities of Seller and Division
(but (i) only insofar as such liabilities relate solely to the Business and the
Purchased Assets and (ii) excluding any Funded Indebtedness and certain other
liabilities related to vacation pay and sick pay as described in items 4 and 5
of Schedule 3.11) properly reflected on the Division's most recent balance
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sheet, as updated by the Preliminary Closing Balance Sheet other than any
Excluded Liabilities (as defined in Section 2.3) reflected thereon (the "ASSUMED
-----------
LIABILITIES"), and no others, pursuant to this Agreement and the Assignment and
Assumption Agreement referred to in Section 2.4; provided, however, that the
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following shall be considered to be Assumed Liabilities: (i) the liabilities of
Seller incurred for the benefit of Buyer from the Effective Date through April
30, 1998 pursuant to the Management Services Agreement and (ii) any product
liability claims which arise from products purchased by the Division after the
Effective Date, but only in the event Seller uses its best efforts to recover
all insurance proceeds for such claims if the liability for such claims is
covered by Seller's insurance.
2.3 EXCLUDED LIABILITIES. Notwithstanding anything to the contrary
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contained in this Agreement, Buyer will not assume or be liable for and Seller
will retain and remain responsible for all of Seller's and the Business' debts,
liabilities and obligations of any nature whatsoever, other than the Assumed
Liabilities, whether accrued, absolute or contingent, whether known or unknown,
whether due or to become due and whether related to the Purchased Assets or
otherwise, and regardless of when asserted (the "EXCLUDED LIABILITIES"),
including, without limitation, the following liabilities or obligations of
Seller (none of which will constitute Assumed Liabilities; provided, however,
that the liabilities of Seller incurred for the benefit of Buyer from the
Effective Date through April 30, 1998 pursuant to the Management Services
Agreement shall be deemed Assumed Liabilities):
(A) All of Seller's or Division's liabilities or obligations
under this Agreement or under any other agreement between Seller or Division on
the one hand and Buyer on the other hand entered into on or after the date of
this Agreement;
(B) All liabilities and obligations of Seller or Division for
Taxes which are imposed on or measured by income, for any period, and all of
Seller's and Division's liabilities or obligations with respect to any Taxes not
specifically accrued as a current liability on the Preliminary Closing Balance
Sheet and therefor assumed pursuant to Section 2.2;
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(C) All of Seller's or Division's liabilities or obligations
arising out of or in connection with the breach of any contract or agreement
included in the Purchased Assets, other than for such amounts as are adequately
and properly reserved for in the Preliminary Closing Balance Sheet;
(D) All of Seller's or Division's liabilities or obligations for
expenses, Taxes or fees incident to or arising out of the negotiation,
preparation, approval, or authorization of
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<PAGE>
this Agreement or the consummation (or preparation for the consummation) of the
transactions contemplated hereby, including all attorneys' and accountants' fees
(excluding the cost of the audit contemplated in Section 2.10 which shall be
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paid by the Buyer in accordance with the terms hereof), brokerage fees,
consultants' fees and finders' fees, and sales, bulk sales and transfer taxes
which are Seller's responsibility hereunder;
(E) Seller's or Division's obligations and liabilities for the
period up to and including the Closing Date which relate to any Employee Plan
(as defined in Section 3.11(a)) (including unfunded pension plan liabilities and
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retiree health benefits), except as otherwise provided in Section 2.2;
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(F) All of Seller's or Division's liabilities or obligations
against which Seller or Division is insured or otherwise contractually
indemnified by a Person other than Buyer, provided Seller receives payment for
such liability or obligation (Seller is obligated to pursue any such insurance
or indemnification claim);
(G) Any liability or obligation under COBRA (as defined in
Section 3.11(b)) to any person covered by Seller's or Division's health plans or
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any Employee who ceases to be employed by Seller or Division on or before the
Closing Date, or who is not employed by Buyer on the Closing Date, and any
liability or obligation under COBRA to any family member of such person or
Employee; and
(H) Any liability or obligation for Funded Indebtedness or any
other liability or obligation of Seller or Division that does not relate to, or
arise from, the Business and the Purchased Assets.
2.4 TITLE TO THE PURCHASED ASSETS: DOCUMENTS OF CONVEYANCE. At
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Closing, Seller and Division shall convey all of their right, title and interest
in and to the Purchased Assets to Buyer free and clear of all liabilities,
obligations, liens and encumbrances, excepting only the Assumed Liabilities (as
defined in Section 1.1). Title to the Purchased Assets other than the Real
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Property shall be conveyed pursuant to a General Assignment, Bill of Sale and
Assumption Agreement substantially in the form attached hereto as Exhibit B (the
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"ASSIGNMENT AND ASSUMPTION AGREEMENT"), and by such other documents as are
reasonably acceptable to counsel for Seller and counsel for Buyer in accordance
with the terms hereof. Each of the parties hereto agrees to use its best
efforts to take or cause to be taken all action, and to do, or cause to be done,
all things reasonably necessary, proper or advisable, whether before or after
Closing, to ensure transfer of title to the Purchased Assets to Buyer occurs as
contemplated hereunder.
2.5 PURCHASE PRICE; ALLOCATION OF PURCHASE PRICE. The total purchase
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price for the Purchased Assets (the "PURCHASE PRICE") shall be equal to
$5,600,000, subject to any adjustment required to be made pursuant to
Sections 2.7 and 2.11 below. The Purchase Price shall be allocated among the
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assets as follows: (i) all tangible assets shall be reflected at their "book
value" on the Audited Closing Balance sheet; (ii) $100,000 of the Purchase Price
will be allocated to the non-competition covenant; and (iii) the balance of the
Purchase Price will be allocated to goodwill.
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2.6 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be payable
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by Buyer at the Closing (as defined in Section 2.8) as follows:
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(I) $5,040,000 of the Purchase Price as adjusted as set
forth in Sections 2.7 and 2.11 below will be paid, at the direction
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of Seller, by wire transfer of funds to Seller's account as specified
in Schedule 2.6 (including the payment of $100,000 for the agreements
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not to compete provided in Section 6.4); and
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(II) Ten percent (10%) of the Purchase Price, or $560,000,
will be paid in cash by wire transfer of funds to the Escrow Agent to
be held in escrow pursuant to Section 2.9 for satisfaction of Seller's
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indemnification obligations specified in Section 8.1.
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2.7 PURCHASE PRICE ADJUSTMENTS.
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(A) FUNDED INDEBTEDNESS ADJUSTMENT. The Purchase Price shall be
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reduced by an amount equal to the total amount of any Funded Indebtedness paid
at the Closing by Buyer in order to remove all Encumbrances on the Purchased
Assets.
(B) PRELIMINARY ADJUSTMENT AMOUNT. The Purchase Price shall be
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further reduced by an amount (the "PRELIMINARY ADJUSTMENT AMOUNT"), if any,
which is the greater of (i) the amount by which the Working Capital as reflected
on the Preliminary Closing Balance Sheet is less than $1,242,000 or (ii) the
amount by which the Net Worth reflected on the Preliminary Closing Balance Sheet
is less than $1,870,000; provided, however, that the adjustments set forth in
(i) and (ii) above are subject to the $50,000 basket set forth in Section 8.6
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herein.
2.8 CLOSING. The closing of the transactions contemplated hereby
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(the "CLOSING") shall occur on February 26, 1998 at the offices of Cooley,
Shrair in Springfield, Massachusetts, or by facsimile and wire transfer should
the parties otherwise agree, to be effective as of February 1, 1998 (the
"EFFECTIVE DATE"). The actual date of Closing is referred to herein as the
"CLOSING DATE."
2.9 ESCROW ARRANGEMENTS. Pursuant to the Escrow Agreement to be
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entered into among Seller, Buyer and the Escrow Agent, the portion of the
Purchase Price specified in Section 2.6(ii) shall be delivered to the Escrow
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Agent at Closing in immediately available funds. Such monies (which, together
with all interest accrued thereon, is hereinafter referred to as the "ESCROW
SUM") shall be held pursuant to the terms of the Escrow Agreement for payment
from such Escrow Sum of the amounts, if any, owing by Seller to Buyer pursuant
to the indemnification provisions of Article VIII below. Upon the completion of
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the Audited Closing Balance Sheet, the Escrow Sum shall be promptly reduced by
an amount, if any, equal to the difference between (i) $560,000 and (ii) the sum
of $280,000 and the aggregate amount of all claims made against the Escrow Sum
prior to such date (including the Final Adjustment Amount). At the conclusion
of the period ending on the first anniversary of the Closing Date (such period
being referred to herein as the "ESCROW PERIOD"), such remaining portion of the
Escrow Sum not theretofore claimed by or paid to Buyer in accordance with the
terms of the
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Escrow Agreement and this Agreement shall be disbursed to Seller. Seller and
Buyer agree that each will execute and deliver such reasonable instruments and
documents as are furnished by any other party to enable such furnishing party to
receive those portions of the Escrow Sum to which the furnishing party is
entitled under the provisions of the Escrow Agreement and this Agreement.
2.10 CLOSING AUDIT. Within 120 days following the Closing Date, there
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shall be delivered to Buyer and to Seller an audited version of the Preliminary
Closing Balance Sheet (the "AUDITED CLOSING BALANCE SHEET") of Seller at and as
of the Effective Date. The Audited Closing Balance Sheet shall be audited by
Ernst Young, LLP in accordance with GAAP as modified in this Agreement. The
cost of the Audited Closing Balance Sheet shall be paid by Buyer. In the event
that the either Buyer or Seller disputes any items on the Audited Closing
Balance Sheet within ten days after such party's receipt thereof, the parties
agree that Arthur Andersen, LLP (the "INDEPENDENT ACCOUNTANTS") will review the
disputed item(s) on the Audited Closing Balance Sheet. The final determination
of such disputed item(s) by the Independent Accountants shall be reflected on
the Audited Closing Balance Sheet and shall be final and binding on the parties
for all purposes. The cost of retaining the Independent Accountants shall be
borne by the disputing party; provided, however, that the non-disputing party
shall reimburse the disputing party for the cost of the Independent Accountants
in the event that such review results in an increase (if Seller is the disputing
party) or decrease (if Buyer is the disputing party) of more than $25,000 in the
Final Adjustment Amount as reflected on the Audited Closing Balance Sheet
prepared by Ernst & Young, LLP.
2.11 POST-CLOSING PURCHASE PRICE ADJUSTMENT. Upon final completion of
--------------------------------------
the Audited Closing Balance Sheet, Ernst & Young, LLP or the Independent
Accountants, as the case may be, shall determine the greater of (i) the amount,
if any, by which the Working Capital reflected on the Audited Closing Balance
Sheet is less than $1,242,000 or (ii) the amount, if any, by which the Net Worth
reflected on the Audited Closing Balance Sheet is less than $1,870,000 (the
"FINAL ADJUSTMENT AMOUNT"). In the event that the Final Adjustment Amount
exceeds the Preliminary Adjustment Amount, then the Purchase Price will be
adjusted downward and Seller shall pay to the Buyer the amount of such excess.
Conversely, in the event that the Final Adjustment Amount is less than the
Preliminary Adjustment Amount, then the Purchase Price shall be adjusted upward
and the Buyer shall pay Seller the lesser of (i) amount by which the Final
Adjustment Amount is less than the Preliminary Adjustment Amount or (ii) the
Preliminary Adjustment Amount. The post-closing adjustment to the Purchase
Price, if any, shall be paid by Seller to the Buyer from the Escrow Sum or by
Buyer to Seller, as the case may be, in immediately available funds within ten
(10) business days of delivery of the Audited Closing Balance Sheet, unless
Seller disputes any items on the Audited Closing Balance Sheet, in which case it
shall be paid within ten (10) business days after the Independent Accountants
finally determine the disputed item(s), and the Buyer delivers to the Seller an
Audited Closing Balance Sheet modified to reflect such determination.
Notwithstanding the foregoing, the Seller shall have the right to (i) make any
final downward adjustment payment out of the Escrow Sum and (ii) utilize all or
a portion of the $50,000 indemnity deductible provided in Section 8.6 hereof
-----------
against either the Preliminary Adjustment Amount or the Final Adjustment Amount.
-11-
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLER
Except as set forth on the Disclosure Schedules attached hereto (which
--------------------
Disclosure Schedules contains a reasonably detailed description of each such
- --------------------
exception and references the applicable representation so qualified), Seller
represents and warrants to Buyer that:
3.1 DUE ORGANIZATION. Seller is a corporation duly organized,
----------------
validly existing, and in good standing under the laws of the Commonwealth of
Massachusetts and has full corporate power and authority to own and lease its
properties and assets and to carry on its business as now conducted and as
proposed to be conducted through Closing. Complete and correct copies of the
Articles of Incorporation and Bylaws of Seller, and all amendments thereto, have
been delivered to Buyer and are attached hereto as Schedule 3.1-1 and Schedule
-------------- --------
3.1-2, respectively. Seller is qualified to do business in every jurisdiction
- -----
in which the nature of the Business or the ownership of its properties requires
such qualification except where the failure to be so qualified does not and
could not reasonably be expected to have a Material Adverse Effect. The
jurisdictions in which Seller is so qualified are listed on Schedule 3.1-3
--------------
attached hereto.
3.2 SUBSIDIARIES. Except as disclosed on the Disclosure Schedules,
------------ --------------------
the Division does not own, directly or indirectly, any capital stock or
ownership interests in any Person. Seller does not own any capital stock or
ownership interest in any other Person engaged in the Business.
3.3 DUE AUTHORIZATION. Seller has full power and authority to
-----------------
execute, deliver and perform this Agreement and to carry out the transactions
contemplated hereby. The execution, delivery, and performance of this Agreement
and the transactions contemplated hereby have been duly and validly authorized
by all necessary corporate action of Seller. This Agreement has been duly and
validly executed and delivered by Seller and constitutes the valid and binding
obligations of Seller, enforceable in accordance with its terms, except to the
extent that enforceability may be limited by laws affecting creditors' rights
and debtors' obligations generally, and legal limitations relating to remedies
of specific performance and injunctive and other forms of equitable relief (the
"EQUITABLE EXCEPTIONS"). The execution, delivery, and performance of this
Agreement (as well as all other instruments, agreements, certificates, or other
documents contemplated hereby) by Seller, do not (a) violate any Requirements of
Laws or any Court Order of any Governmental Body applicable to Seller, or their
respective property, (b) violate or conflict with, or permit the cancellation
of, or constitute a default under, any material agreement to which Seller is a
party, or by which it or any of its property is bound, (c) permit the
acceleration of the maturity of any material indebtedness of, or indebtedness
secured by the property of, Seller, (d) violate or conflict with any provision
of the charter or bylaws of Seller, or (e) except for such consents, approvals,
or registrations as may be required under applicable state securities laws,
require any consent, approval or authorization of, or notice to, or declaration,
filing or registration with, any Governmental Body or other third party.
-12-
<PAGE>
3.4 FINANCIAL STATEMENTS. The following financial statements have
--------------------
been delivered to Buyer by Seller: audited balance sheet of the Division as of
December 31, 1997, and unaudited balance sheets of the Seller as of January 31,
1996 and January 31, 1997, and audited statements of income and cash flows of
Division for the 11 months ended December 31, 1997 and unaudited statements of
income of the Seller for the fiscal years ending January 31, 1996 and January
31, 1997 (collectively, the "FINANCIAL STATEMENTS"). The Financial Statements
(including the notes thereto) have been prepared in accordance with GAAP, as
modified in this Agreement, on a consistent basis throughout the periods
indicated and fairly present the financial position, results of operations and
changes in financial position of Seller and Division as of the indicated dates
and for the indicated periods and are consistent with the books and records of
Seller and Division (which books and records are correct and complete). Since
the date of the last of such Financial Statements, Division has no material
liabilities required by GAAP, as modified in this Agreement, to be reflected on
Division's balance sheet or notes thereto that are not so reflected, nor any
other obligations (whether absolute, contingent, or otherwise) which are
(individually or in the aggregate) Material (in amount or to the conduct of the
Business); and Seller has no Knowledge of any basis for the assertion of any
such liability or obligation. Since December 31, 1997, the Division has not
experienced any Material Adverse Change.
3.5 CERTAIN ACTIONS. Since September 30, 1997, Division has not,
---------------
except as disclosed on any of the Financial Statements or notes thereto: (a)
made or agreed to make any loans or advances or guaranteed or agreed to
guarantee any loans or advances to any party whatsoever; (b) suffered or
permitted any Encumbrance to arise or be granted or created against or upon any
of the Purchased Assets; (c) canceled, waived, or released or agreed to cancel,
waive, or release any of its debts, rights, or claims against third parties in
excess of $20,000 individually or $40,000 in the aggregate; (d) sold, assigned,
pledged, mortgaged, or otherwise transferred, or suffered any material damage,
destruction, or loss (whether or not covered by insurance) to, any of the
Purchased Assets (except in the ordinary course of the Business); (e) amended
its charter or bylaws; (f) paid or made a commitment to pay any severance or
termination payment to any employee or consultant; provided, however, that
Seller (but not Division) has committed to make severance payments to two (2)
employees named Aiken and Walsh, such severance liability not to be assumed by
Buyer; (g) made any material change in its method of management, operation,
accounting or reporting income or deductions for tax purposes; (h) made any
material acquisitions, capital expenditures, including, without limitation,
replacements of equipment in the ordinary course of the Business, or entered
into commitments therefor, except for capital expenditures or commitments
therefor which do not, in the aggregate, exceed $25,000; (i) made any investment
or commitment therefor in any Person; (j) made any payment or contracted for the
payment of any bonus or other compensation or personal expenses, other than (A)
wages and salaries and business expenses paid in the ordinary course of the
Business, (B) wage and salary adjustments made in the ordinary course of the
Business for employees who are not officers, directors, or shareholders of the
Division, and (C) bonuses set forth on Schedule 3.5(k) (none of which are
---------------
payable by Division unless otherwise noted), (k) made, amended, or entered into
any written employment contract or created or made any material change in any
bonus, stock option, pension, retirement, profit sharing or other employee
benefit plan or arrangement; (l) made or entered into any vendor, supply, sales,
distribution, or leasing agreement which involves annual consideration (or
commissions) in excess of $20,000; (m) entered into any non-competition
agreement; (n) made or entered into any agreement or other arrangement with any
officer, director, shareholder, employee of Seller or Affiliate of Seller or any
of the foregoing
-13-
<PAGE>
Persons; (o) materially amended, experienced a termination or received notice of
actual or threatened termination or non-renewal of any material contract (except
for the contract with Northeast Utilities), agreement, lease, franchise or
license to which Seller or Division is a party that would or could reasonably be
expected to have a Material Adverse Effect; or (p) entered into any other
material transactions that would or could reasonably be expected to have a
Material Adverse Effect.
3.6 PROPERTIES. Attached hereto as Schedule 3.6 is a list containing
---------- ------------
a description of each interest in real property, excluding the 135 Freshwater
Boulevard, Enfield, Connecticut location (including, without limitation,
leasehold interests) and each item of personal property utilized by Division in
the conduct of the Business having a book or fair market value in excess of
$20,000 as of the date hereof. Except for Permitted Exceptions, such real and
personal properties are free and clear of Encumbrances. Seller has delivered to
Buyer copies of all real property leases. All of the properties and assets used
in the operation of the Business and the Purchased Assets as currently conducted
(including, without limitation, all books, records, computers and computer
software and data processing systems) are owned, leased or licensed by Seller
and to the Seller's best Knowledge are suitable for the purposes for which they
are currently being used. With the exception of used equipment and inventory
valued at no more than $50,000 in the aggregate on Division's Financial
Statements, the physical properties comprising the Purchased Assets, including
the real properties leased in connection with the Business, are to the Seller's
best Knowledge in good operating condition and repair, normal wear and tear
excepted, and to the Seller's best Knowledge are free from any defects of a
material nature. Except for Permitted Exceptions, Seller has full and
unrestricted legal and equitable title to all such properties and assets. The
operation of the Purchased Assets and Business in the manner in which they are
now and have been operated does not violate any Requirements of Laws, except for
any such violations which would not, individually or in the aggregate, have a
Material Adverse Effect. Except for Permitted Exceptions, to the Seller's best
Knowledge, no restrictive covenants, easements, rights-of-way, or regulations of
record impair the uses of the properties comprising the Purchased Assets for the
purposes for which they are now operated. All leases of real or personal
property by Seller or Division are, as to Seller, legal, valid, binding,
enforceable and in full force and effect and will remain legal, valid, binding,
enforceable and in full force and effect on identical terms until the Closing,
except for the Equitable Exceptions. All facilities leased by Seller or
Division and included in the Purchased Assets have received all approvals of any
Governmental Body (including Governmental Permits) required in connection with
the operation thereof and have been operated and maintained in accordance with
all Requirements of Laws. Seller owns no real property.
3.7 LICENSES AND PERMITS. Attached hereto as Schedule 3.7 is a list
-------------------- ------------
of all licenses, certificates, privileges, approvals, franchises, authorizations
and permits held or applied for by Seller or Division relating to the Business
from any Governmental Body (herein collectively called "GOVERNMENTAL PERMITS")
the absence of which could, individually or in the aggregate, have a Material
Adverse Effect. Seller and Division have complied in all material respects with
the terms and conditions of all such Governmental Permits, and Seller and
Division have not received notification from any Governmental Body of violation
of any such Governmental Permit or the Requirements of Laws governing the
issuance or continued validity
-14-
<PAGE>
thereof. All of such Governmental Permits are valid and in full force and
effect. No additional Governmental Permit is required from any Governmental Body
thereof in connection with the transfer of the Purchased Assets to Buyer and its
conduct of the Business which Governmental Permit, if not obtained, would have a
Material Adverse Effect.
3.8 INTELLECTUAL PROPERTY. Attached hereto as Schedule 3.8 is a list
--------------------- ------------
and brief description of all Intellectual Property owned or utilized by Seller
and Division solely in connection with the Business. Seller has furnished Buyer
with copies of all license agreements to which Seller or Division is a party,
either as licensor or licensee, with respect to any Intellectual Property used
in the Division. Seller has good title to or the right to use all the
Intellectual Property and all inventions, processes, designs, formulae, trade
secrets and know-how necessary for the conduct of the Business, in the Business
as presently conducted have received no notice that they are infringing on any
Intellectual Property right of others, and Seller is not aware of any
infringement by others of any such rights owned by Seller or Division. All
intellectual property licenses set forth on Schedule 3.8 are valid and binding
------------
obligations of Seller, and to the Knowledge of Seller the other parties thereto,
and enforceable against Seller, and to the Knowledge of Seller the other parties
thereto in accordance with their respective terms, except for the Equitable
Exceptions. Seller owns and possesses all right, title and interest in and to,
or has the right to use pursuant to a valid license, all Intellectual Property
used in the operation of the Business as presently conducted.
3.9 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. Seller and Division
------------------------------------------
have (i) complied in all material respects with all Requirements of Laws,
Governmental Permits and Court Orders applicable to the Business and have filed
with the proper Governmental Bodies all statements and reports required by all
Requirements of Laws, Governmental Permits and Court Orders to which Seller,
Division or any of their employees (because of their activities on behalf of the
Business) are subject and (ii) conducted the Business and is in compliance in
all material respects with all federal, state and local energy, public utility,
health, safety and environmental Requirements of Laws, Governmental Permits and
Court Orders including the Clean Air Act, the Clean Water Act, the Solid Waste
Act, the Comprehensive Environmental Response Compensation and Liability Act,
the Resource Conservation and Recovery Act, the Safe Drinking Water Act, OSHA,
the Toxic Substances Control Act and any similar state, local or foreign laws
(collectively "ENVIRONMENTAL AND OSHA OBLIGATIONS") and all other Governmental
Body requirements, except where any such failure to comply or file would not, in
the aggregate, have a Material Adverse Effect. No claim has been made by any
Governmental Body (and, to the best knowledge of Seller, no such claim is
anticipated) to the effect that the Business fails to comply, in any respect,
with any Requirements of Laws, Governmental Permit or Environmental and OSHA
Obligation or that a Governmental Permit or Court Order is necessary in respect
thereto. Neither the ownership nor use of the Purchased Assets nor the conduct
of the Business conflicts with the rights of any other Person violates or, with
or without the giving of notice or the passage of time, or both, will violate,
conflict with or result in a default, right to accelerate or loss of rights
under, any terms or provisions of its Articles of Incorporation or Bylaws as
presently in effect, or any Encumbrance, lease, license, agreement,
understanding or Requirements of Law, or any order, judgment or decree to which
Seller or Division is a party or by which it may be bound or affected.
-15-
<PAGE>
3.10 INSURANCE. Attached hereto as Schedule 3.10 is a list of all
--------- -------------
coverages for fire, liability, or other forms of insurance and all fidelity
bonds held by or applicable to Seller or Division with respect to the Business.
Copies of the binder for all such insurance policies have been delivered to
Buyer. All of such insurance coverages are in full force and effect as of the
Closing Date.
3.11 EMPLOYEE BENEFIT PLANS.
----------------------
(A) Schedule 3.11 hereto lists all Employee Plans in force at
-------------
any time since January 1, 1996 covering employees of the Division currently
employed in the conduct of the Business ("EMPLOYEES"). The term "EMPLOYEE PLAN"
includes any pension, retirement, savings, disability, medical, dental, health,
life (including, without limitation, any individual life insurance policy under
which any Employee is the named insured and as to which Seller, Division, or an
Affiliate, on behalf of the Business, makes premium payments, whether or not
Seller, Division, or an Affiliate is the owner, beneficiary or both of such
policy), death benefit, group insurance, profit-sharing, deferred compensation,
stock option, bonus, incentive, vacation pay, severance pay, or other employee
benefit plan, trust, arrangement, agreement, policy or commitment (including,
without limitation, any employee pension benefit plan as defined in Section 3(2)
of ERISA ("PENSION PLAN"), and any employee welfare benefit plan as defined in
Section 3(1) of ERISA ("WELFARE PLAN")), whether or not any of the foregoing is
funded or insured and whether written or oral, which is intended to provide or
does in fact provide benefits to any or all Employees, and (i) to which Seller
or Division is party or by which Seller or Division (or any of the rights,
properties or assets of Seller or Division) is bound, (ii) with respect to which
Seller or Division has made any payments, contributions or commitments, or may
otherwise have any liability (whether or not Seller or Division still maintains
such Employee Plan) or (iii) under which any director, Employee or agent of
Seller or Division is a beneficiary as a result of his or her employment or
affiliation with Seller.
(B) With respect to any Employee, Seller and Division have no
obligation to contribute to (or any other liability with respect to) any funded
or unfunded Welfare Plan, whether or not terminated, which provides medical,
health, life insurance or other welfare-type benefits for current or future
retirees or current or future former Employees (including their dependents and
spouses) except for limited continued medical benefit coverage for former
Employees, their spouses and their other dependents as required to be provided
under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"), and Seller and Division are in compliance in all material respects
with the continued medical and other welfare benefit coverage requirements of
COBRA and all applicable Requirements of Laws.
(C) With respect to any Employee, Seller and Division do not
maintain, contribute to or have any material liability under (or with respect
to) any Pension Plan which is a tax qualified "defined benefit plan" (as defined
in Section 3(35) of ERISA) or, except as disclosed in Schedule 3.11, a tax-
-------------
qualified "defined contribution plan" (as defined in Section 3(34) of ERISA),
whether or not terminated. All contributions (including all employer
contributions and employee salary reduction contributions) which are due have
been paid to each Employee Plan or are reflected as a liability on the books of
Seller and all contributions for any period ending on or
-16-
<PAGE>
before the Closing Date which are not yet due have been paid to each such
Employee Plan or accrued in accordance with past custom and practice of Seller.
(D) Seller and Division have, with respect to the Business and
all current and former Employee Plans (and all related trusts, insurance
contracts and funds), at all times complied in all material respects with the
applicable requirements of ERISA, the Code, and all other applicable
Requirements of Laws, or has determined that such Requirements of Laws
(including ERISA) were and are not applicable to the Business. Seller and
Division have not engaged in, nor is it bound to enter into, any transaction
with respect to any Employee Plan related to the Business which would subject
Seller or Division to any material liability due to either a civil penalty
assessed pursuant to Section 502(i) of ERISA or the tax or penalty on prohibited
transactions imposed by Section 4975 of the Code. No actions, suits or claims
with respect to the assets of any Employee Plan (and all related trusts,
insurance contracts and funds), other than routine claims for benefits, are
pending or threatened which could result in or subject Seller or Division to any
material liability. There are not now, nor have there been, any tax-qualified
defined benefit retirement plans sponsored or maintained by Seller or Division
for Employees since January 1, 1975, nor are there any unfunded obligations with
respect thereto. With respect to any Employee, Seller has no obligation to
contribute to (or any other liability with respect to) any "multi-employer
plan," as defined in the Multi-employer Pension Plan Amendments Act of 1980, and
Seller has not incurred nor will incur any current or potential withdrawal or
termination liability as a result of a complete or partial withdrawal from any
multi-employer plan or the sale of the Purchased Assets. Each Employee Plan
intended to qualify under Section 401(a) of the Code has been determined by the
IRS to be qualified under the requirements of Section 401(a) of the Code, the
IRS has issued a determination letter to that effect, and such letter remains
effective and has not been revoked. No unfulfilled obligation to contribute with
respect to an Employee Plan exists with respect to any Employee Plan, except as
shown in the Seller's Preliminary Closing Balance Sheet. There is no agreement
or promise, written or oral, of Seller to the effect that any Employee Plan may
not be terminated at Seller's discretion at any time, subject to applicable law.
Schedule 3.11 sets forth a list and a summary description of all collective
- -------------
bargaining agreements, employment and consulting agreements, executive
compensation plans, bonus plans, deferred compensation agreements, employee
pension plans or retirement plans, employee stock options or stock purchase
plans and group life, health and accident insurance and other employee benefit
plans, agreements, arrangements or commitments, whether or not legally binding,
including, without limitation, holiday, vacation, Christmas and other bonus
practices, to which the Business or the Seller is a party or is bound or which
relate to the operation of the Business. The Preliminary Closing Balance Sheet
reflects all accrued vacation and other benefits for the Business' employees as
of the date thereof.
(E) EMPLOYMENT AND NON-TAX QUALIFIED DEFERRED COMPENSATION
------------------------------------------------------
ARRANGEMENTS. Seller does not maintain or contribute to any retirement or
- ------------
deferred or incentive compensation or stock purchase, stock grant or stock
option arrangement entered into between Seller and any current or former
officer, consultant, director or employee of Seller that is not intended to be a
tax qualified arrangement under Section 401(a) of the Code, other than Seller's
(but not Division's) commitment to make severance payments to two (2) employees
named Aiken and Walsh, such severance liability not to be assumed by Buyer.
-17-
<PAGE>
3.12 CONTRACTS AND AGREEMENTS. Schedule 3.12 hereto contains a list
------------------------ -------------
and brief description of all Business-related written or oral contracts,
commitments, leases, and other agreements (including, without limitation,
promissory notes, loan agreements, and other evidences of indebtedness,
guarantees, hedging agreements, off-balance sheet financing arrangements,
indemnity agreements, vendor contracts with office equipment manufacturers,
leasing and marketing agreements) to which Seller is a party or by which Seller
or its properties are bound pursuant to which the obligations thereunder of
either party thereto are, or are contemplated as being, for any one contract
$25,000 or greater or any contract or agreement prohibiting it from freely
engaging in any business or competing anywhere in the world (collectively, the
"CONTRACTS"). Seller is not and, to the best knowledge of Seller, no other
party thereto is in default (and no event has occurred which, with the passage
of time or the giving of notice, or both, would constitute a default by Seller)
under any of the Contracts, and Seller has not waived any right under any of the
Contracts. All of the Contracts to which Seller is a party are legal, valid,
binding, enforceable and in full force and effect and will remain legal, valid,
binding, enforceable and are fully assignable to Buyer and will remain in full
force and effect on identical terms immediately after the Closing, except for
the Equitable Exceptions. Seller has not guaranteed any obligations of any
other Person. Seller has no present expectation or intention of not fully
performing all of its obligations under any Contract, Seller has no knowledge of
any breach or anticipated breach by the other parties to any Contract and
Seller, except with respect to Northeast Utilities (as described on Schedule
--------
3.12) has not received notice of actual or threatened termination or non-renewal
- ----
of any Contract.
3.13 CLAIMS AND PROCEEDINGS. There are no claims, actions, suits,
----------------------
proceedings, or investigations pending or, to the best knowledge and belief of
Seller, threatened against or affecting Seller relating to the Business or any
of its properties or assets, at law or in equity, before or by any court,
municipality or other Governmental Body. To the extent any are disclosed on the
Disclosure Schedule, none of such claims, actions, suits, proceedings, or
investigations, if adversely determined, will result in any liability or loss to
Seller. Seller has not been and Seller is not now, subject to any Court Order,
stipulation, or consent of or with any court or Governmental Body. No inquiry,
action or proceeding has been instituted or, to the best knowledge and belief of
Seller, threatened or asserted against Seller to restrain or prohibit the
carrying out of the transactions contemplated by this Agreement or to challenge
the validity of such transactions or any part thereof or seeking damages on
account thereof. To the best knowledge of Seller there is no basis for any such
valid claim or action.
3.14 TAXES.
-----
(A) All Federal, foreign, state, county and local and other Taxes
due from Seller on or before the Closing have been paid or properly accrued on
Seller's books and all Tax Returns which are required to be filed by Seller on
or before the date hereof have been filed within the time and in the manner
provided by all Requirements of Laws, and all such Tax Returns are true and
correct and accurately reflect the Tax liabilities of Seller. No Tax Returns of
Seller or Division are presently subject to an extension of the time to file.
All Taxes, assessments, penalties, and interest of Seller which have become due
pursuant to such Tax Returns or any assessments received have been paid or
adequately accrued on Seller's Financial
-18-
<PAGE>
Statements. The provisions for Taxes reflected on the balance sheets contained
in the Financial Statements are adequate to cover all of Seller's Tax
liabilities for the respective periods then ended and all prior periods. Seller
has not executed any presently effective waiver or extension of any statute of
limitations against assessments and collection of Taxes, and there are no
pending or threatened claims, assessments, notices, proposals to assess,
deficiencies, or audits with respect to any such Taxes of which the Seller is
aware. For Governmental Bodies with respect to which Seller does not file Tax
Returns, no such Governmental Body has given Seller written notification that
Seller is or may be subject to taxation by that Governmental Body. Seller has
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, shareholder, creditor,
independent contractor or other party. There are no Tax liens on any of the
property or assets of Seller.
(B) No transaction contemplated by this Agreement is subject to
withholding under Section 1445 of the Code and no transfer taxes, real estate
transfer taxes or similar taxes will be imposed upon the transfer and sale of
the Purchased Assets pursuant to this Agreement.
3.15 PERSONNEL. Attached hereto as Schedule 3.15 is a list of the
--------- -------------
names and annual rates of compensation of the employees of the Division whose
annual rates of compensation during the calendar year ended December 31, 1997
(including base salary, bonus and incentive pay) exceed (or by December 31, 1998
are expected to exceed) $60,000. Schedule 3.15 also summarizes the bonus,
-------------
profit sharing, percentage compensation, company automobile, club membership,
and other like benefits, if any, paid or payable to such employees during
Seller's calendar year ended December 31, 1997 and to the date hereof. Schedule
--------
3.15 also contains a brief description of all material terms of employment
- ----
agreements relating to the Business to which Seller is a party and all severance
benefits which any employee of Seller is or may be entitled to receive. The
employee relations of Seller are generally good and there is no pending or, to
the best knowledge of Seller, threatened labor dispute or union organization
campaign. None of the employees of Seller is represented by any labor union or
organization. Seller is in compliance in all material respects with all
Requirements of Laws respecting employment and employment practices, terms and
conditions of employment, and wages and hours, and is not engaged in any unfair
labor practices. Seller has not been advised that any employee will not agree
to remain employed by Seller after the consummation of the transactions
contemplated hereby. There is no unfair labor practice claim against Seller
before the National Labor Relations Board, or any strike, dispute, slowdown, or
stoppage pending or, to the best knowledge of Seller, threatened against or
involving Seller, and none has previously occurred.
3.16 BUSINESS RELATIONS. Seller does not know or has good reason to
------------------
believe that any customer, supplier, vendor or transportation company engaged in
doing business with the Division will cease to do business with Buyer after the
consummation of the transactions contemplated hereby in the same manner and at
the same levels as previously conducted with Seller except for any reductions
which do not result in a Material Adverse Change or reductions by Northeast
Utilities. Seller has no Knowledge of any notice of cancellation of any
material business arrangement between any Person (excluding Northeast Utilities)
and Seller is not aware
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<PAGE>
of any facts which could lead it to believe that the Business will be subject to
cancellation of any such business arrangement.
3.17 ACCOUNTS RECEIVABLE. All of the accounts, notes, and loans
--------------------
receivable that have been recorded on the books of the Business are bona fide
and represent amounts validly due for goods sold or services rendered in the
ordinary course of business. In addition, (a) all of such accounts, notes, and
loans receivable are free and clear of any security interest, lien, encumbrance,
or other charge; (b) none of such accounts, notes, or loans receivable is
subject to any offsets or, to the best of Seller's Knowledge, claims of offset;
and (c) none of the obligors of such accounts, notes, or loans receivable has
given notice that it will or may refuse to pay the full amount or any portion
thereof.
3.18 CUSTOMER CLAIMS. No written or oral claim for breach of contract
---------------
or other claim any customer has been made against Seller since September 30,
1997 which could, individually or in the aggregate, result in any Material
Adverse Effect. To the best knowledge of Seller, no state of facts exists, and
no event has occurred, which could reasonably be expected to form the basis of
any present claim against Seller for liability to any third party in connection
with office equipment sold or services rendered by the Division.
3.19 BROKERS. Neither Seller nor any Affiliate of Seller has engaged,
-------
or caused to be incurred any liability to any finder, broker, or sales agent in
connection with the origin, negotiation, execution, delivery, or performance of
this Agreement or the transactions contemplated hereby.
3.20 AFFILIATED TRANSACTIONS. No officer, director, stockholder
-----------------------
(including Seller) or Affiliate of Seller or any individual related by blood or
marriage to any such Person, or any entity in which any such Person owns any
beneficial interest, is a party to any agreement, contract, arrangement or
commitment relating to the Business with Seller or engaged in any transaction
relating to the Business with Seller or has any interest in any property used by
Seller with the exception of the 135 Freshwater Boulevard, Enfield, Connecticut
property. No officer, director, or shareholder of Seller or any Affiliate of
any such officer, director, or shareholder, has any ownership interest in any
competitor, supplier, or customer of Seller (other than ownership of securities
of a publicly-held corporation of which such Person owns, or has real or
contingent rights to own, less than one percent of any class of outstanding
securities and other than Elliot M.L. Bloom's ownership of Key Productions,
Inc.) or any property used in the operation of the Business.
3.21 FUNDED INDEBTEDNESS; UNDISCLOSED LIABILITIES.
--------------------------------------------
(A) FUNDED INDEBTEDNESS. The Seller does not have any Funded
-------------------
Indebtedness that is not an Excluded Liability.
(B) UNDISCLOSED LIABILITIES. The Division does not have any
-----------------------
liabilities in excess of $15,000 in the aggregate (whether absolute, accrued,
contingent or otherwise), of a nature required by GAAP, as modified in this
Agreement, to be reflected on a corporate balance sheet or disclosed in the
notes thereto, except such liabilities which are accrued
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or reserved against in the Financial Statements or disclosed in the notes
thereto, including without limitation any accounts payable or service
liabilities of Seller incurred prior to the Closing Date, other than liabilities
incurred in the ordinary course of the Business since the date of the latest of
such Financial Statements.
3.22 INDEBTEDNESS TO AND FROM EMPLOYEES. Attached hereto as Schedule
---------------------------------- --------
3.22 is a list and brief description of the payment terms of all indebtedness of
- ----
Seller to employees of the Business and all indebtedness of employees of the
Business to Seller, excluding indebtedness for travel advances or similar
advances for expenses incurred on behalf of and in the ordinary course of the
Business and consistent with its past practices.
3.23 INFORMATION FURNISHED. Seller has made available to Buyer true
---------------------
and correct copies of all material records of Seller relating to the Business
and all material agreements, documents, and other items listed on the Exhibits
and Schedules to this Agreement or referred to in Article III of this Agreement,
-----------
and neither this Agreement, the Exhibits or Schedules hereto, nor any written
information, instrument, or document delivered to Buyer pursuant to this
Agreement contains any untrue statement of a material fact or omits any material
fact necessary to make the statements herein or therein, as the case may be, not
misleading.
ARTICLE IV
BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to Seller as follows:
4.1 DUE ORGANIZATION. Buyer is a corporation duly organized, validly
----------------
existing, and in good standing under the laws of the State of Connecticut, and
Buyer has full corporate power and authority to execute, deliver and perform
this Agreement and to carry out the transactions contemplated hereby.
4.2 DUE AUTHORIZATION. The execution, delivery and performance of
-----------------
this Agreement have been duly authorized by all necessary corporate action of
Buyer and the Agreement has been duly and validly executed and delivered by
Buyer and constitutes the valid and binding obligations of Buyer, enforceable in
accordance with its terms, except for the Equitable Exceptions. The execution,
delivery, and performance of this Agreement (as well as all other instruments,
agreements, certificates or other documents contemplated hereby) by Buyer, do
not (a) violate any Requirements of Laws or Court Order of any Governmental Body
applicable to or Buyer or its properties, (b) violate or conflict with, or
permit the cancellation of, or constitute a default under any agreement to which
Buyer is a party or by which it or its property is bound, (c) permit the
acceleration of the maturity of any indebtedness of, or any indebtedness secured
by the property of, Buyer, or (d) violate or conflict with any provision of the
charter or bylaws of Buyer.
4.3 NO BROKERS. Buyer has not engaged, or caused to be incurred any
----------
liability for which Seller may be liable to any finder, broker or sales agent in
connection with the origin,
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negotiation, execution, delivery, or performance of this Agreement or the
transactions contemplated hereby.
ARTICLE V
COVENANTS OF SELLER
5.1 CONSENTS OF OTHERS. Prior to the Closing, Seller shall use its
------------------
best efforts to obtain and to cause to be obtained all authorizations, consents
and permits required of Seller or the Division to permit them to consummate the
transactions contemplated by this Agreement. To the extent required to
consummate such transactions, Seller shall have used its best efforts to obtain
the written consent of (i) any third party to Contracts with the Business and
(ii) the lessors of the Buildings to the transactions contemplated by the
Agreement.
5.2 SELLER'S EFFORTS. Seller shall use all reasonable efforts to
----------------
cause all conditions for the Closing to be met.
5.3 POWERS OF ATTORNEY. Seller shall terminate or cause to be
------------------
terminated at or prior to Closing all powers of attorney granted by Seller
concerning the Division, the Business or the Purchased Assets, other than those
relating to service of process, qualification or pursuant to governmental
regulatory or licensing agreements, or representation before the IRS or other
Government Bodies.
5.4 CONDUCT OF BUSINESS PENDING CLOSING. From the date of this
-----------------------------------
Agreement to the Closing Date:
(A) Except as otherwise contemplated by this Agreement, or as
Buyer may otherwise consent to in writing, Seller shall conduct the Business and
operate the Purchased Assets only in the ordinary course and shall not engage in
any material activity or enter into any material transaction which would cause a
breach of the representations and warranties contained in Article III.
-----------
(B) Seller shall use its best efforts to cause the Business to
preserve substantially intact its current business organization and present
relationships with its customers, vendors, suppliers and employees and to
maintain all of its insurance currently in effect.
(C) Seller shall give prompt notice to Buyer of any notice of
material default received by Seller or the Division subsequent to the date of
this Agreement under any Contract or any Material Adverse Change occurring prior
to the Closing Date in the operation of the Business and the Purchased Assets.
(D) Neither Seller, nor any of its representatives, shall
solicit, encourage or discuss any Acquisition Proposal (as hereinafter defined)
or supply any non-public information concerning the Business or the Purchased
Assets to any party other than Buyer or its representatives. As used herein,
"ACQUISITION PROPOSAL" means any proposal other than the transactions herein
contemplated, for (i) any merger or other business combination involving the
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Business, (ii) the acquisition of Seller or a material equity interest in Seller
or a material portion of its assets, or (iii) the dissolution or liquidation of
Seller.
5.5 ACCESS TO RECORDS BEFORE CLOSING. Prior to the Closing Date,
--------------------------------
Seller agrees that it will give, or cause to be given, to Buyer and its
representatives (including without limitation certain employees of Buyer's
parent, Global Imaging Systems, Inc. ("GLOBAL")), during normal business hours
and at Buyer's expense, during reasonable business hours full and unrestricted
access to Seller's personnel, officers, agents, employees, assets, properties,
titles, contracts, other books, records, files and documents of Seller with
respect to the Division and the Business (including financial, tax basis, budget
projections, auditors' work papers and other information as Buyer may reasonably
request) and to the Business' personnel, customers, suppliers and independent
auditors, to allow Buyer to obtain such information as it shall desire, and to
make copies at Buyer's expense of such information to the extent reasonably
necessary. Additionally, Seller will provide Buyer and Global opportunities to
meet with key employees of the Business, to visit facilities of the Business and
to otherwise conduct due diligence in respect of the Business and the Purchased
Assets. All materials copied by Buyer or Global shall be maintained in
confidence by Buyer and Global and returned to Seller if the Closing of the
transactions contemplated hereunder fails to occur.
ARTICLE VI
POST-CLOSING COVENANTS
6.1 GENERAL. In case at any time after the Closing any further
-------
action is legally necessary or reasonably desirable (as determined by Buyer and
Seller) to carry out the purposes of this Agreement, each of the parties will
take such further action (including the execution and delivery of such further
instruments and documents) as any other party reasonably may request, all at the
sole cost and expense of the requesting party (unless the requesting party is
entitled to indemnification therefor under Article VIII below). Seller
------------
acknowledges and agrees that from and after the Closing, except for Seller's
corporate records, Buyer will be entitled to possession of copies of all
documents, books, records, agreements, and financial data of any sort relating
solely to the Business. For a period of four (4) years after the Closing Date,
Buyer and Global on the one hand and Seller on the other agree that they will
give, or cause to be given, to the other party, its successors and its
representatives, during normal business hours and at the requesting party's
expense, such reasonable access to the properties, titles, contracts, books,
records, files and documents (but excluding attorney work product or other
privileged communications) relating solely to the Business of Buyer or Global
(to the extent Buyer's or Global's records are the records, materials and data
transferred to Buyer from Seller pursuant to this Agreement) or Seller, as the
case may be, as is reasonably necessary to allow the requesting party to obtain
information in the other party's possession with respect to any claims, demands,
audits, suits or matters of a similar nature made by or against the requesting
party as the previous or new owner and operator of the Business, as the case may
be, and to make copies of such information to the extent reasonably necessary.
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<PAGE>
6.2 TRANSITION. For a period of four (4) years following Closing,
----------
Seller will not take any intentional action that primarily is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of Seller from maintaining the same
business relations with Buyer after the Closing as it maintained with Seller
prior to the Closing. For a period of four (4) years following Closing, (i)
Seller will refer all customer inquiries relating to the Business to Buyer or to
another Person at the Direction of Buyer and (ii) Buyer will refer all customer
inquiries relating to Seller's graphic arts business to Seller or to another
person at the direction of Seller.
6.3 CONFIDENTIALITY. Seller will treat and hold as such all
---------------
Confidential Information, refrain from using any of the Confidential Information
except in connection with this Agreement or otherwise for the benefit of Seller,
Buyer, or Global for a period of four (4) years from the date of this Agreement,
and deliver promptly to Buyer or Global or destroy, at the written request and
option of Buyer, all tangible embodiments (and all copies) of the Confidential
Information which are in their possession except as otherwise permitted herein.
In the event that Seller is requested or required (by oral question or written
request for information or documents in any legal proceeding, interrogatory,
subpoena, civil investigative demand, or similar legal proceeding) to disclose
any Confidential Information, Seller will notify Buyer promptly of the request
or requirement. In addition, Buyer agrees (and agrees to cause Global) to
maintain the confidentiality of the terms of this Agreement except as (i)
required to be disclosed pursuant to subpoena or other legal process, (ii)
publicly disclosed, or (iii) subsequently disclosed by any third party not in
breach of a confidentiality agreement with Seller.
6.4 COVENANT NOT TO COMPETE. For and in consideration of the
-----------------------
allocation of $100,000 of the Purchase Price paid to Seller by Buyer, Seller
covenants and agrees, for a period of three (3) years from and after the Closing
Date, that it will not, directly or indirectly without the prior written consent
of Buyer and Global, for or on behalf of any entity:
(A) become interested or engaged, directly or indirectly, as a
shareholder, bondholder, creditor, officer, director, partner, agent, contractor
with, employer or representative of, or in any manner associated with, or give
financial, technical or other assistance to, any Person, firm or corporation for
the purpose of engaging in the Business in competition with Buyer or any of its
Affiliates, within one-hundred (100) miles of any office of the Business, in the
State of Rhode Island or in Bennington County, Vermont;
(B) enter into any agreement with, service, assist or solicit
the business of any customers of Buyer or any of its Affiliates for the purpose
of distributing and servicing office equipment to such customers in competition
with Buyer or such Affiliates within one hundred (100) miles of any office of
the Business, in the State of Rhode Island or in Bennington County, Vermont or
to cause them to reduce or end their business with Seller; or
(C) hire, retain, or solicit the employment or services of
employees, consultants or representatives of Buyer or any of its Affiliates for
the purpose of causing them to leave the employment of Buyer or such Affiliates;
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provided, however, that Seller may own less than one percent (1%) of the
outstanding stock of any publicly-traded corporation and same shall not be
deemed to be in a violation of this Section 6.4 solely by reason thereof.
-----------
6.5 ACCESS TO RECORDS AFTER CLOSING. For a period of four (4) years
-------------------------------
after the Closing Date, Buyer and Global on the one hand and Seller on the other
agree that they will give, or cause to be given, to the other party, its
successors and its representatives, during normal business hours and at the
requesting party's expense, such reasonable access to the properties, titles,
contracts, books, records, files and documents (but excluding attorney work
product or other privileged communications or corporate records) of Buyer and
Global (to the extent Buyer's or Global's records are the records, materials and
data transferred to Buyer from Seller pursuant to this Agreement) or Seller, as
the case may be, as is reasonably necessary to allow the requesting party to
obtain information in the other party's possession with respect to any claims,
demands, audits, suits or matters of a similar nature made by or against the
requesting party as the previous or new owner and operator of the Business, as
the case may be, and to make copies of such information to the extent reasonably
necessary.
6.6 LITIGATION SUPPORT. In the event and for so long as any party is
------------------
actively contesting or defending against any claim, suit, action or charge,
complaint, or demand in connection with (i) any transaction contemplated under
this Agreement or (ii) any fact, circumstance, status, condition, activity,
practice, occurrence, event, action, failure to act, or transaction on or prior
to the Closing Date involving Seller or Division, each of the other parties will
cooperate and make available themselves or their personnel, as applicable, and
provide such testimony and access to their books and records as shall be
necessary in connection with the contest or defense.
6.7 HIRING OF EMPLOYEES. Buyer shall offer employment to all of the
-------------------
Division's employees on terms reasonably similar to those presently being paid
to the Division employees; provided, however, that in no event shall Buyer be
deemed to have guaranteed employment to all of such employees on a long-term
basis and, provided, further, that for a period of two (2) years after the
Closing Date, Buyer will not solicit for employment any current employees of
Seller's graphic arts business. All Division employees hired by Buyer will be
covered by Buyer's health insurance from the effective date of Closing, or if
there is a waiting period required under Buyer's health plans, then Buyer will
reimburse Seller for its costs in providing such relevant health insurance,
disability and/or medical benefits. Seller will not be in breach hereunder if
one or more employees of Seller refuse to accept employment with Buyer.
6.8 ASSIGNMENT OF CONTRACTS. Anything in this Agreement to the
-----------------------
contrary notwithstanding, this Agreement shall not constitute an agreement to
assign or otherwise transfer any Contract or any rights thereunder, if an
attempted assignment or transfer thereof would constitute a breach thereof,
would be ineffective or would violate any applicable law without the consent of
a third party to such assignment or transfer. Seller and Buyer shall use their
best efforts to obtain all such consents on or prior to the Closing, which
efforts shall not include making any monetary payments in connection therewith.
If any such consent has not been obtained as of the Closing Date, Seller shall
continue to use such best efforts to obtain such
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<PAGE>
consent after the Closing. Until such consent or waiver has been obtained, Buyer
shall make all reasonable efforts to perform in Seller's name all of Seller's
obligations under any such Contract for which any such consent has not been
obtained. Seller shall cooperate with Buyer in any reasonable arrangement
designed to provide for Buyer all of the benefits, and to have Buyer assume the
burdens, liabilities, obligations and expenses under all such Contracts. At
Buyer's request, Seller shall, at Buyer's sole cost and expense, take all
reasonable efforts requested by Buyer to enforce, for the benefit of Buyer, any
and all rights of Seller under any such Contract not otherwise transferred
pursuant to the provisions of this Agreement. Seller hereby authorizes Buyer to
perform and Buyer hereby agrees to perform all of Seller's obligations after the
Closing under all such contracts. Seller agrees to remit promptly to Buyer all
collections or payments received by Seller in respect of all such Contracts, and
shall hold all such collections or payments for the benefit of, and promptly pay
the same over to, Buyer; provided, however, that nothing herein shall create or
provide any rights or benefits in or to third parties.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF PARTIES TO CONSUMMATE CLOSING
7.1 CONDITIONS TO BUYER'S OBLIGATIONS. The obligations of Buyer under this
---------------------------------
Agreement to consummate the Closing is subject to the conditions that:
(A) COVENANTS, REPRESENTATIONS AND WARRANTIES. Seller shall have
-----------------------------------------
performed in all material respects all obligations and agreements and complied
in all material respects with all covenants contained in this Agreement to be
performed and complied with by each of them prior to or at the Closing Date. The
representations and warranties of Seller set forth in this Agreement shall be
accurate in all material respects at and as of the Closing Date with the same
force and effect as though made on and as of the Closing Date except for any
changes resulting from activities or transactions which may have taken place
after the date hereof and which are permitted or contemplated by the Agreement
or which have been entered into in the ordinary course of business and except to
the extent that such representations and warranties are expressly made as of
another specified date and, as to such representation, the same shall be true in
all material respects as of such specified date. In addition, Buyer shall have
determined from its due diligence review of Seller that no Material Adverse
Change or Material Adverse Effect shall have occurred in the financial
condition, business, operations or prospects of Seller from those presented to
Buyer prior to execution of this Agreement.
(B) CONSENTS. All statutory requirements for the valid consummation
--------
by Seller of the transactions contemplated by this Agreement shall have been
fulfilled and all authorizations, consents and approvals, including those of all
federal, state, local and foreign governmental agencies and regulatory
authorities required to be obtained in order to permit the consummation of the
transactions contemplated hereby shall have been obtained in form and substance
reasonably satisfactory to Buyer and Global unless such failure could not
reasonably be expected to have a Material Adverse Effect. All approvals of the
Board of Directors and shareholders of Seller and Division necessary for the
consummation of this Agreement and the transactions contemplated hereby shall
have been obtained.
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<PAGE>
(C) LEASES. Buyer shall be satisfied that the leases for the
------
Buildings have been assigned to Buyer and remain in full force and effect
without default immediately following the Closing on terms satisfactory to
Buyer. In addition, Seller will use reasonable best efforts to obtain from each
of the lessors of the Buildings a Landlord Waiver to PPM America, Inc., as Agent
for Jackson National Life Insurance Company and certain other lenders, in the
form of Exhibit I hereto, except as specifically waived by Seller.
---------
(D) FINANCIAL CONDITION. Seller's Working Capital as projected at
-------------------
the Closing shall be greater than $1,000,000.
(E) DOCUMENTS TO BE DELIVERED BY SELLER. The following documents
-----------------------------------
shall be delivered at the Closing by Seller:
(I) CONVEYANCE DOCUMENTS. Such instruments of sale, transfer,
--------------------
substance reasonably satisfactory to counsel for Buyer (including, without
limitation, the Assignment and Assumption Agreement in substantially the
form attached hereto as Exhibit B), as are required in order to transfer to
---------
Buyer good and marketable title to the Purchased Assets, free and clear of
all liens, charges, security interests and other encumbrances except as
provided herein.
(II) OPINION OF SELLER'S COUNSEL. Buyer shall have received an
---------------------------
opinion of counsel to Seller, dated the Closing Date, in substantially the
same form as the form of opinion that is Exhibit C hereto.
---------
(III) CERTIFICATES. Buyer shall have received an officer's
------------
certificate and a secretary's certificate of Seller executed by officers of
Seller, dated the Closing Date, in substantially the same forms as the
forms of certificates that are Exhibits D-1 and D-2 hereto.
------------ ---
(IV) RESOLUTIONS. A certified copy of resolutions of Seller's
-----------
Board of Directors authorizing the execution, delivery and consummation of
this Agreement and the transactions contemplated hereby.
(V) UCC MATTERS. UCC termination statements and other
-----------
applicable documentation necessary to release any interest of any third
party in the Purchased Assets.
(VI) ESCROW AGREEMENT. Seller shall have delivered to Buyer at
----------------
the Closing the duly executed Escrow Agreement.
(VII) SELLER MANAGEMENT SERVICES AGREEMENT. Seller shall have
------------------------------------
duly executed and delivered a Management Services Agreement in
substantially the same form attached as Exhibit E hereto (the "Management
---------
Services Agreement"), pursuant to which Seller will continue to provide
certain administrative services to Buyer with respect to the Business until
April 30, 1998.
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(VIII) NON-COMPETE AGREEMENT. Elliot M.L. Bloom shall have duly
---------------------
executed and delivered the Non-Compete Agreement in substantially the form
attached as Exhibit F hereto (the "NON-COMPETE AGREEMENT").
---------
(IX) COLLATERAL ASSIGNMENT OF RIGHTS. Seller shall have
-------------------------------
executed and delivered to PPM America, Inc., as agent for Jackson National
Life Insurance Company and certain other lenders, a Collateral Assignment
of Rights in substantially the same form as the form attached hereto as
Exhibit H.
---------
(X) RECORDS OF SELLER. Copies of all contracts, files,
-----------------
documents, data, records and information of Seller relating solely to the
conduct of the Business or the Purchased Assets, shall have been delivered
to Buyer, all of which may be delivered to Buyer at the offices of the
Business.
(XI) AUDIT OF DIVISION. Prior to Closing, the Seller shall have
-----------------
audited the Division's financial statements as of and for the eleven month
period ending December 31, 1997. Such audit shall be conducted by Joseph D.
Kalicka and Company, and shall be paid for by Buyer or Global.
7.2 CONDITIONS TO SELLER'S AND SELLER'S OBLIGATIONS. The obligation of
-----------------------------------------------
Seller under this Agreement to consummate the Closing is subject to the
conditions that:
(A) COVENANTS, REPRESENTATIONS AND WARRANTIES. Buyer shall have
-----------------------------------------
performed in all material respects all obligations and agreements and complied
in all material respects with all covenants contained in this Agreement to be
performed and complied with by Buyer prior to or at the Closing and the
representations and warranties of Buyer set forth in Article IV hereof shall be
----------
accurate in all material respects, at and as of the Closing Date, with the same
force and effect as though made on and as of the Closing Date except for any
changes resulting from activities or transactions which may have taken place
after the date hereof and which are permitted or contemplated by the Agreement
or which have been entered into in the ordinary course of the Business and
except to the extent that such representations and warranties are expressly made
as of another specified date and, as to such representations, the same shall be
true as of such specified date.
(B) CONSENTS. All statutory requirements for the valid consummation
--------
by Buyer of the transactions contemplated by this Agreement shall have been
fulfilled and all authorizations, consents and approvals, including those of all
federal, state, local and foreign governmental agencies and regulatory
authorities required to be obtained in order to permit the consummation by Buyer
of the transactions contemplated hereby shall have been obtained unless such
failure shall not have a Material Adverse Effect on the Business. Buyer shall
have used its reasonable best efforts to have obtained the release of Seller
from all personal guarantees with respect to Seller.
(C) DOCUMENTS TO BE DELIVERED BY BUYER. The following documents
----------------------------------
shall be delivered at the Closing by Buyer:
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(I) ESCROW AGREEMENT. Buyer shall have delivered to Seller at
----------------
the Closing the duly executed Escrow Agreement.
(II) ASSIGNMENT AND ASSUMPTION AGREEMENT. Buyer shall have
-----------------------------------
executed and delivered the Assignment and Assumption Agreement in
substantially the form attached hereto as Exhibit B, dated as of the
---------
Closing Date.
(III) MANAGEMENT SERVICES AGREEMENT. Buyer shall have executed
-----------------------------
and delivered the Management Services Agreement in the same form
attached as Exhibit E hereto.
---------
(D) PAYMENTS TO SELLER. Seller and Escrow Agent shall each have
------------------
received their respective portion of the Purchase Price payable at the Closing.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION OF BUYER. Except as provided in Section 8.6,
------------------------ -----------
Seller agrees to jointly and severally indemnify and hold harmless Buyer and
each officer, director, and Affiliate of Buyer, including without limitation any
successor of Buyer (collectively, the "INDEMNIFIED PARTIES") from and against
any and all damages, losses, claims, liabilities, demands, charges, suits,
penalties, costs and expenses (including court costs and reasonable attorneys'
fees and expenses incurred in for any litigation or proceeding) (collectively,
the "INDEMNIFIABLE COSTS"), which any of the Indemnified Parties may sustain, or
to which any of the Indemnified Parties may be subjected, arising out of (A) any
misrepresentation, breach or default by Seller of or under any of the
representations, covenants, agreements or other provisions of this Agreement or
any agreement or document executed in connection herewith; (B) the assertion and
final determination of any claim or liability against the Purchased Assets or
any of the Indemnified Parties by any Person based upon the facts which form the
alleged basis for any litigation to the extent it should have been, but was not,
reserved for in the Financial Statements in accordance with GAAP, as modified in
this Agreement; (C) Seller's tortious acts or omissions to act prior to Closing
for which Seller did not carry liability insurance for themselves as the insured
party, whether or not such acts or omissions to act result in a breach or
violation of any representation or warranty; and (D) any Excluded Liability paid
by Buyer. In addition, Buyer shall have the right to collect all insurance
proceeds for claims related to the Business made or occurring after the
Effective Date which are covered under Seller's insurance, and Seller agrees to
use reasonable best efforts to recover such proceeds.
8.2 DEFENSE OF CLAIMS. If any legal proceeding shall be instituted,
-----------------
or any claim or demand made, against any Indemnified Party in respect of which
Seller may be liable hereunder, such Indemnified Party shall give prompt written
notice thereof to Seller and, except as otherwise provided in Section 8.4 below,
-----------
Seller shall have the right to defend, or cause Seller or its successors to
defend, any litigation, action, suit, demand, or claim for which it may seek
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indemnification unless, in the reasonable judgment of Buyer, such litigation,
action, suit, demand, or claim, or the resolution thereof, would have an ongoing
effect on Buyer, Seller or its successors, and such Indemnified Party shall
extend reasonable cooperation in connection with such defense, which shall be at
Seller's expense. In the event Seller fails or refuses to defend the same within
a reasonable length of time, the Indemnified Parties shall be entitled to assume
the defense thereof, and Seller shall be liable to repay the Indemnified Parties
for all expenses reasonably incurred in connection with said defense (including
reasonable attorneys' fees and settlement payments), but only in the event an
Indemnified Party is found liable. If Seller shall not have the right to assume
the defense of any litigation, action, suit, demand, or claim in accordance with
either of the two preceding sentences, the Indemnified Parties shall have the
absolute right to control the defense of and to settle, in their sole discretion
and without the consent of Seller, such litigation, action, suit, demand, or
claim, but Seller shall be entitled, at their own expense, to participate in
such litigation, action, suit, demand, or claim.
8.3 ESCROW CLAIM. If any claim for indemnification is made by an
------------
Indemnified Party pursuant to this Article VIII prior to the expiration of the
------------
Escrow Period, such Indemnified Party shall apply to the Escrow Agent provided
in Section 2.9 of this Agreement for reimbursement of such claim in accordance
-----------
with the provisions of the Escrow Agreement; provided, however, the Escrow Sum
is not intended to be an exclusive remedy in the event Buyer has indemnification
claims hereunder which exceed such amount.
8.4 TAX AUDITS, ETC. In the event of an audit of a Tax Return of the
---------------
Seller with respect to which an Indemnified Party might be entitled to
indemnification pursuant to this Article VIII, Seller shall have the right to
------------
control any and all such audits which may result in the assessment of additional
Taxes against Seller and any and all subsequent proceedings in connection
therewith, including appeals (subject to the prior written consent of Buyer,
which shall not unreasonably be withheld and subject to the right of Buyer to
have its accountants and attorneys consult with Seller on such audits or
procedures at Buyer's expense). Seller shall cooperate fully in all matters
relating to any such audit or other Tax proceeding (including according access
to all records pertaining thereto), and will execute and file any and all
consents, powers of attorney, and other documents as shall be reasonably
necessary in connection therewith. If additional Taxes are payable by the
Division or Seller as a result of any such audit or other proceeding, Seller
shall be responsible for and shall promptly pay all Taxes, interest, and
penalties for which any of the Indemnified Parties shall be entitled to
indemnification.
8.5 INDEMNIFICATION OF SELLER. Buyer agrees to indemnify and hold
-------------------------
harmless Seller and each officer, director, stockholder or Affiliate of Seller,
from and against any Indemnifiable Costs arising out of any material
misrepresentation, breach or default by Buyer of or under any of the covenants,
agreements or other provisions of this Agreement or any agreement or document
executed in connection herewith.
8.6 LIMITS ON INDEMNIFICATION. All Indemnifiable Costs sought by any
-------------------------
party hereunder shall be net of any insurance proceeds received by such Person
with respect to such claim (less the present value of any premium increases
occurring as a result of such claim). Except for any claims for breach of the
representations and warranties of Seller under Sections
--------
-30-
<PAGE>
[******Certain information on this page has been omitted and filed
separately with the Securities and Exchange Commission. Confidential
treatment has been requested with respect to the omitted portions.]
3.3 or 3.14 hereof or with respect to Excluded Liabilities (the indemnification
- --- ----
for which shall expire on the expiration of the applicable statute of
limitations except for claims made prior to such date which should continue
after such date until finally resolved), the right to make claims for
indemnification provided under this Article VIII shall expire on June 30, 1999
------------
(except for claims made prior to such date which shall continue after such date
until finally resolved). Seller shall not be obligated to pay any amounts for
indemnification under this Article VIII until the aggregate indemnification
------------
obligation hereunder exceeds $50,000 (as reduced by Seller's election to pay to
Buyer any Preliminary Adjustment Amount or Final Adjustment Amount) whereupon
Seller shall be liable for all amounts for which indemnification may be sought
in excess of [**]. Notwithstanding the foregoing, in no event shall the
aggregate liability of Seller to Buyer exceed the Purchase Price. However
nothing in this Article VIII shall limit Buyer or Seller in exercising or
------------
securing any remedies provided by applicable common law with respect to the
conduct of Seller or Buyer in connection with this Agreement or in the amount of
damages that it can recover from the other in the event that Buyer successfully
proves intentional fraud or intentional fraudulent conduct in connection with
this Agreement. All Indemnified Costs paid by Seller shall be deemed to be a
reduction of the Purchase Price paid by Buyer hereunder.
ARTICLE IX
TERMINATION
9.1 TERMINATION. This Agreement may be terminated at any time prior
-----------
to the Closing:
(A) by the mutual written consent of Seller and Buyer;
(B) in writing by Buyer, if Seller has breached in any material
respect any representation, warranty or covenant contained in this Agreement,
and in each case such breach has not been remedied within ten (10) business days
after receipt of notice specifying such breach and demanding such breach to be
remedied; or
(C) in writing by Seller, if Buyer has breached in any material
respect any representation, warranty or covenant contained in this Agreement,
and in each case such breach has not been remedied within ten (10) business days
after receipt of notice specifying such breach and demanding such breach to be
remedied; or
(D) in writing by either Seller, on the one hand, or Buyer, on
the other hand, in the event the Closing has not occurred on or before March 15,
1998, unless the failure of such consummation or the failure to satisfy such
condition, as applicable, shall be due to a breach of any representation or
warranty made by the party or parties seeking to terminate this Agreement or the
failure of such party or parties to comply in all material respects with the
agreements and covenants contained herein to be performed by such party or
parties.
9.2 EFFECT OF TERMINATION. If the transactions contemplated by this
---------------------
Agreement are terminated pursuant to Section 9.1 by notice in writing to the
-----------
non-terminating
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<PAGE>
party or parties, this Agreement shall become void and of no further force and
effect, except that such termination shall not relieve (i) any party from its
covenants in respect of confidentiality contained in Section 6.3 and (ii) any
-----------
party then in breach of any representation, warranty, covenant or agreement
contained in this Agreement from liability in respect of such breach
ARTICLE X
MISCELLANEOUS
10.1 MODIFICATIONS; WAIVERS. Any amendment, change or modification
----------------------
of this Agreement shall be void unless in writing and signed by all parties
hereto. No failure or delay by any party hereto in exercising any right, power
or privilege hereunder (and no course of dealing between or among any of the
parties) shall operate as a waiver of any such right, power or privilege. No
waiver of any default on any one occasion shall constitute a waiver of any
subsequent or other default. No single or partial exercise of any such right,
power or privilege shall preclude the further or full exercise thereof.
10.2 NOTICES. All notices and other communications hereunder shall
-------
be in writing and shall be deemed to have been duly given when personally
delivered, or 48 hours after deposited in the United States mail, first-class,
postage prepaid, or by facsimile addressed to the respective parties hereto as
follows:
Buyer:
-----
c/o Global Imaging Systems, Inc.
P.O. Box 273478
Tampa, Florida 33688-7877
Attention: Thomas Johnson, President
Fax No.: (813) 264-7877
Tel. No.: (813) 960-5508
With a copy to:
--------------
Hogan & Hartson, LLP
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Attention: Christopher J. Hagan
Fax No.: (202) 637-5910
Tel No.: (202) 637-5771
-32-
<PAGE>
Seller:
------
Bloom's Incorporated
135 Freshwater Boulevard
P.O. Box 1270
Enfield, Connecticut 06083-1270
Attention: Elliot M.L. Bloom
Fax No.: (860) 263-6896
Tel No.: (860) 745-1082 (ext 351)
With a copy to:
--------------
Cooley, Shrair, P.C.
1380 Main Street
Fifth Floor
Springfield, Massachusetts 01103-1616
Attention: David Shrair, Esq.
Fax No.: (413) 733-3042
Tel No.: (413) 735-8000
or to such other address as to any party hereto as such party shall designate by
like notice to the other parties hereto.
10.3 COUNTERPARTS; FACSIMILE TRANSMISSION. This Agreement may be
------------------------------------
executed in several counterparts, each of which shall be deemed an original but
all of which counterparts collectively shall constitute one instrument, and in
making proof of this Agreement, it shall never be necessary to produce or
account for more than one such counterpart. Signatures of a party to this
Agreement or other documents executed in connection herewith which are sent to
the other parties by facsimile transmission shall be binding as evidence of
acceptance of the terms hereof or thereof by such signatory party.
10.4 EXPENSES. Each of the parties hereto will bear all costs,
--------
charges and expenses incurred by such party in connection with this Agreement
and the consummation of the transactions on behalf of Seller contemplated
herein, provided, however, that Seller shall bear all legal and other expenses
of Seller and Division with respect to this Agreement and the transactions
contemplated hereby. The Buyer shall bear the cost of the audit contemplated in
Section 2.10 in accordance with the terms hereof.
- ------------
10.5 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding
--------------------------
upon and inure to the benefit of Seller and Buyer, their heirs, representatives,
successors, and permitted assigns, in accordance with the terms hereof. This
Agreement shall not be assignable by Seller without the prior written consent of
Buyer. This Agreement shall be assignable by Buyer to either (a) any lender
providing financing to Buyer or its Affiliates or (b) an Affiliate of Buyer, in
each case without the prior written consent of Seller. In addition, Buyer may
assign any or all of its rights hereunder, without the consent of Seller, in
connection with any sale of all or
-33-
<PAGE>
substantially all of the assets, capital stock or business of Buyer or Seller
(whether effected by sale, exchange, merger, consolidation or other
transaction).
10.6 ENTIRE AND SOLE AGREEMENT. This Agreement and the other
-------------------------
schedules and agreements referred to herein, constitute the entire agreement
between the parties hereto and supersede all prior agreements, representations,
warranties, statements, promises, information, arrangements and understandings,
whether oral or written, express or implied, with respect to the subject matter
hereof.
10.7 GOVERNING LAW. This Agreement and its validity, construction,
-------------
enforcement, and interpretation shall be governed by the substantive laws of the
State of Connecticut, without giving effect to the principles of conflicts of
laws thereof.
10.8 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
-----------------------------------------------------
Regardless of any investigation at any time made by or on behalf of any party
hereto or of any information any party may have in respect thereof, all
covenants, agreements, representations, and warranties and the related
indemnities made hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall survive the Closing until June 30, 1999,
provided, however, that (a) the representations and warranties contained in
Section 3.14 of this Agreement, and the related indemnities, shall survive the
- ------------
Closing until the expiration of the applicable statutes of limitations for
determining or contesting Tax liabilities; (b) the representations and
warranties contained in Section 3.3 of this Agreement, and the related
-----------
indemnities, shall survive the Closing indefinitely and not expire; and (c) all
covenants in Article VI which have an expiration date contained therein shall
----------
expire as of such date.
10.9 INVALID PROVISIONS. If any provision of this Agreement is
------------------
deemed or held to be illegal, invalid or unenforceable, this Agreement shall be
considered divisible and inoperative as to such provision to the extent it is
deemed to be illegal, invalid or unenforceable, and in all other respects this
Agreement shall remain in full force and effect; provided, however, that if any
provision of this Agreement is deemed or held to be illegal, invalid or
unenforceable there shall be added hereto automatically a provision as similar
as possible to such illegal, invalid or unenforceable provision and be legal,
valid and enforceable. Further, should any provision contained in this Agreement
ever be reformed or rewritten by any judicial body of competent jurisdiction,
such provision as so reformed or rewritten shall be binding upon all parties
hereto.
10.10 PUBLIC ANNOUNCEMENTS. Neither party hereto shall make any
--------------------
public announcement of the transactions contemplated hereby without the prior
written consent of the other party.
10.11 REMEDIES CUMULATIVE. The remedies of the parties under this
-------------------
Agreement are cumulative and shall not exclude any other remedies to which any
party may be lawfully entitled.
10.12 THIRD PARTIES. Except as specifically set forth or referred to
------------
herein, nothing herein expressed or implied is intended or shall be construed to
confer upon or give to
-34-
<PAGE>
any Person, other than the parties hereto and their permitted successors or
assigns, any rights or remedies under or by reason of this Agreement.
10.13 NO STRICT CONSTRUCTION. The parties hereto have participated
----------------------
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement.
[THIS SPACE INTENTIONALLY LEFT BLANK]
-35-
<PAGE>
[THIS SPACE INTENTIONALLY LEFT BLANK]
-36-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed as of the date and year first above written.
BUYER:
-----
CONNECTICUT BUSINESS SYSTEMS, INC.
By: /s/ Thomas S. Johnson
----------------------------------------
Thomas S. Johnson
Chairman
SELLER:
------
BLOOM'S INCORPORATED
By: /s/ Elliot M.L. Bloom
----------------------------------------
Elliot M.L. Bloom
President and Treasurer
-37-
<PAGE>
EXHIBIT 10.28
STOCK PURCHASE AGREEMENT
By and Among
GLOBAL IMAGING SYSTEMS INC.,
SOUTHERN BUSINESS COMMUNICATIONS
OF D.C., INC.
and
GEORGE GOUGH,
MARK M. LLOYD
and
ARTHUR E. KREPS
DATED NOVEMBER 13, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
1.1 Definitions........................................................ 1
ARTICLE II
AGREEMENT OF PURCHASE AND SALE; CLOSING
2.1 Agreement to Sell and Purchase..................................... 4
2.2 Purchase Price..................................................... 4
2.3 Payment of Purchase Price.......................................... 5
2.4 Closing............................................................ 5
2.5 Purchase Price Adjustment.......................................... 5
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND SELLER
3.1 Capitalization..................................................... 5
3.2 No Liens on Shares................................................. 5
3.3 Other Rights to Acquire Capital Stock.............................. 5
3.4 Due Organization................................................... 6
3.5 No Subsidiaries.................................................... 6
3.6 Due Authorization.................................................. 6
3.7 Financial Statements............................................... 6
3.8 Certain Actions.................................................... 7
3.9 Properties......................................................... 8
3.10 Licenses and Permits............................................... 8
3.11 Intellectual Property.............................................. 8
3.12 Compliance with Laws............................................... 9
3.13 Insurance.......................................................... 9
3.14 Employee Benefit Plans............................................. 9
(a) Employee Welfare Benefit Plans................................. 9
(b) Employee Pension Benefit Plans................................. 10
(c) Employment and Non-Tax Qualified Deferred Compensation
Arrangements................................................... 10
3.15 Contracts and Agreements........................................... 10
3.16 Claims and Proceedings............................................. 11
3.17 Taxes.............................................................. 11
3.18 Personnel.......................................................... 12
3.19 Business Relations................................................. 12
-i-
<PAGE>
3.20 Accounts Receivable .............................................. 13
3.21 Bank Accounts .................................................... 13
3.22 Warranties........................................................ 13
3.23 Brokers........................................................... 13
3.24 Interest in Competitors, Suppliers, Customers, Etc ............... 13
3.25 Indebtedness To and From Officers, Directors, Shareholders,
and Employees..................................................... 13
3.26 Undisclosed Liabilities .......................................... 14
3.27 Information Furnished ............................................ 14
ARTICLE IV
GLOBAL'S REPRESENTATIONS AND WARRANTIES
4.1 Due Organization.................................................. 14
4.2 Due Authorization................................................. 14
4.3 No Brokers........................................................ 15
4.4 Investment........................................................ 15
ARTICLE V
COVENANTS OF THE COMPANY AND SELLER
5.1 Consents of Others................................................ 15
5.2 Seller's Efforts.................................................. 15
5.3 Powers of Attorney................................................ 15
ARTICLE VI
POST-CLOSING COVENANTS
6.1 General........................................................... 15
6.2 Transition........................................................ 16
6.3 Confidentiality................................................... 16
6.4 Covenant Not to Compete........................................... 16
6.5 Section 339(h)(10) Election....................................... 17
ARTICLE VII
CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING
7.1 Conditions to Global's Obligations ............................... 17
(a) Covenants, Representations and Warranties.................... 17
(b) Consents..................................................... 18
(c) Lease........................................................ 18
(d) Discharge of Indebtedness and Liens.......................... 18
(e) Material Adverse Change...................................... 18
(f) Transfer Taxes............................................... 18
(g) Documents to be Delivered by Sellers and the Company......... 18
(i) Opinion of Seller's Counsel ............................ 18
(ii) Certificates ........................................... 18
-ii-
<PAGE>
(iii) Release................................................ 19
(iv) Stock Certificates..................................... 19
7.2 Conditions to Sellers and the Company's Obligations................ 19
(a) Covenants, Representations and Warranties..................... 19
(b) Consents...................................................... 19
(c) Documents to be Delivered by Global........................... 19
(i) Opinion of Global's Counsel ........................... 19
(ii) Certificates........................................... 19
(iii) Purchase Price ........................................ 20
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification of Global ......................................... 20
8.2 Indemnification of Seller ......................................... 20
ARTICLE IX
MISCELLANEOUS
9.1 Modifications...................................................... 20
9.2 Notices............................................................ 20
9.3 Counterparts....................................................... 21
9.4 Expenses........................................................... 22
9.5 Binding Effect; Assignment......................................... 22
9.6 Entire and Sole Agreement.......................................... 22
9.7 Governing Law ..................................................... 22
9.8 Survival of Representations, Warranties and Covenants.............. 22
9.9 Invalid Provisions................................................. 22
9.10 Public Announcements............................................... 23
9.11 Remedies Cumulative ............................................... 23
9.12 Waiver ............................................................ 23
-iii-
<PAGE>
LIST OF EXHIBITS
Exhibit A Form of Office Lease
Exhibit B Opinion of Sellers' Counsel
Exhibit C Sellers' Certificates
Exhibit D Release
Exhibit E Global Certificates
Exhibit F Opinion of Global's Counsel
LIST OF SCHEDULES
Schedule 2.3 Sellers' Accounts
Schedule 2.5 Holders of Funded Indebtedness
Schedule 3.1 Ownership of Shares
Schedule 3.4 Articles and Bylaws
Schedule 3.7 Financial Statements
Schedule 3.8A Certain Actions
Schedule 3.8B Material Changes
Schedule 3.9 Properties
Schedule 3.10 Licenses and Permits
Schedule 3.11 Patents and Trademarks
Schedule 3.13 Insurance
Schedule 3.14 Employee Benefit Plans
Schedule 3.15 Contracts and Agreements
Schedule 3.16 Claims and Proceedings
Schedule 3.18 Personnel
Schedule 3.20 Accounts Receivable
Schedule 3.21 Bank Accounts
Schedule 3.22 Warranties
Schedule 3.25 Indebtedness with Officers, Directors and Shareholders
Schedule 3.26 Undisclosed Liabilities
Schedule 3.27 Information Furnished
Schedule 7.1(d) Indebtedness
The Exhibits and Schedules to this Stock Purchase Agreement are not included
with this Registration Statement on Form S-1. Global will provide these exhibits
and schedules upon the request of the Securities and Exchange Commission.
-iv-
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into as of
November 13, 1996 but effective as of September 30, 1996, by and among GLOBAL
IMAGING SYSTEMS INC., a Delaware corporation ("Global"), SOUTHERN BUSINESS
COMMUNICATIONS OF D.C., INC., a Georgia corporation (the "Company") and GEORGE
GOUGH, MARK M. LLOYD and ARTHUR E. KREPS (each individually a "Seller" and
collectively "Sellers").
WITNESSETH:
WHEREAS, the Company is engaged in the electronic presentation, image
processing, and network services industry in McLean, Virginia (the "Business");
and
WHEREAS, Sellers own an aggregate of 10,000 shares of the outstanding
Common Stock, no par value per share, of the Company (the "Shares"), which
Shares constitute all of the issued and outstanding capital stock of the
Company; and
WHEREAS, Global desires to purchase from Sellers and Sellers desire to
sell to Global hereby of the Shares owned by Sellers, all on the terms and
subject to the conditions hereinafter set forth:
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto covenant and agree
as follows:
ARTICLE I
DEFINITIONS
-----------
1.1 Definitions. In this Agreement, the following terms have the
-----------
meanings specified or referred to in this Section 1.1 and shall be equally
-----------
applicable to both the singular and plural forms. Any agreement referred to
below shall mean such agreement as amended, supplemented and modified from time
to time to the extent permitted by the applicable provisions thereof and by this
Agreement.
"Affiliate" means, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by or is under common control
with such Person.
"ATS" means ATS-Atlanta One, L.L.C., a Georgia limited liability
company.
"Building" shall mean the Company's office building located at
8301 Greensboro Drive, Suite 110, McLean, Virginia.
<PAGE>
"Business" has the meaning specified in the first recital of
the Agreement.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. (S)(S) 9601 et seq., any amendments thereto, any
-- ---
successor statutes, and any regulations promulgated thereunder.
"Closing" means the closing of the transfer of the Shares from the
Sellers to Global.
"Closing Date" has the meaning specified in Section 2.4.
-----------
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning specified in the first paragraph of this
Agreement.
"Confidential Information" means all confidential information and
trade secrets of the Company including, without limitation, the identity, lists
or descriptions of any customers, referral sources or organizations; financial
statements, cost reports or other financial information; contract proposals, or
bidding information; business plans and training and operations methods and
manuals; personnel records; fee structure; and management systems, policies or
procedures, including related forms and manuals. Confidential Information shall
not include any information (i) which is disclosed pursuant to subpoena or other
legal process, (ii) which has been publicly disclosed, (iii) which subsequently
becomes known to a third party not subject to a confidentiality agreement with
Global or the Company, or (iv) which is subsequently disclosed by any third
party not in breach of a confidentiality agreement.
"Contracts" has the meaning specified in Section 3.15.
------------
"Court Order" means any judgment, order, award or decree of any
foreign, federal, state, local or other court or tribunal and any award in any
arbitration proceeding.
"Encumbrance" means any lien, claim, charge, security interest,
mortgage, pledge, easement, conditional sale or other title retention agreement,
defect in title, covenant or other restrictions, of any kind.
"Environmental Obligations" has the meaning specified in Section 3.12.
------------
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Financial Statements" has the meaning specified in Section 3.7.
-----------
"Funded Indebtedness" means all (i) indebtedness of such Person for
borrowed money or other interest-bearing indebtedness; (ii) capital lease
obligations of such
-2-
<PAGE>
Person; (iii) obligations of such Person to pay the deferred purchase or
acquisition price for goods or services, other than trade accounts payable or
accrued expenses in the ordinary course of business; or (iv) indebtedness of
others guaranteed by such Person or secured by an Encumbrance on such Person's
property.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"Global" has the meaning specified in the first paragraph of this
Agreement.
"Governmental Body" means any foreign, federal, state, local or
other governmental authority or regulatory body.
"Governmental Permits" has the meaning specified in Section 3.10.
------------
"Indemnifiable Costs" has the meaning specified in Section 8.1.
-----------
"Indemnified Parties" has the meaning specified in Section 8.1.
-----------
"Intellectual Property" has the meaning specified in Section 3.11.
------------
"IRS" means the Internal Revenue Service.
"Material Adverse Change" or "Material Adverse Effect" means a
material adverse change or effect on the assets, properties, Business or the
operations, liabilities, or conditions (financial or otherwise) of the Company.
"OSHA" means the Occupational Safety and Health Act, 29 U.S.C.
(S)(S) 651 et seq., any amendment thereto, and any regulations promulgated
-- ---
thereunder.
"Permitted Exception" means (a) liens for Taxes and other
governmental charges and assessments which are not yet due and payable, (b)
liens of landlords and liens of carriers, warehousemen, mechanics and
materialmen and other like liens arising in die ordinary course of business for
sums not yet due and payable, (c) other liens or imperfections on property which
are not material in amount or do not materially detract from the value of or
materially the existing use of the property affected by such lien or
imperfection, (d) such statement of facts shown on any customary title insurance
policies delivered to Global and (e) purchase money security interest liens in
favor of Canon U.S.A., Inc.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or Governmental Body.
"Purchase Price" has the meaning specified in Section 2.2.
-----------
-3-
<PAGE>
"RCRA" means the Resource Conservation and Recovery Act, 42 U.S.C.
(S)(S) 6901 et seq., and any successor statute, and any regulations promulgated
-- ---
thereunder.
"Requirements of Laws" means any foreign, federal, state and local
laws, statutes, regulations, rules, codes or ordinances enacted, adopted, issued
or promulgated by any Governmental Body (including, without limitation, those
pertaining to electrical, building, zoning, environmental and occupational
safety and health requirements) or common law.
"SBC" means Southern Business Communications, Inc., a Georgia
corporation.
"SBC Purchase Agreement" shall mean that certain Stock Purchase
Agreement of even date herewith among SBC, Global and each of the Sellers other
than George Gough whereby Global shall acquire all of the capital stock of SBC.
"Seller" or "Sellers" have the meanings set forth in the first
paragraph of this Agreement.
"Shares" means all of the issued and outstanding shares of the
capital stock of the Company.
"Tax" or "Taxes" means any federal, state, local or foreign income,
alternative or add-on minimum, gross income, gross receipts, windfall profits,
severance, property, production, sales, use, transfer, gains, license, excise,
employment, payroll, withholding or minimum tax, transfer, goods and services,
or any other tax, custom, duty, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest or any penalty,
addition to tax or additional amount imposed by any Governmental Body.
"Tax Return" means any return, report or similar statement required to
be filed with respect to any Taxes (including any attached schedules),
including, without limitation, any information return, claim for refund, amended
return and declaration of estimated Tax.
ARTICLE II
AGREEMENT OF PURCHASE AND SALE; CLOSING
2.1 Agreement to Sell and Purchase. Upon the basis of the
------------------------------
representations and warranties, for the consideration, and subject to the terms
and conditions set forth in this Agreement, Sellers agree to sell the Shares to
Global and Global agrees to purchase the Shares from Sellers.
2.2 Purchase Price. The total purchase price for the Shares (the
--------------
"Purchase Price") shall be equal to $1,051,866 and as otherwise adjusted
pursuant to Section 2.5 below.
-----------
-4-
<PAGE>
2.3 Payment of Purchase Price. The Purchase Price shall be payable by
-------------------------
Global at the Closing (hereinafter defined) will be paid in cash by wire
transfer of funds or by cashier's checks to the Sellers' accounts specified in
Schedule 2.3 (including the payment of $52,593 for the covenant not to compete
- ------------
provided in Section 6.4.
-----------
2.4 Closing. The Closing of the purchase and sale of the Shares
-------
contemplated by this Agreement shall take place at the offices of Rowe, Foltz &
Martin, P.C. in Atlanta, Georgia. For purposes of this Agreement and the
transactions contemplated hereby, the Closing shall be deemed to take place on
September 30, 1996 (the "Closing Date").
2.5 Purchase Price Adjustment. The Purchase Price payable pursuant to
-------------------------
Section 2.3 above will be reduced by the total amount of Funded Indebtedness
- -----------
assumed or paid in cash by wire transfer of funds to the accounts of the holders
of Funded Indebtedness listed on Schedule 2.5 hereto to satisfy the Company's
------------
Funded Indebtedness with such institutions.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND SELLERS
The Company and Sellers, jointly and severally, represent and warrant
to Global that:
3.1 Capitalization. The authorized capital stock of the Company
--------------
consists of 10,000 shares of Common Stock, no par value per share, all of which
are issued and outstanding. All of the Shares are duly authorized, validly
issued, fully paid, and nonassessable. All of the Shares are owned of record and
beneficially by Sellers in the amounts specified in Schedule 3.1 hereto. None of
------------
the Shares was issued or will be transferred under this Agreement in violation
of any preemptive or preferential rights of any Person. The Sellers own all of
the issued and outstanding capital stock of the Company.
3.2 No Liens on Shares. Sellers collectively own the Shares, free and
------------------
clear of any Encumbrances other than the rights and obligations arising under
this Agreement, and none of the Shares is subject to any outstanding option,
warrant, call, or similar right of any other Person to acquire the same, and
none of the Shares is subject to any restriction on transfer thereof except for
restrictions imposed by applicable federal and state securities laws. Sellers
have full power and authority to convey good and marketable title to the Shares,
free and clear of any Encumbrances.
3.3 Other Rights to Acquire Capital Stock. Except as set forth in this
-------------------------------------
Agreement, there are no authorized or outstanding warrants, options, or rights
of any kind to acquire from the Company any equity or debt securities of the
Company, or securities convertible into or exchangeable for equity or debt
securities of the Company, and there are no shares of capital stock of the
Company reserved for issuance for any purpose nor any contracts, commitments,
understandings or arrangements which require the Company to issue, sell or
deliver any additional shares of its capital stock.
-5-
<PAGE>
3.4 Due Organization. The Company is a corporation duly organized,
----------------
validly existing, and in good standing under the laws of the State of Georgia
and has full corporate power and authority to carry on the Business as now
conducted and as proposed to be conducted through the date hereof. Complete and
correct copies of the Certificate of Incorporation and Bylaws of the Company,
and all amendments thereto, have been heretofore delivered to Global and are
attached hereto as Schedule 3.4. The Company is qualified to do business in
------------
Virginia and in each other jurisdiction in which the nature of the Business or
the ownership of its properties requires such qualification except where the
failure to be so qualified does not and would not have a Material Adverse
Effect.
3.5 No Subsidiaries. The Company does not directly or indirectly have
---------------
any subsidiaries or any direct or indirect ownership interests in any Person.
Except for SBC and ATS, the Sellers do not own any other Person engaged in the
Business.
3.6 Due Authorization. The Company and the Sellers each has full power
-----------------
and authority to execute. deliver and perform this Agreement and to carry out
the transactions contemplated hereby. The execution, delivery, and performance
of this Agreement and the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action of the Company. This
Agreement has been duly and validly executed and delivered by the Company and
Sellers and constitutes the valid and binding obligations of the Company and
Sellers, enforceable in accordance with its terms. The execution, delivery, and
performance of this Agreement (as well as all other instruments, agreements,
certificates, or other documents contemplated hereby) by the Company and
Sellers, do not (a) violate any Requirements of Laws or any Court Order of any
Governmental Body applicable to the Company or Sellers, or their respective
property, (b) violate or conflict with, or permit the cancellation of, or
constitute a default under, any agreement to which the Company or Sellers are a
party, or by which any of them or any of their respective property is bound, (c)
permit the acceleration of the maturity of any indebtedness of, or indebtedness
secured by the property of, the Company or Sellers, or (d) violate or conflict
with any provision of the charter or bylaws of the Company.
3.7 Financial Statements. The following Financial Statements (herein
--------------------
so called) of the Company have been delivered to Global by Sellers and the
Company:
Reviewed balance sheets of the Company as of December 31, 1993,
December 31, 1994 and December 31, 1995 and internally prepared
monthly balance sheets for each month end from August 31, 1995 to
August 31, 1996, and
Reviewed statements of income of the Company for the fiscal years
ended December 31, 1993, December 31, 1994 and December 31, 1995 and
internally prepared income statements for month and year-to-date for
each month commencing August 31, 1995 through the month ending August
31, 1996.
Except as disclosed on Schedule 3.7, the Financial Statements have been
------------
prepared in accordance with GAAP throughout the periods indicated and fairly
present the financial position, results of operations and changes in financial
position of the Company as of the indicated dates and for
-6-
<PAGE>
the indicated periods, subject (in the case of the monthly internally prepared
Financial Statements) to year end accruals made in the ordinary course of the
Business which are not adversely material and which are consistent with past
practices. Except to the extent reflected or provided for in the Financial
Statements or the notes thereto and except as disclosed in Schedule 3.7, the
------------
Company has no liabilities, nor any obligations (whether absolute, contingent,
or otherwise) which are (individually or in the aggregate) material (in amount
or to the conduct of the Business); and neither the Company nor Sellers have
knowledge of any basis for the assertion of any such liability or obligation.
Since August 31, 1996, there has been no Material Adverse Change, and neither
the Company nor Seller have any reason to believe there has been any Material
Adverse Change in the prospects of the Company.
3.8 Certain Actions. Since August 31, 1996, the Company has not, except
---------------
as disclosed on Schedule 3.8A hereto: (a) discharged or satisfied any
-------------
Encumbrance or paid any obligation or liability, absolute or contingent, other
than current liabilities incurred and paid in the ordinary course of the
Business; (b) paid or declared any dividends or distributions, or purchased,
redeemed, acquired, or retired any stock or indebtedness from any stockholder
other than (i) the personal vehicles listed on Schedule 3.8A hereto and (ii) the
-------------
office furniture listed on Schedule 3.8A hereto, each as agreed to by Global;
-------------
(c) made or agreed to make any loans or advances or guaranteed or agreed to
guarantee any loans or advances to any party whatsoever; (d) suffered or
permitted any Encumbrance to arise or be granted or created against or upon any
of its assets, real or personal, tangible or intangible; (e) cancelled, waived,
or released or agreed to cancel, waive, or release any of its debts, rights, or
claims against third parties in excess of $10,000 individually or $50,000 in the
aggregate; (f) sold, assigned, pledged, mortgaged, or otherwise transferred or
suffered any damage, destruction, or loss (whether or not covered by insurance)
to, any assets (except in the ordinary course of the Business); (g) amended its
charter or bylaws; (h) paid or made a commitment to pay any severance or
termination payment to any employee or consultant; (i) made any change in its
method of management or operation or method of accounting; (j) made any capital
expenditures, including, without limitation, replacements of equipment in the
ordinary course of the Business, or entered into commitments therefor, except
for capital expenditures or commitments therefor which do not, in the aggregate,
exceed $50,000; (k) made any investment or commitment therefor in any Person;
(1) made any payment or contracted for the payment of any bonus, gratuity, or
other compensation or personal expenses, other than (A) wages and salaries and
business expenses paid in the ordinary course of the Business, and (B) wage and
salary adjustments made in the ordinary course of the Business for employees who
are not officers, directors, or shareholders of the Company; (m) made, amended,
or entered into any written employment contract or created or made any material
change in any bonus, stock option, pension, retirement, profit sharing or other
employee benefit plan or arrangement; (n) amended or experienced a termination
of any material contract, agreement, lease, franchise or license to which the
Company is a party, except in the ordinary course of the Business; or (o)
entered into any other material transactions except in the ordinary course of
the Business. Since August 31, 1996, except as disclosed an Schedule 3.8B
-------------
hereto, there has not been (a) any Material Adverse Change including, but not
limited to, the loss of any customer of the Company who paid the Company in
excess of $50,000 during the twelve months ended August 31, 1996, or the loss of
any supplier of the Company to whom the Company paid more than $40,000 during
the twelve months ended August 31, 1996, or in any material assets of the
Company, (b) any extraordinary contracts, commitments, orders or
-7-
<PAGE>
rebates, (c) any strike, material slowdown, or demand for recognition by a labor
organization by or with respect to any of the employees of the Company, or (d)
any shutdown, material slow-down, or cessation of any material operations
conducted by, or constituting part of, the Company, nor has the Company agreed
to do any of the foregoing.
3.9 Properties. Attached hereto as Schedule 3.9 is a list containing a
---------- ------------
description of all interests in real property (including, without limitation,
leasehold interests) and personal property utilized by the Company in the
conduct of the Business having a book value in excess of $15,000 as of the date
hereof. Except as expressly set forth on Schedule 3.9, such real and personal
------------
properties are free and clear of Encumbrances. Sellers and the Company have
delivered to Global a lien search of all of the Company's real and personal
property in the State of Virginia. All of the properties and assets necessary in
the Business as currently conducted (including, without limitation, all books,
records, computers and computer software and data processing systems) are owned,
leased or licensed by the Company and are suitable for the purposes for which
they are currently being used. With the exception of used equipment and
inventory valued at no more than $1.00 on the Company's Financial Statements,
the physical properties of the Company, including the real properties leased by
the Company, are in good operating condition and repair, normal wear and tear
excepted, and are free from any defects of a material nature. Except as
otherwise set forth on Schedule 3.9, the Company has full and unrestricted legal
------------
and equitable title to all such properties and assets. The operation of the
properties and Business of the Company in the manner in which they are now and
have been operated does not violate any zoning ordinances, municipal
regulations, or other Requirements of Laws, except for any such violations which
would not, individually or in the aggregate, have a Material Adverse Effect.
Except as set forth on Schedule 3.9, no covenants, easements, rights-of-way, or
------------
regulations of record impair the uses of the properties of the Company for the
purposes for which they are now operated. All leases of real or personal
property by the Company are legal, valid, binding, enforceable and in full force
and effect and will remain legal, valid, binding, enforceable and in full force
and effect on identical terms immediately following date hereof. All facilities
owned or leased by the Company have received all approvals of any Governmental
Body (including Governmental Permits) required in connection with the operation
thereof and have been operated and maintained in accordance with all
Requirements of Laws.
3.10 Licenses And Permits. Attached hereto as Schedule 3.10 is a list
-------------------- -------------
of all licenses, certificates, privileges, immunities approvals, franchises,
authorizations and permits held or applied for by the Company from any
Governmental Body (herein collectively called "Governmental Permits") the
absence of which to the best knowledge of Sellers could have a Material Adverse
Effect. The Company has complied in all material respects with the terms and
conditions of all such Governmental Permits, and no violation of any such
Governmental Permit or the Requirements of Laws governing the issuance or
continued validity thereof has occurred other than violations (if any) which
would not individually or in the aggregate have a Material Adverse Effect. No
additional Government Permit is required from any Governmental Body thereof in
connection with the conduct of the Business which Governmental Permit, if not
obtained, would have a Material Adverse Effect.
3.11 Intellectual Property. Attached hereto as Schedule 3.11 is a list
--------------------- -------------
and brief description of all patents, trademarks, tradenames, copyrights,
licenses, computer software or
-8-
<PAGE>
data (other than general commercial software), trade secrets, or applications
therefor owned by or registered in the name of the Company or in which the
Company has any rights, licenses, or immunities (collectively, the "Intellectual
Property"). The Company has furnished Global with copies of all license
agreements to which the Company is a party, either as licensor or licensee, with
respect to any Intellectual Property. Except as described on Schedule 3.11
-------------
hereto, the Company has good and marketable title to or the right to use such
Intellectual Property and all inventions, processes, designs, formulae, trade
secrets and know-how necessary for the conduct of their Business, in their
Business as presently conducted without the payment of any royalty or similar
payment, and the Company is not infringing on any patent right, tradename,
copyright or trademark right or other Intellectual Property right of others, and
neither the Company nor Sellers are aware of any infringement by others of any
such rights owned by the Company.
3.12 Compliance With Laws. The Company has (i) complied in all material
--------------------
respects with all Requirements of Laws, Governmental Permits and Court Orders
applicable to the Business and has filed with the proper Governmental Bodies all
statements and reports required by all Requirements of Laws, Governmental
Permits and Court Orders to which the Company or any of its employees (because
of their activities on behalf of the Company) are subject and (ii) conducted the
Business and are in compliance in all material respects with all federal, state
and local energy, public utility, health, safety and environmental Requirements
of Laws, Governmental Permits and Court Orders including the Clean Air Act, the
Clean Water Act, RCRA, the Safe Drinking Water Act, CERCLA, OSHA, the Toxic
Substances Control Act and. any similar state, local or foreign laws
(collectively "Environmental Obligations") and all other federal, state, local
or foreign governmental and regulatory requirements, except where any such
failure to comply would not, in the aggregate, have a Material Adverse Effect.
No claim has been made by any Governmental Body (and, to the best knowledge of
the Company and Sellers, no such claim is anticipated) to the effect that the
Business fails to comply, in any respect, with any Requirements of Laws,
Governmental Permit or Environmental Obligation or that a Governmental Permit or
Court Order is necessary in respect thereto.
3.13 Insurance. Attached hereto as Schedule 3.13 is a list of all
--------- -------------
policies of fire, liability, or other forms of insurance and all fidelity bonds
held by or applicable to the Company, which Schedule sets forth in respect of
each such policy the policy name, policy number, carrier, term, type of
coverage, deductible amount or self-insured retention amount, limits of coverage
and annual premium. Copies of all such insurance policies have been delivered to
Global. To the best of Sellers' and the Company's knowledge, no event relating
to the Company has occurred which will result in (i) cancellation of any such
insurance policies; (ii) a retroactive upward adjustment of premiums under any
such insurance policies; or (iii) any prospective upward adjustment in such
premiums. To the best of Sellers' and the Company's knowledge after due inquiry,
all of such insurance policies will remain in full force and effect following
the Closing.
3.14 Employee Benefit Plans.
----------------------
(a) Employee Welfare Benefit Plans. Except as disclosed on Schedule
------------------------------ --------
3.14, the Company does not maintain or contribute to any "employee welfare
- ----
benefit plan" as such term is defined in Section 3(l) of ERISA. With respect to
each such plan, (i) the plan is
-9-
<PAGE>
in material compliance with ERISA; (ii) the Plan has been administered in
accordance with its governing documents; (iii) neither the plan, nor any
fiduciary with respect to the plan, has engaged in any "prohibited transaction"
as defined in Section 406 of ERISA other than any transaction subject to a
statutory or administrative exemption; (iv) except for the processing of routine
claims in the ordinary course of administration, there is no material
litigation, arbitration or disputed claim outstanding; and (v) all premiums due
an any insurance contract through which the plan is funded have been paid.
(b) Employee Pension Benefit Plans. Except as disclosed in Schedule
------------------------------ --------
3.14, the Company does not maintain or contribute to any arrangement that is or
- ----
may be an "employee pension benefit plan" relating to employees, as such term is
defined in Section 3(2) of ERISA. With respect to each such plan: (i) the plan
is qualified under Section 401(a) of the Code, and any trust through which the
plan is funded meets the requirements to be exempt from federal income tax under
Section 501(a) of the Code; (ii) the plan is in material compliance with ERISA;
(iii) the plan has been administered in accordance with its governing documents
as modified by applicable law: (iv) the plan has not suffered an "accumulated
funding deficiency" as defined in Section 412(a) of the Code; (v) the plan has
not engaged in, nor has any fiduciary with respect to the plan engaged in, any
"prohibited transaction" as defined in Section 406 of ERISA or Section 4975 of
the Code other than a transaction subject to statutory or administrative
exemption; (vi) the plan has not been subject to a "reportable event" (as
defined in Section 4043(b) of ERISA), the reporting of which has not been waived
by regulation of the Pension Benefit Guaranty Corporation; (vii) no termination
or partial termination of the plan has occurred within the meaning of Section
411(d)(3) of the Code; (viii) all contributions required to be made to the
plan or under any applicable collective bargaining agreement have been made to
or on behalf of the plan; (ix) there is no material litigation, arbitration or
disputed claim outstanding; and (x) all applicable premiums due to the Pension
Benefit Guaranty Corporation for plan termination insurance have been paid in
full on a timely basis.
(c) Employment and Non-Tax Qualified Deferred Compensation
------------------------------------------------------
Arrangements. Except as disclosed in Schedule 3.14, the Company does not
- ------------ -------------
maintain or contribute to any retirement or deferred or incentive compensation
or stock purchase, stock grant or stock option arrangement entered into between
the Company and any current or former officer, consultant, director or employee
of the Company that is not intended to be a tax qualified arrangement under
Section 401(a) of the Code.
3.15 Contracts And Agreements. Attached hereto as Schedule 3.15 is a
----------------------- -------------
list and brief description of all written or oral contracts, commitments,
leases, and other agreements (including, without limitation, promissory notes,
loan agreements, and other evidences of indebtedness, guarantees, agreements
with distributors, suppliers, dealers, franchisors and customers, and service
agreements) to which the Company is a party or by which the Company or its
properties are bound which either (i) require performance by either party
exceeding one year; (ii) are contracts (other than vendor contracts) pursuant to
which the Company shall pay or receive more than $10,000 over the life of such
contract, or (iii) are vendor contracts pursuant to which SBC's sales of
products obtained pursuant to such contract exceeds $100,000 (collectively,
the "Contracts"). The Company is not and, to the best knowledge of Sellers and
the Company, no other party thereto is in default (and no event has occurred
which, with the
-10-
<PAGE>
passage of time or the giving of notice, or both, would constitute a default)
under any of the Contracts, and the Company has not waived any right under any
of the Contracts. Except as set forth on Schedule 3.15, all of the Contracts to
-------------
which the Company is a party are legal, valid, binding and enforceable against
the Company and, to the best of the Company's and Sellers' knowledge, against
each other party thereto, and in full force and effect and will remain legal,
valid, binding and enforceable against the Company and, to the best of the
Company's and Sellers' knowledge, against each other party thereto, and in full
force and effect on identical terms immediately after the Closing. Except as set
forth in Schedule 3.15, the Company has not guaranteed any obligations of any
-------------
other Person.
3.16 Claims And Proceedings. Attached hereto as Schedule 3.16 is a list
---------------------- -------------
and brief description of all claims, actions, suits, proceedings, or
investigations pending or, to Sellers' and the Company's knowledge, threatened
against or affecting the Company or any of its properties or assets, at law or
in equity, or before or by any court, municipality or other Governmental Body.
Except as set forth on Schedule 3.16 none of such claims, actions, suits,
-------------
proceedings, or investigations is presently expected by Sellers to result in any
liability or loss to the Company. The Company has not been and the Company is
not now, subject to any Court Order, stipulation, or consent of or with any
court or Governmental Body. No inquiry, action or proceeding has been asserted,
threatened or instituted to restrain or prohibit the carrying out of the
transactions contemplated by this Agreement or to challenge the validity of such
transactions or any part thereof or seeking damages on account thereof. To the
best knowledge of the Company and Sellers, except as set forth on Schedule 3.16,
-------------
there is no basis for any such valid claim or action.
3.17 Taxes.
------
(a) All Federal, foreign, state, county and local income, gross
receipts, excise, property, franchise, license, sales, use, withholding, and
other Taxes and all Tax Returns which are required to be filed by the Company on
or before the date hereof have been filed within the time and in the manner
provided by law, and all such Tax Returns are true and correct and accurately
reflect the Tax liabilities of the Company. No Tax Returns of the Company or any
of the Sellers are presently subject to an extension of the time to file. All
Taxes, assessments, penalties, and interest of the Company which have become due
as shown on such Tax Returns or any assessments received have been paid or
adequately accrued on the Company's Financial Statements. The provisions for
Taxes reflected on the balance sheets contained in the Financial Statements are
adequate to cover all of the Company's Tax liabilities for the respective
periods then ended and all prior periods. The Company has not executed any
presently effective waiver or extension of any statute of limitations against
assessments and collection of Taxes, and there are no pending or threatened
claims, assessments, notices, proposals to assess, deficiencies, or audits with
respect to any such Taxes. For Governmental Bodies with respect to which the
Company does not file Tax Returns, to Sellers' and the Company's knowledge, no
such government body has claimed that any of the Company is or may be subject to
taxation by that government body. The Company has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, shareholder, creditor, independent contractor or other party.
There are no tax liens on any of the property or assets of the Company.
-11-
<PAGE>
(b) Neither the Company nor any other corporation has filed an
election under Section 341(f) of the Code that is applicable to the Company or
any assets held by the Company. The Company has not made any payments, is not
obligated to make any payments, and is not a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Code Sec. 280G. The Company has not been a United States real
property holding corporation within the meaning of Code Sec. 897(c)(2) during
the applicable period specified in Code Sec. 897(c)(1)(A)(ii). The Company is
not a party to any Tax allocation or sharing agreement. The Company has not and
has never been (nor does the Company have any liability for unpaid Taxes because
it once was) a member of an affiliated group during any part of which return
year any corporation other than the Company also was a member of the affiliated
group. The Company has made an election to be taxed under subchapter S of the
Code and such election is valid, binding and in full force and effect.
(c) No transaction contemplated by this Agreement is subject to
withholding under Section 1445 of the Code and no stock transfer taxes, real
estate transfer taxes or similar taxes will be imposed upon the transfer and
sale of the Shares pursuant to this Agreement.
3.18 Personnel. Attached hereto as Schedule 3.18 is a list of the names
--------- -------------
and annual rates of compensation of the directors and executive officers of the
Company, and of the employees of the Company whose annual rates of compensation
during the fiscal year ended December 31, 1995 (including base salary, bonus and
incentive pay) exceed (or by December 31, 1996 are expected to exceed) $60,000.
Schedule 3.18 also summarizes the bonus, profit sharing, percentage
- -------------
compensation, company automobile, club membership, and other like benefits, if
any, paid or payable to such directors, officers, and employees during the
Company's fiscal year ended October 31, 1995 and to the date hereof. Schedule
--------
3.18 also contains a brief description of all material terms of employment
- ----
agreements to which the Company is a party and all severance benefits which any
director, officer or employee of the Company is or may be entitled to receive.
The employee relations of the Company are good and there is no pending or, to
the best knowledge of Sellers or the Company, threatened labor dispute or union
organization campaign. None of the employees of the Company are represented by
any labor union or organization. The Company is in compliance in all material
respects with all Requirements of Laws respecting employment and employment
practices, terms and conditions of employment, and wages and hours, and are not
engaged in any unfair labor practices. Neither the Company or Sellers have been
advised, or has any reason to believe, that any of the persons whose names are
set forth on Schedule 3.18 or any other employee will not agree to remain
-------------
employed by the Company after the consummation of the transactions contemplated
hereby. There is no unfair labor practice claim against the Company before the
National Labor Relations Board, or any strike, dispute, slowdown, or stoppage
pending or, to the best knowledge of the Company and Sellers, threatened against
or involving the Company, and none has occurred.
3.19 Business Relations. Neither the Company nor Sellers knows or has
------------------
any reason to believe that any customer or supplier of the Company will cease to
do business with the Company after the consummation of the transactions
contemplated hereby in the same manner and at the same levels as previously
conducted with the Company except for any
-12-
<PAGE>
reductions which do not result in a Material Adverse Change. Except for
disruptions in deliveries from suppliers in the ordinary course of business,
neither Sellers or the Company have received any notice of any material
disruption (including delayed deliveries or allocations by suppliers) in the
availability of any material portion of the materials used by the Company nor
are the Company or Sellers aware of any facts which could lead them to believe
that the Business will be subject to any such material disruption.
3.20 Accounts Receivable. All of the accounts, notes, and loans
-------------------
receivable that have been recorded on the books of the Company are bona fide and
represent amounts validly due for goods sold or services rendered. Except as
disclosed on Schedule 3.20 hereto (a) all of such accounts, notes, and loans
-------------
receivable are free and clear of any Encumbrances; (b) none of such accounts,
notes, or loans receivable is subject to any offsets or claims of offset; and
(c) none of the obligors of such accounts, notes, or loans receivable has given
notice that it will or may refuse to pay the full amount or any portion thereof.
3.21 Bank Accounts. Attached hereto as Schedule 3.21 is a list of all
------------- -------------
banks or other financial institutions with which the Company have an account or
maintain a safe deposit box, showing the type and account number of each such
account and safe deposit box and the names of the persons authorized as
signatories thereon or to act or deal in connection therewith.
3.22 Warranties. Except as Set forth on Schedule 3.22 and except for
---------- -------------
warranty claims that are typical and in the ordinary course of the Business, no
claim for breach of product or service warranty to any customer has been made
against the Company since January 1, 1996. To the best knowledge of Sellers and
the Company, no state of facts exists, and no event has occurred, which may form
the basis of any present claim against the Company for liability on account of
any express or implied warranty to any third party in connection with products
sold or services rendered by the Company.
3.23 Brokers. Neither the Company nor Sellers have engaged, or caused to
-------
be incurred any liability to any finder, broker, or sales agent in connection
with the origin, negotiation, execution, delivery, or performance of this
Agreement or the transactions contemplated hereby.
3.24 Interest In Competitors Suppliers, Customers, Etc. No officer,
-------------------------------------------------
director, or shareholder of the Company or any affiliate of any such officer,
director, or shareholder, has any ownership interest in any competitor,
supplier, or customer of the Company (other than ownership of securities of a
publicly-held corporation of which such Person owns, or has real or contingent
rights to own, less than one percent of any class of outstanding securities) or
any property used in the operation of the Business.
3.25 Indebtedness To And From Officers, Directors, Shareholders, And
---------------------------------------------------------------
Employees. Attached hereto as Schedule 3.25 is a list and brief description of
- --------- -------------
the payment terms of all indebtedness of the Company to officers, directors,
shareholders, and employees of the Company and all indebtedness of officers,
directors, shareholders, and employees of the Company to the Company, excluding
indebtedness for travel advances or similar advances for
-13-
<PAGE>
expenses incurred on behalf of and in the ordinary course of the Business,
consistent with past practices.
3.26 Undisclosed Liabilities. Effective as of August 31, 1996 and
-----------------------
except as indicated in Schedule 3.26 and the other Schedules hereto, the Company
-------------
did not have any material liabilities (whether absolute, accrued, contingent or
otherwise), of a nature required by GAAP to be reflected on a corporate balance
sheet or disclosed in the notes thereto, except such liabilities which were
accrued or reserved against in the Company's financial statements as of such
date or disclosed in the notes thereto, including without limitation any
accounts payable or service liabilities of the Company incurred prior to August
31, 1996.
3.27 Information Furnished. The Company and Sellers have made available
---------------------
to Global true and correct copies of all material corporate records of the
Company and all agreements, documents, and other items listed on the Schedules
to this Agreement or referred to in Article III of this Agreement.
-----------
In making the representations and warranties set forth above, the term
"material" shall be deemed to mean an amount of money greater than $15,000, the
terms "material adverse change," "material adverse trend," "material adverse
effect," or any other term of like import shall mean the occurrence of any
single event, or any series of related events, or set of related circumstances,
which proximately causes an actual, direct economic loss to the Company, taken
as a whole, in excess of $15,000 per occurrence or $20,000 in the aggregate. The
term "knowledge" shall mean actual knowledge after reasonable investigation.
ARTICLE IV
GLOBAL'S REPRESENTATIONS AND WARRANTIES
Global represents and warrants to Sellers as follows:
4.1 Due Organization. Global is a corporation duly organized, validly
----------------
existing, and in good standing under the laws of the State of Delaware and has
full corporate power and authority to enter into and perform this Agreement.
4.2 Due Authorization. The execution, delivery and performance of this
-----------------
Agreement has been duly authorized by all necessary corporate action of Global,
and the Agreement, and all other agreements or instruments contemplated hereby
which have been or will be executed by Global, have been duly and validly
executed and delivered by Global and constitute the valid and binding obligation
of Global, enforceable in accordance with their respective terms. The execution,
delivery, and performance of this Agreement (as well as all other instruments,
agreements, certificates or other documents contemplated hereby) by Global, will
not (a) violate any Requirements of Laws or Court Order of any Governmental Body
applicable to Global or its property, (b) violate or conflict with, or permit
the cancellation of, or constitute a default under any agreement to which Global
is a party or by which it or its property is bound, (c) permit the acceleration
of the maturity of any indebtedness of, or any
-14-
<PAGE>
indebtedness secured by the property of, Global, or (d) violate or conflict with
any provision of the charter or bylaws of Global.
4.3 No Brokers. Global has not engaged, or caused to be incurred any
----------
liability to any finder, broker or sales agent in connection with the origin,
negotiation, execution, delivery, or performance of this Agreement or the
transactions contemplated hereby.
4.4 Investment. Global will acquire the Shares for investment and for
----------
its own account and not with a view to the distribution thereof.
ARTICLE V
COVENANTS OF THE COMPANY AND SELLERS
5.1 Consents Of Others. Prior to the Closing, the Company and Sellers
------------------
shall use their best efforts to obtain and to cause the Company to obtain all
authorizations, consents and permits required of the Company and Sellers to
permit them to consummate the transactions contemplated by this Agreement.
5.2 Seller's Efforts. The Company and Sellers shall use all reasonable
----------------
efforts to cause all conditions for the Closing to be met.
5.3 Powers Of Attorney. The Company and Sellers shall cause the Company
------------------
to terminate at or prior to Closing all powers of attorney granted by the
Company, other than those relating to service of process, qualification or
pursuant to governmental regulatory or licensing agreements, or representation
before the IRS or other government agencies.
ARTICLE VI
POST-CLOSING COVENANTS
6.1 General. In case at any time after the Closing any further action is
-------
legally necessary or reasonably desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
party reasonably may request, all at the sole cost and expense of the requesting
party (unless the requesting party is entitled to indemnification therefor under
Article VIII below). The Sellers acknowledge and agree that from and after the
- ------------
Closing Global will be entitled to possession of all documents, books, records,
agreements, and financial data of any sort relating to the Company, which shall
be maintained at the chief executive office of the Company; provided, however,
-------- -------
that Sellers shall be entitled to reasonable access to and to make copies of
such books and records at their sole cost and expense and Global will maintain
the books, records and material financial data relating to the Company for a
period of at least three (3) years. After such date, the Company will offer such
documentation to Sellers before disposal thereof.
-15-
<PAGE>
6.2 Transition. For a period of three (3) years following Closing, the
----------
Sellers will not take any action that primarily is designed or intended to have
the effect of discouraging any lessor, licensor, customer, supplier, or other
business associate of the Company from maintaining the same business relations
with the Company after the Closing as it maintained with the Company prior to
the Closing. For a period of three (3) years following Closing, the Sellers will
refer all customer inquiries relating to the Business to the Company or Global.
6.3 Confidentiality. The Sellers will treat and hold as such all
---------------
Confidential Information, refrain from using any of the Confidential Information
except in connection with this Agreement for a period of three (3) years from
the Closing, and deliver promptly to Global or destroy, at the request and
option of Global, all tangible embodiments (and all copies) of the Confidential
Information which are in its possession except as otherwise permitted herein. In
the event that any Seller is requested or required (by oral question or request
for information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process) to disclose any Confidential
Information, that Seller will notify Global promptly of the request or
requirement.
6.4 Covenant Not to Compete. For and in consideration of the
-----------------------
allocation of $52,593 of the Purchase Price paid to the Sellers by Global,
Sellers each covenant and agree, for a period of three years from and after the
Closing Date, that they will not, individually or jointly, directly or
indirectly, nor with any member of their immediate family, without the prior
written consent of Global, for or on behalf of any entity:
(a) become interested or engaged in any manner, directly or
indirectly, or become a shareholder, bondholder, creditor, officer, director,
partner, agent, contractor with, employer or representative of, or in any manner
associated with, or give financial, technical or other assistance to, any
Person, firm or corporation for the purpose of engaging in the Business within
the greater of (i) a 100 mile radius of the Company's office facility in McLean,
Virginia or (ii) in any geographic area in which the Company and/or its
subsidiaries currently conduct business; provided, however, that no owner of
-------
less than 1% of the outstanding stock of any publicly-traded corporation (other
than Global) shall be deemed to be so engaged solely by reason thereof in the
Business;
(b) enter into any agreement with, service, assist or solicit the
business of any customers of the Company for the purpose of providing equipment
sales, systems or service related to the Business to such customers or to cause
them to reduce or end their business with the Company; or
(c) enter into any agreement with, or solicit the employment of
employees, consultants or representatives of the Company for the purpose of
causing them to leave the employment of the Company.
Notwithstanding the foregoing, nothing herein shall prevent Arthur E. Kreps from
fulfilling the terms of his Consulting Agreement or Mark M. Lloyd from
fulfilling the terms of his Executive Agreement.
-16-
<PAGE>
6.5 Section 338(h)(10) Election. At Global's option, Sellers and Global
----------------------------
shall join in making a timely election (but in no event later than 120 days
following the Closing) under Section 338(h)(10) of the Code (including the
prerequisite election under Section 338 of the Code) and any similar state law
provisions in all applicable states, with respect to the sale and purchase of
the Shares pursuant to this Agreement, and each party shall provide to the other
all necessary information to permit such elections to be made. Global and
Sellers shall, as promptly as practicable following the Closing Date, take all
actions necessary and appropriate (including filing such forms, returns,
schedules and other documents as may be required) to effect and preserve timely
elections. Sellers shall be made whole by Global for any additional Taxes or
other costs associated with such Section 338(h)(10) elections. In connection
with such elections, within 120 days following the Closing Date, Global and
Sellers shall act together in good faith to determine and agree upon the "deemed
sale price" to be allocated to each asset of Global in accordance with Treasury
Regulation Section 1.339(h)(10)-l(f) and the other regulations under Section 339
of the Code. Both Global and Sellers shall report the tax consequences of the
transactions contemplated by this Agreement consistently with such allocations
and shall not take any position inconsistent with such allocations in any Tax
Return or otherwise. In the event that Global and Sellers are unable to agree as
to such allocations, Global's reasonable positions with respect to such
allocations shall control. Sellers shall be liable for, and shall indemnify and
hold Global and the Company harmless against, any Taxes or other costs
attributable to a failure on the part of Sellers to take all actions required of
them under this Section 6.5.
------------
ARTICLE VII
CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING
7.1 Conditions to Global's Obligations. The obligation of Global under
-----------------------------------
this Agreement to consummate the closing is subject to the conditions that:
(a) Covenants, Representations and Warranties. The Company and Seller
------------------------------------------
shall have performed in all material respects all obligations and agreements and
complied in all material respects with all covenants contained in this Agreement
to be performed and complied with by each of them prior to or at the Closing
Date.
(b) Consents. All statutory requirements for the valid consummation by
---------
the Company and Sellers of the transactions contemplated by this Agreement shall
have been fulfilled and all authorizations, consents and approvals, including
those of all federal, state, local and foreign governmental agencies and
regulatory authorities required to be obtained in order to permit the
consummation of the transactions contemplated hereby shall have been obtained in
form and substance reasonably satisfactory to Global unless such failure shall
not have a Material Adverse Effect. All approvals of the Board of Directors and
shareholders of the Company necessary for the consummation of this Agreement and
the transactions contemplated hereby shall have been obtained.
-17-
<PAGE>
(c) Lease. The Company's lease of the Building shall be on terms
------
reasonably acceptable to Global in the form of Exhibit A hereto and shall be
---------
unaffected by the transactions contemplated hereby.
(d) Discharge of Indebtedness and Lien. Sellers and the Company shall
-----------------------------------
have provided for the payment in full of all Funded Indebtedness of the Company
and all extended credit from vendors at the Closing or such indebtedness shall
be assumed by Global and the Purchase Price shall be reduced in accordance with
Section 2.5 hereof. Such Funded Indebtedness as of September 30, 1996, is listed
- -----------
on Schedule 7. 1(d) hereto. Sellers shall have also provided for the
----------------
termination of all Encumbrances of record on the properties of the Company,
except for Permitted Encumbrances (other than the modification of the Canon UCC
filing).
(e) Material Adverse Change There has been no Material Adverse
-----------------------
Change.
(f) Transfer Taxes. Sellers shall be responsible for and shall have
---------------
paid or set aside sufficient funds to pay all stock transfer taxes incurred in
connection with this Agreement.
(g) Documents to be Delivered by Sellers and the Company. The
-----------------------------------------------------
following documents shall be delivered at the Closing by Sellers and the
Company:
(i) Opinion of Seller's Counsel. Global shall have received an opinion
----------------------------
of Rowe, Foltz & Martin, P.C., counsel to Sellers, dated as of the date hereof,
in substantially the same form as the form of opinion that is Exhibit B hereto.
---------
(ii) Certificates. Global shall have received an officer's certificate
-------------
and a secretary's certificate of the Company executed by officers of the
Company, dated as of the date hereof, in substantially the same forms as the
forms of certificates that are Exhibit C hereto.
---------
(iii) Release. Sellers shall have furnished the Company with a general
--------
release of liabilities, excluding compensation and employee benefits as well as
obligations pursuant to this Agreement, in the form attached as Exhibit D
---------
hereto.
(iv) Stock Certificates. Sellers shall have delivered the Shares
-------------------
accompanied by duly executed stock powers, together with any stock transfer
stamps or receipts for any transfer taxes required to be paid thereon.
7.2 Conditions to Sellers and the Company's Obligations. The
----------------------------------------------------
obligation of Sellers and the Company under this Agreement to consummate the
Closing is subject to the conditions that:
-18-
<PAGE>
(a) Covenants, Representations and Warranties. Global shall have
------------------------------------------
performed in all material respects all obligations and agreements and complied
in all material respects with all covenants contained in this Agreement to be
performed and complied with by Global prior to or at the Closing.
(b) Consents. All statutory requirements for the valid consummation by
---------
Global of the transactions contemplated by this Agreement shall have been
fulfilled and all authorizations, consents and approvals, including those of all
federal, state, local and foreign governmental agencies and regulatory
authorities required to be obtained in order to permit the consummation by
Global of the transactions contemplated hereby shall have been obtained unless
such failure shall not have a material adverse effect on the Business. Global
shall have used its reasonable best efforts to have obtained the release of the
Seller from all personal guarantees with respect to the Company.
(c) Documents to be Delivered by Global. The following documents
------------------------------------
shall be delivered at the Closing by Global:
(i) Opinion of Global's Counsel. Sellers shall have received an opinion
----------------------------
of Davis, Graham & Stubbs LLP, counsel to Global, dated as of the date hereof,
in substantially the same form as the form of opinion that is Exhibit E hereto.
----------
(ii) Certificates. Sellers shall have received an officers' certificate
-------------
and a secretary's certificate executed by officers of Global, dated as of the
date hereof, in substantially the same forms as the forms of certificates that
are Exhibit F hereto.
---------
(iii) Purchase Price. Sellers shall have received the Purchase Price
---------------
for the Shares.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification of Global. Sellers agree to individually indemnify
--------------------------
and hold harmless Global and each officer, director, and affiliate of Global,
including without limitation The Company or any successor of the Company
(collectively, the "Indemnified Parties") from and against any and all damages,
losses, claims, liabilities, demands, charges, suits, penalties, costs and
expenses (including court costs and reasonable attorneys' fees and expenses
actually incurred in investigating and preparing for any litigation or
proceeding) (collectively, the "Indemnifiable Costs") which any of the
Indemnified Parties may sustain, or to which any of the Indemnified Parties may
be subjected, arising out of any misrepresentation, breach or default by such
Seller with respect to such Seller under the representations and warranties made
by him individually in Sections 3.1. 3.2. 3.3 or 3.6 of the Agreement.
------------- ---- --- ----
-19-
<PAGE>
ARTICLE IX
MISCELLANEOUS
9.1 Modifications Any amendment, change or modification of this
-------------
Agreement shall be void unless in writing and signed by all parties hereto, No
failure or delay by any party hereto in exercising any right, power or privilege
hereunder (and no course of dealing between or among any of the parties) shall
operate as a waiver of any such right, power or privilege. No waiver of any
default on any one occasion shall constitute a waiver of any subsequent or other
default. No single or partial exercise of any such right, power or privilege
shall preclude the further or full exercise thereof.
9.2 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed to have been duly given when personally delivered,
or 72 hours after deposited in the United States mail, first-class, postage
prepaid, or 24 hours after transmission by facsimile addressed to the respective
parties hereto as follows:
Global:
- -------
Global Imaging Systems Inc.
P.O. Box 273478
Tampa, Florida 33688-3479
Attention: Thomas S. Johnson, President
Fax No.: (813) 264-7977
Tel No.: (813) 960-5508
With a copy to:
Davis, Graham & Stubbs LLP
1314 Nineteenth Street, N.W.
Washington, D.C. 20036
Attention: Christopher J. Hagan
Fax No.: (202) 293-4794
Tel No.: (202) 822-8660
The Company or Sellers:
- -----------------------
c/o Southern Business Communications, Inc.
3175 Corners North Court
Norcross, Georgia 30071
Attention: Mark M. Lloyd
Arthur E. Kreps
George Gough
Fax No.: (770) 449-0188
Tel No.: (770) 449-4088
-20-
<PAGE>
With a copy to:
Rowe, Foltz & Martin. P.C.
Five Piedmont Center, Suite 750
Atlanta, Georgia 30305-1509
Attention: Paul Shlanta, Esq.
Fax No.: (404) 237-1659
Tel No.: (404) 231-9397
or to such other address as to any party hereto as such party shall designate by
like notice to the other parties hereto.
9.3 Counterparts. This Agreement may be executed in several
-------------
counterparts, each of which shall be deemed an original but all of which
counterparts collectively shall constitute one instrument, and in making proof
of this Agreement, it shall never be necessary to produce or account for more
than one such counterpart.
9.4 Expenses. Each of the parties hereto will bear all costs, charges
---------
and expenses incurred by such party in connection with this Agreement and the
consummation of the transactions contemplated herein, provided, however, that
Sellers shall bear all costs and expenses of any broker involved in this
transaction and the Company shall bear all legal expenses of Sellers or the
Company with respect to this Agreement and the transactions contemplated hereby.
9.5 Binding Effect; Assignment. This Agreement shall be binding upon
---------------------------
and inure to the benefit of the Company, Global and Sellers, their heirs,
representatives, successors, and permitted assigns, in accordance with the terms
hereof. This Agreement shall not be assignable by the Company or Sellers without
the prior written consent of Global. This Agreement shall be assignable by
Global to a wholly-owned subsidiary of Global without the prior written consent
of Sellers.
9.6 Entire and Sole Agreement. This Agreement and the other schedules
--------------------------
and agreements referred to herein, constitute the entire agreement between the
parties hereto and supersede all prior agreements, representations, warranties,
statements, promises, information, arrangements and understandings, whether oral
or written, express or implied, with respect to the subject matter hereof.
9.7 Governing Law. This Agreement and its validity, construction,
--------------
enforcement, and interpretation shall be governed by the substantive laws of the
State of Georgia.
9.8 Survival or Representations, Warranties and Covenants. Regardless
------------------------------------------------------
of any investigation at any time made by or on behalf of any party hereto or of
any information any party may have in respect thereof, all covenants,
agreements, representations, and warranties and the related indemnities made
hereunder or pursuant hereto or in connection with the transactions contemplated
hereby shall survive the Closing for a period of one year, provided
-21-
<PAGE>
(a) the representations and warranties contained in Sections 3.14 and 3.17 of
-------------- ----
this Agreement, and the related indemnities, shall survive the Closing until the
expiration of the applicable statutes of limitations for determining or
contesting Tax liabilities; (b) the representations and warranties contained in
Sections 3.1. 3.2 and 3.3 of this Agreement, and the related indemnities, shall
- --------------------------
survive the Closing indefinitely; and (c) the representations and warranties
contained in Section 3.2 of the Agreement, and the related indemnities, shall
------------
survive the Closing until June 30, 1999.
9.9 Invalid Provisions. If any provision of this Agreement is deemed or
--------------------
held to be illegal, invalid or unenforceable, this Agreement shall be considered
divisible and inoperative as to such provision to the extent it is deemed to be
illegal, invalid or unenforceable, and in all other respects this Agreement
shall remain in full force and effect; provided, however, that if any provision
of this Agreement is deemed or held to be illegal, invalid or unenforceable
there shall be added hereto automatically a provision as similar as possible to
such illegal, invalid or unenforceable provision and be legal, valid and
enforceable. Further, should any provision contained in this Agreement ever be
reformed or rewritten by any judicial body of competent jurisdiction, such
provision as so reformed or rewritten shall be binding upon all parties hereto.
9.10 Public Announcements. Neither party shall make any public
----------------------
announcement of the transactions contemplated hereby without the prior written
consent of the other party, which consent shall not be unreasonably withheld.
9.11 Remedies Cumulative. The remedies of the parties under this
--------------------
Agreement are cumulative and shall not exclude any other remedies to which any
party may be lawfully entitled.
9.12 Waiver. No failure or delay on the part of any party in exercising
--------
any right, power, or privilege hereunder or under any of the documents delivered
in connection with this Agreement shall operate as a waiver of such right,
power, or privilege; nor shall any single or partial exercise of any such right,
power, or privilege preclude any other or further exercise thereof or the
exercise of any other right, power, or privilege.
[THIS SPACE INTENTIONALLY LEFT BLANK]
-22-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed as of the date and year first above written.
GLOBAL:
-------
GLOBAL IMAGING SYSTEMS INC.
By: /s/ Ray Schilling, Attorney-in-Fact
-----------------------------------
Thomas S. Johnson
President and Chief Executive Officer
THE COMPANY:
-----------
SOUTHERN BUSINESS COMMUNICATIONS OF D.C., INC.
By: /s/ Mark M. Lloyd
-----------------------------------
Title: V.P.
-----------------------------
SELLERS:
--------
/s/ George Gough
-----------------------------------------
George Gough
/s/ Mark M. Lloyd
-----------------------------------------
Mark M. Lloyd
/s/ Arthur E. Kreps
-----------------------------------------
Arthur E. Kreps
-23-
<PAGE>
EXHIBIT 10.31
STOCKHOLDERS AGREEMENT
----------------------
THIS AGREEMENT is made as of June 9, 1994, by and among Global Imaging
Systems Inc., a Delaware corporation (the "Company") and the stockholders listed
on the Schedule of Holders attached hereto and their permitted assigns and such
-------------------
other purchasers of the Class A Common Stock, $.01 par value per share ("Class A
Common"), and the Class B Common Stock, $.01 par value per share ("Class B
Common": collectively the Class A Common and the Class B Common are sometimes
collectively referred to as the "Common Stock"), of the Company who may become
parties hereto from time to time and their permitted assigns (collectively
referred to as the "Stockholders" and individually as a "Stockholder").
Capitalized terms used herein are defined in paragraph 7 hereof.
The Company and the Stockholders desire to enter into this Agreement
for the purposes, among others, of (i) establishing the composition of the
Company's Board of Directors (the "Board"), (ii) assuring continuity in the
management and ownership of the Company and (iii) limiting the manner and terms
by which the Stockholders' Common Stock may be transferred.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:
1. BOARD OF DIRECTORS.
------------------
(a) From and after the Closing (as defined in the Purchase
Agreement) and until the provisions of this paragraph 1 cease to be effective,
each Stockholder shall vote all of his or its Common Stock and any other voting
securities of the Company over which such Stockholder has voting control and
shall take all other necessary or desirable actions within his or its control
(whether in such Stockholder's capacity as a stockholder, director, member of a
board committee or officer of the Company or otherwise, and including, without
limitation, attendance at meetings in person or by proxy for purposes of
obtaining a quorum and execution of written consents in lieu of meetings), and
the Company shall take all necessary and desirable actions within its control
(including, without limitation, calling special board and stockholder meetings),
so that:
(i) the authorized number of directors on the Board shall
be established at four (4) directors;
(ii) the following persons shall be elected to the Board:
<PAGE>
(A) three representatives designated by GTCR, so
long as GTCR remains a Qualified Holder, and
(B) the Chief Executive Officer of the Company.
(iii) the composition of the board of directions of each of
the Company's subsidiaries (a "Sub Board") shall be the same as that
of the Board, unless a different composition is approved by at least
75% of the members of the Board;
(iv) the removal from the Board or a Sub Board (with or
without cause) of any representative designated hereunder shall be
effective only upon the written request of the party entitled to
designate such representative pursuant to paragraph 1(a)(ii) above;
provided that if GTCR ceases to be a Qualified Holder, any directors
designated by GTCR may be removed by vote of the Stockholders holding
a majority of the Stockholder Shares; and
(v) in the event that any representative designated
pursuant to paragraph 1(a)(ii) for any reason ceases to serve as
a member of the Board or a Sub Board during his term of office (other
than a removal described in the proviso set forth in 1(a)(iv) above),
the resulting vacancy on the Board or a Sub Board shall be filled by a
representative designated pursuant to paragraph 1(a)(ii), and, in the
case of GTCR ceasing to be a Qualified Holder, any resulting vacancy
shall be filled by the Stockholders, determined by a vote of the
Stockholders holding a majority of the Stockholder Shares then
outstanding; and
(vi) in the event that GTCR elects not to designate any of
the directors which it is entitled to designate in accordance with
paragraph 1(a)(ii) above, the Stockholders agree not to vote to fill
such vacancy other than with an individual designated by GTCR, as
provided in paragraph 1(a)(ii).
(b) The Company shall pay the reasonable out-of-pocket expenses
incurred by each director in connection with attending the meetings of the Board
or a Sub Board or discharging any of such director's duties as a director of the
Company or a Sub Board.
(c) The provisions of this paragraph 1 shall terminate
automatically and be of no further force and effect upon the first to occur of
(i) the tenth anniversary of the date hereof unless extended by the parties
hereto in accordance with Section 218 of the Delaware General Corporation Law or
(ii) a Qualified Public Offering.
2. RESTRICTIONS ON TRANSFER OF STOCKHOLDER SHARES.
----------------------------------------------
(a) TRANSFER OF STOCKHOLDER SHARES. No Stockholder shall sell,
------------------------------
transfer, assign, pledge or otherwise dispose of (a "Transfer") any interest in
any Stockholder Shares except pursuant to the provisions of this paragraph 2 or
pursuant to a Public Sale. Each Stockholder agrees not to consummate any
Transfer (other than a Public Sale) until 30 days
-2-
<PAGE>
after the later of the delivery to the Company and the other Stockholders of
such Stockholder's Offer Notice or Sale Notice (if any), unless the parties to
the Transfer have been finally determined pursuant to this paragraph 2 prior to
the expiration of such 30-day period (the "Election Period").
(b) FIRST OFFER RIGHT. At least 30 days prior to making
-----------------
any Transfer of any Stockholder Shares (other than a Public Sale), the
transferring Stockholder (the "Transferring Stockholder") shall deliver a
written notice (the "Offer Notice") to the Company and the other Stockholders
(the "Other Stockholders"). The Offer Notice shall disclose in reasonable detail
the proposed number of Stockholder Shares to be transferred and the proposed
terms (including price) and conditions of the Transfer (the "Minimum Sale
Terms"). First, the Company may elect to purchase all (but not less than all) of
the Stockholder Shares specified in the Offer Notice at the price and on the
terms specified therein by delivering written notice of such election to the
Transferring Stockholders and the Other Stockholders as soon as practical but in
any event within ten days after the delivery of the Offer Notice. If the Company
has not elected to purchase all of the Stockholder Shares within such ten-day
period, the Other Stockholders may elect to purchase all (but not less than all)
of such Stockholder Shares at the price and on the terms specified in the Offer
Notice by delivering written notice of such election to the Transferring
Stockholder as soon as practical, but in any event within 30 days after delivery
of the Offer Notice. If the Other Stockholders have in the aggregate elected to
purchase more than the number of Stockholder Shares being offered by the
Transferring Stockholder, the shares shall be allocated among the Other
Stockholders electing to purchase shares according to the ratio of each such
Stockholders' Pro Rata Shares. If the Company or any Other Stockholders have
elected to purchase Stockholder Shares from the Transferring Stockholder, the
transfer of such shares shall be consummated as soon as practical after the
delivery of the election notices, but in any event within 15 days after the
expiration of the Election Period. If the Company and the Other Stockholders
have not elected to purchase all of the Stockholder Shares being offered, the
Transferring Stockholder may, within 120 days after the expiration of the
Election Period (the "Authorized Sale Period") and subject to the provisions of
subparagraph (c) below, transfer such Stockholder Shares to one or more third
parties at a price no less than the price per share specified in any Offer
Notice and on other terms no more favorable to the transferees than offered to
the Company and the Other Stockholders in the Offer Notice. The purchase price
specified in any Offer Notice shall be payable solely in cash at the closing of
the transaction or in installments over time, and no Stockholder Shares may be
pledged without the prior written consent of all Qualified Holders, which
consent may be withheld in their sole discretion. Each Stockholder's "Pro Rata
Share" shall be based upon such Stockholder's ownership percentage of all then
outstanding Stockholder Shares. For purposes of this definition, all outstanding
shares of Class A Common shall be treated as being converted into ten percent
(10%) of the outstanding number of shares of Class B Common outstanding
immediately following such conversion.
(c) PARTICIPATION RIGHTS. At least 30 days prior to any
--------------------
Significant Transfer of Stockholder Shares (other than a Public Sale or a
Transfer pursuant to paragraph 2(b)), the Stockholder making such Significant
Transfer (the "Transferring Stockholder") shall deliver a written notice (the
"Sale Notice") to the Company and the other Stockholders who hold Stockholder
Shares (the "Other Stockholders"), specifying in reasonable detail the identity
-3-
<PAGE>
of the prospective transferee(s), the number and class of Stockholders Shares
being transferred and the terms and conditions of the Significant Transfer. The
Other Stockholders may elect to participate in the contemplated Significant
Transfer by delivering written notice to the Transferring Stockholder within 30
days after delivery of the Sale Notice. If any Other Stockholders have elected
to participate in such Significant Transfer, the Transferring Stockholder and
such Other Stockholders shall be entitled to sell in the contemplated
Significant Transfer, at the same price and on the same terms (subject to the
provisions of paragraph 2(d) below), a number of Stockholder Shares equal to the
product of (i) the quotient determined by dividing the percentage of Stockholder
Shares owned by such person by the aggregate percentage of Stockholder Shares
owned by the Transferring Stockholder and the Other Stockholders participating
in such sale and (ii) the number of Stockholder Shares to be sold in the
contemplated Significant Transfer. For purposes of this calculation, all shares
of Class A Common shall be treated as if converted into ten percent (10%) of the
outstanding number of shares of Class B Common outstanding immediately following
such conversion.
For example, if the Sale Notice contemplated a sale of 60
-----------
shares of Class A Common by the Transferring Stockholder,
and if the Transferring Stockholder at such time owns 30% of
all Stockholder Shares and if one Other Stockholder elects
to participate and owns 40 shares of the Class B Common
(representing 20% of all Stockholder Shares), the
Transferring Stockholder would be entitled to sell 36 shares
(30% + 50% x 60 shares) and the Other Stockholder would be
entitled to sell 24 shares (20% + 50% x 60 shares).
Each Stockholder shall use best efforts to obtain the agreement of the
prospective transferee(s) to the participation of the Other Stockholders in any
contemplated Significant Transfer, and each Stockholder shall not transfer any
of its Stockholder Shares to the prospective transferee(s) if the prospective
transferee(s) declines to allow the participation of the Other Stockholders.
(d) TRANSFERS WHILE CLASS A COMMON IS OUTSTANDING. Without
---------------------------------------------
limiting the generality of the other provisions of this paragraph 2, each
Stockholder hereby agrees that so long as any Class A Common remains
outstanding, the Other Stockholders who hold Class B Common shall not be allowed
to participate in any Significant Transfer by a Class A Common Stockholder
under paragraph 2(c) above unless the consideration paid to the Transferring
Stockholder for his shares of Class A Common exceeds the aggregate Unreturned
Original Cost and Unpaid Yield on such Stockholder Shares; provided, further,
-------- -------
that in the event that holders of shares of both Class A Common and Class B
Common are entitled to participate in any Significant Transfer of Stockholder
Shares under paragraph 2(c), the price per share paid to each holder of Class A
Common or Class B Common participating in such Significant Transfer shall be
allocated among such classes of Common Stock in a manner determined in good
faith by the Company's Board after taking into account the Unreturned Original
Cost and Unpaid Yield on each share of Class A Common to be transferred and the
relative distribution percentages of each class of Common Stock under Section
4.2.2(iii) of the Company's Certificate of Incorporation.
-4-
<PAGE>
(e) PERMITTED TRANSFERS. The restrictions contained in this
-------------------
paragraph 2 shall not apply with respect to any Transfer of Stockholder Shares
by any Stockholder (i) in the case of a Stockholder that is an individual,
pursuant to applicable laws of descent and distribution or among such
Stockholder's Family Group, (ii) in the case of a Stockholder that is not an
individual, among its Affiliates (collectively referred to herein as "Permitted
Transferees"), (iii) involving not more than 2% of the total Stockholder Shares
then outstanding (on a fully diluted basis) in one or a series of related
transactions or (iv) referred to or otherwise permitted by the Purchase
Agreement. Notwithstanding the foregoing two sentences, the restrictions
contained in this paragraph 2 shall continue to be applicable to the Stockholder
Shares after any such Transfer and provided further that the transferees of such
Stockholder Shares shall have agreed in writing to be bound by the provisions of
this Agreement affecting the Stockholder Shares so transferred. "Family Group"
means an individual's spouse and descendants (whether natural or adopted) and
any trust solely for the benefit of the individual and/or the individual's
spouse and/or descendants, and any such trust may transfer shares to the
individual and/or members of the individual's immediate family in accordance
with its terms.
(f) TERMINATION OF RESTRICTIONS. The restrictions set forth in
---------------------------
this paragraph 2 shall continue with respect to each Stockholder Share until the
earlier of (i) the date on which such Stockholder Share has been transferred in
a Public Sale, or (ii) the consummation of a Qualified Public Offering.
3. LEGEND. Each certificate evidencing Shareholder Shares and each
------
certificate issued in exchange for or upon the transfer of any Stockholder
Shares (if such shares remain Stockholder Shares as defined herein after such
transfer) shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"The securities represented by this certificate are subject to
a Stockholders Agreement dated as of June ____ 1994, among
the issuer of such securities (the "Company") and certain of
the Company's stockholders. A copy of such Stockholders
Agreement will be furnished without charge by the Company to
the holder hereof upon written request."
The Company shall imprint such legend on certificates evidencing Stockholder
Shares outstanding prior to the date hereof. The legend set forth above shall be
removed from the certificates evidencing any shares which cease to be
Stockholder Shares in accordance with paragraph 6 hereof.
4. TRANSFER. Prior to transferring any Stockholder Shares (other
--------
than in a Public Sale) to any person or entity, the transferring Stockholder
shall cause the prospective transferee to execute and deliver to the Company and
the other Stockholders a counterpart of this Agreement.
-5-
<PAGE>
5. SALE OF THE COMPANY.
-------------------
(a) If the Board and all Qualified Holders approved a Sale of
the Company (the "Approved Sale"), the holders of Stockholder Shares will
consent to and raise no objections against the Approved Sale of the Company, and
if the Approved Sale of the Company is structured as a sale of stock, the
holders of Stockholder Shares will agree to sell their Stockholder Shares and
all other equity securities of the Company held by such Stockholder on the terms
and conditions approved by the Board and the Qualified Holders. The holders of
Stockholder Shares will take all necessary and desirable actions in connection
with the consummation of the Approved Sale of the Company.
(b) If, at any time after the fifth anniversary of this
Agreement, (i) a Qualified Holder delivers an Offer Notice to the Other
Stockholders of the type described in paragraph 2(b) above with respect to all
of the Stockholder Shares then held by such Qualified Holder and (ii) the
Company and the Other Stockholders do not elect to purchase all of such
Stockholder Shares prior to the expiration of the Election Period, such
Qualified Holder shall be entitled to give written notice to the Other
Stockholders prior to the expiration of the Authorized Sale Period that such
Qualified Holder intends to seek an Independent Third Party who will purchase
all of the outstanding securities of the Company. If not later than 120 days
after the expiration of the Authorized Sale Period the Qualified Holder
identifies an Independent Third Party that has agreed to consummate prior to the
termination of such 120-day period the purchase of all of the outstanding
securities of the Company, such Qualified Holder shall be entitled to give
written notice to the Other Stockholders that a Sale of the Company shall be
deemed to have been approved in accordance with Section 5(a). In connection with
such Approved Sale, holders of Stockholder Shares will consent to and raise no
objections against the Approved Sale and the holders of Stockholder Shares will
agree to sell their Stockholder Shares and all other equity securities of the
Company held by such Stockholders on terms (including price) and conditions no
less favorable than the Minimum Sale Terms (as defined below). The holders of
Stockholders Shares will take all necessary and desirable actions in connection
with the consummation of the Approved Sale.
(c) The obligations of the holders of Stockholder Shares set
forth in paragraph 5(a) and 5(b) above are subject to the satisfaction of the
following conditions (the "Minimum Sale Terms"): (i) upon the consummation of
the Approved Sale, all holders of the Class A Common will receive for each share
of Class A Common held by such holder an amount equal to the sum of (A) the
Unreturned Original Cost, (B) the Unpaid Yield and (C) its pro rata share of 10%
of all net proceeds payable to the Stockholders from the Approved Sale (after
satisfaction in full of the aggregate Unreturned Original Cost and Unpaid Yield
on each outstanding share of Class A Common), (ii) upon the consummation of the
Approved Sale, all holders of the Class B Common will receive for each share of
Class B Common held by such holder an amount equal to its pro rata share of 90%
of all net proceeds payable to the Stockholders from the Approved Sale (after
satisfaction in full of the aggregate Unreturned Original Cost and Unpaid Yield
on each outstanding share of Class A Common), (iii) upon the consummation of the
Approved Sale, all of the holders of Class A Common will receive the same form
and amount of consideration per share of Class A Common, or if any holders of
Class A Common are given an option as to the form and amount of consideration to
be
-6-
<PAGE>
received, all holders will be given the same option, (iv) upon the consummation
of the Approved Sale, all of the holders of Class B Common will receive the same
form and amount of consideration per share of Class B Common, or if any holders
of Class B Common are given an option as to the form and amount of
consideration to be received, all holders will be given the same option; and
(v) all holders of rights to acquire shares of Common Stock will be given an
opportunity to either (A) exercise such rights prior to the consummation of the
Approved Sale and participate in such sale as holders of Common Stock or (b)
upon the consummation of the Approved Sale, receive in exchange for such rights
consideration equal to the amount determined by multiplying (1) the same amount
of consideration per share of Class A Common or Class B Common received by the
holders of such class in connection with the Approved Sale less the exercise
price per share of Common Stock of such rights to acquire Common Stock by (2)
the number of shares of Class A Common or Class B Common represented by such
rights.
(d) If the Company or the holders of the Company's securities
enter into any negotiation or transaction for which Rule 506 of the Securities
Act (or any similar rule then in effect) promulgated by the Securities Exchange
Commission may be available with respect to such negotiation or transaction
(including a merger, consolidation or other reorganization), the holders of
Stockholder Shares will, at the request of the Company, appoint a purchaser
representative (as such term is defined in Rule 501 of the Securities Act)
reasonably acceptable to the Company. If any holder of Stockholder Shares
appoints a purchaser representative designated by the Company, the Company will
pay the fees of such purchaser representative, but if any holder of Stockholder
Shares declines to appoint the purchaser representative designated by the
Company such holder will appoint another purchaser representative (reasonably
acceptable to the Company), and such holder will be responsible for the fees of
the purchaser representative so appointed.
(e) Each Stockholder will bear its pro-rata share (based upon
the amount of money received by each Stockholder for the sale of its shares) of
the costs of any sale of Stockholder Shares pursuant to an Approved Sale to the
extent such costs are incurred for the benefit of all holders of Stockholder
Shares and are not otherwise paid by the Company or the acquiring party. Costs
incurred by a Stockholder on its own behalf will not be considered costs of the
transaction hereunder.
6. STOCKHOLDERS PREEMPTIVE RIGHTS. The Company hereby grants to each
------------------------------
Stockholder, its successors and Affiliates the right on the terms (including the
limitations contained in paragraph (d) below) set forth below to purchase such
Stockholder's Pro Rata Share of New Securities (as defined in subparagraph (a)
below) which the Company may, after the date hereof, from time to time, propose
to sell and issue for cash or other consideration.
(a) "New Securities" shall mean any authorized but unissued
shares, and any treasury shares, of capital stock of the Company and all rights,
options or warrants to purchase capital stock, and securities of any type
whatsoever that are, or may become, convertible into capital stock; provided,
--------
however, that the term "New Securities" does not include:
- -------
-7-
<PAGE>
(i) Common Stock under the Purchase Agreement;
(ii) equity securities issued pursuant to the acquisition
of another corporation or entity by the Company by merger, purchase of
all or substantially all of the assets or other reorganization whereby
the Company shall become the owner of more than 50% of the voting
power of such corporation; provided, however, that such securities,
-------- -------
together with all other securities sold in reliance under this
subparagraph (ii), do not exceed 20% of any class of the Corporation's
Common Stock;
(iii) equity securities issued to financial institutions
solely as consideration for and in connection with any credit
facilities obtained by the Company;
(iv) equity securities issued (after all shares of New
Stock have been sold pursuant to the Purchase Agreement) in order to
ensure compliance with any of the Corporation's debt instruments or
credit agreements;
(v) equity securities issued in connection with any stock
split, stock dividend or reclassification of Common Stock
distributable on a pro rata basis to all holders of Common Stock; and
(vi) up to 3,267.97 shares of Common Stock (subject to
adjustment from time to time for any stock splits, stock dividends
recombinations, mergers, reclassifications, recapitalizations or any
similar event) sold or issued pursuant to options granted after the
date hereof to any senior management personnel or directors or
pursuant to any employee stock option plan entered into by the
Company and approved by the Board.
(b) In the event the Company proposes to undertake an issuance
of New Securities, it shall give the Stockholders, their successors and/or their
Affiliates written notice of its intention, describing the type of New
Securities, the consideration and the general terms upon which the Company
proposes to issue the same. Each such Person shall have thirty (30) days from
the date of receipt of any such notice to agree to purchase its Pro Rata Share
of such New Securities for the cash or cash equivalent consideration and upon
the general terms specified in the notice by giving written notice to the
Company and stating therein the quantity of New Securities to be purchased. In
the event that any Stockholder, successor or Affiliate elects to purchase less
than its Pro Rata Share of the New Securities so offered, the Pro Rata Share of
such Stockholder, successor or Affiliates not so purchased may be elected to be
purchased within such period by the other Stockholders, their successors or
their Affiliates in such proportion as is agreed by such Stockholders, their
successors or their Affiliates or, failing agreement, in proportion to the
shares of outstanding Class B Common held by each Stockholder, successor or
Affiliate desiring to purchase such New Securities.
(c) In the event a Stockholder, successor or Affiliate fails to
exercise the above rights within said thirty (30) day period, the Company shall
have one hundred twenty
-8-
<PAGE>
(120) days thereafter to sell the New Securities respecting which any such
Person's private preemptive right was not exercised, at a cash or cash
equivalent price and upon general terms no more favorable to the purchasers
thereof than specified in the Company's notice. In the event the Company has not
sold the New Securities within said one hundred twenty (120) day period, the
Company shall not thereafter issue or sell any New Securities, without first
offering a portion of such securities to the Stockholders, their successors and
Affiliates as provided above.
(d) The purchase rights granted under this paragraph 6 shall be
exercisable only by a Stockholder and its successors and by an Affiliate if such
Affiliate received at the time of transfer and continues to hold Class B Common
representing at least two percent (2%) of the number of shares of Class B Common
then issued and outstanding.
(e) GTCR and the Company agree not to cause the issuance of any
shares of New Securities prior to the time that GTCR has purchased its full
commitment of New Stock pursuant to the Purchase Agreement unless such issuance
is made as a result of any of the events described in clauses (i) through (vi)
of paragraph 6(a) above.
7. DEFINITIONS.
-----------
"AFFILIATE" means, as to any Person, any other Person, entity or
---------
investment fund controlling, controlled by or under common control with such
Person and any general partner of such person which is a partnership.
"COMMON STOCK" means collectively, the Company's Class A Common
------------
and Class B Common.
"GTCR" means Golder, Thoma, Cressey, Rauner Fund IV Limited
----
Partnership and its successors and Affiliates.
"INDEPENDENT THIRD PARTY" means any person who, immediately prior
-----------------------
to the contemplated transaction, does not own in excess of 5% of the Company's
Common Stock on a fully-diluted basis assuming conversion of the Preferred
Stock into Common Stock (a "5% Owner"), who is not controlling, controlled by or
under common stock with any such 5% Owner and who is not the spouse or
descendent (by birth or adoption) of such 5% Owner or a trust for the benefit of
such 5% Owner and/or such other persons.
"NEW STOCK" shall have the meaning assigned to such term in the
---------
Purchase Agreement.
"PERMITTED TRANSFEREE" shall have the meaning set forth in
--------------------
paragraph 2(e) hereof.
"PERSON" means an individual, a partnership, a corporation, an
------
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a governmental entity or any department, agency or political
subdivision thereof.
-9-
<PAGE>
"PRO RATA SHARE" shall mean the ratio of (i) the number of
--------------
shares of Class B Common owned by a Stockholder on such date to (ii) the total
number of shares of Class B Common then outstanding.
"PUBLIC SALE" means any sale of Stockholder Shares to the public
-----------
pursuant to an offering registered under the Securities Act or to the public
through a broker, dealer or market maker pursuant to the provisions of Rule 144
adopted under the Securities Act.
"PURCHASE AGREEMENT" means that certain Equity Purchase
------------------
Agreement of even date herewith among the Company, GTCR and Thomas S. Johnson,
as amended from time to time.
"QUALIFIED HOLDER" means GTCR and any other Stockholder
----------------
(together with its Affiliates) so long as it owns at least 20% of each class of
the then outstanding Class A Common and Class B Common.
"QUALIFIED PUBLIC OFFERING" means the sale in an underwritten
-------------------------
public offering registered under the Securities Act of shares of the Company's
Common Stock having an aggregate value of at least $5 million.
"SALE OF THE COMPANY" means the sale of the Company to an
-------------------
Independent Third Party or group of Independent Third Parties pursuant to which
such party or parties acquire (i) capital stock of the Company possessing the
voting power under normal circumstances to elect a majority of the Company's
board of directors (whether by merger, consolidation or sale or transfer of the
Company's capital stock) or (ii) all or substantially all of the Company's
assets determined on a consolidated basis.
"SECURITIES ACT" means the Securities Act of 1933, as amended
--------------
from time to time.
"SECURITIES EXCHANGE COMMISSION" means the United States
-------------------------------
Securities and Exchange Commission and any governmental body or agency
succeeding to the functions thereof.
"SIGNIFICANT TRANSFER" shall mean a Transfer in one transaction
---------------------
or a series of transactions of more than 10% of the then outstanding Stockholder
Shares by a Qualified Holder.
"STOCKHOLDER SHARES" means (i) any Common Stock purchased or
------------------
otherwise acquired by any Stockholder and (ii) any equity securities issued or
issuable directly or indirectly with respect to the Stock by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular shares constituting Stockholder Shares, such shares will cease to be
Stockholder Shares when they have been (x) effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering them or (y) sold to the public
-10-
<PAGE>
through a broker, dealer or market maker pursuant to Rule 144 (or any similar
provision then in force) under the Securities Act. For purposes of calculating
any percentage of Stockholder Shares, all outstanding shares of Class A Common
shall be deemed to be converted into 10% of the then outstanding Class B Common.
"UNPAID YIELD" shall have the meaning assigned to such term in
------------
the Company's Certificate of Incorporation.
"UNRETURNED ORIGINAL COST" shall have the meaning assigned to
------------------------
such term in the Company's Certificate of Incorporation.
8. TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or attempted
------------------------------------
Transfer of any Stockholder Shares in violation of any provision of this
Agreement shall be void, and the Company shall not record such Transfer on its
books or treat any purported transferee of such Stockholder Shares as the owner
of such shares for any purpose.
9. AMENDMENT AND WAIVER. Except as otherwise provided herein, no
--------------------
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company or the Stockholders unless such modification,
amendment or waiver is approved in writing by the Company, the Qualified
Holders, and the holders of at least 70% of each class of Common Stock then
outstanding. The failure of any party to enforce any of the provisions of this
Agreement shall in no way be construed as a waiver of such provisions and shall
not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.
10. SEVERABILITY. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
11. ENTIRE AGREEMENT. Except as otherwise expressly set forth
----------------
herein, this document embodies the complete agreement and understanding among
the parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
12. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
----------------------
this Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Stockholders and any subsequent
holders of Stockholder Shares and the respective successors and assigns of each
of them, so long as they hold Stockholder Shares.
-11-
<PAGE>
13. NEW STOCKHOLDERS. During the term of this Agreement, the Company
----------------
shall cause all purchasers of its Stock to become parties hereto, without the
consent of any Stockholders hereto, by execution and delivery of a counterpart
to this Agreement. All additional shares of Common Stock issued by the Company
to such purchasers shall be deemed to be "Stockholder Shares" for purposes of
this Agreement.
14. COUNTERPARTS. This Agreement may be executed in separate
------------
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
15. REMEDIES. The Company and the Stockholders shall be entitled to
--------
enforce their rights under this Agreement specifically to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights existing in their favor. The parties hereto agree and acknowledge
that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that the Company or any Stockholder may in its
sole discretion apply to any court of law or equity of competent jurisdiction
for specific performance and/or injunctive relief (without posting a bond or
other security) in order to enforce or prevent any violation of the provisions
of this Agreement.
16. GOVERNING LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
-------------
VALIDITY AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL
LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF DELAWARE.
17. DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement
--------------------
are inserted for convenience only and do not constitute a part of this
Agreement.
18. NOTICES. All notices, demands or other communications to be given
-------
or delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when delivered personally or
mailed by certified or registered mail, return receipt requested and postage
prepaid, to the recipient. Such notices, demands and other communications will
be sent to each Stockholder at the address indicated on the Schedule of Holders
-------------------
and to the Company at the address indicated below:
Global Imaging Systems Inc.
P.O. Box 273478
Tampa, Florida 33688-3478
Attention: Chief Executive Officer
Telecopy: (813) 264-7877
-12-
<PAGE>
With a copy to:
Christopher J. Hagan, Esq.
Davis, Graham & Stubbs
1225 New York Avenue, N.W.
Suite 1200
Washington, DC 20005-3919
Telecopy: (202) 293-4794
or to such other address or to the attention of such other Person as the
recipient party has specified by prior written notice to the sending party.
19. TERM OF AGREEMENT. The Term of this Agreement shall begin on the
-----------------
date hereof and shall terminate on the first to occur of the following events:
(a) the written consent of all Stockholders; (b) the Sale of the Company; (c) a
merger or other business combination involving the Company in which the
Stockholders of the Company immediately prior to the effective time of such
merger or business combination own less than 50% of the capital stock of the
surviving corporation (determined on a fully diluted basis) immediately after
the effective time of such merger or business combination or (d) the closing of
a Qualified Public Offering; provided, that unless earlier terminated pursuant
--------
to clauses (a), (b), (c) or (d) above, the agreements set forth in Section 1
hereof shall terminate on the date 10 years after the date hereof.
-13-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
GLOBAL IMAGING SYSTEMS INC.
By: /s/ Thomas S. Johnson
--------------------------------
Thomas S. Johnson,
President and Chief Executive Officer
GOLDER, THOMA, CRESSEY, RAUNER FUND IV LIMITED
PARTNERSHIP
By: Golder, Thoma, Cressey, Rauner IV, L.P.
Its: General Partner
By: Golder, Thoma, Cressey, Rauner, Inc.
Its: General Partner
By: /s/ Carl D. Thoma
--------------------------------
Carl D. Thoma, Authorized Officer
/s/ Thomas S. Johnson
-------------------------------------
Thomas S. Johnson
/s/ Raymond Schilling
-------------------------------------
Raymond Schilling
-14-
<PAGE>
SCHEDULE OF HOLDERS
-------------------
NAME ADDRESS
- ---- -------
Golder, Thoma, Cressey, Rauner c/o Golder, Thoma, Cressey, Rauner, Inc.
Fund IV Limited Partnership 233 South Wacker Drive
Suite 6100
Chicago, IL 60606
Attn: Carl D. Thoma
Telecopy: (312) 382-2201
Thomas S. Johnson P.O. Box 273478
Tampa, FL 33688-3478
Telecopy: (813) 264-7877
Raymond Schilling P.O. Box 273478
Tampa, FL 33688-3478
Telecopy: (813) 264-7877
-15-
<PAGE>
AMENDMENT NO. 1
---------------
TO STOCKHOLDERS AGREEMENT
-------------------------
This AMENDMENT NO. 1 is made as of this 15 day of DECEMBER, 1994 (this
"Amendment") by and among Global Imaging Systems Inc., a Delaware corporation
(the "Company"), Golder, Thoma, Cressey, Rauner Fund IV, Limited Partnership, a
Delaware limited partnership ("GTCR"), Thomas S. Johnson ("Johnson"), Raymond
Schilling ("Schilling") and Arthur C. Felcoff ("Felcoff") ("Felcoff"), to that
certain Stockholders Agreement dated as of June 9, 1994 (the "Agreement") among
the Company, GTCR, Johnson and Schilling. Terms not otherwise defined herein
shall have the meanings assigned to such terms in the Agreement.
1. The Company, GTCR, Johnson and Schilling hereby agree to add to
Felcoff as a party to the Agreement. All references to "Stockholders" in the
Agreement shall include Felcoff.
2. The Schedule of Holders attached as Exhibit A to the Agreement
shall be amended to add the following:
Arthur C. Felcoff 1560 Cable Ranch Road
Suite 200
San Antonio, TX 78245
Telephone: (210) 673-7000
Facsimile: (210) 674-2641
3. Felcoff hereby agrees to be bound by the terms of the Agreement,
as amended by this Amendment.
4. This Amendment may be executed in counterparts, each of which is
deemed to be an original and all of which taken together shall constitute one
and the same agreement. This Amendment may be executed and delivered by
facsimile transmission.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this AMENDMENT NO. 1 as of
the day and year first above written.
GLOBAL IMAGING SYSTEMS INC.
By: /s/ Thomas S. Johnson
----------------------
Thomas S. Johnson
President
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV, LIMITED PARTNERSHIP
By: GOLDER, THOMA, CRESSEY,
RAUNER IV, L.P.
General Partner
By: GOLDER, THOMA, CRESSEY,
RAUNER, INC.
General Partner
By: /s/ Carl D. Thoma
----------------------
Carl D. Thoma
Authorized Officer
/s/ Thomas S. Johnson
----------------------
Thomas S. Johnson
/s/ Raymond Schilling
----------------------
Raymond Schilling
AGREED AND ACCEPTED:
/s/ Arthur C. Felcoff
- ---------------------
Arthur C. Felcoff
<PAGE>
JOINDER AND AMENDMENT TO
STOCKHOLDERS AGREEMENT
----------------------
The undersigned James B. Conway ("Conway"), Peter W. Dinan ("Dinan"), Paul
C. Donehue ("Donehue") and Christopher D. Flanagan ("Flanagan") hereby agree
effective as of January 31, 1995 to become parties to and to be bound by the
terms and conditions of that certain Stockholders Agreement dated June 9, 1994,
as amended (the "Agreement") by and among Global Imaging Systems Inc., a
Delaware corporation ("Global") and the Stockholders of Global. The Agreement is
hereby amended to provide that all references to "Stockholders" in the Agreement
shall include Conway, Dinan, Donehue and Flanagan
Paragraph 6(d) of the Agreement is hereby amended to delete the phrase
"two percent (2%)" and to insert the phrase "one percent (1%)" in its place.
IN WITNESS WHEREOF, the undersigned has executed this Joinder and Amendment
to the Stockholders Agreement as of the date first written above.
/s/ James B. Conway
---------------------------
James B. Conway
/s/ Peter W. Dinan
---------------------------
Peter W. Dinan
/s/ Paul C. Donehue
---------------------------
Paul C. Donehue
/s/ Christopher D. Flanagan
---------------------------
Christopher D. Flanagan
<PAGE>
Agreed and Accepted as of
January 31, 1995:
GLOBAL IMAGING SYSTEMS INC.
By: /s/ Thomas S. Johnson
---------------------
Thomas S. Johnson
President and Cheif Executive Officer
MAJORITY STOCKHOLDERS:
- ----------------------
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV LIMITED PARTNERSHIP
By: Golder, Thoma, Cressey, Rauner IV, L.P.
Its: General Partner
By: GTCR, Inc.
Its: General Partner
By: /s/ Carl D. Thoma
-----------------
Carl D. Thoma
Authorized Officer
/s/ Thomas S. Johnson
- ---------------------
Thomas S. Johnson
-2-
<PAGE>
AMENDMENT NO. 2 TO STOCKHOLDERS AGREEMENT
-----------------------------------------
THIS AMENDMENT TO NO. 2 TO STOCKHOLDERS AGREEMENT is made as of August
14, 1996 by and among Global Imaging Systems Inc., a Delaware corporation (the
"COMPANY"); Golder, Thoma, Cressey, Rauner Fund IV, Limited Partnership, a
Delaware limited partnership ("GTCR"); Thomas S. Johnson ("JOHNSON"); Raymond
Schilling ("SCHILLING"); Michael Mueller ("MUELLER"); and Jackson National Life
Insurance Company, a Michigan life insurance company ("JNL").
WITNESSETH:
The Company, GTCR, Johnson, Schilling, Mueller, James B. Conway, Paul
Donehue, Chris Flanagan, Peter Dinan, L. Neal Berney, Edward Cobb, Raymond
Echols, Rodney Reid, Douglas A. Timm, Dennis Cameron, Paul Robichaud, Thomas
Kane, Todd Johnson, Michael J. Fitzgibbons, Christopher Groff, Mathew G. Swider,
Donald P. Fink, Thresa N. Dunn, Alexis McGhee, Bruce Cook, Terry K. Smith and
Crystal E. Smith are parties to a Stockholders Agreement dated June 9, 1994, as
amended (the "STOCKHOLDERS AGREEMENT") pursuant to which the Company and such
parties have agreed to certain voting arrangements and restrictions on the
transfer of their shares of the Company's Common Stock. In order to induce JNL
to enter into an Equity Purchase Agreement of even date herewith (the "JNL
PURCHASE AGREEMENT"), the Company and each of GTCR and Johnson have agreed to
amend the Stockholders Agreement to add JNL as a party thereto. The execution
and delivery of this Agreement is a condition to the Closing under the JNL
Purchase Agreement.
Certain Capitalized Terms used herein are defined in the Stockholders
Agreement.
The parties hereto agree as follows:
1. AMENDMENTS TO STOCKHOLDERS AGREEMENT.
1.1 PREAMBLE. The first paragraph of the Stockholders Agreements is
--------
hereby amended to add the phrase "the Class C Common Stock, $.01 par value per
share ("CLASS C COMMON")," after "("CLASS A COMMON")," in the fourth line of
such paragraph. In addition, the first paragraph is further amended to add the
phrase ",Class C Common" after the first word "Common" in the sixth line of such
paragraph.
1.2 VOTING. Paragraph 1 of the Stockholders Agreement is hereby
------
amended and restated in its entirety to read as follows:
"1. BOARD OF DIRECTORS.
------------------
(a) From and after the Closing (as defined in the Purchase
Agreement) and until the provisions of this paragraph 1 cease to be
effective, each Stockholder shall vote all of his or its Common Stock
and any other voting securities of the Company over which such
Stockholder has voting control and
-1-
<PAGE>
shall take all other necessary or desirable actions within his or its
control (whether in such Stockholder's capacity as a stockholder,
director, member of a board committee or officer of the Company or
otherwise, and including, without limitation, attendance at meetings
in person or by proxy for purposes of obtaining a quorum and execution
of written consents in lieu of meetings), and the Company shall take
all necessary and desirable actions within its control (including,
without limitation, calling special board and stockholder meetings),
so that:
(i) the authorized number of directors on the Board
shall be established at five (5) directors;
(ii) the following persons shall be elected to the
Board:
(A) three representatives designated by GTCR, so
long as GTCR remains a Qualified Holder,
(B) the Chief Executive Officer of the Company,
and
(C) one representative designated by JNL (which
designee shall be Bruce Gorchow; any subsequent replacement
designee shall be subject to the approval of GTCR, as lon
as GTCR remains a Qualified Holder), so long as JNL owns at
least 50% of the JNL Stockholder Shares.
(iii) the composition of the board of directions of each
of the Company's subsidiaries (a "SUB BOARD") shall be the same
as that of the Board, unless a different composition is approved
by at least 75% of the members of the Board;
(iv) the removal from the Board or a Sub Board (with or
without cause) of any representative designated hereunder shall
be effective only upon the written request of the party entitled
to designate such representative pursuant to paragraph 1(a)(ii)
above; provided that (a) if GTCR ceases to be a Qualified Holder,
any directors designated by GTCR may be removed by vote of the
Stockholders holding a majority of the Stockholder Shares or (b)
if JNL ceases to own at least 50% of the JNL Stockholder Shares,
the director designated by JNL may be removed by vote of the
Stockholders holding a majority of the Stockholder Shares; and
(v) in the event that any representative designated
pursuant to paragraph 1(a)(ii) for any reason ceases to serve as
a member of the Board or a Sub Board during his term of office
(other than a removal described in the proviso set forth in
1(a)(iv) above), the resulting
-2-
<PAGE>
vacancy on the Board or a Sub Board shall be filled by a
representative designated pursuant to paragraph 1(a)(ii), and, in
the case of GTCR ceasing to be a Qualified Holder or JNL ceasing
to own at least 50% of the JNL Stockholder Shares, any resulting
vacancy shall be filled by the Stockholders, determined by a vote
of the Stockholders holding a majority of the Stockholder Shares
then outstanding; and
(vi) in the event that GTCR elects not to designate
any of the directors which it is entitled to designate in
accordance with paragraph 1(a)(ii) above, the Stockholders agree
not to vote to fill such vacancy other than with an individual
designated by GTCR, as provided in paragraph 1(a)(ii).
(b) The Company shall pay the reasonable out-of-pocket
expenses incurred by each director in connection with attending the
meetings of the Board or a Sub Board or discharging any of such
director's duties as a director of the Company or a Sub Board.
(c) The provisions of this paragraph 1 shall terminate
automatically and be of no further force and effect upon the first to
occur of (i) the tenth anniversary of the date hereof unless extended
by the parties hereto in accordance with Section 218 of the Delaware
General Corporation Law or (ii) a Qualified Public Offering.
(d) So long as JNL holds at least 1% of the shares of any
class of the Company's outstanding Stockholder Shares, JNL shall
receive notice of and will be entitled to have one (1) representative
attend all meetings of the Board (whether in person or by telephone);
provided, however, in the event JNL's representative director is
unable to attend the Board meeting, two individuals designated by JNL
shall be invited to attend as observers of such meeting. Notice of any
meeting of the Board shall be given to JNL at the same time and in the
same manner as it is given to the Company's directors.
(e) The Company shall hold meetings of the Board at least
quarterly during the term of this Agreement."
1.3 TRANSFERS WHILE CLASS A COMMON IS OUTSTANDING. Subparagraph 2(d)
---------------------------------------------
of the Stockholders Agreement is hereby amended to (i) delete the phrase "in
good faith by the Company's Board after" in the fourth and fifth lines from the
end of such subparagraph and to replace it with the word "by," and (ii) change
the Section reference in the last line from Section 4.2.2(iii) to Section
----------------- -------
5.2.2(iii) of the Company's Certificate of Incorporation.
- ---------
1.4 PERMITTED TRANSFERS. Subparagraph 2(e) of the Stockholders
--------------------
Agreement is hereby amended to delete clauses (iii) and (iv) of the first
sentence and to replace it with the following:
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<PAGE>
"or (iii) a Transfer by JNL of Stockholder Shares to any Person in
connection with a pro rata transfer of Senior Notes to such Person,
provided, that such transferee agrees to execute and deliver to the Company
and the other Stockholders a counterpart of this Agreement."
1.5 SALE OF THE COMPANY.
-------------------
(a) Subparagraph 5(a) of the Stockholders Agreement is hereby amended
to add the following provision at the end of the sentence:
";provided, however, that no Stockholder shall be required (i) to
-------- -------
incur aggregate indemnification liability in connection with such an
Approved Sale greater than the value of the consideration to be received by
such Stockholder in connection with such sale, (ii) to incur
indemnification liability in a proportion which is greater that such
Stockholder's pro rata share of the proceeds of such Approved Sale with
respect to breaches of representations and warranties regarding matters
other than such Stockholder and the securities purported to be held by such
Stockholder, (iii) to pay incidental or consequential damages with respect
to breaches of representations and warranties which were not known by such
Stockholder, but which were known by any other Stockholder, to be untrue in
any material respect when made, (iv) to make representations or warranties
with respect to any matter not relating to the Company, its Subsidiaries,
such Stockholder, or the securities purported to be held by such
Stockholder, which are not qualified as to such Stockholder's actual
knowledge. Each Stockholder will use its best efforts to cooperate in such
Approved Sale and will take all necessary and desirable actions in
connection with the consummation of such Approved Sale as are reasonably
requested by the Company; provided that the reasonable out-of-pocket
--------
expense incurred by any such Stockholder in the ordinary course of
complying with this subparagraph 5(a) (including reasonable attorneys'
-----------------
fees) shall be paid for or reimbursed by the Company.
(b) Subparagraph 5(c) of the Stockholder's Agreement is hereby
amended to add the following clause (vi) to the end of such subparagraph:
"and (vi) except with the prior written consent of the holders of
a majority of the JNL Stockholder Shares, the Approved Sale shall be made
for an aggregate consideration (which consideration must consist of cash or
other marketable securities which may legally be held by the holders of JNL
Stockholder Shares and which are not deemed to be an Illegal Investment)
not less than the "Fair Market Value" of the Company as of the date of the
Company's most recent Financial Statements (such "FAIR MARKET VALUE" to be
determined by an independent appraiser or investment banker jointly
selected by the Company and JNL)."
-4-
<PAGE>
1.6 PREEMPTIVE RIGHTS.
-----------------
(a) Subparagraph 6(a) of the Stockholders Agreement is hereby
amended to add the following phrase after the end of clause (i) of such
subparagraph:
"or the JNL Purchase Agreement or 1,354.17 shares of Class A
and 240.13 shares of Class B Common Stock contemplated to be issued to
Green, Manning & Bunch" ("GMB") (together with any Common Stock
purchased by GMB pursuant to any preemptive rights granted to GMB in
connection with such issuance); provided, however, that
-------- -------
notwithstanding the foregoing, if after the date of the JNL Purchase
Agreement GTCR and/or Thomas S. Johnson ("JOHNSON") purchase
additional shares of Class A Common Stock pursuant to the Purchase
Agreement, JNL shall have the right under this Section 6 to purchase
---------
its proportionate share of Class A Common Stock for a price of $90.00
per share (i.e., the same per share price for such securities provided
----
for the JNL Purchase Agreement with respect to the Class A Common
Stock JNL purchased upon consummation thereof) up to a total number of
shares as is necessary, when taken together with the number of shares
of Class C Common Stock purchased by JNL pursuant to subparagraph (g)
----------------
below, to maintain JNL's Common Stock ownership in the Company;"
(b) Subparagraph 6(a) of the Stockholders Agreement is hereby
amended to add the following sentence at the end of such subparagraph:
"Notwithstanding the foregoing, the exemptions provided in
clauses (iii), (iv) and (vi) above shall not apply to securities
issued to GTCR and its Affiliates."
(c) Subparagraph 6(d) of the Stockholders Agreement is hereby
amended to delete "The" in the first line of such subparagraph and to replace it
with the following:
"Except for the holders of the JNL Stockholder Shares, the"
(d) New subparagraphs "(f)" and "(g)" are hereby added to the
end of paragraph 6 of the Stockholders Agreement:
"(f) For purposes of this paragraph 6, all references to
"Class B Common" shall be deemed to include all outstanding shares of
Class C Common assuming they have been converted into Class B Common.
(g) If after the date of the JNL Purchase Agreement, GTCR
and/or Johnson purchase additional shares of Class A Common Stock in
partial or complete fulfillment of their total $20,500,000 commitment
pursuant to the Purchase Agreement, and JNL exercises its preemptive
right to purchase its proportionate share of additional shares of
Class A Common Stock in accordance
-5-
<PAGE>
with the terms of subparagraph (a)(i) of this Section 6, then
------------------- ---------
simultaneously with such purchase by JNL, JNL shall have the right to
purchase additional Class C Common Stock for a price of $13.014 per
share (i.e., the same per share price for such securities provided for
----
in the JNL Purchase Agreement with respect to the Class C Common Stock
JNL purchased upon consummation thereof) up to a total number of
shares as is necessary, when taken together with the shares of Class A
Common Stock purchased by JNL pursuant to subparagraph (a)(i) of this
-------------------
Section 6, to maintain JNL's Common Stock ownership in the Company;
---------
provided, however, that in exercising its rights pursuant to this
-------- -------
subparagraph (g) and subparagraph (a)(i) of this Section 6, JNL will
---------------- ------------------- ---------
maintain its 97.5%/2.5% ownership split as between its Class A and
Class C Common Stock. The terms of such purchase shall otherwise be in
accordance with the terms of the JNL Purchase Agreement as though such
agreement pertained to such Class C Common Stock so purchased by JNL,
and the terms of the JNL Purchase Agreement are incorporated herein by
this reference."
1.7 DEFINITIONS.
-----------
(a) Paragraph 7 of the Stockholders Agreement is hereby amended
to add the following language at the end of the definition of "Affiliate":
";provided, however, that an "Affiliate" will not mean any
-------- -------
entity in which GTCR is an investor other than an investment fund in
which GTCR (or its Affiliates) serve as managing general partner"
(b) The definition of "COMMON STOCK" in paragraph 7 of the
Stockholders Agreement is hereby amended and restated in its entirety to read as
follows:
"COMMON STOCK" means collectively the Company's Class A Common, Class
B Common and Class C Common.
(c) The definition of "INDEPENDENT THIRD PARTY" in paragraph 7
of the Stockholders Agreement is amended to delete the word "person" in the
first line of such definition and to replace it with the phrase "Person,
together with its Affiliates (other than any Qualified Holder),"
(d) The definition of "PRO RATA SHARE" in paragraph 7 of the
Stockholders Agreement is hereby amended to add the following sentence at the
end of such definition:
"For purposes of this definition, all outstanding shares of
Class C Common shall be deemed to be converted into shares of Class B
Common."
(e) The definition of "QUALIFIED HOLDER" in paragraph 7 of the
Stockholders Agreement is hereby amended to delete "20%" in the second line of
such definition and to replace it with "50%".
-6-
<PAGE>
(f) The definition of "QUALIFIED PUBLIC OFFERING" in paragraph 7
of the Stockholders Agreement is hereby amended to delete the number "$5
million" and to replace it with "$20 million".
(g) The definition of "SIGNIFICANT TRANSFER" in hereby amended
and restated in its entirety to read as follows:
"SIGNIFICANT TRANSFER" shall mean a Transfer in one
transaction or a series of transactions (other than to a Permitted
Transferee) of then outstanding Stockholder Shares by a Qualified
Holder, GTCR, Thomas Johnson, JNL, an executive officer of the Company
or any holder of more than two percent (2%) of the then outstanding
Stockholder Shares.
(h) The definition of "STOCKHOLDER SHARES" in paragraph 7 of the
Stockholders Agreement is hereby amended to add the phrase "and all outstanding
shares of Class C Common shall be deemed to have been converted into Class B
Common" to the end of such definition.
1.8 NEW DEFINITIONS. Paragraph 7 of the Stockholders Agreement is
---------------
hereby amended to add the following new definitions to such paragraph:
"ILLEGAL INVESTMENT" means any investment or other property
with respect to which none of JNL nor any Affiliate of either of them
is permitted to loan or invest their funds, buy, sell, hold title to,
possess, occupy, pledge, convey, manage, protect, insure, or otherwise
deal with pursuant to Section 500.901 through 500.8184 of the Michigan
Administrative Code, as amended (the "INSURANCE CODE"),
notwithstanding the availability under any applicable asset thresholds
or reserve baskets set forth in such Insurance Code sections pursuant
to which JNL, or any such Affiliate would otherwise be able to hold
such investment or property, other than those baskets and/or
thresholds the availability of or under which is already reduced by
JNL's or any such Affiliate's existing equity investments in the
Company.
"JNL" means Jackson National Life Insurance Company and its
successors and Affiliates.
"JNL PURCHASE AGREEMENT" means that certain Equity Purchase
Agreement between the Company and JNL dated August 14, 1996, as
amended from time to time."
"JNL STOCKHOLDER SHARES" shall mean any Stockholder Shares
initially issued to JNL under the JNL Purchase Agreement and any
shares transferred by JNL thereafter to any Permitted Transferee.
"SENIOR NOTES" shall mean the Notes issued to JNL pursuant
to that certain credit agreement dated August 14, 1996, as amended
from time to time,
-7-
<PAGE>
among PPM America, INC., JNL, the Company and certain subsidiaries of
the Company."
1.9 TRANSFERS IN VIOLATION OF THIS AGREEMENT. Paragraph 8 of the
----------------------------------------
Stockholders Agreement is hereby amended to add the following sentence at the
beginning of such paragraph:
"Prior to transferring any Stockholder Shares to any Person,
the Transferring Stockholder shall cause the prospective transferee to
execute and deliver to the Company and the other Stockholders a
counterpart of this Agreement."
1.10 AMENDMENTS AND WAIVERS. Paragraph 9 of the Stockholders Agreement
----------------------
is hereby amended to add the phrase "the holders of a majority of the JNL
Stockholders Shares" after the phrase "the Qualified Holders," in the fourth
line of such paragraph. In addition, the parenthetical "(other than the Class C
Common") "is hereby added after the word "Stock" in the fifth line of such
Paragraph.
1.11 NEW PARAGRAPHS. The following new paragraphs 20 and 21 is hereby
--------------
added to the end of such Agreement:
"20. PUBLIC OFFERING. In the event that the Board and GTCR
---------------
approve a Qualified Public Offering, the holders of Stockholder Shares
shall take all necessary or desirable actions in connection with the
consummation of the Qualified Public Offering. In the event that such
Qualified Public Offering is an underwritten offering and the managing
underwriters advise the Company in writing that in their opinion the
capital stock structure shall adversely affect the marketability of
the offering, each holder of Stockholder Shares shall consent to and
vote for a recapitalization, reorganization and/or exchange of any
class of Stockholder Shares into securities that the managing
underwriters, the Board and GTCR find acceptable and shall take all
necessary or desirable actions in connection with the consummation of
the recapitalization, reorganization and/or exchange; provided that
the resulting securities reflect and are consistent with the rights
and preferences set forth in the Company's Certificate of
Incorporation as in effect immediately prior to such Qualified Public
Offering.
21. AGREEMENT TO CONVERT CLASS A COMMON. In the event that
-----------------------------------
not all of the outstanding shares of Class A Common are redeemed in
connection with a Qualified Public Offering, each of the holders of
the Stockholders Shares hereby agree to cause the Company to amend its
Amended and Restated Certificate of Incorporation in order to provide
for the conversion of the Class A Common into shares of Class B Common
(or Class C Common for the holders of JNL Stockholder Shares at the
holder's option). Such conversion will be effected as follows:
-8-
<PAGE>
Each Share of outstanding Class A Common will be converted
into the right to receive a number of shares of Class B Common (or
Class C Common for the holders of JNL Stockholder Shares at the
holder's option) equal to the sum of (i) the Preferred Amount and (ii)
the Common Amount.
For purposes of this paragraph 21. the "Preferred Amount"
shall mean the number of shares of Class B Common or Class C Common,
as the case may be, equal to the quotient by dividing (i) the sum of
(A) $90 and (B) the Unpaid Yield on such share of Class A Common, by
(ii) the product of (A) the Market Price and (B) 80%. For purposes of
this definition, the "Market Price" shall mean the good faith
determination of the managing underwriters of the Company's initial
Qualified Public Offering of the initial public offering price of the
Class B Common after taking into account the conversion and/or
redemption of the Class A Common in full.
For purposes of this paragraph 21, the "Common Amount" shall
mean the number of shares of Class B Common or Class C Common, as the
case may be, determined by the following formula:
Common Amount = (OBC divided by 9) divided by OA
WHERE:
OBC = The number of outstanding shares of Class B Common and
Class C Common on a fully-diluted basis immediately prior
to conversion of the Class A Common.
OA = The number of outstanding shares of Class A Common on a
fully-diluted basis immediately prior to conversion of
the Class A Common.
For example:
If there are 50,000 outstanding shares of Class B Common, 5,000
outstanding shares of Class C Common and 50,000 shares of Class A
Common, the aggregate Yield on such share of Class A Common is $25 and
the Market Price is $20, then:
The Preferred Amount will equal:
Preferred Amount = ($90 + 25) divided by (20 x .8)
Preferred Amount = 115/16
Preferred Amount = 7.1875 shares of Class B Common
-9-
<PAGE>
The Common Amount will equal:
Common Amount = (55,000 divided by 9) divided by 50,000
Common Amount = 6,111.111 divided by 50,000
Common Amount = .122 shares of Class B Common Stock
Thus the holder of such Class A Common Share will be
entitled to receive the sum of (i) 7.185 shares of Class B Common and
(ii) .122 shares of Class B Common or 7.307 shares of Class B Common
Stock."
1.12 SCHEDULE OF HOLDERS. The Schedule of Holders to the
-------------------
Stockholders Agreement is hereby amended to be in the form attached hereto as
Exhibit A. All references to "Stockholders" in the Stockholders Agreement shall
- ---------
include all parties listed on the Schedule of Holders including "Jackson
National Life Insurance Company, a Michigan life insurance company".
2. EFFECT OF THE AMENDMENT. All references to the Stockholders
Agreement in the Purchase Agreement of the JNL Purchase Agreement or any related
document shall mean the Stockholders Agreement as amended by this Amendment.
Except as specifically amended above, the Stockholders Agreement shall remain in
full force and effect, and is hereby ratified and confirmed.
3. DESCRIPTIVE HEADINGS. The descriptive headings of this
Amendment are inserted for convenience only and do not constitute a part of this
Amendment.
4. GOVERNING LAW. This Amendment shall be governed by and
construed and enforced in accordance with the laws of the State of Illinois.
5. COUNTERPARTS. This Amendment may be executed and delivered in
counterparts, each of which shall constitute an original, and all of which
together shall constitute one Amendment.
-10-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment No. 2 to
Stockholders Agreement as of the date first written above.
GLOBAL IMAGING SYSTEMS INC.
By: /s/ Raymond Schilling
--------------------------------
Its: CFO
-------------------------------
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV, LIMITED PARTNERSHIP
By: GTCR IV, L.P.
General Partner
By: Golder, Thoma, Cressey, Rauner Inc.
General Partner
By: /s/ Carl D. Thoma
-------------------------------
Its:_______________________________
/s/ Thomas S. Johnson
-----------------------------------
THOMAS S. JOHNSON
/s/ Raymond Schilling
-----------------------------------
RAYMOND SCHILLING
/s/ Michael Mueller
-----------------------------------
MICHAEL MUELLER
FOR: JACKSON NATIONAL LIFE INSURANCE
COMPANY
By: PPM America, Inc. as its Agent
By: /s/ BEN JAMES
--------------------------------
Its: Vice President
------------------------------
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<PAGE>
EXHIBIT 10.32
EQUITY SUBSCRIPTION AGREEMENT
-----------------------------
THIS AGREEMENT is made as of March 27, 1998 by and among GLOBAL
IMAGING SYSTEMS INC., a Delaware corporation (the "COMPANY"), and Thomas S.
Johnson, Golder, Thoma, Cressey, Rauner, Fund IV Limited Partnership, a Delaware
limited partnership, and Jackson National Life Insurance Company, a Michigan
life insurance company (collectively, the "PURCHASERS" and each individually a
"PURCHASER"). Except as otherwise indicated, capitalized terms used herein are
defined in paragraph 8 hereof.
-----------
The parties hereto agree as follows:
1. AUTHORIZATION OF STOCK. The Company has authorized the issuance
----------------------
and sale to the Purchasers of an aggregate of 653.61 shares (the "STOCK"),
consisting of 580.456 shares of its Class B Common Stock, $.01 par value per
share (the "CLASS B COMMON") and 73.154 shares of its Class C Common Stock, $.01
par value per share (the "CLASS C COMMON"). The Stock is being issued to the
Purchasers pursuant to that certain option granted to Purchasers under the
Executive Agreement with Thomas S. Johnson dated June 9, 1994, as amended (the
"JOHNSON EXECUTIVE AGREEMENT").
2. PURCHASE AND SALE OF THE STOCK. The parties will execute and
------------------------------
deliver counterparts of this Agreement on or about March 31, 1998. The
subscription by the Purchasers will occur at a closing ("CLOSING") to be held on
a date mutually satisfactory to the Purchasers and the Company not later than
March 31, 1998. At the Closing, the Company will sell to the Purchasers and,
subject to the terms and conditions set forth herein, the Purchasers will
purchase from the Company, an aggregate of 653.61 shares of Stock (580.456
shares of Class B Common and 73.154 shares of Class C Common) at a price of
$9.00 per share (in the aggregate, a total price of $5,882.49). The allocation
of the purchase of the Stock among each of the Purchasers is set forth in
Exhibit A hereto. The Closing of the purchase and sale of the Stock will be
- ---------
effected by exchange of documents, certificates and agreements, by air courier,
telefax or other means satisfactory to the parties. At the Closing, the Company
will issue and deliver to the Purchasers certificates evidencing the Stock to be
purchased by the Purchasers, registered in each Purchaser's name, against
payment of the purchase price therefor by check or wire transfer of funds in the
amount set forth for each Purchaser in Exhibit A hereto.
---------
3. CONDITIONS OF THE PURCHASERS' OBLIGATION AT THE CLOSING. The
-------------------------------------------------------
obligation of the Purchasers to purchase and pay for the Stock at the Closing is
subject to the satisfaction as of the Closing of the following conditions:
3A. REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------
warranties contained in paragraph 6 hereof will be true and correct at and as of
the Closing as though then made, except to the extent of changes caused by the
transactions expressly contemplated herein.
<PAGE>
3B. CERTIFICATE OF INCORPORATION. The Company's Restated
----------------------------
Certificate of Incorporation (the "CHARTER") as filed with the State of Delaware
will be in full force and effect at the Closing and will not have been further
amended or modified.
3C. PROCEEDINGS. All corporate and other proceedings taken or
-----------
required to be taken in connection with the transactions contemplated hereby to
be consummated at or prior to the Closing and all documents incident thereto
will be satisfactory in form and substance to the Purchasers.
4. TRANSFER OF RESTRICTED SECURITIES.
---------------------------------
(i) Restricted Securities are transferable pursuant to (a)
public offerings registered under the Securities Act, (b) Rule 144 of
the Securities and Exchange Commission (or any similar rule then in
force) if such rule is available and (c) subject to the conditions
specified in subparagraph 4(ii) below, any other legally available
------------------
means of transfer.
(ii) In connection with the transfer of any Restricted
Securities (other than a transfer described in subparagraph 4(i)(a) or
-----------------------
(b) above), the holder thereof will deliver written notice to the
---
Company describing the transfer or proposed transfer, together with an
opinion of Hogan & Hartson LLP or other counsel, which (to the
Company's reasonable satisfaction) is knowledgeable in securities law
matters, to the effect that such transfer of Restricted Securities may
be effected without registration of such Restricted Securities under
the Securities Act. In addition, if the holder of the Restricted
Securities delivers to the Company an opinion of Hogan & Hartson LLP
or such other counsel that no subsequent transfer of such Restricted
Securities will require registration under the Securities Act, the
Company will promptly upon such contemplated transfer deliver new
certificates for such Restricted Securities which do not bear the
Securities Act legend set forth in paragraph 9A. If the Company is
------------
not required to deliver such new certificates for such Restricted
Securities, the holder thereof will not transfer the same until the
prospective transferee has confirmed to the Company in writing its
agreement to be bound by the conditions contained in this paragraph
and paragraph 9A.
------------
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each of the
------------------------------------------------
Purchasers represents and warrants to the Company that he or it is purchasing
and will purchase the Stock for his or its own account, with no present
intention of distributing or reselling the Stock or any part thereof, and that
he or it is prepared to bear the economic risk of retaining the Stock for an
indefinite period, all without prejudice, however, to his or its right at any
time, in accordance with this Agreement, lawfully to sell or otherwise dispose
of all or any part of the Stock held by him or it. Each of the Purchasers also
represents and warrants that he or it is an accredited investor, as such term is
defined in Rule 501 of Regulation D promulgated under the Securities Act, and
that he or it has had the opportunity to ask questions of the Company's
management with respect to his or its investment. Each of the Purchasers also
represents and warrants that he or it has received the confidential offering
memorandum of the Company
-2-
<PAGE>
delivered to such Purchaser in accordance with applicable securities laws. Each
of the Purchasers agrees that if, and to the extent, he or it elects to sell the
Stock, he or it will do so in compliance with the provisions and requirements of
the Securities Act and applicable state securities laws. Each of the Purchasers
further represents that he or it has full authority to enter into the
transactions contemplated by this Agreement and to perform his or its
obligations hereunder. Further, each of the Purchasers represents and warrants
that the sale and issuance of the Stock has been properly allocated among each
of the Purchasers as set forth in any agreements between the Company and the
Purchasers and that no additional shares of the capital stock of the Company are
issuable to such Purchasers in connection herewith or therewith.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. As a material
---------------------------------------------
inducement to the Purchasers to enter into this Agreement and purchase the
Stock, the Company hereby represents and warrants that:
6A. ORGANIZATION AND CORPORATE POWER. The Company is a
--------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is qualified to do business in every jurisdiction
in which the failure so to qualify might reasonably be expected to have a
material adverse effect on the financial condition, operating results or
business prospects of the Company. The Company has all requisite corporate power
and authority and all material licenses, permits and authorizations necessary to
own and operate its properties, to carry on its businesses as now conducted and
presently proposed to be conducted and to carry out the transactions
contemplated by this Agreement. The copies of the Company's Charter and bylaws
that have been furnished to the Purchasers' counsel reflect all amendments made
thereto at any time prior to the date of this Agreement and are correct and
complete.
6B. CAPITAL STOCK AND RELATED MATTERS. Based in part on the
---------------------------------
investment representations of the Purchasers in paragraph 5 above, the Company
-----------
has not violated any applicable federal or state securities laws in connection
with the offer, sale or issuance of any of the Stock, and the offer, sale and
issuance of the Stock hereunder do not require registration under the Securities
Act or any applicable state securities laws. To the best of the Company's
knowledge, there are no agreements among the Company's stockholders with respect
to the voting or transfer of the Company's capital stock or with respect to any
other aspect of the Company's affairs that would conflict with the provisions of
this Agreement..
6C. AUTHORIZATION; NO BREACH. The execution, delivery and
------------------------
performance of this Agreement and all other agreements contemplated hereby to
which the Company is a party have been duly authorized by the Company. This
Agreement and all other agreements contemplated hereby each constitutes a valid
and binding obligation of the Company, enforceable in accordance with its terms.
The execution and delivery by the Company of this Agreement and all other
agreements contemplated hereby to which the Company is a party, the offering,
sale and issuance of the Stock hereunder, and fulfillment of and compliance with
the respective terms hereof and thereof by the Company, do not and will not (i)
conflict with or result in a breach of the terms, conditions or provisions of,
(ii) constitute a default under, (iii) result in the creation of any lien,
security interest, charge or encumbrance upon the Company's capital stock or
assets pursuant to, (iv) give any third party the right to accelerate any
-3-
<PAGE>
obligation under, (v) result in a violation of, or (vi) require any
authorization, consent, approval, exemption or other action by or notice to any
court or administrative or governmental body pursuant to, the Charter or bylaws
of the Company, or any law, statute, rule or regulation to which the Company is
subject, or any agreement, instrument, order, judgment or decree to which the
Company is a party or by which it is bound.
6D. BROKERAGE. There are no claims against the Company for
---------
brokerage commissions, finders' fees or similar compensation in connection with
the transactions contemplated by this Agreement based on any arrangement or
agreement binding upon the Company.
6E. GOVERNMENTAL CONSENT, ETC. No permit, consent, approval or
--------------------------
authorization of, or declaration to or filing with, any governmental authority
is required in connection with the execution, delivery and performance by the
Company of this Agreement or the other agreements contemplated hereby, or the
consummation by the Company of any other transaction contemplated hereby or
thereby.
6F. COMPLIANCE WITH LAWS. The Company is not in violation of any
--------------------
law or any regulation or requirement which violation might reasonably be
expected to have a material adverse effect upon the financial condition,
operating results or business prospects of the Company and the Company has not
received notice of any such violation.
6G. DISCLOSURE. Neither this Agreement nor any of the schedules,
----------
attachments, written statements, documents, certificates or other items prepared
or supplied to the Purchasers by or on behalf of the Company with respect to the
transactions contemplated hereby contains any untrue statement of a material
fact or omits a material fact necessary to make each statement contained herein
or therein not misleading. There is no fact which the Company has not disclosed
to the Purchasers in writing and of which any of its officers, directors or
executive employees is aware and which could reasonably be anticipated to have a
material adverse effect upon the existing or expected financial condition,
operating results, assets, customer relations, employee relations or business
prospects of the Company.
6H. CLOSING DATE. The representations and warranties of the
------------
Company contained in this paragraph 6 and elsewhere in this Agreement and all
-----------
information contained in any exhibit, schedule or attachment hereto or in any
writing delivered by, or on behalf of, the Company to any Purchasers will be
true and correct in all material respects on the date of the Closing as though
then made, except as affected by the transactions expressly contemplated by this
Agreement.
7. REPURCHASE OF SHARES. Notwithstanding anything to the contrary
--------------------
contained in this Agreement, the Purchasers hereby agree that the Company shall
have the right to repurchase all of the Stock from the Purchasers at a price per
share equal to $9.00 per share, in the event that the Company's initial public
offering registered under the Securities Act is not closed on or before July 31,
1998 (the "IPO"). In the event the IPO does not occur prior to July 31, 1998,
the Company shall have 30 days thereafter to redeem all, but not less than all,
of the Stock from the Purchasers in accordance with the terms of this paragraph
---------
7. Each of the
- -
-4-
<PAGE>
Purchasers further agrees not to transfer the Stock on or prior to August 31,
1998 without getting the transferee thereof to deliver its agreement in writing
to the Company to be bound by the terms and conditions set forth in this
paragraph 7. The provisions of this paragraph 7 will terminate on the closing of
- ----------- -----------
the IPO.
8. DEFINITIONS. For the purposes of this Agreement, the following
-----------
terms have the meanings set forth below:
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a governmental entity or any department, agency or political
subdivision thereof.
"RESTRICTED SECURITIES" means the Stock issued hereunder, and any
securities issued with respect thereto by way of a stock dividend or stock split
or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization. As to any particular Restricted
Securities, such securities will cease to be Restricted Securities when they
have (a) been effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them, (b) become eligible
for sale and have actually been sold to the public pursuant to Rule 144 (or any
similar provision then in force) under the Securities Act or (c) been otherwise
transferred and new certificates for them not bearing the Securities Act legend
set forth in paragraph 9A have been delivered by the Company in accordance with
------------
subparagraph 4(ii). Whenever any particular securities cease to be Restricted
- ------------------
Securities, the holder thereof will be entitled to receive from the Company,
without expense, new securities of like tenor not bearing a Securities Act
legend of the character set forth in paragraph 9A.
------------
"SECURITIES ACT" means the Securities Act of 1933, as amended, or
any similar federal law then in force.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended, or any similar federal law then in force.
"SUBSIDIARY" means any corporation of which the securities having
a majority of the ordinary voting power in electing the board of directors are,
at the time as of which any determination is being made, owned by the Company
either directly or through one or more Subsidiaries.
9. MISCELLANEOUS.
-------------
9A. RESTRICTIVE LEGEND. Each certificate for Restricted
------------------
Securities will be imprinted with a legend in substantially the following form:
The securities represented by this certificate have not
been registered under the Securities Act of 1933, as
amended. The transfer of the securities represented by
this certificate is subject to the conditions specified
in the Equity
-5-
<PAGE>
Subscription Agreement, dated as of March 27, 1998, by
and between the issuer (the "COMPANY") and a certain
investor, and the Company reserves the right to refuse
the transfer of such securities until such conditions
have been fulfilled with respect to such transfer. A
copy of such conditions will be furnished by the Company
to the holder hereof upon written request and without
charge.
9B. SUCCESSORS AND ASSIGNS. Except as otherwise expressly
----------------------
provided herein or in any instruments of transfer or assignment, all covenants
and agreements contained in this Agreement by or on behalf of any of the parties
hereto will bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not. In addition, and
whether or not any express assignment has been made, the provisions of this
Agreement which are for the Purchasers' benefit as a purchaser or holder of
Stock are also for the benefit of, and enforceable by, any subsequent holder of
such Stock.
9C. COUNTERPARTS FACSIMILE SIGNATURES. This Agreement may be
---------------------------------
executed simultaneously in counterparts, both of which need not contain the
signatures of more than one party, but both such counterparts taken together
will constitute one and the same Agreement. This Agreement may be executed by
facsimile transmission.
9D. GOVERNING LAW. This Agreement will be governed by the
-------------
internal law, and not the law of conflicts, of Delaware.
9E. NOTICES. All notices, demands or other communications to be
-------
given or delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have been given when delivered personally,
or sent by telex or facsimile transmission, or sent by receipted air courier, or
mailed by certified or registered mail, return receipt requested and postage
prepaid, to the recipient. Such notices, demands and other communications will
be sent to the Company and the Purchasers at the address indicated below:
Notice to the Company
---------------------
Global Imaging Systems Inc.
P.O. Box 273478
Tampa, Florida 33688
Attention: Thomas S. Johnson
Notice to the Purchasers
------------------------
At the addresses listed on the Company's stockholder records
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
GLOBAL IMAGING SYSTEMS, INC.
By: /s/ Raymond Schilling
---------------------------------------
Raymond Schilling, Executive Vice
President and Chief Financial Officer
PURCHASERS:
/s/ Thomas S. Johnson
--------------------------------------------
Thomas S. Johnson
GOLDER, THOMA, CRESSEY, RAUNER, FUND IV LIMITED
PARTNERSHIP
By: GTCR IV, L.P.
Its: General Partner
By: Golder, Thoma, Cressey, Rauner Inc.
Its: General Partner
By: /s/ Carl D. Thoma
---------------------------------
Carl D. Thoma
Authorized Officer
JACKSON NATIONAL LIFE INSURANCE COMPANY
By: /s/ Bruce Gorchow
---------------------------------------
Bruce Gorchow
Its:__________________________________
-7-
<PAGE>
EXHIBIT A
LIST OF PURCHASERS
<TABLE>
<CAPTION>
AMOUNT OFFERED SHARES OF
NAME AND ADDRESS ($) CLASS B STOCK
- ------------------------------------------- ---------------------- ---------------------------
<S> <C> <C>
Thomas S. Johnson $ 615.44 68.382
Golder, Thoma, Cressey, Rauner Fund IV, $4,608.67 512.074
L.P.
Jackson National Life Insurance Company $ 658.38 73.154*
---------------------- ---------------------------
Total 5,882.49 653.61
====================== ===========================
</TABLE>
* Jackson National Life Insurance Company will aqcuire Class C Common Stock in
lieu of Class B Common Stock.
<PAGE>
Exhibit 23.1
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated May 6, 1998 (except for Note 12, as to which the date
is May 28, 1998), in Amendment No. 4 to the Registration Statement (Form S-1
No. 333-48103) and related Prospectus of Global Imaging Systems, Inc. for the
registration of 8,050,000 shares of its common stock.
/s/ Ernst & Young LLP
Tampa, FL
June 8, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated February 12, 1998
with respect to the financial statements of Copy Service and
Supply, Inc., included in the Registration Statement (Form S-1;
File Number 333-48103), any Registration Statement relating to
such Registration Statement under Rule 462 and any related
Prospectus of Global Imaging Systems, Inc. for the registration
of its common stock.
Barnard, Combs, Potts & Rhyne, PA
[SIGNATURES]
Certified Public Accountants
Statesville, North Carolina
June 4, 1998
<PAGE>
EXHIBIT 23.3
Global Imaging Systems, Inc.
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated January 8, 1998 with respect to the financial
statements of Southern Business Communications Group included in the
Registration Statement (Form S-1 File Number 333-48103), any Registration
Statement relating to such Registration Statement under Rule 462 and any
related Prospectus of Global Imaging Systems, Inc. for the registration of its
common stock.
/s/ Smith & Howard, P.C.
Smith & Howard, P.C.
Atlanta, Georgia
June 3, 1998
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated January 23, 1998, with respect to the financial
statements of Electronic Systems, Inc., included in Amendment No. 4 to the
Registration Statement (Form S-1 No. 333-48103) and related Prospectus of Global
Imaging Systems, Inc. for the registration of its common stock.
/s/ ERNST & YOUNG LLP
Richmond, Virginia
June 5, 1998
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated December 17, 1997, with respect to the financial
statements of Eastern Copy Products, Inc. and Subsidiaries included in the
Registration Statement (Form S-1; File Number 333-48103), any Registration
Statement relating to such Registration Statement under Rule 462 and any
related Prospectus of Global Imaging Systems, Inc. for the registration of its
common stock.
Syracuse, New York /S/ PASQUALE & BOWERS, LLP
June 4, 1998
<PAGE>
EXHIBIT 23.6
INDEPENDENT AUDITOR'S CONSENT
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated December 19, 1997, with respect to the financial
statements of Duplicating Specialties, Inc. included in the Registration
Statement (Form S-1; File Number 333-48103) and related Prospectus of Global
Imaging Systems, Inc. for the registration of its common stock.
/S/ MOSS ADAMS LLP
Vancouver, Washington
June 8, 1998
<PAGE>
EXHIBIT 23.7
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated January 27, 1998, with respect to the financial
statements of Electronic Systems of Richmond, Inc., included in the
Registration Statement (Form S-1; File Number 333-48103), any Registration
Statement relating to such Registration Statement under Rule 462 and any
related Prospectus of Global Imaging Systems, Inc. for the registration of its
common stock.
/s/ EDMONDSON, LEDBETTER & BALLARD, L.L.P.
Norfolk, Virginia
June 8, 1998
<PAGE>
EXHIBIT 23.8
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 16, 1998, with respect to the financial
statements of Connecticut Business Systems, Inc., included in the Registration
Statement (Form S-1; File Number 333-48103), any Registration Statement
relating to such Registration Statement under Rule 462 and any related
Prospectus of Global Imaging Systems, Inc. for the registration of its common
stock.
/S/ ARTHUR ANDERSEN LLP
Hartford, Connecticut
June 6, 1998
<PAGE>
EXHIBIT 23.9
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 6, 1998 (for the eleven months ended
December 31, 1997) and February 20, 1998 (for the year ended January 31,
1997), with respect to the financial statements of Business Systems Division
(an operating division of Bloom's Incorporated), included in the Registration
Statement (Form S-1; File Number 333-48103, any Registration Statement
relating to such Registration Statement under Rule 462 and any related
Prospectus of Global Imaging Systems, Inc. for the registration of its common
stock.
/s/ Joseph D. Kalicka & Company, LLP
JOSEPH D. KALICKA & COMPANY, LLP
Certified Public Accountants
Holyoke, Massachusetts
June 4, 1998
