<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________________ TO __________________
Commission File Number: 000-24373
GLOBAL IMAGING SYSTEMS, INC.
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 59-3247752
- -------------------------------- ---------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NO.)
13902 NORTH DALE MABRY HIGHWAY, SUITE 300 33618
TAMPA, FLORIDA
- ------------------------------------------ ---------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 813-960-5508
NOT APPLICABLE
- --------------------------------------------------------------------------------
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
The registrant had 17,981,450 Shares of Common Stock, $.01 par value,
outstanding as of November 11, 1998.
<PAGE>
INDEX
Page
----
PART I--FINANCIAL INFORMATION
ITEM 1--Consolidated Financial Statements
Consolidated Balance Sheets as of September 30, 1998 (Unaudited)
and March 31, 1998 3
Consolidated Statements of Operations for the three and six
months ended September 30, 1998 and 1997 (Unaudited) 4
Consolidated Statements of Cash Flows for the six months ended
September 30, 1998 and 1997 (Unaudited) 6
Consolidated Statement of Stockholders' Equity for the six
months ended September 30, 1998 (Unaudited) 7
Notes to Consolidated Financial Statements (Unaudited) 8
ITEM 2--Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
PART II--OTHER INFORMATION
ITEM 2--CHANGES IN SECURITIES AND USE OF PROCEEDS 21
ITEM 6--EXHIBITS AND REPORTS ON FORM 8-K 21
SIGNATURE 23
EXHIBIT INDEX 24
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
GLOBAL IMAGING SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT FOR SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
ASSETS 1998 1998
---------------- ----------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,835 $ 4,496
Accounts receivable, net of allowance for doubtful
accounts($1,040 and $871 at September 30, 1998
and March 31, 1998, respectively) 38,541 27,572
Inventories 24,357 19,061
Deferred income taxes 1,629 1,543
Prepaid expenses and other current assets 1,067 425
-------- --------
Total current assets 70,429 53,097
Rental equipment, net 4,651 4,655
Property and equipment, net 4,766 4,419
Other assets 761 2,147
Deferred income taxes 265 571
Related party notes receivable 547 547
Intangible assets, net:
Goodwill 113,817 94,685
Noncompete agreements 1,255 1,336
Financing fees 1,270 2,885
-------- --------
Total assets $197,761 $164,342
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 15,589 $ 10,556
Accrued liabilities 4,960 3,878
Accrued compensation and benefits 3,970 3,543
Current maturities of long-term debt 118 233
Deferred revenue 11,732 10,632
-------- --------
Total current liabilities 36,369 28,842
Long-term debt, less current maturities 87,600 97,252
-------- --------
Total liabilities 123,969 126,094
Stockholders equity:
Preferred Stock, $.01 par value:
10,000,000 shares authorized: No shares issued. - -
Class A common stock, $.01 par value:
400,000 shares authorized: 339,945
shares issued and outstanding at March 31, 1998 - 3
Class B common stock, $.01 par value:
50,000,000 shares authorized: 9,521,058
shares issued and outstanding at March 31, 1998 - 95
Class C common stock, $.01 par value:
905,000 shares authorized: 904,252
shares issued and outstanding at March 31, 1998 - 9
Common Stock, $.01 par value:
50,000,000 shares authorized: 17,981,450
shares issued and outstanding at September 30, 1998 180 -
Additional paid-in capital 70,858 33,618
Retained earnings 2,754 4,754
-------- --------
73,792 38,479
Less stockholder receivables - (231)
-------- --------
Total stockholders' equity 73,792 38,248
-------- --------
Total liabilities and stockholders' equity $197,761 $164,342
======== ========
</TABLE>
See accompanying notes.
<PAGE>
GLOBAL IMAGING SYSTEMS, INC
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS EXCEPT PER-SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1998 1997
------------- -------------
<S> <C> <C>
Revenues:
Equipment and supplies sales $51,958 $30,543
Service and rentals 15,048 10,860
------- -------
Total revenues 67,006 41,403
Costs and operating expenses:
Cost of equipment and supplies sales 37,922 22,363
Service and rental costs 7,549 5,216
Selling, general and administrative expenses 14,004 9,460
Intangible asset amortization 943 753
------- -------
Total costs and operating expenses 60,418 37,792
------- -------
Income from operations 6,588 3,611
Interest expense 1,456 1,616
------- -------
Income before income taxes and extraordinary item 5,132 1,995
Income taxes 2,295 990
------- -------
Income before extraordinary item 2,837 1,005
Extraordinary charge for early retirement of debt,
net of tax benefit of $774 (1,133) -
------- -------
Net income 1,704 1,005
Yield adjustment on Class A common stock and accretions - (434)
------- -------
Net Income available to common stockholders $ 1,704 $ 571
======= =======
Basic earnings per share:
Income before extraordinary item, including
yield adjustment and accretions $ 0.16 $ 0.06
Extraordinary charge for early retirement of debt,
net of tax benefit of $774 (0.06) -
------- -------
Net income per share $ 0.10 $ 0.06
======= =======
Diluted earnings per share:
Income before extraordinary item, including
yield adjustment and accretions $ 0.16 $ 0.06
Extraordinary charge for early retirement of debt,
net of tax benefit of $774 (0.06) -
------- -------
Net income per share $ 0.10 $ 0.06
======= =======
Weighted average number of shares outstanding (in thousands):
Basic 17,642 9,549
Diluted 17,700 9,549
</TABLE>
See accompanying notes.
<PAGE>
GLOBAL IMAGING SYSTEMS, INC
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS EXCEPT PER-SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30,
1998 1997
------------- -------------
<S> <C> <C>
Revenues:
Equipment and supplies sales $ 95,292 $45,725
Service and rentals 29,916 17,590
-------- -------
Total revenues 125,208 63,315
Costs and operating expenses:
Cost of equipment and supplies sales 68,809 32,636
Service and rental costs 14,555 8,520
Selling, general and administrative expenses 27,293 14,962
Intangible asset amortization 1,844 1,316
-------- -------
Total costs and operating expenses 112,501 57,434
-------- -------
Income from operations 12,707 5,881
Interest expense 3,686 2,554
-------- -------
Income before income taxes and extraordinary item 9,021 3,327
Income taxes 4,096 1,651
-------- -------
Income before extraordinary item 4,925 1,676
Extraordinary charge for early retirement of debt,
net of tax benefit of $1,241 (1,817) -
-------- -------
Net income 3,108 1,676
Yield adjustment on Class A common stock and accretions (901) (816)
-------- -------
Net Income available to common stockholders $ 2,207 $ 860
======== =======
Basic earnings per share:
Income before extraordinary item, including
yield adjustment and accretions $ 0.28 $ 0.09
Extraordinary charge for early retirement of debt,
net of tax benefit of $1,241 (0.13) -
-------- -------
Net income per share $ 0.15 $ 0.09
======== =======
Diluted earnings per share:
Income before extraordinary item, including
yield adjustment and accretions $ 0.27 $ 0.09
Extraordinary charge for early retirement of debt,
net of tax benefit of $1,241 (0.12) -
-------- -------
Net income per share $ 0.15 $ 0.09
======== =======
Weighted average number of shares outstanding (in thousands):
Basic 14,601 9,432
Diluted 15,122 9,432
</TABLE>
See accompanying notes.
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30,
1998 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $3,108 $1,676
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 2,162 1,560
Amortization 5,064 1,502
Deferred income taxes 220 -
Changes in operating assets and liabilities, net of amounts acquired in
purchase business combinations:
Accounts receivable (7,355) (2,209)
Inventory (2,693) (185)
Prepaid expenses and other current assets (626) (115)
Other assets (148) (173)
Accounts payable 3,735 798
Accrued liabilities 89 3,171
Deferred revenue 86 328
Income taxes (293) 417
-------- --------
Net cash provided by operating activities 3,349 6,770
INVESTING ACTIVITIES
Related party notes receivable - (500)
Purchase of property, equipment and rental equipment (2,037) (1,727)
Payment for purchase of businesses, net of cash acquired (20,101) (42,309)
-------- --------
Net cash used in investing activities (22,138) (44,536)
FINANCING ACTIVITIES
Net draws (payments) under line of credit (9,766) 38,525
Financing fees (1,599) (5)
Common stock redemption and retirement (35,339) -
Common stock issued for cash 65,832 4,503
-------- --------
Net cash provided by financing activities 19,128 43,023
-------- --------
Net increase in cash and cash equivalents 339 5,257
Cash and cash equivalents, beginning of period 4,496 961
-------- --------
Cash and cash equivalents, end of period $ 4,835 $ 6,218
======== ========
</TABLE>
See accompanying notes.
<PAGE>
GLOBAL IMAGING SYSTEMS, INC
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
(IN THOUSANDS EXCEPT FOR SHARE AMOUNTS)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
COMMON STOCK COMMON STOCK COMMON STOCK COMMON STOCK
--------------------------------------------------------------------------
SHARES PAR SHARES PAR SHARES PAR SHARES PAR
VALUE VALUE VALUE VALUE
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at March 31, 1998 339,945 $ 3 9,521,101 $ 95 904,252 $ 9 $ -
Common stock issued in
Initial Public Offering 6,000,000 60
Common stock issued in
conjunction with Acquisitions 397,811 4
Common stock retired (339,945) (3)
Dividend -
Class A common stock
Common stock converted (9,521,101) (95) (904,252) (9) 11,583,639 116
Cost of Initial Public Offering
Net Income
--------------------------------------------------------------------------
Balances at September 30, 1998 - $ - - $ - - $ - 17,981,450 $180
==========================================================================
ADDITIONAL
PAID-IN STOCKHOLDER RETAINED
CAPITAL RECEIVABLES EARNINGS TOTAL
-----------------------------------------------------
<C> <C> <C> <C>
Balances at March 31, 1998 $ 33,618 $(231) $4,754 $ 38,248
Common stock issued in
Initial Public Offering 66,900 66,960
Common stock issued in
conjunction with Acquisitions 3,412 3,416
Common stock retired (30,459) 231 (133) (30,364)
Dividend -
Class A common stock (4,975) (4,975)
Common stock converted (12) -
Cost of Initial Public Offering (2,601) (2,601)
Net Income 3,108 3,108
-----------------------------------------------------
Balances at September 30, 1998 $ 70,858 $ - $2,754 $73,792
=====================================================
</TABLE>
See accompanying notes.
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying consolidated balance sheet as of September 30, 1998,
consolidated statements of operations for the three and six months ended
September 30, 1998 and September 30, 1997, the consolidated statements of cash
flows for the six months ended September 30, 1998 and September 30, 1997, and
the consolidated statement of stockholders' equity for the six months ended
September 30, 1998 are unaudited. In the opinion of management, all
adjustments, consisting of normal recurring accruals, necessary for a fair
presentation of the results of operations for the interim periods presented have
been reflected herein. The results of operations for the interim periods are
not necessarily indicative of the results which may be expected for the entire
fiscal year. The consolidated financial statements should be read in conjunction
with the consolidated financial statements and the notes thereto included in the
Registration Statement on Form S-1, File No. 333-48103, filed by Global Imaging
Systems, Inc. (together with its subsidiaries, "Global" or the "Company") and
declared effective by the Securities and Exchange Commission on June 17, 1998.
NOTE 2. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings Per Share, which is effective for annual and interim periods
ending after December 15, 1997. Statement No. 128 requires the dual
presentation of basic and diluted earnings per share ("EPS") for complex capital
structures on the consolidated statement of operations. Basic EPS is computed
by dividing net income by the weighted average number of shares outstanding for
the period. Diluted EPS reflects the potential dilution from the exercise of
stock options or the conversion of securities into stock. Global has
implemented Statement No. 128 for the three and six months ended September 30,
1998 and September 30, 1997.
The following table reconciles the numerators and denominators of the basic and
diluted EPS computations:
(In thousands except per share amounts)
<TABLE>
<CAPTION>
For Three Months Ended For Six Months Ended
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Numerator:
Income before extraordinary item $2,837 $1,005 $4,925 $1,678
Extraordinary charge for early
retirement of debt, net of tax benefit 1,133 - 1,817 -
------------- ------------- ------------- -------------
Net income 1,704 1,005 3,108 1,676
Yield adjustment of Class A common stock
and accretions - 434 901 816
------------- ------------- ------------- -------------
Numerator for basic and diluted earnings per
share - income available to common
stockholders $1,704 $ 571 $2,207 $ 860
============= ============= ============= =============
Denominator:
Denominator for basic earnings per share 17,642 9,549 14,601 9,432
Effect of dilutive securities:
Contingent stock-redemption of A shares in
June 1998 490
Employee stock options 58 31
------------- ------------- ------------- -------------
Dilutive potential common shares 58 521
Denominator for diluted earnings per share -
adjusted weighted average shares and
assumed conversions 17,700 9,549 15,122 9,432
============= ============= ============= =============
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Basic earnings per share:
Earnings per share before extraordinary
item, including yield adjustments and
adjustments and accretions $0.16 $0.06 $0.28 $0.09
Extraordinary charge for early retirement
of debt, net of tax benefit (0.06) - (0.13) -
------------- ------------- ------------- -------------
Net income per share $0.10 $0.06 $0.15 $0.09
============= ============= ============= ==============
Diluted earnings per share:
Earnings per share before extraordinary
item, including yield adjustments
and accretions $0.16 $0.06 $0.27 $0.09
Extraordinary charge for early retirement
of debt, net of tax benefit (0.06) (0.12)
------------- ------------- ------------- -------------
Net Income per share $0.10 $0.06 $0.15 $0.09
============= ============= ============= ==============
</TABLE>
NOTE 3. INITIAL PUBLIC OFFERING AND USE OF PROCEEDS
In April 1998, the Board of Directors approved a change in the Company's capital
stock structure, authorizing 10,000,000 shares of $.01 par value preferred
stock, 50,000,000 shares of $.01 par value Class B common stock and 905,000
shares of $.01 par value Class C common stock. The Board also authorized a 132-
for-1 stock 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 the consummation of the initial public
offering; the redemption of each share of Class A common stock for $90 plus 8%
per annum from the time of its purchase through May 31, 1998 and approximately
3.41 shares of Class B common stock upon the consummation of the initial public
offering; and renamed its class B common stock ("Common Stock").
In June 1998, the Company sold 6,000,000 shares of the Company's Common Stock,
par value $.01, in an initial public offering. The aggregate offering price of
the 6,000,000 shares was $72,000,000. After deducting expenses, the Company
received approximately $64,185,000 in proceeds from the initial public offering.
Of the $64,185,000 in estimated net proceeds to the Company, $28,831,000 was
used to repay amounts due Jackson National Life Insurance Company ("JNL"). The
remaining approximately $35,354,000 in proceeds was used to pay the cash portion
of the redemption price of the Company's Class A Common Stock, redeemed upon the
closing of the initial public offering.
NOTE 4. RETIREMENT OF DEBT
In June 1998, the Company repaid $31.5 million of long-term debt outstanding to
JNL, principally with proceeds from the initial public offering. Recognition of
a prepayment penalty of $250,000 and deferred financing costs of $901,000
related to the JNL debt repayment resulted in an extraordinary charge of
$684,000 ($.06 per share), net of related income tax benefit of $467,000. In
July 1998, the Company repaid the remaining $65.8 million balance of the JNL
loan with proceeds from a replacement credit agreement with First Union National
Bank ("First Union"). The Company recognized the remaining pro rata deferred
financing costs of $1,907,000 from the JNL loan, resulting in an extraordinary
charge of $1,133,000 ($.06 per share), net of related income tax benefit of
$774,000. The Credit Agreement with First Union consists of a $5.0 million
swingline line of credit and a $170.0 million revolving line of credit. The
Credit Agreement bears interest at rates ranging from 0.75% 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 varies according to the Company's ratio of its total funded
debt to earnings before interest, taxes, depreciation, and amortization. Amounts
borrowed under the Credit Agreement may be repaid and reborrowed over the life
of the Credit Agreement, with a final maturity date of July 31, 2003. Under the
9
<PAGE>
Credit Agreement, the Company has pledged substantially all of its assets,
including the capital stock of the Company's subsidiaries, to First Union.
Amounts borrowed under the Credit Agreement may be used to fund working capital
and general corporate purposes, including acquisitions.
NOTE 5. STOCK OPTIONS AND STOCK OPTION PLAN
The Board of Directors adopted a stock option plan, effective upon the closing
of the initial public offering. Under the terms of the stock option plan
1,820,000 shares of the Company's common stock may be sold pursuant to stock
options or granted or sold as restricted stock to directors, officers,
employees, and consultants to the Company. As of September 30, 1998 the Board
had granted options to purchase a total of 519,750 shares of common stock of the
Company under the stock option plan and an option to purchase 10,000 shares of
common stock of the Company outside of the stock option plan, all at an exercise
price of $12, equal to the offering price per share, in the Company's initial
public offering. All of these options are subject to vesting requirements based
on length of service.
NOTE 6. ACQUISITIONS
During the six months ended September 30, 1998 the Company acquired three
businesses that provide office-imaging solutions and related services. Aggregate
consideration for these three acquisitions was approximately $25,593,000,
including $21,200,000 in cash, plus stock valued at approximately $4,300,000,
and acquisition related expenses of $93,000. Liabilities totaling $3,757,000
were assumed by the Company in connection with these acquisitions. Goodwill of
approximately $21,315,000 was recorded related to these acquisitions. All
acquisitions were accounted for by the purchase method of accounting and
accordingly are included in the results of operations from their dates of
acquisitions.
Under the terms of one of its purchase agreements, the Company is committed to
make contingent payments (the Earn-out) of up to $600,000 to two of the former
owners of the acquired company on or before October 31, 2001. These contingent
payments are based on the future profitability, specifically earnings before
interest and taxes, of the acquired company.
The unaudited pro forma results presented below include the effects of the
acquisitions as if they had been consummated as of April 1, 1997. The unaudited
pro forma 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.
Unaudited Pro forma
Six Months ended September 30,
(In Thousands Except Per Share Amounts)
----------------------------------------
1998 1997
-------- --------
Revenues.............................. $141,395 $120,116
Net income before extraordinary item.. 5,028 767
Less extraordinary item............... (1,817) -
-------- --------
Net income............................ $ 3,211 $ 767
======== ========
10
<PAGE>
Basic earnings per share:
Income before extraordinary item,
including yield adjustment and
accretions.......................... $ 0.23 $ (0.03)
Net income per share................. $ 0.13 $ (0.03)
Diluted earnings per share:
Income before extraordinary item,
including yield adjustment and
accretions.......................... $ 0.22 $ (0.03)
Net income per share................. $ 0.12 $ (0.03)
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The discussion below contains forward-looking statements which involve known
and unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company or its industry to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others: the Company's need for substantial additional funding to continue
to implement its acquisition strategy and its ability to obtain such funding,
the Company's dependence on its suppliers, the ability of the Company and
various third parties to make the Company's software Year 2000 compliant at
projected costs and on anticipated timetables, the pace and effects of
technological developments in the Company's industry and other risk factors
discussed in the Company's Registration Statement on Form S-1, File No. 333-
48103, declared effective on June 17, 1998.
OVERVIEW
The Company 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 document imaging management (DIM) systems as well as network
integration and management services. Since its founding, the Company has
acquired ten core companies primarily in the Northeast, Southeast, and Pacific
Northwest, and 17 additional satellite companies that have been integrated into
the core companies. The first acquisition was completed in August 1994.
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 service revenues are impacted by price,
general economic conditions, service reputation, and competitors' actions in the
marketplace. Revenues 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
11
<PAGE>
systems or document imaging systems ("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 selected consolidated financial information as
a percentage of total revenues.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------- ---------------------------
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Equipment and supplies sales........... 77.5% 73.8% 76.1% 72.2%
Service and rentals.................... 22.5 26.2 23.9 27.8
----- ----- ----- -----
Total revenues........................... 100.0 100.0 100.0 100.0
Costs and operating expenses:
Cost of equipment and supplies
sales................................. 56.6 54.0 55.0 51.5
Service and rental costs............... 11.3 12.6 11.6 13.5
Selling, general, and
administrative expenses............... 20.9 22.9 21.8 23.6
Intangible asset amortization.......... 1.4 1.8 1.5 2.1
----- ----- ----- -----
Total costs and operating expenses....... 90.2 91.3 89.9 90.7
----- ----- ----- -----
Income from operations................... 9.8 8.7 10.1 9.3
Interest expense......................... 2.2 3.9 2.9 4.0
----- ----- ----- -----
Income before income taxes and
extraordinary item..................... 7.6 4.8 7.2 5.3
Income taxes............................. 3.4 2.4 3.3 2.6
----- ----- ----- -----
Income before extraordinary item......... 4.2 2.4 3.9 2.7
Extraordinary charge for early
retirement of debt, net of tax benefit.. (1.7) - (1.4) -
----- ----- ----- -----
Net Income............................... 2.5% 2.4% 2.5% 2.7%
===== ===== ===== =====
</TABLE>
12
<PAGE>
Three Months Ended September 30, 1998 Compared to Three Months Ended
September 30, 1997
Revenues
Total revenues increased 61.8% from $41.4 million for the three months ended
September 30, 1997 to $67.0 million for the three months ended September 30,
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.
Equipment and supplies sales increased 70.1% from $30.5 million, or 73.8% of
total revenues, for the three months ended September 30, 1997 to $52.0 million,
or 77.5% of total revenues, for the three months ended September 30, 1998. The
equipment component of sales of the businesses acquired during 1997 and 1998 was
a larger portion of total revenues than for the Company's existing businesses.
Service and rental revenues increased 38.6% from $10.9 million, or 26.2% of
total revenues for the three months ended September 30, 1997 to $15.0 million,
or 22.5% of total revenues, for the three months ended September 30, 1998. The
change in the percentage of total revenues attributable to service and rental
revenues is consistent with the change in the revenue mix described above.
Gross Profit
Total gross profit increased 55.8% from $13.8 million, or 33.4% of total
revenues, for the three months ended September 30, 1997 to $21.5 million, or
32.1% of total revenues, for the three months ended September 30, 1998. The
change in total gross profit margins from year to year was due primarily 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, electronic presentation systems and DIM systems dealers derive a
higher percentage of total revenues from sales of equipment and supplies. The
gross profit margins on equipment sold by office equipment dealers typically are
higher than the equipment gross profit margins in network integration,
electronic presentation and DIM systems. 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 52.0% for the
three months ended September 30, 1997 and 49.8% for the three months ended
September 30, 1998.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 48.0% from $9.5
million, or 22.9% of revenues, for the three months ended September 30, 1997 to
$14.0 million, or 20.9% of revenues, for the three months ended September 30,
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 61.8%
without a proportionate increase in selling, general, and administrative
expenses.
13
<PAGE>
Intangible Asset Amortization
For the three months ended September 30, 1997 and 1998, asset amortization
was $.8 million and $.9 million, respectively. Asset amortization includes the
amortization of goodwill and non-compete agreements from acquisitions.
Income From Operations
Income from operations increased 82.4% from $3.6 million, or 8.7% of total
revenues, for the three months ended September 30, 1997 to $6.6 million, or 9.8%
of total revenues, for the three months ended September 30, 1998.
Interest Expense
Interest expense decreased 9.9%, from $1.6 million for the three months ended
September 30, 1997 to $1.5 million for the three months ended September 30,
1998. The decrease was primarily due to the reduction in the Company's
borrowings, as $31.5 million of long-term debt was repaid in June 1998 with
proceeds from the initial public offering. Also, the Company's credit facility
with First Union bears interest at lower rates than the JNL loan it replaced.
The proceeds from the additional borrowings incurred during the quarters ended
September 30, 1997 and 1998 were used to fund the cost of the businesses
acquired. Interest expense includes the amortization of financing fees incurred
in connection with the Company's credit facility from JNL in 1997 and First
Union in 1998.
Income Taxes
The provision for income taxes was $1.0 million for the three months ended
September 30, 1997 and $2.3 million for the three months ended September 30,
1998. The increase in income taxes was primarily due to increased pre-tax
income resulting from the inclusion of businesses acquired during 1997 and 1998.
The effective income tax rate decreased from 49.6% for the three months ended
September 30, 1997 to 44.7% for the three months ended September 30, 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.
Extraordinary Charge
During July 1998, the Company retired the remaining $65.8 million of long-
term debt payable to JNL due in 2004. Recognition of the deferred financing
costs of $1,907,000 related to the long-term debt repayment resulted in an
extraordinary charge of $1,133,000 ($.06 per share), net of related income tax
benefit of $774,000.
Six Months Ended September 30, 1998 Compared to Six Months Ended September 30,
1997
Revenues
Total revenues increased 97.8% from $63.3 million for the six months ended
September 30, 1997 to $125.2 million for the six months ended September 30,
14
<PAGE>
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.
Equipment and supplies sales increased 108.4% from $45.7 million, or 72.2% of
total revenues, for the six months ended September 30, 1997 to $95.3 million, or
76.1% of total revenues, for the six months ended September 30, 1998. The
equipment component of sales of the businesses acquired during 1997 and 1998 was
a larger portion of total revenues than for the Company's existing businesses.
Service and rental revenues increased 70.1%, from $17.6 million, or 27.8% of
total revenues for the six months ended September 30, 1997 to $29.9 million, or
23.9% of total revenues, for the six months ended September 30, 1998. The
change in the percentage of total revenues attributable to service and rental
revenues is consistent with the change in the revenue mix described above.
Gross Profit
Total gross profit increased 88.8% from $22.2 million, or 35.0% of total
revenues, for the six months ended September 30, 1997 to $41.8 million, or 33.4%
of total revenues, for the six months ended September 30, 1998. The change in
total gross profit margins from year to year was primarily 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,
electronic presentation systems and DIM systems dealers derive a higher
percentage of total revenues from sales of equipment and supplies. The gross
profit margins on equipment sold by office equipment dealers are typically
higher than the equipment gross profit margins in network integration,
electronic presentation and DIM systems. 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 51.6% for the
six months ended September 30, 1997 and 51.3% for the six months ended September
30, 1998.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 82.4% from $15.0
million, or 23.6% of revenues, for the six months ended September 30, 1997 to
$27.3 million, or 21.8% of revenues, for the six months ended September 30,
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 97.8%
without a proportionate increase in selling, general, and administrative
expenses.
Intangible Asset Amortization
For the six months ended September 30, 1997 and 1998, asset amortization was
$1.3 million and $1.8 million, respectively. Asset amortization includes the
amortization of goodwill and non-compete agreements from acquisitions.
15
<PAGE>
Income From Operations
Income from operations increased 116.1% from $5.9 million, or 9.3% of total
revenues, for the six months ended September 30, 1997 to $12.7 million, or 10.1%
of total revenues, for the six months ended September 30, 1998.
Interest Expense
Interest expense increased 44.3%, from $2.6 million for the six months ended
September 30, 1997 to $3.7 million for the six months ended September 30, 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 Company's credit facility from
JNL in 1997 and First Union in 1998.
Income Taxes
The provision for income taxes was $1.7 million for the six months ended
September 30, 1997 and $4.1 million for the six months ended September 30, 1998.
The increase in income taxes was primarily due to increased pre-tax income
resulting from the inclusion of businesses acquired during 1997 and 1998. The
effective income tax rate decreased from 49.6% for the six months ended
September 30, 1997 to 45.4% for the six months ended September 30, 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.
Extraordinary Charge
During June and July 1998 the company retired $97.3 million of long-term debt
payable to JNL due in 2004. Recognition of the prepayment penalty of $250,000
and deferred financing costs of $2,808,000 related to the long-term debt
repayment resulted in an extraordinary charge of $1,817,000 ($.13 per share),
net of related income tax benefit of $1,241,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations during the first six months of the
fiscal year 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.
In June 1998, the Company repaid $31.5 million of long-term debt outstanding
to JNL principally with proceeds from the Company's initial public offering. In
July, the Company repaid the remaining $65.8 million balance of the JNL loan
with proceeds from a replacement credit agreement with First Union. The
Company's credit agreement with First Union (the "Credit Agreement") consists of
a $5.0 million swingline line of credit and a $170.0 million revolving line of
credit for acquisitions and for working capital purposes. At September 30,
1998, $87.6 million was outstanding under the credit facility, $1.6 million of
16
<PAGE>
which was outstanding under the swingline line of credit and $86.0 million of
which was outstanding under the revolving line of credit. The Credit Agreement
bears interest at rates ranging from 0.75% 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 varies according to the Company's ratio of its total funded debt to
earnings before interest, taxes, depreciation, and amortization. Amounts
borrowed under the Credit Agreement may be repaid and reborrowed over the life
of the Credit Agreement, with a final maturity date of July 31, 2003. Under the
Credit Agreement, the Company has pledged substantially all of its assets,
including the capital stock of the Company's subsidiaries, to First Union. The
terms of the Credit Agreement require strict compliance with numerous
affirmative, negative and financial 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. Amounts borrowed under the Credit Agreement may be
used 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.
For the six months ended September 30, 1998 the net cash provided by
operations was $3.3 million and for the six months ended September 30, 1997 the
net cash provided by operations was $6.8 million. For the six months ended
September 30, 1998 and for the six months ended September 30, 1997 the Company's
net cash used in investing activities was $22.1 million and $44.5 million,
respectively, primarily for the purchase of acquired businesses and also for the
purchase of property and equipment and rental equipment. For the six months
ended September 30, 1998 and the six months ended September 30, 1997, the
Company's net cash provided by financing activities was $19.1 million and $43.0
million, respectively. Net cash provided by financing activities consists of
equity capital provided by Golder, Thoma, Cressey, Rauner Fund IV Limited
Partnership, JNL, and certain members of management of the Company and Acquired
Businesses, net borrowings under the Credit Agreements and for the six months
ended September 30, 1998 the net proceeds to the Company of the Initial Public
Offering.
The Company believes that the Credit Agreement, together with the cash on
hand 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. The Company is currently in
discussions with First Union to increase the total amount of the Credit
Agreement from $175 million to $250 million. The Company has not yet received a
commitment from First Union regarding this increase, and there can be no
assurance that it will succeed in obtaining such increase. The Company expects
that if it is successful in obtaining this additional financing from First
Union, the terms of the amended Credit Agreement will be similar to the existing
Credit Agreement. The Company plans to use the additional financing, if
obtained, primarily to fund acquisitions.
YEAR 2000 SOFTWARE ISSUE
With the exception of historical information such as the Company's costs and
efforts to date relating to year 2000 issues, the discussion in this section
consists of forward looking statements that involve risks and uncertainties.
The Company's success in addressing year 2000 issues, and the impact of year
2000 issues on the Company's business, results of operations or financial
17
<PAGE>
condition, could differ materially from the description that follows. Factors
that could cause or contribute to such differences include, but are not limited
to, those discussed below.
In 1998, the Company established a formal plan to address risks associated
with the "year 2000 issue," which relates to the potential inability of computer
systems and equipment to function properly as a result of their inability to
recognize or process dates occurring after 1999. The Company's year 2000 plan
addresses the following areas: (i) information technology ("IT") systems used in
the Company's internal operations, including accounting, data processing and
telephone systems; (ii) non-IT systems used in the Company's internal
operations, including alarm systems and fax machines; (iii) the state and impact
of year 2000 readiness of products sold by the Company (which the Company
primarily purchases from third party vendors); and (iv) certain operational
systems of the Company's critical suppliers and customers that may affect the
Company. As discussed below, the Company's year 2000 plan involves (i)
identifying and assessing the potential year 2000 risks faced by the Company,
(ii) remediating any year 2000 noncompliance identified by the Company's
assessment; (iii) testing the year 2000 readiness of the Company's systems; and
(iv) planning for year 2000 contingencies.
State of Year 2000 Readiness
The Company is currently in the early stages of reviewing its overall
exposure to year 2000 risks. The Company's plan to address the impact of the
year 2000 issue on its IT and non-IT systems involves (i) making an inventory of
potentially date sensitive devices and software, (ii) assessing the systems
affected by these devices and software, (iii) remediating or replacing these
systems as necessary, and (iv) testing its systems to confirm year 2000
readiness. Both IT and non-IT systems contain embedded technology, which
complicates the Company's year 2000 assessment and remediation efforts.
The Company estimates that it has completed approximately 35% (in terms of
time spent) of the inventory and assessment phases of this process, and expects
to complete these phases by the end of March 1999. The Company plans to begin
the remediation phase as its assessments reveal a need to remediate or replace
its systems. Although the Company does not yet know how extensive its
remediation efforts will need to be, the Company currently expects to begin
remediating its systems in November 1998 and to complete this phase by March
1999. The testing phase of the Company's year 2000 plan will be conducted
beginning January 1999 and is expected to be completed by March 1999. The
planned timing of these phases is based on management's best estimates, which
were derived using numerous assumptions regarding future events, including the
results of the Company's year 2000 assessment, the continued availability of
certain resources and the implementation and success of third party remediation
plans. There can be no assurance that these estimates will prove to be
accurate, and actual results could differ materially as a result of many
factors, including the Company's ability to identify, assess, remediate and test
all relevant systems and technology embedded in those systems.
To the extent that the Company has completed its year 2000 assessment of its
IT systems, the Company's assessment has not revealed substantial year 2000
noncompliance. Specifically, for most Company functions, the Company utilizes
Optimizing Management Decisions ("OMD") software. The OMD Corporation has
stated that final year 2000 modifications to OMD software will be released
during the first quarter of 1999. The Company uses nationally known software
providers for both its general accounting and industry-specific systems and has
18
<PAGE>
been assured by the manufacturers or vendors of such products that these
applications will be year 2000 compliant by July 1999. The Company's assessment
of its non-IT systems is still at a preliminary stage.
The risk to the Company's business, results of operations or financial
condition that third parties and their products will not be year 2000 ready is
difficult to quantify, but could potentially be significant. The Company is in
the early stages of assessing the risks it faces from year 2000 noncompliance of
the products the Company sells (which are, for the most part, manufactured by
third parties), as well as risks associated with year 2000 unreadiness of its
critical suppliers and customers. The Company has sent questionnaires to its
critical suppliers and customers to determine their year 2000 readiness, and is
reviewing responses received to date to assess the impact of the year 2000
readiness of the Company's suppliers and customers.
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. If year 2000 issues impair the ability of
the Company's suppliers to provide products timely and at competitive prices,
the Company's business, results of operations and financial condition could be
materially and adversely affected. The Company does not rely upon any one
customer for the majority of its sales, or one product vendor for the bulk of
its purchases. No individual supplier represents more than 16% of equipment
purchases and the Company's top ten customers combined represent less than 15%
of the Company's total sales for the period ending fiscal year to date September
30, 1998. The Company believes that its large customer base will minimize the
effect on the Company of any year 2000 business disruption experienced by any of
its customers.
Costs to Address Year 2000 Issue
The Company has not incurred material historical costs associated with year
2000 remediation. The Company operates most of its systems on third party
software that it believes or has been informed is already year 2000 compliant.
The Company estimates its costs of remediation will be approximately $500,000,
and does not expect these costs to be material in any year to the Company's
consolidated financial condition, results of operations or cash flows. All
modification costs relating to the year 2000 issue are expensed as incurred and
are expected to be paid for out of internally generated funds.
The Company's estimate of remediation costs is based on numerous assumptions
regarding future events, including the results of the Company's year 2000
assessment, continued availability of certain resources and the implementation
and success of third party remediation plans. There can be no assurance that
this estimate will prove to be accurate, and actual costs could differ
materially as a result of many factors, including those discussed in this
section.
Risks Related to the Year 2000 Issue
In evaluating year 2000 risks to the Company, the Company has identified and
evaluated five mission-critical aspects of the business: Sales, Billing,
Service, Delivery and Accounting Information Systems. Should any of these
functions fail due to Year 2000 issues, a material disruption in business could
result.
19
<PAGE>
Sales: Should the Company's telecommunications system fail as a result of
Year 2000 issues, the Company's sales could be adversely affected. The Company
is currently in the process of confirming Year 2000 compliance by its third
party telecommunications providers. The Company believes its sales division
could remain fully operational if it experienced a disruption in
telecommunications service. Although the Company expects confirmation of Year
2000 compliance from its third party telecommunications providers, the Company
is preparing a contingency plan to continue sales operations without
telecommunication support.
Billing: The Company is dependent upon computerized billing systems. A
breakdown in IT billing systems could result in delayed or missed customer
payments. By March 1999, the Company expects to have completed the inventory
and assessment of all potentially affected IT systems. Based upon the level of
impairment, duplicate manual billing systems will be set in place to facilitate
uninterrupted service where the Company anticipates a possible problem.
Service: The Company utilizes a combination of manual and computerized
service dispatch systems. A disruption in the Company's computerized dispatch
system could result in delayed customer service. By March 1999, the Company
will have completed the inventory and assessment of all potentially affected IT
systems. Based upon the level of impairments, duplicate dispatch systems will
be set in place to facilitate uninterrupted service with regard to the uncertain
systems.
Delivery: The Company is heavily dependent upon timely delivery of products
from its product vendors as well as delivery to its customers. Any disruption
in product supply could result in low customer service and ultimately lost
sales. The Company is making every effort to ensure its suppliers and delivery
channels are adequately prepared to transition to the year 2000. If the Company
determines there is a likely possibility of untimely deliveries by its
suppliers, it will take appropriate steps to increase inventory of the affected
products.
Accounting Information Systems: The majority of the Company's accounting
information systems are computerized and susceptible to Year 2000 problems.
Failure to convert all affected systems could result in delayed or lost
financial data. The Company has prioritized evaluation of these systems and
expects to make remediations to affected systems by the first quarter of 1999.
Liability or Litigation Relating to Year 2000 Issues
In addition to the risk of failure of a function critical to the Company's
operations, the Company faces risks that are difficult to quantify relating to
potential liability resulting from the year 2000 issue. The breadth of
different products and services offered by the Company and uncertainty relating
to the meaning of the term "year 2000 compliant" could result in the Company
facing claims arising from the effect of the year 2000 issue on the products it
sells and services. The year 2000 readiness of the products the Company sells
depends on the implementation and success of efforts by the suppliers from whom
the Company purchases these products in making them year 2000 compliant. The
Company has begun the process of evaluating the risks it faces from such
noncompliance, and expects to complete its assessment by the end of the first
quarter of 1999. The Company cannot currently estimate the risks it faces from
such potential liability or litigation.
Although the Company's year 2000 efforts and the contingency plans described
above are intended to minimize the adverse effects of the year 2000 issue on the
20
<PAGE>
Company's business and operations, the actual effects of the issue and the
success or failure of the Company's efforts described above cannot be known
until the year 2000. Failure by the Company, major suppliers of computer
systems and equipment used in the Company's operations, and major vendors and
customers of products or services sold by the Company to address adequately
their respective year 2000 issues in a timely manner could have a material
adverse effect on the Company's business, results of operations and financial
condition.
Contingency Plans
The Company is in the process of forming contingency plans to address the
year 2000 issue, and expects this planning stage to continue to be an active
process through 1999. As the Company's identification and evaluation of the
risks it faces progresses, the Company will develop plans to handle these
scenarios. The Company expects to continually revise its contingency planning
as it receives information regarding third party year 2000 readiness, and as it
integrates future acquisitions.
PART II--OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds.
(c) On August 31, 1998, the company issued 22,201 shares of Common Stock to
the Stockholders of Centre Business Products, Inc. ("Centre") as payment for ten
percent of the outstanding stock of Centre. The offer and sale of the Company's
Common Stock was made to accredited investors and was exempt from registration
under the Securities Act of 1933 as amended pursuant to Rule 506 thereunder.
On September 16, 1998, the Company issued 332,344 shares of Common Stock to
the Stockholders of Carr Business Systems of Great Neck, Inc. ("Carr") as
payment for twenty percent of the outstanding stock of Carr. The offer and sale
of the Company's Common Stock was made to accredited investors and was exempt
from registration pursuant to Rule 506.
On September 28, 1998, the Company issued 43,266 shares of Common Stock to
the Stockholders of ProView, Inc. ("ProView") as payment for ten percent of the
outstanding stock of ProView. The offer and sale of Common Stock was made to
accredited investors and was exempt from registration pursuant to Rule 506.
ITEM 6. Exhibits and Reports on Form 8-K.
<TABLE>
<CAPTION>
(A) EXHIBITS
NUMBER EXHIBIT
------ -------
<C> <S>
*3.1 Amended and Restated Certificate of Incorporation
*3.2 Amended and Restated Bylaws
*4.1 Specimen Common Stock Certificate
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
NUMBER EXHIBIT
------ -------
<C> <S>
10.1 Credit Agreement, dated as of July 31, 1998, by and among the
Company and its subsidiaries, as Borrowers, the Lenders referred
to therein, First Union National Bank, as Administrative Agent,
and ScotiaBanc, Inc., as Documentation Agent.
10.2 Stock Purchase Agreement, dated as of August 31, 1998, by and
among Global and Southern Business Communications, Inc. ("SBC") as
Buyer, Centre Business Products, Inc., and the shareholders
thereof, as Sellers.
**10.3 Stock Purchase Agreement, dated as of September 16, 1998, by and
among the Company, Carr Acquisition Corporation as Buyer, Carr
Business Machines of Great Neck Inc. and Paul Schulman and Robert
Smith as Sellers.
10.4 Stock Purchase Agreement, dated as of September 28, 1998, by and
among Global and SBC as Buyer, ProView, Inc., and the shareholders
thereof, as Sellers.
***11.1 Statement of Computation of Per Share Earnings
27.1 Financial Data Schedule
</TABLE>
* Incorporated by reference to the Registrant's Registration Statement on
Form S-1, No. 333-48103, which was declared effective by the Securities and
Exchange Commission on June 17, 1998.
** Incorporated by reference to the Registrant's Current Report on Form 8-K
filed with the SEC on September 29, 1998.
*** See Note 2 to the Notes to Consolidated Financial Statements
(B) REPORTS ON FORM 8-K.
On September 29, 1998, the Company filed with the SEC a Current Report on Form
8-K (the "Report") to report an acquisition of assets. Financial statements
relating to such acquisition have not yet been filed with the SEC, but will be
filed with an amendment to the Report no later than November 30, 1998.
22
<PAGE>
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Global Imaging Systems, Inc.
--------------------------------------------
(Registrant)
November 12, 1998 /s/ Raymond Schilling
- ------------------------ --------------------------------------------
Date Raymond Schilling
Chief Financial Officer, Secretary, and
Treasurer, (Duly Authorized Officer and
Principal Financial and Accounting Officer)
23
<PAGE>
EXHIBIT INDEX
-------------
(Pursuant to item 601 of Regulation S-K)
NUMBER EXHIBIT
------ -------
*3.1 Amended and Restated Certificate of Incorporation
*3.2 Amended and Restated Bylaws
*4.1 Specimen Common Stock Certificate
10.1 Credit Agreement, dated as of July 31, 1998, by and among the
Company and its subsidiaries, as Borrowers, the Lenders referred
to therein, First Union National Bank, as Administrative Agent,
and ScotiaBanc, Inc., as Documentation Agent.
10.2 Stock Purchase Agreement, dated as of August 31, 1998, by and
among Global and Southern Business Communications, Inc. ("SBC") as
Buyer, Centre Business Products, Inc., and the shareholders
thereof, as Sellers.
**10.3 Stock Purchase Agreement, dated as of September 16, 1998, by and
among the Company, Carr Acquisition Corporation as Buyer, Carr
Business Machines of Great Neck Inc. and Paul Schulman and Robert
Smith as Sellers.
10.4 Stock Purchase Agreement, dated as of September 28, 1998, by and
among Global and SBC as Buyer, ProView, Inc., and the shareholders
thereof, as Sellers.
***11.1 Statement of Computation of Per Share Earnings
27.1 Financial Data Schedule
* Incorporated by reference to the Registrant's Registration Statement on
Form S-1, No. 333-48103, which was declared effective by the Securities and
Exchange Commission on June 17, 1998.
** Incorporated by reference to the Registrant's Current Report on Form 8-K
filed with the SEC on September 29, 1998.
*** See Note 2 to the Notes to Consolidated Financial Statements
24
<PAGE>
EXHIBIT 10.1
================================================================================
CREDIT AGREEMENT
dated as of July 31, 1998,
by and among
GLOBAL IMAGING SYSTEMS, INC.
and the Material Subsidiaries thereof party hereto,
as Borrowers,
the Lenders referred to herein,
FIRST UNION NATIONAL BANK,
as Administrative Agent,
and
SCOTIABANC INC.,
as Documentation Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS........................................................................................ 1
SECTION 1.1 Definitions.................................................................................. 1
SECTION 1.2 General...................................................................................... 16
SECTION 1.3 Other Definitions and Provisions............................................................. 16
ARTICLE II REVOLVING CREDIT FACILITY......................................................................... 16
SECTION 2.1 Revolving Credit Loans....................................................................... 16
SECTION 2.2 Swingline Loans.............................................................................. 17
SECTION 2.3 Procedure for Advances of Revolving Credit Loans and Swingline Loans......................... 18
SECTION 2.4 Repayment of Loans........................................................................... 19
SECTION 2.5 Notes........................................................................................ 20
SECTION 2.6 Permanent Reduction of the Aggregate Commitment.............................................. 20
SECTION 2.7 Termination of Credit Facility............................................................... 21
SECTION 2.8 Use of Proceeds.............................................................................. 21
SECTION 2.9 Security..................................................................................... 21
ARTICLE III LETTER OF CREDIT FACILITY........................................................................ 21
SECTION 3.1 L/C Commitment............................................................................... 21
SECTION 3.2 Procedure for Issuance of Letters of Credit.................................................. 22
SECTION 3.3 Commissions and Other Charges................................................................ 22
SECTION 3.4 L/C Participations........................................................................... 23
SECTION 3.5 Reimbursement Obligation of the Borrowers.................................................... 24
SECTION 3.6 Obligations Absolute......................................................................... 24
SECTION 3.7 Effect of Application........................................................................ 25
ARTICLE IV GENERAL LOAN PROVISIONS........................................................................... 25
SECTION 4.1 Interest..................................................................................... 25
SECTION 4.2 Notice and Manner of Conversion or Continuation of Loans..................................... 28
SECTION 4.3 Fees......................................................................................... 28
SECTION 4.4 Manner of Payment............................................................................ 29
SECTION 4.5 Crediting of Payments and Proceeds........................................................... 30
SECTION 4.6 Adjustments.................................................................................. 30
SECTION 4.7 Nature of Obligations of Lenders Regarding Extensions of Credit; Assumption by the
Administrative Agent........................................................................ 30
SECTION 4.8 Changed Circumstances........................................................................ 31
SECTION 4.9 Indemnity.................................................................................... 33
SECTION 4.10 Capital Requirements......................................................................... 33
SECTION 4.11 Taxes........................................................................................ 33
</TABLE>
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<TABLE>
<S> <C>
ARTICLE V CLOSING; CONDITIONS OF CLOSING AND BORROWING........................................................ 35
SECTION 5.1 Closing....................................................................................... 35
SECTION 5.2 Conditions to Closing and Initial Extensions of Credit........................................ 35
SECTION 5.3 Conditions to All Loans and Letters of Credit................................................. 39
SECTION 5.4 Post-Closing Covenants........................................................................ 40
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE BORROWERS.................................................... 40
SECTION 6.1 Representations and Warranties................................................................ 40
SECTION 6.2 Survival of Representations and Warranties, Etc............................................... 47
ARTICLE VII FINANCIAL INFORMATION AND NOTICES................................................................. 47
SECTION 7.1 Financial Statements and Projections.......................................................... 47
SECTION 7.2 Officer's Compliance Certificate.............................................................. 48
SECTION 7.3 Accountants' Certificate...................................................................... 48
SECTION 7.4 Other Reports................................................................................. 49
SECTION 7.5 Notice of Litigation and Other Matters........................................................ 49
SECTION 7.6 Accuracy of Information....................................................................... 50
ARTICLE VIII AFFIRMATIVE COVENANTS............................................................................ 50
SECTION 8.1 Preservation of Corporate Existence and Related Matters....................................... 50
SECTION 8.2 Maintenance of Property....................................................................... 50
SECTION 8.3 Insurance..................................................................................... 50
SECTION 8.4 Accounting Methods and Financial Records...................................................... 51
SECTION 8.5 Payment and Performance of Obligations........................................................ 51
SECTION 8.6 Compliance With Laws and Approvals............................................................ 51
SECTION 8.7 Environmental Laws............................................................................ 51
SECTION 8.8 Compliance with ERISA......................................................................... 51
SECTION 8.9 Compliance With Agreements.................................................................... 52
SECTION 8.10 Conduct of Business........................................................................... 52
SECTION 8.11 Visits and Inspections........................................................................ 52
SECTION 8.12 Additional Borrowers and Collateral........................................................... 52
SECTION 8.13 Additional Real Property Collateral........................................................... 53
SECTION 8.14 Year 2000 Compatibility....................................................................... 53
SECTION 8.15 Interest Rate Protection...................................................................... 53
SECTION 8.16 Further Assurances............................................................................ 53
ARTICLE IX FINANCIAL COVENANTS................................................................................ 54
SECTION 9.1 Leverage Ratio................................................................................ 54
SECTION 9.2 Senior Leverage Ratio......................................................................... 54
SECTION 9.3 Fixed Charge Coverage Ratio................................................................... 54
SECTION 9.4 Minimum Net Worth............................................................................. 55
</TABLE>
ii
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<TABLE>
<S> <C>
SECTION 9.5 Limitation on Rental Pool Capital Expenditures................................................ 55
ARTICLE X NEGATIVE COVENANTS.................................................................................. 55
SECTION 10.1 Limitations on Debt........................................................................... 55
SECTION 10.2 Limitations on Guaranty Obligations........................................................... 56
SECTION 10.3 Limitations on Liens.......................................................................... 57
SECTION 10.4 Limitations on Loans, Advances, Investments and Acquisitions.................................. 58
SECTION 10.5 Limitations on Mergers and Liquidation........................................................ 62
SECTION 10.6 Limitations on Sale of Assets................................................................. 63
SECTION 10.7 Limitations on Dividends and Distributions.................................................... 63
SECTION 10.8 Limitations on Exchange and Issuance of Capital Stock......................................... 63
SECTION 10.9 Transactions with Affiliates.................................................................. 64
SECTION 10.10 Certain Accounting Changes................................................................... 64
SECTION 10.11 Amendments; Payments and Prepayments of Subordinated Debt.................................... 64
SECTION 10.12 Restrictive Agreements....................................................................... 64
ARTICLE XI DEFAULT AND REMEDIES............................................................................... 64
SECTION 11.1 Events of Default............................................................................. 64
SECTION 11.2 Remedies...................................................................................... 67
SECTION 11.3 Rights and Remedies Cumulative; Non-Waiver; etc............................................... 68
ARTICLE XII THE ADMINISTRATIVE AGENT.......................................................................... 68
SECTION 12.1 Appointment................................................................................... 68
SECTION 12.2 Delegation of Duties.......................................................................... 68
SECTION 12.3 Exculpatory Provisions........................................................................ 68
SECTION 12.4 Reliance by the Administrative Agent.......................................................... 69
SECTION 12.5 Notice of Default............................................................................. 69
SECTION 12.6 Non-Reliance on the Administrative Agent and Other Lenders.................................... 70
SECTION 12.7 Indemnification............................................................................... 70
SECTION 12.8 The Administrative Agent in Its Individual Capacity........................................... 71
SECTION 12.9 Resignation of the Administrative Agent; Successor Administrative Agent....................... 71
SECTION 12.10 Documentation Agent.......................................................................... 71
ARTICLE XIII MISCELLANEOUS.................................................................................... 71
SECTION 13.1 Notices....................................................................................... 71
SECTION 13.2 Expenses; Indemnity........................................................................... 72
SECTION 13.3 Set-off....................................................................................... 73
SECTION 13.4 Governing Law................................................................................. 73
SECTION 13.5 Consent to Jurisdiction....................................................................... 73
SECTION 13.6 Binding Arbitration; Waiver of Jury Trial..................................................... 74
SECTION 13.7 Reversal of Payments.......................................................................... 75
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
SECTION 13.8 Injunctive Relief; Punitive Damages........................................................... 75
SECTION 13.9 Accounting Matters............................................................................ 75
SECTION 13.10 Successors and Assigns; Participations....................................................... 76
SECTION 13.11 Amendments, Waivers and Consents............................................................. 79
SECTION 13.12 Performance of Duties........................................................................ 79
SECTION 13.13 All Powers Coupled with Interest............................................................. 79
SECTION 13.14 Survival of Indemnities...................................................................... 79
SECTION 13.15 Titles and Captions.......................................................................... 80
SECTION 13.16 Severability of Provisions................................................................... 80
SECTION 13.17 Counterparts................................................................................. 80
SECTION 13.18 Company as Agent for the Borrowers........................................................... 80
SECTION 13.19 Obligations Joint and Several; Contribution.................................................. 80
SECTION 13.20 Term of Agreement............................................................................ 81
</TABLE>
iv
<PAGE>
EXHIBITS AND SCHEDULES
<TABLE>
EXHIBITS
<S> <C>
Exhibit A-1 - Form of Revolving Credit Note
Exhibit A-2 - Form of Swingline Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Notice of Account Designation
Exhibit D - Form of Notice of Prepayment
Exhibit E - Form of Notice of Conversion/Continuation
Exhibit F - Form of Officer's Compliance Certificate
Exhibit G - Form of Assignment and Acceptance
Exhibit H - Form of Pledge Agreement
Exhibit I - Form of Security Agreement
Exhibit J - Form of Joinder Agreement
SCHEDULES
Schedule 1.1(a) - Lenders and Commitments
Schedule 1.1(b) - Refinanced Debt
Schedule 5.4 - Locations of Real Property with Significant Inventory
Schedule 6.1(a) - Jurisdictions of Organization and Qualification
Schedule 6.1(b) - Subsidiaries and Capitalization
Schedule 6.1(i) - ERISA Plans
Schedule 6.1(l) - Material Contracts
Schedule 6.1(m) - Labor and Collective Bargaining Agreements
Schedule 6.1(r) - Description of Real Property
Schedule 6.1(t) - Debt and Guaranty Obligations
Schedule 6.1(u) - Litigation
Schedule 10.1 - Existing Debt Not Otherwise Permitted
Schedule 10.3(f) - Existing General Liens
Schedule 10.3(h) - Existing Vendor-Provided Financing and Trade Payable Liens
Schedule 10.4 - Existing Loans, Advances and Investments
</TABLE>
v
<PAGE>
CREDIT AGREEMENT
----------------
CREDIT AGREEMENT, dated as of the 31st day of July, 1998, by and among
GLOBAL IMAGING SYSTEMS, INC., a Delaware corporation (the "Company"), the
Material Subsidiaries of the Company listed on the signature pages hereto
(together with the Company, the "Initial Borrowers"), and any Additional
Borrowers who may become party to this Agreement (the "Additional Borrowers",
and together with the Initial Borrowers, the "Borrowers"), the Lenders who are
or may become a party to this Agreement (the "Lenders"), FIRST UNION NATIONAL
BANK, as Administrative Agent for the Lenders (the "Administrative Agent"), and
SCOTIABANC INC., as Documentation Agent for the Lenders (the "Documentation
Agent").
STATEMENT OF PURPOSE
--------------------
The Initial Borrowers have requested, and the Lenders have agreed, to
extend certain credit facilities to the Borrowers on the terms and conditions of
this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, such parties
hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions The following terms when used in this Agreement
-----------
shall have the meanings assigned to them below:
"Additional Borrower" means each Material Subsidiary which hereafter
-------------------
becomes a Borrower pursuant to Section 8.12.
"Adjustment Date" shall have the meaning assigned thereto in Section
---------------
4.1(c).
"Affiliate" means, with respect to any Person, any other Person (other than
---------
a Subsidiary) which directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such first
Person or any of its Subsidiaries. The term "control" means (a) the power to
vote five percent (5%) or more of the securities or other equity interests of a
Person having ordinary voting power, or (b) the possession, directly or
indirectly, of any other power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting
securities, by contract or otherwise.
"Administrative Agent" means First Union in its capacity as Administrative
--------------------
Agent hereunder, and any successor thereto appointed pursuant to Section 12.9.
<PAGE>
"Administrative Agent's Office" means the office of the Administrative
-----------------------------
Agent specified in or determined in accordance with the provisions of Section
13.1.
"Aggregate Commitment" means the aggregate amount of the Lenders'
--------------------
Commitments hereunder, as such amount may be reduced or modified at any time or
from time to time pursuant to the terms hereof. On the Closing Date, the
Aggregate Commitment shall be One Hundred Seventy-Five Million Dollars
($175,000,000).
"Agreement" means this Credit Agreement, as amended, restated, supplemented
---------
or otherwise modified.
"Applicable Law" means all applicable provisions of constitutions, laws,
--------------
statutes, ordinances, rules, treaties, regulations, permits, licenses,
approvals, interpretations and orders of courts or Governmental Authorities and
all orders and decrees of all courts and arbitrators.
"Applicable Margin" shall have the meaning assigned thereto in Section
-----------------
4.1(c).
"Application" means an application, in the form specified by the Issuing
-----------
Lender from time to time, requesting the Issuing Lender to issue a Letter of
Credit.
"Assignment and Acceptance" shall have the meaning assigned thereto in
-------------------------
Section 13.10.
"Available Commitment" means, as to any Lender at any time, an amount equal
--------------------
to the excess, if any, of (a) such Lender's Commitment over (b) such Lender's
Extensions of Credit.
"Base Rate" means, at any time, the higher of (a) the Prime Rate or (b) the
---------
Federal Funds Rate plus 1/2 of 1%; each change in the Base Rate shall take
----
effect simultaneously with the corresponding change or changes in the Prime Rate
or the Federal Funds Rate.
"Base Rate Loan" means any Loan bearing interest at a rate based upon the
--------------
Base Rate as provided in Section 4.1(a).
"Borrowers" means the collective reference to the Initial Borrowers and any
---------
Additional Borrowers in their capacity as borrowers hereunder.
"Business Day" means (a) for all purposes other than as set forth in clause
------------
(b) below, any day other than a Saturday, Sunday or legal holiday on which banks
in Charlotte, North Carolina and New York, New York, are open for the conduct of
their commercial banking business, and (b) with respect to all notices and
determinations in connection with, and payments of principal and interest on,
any LIBOR Rate Loan, any day that is a Business Day described in clause (a) and
that is also a day for trading by and between banks in Dollar deposits in the
London interbank market.
2
<PAGE>
"Capital Asset" means, with respect to the Company and its Subsidiaries,
-------------
any asset that should, in accordance with GAAP, be classified and accounted for
as a capital asset on a Consolidated balance sheet of the Company and its
Subsidiaries.
"Capital Expenditures" means, with respect to the Company and its
--------------------
Subsidiaries for any period, the aggregate cost of all Capital Assets acquired
by Company or any Subsidiary thereof during such period, as determined in
accordance with GAAP.
"Capital Lease" means, with respect to the Company and its Subsidiaries,
-------------
any lease of any property that should, in accordance with GAAP, be classified
and accounted for as a capital lease on a Consolidated balance sheet of the
Company and its Subsidiaries.
"Cash Equivalents" shall have the meaning given thereto in Section 10.4(b).
----------------
"Change in Control" shall have the meaning assigned thereto in Section
-----------------
11.1(i).
"Closing Date" means the date of this Agreement or such later Business Day
------------
upon which each condition described in Article V shall be satisfied or waived in
all respects in a manner acceptable to the Administrative Agent, in its sole
discretion.
"Code" means the Internal Revenue Code of 1986, and the rules and
----
regulations thereunder, each as amended, supplemented or otherwise modified.
"Collateral" means any collateral pledged by any Borrower, an equityholder
----------
of any Borrower, or any Subsidiary of any Borrower, to the Administrative Agent
for the ratable benefit of the Administrative Agent and the Lenders, in order to
secure the Obligations or any portion thereof.
"Commitment" means, as to any Lender, the obligation of such Lender to make
----------
Revolving Credit Loans and issue or participate in Letters of Credit and
participate in Swingline Loans hereunder in an aggregate principal or face
amount at any time outstanding not to exceed the amount set forth opposite such
Lender's name on Schedule 1.1(a) hereto, as the same may be reduced or modified
--------------
at any time or from time to time pursuant to the terms hereof.
"Commitment Fee Rate" shall have the meaning assigned thereto in Section
-------------------
4.3(a).
"Commitment Percentage" means, as to any Lender at any time, the ratio of
---------------------
(a) the amount of the Commitment of such Lender to (b) the Aggregate Commitment
of all of the Lenders.
"Company" shall have the meaning assigned thereto in the preamble to this
-------
Agreement.
"Consolidated" means, when used with reference to financial statements or
------------
financial statement items of the Company and its Subsidiaries, such statements
or items on a consolidated basis in accordance with applicable principles of
consolidation under GAAP.
3
<PAGE>
"Credit Facility" means the collective reference to the Revolving Credit
---------------
Facility and the L/C Facility.
"Debt" means, with respect to the Company and its Subsidiaries at any date
----
and without duplication, the sum of the following calculated on a Consolidated
basis in accordance with GAAP: (a) all liabilities, obligations and
indebtedness for borrowed money including but not limited to obligations
evidenced by bonds, debentures, notes or other similar instruments of any such
Person, (b) all obligations to pay the deferred purchase price of property or
services of any such Person, except obligations with respect to (i) Vendor-
Provided Financing and (ii) Trade Payables and all other trade payables arising
in the ordinary course of business which are not more than ninety (90) days past
due (provided that commencing sixty (60) days after the Closing Date, Debt shall
include any Vendor-Provided Financing or other trade credit in each case
referred to in Section 5.4(b) with respect to which an intercreditor agreement
has not been executed as provided in such Section 5.4(b)), (c) all obligations
of any such Person as lessee under Capital Leases, (d) all Debt of any other
Person secured by a Lien on any asset of any such Person, (e) all Guaranty
Obligations of any such Person, and (f) all obligations, contingent or
otherwise, of any such Person relative to the face amount of letters of credit,
whether or not drawn, including without limitation any Reimbursement Obligation,
and banker's acceptances issued for the account of any such Person.
"Default" means any of the events specified in Section 11.1 which with the
-------
passage of time, the giving of notice or any other condition, would constitute
an Event of Default.
"Documentation Agent" means Scotiabanc Inc. in its capacity as
-------------------
Documentation Agent hereunder.
"Dollars" or "$" means, unless otherwise qualified, dollars in lawful
---------------
currency of the United States.
"EBITDA" means, with respect to the Company and its Subsidiaries for any
------
period, the following calculated without duplication for such period on a
Consolidated basis in accordance with GAAP: (a) Net Income plus (b) the sum of
----
the following, in each case to the extent deducted in the determination of Net
Income, (i) income and franchise tax provisions by the Company and its
Subsidiaries, (ii) Interest Expense, (iii) amortization, depreciation and other
non-cash charges (including amortization of goodwill, covenants not to compete
and other intangible assets).
"Eligible Assignee" means, with respect to any assignment of the rights,
-----------------
interest and obligations of a Lender hereunder, a Person that is at the time of
such assignment (a) a commercial bank organized under the laws of the United
States or any state thereof, having combined capital and surplus in excess of
$500,000,000, (b) a commercial bank organized under the laws of any other
country that is a member of the Organization of Economic Cooperation and
Development, or a political subdivision of any such country, having combined
capital and surplus in excess of $500,000,000, (c) a finance company, insurance
company or other financial
4
<PAGE>
institution which in the ordinary course of business extends credit of the type
extended hereunder and that has total assets in excess of $1,000,000,000, (d)
already a Lender hereunder (whether as an original party to this Agreement or as
the assignee of another Lender), (e) the successor (whether by transfer of
assets, merger or otherwise) to all or substantially all of the commercial
lending business of the assigning Lender, or (f) any other Person that has been
approved in writing as an Eligible Assignee by the BorrowerS and the
Administrative Agent.
"Employee Benefit Plan" means any employee benefit plan within the meaning
---------------------
of Section 3(3) of ERISA which (a) is maintained for employees of any Borrower
or any ERISA Affiliate or (b) has at any time within the preceding six years
been maintained for the employees of any Borrower or any current or former ERISA
Affiliate.
"Environmental Laws" means any and all federal, state and local laws,
------------------
statutes, ordinances, rules, regulations, permits, licenses, approvals,
interpretations and orders of courts or Governmental Authorities, relating to
the protection of human health or the environment, including, but not limited
to, requirements pertaining to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation, handling, reporting, licensing,
permitting, investigation or remediation of Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, and the
-----
rules and regulations thereunder, each as amended, supplemented or otherwise
modified.
"ERISA Affiliate" means any Person who together with any Borrower is
---------------
treated as a single employer within the meaning of Section 414(b), (c), (m) or
(o) of the Code or Section 4001(b) of ERISA.
"Eurodollar Reserve Percentage" means, for any day, the percentage
-----------------------------
(expressed as a decimal and rounded upwards, if necessary, to the next higher
1/100th of 1%) which is in effect for such day as prescribed by the Federal
Reserve Board (or any successor) for determining the maximum reserve requirement
(including without limitation any basic, supplemental or emergency reserves) in
respect of Eurocurrency liabilities or any similar category of liabilities for a
member bank of the Federal Reserve System in New York City.
"Event of Default" means any of the events specified in Section 11.1,
----------------
provided that any requirement for passage of time, giving of notice, or any
other condition, has been satisfied.
"Extensions of Credit" means, as to any Lender at any time, an amount equal
--------------------
to the sum of (a) the aggregate principal amount of all Revolving Credit Loans
made by such Lender then outstanding, (b) such Lender's Commitment Percentage of
the L/C Obligations then outstanding and (c) such Lender's Commitment Percentage
of the Swingline Loans then outstanding.
"FDIC" means the Federal Deposit Insurance Corporation, or any successor
----
thereto.
"Federal Funds Rate" means, the rate per annum (rounded upwards, if
------------------
necessary, to the next higher 1/100th of 1%) representing the daily effective
federal funds rate as quoted by the
5
<PAGE>
Administrative Agent and confirmed in Federal Reserve Board Statistical Release
H.15 (519) or any successor or substitute publication selected by the
Administrative Agent. If, for any reason, such rate is not available, then
"Federal Funds Rate" shall mean a daily rate which is determined, in the opinion
of the Administrative Agent, to be the rate at which federal funds are being
offered for sale in the national federal funds market at 9:00 a.m. (Charlotte
time). Rates for weekends or holidays shall be the same as the rate for the most
immediate preceding Business Day.
"Fee Letter" means the separate fee letter agreement executed by the
----------
Company, FUCMG and First Union dated April 22, 1998.
"First Union" means First Union National Bank, a national banking
-----------
association, and its successors.
"Fiscal Year" means the fiscal year of the Company and its Subsidiaries
-----------
ending on March 31.
"Fixed Charges" means, with respect to the Company and its Subsidiaries for
-------------
any period, the sum of the following for such period calculated on a
Consolidated basis in accordance with GAAP: (a) income and franchise taxes paid
or payable during such period, (b) Interest Expense paid or payable during such
period, (c) scheduled principal payments paid or payable during such period with
respect to any Debt (including, without limitation, the principal portion of
payments attributable to Capital Leases), (d) Capital Expenditures paid or
payable during such period (excluding (i) Capital Expenditures constituting part
of a Permitted Acquisition and (ii) Rental Pool Capital Expenditures) and (e)
Rental Expense paid or payable during such period.
"FUCMG" means First Union Capital Markets Group, a division of Wheat First
-----
Securities, Inc., and its successors.
"Funded Debt" means, with respect to the Company and its Subsidiaries on
-----------
any date, all Debt of such Persons calculated on a Consolidated basis.
"GAAP" means generally accepted accounting principles, as recognized by the
----
American Institute of Certified Public Accountants and the Financial Accounting
Standards Board, consistently applied and maintained on a consistent basis for
the Company and its Subsidiaries throughout the period indicated and consistent
with the prior financial practice of the Company and its Subsidiaries.
"Governmental Approvals" means all authorizations, consents, approvals,
----------------------
licenses and exemptions of, registrations and filings with, and reports to, all
Governmental Authorities.
"Governmental Authority" means any nation, province, state or political
----------------------
subdivision thereof, and any government or any Person exercising executive,
legislative, regulatory or administrative functions of or pertaining to
government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
6
<PAGE>
"Guaranty Obligation" means, with respect to the Company and its
-------------------
Subsidiaries, without duplication, any obligation, contingent or otherwise, of
any such Person pursuant to which such Person has directly or indirectly
guaranteed any Debt or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of any such Person (a) to purchase or pay (or advance
or supply funds for the purchase or payment of) such Debt or other obligation
(whether arising by virtue of partnership arrangements, by agreement to keep
well, to purchase assets, goods, securities or services, to take-or-pay, or to
maintain financial statement condition or otherwise) or (b) entered into for the
purpose of assuring in any other manner the obligee of such Debt or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided, that the term Guaranty
--------
Obligation shall not include endorsements for collection or deposit in the
ordinary course of business.
"Hazardous Materials" means any substances or materials (a) which are or
-------------------
become defined as hazardous wastes, hazardous substances, pollutants,
contaminants, chemical substances or mixtures or toxic substances under any
Applicable Law, (b) which are toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise harmful to human
health or the environment and are or become regulated by any Governmental
Authority, (c) the presence of which require investigation or remediation under
any Applicable Law, (d) the discharge or emission or release of which requires a
permit or license under any Applicable Law or other Governmental Approval, (e)
which are deemed to constitute a nuisance, a trespass or pose a health or safety
hazard to persons or neighboring properties, (f) which consist of underground or
aboveground storage tanks, whether empty, filled or partially filled with any
substance, or (g) which contain, without limitation, asbestos, polychlorinated
biphenyls, urea formaldehyde foam insulation, petroleum hydrocarbons, petroleum
derived substances or waste, crude oil, nuclear fuel, natural gas or synthetic
gas.
"Hedging Agreement" means any agreement with respect to an interest rate or
-----------------
currency swap, collar, cap, floor or a forward rate agreement or other agreement
regarding the hedging of interest rate risk exposure or foreign currency
exposure of any Borrower or any Subsidiary thereof, and any confirming letter
executed pursuant to such hedging agreement, all as amended, restated,
supplemented or otherwise modified.
"Initial Borrowers" shall have the meaning assigned thereto in the preamble
-----------------
to this Agreement.
"Interest Expense" means, with respect to the Company and its Subsidiaries
----------------
for any period, the total interest expense (including, without limitation,
interest expense attributable to Capital Leases and all net obligations pursuant
to Hedging Agreements, but excluding amortization of financing fees) of such
Persons, all determined for such period on a Consolidated basis in accordance
with GAAP.
"Interest Period" shall have the meaning assigned thereto in Section
---------------
4.1(b).
"Inventory" shall have the meaning assigned thereto in the Security
---------
Agreement.
7
<PAGE>
"Issuer" shall have the meaning assigned thereto in the Pledge Agreement.
------
"Issuing Lender" means First Union, in its capacity as issuer of any Letter
--------------
of Credit, or any successor.
"Joinder Agreement" means any Joinder Agreement executed by a Material
-----------------
Subsidiary of any Borrower pursuant to Section 8.12 in favor of Administrative
Agent for the ratable benefit of the Administrative Agent and the Lenders and
substantially in the form of Exhibit J, as amended, restated, supplemented or
---------
otherwise modified.
"L/C Commitment" means Five Million Dollars ($5,000,000).
--------------
"L/C Facility" means the letter of credit facility established pursuant to
------------
Article III hereof.
"L/C Obligations" means at any time, an amount equal to the sum of (a) the
---------------
aggregate undrawn and unexpired amount of the then outstanding Letters of Credit
and (b) the aggregate amount of drawings under Letters of Credit which have not
then been reimbursed pursuant to Section 3.5.
"L/C Participants" means the collective reference to all the Lenders other
----------------
than the Issuing Lender.
"L/C Facility Termination Date" means the earlier to occur of (a) the
-----------------------------
resignation of First Union as Administrative Agent in accordance with Section
12.9 and (b) the Revolving Credit Termination Date.
"Lender" means each Person executing this Agreement as a Lender set forth
------
on the signature pages hereto and each Person that hereafter becomes a party to
this Agreement as a Lender pursuant to Section 13.10.
"Lending Office" means, with respect to any Lender, the office of such
--------------
Lender maintaining such Lender's Commitment Percentage of the Loans.
"Letters of Credit" shall have the meaning assigned thereto in Section 3.1.
-----------------
"Leverage Ratio" means the ratio calculated in accordance with Section 9.1.
--------------
"LIBOR" means the rate of interest per annum determined on the basis of the
-----
rate for deposits in Dollars in a minimum amount of at least $5,000,000 for a
period equal to the applicable Interest Period which appears on the Telerate
Page 3750 (or any successor) at approximately 11:00 a.m. (London time) two (2)
Business Days prior to the first day of the applicable Interest Period (rounded
upward, if necessary, to the nearest one-sixteenth of one percent (1/16%)). If,
for any reason, such rate does not appear on Telerate Page 3750, then "LIBOR"
shall be determined by the Administrative Agent to be the arithmetic average
(rounded
8
<PAGE>
upward, if necessary, to the nearest one-sixteenth of one percent (1/16%)) of
the rate per annum at which deposits in Dollars would be offered by first class
banks in the London interbank market to the Administrative Agent approximately
11:00 a.m. (London time) two (2) Business Days prior to the first day of the
applicable Interest Period for a period equal to such Interest Period and in an
amount substantially equal to the amount of the applicable Loan.
"LIBOR Rate" means a rate per annum (rounded upwards, if necessary, to the
----------
next higher 1/100th of 1%) determined by the Administrative Agent pursuant to
the following formula:
LIBOR Rate = LIBOR
------------------------------------
1.00 - Eurodollar Reserve Percentage
"LIBOR Rate Loan" means any Loan bearing interest at a rate based upon the
---------------
LIBOR Rate as provided in Section 4.1(a).
"Lien" means, with respect to any asset, any mortgage, lien pledge, charge,
----
security interest or encumbrance of any kind in respect of such asset. For the
purposes of this Agreement, a Person shall be deemed to own subject to a Lien
any asset which it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, Capital Lease or other title
retention agreement relating to such asset.
"Loans" means the collective reference to the Revolving Credit Loans and
-----
the Swingline Loans and "Loan" means any of such Loans.
"Loan Documents" means, collectively, this Agreement, the Notes, the
--------------
Applications, the Letters of Credit, the Security Documents and each other
document, instrument and agreement executed and delivered by any Borrower, any
Subsidiary thereof or their counsel in connection with this Agreement or
otherwise referred to herein or contemplated hereby, all as may be amended,
restated, supplemented or otherwise modified.
"Material Adverse Effect" means, with respect to the Company and its
-----------------------
Subsidiaries, a material adverse effect on the properties, business, prospects,
operations or condition (financial or otherwise) of such Persons, taken as a
whole, or the ability of such Persons, taken as a whole, to perform its
obligations under the Loan Documents or Material Contracts, in each case to
which it is a party.
"Material Contract" means (a) any contract or other agreement, written or
-----------------
oral, of any Borrower or any of its Subsidiaries involving monetary liability of
or to any such Person in an amount in excess of $1,000,000 per annum, or (b) any
other contract or agreement, written or oral, of any Borrower or any of its
Subsidiaries the failure to comply with which could reasonably be expected to
have a Material Adverse Effect.
"Material Subsidiary" means, for any period of four (4) consecutive
-------------------
fiscal quarters, (a) any Subsidiary of any Borrower with Pro Forma Adjusted
EBITDA in excess of five percent (5%) of the Consolidated Pro Forma Adjusted
EBITDA of the Company and its Subsidiaries for
9
<PAGE>
such period as reflected on the financial statements delivered in accordance
with Section 7.1, (b) any parent of any Subsidiary referred to in clause (a) of
this definition, which parent is also a Subsidiary and which parent is not
deemed a "Material Subsidiary" pursuant to clause (a) of this definition, (c)
any Subsidiary of any Borrower voluntarily designated in writing to the Agent by
any Borrower as a "Material Subsidiary" regardless of whether such Subsidiary is
deemed a "Material Subsidiary" pursuant to clause (a) or (b) of this definition
and (d) any Subsidiary of any Borrower executing either this Agreement or all
relevant joinder documents in compliance with Section 8.12 regardless of whether
such Subsidiary is deemed a "Material Subsidiary" pursuant to clause (a), (b) or
(c) of this definition; provided, however, that notwithstanding the foregoing
the Subsidiaries of the Borrowers which comprise "Material Subsidiaries" at all
times shall have Pro Forma Adjusted EBITDA for any period of four (4)
consecutive fiscal quarters equal to not less than ninety percent (90%) of
Consolidated Pro Forma Adjusted EBITDA for such period. The Material
Subsidiaries of the Borrowers as of the Closing Date are designated on Schedule
--------
6.1(b).
- ------
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
------------------
4001(a)(3) of ERISA to which any Borrower or any ERISA Affiliate is making, or
is accruing an obligation to make, contributions within the preceding six years.
"Net Cash Proceeds" means, as applicable, (a) with respect to any sale or
-----------------
other disposition of assets, the gross cash proceeds received by a Borrower or
any of its Subsidiaries from such sale less the sum of (i) all income taxes
----
and other taxes assessed by a Governmental Authority as a result of such sale
and any other reasonable fees and expenses incurred in connection therewith and
(ii) the principal amount of, premium, if any, and interest on any Debt secured
by a Lien on the asset (or a portion thereof) sold, which Debt is required to be
and is repaid in connection with such sale, (b) with respect to any payment
under an insurance policy or in connection with a condemnation proceeding, the
amount of cash proceeds received by a Borrower or its Subsidiaries from an
insurance company or Governmental Authority net of all reasonable expenses of
collection and (c) with respect to any issuance or offering of equity securities
and for purposes of Section 9.4, the gross cash proceeds received by a Borrower
or any of its Subsidiaries therefrom less all legal, underwriting and other
----
reasonable fees and expenses incurred in connection therewith.
"Net Income" means, with respect to the Company and its Subsidiaries for
----------
any period, the net income (or loss) thereof for such period determined on a
Conso lidated basis in accordance with GAAP; provided, that there shall be
--------
excluded from net income (or loss): (a) the income (or loss) of any Person
(other than a Wholly-Owned Subsidiary of the Company) in which the Company or
any Subsidiary has an ownership interest unless received by any such Person in a
cash distribution and (b) to the extent not included in clause (a) above, any
after-tax extraordinary gains or losses.
"Net Worth" means, at any date of determination, the total stockholders'
---------
equity (including capital stock, additional paid-in capital and retained
earnings after deducting the treasury stock) of the Company and its Subsidiaries
appearing on a Consolidated balance sheet of
10
<PAGE>
the Company and its Subsidiaries and calculated on a Consolidated basis in
accordance with GAAP.
"Notes" means the collective reference to the Revolving Credit Notes
-----
and Swingline Note and "Note" means any of such Notes.
"Notice of Account Designation" shall have the meaning assigned thereto in
-----------------------------
Section 2.3(b).
"Notice of Borrowing" shall have the meaning assigned thereto in Section
-------------------
2.3(a).
"Notice of Conversion/Continuation" shall have the meaning assigned thereto
---------------------------------
in Section 4.2.
"Notice of Prepayment" shall have the meaning assigned thereto in Section
--------------------
2.4(c).
"Obligations" means, in each case, whether now in existence or hereafter
-----------
arising: (a) the principal of and interest on (including interest accruing after
the filing of any bankruptcy or similar petition) the Loans, (b) the L/C
Obligations, and (c) all other fees and commissions (including attorney's fees),
charges, indebtedness, loans, liabilities, financial accommodations,
obligations, covenants and duties owing by any Borrower to any Lender or the
Administrative Agent, of every kind, nature and description, direct or indirect,
absolute or contingent, due or to become due, contractual or tortious,
liquidated or unliquidated, and whether or not evidenced by any note, in each
case for the payment of money under or in respect of this Agreement, any Note,
any Letter of Credit, any of the other Loan Documents or any Hedging Agreement
hedging interest rate exposure under this Agreement.
"Officer's Compliance Certificate" shall have the meaning assigned thereto
--------------------------------
in Section 7.2.
"Other Taxes" shall have the meaning assigned thereto in Section 4.11(b).
-----------
"Partnership/LLC" shall have the meaning assigned thereto in the Pledge
---------------
Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
----
agency.
"Pension Plan" means any Employee Benefit Plan, other than a Multiemployer
------------
Plan, which is subject to the provisions of Title IV of ERISA or Section 412 of
the Code and which (a) is maintained for employees of any Borrower or any ERISA
Affiliates or (b) has at any time within the preceding six years been maintained
for the employees of any Borrower or any of their current or former ERISA
Affiliates.
"Permitted Acquisition" means any acquisition permitted by Section 10.4(e)
----------------------
hereof.
11
<PAGE>
"Permitted Acquisition Value" means the aggregate amount of the purchase
---------------------------
price (including, without limitation, any assumed debt, earn-outs and deferred
payments (to the extent a fixed and determinable obligation is incurred), or
capital stock of the acquiree, net of the applicable acquired company's cash
(including Cash Equivalents) balance as shown on the most recent financial
statements of the acquired company delivered in connection with the applicable
Permitted Acquisition) to be paid in connection with any applicable Permitted
Acquisition as set forth in the applicable stock or asset purchase documents
executed by any Borrower or any Subsidiary thereof in order to consummate the
applicable Permitted Acquisition.
"Person" means an individual, corporation, limited liability company,
------
partnership, association, trust, business trust, joint venture, joint stock
company, pool, syndicate, sole proprietorship, unincorporated organization,
Governmental Authority or any other form of entity or group thereof.
"Pledge Agreement" means the pledge agreement executed by the Borrowers in
----------------
favor of the Administrative Agent for the ratable benefit of itself and the
other Lenders, substantially in the form of Exhibit H , as amended, restated,
---------
supplemented or otherwise modified.
"Prime Rate" means, at any time, the rate of interest per annum publicly
----------
announced from time to time by First Union as its prime rate. Each change in the
Prime Rate shall be effective as of the opening of business on the day such
change in the Prime Rate occurs. The parties hereto acknowledge that the rate
announced publicly by First Union as its Prime Rate is an index or base rate and
shall not necessarily be its lowest or best rate charged to its customers or
other banks.
"Pro Forma Adjusted EBITDA" means, with respect to the Company and its
-------------------------
Subsidiaries for any period, EBITDA calculated on a pro forma basis to include
as of the first day of such period any Permitted Acquisition. For the purposes
hereof, Pro Forma Adjusted EBITDA shall be adjusted to reflect any non-recurring
costs and any extraordinary expenses of any Permitted Acquisition and any
permitted divestiture in a manner satisfactory to the Administrative Agent (with
respect to any Permitted Acquisition that does not require the consent of the
Required Lenders pursuant to Section 10.4(e) of this Agreement) and in a manner
satisfactory to the Administrative Agent and the Required Lenders (with respect
to any Permitted Acquisition that requires the consent of the Agent and the
Required Lenders pursuant to Section 10.4(e) of this Agreement and with respect
to any permitted divestiture). These adjustments shall be consistent with the
adjustments made in the financial information delivered to the Agent and Lenders
as of the Closing Date and may include, but not be limited to, management
compensation in excess of historical compensation levels respecting the acquired
Person (including, without limitation, perquisites in excess of historical
levels) to be paid by the Company or any of its Subsidiaries following any
Permitted Acquisition, fees for professional services in excess of historical
levels after any such Permitted Acquisition, expenses incurred in connection
with any such Permitted Acquisition and such other similar additional expenses
incurred after any such Permitted Acquisition.
12
<PAGE>
"Real Property Security Documents" means any mortgage, deed of trust,
--------------------------------
leasehold mortgage, leasehold deed of trust, landlord agreement and other
agreement or writing pursuant to which any Borrower or any Subsidiary thereof
grants a security interest in any real property interest securing the
Obligations.
"Refinanced Debt" means all Debt and other obligations of the Borrowers set
---------------
forth on Schedule 1.1(b) attached hereto.
---------------
"Register" shall have the meaning assigned thereto in Section 13.10(d).
--------
"Reimbursement Obligation" means the obligation of the Borrowers to
------------------------
reimburse the Issuing Lender pursuant to Section 3.5 for amounts drawn under
Letters of Credit.
"Rental Expense" means, with respect to the Company and its Subsidiaries
--------------
for any period, all lease and rental expenses of such Persons with respect to
any operating lease or rental agreement for real property for such period, all
determined for such period on a Consolidated basis in accordance with GAAP.
"Rental Pool Capital Expenditures" means, with respect to the Company and
--------------------------------
its Subsidiaries for any period, all expenditures of such Persons which are made
in connection with the acquisition, replacement or repair of any equipment that
will be revenue producing and rented to customers of such Persons for, with
respect to any new equipment, an initial term of at least one (1) year, all
determined for such period on a Consolidated basis in accordance with GAAP.
"Required Lenders" means, at any date, any combination of holders of at
----------------
least fifty-one percent (51%) of the Extension of Credit, or if no Extensions of
Credit are outstanding, any combination of Lenders whose Commitment Percentages
aggregate at least fifty-one percent (51%); provided that Lenders" shall at all
times be comprised of at least two (2) Lenders.
"Responsible Officer" means any of the following: the chief executive
-------------------
officer or chief financial officer of the Company or any other officer of the
Company reasonably acceptable to the Administrative Agent.
"Revolving Credit Facility" means the revolving credit and swingline
-------------------------
facility established pursuant to Article II hereof.
"Revolving Credit Loans" means any revolving loan made to any Borrower
----------------------
pursuant to Section 2.1, and all such revolving loans collectively as the
context requires.
"Revolving Credit Notes" means the collective reference to the Revolving
----------------------
Credit Notes made by the Borrowers payable to the order of each Lender,
substantially in the form of Exhibit A-1 hereto, evidencing the Revolving Credit
-----------
Facility, and any amendments and modifications thereto, any substitutes
therefor, and any replacements, restatements, renewals or extension thereof, in
whole or in part; "Revolving Credit Note" means any of such Revolving Credit
Notes.
13
<PAGE>
"Revolving Credit Termination Date" means the earliest of the dates
---------------------------------
referred to in Section 2.7.
"Security Agreement" means the security agreement executed by the Borrowers
------------------
in favor of the Administrative Agent for the ratable benefit of itself and the
other Lenders, substantially in the form of Exhibit I , as amended, restated,
---------
supplemented or otherwise modified.
"Security Documents" means the collective reference to the Security
------------------
Agreement, the Pledge Agreement, the Real Property Security Documents, any
intellectual property security agreements and each other agreement or writing
pursuant to which any Borrower or any Subsidiary thereof purports to pledge or
grant a security interest in any property or assets securing the Obligations or
any such Person purports to guaranty the payment and/or performance of the
Obligations.
"Senior Funded Debt" means, with respect to the Company and its
------------------
Subsidiaries on any date, Funded Debt of such Persons minus Funded Debt of such
-----
Persons which constitutes Subordinated Debt.
"Solvent" means, as to any Borrower or any of its Subsidiaries on a
-------
particular date, that any such Person (a) has capital sufficient to carry on its
business and transactions and all business and transactions in which it is about
to engage and is able to pay its debts as they mature, (b) owns property having
a value, both at fair valuation and at present fair saleable value on a going
concern basis, greater than the amount required to pay its probable liabilities
(including contingencies), and (c) does not believe that it will incur debts or
liabilities beyond its ability to pay such debts or liabilities as they mature.
"Subordinated Debt" means any other Debt of any Borrower or any Subsidiary
-----------------
thereof subordinated in right and time of payment to the Obligations on terms
satisfactory to the Required Lenders.
"Subsidiary" means as to any Person, any corporation, partnership, limited
----------
liability company or other entity of which more than fifty percent (50%) of the
outstanding capital stock or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other managers of such
corporation, partnership, limited liability company or other entity is at the
time, directly or indirectly, owned by or the management is otherwise controlled
by such Person (irrespective of whether, at the time, capital stock or other
ownership interests of any other class or classes of such corporation,
partnership, limited liability company or other entity shall have or might have
voting power by reason of the happening of any contingency). Unless otherwise
qualified references to "Subsidiary" or "Subsidiaries" herein shall refer to
those of the Company.
"Subsidiary Borrowers" means any Material Subsidiary of the Company which
--------------------
is a Borrower hereunder.
14
<PAGE>
"Swingline Commitment" means Five Million Dollars ($5,000,000).
--------------------
"Swingline Lender" means First Union in its capacity as swingline lender
----------------
hereunder.
"Swingline Loan" means any swingline loan made by the Swingline Lender to
--------------
the Borrowers pursuant to Section 2.2, and all such swingline loans collectively
as the context requires.
"Swingline Note" means the Swingline Note made by the Borrowers payable to
--------------
the order of the Swingline Lender, substantially in the form of Exhibit A-2
-----------
hereto, evidencing the Swingline Loans, and any amendments and modifications
thereto, any substitutes therefor, and any replacements, restatements, renewals
or extension thereof, in whole or in part.
"Swingline Termination Date" means the earlier to occur of (a) the
--------------------------
resignation of First Union as Administrative Agent in accordance with Section
12.9 and (b) the Revolving Credit Termination Date.
"Taxes" shall have the meaning assigned thereto in Section 4.11(a).
-----
"Termination Event" means: (a) a "Reportable Event" described in Section
-----------------
4043 of ERISA, or (b) the withdrawal of any Borrower or any ERISA Affiliate from
a Pension Plan during a plan year in which it was a "substantial employer" as
defined in Section 4001(a)(2) of ERISA, or (c) the termination of a Pension
Plan, the filing of a notice of intent to terminate a Pension Plan or the
treatment of a Pension Plan amendment as a termination under Section 4041 of
ERISA, or (d) the institution of proceedings to terminate, or the appointment of
a trustee with respect to, any Pension Plan by the PBGC, or (e) any other event
or condition which would constitute grounds under Section 4042(a) of ERISA for
the termination of, or the appointment of a trustee to administer, any Pension
Plan, or (f) the partial or complete withdrawal of any Borrower or any ERISA
Affiliate from a Multiemployer Plan, or (g) the imposition of a Lien pursuant to
Section 412 of the Code or Section 302 of ERISA, or (h) any event or condition
which results in the reorganization or insolvency of a Multiemployer Plan under
Sections 4241 or 4245 of ERISA, or (i) any event or condition which results in
the termination of a Multiemployer Plan under Section 4041A of ERISA or the
institution by PBGC of proceedings to terminate a Multiemployer Plan under
Section 4042 of ERISA.
"Trade Payables" means trade payables of the Company and its Subsidiaries
--------------
(other than Vendor-Provided Financing) arising in the ordinary course of
business which are not more than thirty (30) days past due.
"Uniform Customs" the Uniform Customs and Practice for Documentary Credits
---------------
(1994 Revision), International Chamber of Commerce Publication No. 500.
"UCC" means the Uniform Commercial Code as in effect in the State of North
---
Carolina.
"United States" means the United States of America.
-------------
15
<PAGE>
"Vendor-Provided Financing" means financing provided to the Company and its
-------------------------
Subsidiaries arising in the ordinary course of business in order to finance the
purchase of Inventory thereby, which financing (i) is provided either directly
by the corresponding vendor or a third party financial institution or
"aggregator" to whom the vendor has transferred title to the financed Inventory
and (ii) is payable within one hundred and twenty (120) days of the invoice date
thereof.
"Wholly-Owned" means, with respect to a Subsidiary, that all of the shares
------------
of capital stock or other ownership interests of such Subsidiary are, directly
or indirectly, owned or controlled by any Borrower and/or one or more of its
Wholly-Owned Subsidiaries.
SECTION 1.2 General. Unless otherwise specified, a reference in this
-------
Agreement to a particular section, subsection, Schedule or Exhibit is a
reference to that section, subsection, Schedule or Exhibit of this Agreement.
Wherever from the context it appears appropriate, each term stated in either the
singular or plural shall include the singular and plural, and pronouns stated in
the masculine, feminine or neuter gender shall include the masculine, the
feminine and the neuter. Any reference herein to "Charlotte time" shall refer to
the applicable time of day in Charlotte, North Carolina.
SECTION 1.3 Other Definitions and Provisions.
(a) Use of Capitalized Terms. Unless otherwise defined therein, all
------------------------
capitalized terms defined in this Agreement shall have the defined meanings when
used in this Agreement, the Notes and the other Loan Documents or any
certificate, report or other document made or delivered pursuant to this
Agreement.
(b) Miscellaneous. The words "hereof", "herein" and "hereunder" and
-------------
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
ARTICLE II
REVOLVING CREDIT FACILITY
SECTION 2.1 Revolvingt Credit Loans. Subject to the terms and conditions of
-----------------------
this Agreement, each Lender severally agrees to make Revolving Credit Loans to
the Borrowers on a joint and several basis from time to time from the Closing
Date through the Revolving Credit Termination Date as requested by the Company,
on behalf of the Borrowers, in accordance with the terms of Section 2.3;
provided, that (a) the aggregate principal amount of all outstanding Revolving
- --------
Credit Loans (after giving effect to any amount requested) shall not exceed the
Aggregate Commitment less the sum of all outstanding Swingline Loans and L/C
----
Obligations and (b) the principal amount of outstanding Revolving Credit Loans
from any Lender to the Borrowers shall not at any time exceed such Lender's
Available Commitment.
16
<PAGE>
Each Revolving Credit Loan by a Lender shall be in a principal amount equal to
such Lender's Commitment Percentage of the aggregate principal amount of
Revolving Credit Loans requested on such occasion. Subject to the terms and
conditions hereof, the Borrowers may borrow, repay and reborrow Revolving Credit
Loans hereunder until the Revolving Credit Termination Date.
SECTION 2.2 Swingline Loans.
---------------
(a) Availability. Subject to the terms and conditions of this Agreement,
------------
the Swingline Lender agrees to make Swingline Loans to the Borrowers from time
to time from the Closing Date through, but not including, the Swingline
Termination Date; provided, that the aggregate principal amount of all
--------
outstanding Swingline Loans (after giving effect to any amount requested), shall
not exceed the lesser of (i) the Aggregate Commitment less the sum of all
outstanding Revolving Credit Loans and L/C Obligations and (ii) the Swingline
Commitment.
(b) Refunding.
---------
(i) Swingline Loans shall be refunded by the Lenders on demand by the
Swingline Lender. Such refundings shall be made by the Lenders in accordance
with their respective Commitment Percentages and shall thereafter be reflected
as Revolving Credit Loans of the Lenders on the books and records of the
Administrative Agent. Each Lender shall fund its respective Commitment
Percentage of Revolving Credit Loans as required to repay Swingline Loans
outstanding to the Swingline Lender upon demand by the Swingline Lender but in
no event later than 2:00 p.m. (Charlotte time) on the next succeeding Business
Day after such demand is made. No Lender's obligation to fund its respective
Commitment Percentage of a Swingline Loan shall be affected by any other
Lender's failure to fund its Commitment Percentage of a Swingline Loan, nor
shall any Lender's Commitment Percentage be increased as a result of any such
failure of any other Lender to fund its Commitment Percentage.
(ii) The Borrowers shall pay to the Swingline Lender on demand the
amount of such Swingline Loans to the extent amounts received from the Lenders
are not sufficient to repay in full the outstanding Swingline Loans requested or
required to be refunded. In addition, the Borrowers hereby authorize the
Administrative Agent to charge any account maintained with the Swingline Lender
(up to the amount available therein) in order to immediately pay the Swingline
Lender the amount of such Swingline Loans to the extent amounts received from
the Lenders are not sufficient to repay in full the outstanding Swingline Loans
requested or required to be refunded. If any portion of any such amount paid to
the Swingline Lender shall be recovered by or on behalf of the Borrowers from
the Swingline Lender in bankruptcy or otherwise, the loss of the amount so
recovered shall be ratably shared among all the Lenders in accordance with their
respective Commitment Percentages.
(iii) Each Lender acknowledges and agrees that its obligation to
refund Swingline Loans in accordance with the terms of this Section 2.2 is
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including, without limitation, any Default, Event of Default or non-
satisfaction of the conditions set forth in Article V. Further, each Lender
agrees and acknowledges that if prior to the refunding of any outstanding
Swingline
17
<PAGE>
Loans pursuant to this Section 2.2, one of the events described in Section
11.1(j) or (k) shall have occurred, each Lender will, on the date the applicable
Revolving Credit Loan would have been made, purchase an undivided participating
interest in the Swingline Loan to be refunded in an amount equal to its
Commitment Percentage of the aggregate amount of such Swingline Loan. Each
Lender will immediately transfer to the Swingline Lender, in immediately
available funds, the amount of its participation and upon receipt thereof the
Swingline Lender will deliver to such Lender a certificate evidencing such
participation dated the date of receipt of such funds and for such amount.
Whenever, at any time after the Swingline Lender has received from any Lender
such Lender's participating interest in a Swingline Loan, the Swingline Lender
receives any payment on account thereof, the Swingline Lender will distribute to
such Lender its participating interest in such amount (appropriately adjusted,
in the case of interest payments, to reflect the period of time during which
such Lender's participating interest was outstanding and funded).
SECTION 2.3 Procedure for Advances of Revolving Credit Loans and Swingline
--------------------------------------------------------------
Loans.
- -----
(a) Requests for Borrowing. The Company, on behalf of the Borrowers, shall
----------------------
give the Administrative Agent irrevocable prior written notice in the form
attached hereto as Exhibit B (a "Notice of Borrowing") not later than 11:00 a.m.
---------
(Charlotte time) (i) on the same Business Day as each Base Rate Loan and each
Swingline Loan and (ii) at least three (3) Business Days before each LIBOR Rate
Loan, of its intention to borrow, specifying (A) the date of such borrowing,
which shall be a Business Day, (B) the amount of such borrowing, which shall be
in an amount equal to the amount of the Aggregate Commitment then available to
the Borrowers, or if less, (x) with respect to Base Rate Loans in an aggregate
principal amount of $1,000,000 or a whole multiple of $250,000 in excess thereof
, (y) with respect to LIBOR Rate Loans in an aggregate principal amount of
$3,000,000 or a whole multiple of $1,000,000 in excess thereof and (z) with
respect to Swingline Loans in an aggregate principle amount of $500,000 or a
whole multiple of $100,000 in excess thereof, (C) whether such Loan is to be a
Revolving Credit Loan or a Swingline Loan, (D) in the case of a Revolving Credit
Loan, whether such Loan is to be a LIBOR Rate Loan or a Base Rate Loan and (E)
in the case of a LIBOR Rate Loan, the duration of the Interest Period applicable
thereto. Notices received after 11:00 a.m. (Charlotte time) shall be deemed
received on the next Business Day. The Administrative Agent shall promptly
notify the Lenders of each Notice of Borrowing.
(b) Disbursement of Loans. Not later than 2:00 p.m. (Charlotte time) on
---------------------
the proposed borrowing date, (i) each Lender will make available to the
Administrative Agent, for the account of the Borrowers, at the office of the
Administrative Agent in funds immediately available to the Administrative Agent,
such Lender's Commitment Percentage of the Revolving Credit Loans to be made on
such borrowing date and (ii) the Swingline Lender will make available to the
Administrative Agent, for the account of the Borrowers, at the office of the
Administrative Agent in funds immediately available to the Administrative Agent,
the Swingline Loans to be made on such borrowing date. The Borrowers hereby
irrevocably authorize the Administrative Agent to disburse the proceeds of each
borrowing requested pursuant to this Section 2.3 in immediately available funds
by crediting or wiring such proceeds to the deposit account of the Borrowers
identified in the most recent notice substantially in the form of Exhibit C
---------
hereto (a "Notice of
18
<PAGE>
Account Designation") delivered by the Company, on behalf of the Borrowers, to
the Administrative Agent or may be otherwise agreed upon by the Borrowers and
the Administrative Agent from time to time. Subject to Section 4.7 hereof, the
Administrative Agent shall not be obligated to disburse the portion of the
proceeds of any Revolving Credit Loan requested pursuant to this Section 2.3 to
the extent that any Lender has not made available to the Administrative Agent
its Commitment Percentage of such Loan. Revolving Credit Loans to be made for
the purpose of refunding Swingline Loans shall be made by the Lenders as
provided in Section 2.2(b).
SECTION 2.4 Repayment of Loans.
------------------
(a) Repayment on Revolving Credit Termination Date. The Borrowers shall
----------------------------------------------
repay the outstanding principal amount of (i) all Revolving Credit Loans in full
on the Revolving Credit Termination Date and (ii) all Swingline Loans in full in
accordance with Section 2.2(b)(ii), together, in each case, with all accrued but
unpaid interest thereon.
(b) Mandatory Repayment of Excess Loans. If at any time the outstanding
-----------------------------------
principal amount of all Loans exceeds the Aggregate Commitment less the sum of
----
all outstanding Swingline Loans and L/C Obligations, the Borrowers shall repay
immediately upon notice from the Administrative Agent, by payment to the
Administrative Agent for the account of the Lenders, Extensions of Credit in an
amount equal to such excess with each such repayment applied first to the
principal amount of outstanding Swingline Loans and second to the principal
amount of outstanding Revolving Credit Loans and, if necessary, to cash
collateralize any outstanding Letters of Credit in accordance with Section
11.2(b). Each such repayment shall be accompanied by any amount required to be
paid pursuant to Section 4.9 hereof.
(c) Optional Repayments. The Borrowers may at any time and from time
-------------------
to time repay the Loans, in whole or in part, upon at least three (3) Business
Days' irrevocable notice to the Administrative Agent with respect to LIBOR Rate
Loans and one (1) Business Day irrevocable notice with respect to Base Rate
Loans and Swingline Loans, in the form attached hereto as Exhibit D (a "Notice
---------
of Prepayment"), specifying the date and amount of repayment and whether the
repayment is of LIBOR Rate Loans, Base Rate Loans, Swingline Loans or a
combination thereof, and, if of a combination thereof, the amount allocable to
each. Upon receipt of such notice, the Administrative Agent shall promptly
notify each Lender. If any such notice is given, the amount specified in such
notice shall be due and payable on the date set forth in such notice. Partial
repayments shall be in an aggregate amount of $1,000,000 or a whole multiple of
$250,000 in excess thereof with respect to Base Rate Loans, $3,000,000 or a
whole multiple of $1,000,000 in excess thereof with respect to LIBOR Rate Loans
and $500,000 or a whole multiple of $100,000 in excess thereof with respect to
Swingline Loans. Each such repayment shall be accompanied by any amount
required to be paid pursuant to Section 4.9 hereof.
(d) Limitation on Repayment of LIBOR Rate Loans. The Borrowers may not
-------------------------------------------
repay any LIBOR Rate Loan on any day other than on the last day of the Interest
Period applicable
19
<PAGE>
thereto unless such repayment is accompanied by any amount required to be paid
pursuant to Section 4.9 hereof.
SECTION 2.5 Notes.
-----
(a) Revolving Credit Notes. Each Lender's Revolving Credit Loans and
----------------------
the obligation of the Borrowers to repay such Revolving Credit Loans shall be
evidenced by a separate Revolving Credit Note executed by the Borrowers payable
to the order of such Lender representing the obligation of the Borrowers to pay
such Lender's Commitment or, if less, the aggregate unpaid principal amount of
all Revolving Credit Loans made and to be made by such Lender to the Borrowers
hereunder, plus interest and all other fees, charges and other amounts due
----
thereon. Each Revolving Credit Note shall be dated the date hereof and shall
bear interest on the unpaid principal amount thereof at the applicable interest
rate per annum specified in Section 4.1.
(b) Swingline Note. The Swingline Loans and the obligations of the
--------------
Borrowers to repay such Swingline Loans shall be evidenced by a Swingline Note
executed by the Borrowers payable to the order of the Swingline Lender
representing the obligation of the Borrowers to pay the Swingline Lender's
Swingline Commitment or, if less, the aggregate unpaid principal amount of all
Swingline Loans made by the Swingline Lender to the Borrowers hereunder, plus
----
interest on such principal amounts and all other fees, charges and other amounts
due thereon. The Swingline Note shall be dated the date hereof and shall bear
interest on the unpaid principal amount thereof at the applicable interest rate
per annum specified in Section 4.1.
SECTION 2.6 Permanent Reduction of the Aggregate Commitment.
-----------------------------------------------
(a) Optional Reduction. The Borrowers shall have the right at any
------------------
time and from time to time, upon at least five (5) Business Days prior written
notice to the Administrative Agent, to permanently reduce, without premium or
penalty, (i) the entire Aggregate Commitment at any time or (ii) portions of the
Aggregate Commitment, from time to time, in an aggregate principal amount not
less than $3,000,000 or any whole multiple of $1,000,000 in excess thereof.
(b) Mandatory Reductions.
--------------------
(i) Asset Sale Proceeds. The Aggregate Commitment shall be
-------------------
permanently reduced by an amount equal to one hundred percent (100%)
of the Net Cash Proceeds in excess of $5,000,000 in the aggregate from
the sale or other disposition of assets during the term of this
Agreement by any Borrower or any of its Subsidiaries pursuant to
Section 10.6(f) hereof; provided that such reduction shall not be
--------
required to the extent that such Net Cash Proceeds are reinvested in
comparable replacement assets within one hundred and eighty (180) days
of any such transaction. Such reduction shall be made within one
hundred and eighty (180) days after the date of consummation of any
such transaction.
(ii) Insurance Proceeds. The Aggregate Commitment shall be
------------------
permanently reduced by an amount equal to one hundred percent (100%)
of the Net Cash Proceeds in
20
<PAGE>
excess of $5,000,000 in the aggregate received by any Borrower or any
of its Subsidiaries from any payment during the term of this Agreement
under any hazard insurance policy (as required in accordance with
Section 4(a)(vi) of the Security Agreement); provided that such
--------
reduction shall not be required to the extent that such Net Cash
Proceeds are used to replace or restore the damaged property to which
such Net Cash Proceeds relate within one hundred and eighty (180) days
of the date of the receipt of receipt of such Net Cash Proceeds. Such
reduction shall be made within one hundred and eighty (180) days after
the date of the receipt of such Net Cash Proceeds.
(c) Manner of Payment. Each permanent reduction permitted or required
-----------------
pursuant to this Section 2.6 shall be accompanied by a payment of principal
sufficient to reduce the aggregate outstanding Extensions of Credit of the
Lenders after such reduction to the Aggregate Commitment as so reduced. Any
reduction of the Aggregate Commitment to zero shall be accompanied by payment of
all outstanding Obligations (and furnishing of cash collateral in accordance
with Section 11.2(b) for all L/C Obligations) and termination of the Commitments
and Credit Facility. Such cash collateral shall be applied in accordance with
Section 11.2(b). If the reduction of the Aggregate Commitment requires the
repayment of any LIBOR Rate Loan, such repayment shall be accompanied by any
amount required to be paid pursuant to Section 4.9 hereof.
SECTION 2.7 Termination of Credit Facility. The Credit Facility
------------------------------
shall terminate on the earliest of (a) July 31, 2003, (b) the date of
termination by the Borrowers pursuant to Section 2.6(a) and (c) the date of
termination by the Administrative Agent on behalf of the Lenders pursuant to
Section 11.2(a).
SECTION 2.8 Use of Proceeds. The Borrowers shall use the proceeds of
---------------
the Extensions of Credit (a) to refinance the Refinanced Debt, (b) to finance
Permitted Acquisitions and (c) for working capital and general corporate
requirements of the Borrowers and their Subsidiaries, including the payment of
certain fees and expenses incurred in connection with the transactions
contemplated hereby.
SECTION 2.9 Security. The Obligations of the Borrowers shall be
--------
secured by the Collateral described in the Security Documents.
ARTICLE III
LETTER OF CREDIT FACILITY
SECTION 3.1 L/C Commitment. Subject to the terms and conditions
--------------
hereof, the Issuing Lender, in reliance on the agreements of the other Lenders
set forth in Section 3.4(a), agrees to issue standby letters of credit ("Letters
of Credit") for the account of the Borrowers on any Business Day from the
Closing Date through but not including the L/C Facility Termination Date in such
form as may be approved from time to time by the Issuing Lender; provided, that
--------
the Issuing Lender shall have no obligation to issue any Letter of Credit if,
after giving effect to
21
<PAGE>
such issuance, the L/C Obligations would exceed (a) the L/C Commitment or (b)
the Available Commitment of any Lender. Each Letter of Credit shall (i) be
denominated in Dollars in a minimum amount of $50,000, (ii) be a standby letter
of credit issued to support obligations of any Borrower, contingent or
otherwise, incurred in the ordinary course of business, (iii) expire on a date
satisfactory to the Issuing Lender, which date shall be no later than the
earlier of (A) the date that is twelve (12) months after the date of issuance
thereof (provided that any Letter of Credit may be automatically renewable for
additional twelve (12) month periods so long as no such renewal shall cause such
Letter of Credit to terminate on a date that is later than the Revolving Credit
Termination Date) and (B) the Revolving Credit Termination Date and (iv) be
subject to the Uniform Customs and, to the extent not inconsistent therewith,
the laws of the State of North Carolina. The Issuing Lender shall not at any
time be obligated to issue any Letter of Credit hereunder if such issuance would
conflict with, or cause the Issuing Lender or any L/C Participant to exceed any
limits imposed by, any Applicable Law. References herein to "issue" and
derivations thereof with respect to Letters of Credit shall also include
extensions or modifications of any existing Letters of Credit, unless the
context otherwise requires.
SECTION 3.2 Procedure for Issuance of Letters of Credit. The
-------------------------------------------
Borrowers may from time to time request that the Issuing Lender issue a Letter
of Credit by delivering to the Issuing Lender at the Administrative Agent's
Office an Application therefor, completed to the satisfaction of the Issuing
Lender, and such other certificates, documents and other papers and information
as the Issuing Lender may request. Upon receipt of any Application, the Issuing
Lender shall process such Application and the certificates, documents and other
papers and information delivered to it in connection therewith in accordance
with its customary procedures and shall, subject to Section 3.1 and Article V
hereof, promptly issue the Letter of Credit requested thereby (but in no event
shall the Issuing Lender be required to issue any Letter of Credit earlier than
three (3) Business Days after its receipt of the Application therefor and all
such other certificates, documents and other papers and information relating
thereto) by issuing the original of such Letter of Credit to the beneficiary
thereof or as otherwise may be agreed by the Issuing Lender and the applicable
Borrower. The Issuing Lender shall furnish to the Company a copy of such Letter
of Credit and furnish to each Lender a copy of such Letter of Credit and the
amount of each Lender's L/C Participation therein, all promptly following the
issuance of such Letter of Credit.
SECTION 3.3 Commissions and Other Charges.
-----------------------------
(a) The Borrowers shall pay to the Administrative Agent, for the
account of the Issuing Lender and the L/C Participants, a letter of credit
commission with respect to each Letter of Credit in an amount equal to the
Applicable Margin with respect to LIBOR Rate Loans (as set forth in Section 4.1
hereof) on per annum basis on the face amount of such Letter of Credit. Such
commission shall be payable quarterly in arrears on the last Business Day of
each calendar quarter (based on the then current Applicable Margin) and on the
Revolving Credit Termination Date. The Administrative Agent shall, promptly
following its receipt thereof, distribute to the Issuing Lender and the L/C
Participants such commission in accordance with their respective Commitment
Percentages.
22
<PAGE>
(b) In addition to the foregoing commission, the Borrowers shall pay
the Issuing Lender for its account an issuance fee of one-eighth percent
(0.125%) per annum on the face amount of each Letter of Credit, payable
quarterly in arrears on the last Business Day of each calendar quarter and on
the Revolving Credit Termination Date.
(c) In addition to the foregoing commissions, the Borrowers shall pay
or reimburse the Issuing Lender for such normal and customary costs and expenses
as are incurred or charges by the Issuing Lender in issuing, effecting payment
under, amending or otherwise administering any Letter of Credit.
SECTION 3.4 L/C Participations.
------------------
(a) The Issuing Lender irrevocably agrees to grant and hereby grants
to each L/C Participant, and, to induce the Issuing Lender to issue Letters of
Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase
and hereby accepts and purchases from the Issuing Lender for such L/C
Participant's own account and risk an undivided interest equal to such L/C
Participant's Commitment Percentage in the Issuing Lender's obligations and
rights under each Letter of Credit issued hereunder and the amount of each draft
paid by the Issuing Lender thereunder. Each L/C Participant unconditionally and
irrevocably agrees with the Issuing Lender (notwithstanding any Default, Event
of Default, non-satisfaction of conditions set forth in Article V or any other
circumstances whatsoever) that, if a draft is paid under any Letter of Credit
for which the Issuing Lender is not reimbursed in full by the Borrowers in
accordance with the terms of this Agreement, such L/C Participant shall pay to
the Issuing Lender upon demand at the Issuing Lender's address for notices
specified herein an amount equal to such L/C Participant's Commitment Percentage
of the amount of such draft, or any part thereof, which is not so reimbursed.
(b) Upon becoming aware of any amount required to be paid by any L/C
Participant to the Issuing Lender pursuant to Section 3.4(a) in respect of any
unreimbursed portion of any payment made by the Issuing Lender under any Letter
of Credit, the Issuing Lender shall notify each L/C Participant of the amount
and due date of such required payment and such L/C Participant shall pay to the
Issuing Lender the amount specified on the applicable due date. If any such
amount is paid to the Issuing Lender after the date such payment is due, such
L/C Participant shall pay to the Issuing Lender on demand, in addition to such
amount, the product of (i) such amount, times (ii) the daily average Federal
-----
Funds Rate as determined by the Administrative Agent during the period from and
including the date such payment is due to the date on which such payment is
immediately available to the Issuing Lender, times (iii) a fraction the
-----
numerator of which is the number of days that elapse during such period and the
denominator of which is 360. A certificate of the Issuing Lender with respect
to any amounts owing under this Section 3.4 shall be conclusive in the absence
of manifest error. With respect to payment to the Issuing Lender of the
unreimbursed amounts described in this Section 3.4(b), if the L/C Participants
receive notice that any such payment is due (A) prior to 1:00 p.m. (Charlotte
time) on any Business Day, such payment shall be due that Business Day, and (B)
after 1:00 p.m. (Charlotte time) on any Business Day, such payment shall be due
on the following Business Day.
23
<PAGE>
(c) Whenever, at any time after the Issuing Lender has made payment
under any Letter of Credit and has received from any L/C Participant its
Commitment Percentage of such payment in accordance with this Section 3.4, the
Issuing Lender receives any payment related to such Letter of Credit (whether
directly from any Borrower or otherwise, or any payment of interest on account
thereof, the Issuing Lender will distribute to such L/C Participant its pro rata
--- ----
share thereof; provided, that in the event that any such payment received by the
--------
Issuing Lender shall be required to be returned by the Issuing Lender, such L/C
Participant shall return to the Issuing Lender the portion thereof previously
distributed by the Issuing Lender to it.
SECTION 3.5 Reimbursement Obligation of the Borrowers. The Borrowers
-----------------------------------------
agree to reimburse the Issuing Lender on each date on which the Issuing Lender
notifies the Borrowers of the date and amount of a draft paid under any Letter
of Credit for the amount of (a) such draft so paid and (b) any taxes, fees,
charges or other costs or expenses incurred by the Issuing Lender in connection
with such payment. Each such payment shall be made to the Issuing Lender at its
address for notices specified herein in lawful money of the United States and in
immediately available funds. Interest shall be payable on any and all amounts
remaining unpaid by the Borrowers under this Article III from the date such
amounts become payable (whether at stated maturity, by acceleration or
otherwise) until payment in full at the rate which would be payable on any
outstanding Base Rate Loans which were then overdue. If the Borrowers fail to
timely reimburse the Issuing Lender on the date the Borrowers receive the notice
referred to in this Section 3.5, the Borrowers shall be deemed to have timely
given a Notice of Borrowing hereunder to the Administrative Agent requesting the
Lenders to make a Base Rate Loan on such date in an amount equal to the amount
of such drawing and, regardless of whether or not the conditions precedent
specified in Article V have been satisfied, the Lenders shall make Base Rate
Loans in such amount, the proceeds of which shall be applied to reimburse the
Issuing Lender for the amount of the related drawing and costs and expenses.
SECTION 3.6 Obligations Absolute. The obligations of the Borrowers
--------------------
under this Article III (including, without limitation, the Reimbursement
Obligation) shall be joint and several, and absolute and unconditional under any
and all circumstances and irrespective of any set-off, counterclaim or defense
to payment which the Borrowers may have or have had against the Issuing Lender
or any beneficiary of a Letter of Credit. The Borrowers also agree with the
Issuing Lender that the Issuing Lender shall not be responsible for, and the
Reimbursement Obligation of the Borrowers under Section 3.5 shall not be
affected by, among other things, the validity or genuineness of documents or of
any endorsements thereon, even though such documents shall in fact prove to be
invalid, fraudulent or forged, or any dispute between or among any Borrower and
any beneficiary of any Letter of Credit or any other party to which such Letter
of Credit may be transferred or any claims whatsoever of any Borrower against
any beneficiary of such Letter of Credit or any such transferee. The Issuing
Lender shall not be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit, except for errors or
omissions caused by the Issuing Lender's gross negligence or willful misconduct.
The Borrowers agree that any action taken or omitted by the Issuing Lender under
or in connection with any Letter of Credit or the related drafts or documents,
if done in the absence of gross negligence or willful misconduct and in
accordance with the standards of care specified in the
24
<PAGE>
Uniform Customs and, to the extent not inconsistent therewith, the UCC shall be
binding on the Borrowers and shall not result in any liability of the Issuing
Lender to the Borrowers. The responsibility of the Issuing Lender to the
Borrowers in connection with any draft presented for payment under any Letter of
Credit shall, in addition to any payment obligation expressly provided for in
such Letter of Credit, be limited to determining that the documents (including
each draft) delivered under such Letter of Credit in connection with such
presentment are in conformity with such Letter of Credit.
SECTION 3.7 Effect of Application. To the extent that any provision
---------------------
of any Application related to any Letter of Credit is inconsistent with the
provisions of this Article III, the provisions of this Article III shall apply.
ARTICLE IV
GENERAL LOAN PROVISIONS
SECTION 4.1 Interest.
--------
(a) Interest Rate Options.
---------------------
(i) Revolving Credit Loans. Subject to the provisions of this
----------------------
Section 4.1, at the election of the Company, on behalf of the Borrowers, the
aggregate principal balance of the Revolving Credit Notes or any portion thereof
shall bear interest at the Base Rate or the LIBOR Rate plus, in each case, the
Applicable Margin as set forth below; provided that the LIBOR Rate shall not be
--------
available until three (3) Business Days after the Closing Date. The Company, on
behalf of the Borrowers, shall select the rate of interest and Interest Period,
if any, applicable to any Loan at the time a Notice of Borrowing is given
pursuant to Section 2.3 or at the time a Notice of Conversion/Continuation is
given pursuant to Section 4.2. Each Loan or portion thereof bearing interest
based on the Base Rate shall be a "Base Rate Loan", each Loan or portion thereof
bearing interest based on the LIBOR Rate shall be a "LIBOR Rate Loan." Any
Revolving Credit Loan or any portion thereof as to which the Company, on behalf
of the Borrowers, has not duly specified an interest rate as provided herein
shall be deemed a Base Rate Loan.
(ii) Swingline Loans. Subject to the provisions of this Section
---------------
4.1 each Swingline Loan shall bear interest at the Base Rate plus the Applicable
----
Margin as set forth below.
(b) Interest Periods. In connection with each LIBOR Rate Loan, the
----------------
Company, on behalf of the Borrowers, by giving notice at the times described in
Section 4.1(a), shall elect an interest period (each, an "Interest Period") to
be applicable to such Loan, which Interest Period shall be a period of one (1),
two (2), three (3), or six (6) months with respect to each LIBOR Rate Loan;
provided that:
- --------
25
<PAGE>
(i) the Interest Period shall commence on the date of advance
of or conversion to any LIBOR Rate Loan and, in the case of immediately
successive Interest Periods, each successive Interest Period shall commence on
the date on which the next preceding Interest Period expires;
(ii) if any Interest Period would otherwise expire on a day that
is not a Business Day, such Interest Period shall expire on the next succeeding
Business Day; provided, that if any Interest Period with respect to a LIBOR Rate
--------
Loan would otherwise expire on a day that is not a Business Day but is a day of
the month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(iii) any Interest Period with respect to a LIBOR Rate Loan that
begins on the last Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the relevant calendar
month at the end of such Interest Period;
(iv) no Interest Period shall extend beyond the Revolving Credit
Termination Date; and
(v) there shall be no more than six (6) Interest Periods
outstanding at any time.
(c) Applicable Margin. The Applicable Margin provided for in Section
-----------------
4.1(a) with respect to the Loans (the "Applicable Margin") shall (i) on the
Closing Date equal the percentages set forth in the certificate delivered
pursuant to Section 5.2(e)(ii) and (ii) for each fiscal quarter thereafter be
determined by reference to the Leverage Ratio as of the end of the fiscal
quarter immediately preceding the delivery of the applicable Officer's
Compliance Certificate or as of the closing date of any Permitted Acquisition as
follows:
Applicable Margin Per Annum
Leverage Ratio Base Rate + LIBOR Rate +
-------------- ------------------------------
Greater than or equal
to 3.50 to 1.00 0.500% 1.500%
Less than 3.50 to 1.00
and greater than or
equal to 3.00 to 1.00 0.250% 1.250%
Less than 3.00 to 1.00
and greater than or
equal to 2.50 to 1.00 0.000% 1.000%
Less than 2.50 to 1.00
26
<PAGE>
and greater than or
equal to 2.00 to 1.00 0.000% 0.875%
Less than 2.00 to 1.00 0.000% 0.750%
Adjustments, if any, in the Applicable Margin shall be made by the
Administrative Agent on the tenth (10th) Business Day (each an "Adjustment
Date") after receipt by the Administrative Agent of quarterly financial
statements for the Company and its Subsidiaries and the accompanying Officer's
Compliance Certificate setting forth the Leverage Ratio of the Company and its
Subsidiaries as of the most recent fiscal quarter end; provided that adjustments
--------
in the Applicable Margin also shall be made by the Administrative Agent on the
closing date of any Permitted Acquisition following receipt by the
Administrative Agent of evidence of pro forma covenant compliance with each
---------
covenant contained in Article IX (as delivered pursuant to Section 10.4(e)
hereof). In the event the Company fails to deliver such financial statements
and certificate or evidence of covenant compliance, as applicable, within the
time required by Sections 7.1, 7.2 and 10.4(e) hereof, the Applicable Margin
shall be the highest Applicable Margin set forth above until the Adjustment Date
following the delivery of such financial statements and certificate or evidence
of covenant compliance, as applicable.
(d) Default Rate. At the election of the Administrative Agent, upon the
------------
occurrence and during the continuance of an Event of Default, (i) the Borrowers
shall no longer have the option to request LIBOR Rate Loans, (ii) all
outstanding LIBOR Rate Loans shall bear interest at a rate per annum two percent
(2%) in excess of the rate then applicable to LIBOR Rate Loans, as applicable,
until the end of the applicable Interest Period and thereafter at a rate equal
to two percent (2%) in excess of the rate then applicable to Base Rate Loans,
and (iii) all outstanding Base Rate Loans and Swingline Loans shall bear
interest at a rate per annum equal to two percent (2%) in excess of the rate
then applicable to Base Rate Loans. Interest shall continue to accrue on the
Notes after the filing by or against any Borrower of any petition seeking any
relief in bankruptcy or under any act or law pertaining to insolvency or debtor
relief, whether state, federal or foreign.
(e) Interest Payment and Computation. Interest on each Base Rate Loan
--------------------------------
shall be payable in arrears on the last Business Day of each calendar quarter
commencing September 30, 1998; and interest on each LIBOR Rate Loan shall be
payable on the last day of each Interest Period applicable thereto, and if such
Interest Period extends over three (3) months, at the end of each three (3)
month interval during such Interest Period. All interest rates, fees and
commissions provided hereunder shall be computed on the basis of a 360-day year
and assessed for the actual number of days elapsed; provided, that interest on
--------
Base Rate Loans shall be computed on the basis of a 365/66-day year and assessed
for the actual number of days elapsed.
(f) Maximum Rate. In no contingency or event whatsoever shall the
------------
aggregate of all amounts deemed interest hereunder or under any of the Notes
charged or collected pursuant to the terms of this Agreement or pursuant to any
of the Notes exceed the highest rate permissible under any Applicable Law which
a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. In the event that such a court determines that the Lenders
have charged
27
<PAGE>
or received interest hereunder in excess of the highest applicable rate, the
rate in effect hereunder shall automatically be reduced to the maximum rate
permitted by Applicable Law and the Lenders shall at the Administrative Agent's
option (i) promptly refund to the Borrowers any interest received by Lenders in
excess of the maximum lawful rate or (ii) shall apply such excess to the
principal balance of the Obligations. It is the intent hereof that the Borrowers
not pay or contract to pay, and that neither the Administrative Agent nor any
Lender receive or contract to receive, directly or indirectly in any manner
whatsoever, interest in excess of that which may be paid by the Borrowers under
Applicable Law.
SECTION 4.2 Notice and Manner of Conversion or Continuation of Loans.
--------------------------------------------------------
Provided that no Event of Default has occurred and is then continuing, the
Borrowers shall have the option to (a) convert at any time all or any portion of
its outstanding Base Rate Loans (other than Swingline Loans) in a principal
amount equal to $3,000,000 or any whole multiple of $1,000,000 in excess thereof
into one or more LIBOR Rate Loans and (b) upon the expiration of any Interest
Period, (i) convert all or any part of its outstanding LIBOR Rate Loans in a
principal amount equal to $1,000,000 or a whole multiple of $250,000 in excess
thereof into Base Rate Loans or (ii) continue such LIBOR Rate Loans as LIBOR
Rate Loans. Whenever the Borrowers desire to convert or continue Loans as
provided above, the Company, on behalf of the Borrowers, shall give the
Administrative Agent irrevocable prior written notice in the form attached as
Exhibit E (a "Notice of Conversion/Continuation") not later than 11:00 a.m.
- ---------
(Charlotte time) three (3) Business Days before the day on which a proposed
conversion or continuation of such Loan is to be effective specifying (A) the
Loans to be converted or continued, and, in the case of any LIBOR Rate Loan to
be converted or continued, the last day of the Interest Period therefor, (B) the
effective date of such conversion or continuation (which shall be a Business
Day), (C) the principal amount of such Loans to be converted or continued, and
(D) the Interest Period to be applicable to such converted or continued LIBOR
Rate Loan. The Administrative Agent shall promptly notify the Lenders of such
Notice of Conversion/Continuation.
SECTION 4.3 Fees.
----
(a) Commitment Fee. Commencing on the Closing Date, the Borrowers shall
--------------
pay to the Administrative Agent, for the account of the Lenders, a non-
refundable commitment fee at a rate per annum equal to the applicable rate (the
"Commitment Fee Rate") set forth below on the average daily unused portion of
the Aggregate Commitment; provided, that the amount of outstanding Swingline
--------
Loans shall not be considered usage of the Aggregate Commitment for the purpose
of calculating such commitment fee. The commitment fee shall be payable in
arrears on the last Business Day of each calendar quarter during the term of
this Agreement commencing September 30, 1998, and on the Revolving Credit
Termination Date. Such commitment fee shall be distributed by the
Administrative Agent to the Lenders pro rata in accordance with the Lenders'
--- ----
respective Commitment Percentages. The Commitment Fee Rate shall (i) on the
Closing Date equal the percentage set forth in the certificate delivered
pursuant to Section 5.2(e)(ii) and (ii) for each fiscal quarter thereafter be
determined by reference to the Leverage Ratio as of the end of the fiscal
quarter immediately preceding the delivery of the applicable Officer's
Compliance Certificate or as of the closing date of any Permitted Acquisition as
follows:
28
<PAGE>
Leverage Ratio Commitment Fee Rate
-------------- -------------------
Greater than or equal
to 3.00 to 1.00 0.275%
Less than 3.00 to 1.00 0.250%
Adjustments, if any, in the Commitment Fee Rate shall be made by the
Administrative Agent on the Adjustment Date; provided that adjustments in the
--------
Commitment Fee Percentage also shall be made by the Administrative Agent on the
closing date of any Permitted Acquisition following receipt by the
Administrative Agent of evidence of pro forma covenant compliance with each
covenant contained in Article IX (as delivered pursuant to Section 10.4(e)
hereof). In the event the Company fails to deliver such financial statements
and certificate or evidence of covenant compliance, as applicable, within the
time required by Sections 7.1, 7.2 and 10.4(e) hereof, the Commitment Fee Rate
shall be the highest Commitment Fee Rate set forth above until the Adjustment
Date following the delivery of such financial statements and certificate or
evidence of covenant compliance, as applicable.
(b) Underwriting Fees. The Borrowers shall pay to First Union on the
-----------------
Closing Date the underwriting fee as set forth in the Fee Letter.
(c) Administrative Agent's and Other Fees. The Borrowers agree to pay to
-------------------------------------
the Administrative Agent, for its account, the annual administrative fee as set
forth in the Fee Letter.
SECTION 4.4 Manner of Payment. Each payment by the Borrowers on account of
-----------------
the principal of or interest on the Loans or of any fee, commission or other
amounts (including the Reimbursement Obligation) payable to the Lenders under
this Agreement or any Note shall be made not later than 1:00 p.m. (Charlotte
time) on the date specified for payment under this Agreement to the
Administrative Agent at the Administrative Agent's Office for the account of the
Lenders (other than as set forth below) pro rata in accordance with their
--- ----
respective Commitment Percentages (except as specified below), in Dollars, in
immediately available funds and shall be made without any set-off, counterclaim
or deduction whatsoever. Any payment received after such time but before 2:00
p.m. (Charlotte time) on such day shall be deemed a payment on such date for the
purposes of Section 11.1, but for all other purposes shall be deemed to have
been made on the next succeeding Business Day. Any payment received after 2:00
p.m. (Charlotte time) shall be deemed to have been made on the next succeeding
Business Day for all purposes. Upon receipt by the Administrative Agent of each
such payment, the Administrative Agent shall distribute to each Lender at its
address for notices set forth herein its pro rata share of such payment in
--- ----
accordance with such Lender's Commitment Percentage (except as specified below)
and shall wire advice of the amount of such credit to each Lender. Each payment
to the Administrative Agent of the Issuing Lender's fees or L/C Participants'
commissions shall be made in like manner, but for the account of the Issuing
Lender or the L/C Participants, as the case may be. Each payment to the
Administrative Agent of Administrative Agent's fees or expenses shall be made
for the account of the Administrative Agent and any amount payable to
29
<PAGE>
any Lender under Sections 4.8, 4.9, 4.10, 4.11 or 13.2 shall be paid to the
Administrative Agent for the account of the applicable Lender.
SECTION 4.5 Crediting of Payments and Proceeds. In the event that the
----------------------------------
Borrowers shall fail to pay any of the Obligations when due and the Obligations
have been accelerated pursuant to Section 11.2, all payments received by the
Lenders upon the Notes and the other Obligations and all net proceeds from the
enforcement of the Obligations shall be applied first to all expenses then due
and payable by the Borrowers hereunder and under the Loan Documents, then to all
indemnity obligations then due and payable by the Borrowers hereunder and under
the Loan Documents, then to all Administrative Agent's and Issuing Lender's fees
then due and payable, then to all commitment and other fees and commissions then
due and payable, then to accrued and unpaid interest on the Swingline Note to
the Swingline Lender, then to the principal amount outstanding under the
Swingline Note to the Swingline Lender, then to accrued and unpaid interest on
the Revolving Credit Notes and the Reimbursement Obligation (pro rata in
--- ----
accordance with all such amounts due), then to the principal amount of the
Revolving Credit Notes and Reimbursement Obligation, then to the cash collateral
account described in Section 11.2(b) hereof to the extent of any L/C Obligations
then outstanding, and then to the ratable payment of any other outstanding
Obligations, in that order.
SECTION 4.6 Adjustments. If any Lender (a "Benefitted Lender") shall at
-----------
any time receive any payment of all or part of the Obligations owing thereto, or
if any Lender shall at any time receive any collateral in respect to the
Obligations owing thereto (whether voluntarily or involuntarily, by set-off or
otherwise), in a greater proportion than the pro rata distribution to the extent
--- ----
required by Section 4.4, such Benefitted Lender shall purchase for cash from the
other Lenders such portion of each such other Lender's Extensions of Credit or
other Obligations, or shall provide such other Lenders with the benefits of any
such collateral, or the proceeds thereof, as shall be necessary to cause such
Benefitted Lender to share the excess payment or benefits of such collateral or
proceeds ratably with each of the Lenders; provided, that if all or any portion
--------
of such excess payment or benefits is thereafter recovered from such Benefitted
Lender, such purchase shall be rescinded, and the purchase price and benefits
returned to the extent of such recovery, but without interest. The Borrowers
agree that each Lender so purchasing a portion of another Lender's Extensions of
Credit or other Obligations may exercise all rights of payment (including,
without limitation, rights of set-off) with respect to such portion as fully as
if such Lender were the direct holder of such portion.
SECTION 4.7 Nature of Obligations of Lenders Regarding Extensions of
--------------------------------------------------------
Credit; Assumption by the Administrative Agent. The obligations of the Lenders
- ----------------------------------------------
under this Agreement to make the Loans and issue or participate in Letters of
Credit are several and are not joint or joint and several. Unless the
Administrative Agent shall have received notice from a Lender prior to a
proposed borrowing date that such Lender will not make available to the
Administrative Agent such Lender's ratable portion of the amount to be borrowed
on such date (which notice shall not release such Lender of its obligations
hereunder), the Administrative Agent may assume that such Lender has made such
portion available to the Administrative Agent on the proposed borrowing date in
accordance with Section 2.3(b) and the Administrative Agent may, in reliance
upon such assumption, make available to the Borrowers on such date a
30
<PAGE>
corresponding amount. If such amount is made available to the Administrative
Agent on a date after such borrowing date, such Lender shall pay to the
Administrative Agent on demand an amount, until paid, equal to the product of
(a) the amount of such Lender's Commitment Percentage of such borrowing, times
-----
(b) the daily average Federal Funds Rate during such period as determined by the
Administrative Agent, times (c) a fraction the numerator of which is the number
-----
of days that elapse from and including such borrowing date to the date on which
such Lender's Commitment Percentage of such borrowing shall have become
immediately available to the Administrative Agent and the denominator of which
is 360. A certificate of the Administrative Agent with respect to any amounts
owing under this Section 4.7 shall be conclusive, absent manifest error. If such
Lender's Commitment Percentage of such borrowing is not made available to the
Administrative Agent by such Lender within three (3) Business Days of such
borrowing date, the Administrative Agent shall be entitled to recover such
amount made available by the Administrative Agent with interest thereon at the
rate per annum applicable to Base Rate Loans hereunder, on demand, from the
Borrowers. The failure of any Lender to make its Commitment Percentage of any
Loan available shall not relieve it or any other Lender of its obligation, if
any, hereunder to make its Commitment Percentage of such Loan available on such
borrowing date, but no Lender shall be responsible for the failure of any other
Lender to make its Commitment Percentage of such Loan available on the borrowing
date.
SECTION 4.8 Changed Circumstances.
---------------------
(a) Circumstances Affecting LIBOR Rate Availability. If with respect to
-----------------------------------------------
any Interest Period the Administrative Agent or any Lender (after consultation
with Administrative Agent) shall determine that, by reason of circumstances
affecting the foreign exchange and interbank markets generally, deposits in
eurodollars, in the applicable amounts are not being quoted via Telerate Page
3750 or offered to the Administrative Agent or such Lender for such Interest
Period, then the Administrative Agent shall forthwith give notice thereof to the
Borrowers. Thereafter, until the Administrative Agent notifies the Borrowers
that such circumstances no longer exist, the obligation of the Lenders to make
LIBOR Rate Loans and the right of the Borrowers to convert any Loan to or
continue any Loan as a LIBOR Rate Loan shall be suspended, and the Borrowers
shall repay in full (or cause to be repaid in full) the then outstanding
principal amount of each such LIBOR Rate Loans together with accrued interest
thereon, on the last day of the then current Interest Period applicable to such
LIBOR Rate Loan or convert the then outstanding principal amount of each such
LIBOR Rate Loan to a Base Rate Loan as of the last day of such Interest Period.
(b) Laws Affecting LIBOR Rate Availability. If, after the date hereof, the
--------------------------------------
introduction of, or any change in, any Applicable Law or any change in the
interpretation or administration thereof by any Governmental Authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Lender (or any of their respective Lending
Offices) with any request or directive (whether or not having the force of law)
of any such Authority, central bank or comparable agency, shall make it unlawful
or impossible for any of the Lenders (or any of their respective Lending
Offices) to honor its obligations hereunder to make or maintain any LIBOR Rate
Loan, such Lender shall promptly give notice thereof to the Administrative Agent
and the Administrative Agent shall promptly
31
<PAGE>
give notice to the Borrowers and the other Lenders. Thereafter, until the
Administrative Agent notifies the Borrowers that such circumstances no longer
exist, (i) the obligations of the Lenders to make LIBOR Rate Loans and the right
of the Borrowers to convert any Loan or continue any Loan as a LIBOR Rate Loan
shall be suspended and thereafter the Borrowers may select only Base Rate Loans
hereunder, and (ii) if any of the Lenders may not lawfully continue to maintain
a LIBOR Rate Loan to the end of the then current Interest Period applicable
thereto as a LIBOR Rate Loan, the applicable LIBOR Rate Loan shall immediately
be converted to a Base Rate Loan for the remainder of such Interest Period.
(c) Increased Costs. If, after the date hereof, the introduction of, or
---------------
any change in, any Applicable Law, or in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any of the
Lenders (or any of their respective Lending Offices) with any request or
directive (whether or not having the force of law) of such Authority, central
bank or comparable agency:
(i) shall subject any of the Lenders (or any of their respective
Lending Offices) to any tax, duty or other charge with respect to any Note,
Letter of Credit or Application or shall change the basis of taxation of
payments to any of the Lenders (or any of their respective Lending Offices) of
the principal of or interest on any Note, Letter of Credit or Application or any
other amounts due under this Agreement in respect thereof (except for changes in
the rate of tax on the overall net income of any of the Lenders or any of their
respective Lending Offices imposed by the jurisdiction in which such Lender is
organized or is or should be qualified to do business or such Lending Office is
located); or
(ii) shall impose, modify or deem applicable any reserve (including,
without limitation, any imposed by the Board of Governors of the Federal Reserve
System), special deposit, insurance or capital or similar requirement against
assets of, deposits with or for the account of, or credit extended by any of the
Lenders (or any of their respective Lending Offices) or shall impose on any of
the Lenders (or any of their respective Lending Offices) or the foreign exchange
and interbank markets any other condition affecting any Note;
and the result of any of the foregoing is to increase the costs to any of the
Lenders of maintaining any LIBOR Rate Loan or issuing or participating in
Letters of Credit or to reduce the yield or amount of any sum received or
receivable by any of the Lenders under this Agreement or under the Notes in
respect of a LIBOR Rate Loan or Letter of Credit or Application, then such
Lender shall promptly notify the Administrative Agent, and the Administrative
Agent shall promptly notify the Borrowers of such fact and demand compensation
therefor and, within fifteen (15) days after such notice by the Administrative
Agent, the Borrowers shall pay to such Lender such additional amount or amounts
as will compensate such Lender or Lenders for such increased cost or reduction.
The Administrative Agent will promptly notify the Borrowers of any event of
which it has knowledge which will entitle such Lender to compensation pursuant
to this Section 4.8(c); provided, that the Administrative Agent shall incur no
--------
liability whatsoever to the Lenders or the Borrowers in the event it fails to do
so. The amount of such compensation shall be determined, in the applicable
Lender's sole discretion, based upon the assumption that such
32
<PAGE>
Lender funded its Commitment Percentage of the LIBOR Rate Loans in the London
interbank or domestic certificate of deposit market, as applicable, and using
any reasonable attribution or averaging methods which such Lender deems
appropriate and practical. A certificate of such Lender setting forth the basis
for determining such amount or amounts necessary to compensate such Lender shall
be forwarded to the Borrowers through the Administrative Agent and shall be
conclusively presumed to be correct save for manifest error.
SECTION 4.9 Indemnity. The Borrowers hereby indemnify each of the
---------
Lenders against any loss or expense which may arise or be attributable to each
Lender's obtaining, liquidating or employing deposits or other funds acquired to
effect, fund or maintain any Loan (a) as a consequence of any failure by the
Borrowers to make any payment when due of any amount due hereunder in connection
with a LIBOR Rate Loan, (b) due to any failure of the Borrowers to borrow on a
date specified therefor in a Notice of Borrowing or Notice of
Continuation/Conversion or (c) due to any payment, prepayment or conversion of
any LIBOR Rate Loan on a date other than the last day of the Interest Period
therefor. The amount of such loss or expense shall be determined, in the
applicable Lender's sole discretion, based upon the assumption that such Lender
funded its Commitment Percentage of the LIBOR Rate Loans in the London interbank
or domestic certificate of deposit market, as applicable, and using any
reasonable attribution or averaging methods which such Lender deems appropriate
and practical. A certificate of such Lender setting forth the basis for
determining such amount or amounts necessary to compensate such Lender shall be
forwarded to the Borrowers through the Administrative Agent and shall be
conclusively presumed to be correct save for manifest error.
SECTION 4.10 Capital Requirements. If either (a) the introduction of, or
--------------------
any change in, or in the interpretation of, any Applicable Law or (b) compliance
with any guideline or request from any central bank or comparable agency or
other Governmental Authority (whether or not having the force of law), has or
would have the effect of reducing the rate of return on the capital of, or has
affected or would affect the amount of capital required to be maintained by, any
Lender or any corporation controlling such Lender as a consequence of, or with
reference to the Commitments and other commitments of this type, below the rate
which the Lender or such other corporation could have achieved but for such
introduction, change or compliance, then within five (5) Business Days after
written demand by any such Lender, the Borrowers shall pay to such Lender from
time to time as specified by such Lender additional amounts sufficient to
compensate such Lender or other corporation for such reduction. A certificate as
to such amounts submitted to the Borrowers and the Administrative Agent by such
Lender, shall, in the absence of manifest error, be presumed to be correct and
binding for all purposes.
SECTION 4.11 Taxes.
-----
(a) Payments Free and Clear. Any and all payments by the Borrowers
-----------------------
hereunder or under the Notes or the Letters of Credit shall be made free and
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholding, and all liabilities with respect
thereto excluding, (i) in the case of each Lender and the Administrative Agent,
income and franchise taxes imposed by the jurisdiction under the laws of which
such
33
<PAGE>
Lender or the Administrative Agent (as the case may be) is organized or is or
should be qualified to do business or any political subdivision thereof and (ii)
in the case of each Lender, income and franchise taxes imposed by the
jurisdiction of such Lender's Lending Office or any political subdivision
thereof (all such non-excluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as "Taxes"). If the
Borrowers shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder or under any Note or Letter of Credit to any Lender or the
Administrative Agent, (A) the sum payable shall be increased as may be necessary
so that after making all required deductions (including deductions applicable to
additional sums payable under this Section 4.11) such Lender or the
Administrative Agent (as the case may be) receives an amount equal to the amount
such party would have received had no such deductions been made, (B) the
Borrowers shall make such deductions, (C) the Borrowers shall pay the full
amount deducted to the relevant taxing authority or other authority in
accordance with applicable law, and (D) the Borrowers shall deliver to the
Administrative Agent evidence of such payment to the relevant taxing authority
or other authority in the manner provided in Section 4.11(d).
(b) Stamp and Other Taxes. In addition, the Borrowers shall pay any
---------------------
present or future stamp, registration, recordation or documentary taxes or any
other similar fees or charges or excise or property taxes, levies of the United
States or any state or political subdivision thereof or any applicable foreign
jurisdiction which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement, the
Loans, the Letters of Credit, the other Loan Documents, or the perfection of any
rights or security interest in respect thereto (hereinafter referred to as
"Other Taxes").
(c) Indemnity. The Borrowers shall indemnify each Lender and the
---------
Administrative Agent for the full amount of Taxes and Other Taxes (including,
without limitation, any Taxes and Other Taxes imposed by any jurisdiction on
amounts payable under this Section 4.11) paid by such Lender or the
Administrative Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or legally asserted.
Such indemnification shall be made within thirty (30) days from the date such
Lender or the Administrative Agent (as the case may be) makes written demand
therefor.
(d) Evidence of Payment. Within thirty (30) days after the date of any
-------------------
payment of Taxes or Other Taxes, the Borrowers shall furnish to the
Administrative Agent, at its address referred to in Section 13.1, the original
or a certified copy of a receipt evidencing payment thereof or other evidence of
payment satisfactory to the Administrative Agent.
(e) Delivery of Tax Forms. Each Lender organized under the laws of a
---------------------
jurisdiction other than the United States or any state thereof shall deliver to
the Borrowers, with a copy to the Administrative Agent, on the Closing Date or
concurrently with the delivery of the relevant Assignment and Acceptance, as
applicable, (i) two United States Internal Revenue Service Forms 4224 or Forms
1001, as applicable (or successor forms) properly completed and certifying in
each case that such Lender is entitled to a complete exemption from withholding
or deduction for or on account of any United States federal income taxes, and
(ii) an Internal Revenue Service
34
<PAGE>
Form W-8 or W-9 or successor applicable form, as the case may be, to establish
an exemption from United States backup withholding taxes. Each such Lender
further agrees to deliver to the Borrowers, with a copy to the Administrative
Agent, a Form 1001 or 4224 and Form W-8 or W-9, or successor applicable forms or
manner of certification, as the case may be, on or before the date that any such
form expires or becomes obsolete or after the occurrence of any event requiring
a change in the most recent form previously delivered by it to the Borrowers,
certifying in the case of a Form 1001 or 4224 that such Lender is entitled to
receive payments under this Agreement without deduction or withholding of any
United States federal income taxes (unless in any such case an event (including
without limitation any change in treaty, law or regulation) has occurred prior
to the date on which any such delivery would otherwise be required which renders
such forms inapplicable or the exemption to which such forms relate unavailable
and such Lender notifies the Borrowers and the Administrative Agent that it is
not entitled to receive payments without deduction or withholding of United
States federal income taxes) and, in the case of a Form W-8 or W-9, establishing
an exemption from United States backup withholding tax.
(f) Survival. Without prejudice to the survival of any other agreement of
--------
the Borrowers hereunder, the agreements and obligations of the Borrowers
contained in this Section 4.11 shall survive the payment in full of the
Obligations and the termination of the Commitments.
ARTICLE V
CLOSING; CONDITIONS OF CLOSING AND BORROWING
--------------------------------------------
SECTION 5.1 Closing. The closing shall take place at the offices of
-------
Kennedy, Covington, Lobdell & Hickman, L.L.P. at 10:00 a.m. on July 31, 1998 or
on such other date as the parties hereto shall mutually agree.
SECTION 5.2 Conditions to Closing and Initial Extensions of Credit. The
------------------------------------------------------
obligation of the Lenders to close this Agreement and to make the initial Loan
or issue the initial Letter of Credit is subject to the satisfaction of each of
the following conditions:
(a) Executed Loan Documents. The following Loan Documents in form and
-----------------------
substance reasonably satisfactory to the Administrative Agent and each Lender:
(i) this Agreement;
(ii) the Revolving Credit Notes;
(iii) the Swingline Note;
(iv) the Security Agreement; and
35
<PAGE>
(v) the Pledge Agreement;
shall have been duly authorized, executed and delivered to the Administrative
Agent by the parties thereto, shall be in full force and effect and no default
shall exist thereunder, and the Borrowers shall have delivered original
counterparts thereof to the Administrative Agent.
(b) Closing Certificates; etc.
-------------------------
(i) Officer's Certificate of the Borrowers. The Administrative
--------------------------------------
Agent shall have received a certificate from a Responsible Officer of the
Company, on behalf of each Borrower and in form and substance satisfactory to
the Administrative Agent, to the effect that all representations and warranties
of the Borrowers contained in this Agreement and the other Loan Documents are
true, correct and complete; that the Borrowers are not in violation of any of
the covenants contained in this Agreement and the other Loan Documents; that,
after giving effect to the transactions contemplated by this Agreement, no
Default or Event of Default has occurred and is continuing; and that the
Borrowers have satisfied each of the closing conditions.
(ii) Certificate of Secretary of each Borrower. The Administrative
-----------------------------------------
Agent shall have received a certificate of the secretary or assistant secretary
of each Borrower certifying as to the incumbency and genuineness of the
signature of each officer of such Borrower executing Loan Documents to which it
is a party and certifying that attached thereto is a (A) true and complete copy
of the articles of incorporation of such Borrower and all amendments thereto,
certified as of a recent date by the appropriate Governmental Authority in its
jurisdiction of incorporation, (B) a true and complete copy of the bylaws of
such Borrower as in effect on the date of such certifications, (C) that attached
thereto is a true and complete copy of resolutions duly adopted by the Board of
Directors of such Borrower authorizing the borrowings contemplated hereunder and
the execution, delivery and performance of this Agreement and the other Loan
Documents to which it is a party, and (D) a true and complete copy of each
certificate required to be delivered pursuant to Section 5.2(b)(iii).
(iii) Certificates of Good Standing. To the extent requested by the
-----------------------------
Administrative Agent, the Administrative Agent shall have received long-form
certificates as of a recent date of the good standing of each Borrower under the
laws of its jurisdiction of organization and each other jurisdiction where such
Borrower is qualified to do business.
(iv) Opinions of Counsel. The Administrative Agent shall have
-------------------
received favorable opinions of counsel to the Borrowers addressed to the
Administrative Agent and the Lenders with respect to the Borrowers, the Loan
Documents and such other matters as the Lenders shall request.
(v) Tax Forms. The Administrative Agent shall have received
---------
copies of the United States Internal Revenue Service forms required by Section
4.11(e) hereof.
(c) Collateral.
----------
36
<PAGE>
(i) Filings and Recordings. All filings and recordations that are
----------------------
necessary to perfect the security interests of the Lenders in the collateral
described in the Security Documents shall have been forwarded for filing in all
appropriate locations and the Administrative Agent shall have received evidence
satisfactory to the Administrative Agent that upon such filings and recordations
such security interests constitute valid and perfected first priority Liens
therein.
(ii) Pledged Collateral. The Administrative Agent shall have
------------------
received (A) original stock certificates or other certificates evidencing the
capital stock or other ownership interests pledged pursuant to the Pledge
Agreement, together with an undated stock or other power for each such
certificate duly executed in blank by the registered owner thereof, and, as
applicable, executed acknowledgements and consents, authorizations statements
and transactions statements and (B) each original promissory note pledged
pursuant to the Security Agreement, together with an undated transfer
instruments executed in blank by the registered owner thereof.
(iii) Lien Search. The Administrative Agent shall have received the
-----------
results of a Lien search (including a search as to judgments, pending litigation
and tax matters) made against the Borrowers and any of their Subsidiaries under
the Uniform Commercial Code (or applicable judicial docket) as in effect in any
state in which any of its assets are located, indicating among other things that
its assets are free and clear of any Lien except for Liens permitted hereunder.
(iv) Hazard and Liability Insurance. The Administrative Agent shall
------------------------------
have received certificates of insurance, evidence of payment of all insurance
premiums for the current policy year of each, and, if requested by the
Administrative Agent, copies (certified by a Responsible Officer of the Company)
of insurance policies in the form required under Section 8.3 and the Security
Documents and otherwise in form and substance reasonably satisfactory to the
Administrative Agent.
(d) Consents; Defaults.
------------------
(i) Governmental and Third Party Approvals. The Borrowers shall
--------------------------------------
have obtained all necessary approvals, authorizations and consents of any Person
and of all Governmental Authorities and courts having jurisdiction with respect
to the transactions contemplated by this Agreement and the other Loan Documents.
(ii) Permits and Licenses. All permits and licenses, including
--------------------
permits and licenses under Applicable Laws, the absence of which would have a
Material Adverse Effect on the current conduct of business of the Borrowers and
their Subsidiaries, shall have been obtained.
(iii) No Injunction, Etc. No action, proceeding, investigation,
------------------
regulation or legislation shall have been instituted, threatened or proposed
before any Governmental Authority to enjoin, restrain, or prohibit, or to obtain
substantial damages in respect of, or which is related to or arises out of this
Agreement or the other Loan Documents or the consummation of the transactions
contemplated hereby or thereby, or which, in the Administrative Agent's sole
discretion, would make it inadvisable to consummate the transactions
contemplated by this Agreement and such other Loan Documents.
37
<PAGE>
(iv) No Material Adverse Change. There shall not have occurred any
--------------------------
material adverse change in the condition (financial or otherwise), operations,
properties, business or prospects of the Borrowers and their Subsidiaries or any
event or condition that has had or could reasonably be expected to have a
Material Adverse Effect.
(v) No Event of Default. No Default or Event of Default shall have
-------------------
occurred and be continuing.
(e) Financial Matters.
-----------------
(i) Financial Statements. The Administrative Agent shall have
--------------------
received the audited Consolidated financial statements of the Company and its
Subsidiaries as of March 31, 1998, in form and substance satisfactory to the
Administrative Agent.
(ii) Financial Condition Certificate. The Company, on behalf of the
-------------------------------
Borrowers, shall have delivered to the Administrative Agent a certificate, in
form and substance satisfactory to the Administrative Agent, and certified as
accurate by a Responsible Officer of the Company, that (A) each Borrower and
each of its Subsidiaries are each Solvent, (B) the payables of each Borrower are
current and not past due in the ordinary course of business, (C) attached
thereto is a pro forma balance sheet of the Company and its Subsidiaries setting
--- -----
forth on a pro forma basis the financial condition of the Company and its
--- -----
Subsidiaries on a Consolidated basis as of that date, reflecting a pro forma
--- -----
basis the effect of the transactions contemplated herein, including all fees and
expenses in connection therewith, and evidencing compliance on a pro forma basis
---------
with the covenants contained in Articles IX and X hereof, (D) attached thereto
are the financial projections previously delivered to the Administrative Agent
representing the good faith opinions of the Company and senior management
thereof as to the projected results contained therein, (E) attached thereto is a
calculation of the Applicable Margin and the Commitment Fee Percentage pursuant
to Sections 4.1(c) and 4.3(a) and (F) attached thereto is a calculation setting
forth the Pro Forma Adjusted EBITDA of each Subsidiary of the Company for the
purpose of determining which Subsidiaries of the Company shall be a Borrower on
the Closing Date.
(iii) Payment at Closing; Fee Letters. The Borrowers shall have
-------------------------------
paid the fees set forth or referenced in Section 4.3 and any other accrued and
unpaid fees or commissions due hereunder (including, without limitation, legal
fees and expenses) to the Administrative Agent and Lenders, and to any other
Person such amount as may be due thereto in connection with the transactions
contemplated hereby, including all taxes, fees and other charges in connection
with the execution, delivery, recording, filing and registration of any of the
Loan Documents. The Administrative Agent shall have received duly authorized
and executed copies of the Fee Letter.
(f) Miscellaneous.
-------------
(i) Notice of Borrowing. The Administrative Agent shall have
-------------------
received a Notice of Borrowing from the Company, on behalf of the Borrowers, in
accordance with Section
38
<PAGE>
2.3(a), and a Notice of Account Designation from the Company, on behalf of the
Borrowers, specifying the account or accounts to which the proceeds of any Loans
made after the Closing Date are to be disbursed.
(ii) Proceedings and Documents. All opinions, certificates and
-------------------------
other instruments and all proceedings in connection with the transactions
contemplated by this Agreement shall be satisfactory in form and substance to
the Lenders. The Lenders shall have received copies of all other instruments and
other evidence as the Lender may reasonably request, in form and substance
satisfactory to the Lenders, with respect to the transactions contemplated by
this Agreement and the taking of all actions in connection therewith.
(iii) Termination of Refinanced Debt. On or prior to the Closing
------------------------------
Date, the Refinanced Debt shall have been fully and finally paid and terminated
and the Borrowers shall have delivered to the Administrative Agent all UCC
termination statements and other applicable release documents with respect to
all Liens relating to such Refinanced Debt or evidence that such terminations
and releases have been forwarded to the appropriate offices for filing.
(iv) Due Diligence and Other Documents. The Borrowers shall have
---------------------------------
delivered to the Administrative Agent such other documents, certificates and
opinions as the Administrative Agent reasonably requests, including, without
limitation, copies of each document evidencing or governing the Subordinated
Debt to the extent requested thereby, certified by Responsible Officer of the
Company as a true and correct copy thereof.
SECTION 5.3 Conditions to All Loans and Letters of Credit. The obligations
---------------------------------------------
of the Lenders to make any Loan or issue any Letter of Credit is subject to the
satisfaction of the following conditions precedent on the relevant borrowing or
issue date, as applicable:
(a) Continuation of Representations and Warranties. The representations
----------------------------------------------
and warranties contained in Article VI shall be true and correct on and as of
such borrowing or issuance date with the same effect as if made on and as of
such date; except for any representation and warranty made as of an earlier
date, which representation and warranty shall remain true and correct as of such
earlier date.
(b) No Existing Default. No Default or Event of Default shall have
-------------------
occurred and be continuing hereunder (i) on the borrowing date with respect to
such Loan or after giving effect to the Loans to be made on such date or (ii) or
the issue date with respect to such Letter of Credit or after giving affect to
such Letters of Credit on such date.
(c) Officer's Compliance Certificate; Additional Documents. The
------------------------------------------------------
Administrative Agent shall have received the current Officer's Compliance
Certificate and each additional document, instrument, legal opinion or other
item of information reasonably requested by it.
39
<PAGE>
SECTION 5.4 Post-Closing Covenants.
----------------------
(a) Within ninety (90) days of the Closing Date, the Borrowers shall
obtain landlord or lessor consents to the Liens in favor of Administrative Agent
and the Lenders granted pursuant to the Security Documents, in form and
substance satisfactory to the Administrative Agent, with respect to any real
property leased by any Borrower on which real property is located Inventory with
a value in excess of $500,000 (the locations of such real property to be set
forth on Schedule 5.4 attached hereto). In addition, the Borrower shall take all
------------
actions reasonably requested by the Administrative Agent or the Required Lenders
to obtain such landlord or lessor consents and any other documents or
certificates reasonably requested by the Administrative Agent in connection
therewith and, if requested thereby, duly recording each document related
thereto in such manner and in such places as are required by the law to perfect
and preserve the Liens in favor of the Administrative Agent and the Lenders
granted pursuant to the Security Documents.
(b) Within sixty (60) days of the Closing Date, the Administrative Agent
shall have entered into an intercreditor agreement in form and substance
reasonably satisfactory thereto with any financial institution which has
extended Vendor-Provided Financing or other trade credit to any Borrower or
Borrowers which financing or credit is secured by a Lien which covers any assets
of the applicable Borrower or Borrowers other than or in addition to the
property and related receivables financed by such financing or credit.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE BORROWERS
SECTION 6.1 Representations and Warranties. To induce the Administrative
------------------------------
Agent and Lenders to enter into this Agreement and to induce the Lenders to make
the Loans or issue or participate in the Letters of Credit, each Borrower hereby
represents and warrants to the Administrative Agent and the Lenders that:
(a) Organization; Power; Qualification. Each Borrower and each Subsidiary
----------------------------------
thereof is duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or formation, has the power and
authority to own its properties and to carry on its business as now being and
hereafter proposed to be conducted and is duly qualified and authorized to do
business in each jurisdiction in which the character of its properties or the
nature of its business requires such qualification and authorization, except
where the failure to be so qualified and authorized would not be reasonably
expected to have a Material Adverse Effect. The jurisdictions in which each
Borrower and each Subsidiary thereof is organized and qualified to do business
as of the Closing Date are described on Schedule 6.1(a).
---------------
(b) Ownership. Each Subsidiary and each Material Subsidiary of each
---------
Borrower as of the Closing Date is listed on Schedule 6.1(b). As of the
---------------
Closing Date, the capitalization of each Borrower and each Subsidiary thereof
consists of the number of shares, authorized, issued and
40
<PAGE>
outstanding, of such classes and series, with or without par value, described on
Schedule 6.1(b). All outstanding shares have been duly authorized and validly
- ---------------
issued and are fully paid and nonassessable. The shareholders of each Subsidiary
of each Borrower and the number of shares owned by each as of the Closing Date
are described on Schedule 6.1(b). As of the Closing Date, there are no
---------------
outstanding stock purchase warrants, subscriptions, options, securities,
instruments or other rights of any type or nature whatsoever, which are
convertible into, exchangeable for or otherwise provide for or permit the
issuance of capital stock of any Borrower or any Subsidiary thereof, except as
described on Schedule 6.1(b).
---------------
(c) Authorization of Agreement, Loan Documents and Borrowing. Each
--------------------------------------------------------
Borrower and each Subsidiary thereof has the right, power and authority and has
taken all necessary corporate and other action to authorize the execution,
delivery and performance of this Agreement and each of the other Loan Documents
to which it is a party in accordance with their respective terms. This Agreement
and each of the other Loan Documents have been duly executed and delivered by
the duly authorized officers of each Borrower and each Subsidiary thereof party
thereto, and each such document constitutes the legal, valid and binding
obligation of each Borrower and each Subsidiary thereof party thereto,
enforceable in accordance with its terms, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar state
or federal debtor relief laws from time to time in effect which affect the
enforcement of creditors' rights in general and the availability of equitable
remedies.
(d) Compliance of Agreement, Loan Documents and Borrowing with Laws, Etc.
--------------------------------------------------------------------
The execution, delivery and performance by each Borrower and each Subsidiary
thereof of the Loan Documents to which each such Person is a party, in
accordance with their respective terms, the borrowings hereunder and the
transactions contemplated hereby do not and will not, by the passage of time,
the giving of notice or otherwise, (i) require any Governmental Approval or
violate any Applicable Law relating to any Borrower or any Subsidiary thereof,
(ii) conflict with, result in a breach of or constitute a default under the
articles of incorporation, bylaws or other organizational documents of any
Borrower or any Subsidiary thereof or any indenture, agreement or other
instrument to which such Person is a party or by which any of its properties may
be bound or any Governmental Approval relating to such Person, or (iii) result
in or require the creation or imposition of any Lien upon or with respect to any
property now owned or hereafter acquired by such Person other than Liens arising
under the Loan Documents.
(e) Compliance with Law; Governmental Approvals. Each Borrower and each
-------------------------------------------
Subsidiary thereof (i) has all Governmental Approvals required by any Applicable
Law for it to conduct its business, each of which is in full force and effect,
is final and not subject to review on appeal and is not the subject of any
pending or, to the best of its knowledge, threatened attack by direct or
collateral proceeding, and (ii) is in compliance with each Governmental Approval
applicable to it and in compliance with all other Applicable Laws relating to it
or any of its respective properties, except where the failure to be in
compliance with any such Governmental Approval or Applicable Law would not be
reasonably expected to have a Material Adverse Effect.
41
<PAGE>
(f) Tax Returns and Payments. Each Borrower and each Subsidiary thereof
------------------------
has duly filed or caused to be filed all federal, state, local and other tax
returns required by Applicable Law to be filed, and has paid, or made adequate
provision for the payment of, all federal, state, local and other taxes,
assessments and governmental charges or levies upon it and its property, income,
profits and assets which are due and payable. Except as set forth on Schedule
--------
6.1(u), no Governmental Authority has asserted any Lien or other claim against
- ------
any Borrower or any Subsidiary thereof with respect to unpaid taxes which has
not been discharged or resolved. The charges, accruals and reserves on the
books of each Borrower and each Subsidiary thereof in respect of federal, state,
local and other taxes for all Fiscal Years and portions thereof since the
organization of each such Borrower and each such Subsidiary thereof are in the
judgment of each such Borrower adequate, and each such Borrower does not
anticipate any additional taxes or assessments for any of such years.
(g) Intellectual Property Matters. Each Borrower and each Subsidiary
-----------------------------
thereof owns or possesses rights to use all franchises, licenses, copyrights,
copyright applications, patents, patent rights or licenses, patent applications,
trademarks, trademark rights, trade names, trade name rights, copyrights and
rights with respect to the foregoing which are material and required to conduct
its business. No event has occurred which permits, or after notice or lapse of
time or both would permit, the revocation or termination of any such rights,
and, to each Borrower's knowledge, no Borrower nor any Subsidiary thereof is
liable to any Person for infringement under Applicable Law with respect to any
such rights as a result of its business operations.
(h) Environmental Matters.
---------------------
(i) The properties of each Borrower and each Subsidiary thereof do
not contain, and to their knowledge have not previously contained, any Hazardous
Materials in amounts or concentrations which (A) constitute or constituted a
violation of applicable Environmental Laws or (B) could give rise to liability
under applicable Environmental Laws;
(ii) Such properties and all operations conducted in connection
therewith are in compliance, and have been in compliance, with all applicable
Environmental Laws, and there is no contamination at, under or about such
properties or such operations which could interfere with the continued operation
of such properties or impair the fair saleable value thereof;
(iii) No Borrower nor any Subsidiary thereof has received any notice
of violation, alleged violation, non-compliance, liability or potential
liability regarding environmental matters or compliance with Environmental Laws
with regard to any of their properties or the operations conducted in connection
therewith, nor does any Borrower or any Subsidiary thereof have knowledge or
reason to believe that any such notice will be received or is being threatened;
(iv) Hazardous Materials have not been transported or disposed of
from the properties of any Borrower or any Subsidiary thereof in violation of,
or in a manner or to a location which could give rise to liability under,
Environmental Laws, nor have any Hazardous Materials been generated, treated,
stored or disposed of at, on or under any of such properties in
42
<PAGE>
violation of, or in a manner that could give rise to liability under, any
applicable Environmental Laws;
(v) No judicial proceedings or governmental or administrative
action is pending, or, to the knowledge of any Borrower, threatened, under any
Environmental Law to which any Borrower or any Subsidiary thereof is or will be
named as a party with respect to such properties or operations conducted in
connection therewith, nor are there any consent decrees or other decrees,
consent orders, administrative orders or other orders, or other administrative
or judicial requirements outstanding under any Environmental Law with respect to
such properties or such operations; and
(vi) There has been no release, or to the best of the knowledge of
any Borrower, the threat of release, of Hazardous Materials at or from such
properties, in violation of or in amounts or in a manner that could give rise to
liability under Environmental Laws.
(i) ERISA.
-----
(i) As of the Closing Date, no Borrower nor any ERISA Affiliate
maintains or contributes to, or has any obligation under, any Employee Benefit
Plans other than those identified on Schedule 6.1(i);
---------------
(ii) Each Borrower and each ERISA Affiliate is in compliance with
all applicable provisions of ERISA and the regulations and published
interpretations thereunder with respect to all Employee Benefit Plans except for
any required amendments for which the remedial amendment period as defined in
Section 401(b) of the Code has not yet expired. Each Employee Benefit Plan that
is intended to be qualified under Section 401(a) of the Code has been determined
by the Internal Revenue Service to be so qualified, and each trust related to
such plan has been determined to be exempt under Section 501(a) of the Code. No
liability has been incurred by any Borrower or any ERISA Affiliate which remains
unsatisfied for any taxes or penalties with respect to any Employee Benefit Plan
or any Multiemployer Plan;
(iii) No Pension Plan has been terminated, nor has any accumulated
funding deficiency (as defined in Section 412 of the Code) been incurred
(without regard to any waiver granted under Section 412 of the Code), nor has
any funding waiver from the Internal Revenue Service been received or requested
with respect to any Pension Plan, nor has any Borrower or any ERISA Affiliate
failed to make any contributions or to pay any amounts due and owing as required
by Section 412 of the Code, Section 302 of ERISA or the terms of any Pension
Plan prior to the due dates of such contributions under Section 412 of the Code
or Section 302 of ERISA, nor has there been any event requiring any disclosure
under Section 4041(c)(3)(C) or 4063(a) of ERISA with respect to any Pension
Plan;
(iv) No Borrower nor any ERISA Affiliate has: (A) engaged in a
nonexempt prohibited transaction described in Section 406 of the ERISA or
Section 4975 of the Code, (B) incurred any liability to the PBGC which remains
outstanding other than the payment of premiums and there are no premium payments
which are due and unpaid, (C) failed to make a
43
<PAGE>
required contribution or payment to a Multiemployer Plan, or (D) failed to make
a required installment or other required payment under Section 412 of the Code;
(v) No Termination Event has occurred or is reasonably expected to
occur; and
(vi) No proceeding, claim, lawsuit and/or investigation is existing
or, to the best knowledge of any Borrower after due inquiry, threatened
concerning or involving any (A) employee welfare benefit plan (as defined in
Section 3(1) of ERISA) currently maintained or contributed to by any Borrower or
any ERISA Affiliate, (B) Pension Plan or (C) Multiemployer Plan.
(j) Margin Stock. No Borrower nor any Subsidiary thereof is engaged
------------
principally or as one of its activities in the business of extending credit for
the purpose of "purchasing" or "carrying" any "margin stock" (as each such term
is defined or used in Regulations G and U of the Board of Governors of the
Federal Reserve System). No part of the proceeds of any of the Loans or Letters
of Credit will be used for purchasing or carrying margin stock or for any
purpose which violates, or which would be inconsistent with, the provisions of
Regulation G, T, U or X of such Board of Governors.
(k) Government Regulation. No Borrower nor any Subsidiary thereof is an
---------------------
"investment company" or a company "controlled" by an "investment company" (as
each such term is defined or used in the Investment Company Act of 1940, as
amended) and no Borrower nor any Subsidiary thereof is, or after giving effect
to any Extension of Credit will be, subject to regulation under the Public
Utility Holding Company Act of 1935 or the Interstate Commerce Act, each as
amended, or any other Applicable Law which limits its ability to incur or
consummate the transactions contemplated hereby.
(l) Material Contracts. Schedule 6.1(l) sets forth a complete and
------------------ ---------------
accurate list of all Material Contracts of each Borrower and each Subsidiary
thereof in effect as of the Closing Date not listed on any other Schedule
hereto; other than as set forth in Schedule 6.1(l), each such Material Contract
---------------
is, and after giving effect to the consummation of the transactions contemplated
by the Loan Documents will be, in full force and effect in accordance with the
terms thereof. Each Borrower and each Subsidiary thereof has delivered to the
Administrative Agent a true and complete copy of each Material Contract which is
required to be listed on Schedule 6.1(l) or any other Schedule hereto and which
---------------
has been requested by the Administrative Agent.
(m) Employee Relations. Each Borrower and each Subsidiary thereof has a
------------------
stable work force in place and is not, as of the Closing Date, party to any
collective bargaining agreement nor has any labor union been recognized as the
representative of its employees except as set forth on Schedule 6.1(m). No
---------------
Borrower knows of any pending, threatened or contemplated strikes, work stoppage
or other collective labor disputes involving its employees or those of its
Subsidiaries.
44
<PAGE>
(n) Burdensome Provisions. No Borrower nor any Subsidiary thereof is a
---------------------
party to any indenture, agreement, lease or other instrument, or subject to any
corporate or partnership restriction, Governmental Approval or Applicable Law
which is so unusual or burdensome as in the foreseeable future could be
reasonably expected to have a Material Adverse Effect. No Borrower nor any
Subsidiary thereof presently anticipates that future expenditures needed to meet
the provisions of any statutes, orders, rules or regulations of a Governmental
Authority will be so burdensome as to have a Material Adverse Effect.
(o) Financial Statements. The Consolidated balance sheets of the Company
--------------------
and its Subsidiaries as of March 31, 1998 and the related statements of income
and retained earnings and cash flows for the Fiscal Year then ended, copies of
which have been furnished to the Administrative Agent and each Lender, are
complete and correct and fairly present the assets, liabilities and financial
position of the Company and its Subsidiaries as at such dates, and the results
of the operations and changes of financial position for the periods then ended.
All such financial statements, including the related schedules and notes
thereto, have been prepared in accordance with GAAP. The Company and its
Subsidiaries have no Debt, obligation or other unusual forward or long-term
commitment which is not fairly reflected in the foregoing financial statements
or in the notes thereto.
(p) No Material Adverse Change. Since March 31, 1998, there has been no
--------------------------
material adverse change in the properties, business, operations, prospects, or
condition (financial or otherwise) of the Borrowers and their Subsidiaries and
no event has occurred or condition arisen that could reasonably be expected to
have a Material Adverse Effect.
(q) Solvency. As of the Closing Date and after giving effect to each
--------
Extension of Credit made hereunder, each Borrower and each Subsidiary thereof
will be Solvent.
(r) Titles to Properties. Each Borrower and each Subsidiary thereof has
--------------------
such title to the real property owned by it as is necessary or desirable to the
conduct of its business and valid and legal title to all of its personal
property and assets, including, but not limited to, those reflected on the
balance sheets of the Company and its Subsidiaries delivered pursuant to Section
6.1(o), except those which have been disposed of by any Borrower or any
Subsidiary thereof subsequent to such date which dispositions have been in the
ordinary course of business or as otherwise expressly permitted hereunder. All
of the real property owned or leased by any Borrower is described on Schedule
--------
6.1(r) hereto.
- ------
(s) Liens. None of the properties and assets of any Borrower or any
-----
Subsidiary thereof is subject to any Lien, except Liens permitted pursuant to
Section 10.3. No financing statement under the Uniform Commercial Code of any
state which names any Borrower or any Subsidiary thereof or any of their
respective trade names or divisions as debtor, and which has not been
terminated, has been filed in any state or other jurisdiction and no Borrower
nor any Subsidiary thereof has signed any such financing statement or any
security agreement authorizing any secured party thereunder to file any such
financing statement, except to perfect those Liens permitted by Section 10.3
hereof.
45
<PAGE>
(t) Debt and Guaranty Obligations. Schedule 6.1(t) is a complete and
----------------------------- ---------------
correct listing of all Debt and Guaranty Obligations of each Borrower and each
Subsidiary thereof as of the Closing Date in excess of $1,000,000. Each
Borrower and each Subsidiary thereof has performed and is in compliance with all
of the terms of such Debt and Guaranty Obligations and all instruments and
agreements relating thereto, and no default or event of default, or event or
condition which with notice or lapse of time or both would constitute such a
default or event of default on the part of any Borrower or any Subsidiary
thereof exists with respect to any such Debt or Guaranty Obligation.
(u) Litigation. Except as set forth on Schedule 6.1(u), as of the Closing
---------- ---------------
Date there are no actions, suits or proceedings pending nor, to the knowledge of
any Borrower, threatened against or in any other way relating adversely to or
affecting any Borrower or any Subsidiary thereof or any of their respective
properties in any court or before any arbitrator of any kind or before or by any
Governmental Authority.
(v) Absence of Defaults. No event has occurred or is continuing which
-------------------
constitutes a Default or an Event of Default, or which constitutes, or which
with the passage of time or giving of notice or both would constitute, a default
or event of default by any Borrower or any Subsidiary thereof under any Material
Contract or judgment, decree or order to which any Borrower or any Subsidiary
thereof is a party or by which any Borrower or any Subsidiary thereof or any of
their respective properties may be bound or which would require any Borrower or
its Subsidiaries to make any payment thereunder prior to the scheduled maturity
date therefor.
(w) Senior Debt Status. The Obligations of the Borrowers and their
------------------
Subsidiaries under this Agreement, the Notes and each other Loan Document to
which each such Person is a party do rank and will rank at least senior in
priority of payment to all Subordinated Debt and all senior unsecured Debt of
each such Person and is hereby designated as "Senior Indebtedness" under all
instruments and documents, now or in the future, relating to all Subordinated
Debt and all senior unsecured Debt of each such Person.
(x) No Hostile Acquisitions. No part of the proceeds of the Loans or the
-----------------------
Letters of Credit will be used to finance any Permitted Acquisition unless the
board of directors (or other governing body) or the shareholders of the Person
to be acquired and/or seller, as applicable, shall have previously approved such
transaction.
(y) Accuracy and Completeness of Information. All written information,
----------------------------------------
reports and other papers and data produced by or on behalf of each Borrower and
each Subsidiary thereof and furnished to the Lenders were, at the time the same
were so furnished, complete and correct in all respects to the extent necessary
to give the recipient a true and accurate knowledge of the subject matter. No
document furnished or written statement made to the Administrative Agent or the
Lenders by any Borrower or any Subsidiary thereof in connection with the
negotiation, preparation or execution of this Agreement or any of the Loan
Documents contains or will contain any untrue statement of a fact material to
the creditworthiness of any Borrower or any Subsidiary thereof or omits or will
omit to state a fact necessary in order to make the statements contained therein
not misleading. No Borrower is aware of any facts which it has not disclosed
46
<PAGE>
in writing to the Administrative Agent having a Material Adverse Effect, or
insofar as any Borrower can now foresee, could reasonably be expected to have a
Material Adverse Effect.
SECTION 6.2 Survival of Representations and Warranties, Etc. All
-----------------------------------------------
representations and warranties set forth in this Article VI and all
representations and warranties contained in any certificate, or any of the Loan
Documents (including but not limited to any such representation or warranty made
in or in connection with any amendment thereto) shall constitute representations
and warranties made under this Agreement. All representations and warranties
made under this Agreement shall be made or deemed to be made at and as of the
Closing Date, shall survive the Closing Date and shall not be waived by the
execution and delivery of this Agreement, any investigation made by or on behalf
of the Lenders or any borrowing hereunder.
ARTICLE VII
FINANCIAL INFORMATION AND NOTICES
Until all the Obligations have been paid and satisfied in full and the
Commitments terminated, unless consent has been obtained in the manner set forth
in Section 13.11 hereof, the Borrowers will furnish or cause to be furnished to
the Administrative Agent and to the Lenders at their respective addresses as set
forth on Schedule 1.1(a), or such other office as may be designated by the
---------------
Administrative Agent and Lenders from time to time:
SECTION 7.1 Financial Statements and Projections.
------------------------------------
(a) Quarterly Financial Statements. As soon as practicable and in any
------------------------------
event within forty-five (45) days after the end of each fiscal quarter, an
unaudited Consolidated balance sheet of the Company and its Subsidiaries as of
the close of such fiscal quarter and unaudited Consolidated statements of
income, retained earnings and cash flows for the fiscal quarter then ended and
that portion of the Fiscal Year then ended, including the notes thereto and a
report containing management's discussion and analysis of such financial
statements, all in reasonable detail setting forth in comparative form the
corresponding figures for the preceding Fiscal Year and prepared by the Company
in accordance with GAAP and, if applicable, containing disclosure of the effect
on the financial position or results of operations of any change in the
application of accounting principles and practices during the period, and
certified by the chief financial officer of the Company to present fairly in all
material respects the financial condition of the Company and its Subsidiaries as
of their respective dates and the results of operations of the Company and its
Subsidiaries for the respective periods then ended, subject to normal year end
adjustments; provided that the requirements of this subsection (a) may be
--------
satisfied by the delivery of the applicable quarterly report on Form 10-Q
containing the foregoing.
(b) Annual Financial Statements. As soon as practicable and in any event
---------------------------
within ninety (90) days after the end of each Fiscal Year, an audited
Consolidated balance sheet of the Company and its Subsidiaries as of the close
of such Fiscal Year and audited Consolidated statements of income, retained
earnings and cash flows for the Fiscal Year then ended, including
47
<PAGE>
the notes thereto and a report containing management's discussion and analysis
of such financial statements, all in reasonable detail setting forth in
comparative form the corresponding figures for the preceding Fiscal Year and
prepared by an independent certified public accounting firm acceptable to the
Administrative Agent in accordance with GAAP and, if applicable, containing
disclosure of the effect on the financial position or results of operation of
any change in the application of accounting principles and practices during the
year, and accompanied by a report thereon by such certified public accountants
that is not qualified with respect to scope limitations imposed by the Company
or any of its Subsidiaries or with respect to accounting principles followed by
the Company or any of its Subsidiaries not in accordance with GAAP; provided
--------
that the requirements of this subsection (b) may be satisfied by the delivery of
the applicable annual report on Form 10-K containing the foregoing.
(c) Annual Business Plan and Financial Projections. As soon as
----------------------------------------------
practicable and in any event within 30 days after the end of each Fiscal Year, a
business plan of the Company and its Subsidiaries for the ensuing four (4)
fiscal quarters, such plan to be prepared in accordance with GAAP and to
include, on a quarterly basis, the following: a quarterly operating and capital
budget, a projected income statement, statement of cash flows and balance sheet
and a report containing management's discussion and analysis of such
projections, accompanied by a certificate from the chief financial officer of
the Company to the effect that, to the best of such officer's knowledge, such
projections are good faith estimates of the financial condition and operations
of the Company and its Subsidiaries for such four (4) fiscal quarter period.
SECTION 7.2 Officer's Compliance Certificate. At each time financial
--------------------------------
statements are delivered pursuant to Sections 7.1 (a) or (b) and at such other
times as the Administrative Agent shall reasonably request, a certificate of the
chief financial officer or the treasurer of the Company, on behalf of the
Borrowers, in the form of Exhibit F attached hereto (an "Officer's Compliance
---------
Certificate").
SECTION 7.3 Accountants' Certificate. At each time financial statements
------------------------
are delivered pursuant to Section 7.1(b), a certificate of the independent
public accountants certifying such financial statements addressed to the
Administrative Agent for the benefit of the Lenders:
(a) stating that in making the examination necessary for the certification
of such financial statements, they obtained no knowledge of any Default or Event
of Default or, if such is not the case, specifying such Default or Event of
Default and its nature and period of existence; and
(b) including the calculations prepared by the Company and reviewed by
such accountants required to establish whether or not the Company and its
Subsidiaries are in compliance with the financial covenants set forth in Article
IX hereof as at the end of each respective period.
48
<PAGE>
SECTION 7.4 Other Reports.
-------------
(a) Promptly upon receipt thereof, copies of all reports, if any,
submitted to any Borrower or its Board of Directors by its independent public
accountants in connection with their auditing function, including, without
limitation, any management report and any management responses thereto;
(b) Such other information regarding the operations, business affairs and
financial condition of each Borrower and each Subsidiary thereof as the
Administrative Agent or any Lender may reasonably request.
SECTION 7.5 Notice of Litigation and Other Matters. Prompt (but in no
--------------------------------------
event later than ten (10) days after an officer of any Borrower obtains
knowledge thereof) telephonic and written notice of:
(a) the commencement of all proceedings and investigations by or before
any Governmental Authority and all actions and proceedings in any court or
before any arbitrator against or involving any Borrower or any Subsidiary
thereof or any of their respective properties, assets or businesses;
(b) any notice of any violation received by any Borrower or any Subsidiary
thereof from any Governmental Authority including, without limitation, any
notice of violation of Environmental Laws which in any such case could
reasonably be expected to have a Material Adverse Effect;
(c) any labor controversy that has resulted in, or threatens to result in,
a strike or other work action against any Borrower or any Subsidiary thereof;
(d) any attachment, judgment, lien, levy or order exceeding $1,000,000
that may be assessed against or threatened against any Borrower or any
Subsidiary thereof;
(e) any Default or Event of Default, or any event which constitutes or
which with the passage of time or giving of notice or both would constitute a
default or event of default under any Material Contract to which any Borrower or
any Subsidiary thereof is a party or by which any Borrower or any Subsidiary
thereof or any of their respective properties may be bound;
(f) (i) any unfavorable determination letter from the Internal Revenue
Service regarding the qualification of an Employee Benefit Plan under Section
401(a) of the Code (along with a copy thereof), (ii) all notices received by any
Borrower or any ERISA Affiliate of the PBGC's intent to terminate any Pension
Plan or to have a trustee appointed to administer any Pension Plan, (iii) all
notices received by any Borrower or any ERISA Affiliate from a Multiemployer
Plan sponsor concerning the imposition or amount of withdrawal liability
pursuant to Section 4202 of ERISA and (iv) any Borrower obtaining knowledge or
reason to know that any Borrower or any ERISA Affiliate has filed or intends to
file a notice of intent to
49
<PAGE>
terminate any Pension Plan under a distress termination within the meaning of
Section 4041(c) of ERISA; and
(g) any event which makes any of the representations set forth in Section
6.1 inaccurate in any respect.
SECTION 7.6 Accuracy of Information. All written information, reports,
-----------------------
statements and other papers and data furnished by or on behalf of the Borrowers
to the Administrative Agent or any Lender (other than financial forecasts)
whether pursuant to this Article VII or any other provision of this Agreement,
or any of the Security Documents, shall be, at the time the same is so
furnished, complete and correct in all material respects to the extent necessary
to give the Administrative Agent or any Lender complete, true and accurate
knowledge of the subject matter based on the knowledge of the Borrowers thereof.
ARTICLE VIII
AFFIRMATIVE COVENANTS
Until all of the Obligations have been paid and satisfied in full and the
Commitments terminated, unless consent has been obtained in the manner provided
for in Section 13.11, each Borrower will, and will cause each of its
Subsidiaries to:
SECTION 8.1 Preservation of Corporate Existence and Related Matters.
-------------------------------------------------------
Except as permitted by Section 10.5, preserve and maintain its separate
corporate existence and all rights, franchises, licenses and privileges
necessary to the conduct of its business, and qualify and remain qualified as a
foreign corporation and authorized to do business in each jurisdiction in which
the failure to so qualify would have a Material Adverse Effect.
SECTION 8.2 Maintenance of Property. Protect and preserve all properties
-----------------------
useful in and material to its business, including copyrights, patents, trade
names and trademarks; maintain in good working order and condition all
buildings, equipment and other tangible real and personal property; and from
time to time make or cause to be made all renewals, replacements and additions
to such property necessary for the conduct of its business, so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times.
SECTION 8.3 Insurance. Maintain insurance with financially sound and
---------
reputable insurance companies against such risks and in such amounts as are
customarily maintained by similar businesses and as may be required by
Applicable Law and as are required by any Security Documents, and on the Closing
Date and from time to time thereafter deliver to the Administrative Agent upon
its request a detailed list of the insurance then in effect, stating the names
of the insurance companies, the amounts and rates of the insurance, the dates of
the expiration thereof and the properties and risks covered thereby.
50
<PAGE>
SECTION 8.4 Accounting Methods and Financial Records. Maintain a system
----------------------------------------
of accounting, and keep such books, records and accounts (which shall be true
and complete in all material respects) as may be required or as may be necessary
to permit the preparation of financial statements in accordance with GAAP and in
compliance with the regulations of any Governmental Authority having
jurisdiction over it or any of its properties.
SECTION 8.5 Payment and Performance of Obligations. Pay and perform all
--------------------------------------
Obligations under this Agreement and the other Loan Documents, and pay or
perform (a) all taxes, assessments and other governmental charges that may be
levied or assessed upon it or any of its property, and (b) all other
indebtedness, obligations and liabilities in accordance with customary trade
practices; provided, that such Borrower or such Subsidiary thereof may contest
--------
any item described in clauses (a) or (b) of this Section 8.5 in good faith so
long as adequate reserves are maintained with respect thereto in accordance with
GAAP.
SECTION 8.6 Compliance With Laws and Approvals. Observe and remain in
----------------------------------
compliance with all Applicable Laws and maintain in full force and effect all
Governmental Approvals, in each case applicable to the conduct of its business.
SECTION 8.7 Environmental Laws. In addition to and without limiting the
------------------
generality of Section 8.6, (a) comply with, and ensure such compliance by all
tenants and subtenants with all applicable Environmental Laws and obtain and
comply with and maintain, and ensure that all tenants and subtenants obtain and
comply with and maintain, any and all licenses, approvals, notifications,
registrations or permits required by applicable Environmental Laws, (b) conduct
and complete all investigations, studies, sampling and testing, and all
remedial, removal and other actions required under Environmental Laws, and
promptly comply with all lawful orders and directives of any Governmental
Authority regarding Environmental Laws, and (c) defend, indemnify and hold
harmless the Administrative Agent and the Lenders, and their respective parents,
Subsidiaries, Affiliates, employees, Administrative Agents, officers and
directors, from and against any claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature known or
unknown, contingent or otherwise, arising out of, or in any way relating to the
violation of, noncompliance with or liability under any Environmental Laws
applicable to the operations of such Borrower or such Subsidiary, or any orders,
requirements or demands of Governmental Authorities related thereto, including,
without limitation, reasonable attorney's and consultant's fees, investigation
and laboratory fees, response costs, court costs and litigation expenses, except
to the extent that any of the foregoing directly result from the gross
negligence or willful misconduct of the party seeking indemnification therefor.
SECTION 8.8 Compliance with ERISA. In addition to and without limiting
---------------------
the generality of Section 8.6, (a) comply with all applicable provisions of
ERISA and the regulations and published interpretations thereunder with respect
to all Employee Benefit Plans, (b) not take any action or fail to take action
the result of which could be a liability to the PBGC or to a Multiemployer Plan,
(c) not participate in any prohibited transaction that could result in any civil
penalty under ERISA or tax under the Code, (d) operate each Employee Benefit
Plan in such a manner that will not incur any tax liability under Section 4980B
of the Code or any liability to
51
<PAGE>
any qualified beneficiary as defined in Section 4980B of the Code and (e)
furnish to the Administrative Agent upon the Administrative Agent's request such
additional information about any Employee Benefit Plan as may be reasonably
requested by the Administrative Agent.
SECTION 8.9 Compliance With Agreements. Comply in all respects with each
--------------------------
term, condition and provision of all leases, agreements and other instruments
entered into in the conduct of its business including, without limitation, any
Material Contract; provided, that such Borrower or such Subsidiary may contest
--------
any such lease, agreement or other instrument in good faith through applicable
proceedings so long as adequate reserves are maintained in accordance with GAAP.
SECTION 8.10 Conduct of Business. Engage only in businesses in
-------------------
substantially the same fields as the businesses conducted on the Closing Date
and in lines of business reasonably related thereto.
SECTION 8.11 Visits and Inspections. Permit representatives of the
----------------------
Administrative Agent or any Lender, from time to time upon notice to the Company
and during normal business hours (other than upon or during the continuance of a
Default or an Event of Default), to visit and inspect its properties; inspect,
audit and make extracts from its books, records and files, including, but not
limited to, management letters prepared by independent accountants; and discuss
with its principal officers, and its independent accountants, its business,
assets, liabilities, financial condition, results of operations and business
prospects.
SECTION 8.12 Additional Borrowers and Collateral. Upon the creation or the
-----------------------------------
acquisition of any Material Subsidiary of any Borrower in connection with any
Permitted Acquisition pursuant to Section 10.4(e) and, with respect to any
Subsidiary of any Borrower becoming a Material Subsidiary as evidenced by the
information set forth in the Officer's Compliance Certificate delivered pursuant
to Section 7.2, on or before such delivery date, cause to be delivered to the
Administrative Agent, (i) a Joinder Agreement duly executed by the Company, such
Material Subsidiary and the parent of such Material Subsidiary pursuant to which
(A) such Material Subsidiary shall become a Borrower hereunder, (B) such
Material Subsidiary shall become a Grantor under the Security Agreement and (C)
such Material Subsidiary shall become an Issuer or Partnership/LLC under the
Pledge Agreement, (ii) replacement Notes duly executed by such Material
Subsidiary and each other Borrower then party hereto, (iii) such closing
documents and closing certificates consistent with Section 5.2 hereof as may
reasonably be requested by the Administrative Agent, and (iv) such other
documents reasonably requested by the Administrative Agent in order that such
Material Subsidiary shall become bound by all of the terms, covenants and
agreements contained in the Credit Agreement, the Security Agreement, the Pledge
Agreement and any other Loan Document applicable to such Material Subsidiary. To
the extent that the prior written consent of the Required Lenders is not
required to be delivered pursuant to Section 10.4(e) in connection with the
acquisition of any Material Subsidiary, the Borrowers shall also deliver to the
Administrative Agent, within thirty (30) Business Days of the acquisition of
such Material Subsidiary, favorable legal opinions of counsel to the Company
addressed to the Administrative Agent and the Lenders in form and substance
satisfactory to the Administrative Agent with respect to the Joinder
52
<PAGE>
Agreement and the Collateral relating thereto. To the extent that the prior
written consent of the Required Lenders is required to be delivered pursuant to
Section 10.4(e) in connection with the acquisition of any Material Subsidiary,
such legal opinions of counsel to the Company shall be delivered within twenty
(20) Business Days of the acquisition of such Material Subsidiary.
SECTION 8.13 Additional Real Property Collateral.Promptly at the request
-----------------------------------
of the Required Lenders, grant to the Administrative Agent for the ratable
benefit of itself and the Lenders a security interest in any real property owned
or leased by any Borrower or any Subsidiary thereof and/or assign to the
Administrative Agent for the ratable benefit of itself and the Lenders all
rights of any Borrower or any Subsidiary thereof under any real property owned
or leased by any Borrower or any Subsidiary thereof pursuant to documentation
reasonably satisfactory to the Administrative Agent and the Required Lenders,
and take all actions reasonably requested by the Administrative Agent or the
Required Lenders in connection with consummating such assignments and the
granting of such security interests including, without limitation, the obtaining
of landlord or lessor consents, mortgagee title insurance policies, title
surveys and real estate appraisals satisfying the requirements of all Applicable
Laws and duly recording each document related thereto in such manner and in such
places as are required by the law to perfect and preserve the Liens in favor of
the Administrative Agent and the Lenders granted pursuant to such documents.
SECTION 8.14 Year 2000 Compatibility. Take all actions reasonably
-----------------------
necessary to assure that each Borrower's computer based systems are able to
operate and effectively process data which includes dates on and after January
1, 2000. At the request of the Administrative Agent, the Company shall provide
reasonable assurances satisfactory to the Administrative Agent of each
Borrower's Year 2000 compatibility.
SECTION 8.15 Interest Rate Protection. Maintain, commencing within one
------------------------
hundred eighty (180) days of any date on which Extensions of Credit are equal to
or greater than $75,000,000, a Hedging Agreement with a minimum notional amount
at any date of determination as agreed upon by the Borrower and Administrative
Agent and at an interest rate and upon other terms and conditions satisfactory
to the Administrative Agent; provided that the Borrowers shall not be required
to obtain such Hedging Agreement at any time Subordinated Debt permitted under
Section 10.1(c) is outstanding at a fixed interest rate in an aggregate amount
equal to or greater than $75,000,000.
SECTION 8.16 Further Assurances. Make, execute and deliver all such
------------------
additional and further acts, things, deeds and instruments as the Administrative
Agent or any Lender may reasonably require to document and consummate the
transactions contemplated hereby and to vest completely in and insure the
Administrative Agent and the Lenders their respective rights under this
Agreement, the Notes, the Letters of Credit and the other Loan Documents.
53
<PAGE>
ARTICLE IX
FINANCIAL COVENANTS
Until all of the Obligations have been paid and satisfied in full and the
Commitments terminated, unless consent has been obtained in the manner set forth
in Section 13.11 hereof, the Company and its Subsidiaries on a Consolidated
basis will not:
SECTION 9.1 Leverage Ratio. As of the end of any fiscal quarter during
--------------
any period set forth below, permit the ratio of (a) Funded Debt as of such date
less cash and Cash Equivalents in excess of $5,000,000 as of such date to (b)
- ----
Pro Forma Adjusted EBITDA for the period of four (4) consecutive fiscal quarters
ending on such date, to exceed the corresponding ratio set forth below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Closing Date through and
including December 31, 1999 4.50 to 1.00
January 1, 2000 through and
including December 31, 2000 4.25 to 1.00
January 1, 2001 and thereafter 4.00 to 1.00
</TABLE>
SECTION 9.2 Senior Leverage Ratio. As of the end of any fiscal quarter
---------------------
during any period set forth below, permit the ratio of (a) Senior Funded Debt as
of such date less cash and Cash Equivalents in excess of $5,000,000 as of such
----
date to (b) Pro Forma Adjusted EBITDA for the period of four (4) consecutive
fiscal quarters ending on such date, to exceed the corresponding ratio set forth
below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Closing Date through and
including March 31, 2000 3.75 to 1.00
April 1, 2000 through and
including March 31, 2001 3.50 to 1.00
April 1, 2001 and thereafter 3.25 to 1.00
</TABLE>
SECTION 9.3 Fixed Charge Coverage Ratio. As of the end of any fiscal
---------------------------
quarter during any period set forth below, permit the ratio of (a) (i) EBITDA
for the period of four (4) consecutive fiscal quarters ending on such date plus
----
(ii) Rental Expense paid or payable during such period of four (4) consecutive
fiscal quarters to (b) Fixed Charges for such period of four (4) consecutive
fiscal quarters, to be less than the corresponding ratio set forth below:
54
<PAGE>
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Closing Date through and
including March 31, 1999 1.50 to 1.00
April 1, 1999 through and
Including March 31, 2000 1.60 to 1.00
April 1, 2000 and thereafter 1.75 to 1.00
</TABLE>
SECTION 9.4 Minimum Net Worth. As of the end of any fiscal quarter
-----------------
beginning with the fiscal quarter ending June 30, 1998, permit Net Worth to be
less than (i) $60,000,000 plus (ii) fifty percent (50%) of the aggregate of Net
----
Income for each fiscal quarter ending after June 30, 1998 (provided that Net
--------
Income for any such fiscal quarter shall be taken into account for purposes of
this calculation only if positive) plus (iii) one hundred percent (100%) of the
----
aggregate amount of all increases in the stated capital and additional paid-in-
capital accounts of the Company and its Subsidiaries, as determined on a
Consolidated basis in accordance with GAAP, resulting from the issuance of
equity securities (including pursuant to the exercise of options, rights or
warrants or pursuant to the conversion of convertible securities) or other
capital stock after June 30, 1998 plus (iv) one hundred percent (100%) of the
----
Net Cash Proceeds from any equity issuance after June 30, 1998.
SECTION 9.5 Limitation on Rental Pool Capital Expenditures. As of any
----------------------------------------------
Fiscal Year end, permit Rental Pool Capital Expenditures to exceed fifteen
percent (15%) of EBITDA for such Fiscal Year.
ARTICLE X
NEGATIVE COVENANTS
Until all of the Obligations have been paid and satisfied in full and the
Commitments terminated, unless consent has been obtained in the manner set forth
in Section 13.11 hereof, each Borrower will not, and will not permit any of its
Subsidiaries to:
SECTION 10.1 Limitations on Debt. Create, incur, assume or suffer to
-------------------
exist any Debt except:
(a) the Obligations;
(b) Debt incurred in connection with a Hedging Agreement with a
counterparty and upon terms and conditions (including interest rate) reasonably
satisfactory to the Administrative Agent;
55
<PAGE>
(c) Subordinated Debt arising under or in connection with public or
privately placed notes, debentures, bonds, or debt securities or related
indentures or other agreements in an aggregate principal amount not to exceed
$150,000,000, so long as (i) no Default or Event of Default exists on the date
any such Subordinated Debt is issued or arises as a result of the incurrence
thereof, (ii) the provisions of the documents evidencing such Subordinated Debt
are not materially more restrictive (as reasonably determined by the
Administrative Agent) than the covenants and other provisions set forth herein
and in the other Loan Documents, (iii) such Subordinated Debt provides for no
scheduled payment of principal prior to July 31, 2004, (iv) such Subordinated
Debt does not require any principal repayment with the proceeds of any event
listed in Section 2.6(b), except to the extent the Lenders waive the application
of any such proceeds to the Obligations, and (v) the documents and other terms
pursuant to which such Subordinated Debt is issued are reasonably satisfactory
to the Administrative Agent and the Required Lenders;
(d) Debt set forth on Schedule 10.1 which is existing on the Closing Date
-------------
and is not otherwise referred to in this Section 10.1, and the renewal and
refinancing (but not the increase at the aggregate principal amount thereof)
thereof;
(e) Debt of the Borrowers and their Subsidiaries incurred in connection
with Capital Leases in an aggregate amount not to exceed $2,000,000 on any date
of determination;
(f) purchase money Debt of the Borrowers and their Subsidiaries with
respect to Capital Assets in an aggregate amount not to exceed $2,000,000 on any
date of determination;
(g) intercompany Debt between any Borrower and any other Borrower;
(h) seller financing constituting Subordinated Debt existing on the Closing
Date or entered into in conjunction with any Permitted Acquisition in an amount
not to exceed $2,500,000 on any date of determination;
(i) Debt consisting of Guaranty Obligations permitted by Section 10.2; and
provided, that none of the Debt permitted to be incurred by this Section 10.1
- --------
shall restrict, limit or otherwise encumber (by covenant or otherwise) the
ability of any Subsidiary of any Borrower to make any payment to any Borrower or
any of its Subsidiaries (in the form of dividends, intercompany advances or
otherwise) for the purpose of enabling such Borrower to pay the Obligations.
SECTION 10.2 Limitations on Guaranty Obligations. Create, incur, assume
-----------------------------------
or suffer to exist any Guaranty Obligations except:
(a) Guaranty Obligations in favor of the Administrative Agent for the
benefit of the Administrative Agent and the Lenders;
56
<PAGE>
(b) Guaranty Obligations in an amount not to exceed $500,000 to secure
payment or performance of customer service contracts incurred in the ordinary
course of business; and
(c) Guaranty Obligations of the Company with respect to the Debt of any
Subsidiary Borrower permitted by Section 10.1.
SECTION 10.3 Limitations on Liens. Create, incur, assume or suffer to
--------------------
exist, any Lien on or with respect to any of its assets or properties (including
without limitation shares of capital stock or other ownership interests), real
or personal, whether now owned or hereafter acquired, except:
(a) Liens for taxes, assessments and other governmental charges or levies
(excluding any Lien imposed pursuant to any of the provisions of ERISA or
Environmental Laws) not yet due or as to which the period of grace (not to
exceed thirty (30) days), if any, related thereto has not expired or which are
being contested in good faith and by appropriate proceedings if adequate
reserves are maintained to the extent required by GAAP;
(b) the claims of materialmen, mechanics, carriers, warehousemen,
processors or landlords for labor, materials, supplies or rentals incurred in
the ordinary course of business, (i) which are not overdue for a period of more
than thirty (30) days or (ii) which are being contested in good faith and by
appropriate proceedings;
(c) Liens consisting of deposits or pledges made in the ordinary course of
business in connection with, or to secure payment of, obligations under workers'
compensation, unemployment insurance or similar legislation or obligations under
customer service contracts;
(d) Liens constituting encumbrances in the nature of zoning restrictions,
easements and rights or restrictions of record on the use of real property,
which in the aggregate are not substantial in amount and which do not, in any
case, detract from the value of such property or impair the use thereof in the
ordinary conduct of business;
(e) Liens of the Administrative Agent for the benefit of the Administrative
Agent and the Lenders;
(f) Liens not otherwise referred to in this Section 10.3 and in existence
on the Closing Date and described on Schedule 10.3(f);
----------------
(g) Liens securing Debt permitted under Section 10.1(e);
(h) Liens securing obligations of the Company or any applicable Subsidiary
under Vendor-Provided Financing or Trade Payables and described on Schedule
--------
10.3(h); provided that (i) such Liens shall be created substantially
- ------- --------
simultaneously with the acquisition of the related property, (ii) except with
respect to such Liens designated as "blanket liens" on Schedule 10.3(h), such
----------------
Liens do not at any time encumber any property other than the property and
related receivables of the applicable creditor financed by such financing, (iii)
the principal amount of the
57
<PAGE>
obligations secured by any such Lien shall at no time exceed one hundred percent
(100%) of the original purchase price of such property at the time it was
acquired and (iv) the obligations with respect to which such Liens are created
shall not exceed fifty percent (50%) of the fair market value of the Inventory
as of thirty (30) days after the end of any fiscal quarter;
(i) Liens securing Debt permitted under Section 10.1(f); provided that (i)
--------
such Liens shall be created substantially simultaneously with the acquisition of
the related asset, (ii) such Liens do not at any time encumber any property
other than the property financed by such Debt, (iii) the amount of Debt secured
thereby is not increased and (iv) the principal amount of Debt secured by any
such Lien shall at no time exceed one hundred percent (100%) of the original
purchase price of such property at the time it was acquired; and
SECTION 10.4 Limitations on Loans, Advances, Investments and Acquisitions.
------------------------------------------------------------
Purchase, own, invest in or otherwise acquire, directly or indirectly, any
capital stock, interests in any partnership or joint venture (including without
limitation the creation or capitalization of any Subsidiary), evidence of Debt
or other obligation or security, substantially all or a portion of the business
or assets of any other Person or any other investment or interest whatsoever in
any other Person, or make or permit to exist, directly or indirectly, any loans,
advances or extensions of credit to, or any investment in cash or by delivery of
property in, any Person except:
(a) investments in Subsidiaries and the existing loans, advances and
investments not otherwise referred to in this Section 10.4 described on Schedule
--------
10.4;
- ----
(b) investments in (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency thereof
maturing within 120 days from the date of acquisition thereof, (ii) commercial
paper maturing no more than 120 days from the date of creation thereof and
currently having the highest rating obtainable from either Standard & Poor's
Ratings Services, a division of The McGraw-Hill Companies, Inc. or Moody's
Investors Service, Inc., (iii) certificates of deposit maturing no more than 120
days from the date of creation thereof issued by commercial banks incorporated
under the laws of the United States of America, each having combined capital,
surplus and undivided profits of not less than $500,000,000 and having a rating
of "A" or better by a nationally recognized rating agency; provided, that the
--------
aggregate amount invested in such certificates of deposit shall not at any time
exceed $5,000,000 for any one such certificate of deposit and $10,000,000 for
any one such bank, or (iv) time deposits maturing no more than 30 days from the
date of creation thereof with commercial banks or savings banks or savings and
loan associations each having membership either in the FDIC or the deposits of
which are insured by the FDIC and in amounts not exceeding the maximum amounts
of insurance thereunder (any such investment, a "Cash Equivalent");
(c) loans and advances to employees in the ordinary course of business in
an aggregate amount not to exceed $750,000 at any time;
(d) intercompany loans and advances in connection with intercompany Debt
permitted under Section 10.1(g) hereof; and
58
<PAGE>
(e) investments by the Company or any Subsidiary thereof in the form of
acquisitions of all or substantially all of the business or a line of business
(whether by the acquisition of capital stock, assets or any combination thereof)
of any other Person; provided that (i) the Person to be acquired shall engage in
--------
a business or the assets to be acquired shall be used in a business described in
Section 8.10 hereof, (ii) a Borrower or any Subsidiary thereof shall be the
surviving Person and no Change in Control shall have been effected thereby,
(iii) no Default or Event of Default shall have occurred and be continuing both
before and after giving effect to the acquisition, (iv) the Borrowers shall have
obtained the prior written consent of the Required Lenders prior to the
consummation of such acquisition if the cash portion of the Permitted
Acquisition Value of such acquisition exceeds $15,000,000 or the aggregate
Permitted Acquisition Value of such acquisition exceeds $40,000,000 (to the
extent that such consent is required to be provided hereby and to the extent the
Borrowers comply with all applicable provisions of paragraph (C) below, such
written consent, or written notice (or verbal notice subsequently confirmed in
writing) that such consent shall not be given by the Required Lenders, to be
delivered to the Company no later than five (5) Business Days after receipt by
the Lenders of such information), and (v) the Borrowers must comply with the
following requirements:
(A) with respect to any such investment for which the prior written
consent of the Required Lenders is not required and the Person surviving
such acquisition is a not a Material Subsidiary, the Borrowers must comply
with the following additional requirements:
(1) the Borrowers shall have delivered to the Administrative
Agent an Officer's Compliance Certificate dated as of the
closing date of the acquisition demonstrating, in form and
substance reasonably satisfactory thereto, pro forma
--- -----
compliance with each covenant contained in Articles IX and
X;
(2) the Borrowers shall have delivered to the Administrative
Agent on or before the closing date of the acquisition a
description of the acquisition (including, without
limitation, a description of the Person or assets to be
acquired, the purchase price, the manner of acquisition, the
payment structure and any other terms and conditions
reasonably required by the Administrative Agent); and
(3) the Borrowers shall have delivered to the Administrative
Agent such other documents reasonably requested by the
Administrative Agent in connection with such acquisition;
(B) with respect to any such investment for which the prior written
consent of the Required Lenders is not required and the Person surviving
such acquisition is a Material Subsidiary, the Borrowers must comply with
the following additional requirements:
59
<PAGE>
(1) the Borrowers shall have delivered to the Administrative
Agent an Officer's Compliance Certificate dated as of the
closing date of the acquisition demonstrating, in form and
substance reasonably satisfactory thereto, pro forma
--- -----
compliance with each covenant contained in Articles IX and
X;
(2) the Borrowers shall have delivered to the Administrative
Agent on or before the closing date of the acquisition a
description of the acquisition (including, without
limitation, a description of the Person or assets to be
acquired, the purchase price, the manner of acquisition, the
payment structure and any other terms and conditions
reasonably required by the Administrative Agent) and draft
copies of the governing documentation (including, without
limitation, the purchase agreement) with respect to the
acquisition;
(3) the Borrowers shall have delivered to the Administrative
Agent all documents required pursuant to Sections 8.12 and
8.13 hereof pursuant to the provisions thereof;
(4) the Borrowers shall have delivered to the Administrative
Agent evidence of the approval of the acquisition by the
board of directors or equivalent governing body (or the
shareholders) of the seller and/or the Person to be
acquired, in form and substance satisfactory to the
Administrative Agent, within thirty (30) days after the
closing of the acquisition;
(5) the Borrowers shall have delivered to the Administrative
Agent copies of the final governing documentation
(including, without limitation, the purchase agreement and
all opinions of counsel to the seller and/or the Person to
be acquired) with respect to the acquisition within thirty
(30) days after the closing of the acquisition;
(6) the Borrowers shall have delivered to the Administrative
Agent within thirty (30) days after the closing of the
acquisition, in form and substance satisfactory thereto, the
historical financial statements of the Person to be
acquired, if applicable, for the most recent two (2) year
period and the most recent interim financial statements of
the Person to be acquired;
(7) the Borrowers shall have delivered to the Administrative
Agent within thirty (30) days after the closing of the
acquisition, in form and substance satisfactory thereto, a
projected income statement, statement of cash flows and
balance sheet (including, without limitation, a summary of
assumptions and pro forma adjustments
--- -----
60
<PAGE>
made in connection therewith) of the Person to be acquired,
if applicable, prepared on a quarterly basis for the ensuing
three (3) year period;
(8) the Borrowers shall have delivered to the Administrative
Agent all due diligence reports prepared by or on behalf of
the Company or the applicable Subsidiary thereof within
thirty (30) days after the consummation of the acquisition;
and
(9) the Borrowers shall have provided to the Administrative
Agent such other documents reasonably requested by the
Administrative Agent in connection with such acquisition;
(C) with respect to any such investment for which the prior written
consent of the Required Lenders is required (regardless of whether the
Person surviving such acquisition is or is not a Material Subsidiary), the
Borrowers must comply with the following additional requirements:
(1) the Borrowers shall have delivered to the Lenders, not less
than ten (10) calendar days prior to the proposed closing
date of the acquisition, a description of the acquisition
(including, without limitation, a description of the Person
or assets to be acquired, the purchase price, the manner of
acquisition, the payment structure and any other terms and
conditions reasonably required by the Administrative Agent)
and draft copies of the governing documentation (including,
without limitation, the purchase agreement) with respect to
the acquisition;
(2) the Borrowers shall have delivered to the Lenders, not less
than ten (10) calendar days prior to the proposed closing
date of the acquisition, all due diligence reports prepared
by or on behalf of the Company or the applicable Subsidiary
thereof;
(3) the Borrowers shall have delivered to the Lenders, not less
than ten (10) calendar days prior to the proposed closing
date of the acquisition, the historical financial statements
of the Person to be acquired, if applicable, for the most
recent two (2) year period and the most recent interim
financial statements of the Person to be acquired;
(4) the Borrowers shall have delivered to the Lenders, not less
than ten (10) calendar days prior to the proposed closing
date of the acquisition, a projected income statement,
statement of cash flows and balance sheet (including,
without limitation, a summary of assumptions and pro forma
adjustments made in connection
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therewith) of the Person to be acquired, if applicable,
prepared on a quarterly basis for the ensuing three (3) year
period;
(5) the Borrowers shall have delivered to the Administrative
Agent, on or before the closing date of the acquisition, an
Officer's Compliance Certificate demonstrating, in form and
substance reasonably satisfactory thereto, pro forma
--- -----
compliance with each covenant contained in Articles IX and
X;
(6) the Borrowers shall have delivered to the Administrative
Agent all documents required pursuant to Sections 8.12 and
8.13 hereof pursuant to the provisions thereof;
(7) the Borrowers shall have delivered to the Administrative
Agent, on or before the closing date of the acquisition,
copies of all opinions of counsel to the seller and/or the
Person to be acquired which are delivered in connection with
the acquisition;
(8) the Borrowers shall have delivered to the Administrative
Agent evidence of the approval of the acquisition by the
board of directors or equivalent governing body (or the
shareholders) of the seller and/or the Person to be
acquired, in form and substance satisfactory to the
Administrative Agent, within twenty (20) days after the
closing of the acquisition;
(9) the Borrowers shall have delivered to the Administrative
Agent copies of the final governing documentation
(including, without limitation, the purchase agreement) with
respect to the acquisition within twenty (20) days after the
closing of the acquisition;
(10) the Borrowers shall have provided to the Administrative
Agent such other documents reasonably requested by the
Administrative Agent in connection with such acquisition.
SECTION 10.5 Limitations on Mergers and Liquidation. Merge,
--------------------------------------
consolidate or enter into any similar combination with any other Person or
liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution)
except:
(a) any Subsidiary Borrower may merge with another Subsidiary Borrower and
any Subsidiary of any Borrower (that is not then a Borrower) may merge with any
Borrower or any Wholly-Owned Subsidiary of any Borrower (that is not then a
Borrower);
(b) any Wholly-Owned Subsidiary may merge into the Person such Wholly-Owned
Subsidiary was formed to acquire in connection with an acquisition permitted by
Section 10.4(e); and
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(c) any Wholly-Owned Subsidiary of any Borrower may wind-up into any
Borrower or any other Wholly-Owned Subsidiary of any Borrower;
provided that, in each case noted above, (i) if a Borrower or the Company is
- --------
party to such transaction, such Borrower or the Company shall be the surviving
entity and (ii) no Default or Event of Default shall have occurred or be
continuing both before and after giving effect to such transaction.
SECTION 10.6 Limitations on Sale of Assets. Convey, sell, lease, assign,
-----------------------------
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, the sale of any receivables and leasehold
interests and any sale-leaseback or similar transaction), whether now owned or
hereafter acquired except:
(a) the sale of Inventory in the ordinary course of business;
(b) the sale of obsolete assets no longer used or usable in the business of
any Borrower or any Subsidiary thereof;
(c) the transfer of assets to any Borrower or any Wholly-Owned Subsidiary
of any Borrower pursuant to Section 10.5(c);
(d) the sale or discount without recourse of accounts receivable arising in
the ordinary course of business in connection with the compromise or collection
thereof; and
(f) any other sale or disposition of assets by any Borrower in the ordinary
course of business; provided that the Net Cash Proceeds from each such sale or
--------
disposition shall be applied to the mandatory repayment of the Extensions of
Credit in the manner set forth in Section 2.6 hereof.
SECTION 10.7 Limitations on Dividends and Distributions. Declare or pay
------------------------------------------
any dividends upon any of its capital stock; purchase, redeem, retire or
otherwise acquire, directly or indirectly, any shares of its capital stock, or
make any distribution of cash, property or assets among the holders of shares of
its capital stock, or make any change in its capital structure that could
reasonably be expected to have a Material Adverse Effect; provided that:
--------
(a) any Borrower or any Subsidiary thereof may pay dividends in shares of
its own capital stock; and
(b) any Borrower or any Subsidiary thereof may pay cash dividends to any
Borrower.
SECTION 10.8 Limitations on Exchange and Issuance of Capital Stock.
-----------------------------------------------------
Issue, sell or otherwise dispose of any class or series of capital stock that,
by its terms or by the terms of any security into which it is convertible or
exchangeable, is, or upon the happening of an event or passage of time would be,
(a) convertible or exchangeable into Debt or (b) required to be
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redeemed or repurchased, including at the option of the holder, in whole or in
part, or has, or upon the happening of an event or passage of time would have, a
redemption or similar payment due.
SECTION 10.9 Transactions with Affiliates. Directly or indirectly (a)
----------------------------
make any loan or advance to, or purchase or assume any note or other obligation
to or from, any of its officers, directors, shareholders or other Affiliates, or
to or from any member of the immediate family of any of its officers, directors,
shareholders or other Affiliates, or subcontract any operations to any of its
Affiliates or (b) enter into, or be a party to, any other transaction with any
of its Affiliates, except in each case pursuant to the reasonable requirements
of its business and upon fair and reasonable terms that are fully disclosed to
and approved in writing by the Required Lenders prior to the consummation
thereof and are no less favorable to it than it would obtain in a comparable
arm's length transaction with a Person not its Affiliate.
SECTION 10.10 Certain Accounting Changes. Change its Fiscal Year end, or
--------------------------
make any change in its accounting treatment and reporting practices except as
required by GAAP.
SECTION 10.11 Amendments; Payments and Prepayments of Subordinated Debt.
---------------------------------------------------------
Amend or modify (or permit the modification or amendment of) any of the terms or
provisions of any Subordinated Debt (unless such amendment or modification does
not, in the reasonable judgment of the Administrative Agent, adversely affect
the Lenders), or cancel or forgive, make any voluntary or optional payment or
prepayment on, or redeem or acquire for value (including without limitation by
way of depositing with any trustee with respect thereto money or securities
before due for the purpose of paying when due) any Subordinated Debt.
SECTION 10.12 Restrictive Agreements. Enter into any Debt which contains
----------------------
any negative pledge on assets or any covenants more restrictive than the
provisions of Articles VIII, IX and X hereof, or which restricts, limits or
otherwise encumbers its ability to incur Liens on or with respect to any of its
assets or properties other than the assets or properties securing such Debt.
ARTICLE XI
DEFAULT AND REMEDIES
SECTION 11.1 Events of Default. Each of the following shall constitute
-----------------
an Event of Default, whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment or order of any court or any order, rule or regulation of any
Governmental Authority or otherwise:
(a) Default in Payment of Principal of Loans and Reimbursement Obligations.
----------------------------------------------------------------------
Any Borrower shall default in any payment of principal of any Loan, Note or
Reimbursement Obligation when and as due (whether at maturity, by reason of
acceleration or otherwise).
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(b) Other Payment Default. Any Borrower shall default in the payment when
---------------------
and as due (whether at maturity, by reason of acceleration or otherwise) of
interest on any Loan, Note or Reimbursement Obligation or the payment of any
other Obligation, and such default shall continue unremedied for three (3)
Business Days.
(c) Misrepresentation. Any representation or warranty made or deemed to be
-----------------
made by any Borrower or any Subsidiary thereof under this Agreement, any Loan
Document or any amendment hereto or thereto, shall at any time prove to have
been incorrect or misleading in any material respect when made or deemed made.
(d) Default in Performance of Certain Covenants. Any Borrower shall
-------------------------------------------
default in the performance or observance of any covenant or agreement contained
in Sections 7.1(a) or (b), 7.2 or 7.5(e) or Articles IX or X of this Agreement.
(e) Default in Performance of Other Covenants and Conditions. Any Borrower
--------------------------------------------------------
or any Subsidiary thereof shall default in the performance or observance of any
term, covenant, condition or agreement contained in this Agreement (other than
as specifically provided for otherwise in this Section 11.1) or any other Loan
Document and such default shall continue for a period of thirty (30) days after
written notice thereof has been given to the Borrowers by the Administrative
Agent.
(f) Hedging Agreement. Any termination payment shall be due by any
-----------------
Borrower under any Hedging Agreement to which any Lender is a party and such
amount is not paid within thirty (30) Business Days of the due date thereof.
(g) Debt Cross-Default. Any Borrower or any Subsidiary thereof shall (i)
------------------
default in the payment of any Debt (other than the Notes or any Reimbursement
Obligation) the aggregate outstanding amount of which Debt is in excess of
$1,000,000 beyond the period of grace if any, provided in the instrument or
agreement under which such Debt was created, or (ii) default in the observance
or performance of any other agreement or condition relating to any Debt (other
than the Notes or any Reimbursement Obligation) the aggregate outstanding amount
of which Debt is in excess of $1,000,000 or contained in any instrument or
agreement evidencing, securing or relating thereto or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such Debt (or a
trustee or agent on behalf of such holder or holders) to cause, with the giving
of notice if required, any such Debt to become due prior to its stated maturity
(any applicable grace period having expired).
(h) Other Cross-Defaults. Any Borrower or any Subsidiary thereof shall
--------------------
default in the payment when due, or in the performance or observance, of any
obligation or condition of any Material Contract unless, but only as long as,
the existence of any such default is being contested by such Borrower or such
Subsidiary in good faith by appropriate proceedings and adequate reserves in
respect thereof have been established on the books of such Borrower or such
Subsidiary to the extent required by GAAP.
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(i) Change in Control. Any person or group of persons (within the meaning
-----------------
of Section 13(d) of the Securities Exchange Act of 1934, as amended) shall
obtain ownership or control in one or more series of transactions of (i) more
than fifty percent (50%) of the common stock or (ii) more than fifty percent
(50%) of the voting power of any Borrower entitled to vote in the election of
members of the board of directors of such Borrower or (iii) such lesser
percentage of such voting power of any Borrower which through its by-laws, a
voting agreement or otherwise entitles any such person or group of person to
elect a majority of the members of the board of directors of such Borrower (any
such event, a "Change in Control").
(j) Voluntary Bankruptcy Proceeding. Any Borrower or any Subsidiary
-------------------------------
thereof shall (i) commence a voluntary case under the federal bankruptcy laws
(as now or hereafter in effect), (ii) file a petition seeking to take advantage
of any other laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or composition for adjustment of debts, (iii) consent
to or fail to contest in a timely and appropriate manner any petition filed
against it in an involuntary case under such bankruptcy laws or other laws, (iv)
apply for or consent to, or fail to contest in a timely and appropriate manner,
the appointment of, or the taking of possession by, a receiver, custodian,
trustee, or liquidator of itself or of a substantial part of its property,
domestic or foreign, (v) admit in writing its inability to pay its debts as they
become due, (vi) make a general assignment for the benefit of creditors, or
(vii) take any corporate action for the purpose of authorizing any of the
foregoing.
(k) Involuntary Bankruptcy Proceeding. A case or other proceeding shall be
---------------------------------
commenced against any Borrower or any Subsidiary thereof in any court of
competent jurisdiction seeking (i) relief under the federal bankruptcy laws (as
now or hereafter in effect) or under any other laws, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, winding up or adjustment of
debts, or (ii) the appointment of a trustee, receiver, custodian, liquidator or
the like for any Borrower or any Subsidiary thereof or for all or any
substantial part of their respective assets, domestic or foreign, and such case
or proceeding shall continue undismissed or unstayed for a period of sixty (60)
consecutive days, or an order granting the relief requested in such case or
proceeding (including, but not limited to, an order for relief under such
federal bankruptcy laws) shall be entered.
(l) Failure of Agreements. Any material provision of this Agreement or of
---------------------
any other Loan Document shall for any reason cease to be valid and binding on
any Borrower or any Subsidiary thereof party thereto or any such Person shall so
state in writing, or this Agreement or any other Loan Document shall for any
reason cease to create a valid and perfected first priority Lien on, or security
interest in, any of the collateral purported to be covered thereby, in each case
other than in accordance with the express terms hereof or thereof.
(m) Termination Event. The occurrence of any of the following events: (i)
-----------------
any Borrower or any ERISA Affiliate fails to make full payment when due of all
amounts which, under the provisions of any Pension Plan or Section 412 of the
Code, any Borrower or any ERISA Affiliate is required to pay as contributions
thereto, (ii) an accumulated funding deficiency in excess of $1,000,000 occurs
or exists, whether or not waived, with respect to any Pension Plan, (iii) a
Termination Event or (iv) any Borrower or any ERISA Affiliate as
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employers under one or more Multiemployer Plan makes a complete or partial
withdrawal from any such Multiemployer Plan and the plan sponsor of such
Multiemployer Plans notifies such withdrawing employer that such employer has
incurred a withdrawal liability requiring payments in an amount exceeding
$1,000,000.
(n) Judgment. A judgment or order for the payment of money which causes
--------
the aggregate amount of all such judgments to exceed $1,000,000 in any Fiscal
Year shall be entered against any Borrower or any of Subsidiary thereof by any
court and such judgment or order shall continue undischarged or unstayed for a
period of thirty (30) days.
SECTION 11.2 Remedies. Upon the occurrence of an Event of Default, upon
--------
the request of the Required Lenders (and only upon such request), the
Administrative Agent shall, by notice to the Borrowers:
(a) Acceleration; Termination of Facilities. Declare the principal of and
---------------------------------------
interest on the Loans, the Notes and the Reimbursement Obligations at the time
outstanding, and all other amounts owed to the Lenders and to the Administrative
Agent under this Agreement or any of the other Loan Documents (other than any
Hedging Agreement) (including, without limitation, all L/C Obligations, whether
or not the beneficiaries of the then outstanding Letters of Credit shall have
presented the documents required thereunder) and all other Obligations (other
than obligations owing under any Hedging Agreement), to be forthwith due and
payable, whereupon the same shall immediately become due and payable without
presentment, demand, protest or other notice of any kind, all of which are
expressly waived, anything in this Agreement or the other Loan Documents to the
contrary notwithstanding, and terminate the Credit Facility and any right of the
Borrowers to request borrowings or Letters of Credit thereunder; provided, that
--------
upon the occurrence of an Event of Default specified in Section 11.1(j) or (k),
the Credit Facility shall be automatically terminated and all Obligations (other
than obligations owing under any Hedging Agreement) shall automatically become
due and payable.
(b) Letters of Credit. With respect to all Letters of Credit with respect
-----------------
to which presentment for honor shall not have occurred at the time of an
acceleration pursuant to the preceding paragraph, require the Borrowers at such
time to deposit in a cash collateral account opened by the Administrative Agent
an amount equal to the aggregate then undrawn and unexpired amount of such
Letters of Credit. Amounts held in such cash collateral account shall be
applied by the Administrative Agent to the payment of drafts drawn under such
Letters of Credit, and the unused portion thereof after all such Letters of
Credit shall have expired or been fully drawn upon, if any, shall be applied to
repay the other Obligations. After all such Letters of Credit shall have
expired or been fully drawn upon, the Reimbursement Obligation shall have been
satisfied and all other Obligations shall have been paid in full, the balance,
if any, in such cash collateral account shall be returned to the Borrowers.
(c) Rights of Collection. Exercise on behalf of the Lenders all of its
--------------------
other rights and remedies under this Agreement, the other Loan Documents and
Applicable Law, in order to satisfy all of the Obligations of the Borrowers.
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SECTION 11.3 Rights and Remedies Cumulative; Non-Waiver; etc. The
-----------------------------------------------
enumeration of the rights and remedies of the Administrative Agent and the
Lenders set forth in this Agreement is not intended to be exhaustive and the
exercise by the Administrative Agent and the Lenders of any right or remedy
shall not preclude the exercise of any other rights or remedies, all of which
shall be cumulative, and shall be in addition to any other right or remedy given
hereunder or under the Loan Documents or that may now or hereafter exist in law
or in equity or by suit or otherwise. No delay or failure to take action on the
part of the Administrative Agent or any Lender in exercising any right, power or
privilege shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or privilege preclude other or further
exercise thereof or the exercise of any other right, power or privilege or shall
be construed to be a waiver of any Event of Default. No course of dealing
between any Borrower, the Administrative Agent and the Lenders or their
respective agents or employees shall be effective to change, modify or discharge
any provision of this Agreement or any of the other Loan Documents or to
constitute a waiver of any Event of Default.
ARTICLE XII
THE ADMINISTRATIVE AGENT
SECTION 12.1 Appointment. Each of the Lenders hereby irrevocably designates
-----------
and appoints First Union as Administrative Agent of such Lender under this
Agreement and the other Loan Documents for the term hereof and each such Lender
irrevocably authorizes First Union as Administrative Agent for such Lender, to
take such action on its behalf under the provisions of this Agreement and the
other Loan Documents and to exercise such powers and perform such duties as are
expressly delegated to the Administrative Agent by the terms of this Agreement
and such other Loan Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement or such other Loan Documents, the Administrative Agent shall not
have any duties or responsibilities, except those expressly set forth herein and
therein, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or the other Loan Documents or otherwise exist
against the Administrative Agent.
SECTION 12.2 Delegation of Duties. The Administrative Agent may execute any
--------------------
of its respective duties under this Agreement and the other Loan Documents by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agents or attorneys-
in-fact selected by the Administrative Agent with reasonable care.
SECTION 12.3 Exculpatory Provisions. Neither the Administrative Agent nor
----------------------
any of its officers, directors, employees, agents, attorneys-in-fact,
Subsidiaries or Affiliates shall be (a) liable for any action lawfully taken or
omitted to be taken by it or such Person under or in connection with this
Agreement or the other Loan Documents (except for actions occasioned solely by
its or such Person's own gross negligence or willful misconduct), or (b)
responsible in
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any manner to any of the Lenders for any recitals, statements, representations
or warranties made by any Borrower or any Subsidiary thereof or any officer
thereof contained in this Agreement or the other Loan Documents or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Administrative Agent under or in connection with, this
Agreement or the other Loan Documents or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or the other Loan
Documents or for any failure of any Borrower or any Subsidiary thereof to
perform its obligations hereunder or thereunder. The Administrative Agent shall
not be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement, or to inspect the properties, books or records of any
Borrower or any Subsidiary thereof.
SECTION 12.4 Reliance by the Administrative Agent. The Administrative Agent
------------------------------------
shall be entitled to rely, and shall be fully protected in relying, upon any
note, writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon advice
and statements of legal counsel (including, without limitation, counsel to the
Borrowers), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent may deem and treat the payee of
any Note as the owner thereof for all purposes unless such Note shall have been
transferred in accordance with Section 13.10 hereof. The Administrative Agent
shall be fully justified in failing or refusing to take any action under this
Agreement and the other Loan Documents unless it shall first receive such advice
or concurrence of the Required Lenders (or, when expressly required hereby or by
the relevant other Loan Document, all the Lenders) as it deems appropriate or it
shall first be indemnified to its satisfaction by the Lenders against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action except for its own gross negligence or
willful misconduct. The Administrative Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and the
Notes in accordance with a request of the Required Lenders (or, when expressly
required hereby, all the Lenders), and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lenders and all
future holders of the Notes.
SECTION 12.5 Notice of Default. The Administrative Agent shall not be
-----------------
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless it has received notice from a Lender or the Borrowers
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". In the event that the
Administrative Agent receives such a notice, it shall promptly give notice
thereof to the Lenders. The Administrative Agent shall take such action with
respect to such Default or Event of Default as shall be reasonably directed by
the Required Lenders; provided that unless and until the Administrative Agent
shall have received such directions, the Administrative Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Lenders, except to the extent that other provisions of
this Agreement
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expressly require that any such action be taken or not be taken only with the
consent and authorization or the request of the Lenders or the Required Lenders,
as applicable.
SECTION 12.6 Non-Reliance on the Administrative Agent and Other Lenders.
----------------------------------------------------------
Each Lender expressly acknowledges that neither the Administrative Agent nor any
of its respective officers, directors, employees, agents, attorneys-in-fact,
Subsidiaries or Affiliates has made any representations or warranties to it and
that no act by the Administrative Agent hereinafter taken, including any review
of the affairs of the Borrowers or any of their Subsidiaries, shall be deemed to
constitute any representation or warranty by the Administrative Agent to any
Lender. Each Lender represents to the Administrative Agent that it has,
independently and without reliance upon the Administrative Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of the
Borrowers and their Subsidiaries and made its own decision to make its Loans and
issue or participate in Letter of Credit hereunder and enter into this
Agreement. Each Lender also represents that it will, independently and without
reliance upon the Administrative Agent or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under this Agreement and the other Loan Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Borrowers and their Subsidiaries. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder or by the other Loan Documents, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, operations,
property, financial and other condition or creditworthiness of the Borrowers or
any of their Subsidiaries which may come into the possession of the
Administrative Agent or any of its respective officers, directors, employees,
agents, attorneys-in-fact, Subsidiaries or Affiliates.
SECTION 12.7 Indemnification. The Lenders agree to indemnify the
---------------
Administrative Agent in its capacity as such and (to the extent not reimbursed
by the Borrowers and without limiting the obligation of the Borrowers to do so),
ratably according to the respective amounts of their Commitment Percentages,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever which may at any time (including, without limitation, at any
time following the payment of the Notes or any Reimbursement Obligation) be
imposed on, incurred by or asserted against the Administrative Agent in any way
relating to or arising out of this Agreement or the other Loan Documents, or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the
Administrative Agent under or in connection with any of the foregoing; provided
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the Administrative
Agent's bad faith, gross negligence or willful misconduct. The agreements in
this Section 12.7 shall survive the payment of the Notes, any Reimbursement
Obligation and all other amounts payable hereunder and the termination of this
Agreement.
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SECTION 12.8 The Administrative Agent in Its Individual Capacity. The
---------------------------------------------------
Administrative Agent and its respective Subsidiaries and Affiliates may make
loans to, accept deposits from and generally engage in any kind of business with
any Borrower as though the Administrative Agent were not an Administrative Agent
hereunder. With respect to any Loans made or renewed by it and any Note issued
to it and with respect to any Letter of Credit issued by it or participated in
by it, the Administrative Agent shall have the same rights and powers under this
Agreement and the other Loan Documents as any Lender and may exercise the same
as though it were not an Administrative Agent, and the terms "Lender" and
"Lenders" shall include the Administrative Agent in its individual capacity.
SECTION 12.9 Resignation of the Administrative Agent; Successor
--------------------------------------------------
Administrative Agent. Subject to the appointment and acceptance of a successor
- --------------------
as provided below, the Administrative Agent may resign at any time by giving
notice thereof to the Lenders and the Borrowers. Upon any such resignation, the
Required Lenders shall have the right, with the consent of the Company, which
consent shall not be unreasonably withheld, to appoint a successor
Administrative Agent, which successor shall have minimum capital and surplus of
at least $500,000,000. If no successor Administrative Agent shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within thirty (30) days after the Administrative Agent's giving of notice of
resignation, then the Administrative Agent may, on behalf of the Lenders,
appoint a successor Administrative Agent, which successor shall have minimum
capital and surplus of at least $500,000,000. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall thereupon succeed to and become
vested with all rights, powers, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations hereunder. After any retiring Administrative
Agent's resignation hereunder as Administrative Agent, the provisions of this
Section 12.9 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Administrative Agent.
SECTION 12.10 Documentation Agent. The Documentation Agent, in its capacity
-------------------
as Documentation Agent, shall have no duties or responsibilities under this
Agreement or any other Loan Document.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1 Notices.
-------
(a) Method of Communication. Except as otherwise provided in this
-----------------------
Agreement, all notices and communications hereunder shall be in writing, or by
telephone subsequently confirmed in writing. Any notice shall be effective if
delivered by hand delivery or sent via telecopy, recognized overnight courier
service or certified mail, return receipt requested, and shall be presumed to be
received by a party hereto (i) on the date of delivery if delivered by hand,
71
<PAGE>
courier service or sent by telecopy and (ii) on the third Business Day following
the date sent by certified mail, return receipt requested. A telephonic notice
to the Administrative Agent as understood by the Administrative Agent will be
deemed to be the controlling and proper notice in the event of a discrepancy
with or failure to receive a confirming written notice.
(b) Addresses for Notices. Notices to any party shall be sent to it at the
---------------------
following addresses, or any other address as to which all the other parties are
notified in writing.
If to the Borrowers: Global Imaging Systems, Inc.
13902 N. Dale Mabry, Suite 300
Tampa, Florida 33618
Attention: Ray Schilling
Chief Financial Officer
Telephone: (813) 960-5508
Telecopy: (813) 264-7877
If to First Union as First Union National Bank
Administrative One First Union Center, TW-10
Agent: 301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Telephone: (704) 374-2698
Telecopy: (704) 383-0288
With copies to: First Union National Bank at the Address set forth
on Schedule 1.1(a) hereto
---------------
If to any Lender: To the Address set forth on Schedule 1.1(a) hereto
---------------
(c) Administrative Agent's Office. The Administrative Agent hereby
-----------------------------
designates its office located at the address set forth above, or any subsequent
office which shall have been specified for such purpose by written notice to the
Borrowers and the Lenders, as the Administrative Agent's Office referred to
herein, to which payments due are to be made and at which Loans will be
disbursed and Letters of Credit issued.
SECTION 13.2 Expenses; Indemnity. The Borrowers will (a) pay all reasonable
-------------------
out-of-pocket expenses of the Administrative Agent in connection with (i) the
preparation, execution and delivery of this Agreement and each other Loan
Document, whenever the same shall be executed and delivered, including without
limitation all out-of-pocket syndication and due diligence expenses and
reasonable fees and disbursements of counsel for the Administrative Agent and
(ii) the preparation, execution and delivery of any waiver, amendment or consent
by the Administrative Agent or the Lenders relating to this Agreement or any
other Loan Document, including without limitation reasonable fees and
disbursements of counsel for the Administrative Agent, (b) pay all reasonable
out-of-pocket expenses of the Administrative Agent and each Lender actually
incurred in connection with the administration and enforcement of any rights and
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<PAGE>
remedies of the Administrative Agent and Lenders under the Credit Facility,
including consulting with appraisers, accountants, engineers, attorneys and
other Persons concerning the nature, scope or value of any right or remedy of
the Administrative Agent or any Lender hereunder or under any other Loan
Document or any factual matters in connection therewith, which expenses shall
include without limitation the reasonable fees and disbursements of such
Persons, and (c) defend, indemnify and hold harmless the Administrative Agent
and the Lenders, and their respective parents, Subsidiaries, Affiliates,
employees, agents, officers and directors, from and against any losses,
penalties, fines, liabilities, settlements, damages, costs and expenses,
suffered by any such Person in connection with any claim, investigation,
litigation or other proceeding (whether or not the Administrative Agent or any
Lender is a party thereto) and the prosecution and defense thereof, arising out
of or in any way connected with the Agreement, any other Loan Document or the
Loans, including without limitation reasonable attorney's and consultant's fees,
except to the extent that any of the foregoing directly result from the gross
negligence or willful misconduct of the party seeking indemnification therefor.
SECTION 13.3 Set-off. In addition to any rights now or hereafter granted
-------
under Applicable Law and not by way of limitation of any such rights, upon and
after the occurrence of any Event of Default and during the continuance thereof,
the Lenders and any assignee or participant of a Lender in accordance with
Section 13.10 are hereby authorized by the Borrowers at any time or from time to
time, without notice to the Borrowers or to any other Person, any such notice
being hereby expressly waived, to set off and to appropriate and to apply any
and all deposits (general or special, time or demand, including, but not limited
to, indebtedness evidenced by certificates of deposit, whether matured or
unmatured) and any other indebtedness at any time held or owing by the Lenders,
or any such assignee or participant to or for the credit or the account of the
Borrowers against and on account of the Obligations irrespective of whether or
not (a) the Lenders shall have made any demand under this Agreement or any of
the other Loan Documents or (b) the Administrative Agent shall have declared any
or all of the Obligations to be due and payable as permitted by Section 11.2 and
although such Obligations shall be contingent or unmatured.
SECTION 13.4 Governing Law. This Agreement, the Notes and the other Loan
-------------
Documents, unless otherwise expressly set forth therein, shall be governed by,
construed and enforced in accordance with the laws of the State of North
Carolina, without reference to the conflicts or choice of law principles
thereof.
SECTION 13.5 Consent to Jurisdiction. The Borrowers hereby irrevocably
-----------------------
consent to the personal jurisdiction of the state and federal courts located in
Mecklenburg County, North Carolina, in any action, claim or other proceeding
arising out of any dispute in connection with this Agreement, the Notes and the
other Loan Documents, any rights or obligations hereunder or thereunder, or the
performance of such rights and obligations. The Borrowers hereby irrevocably
consents to the service of a summons and complaint and other process in any
action, claim or proceeding brought by the Administrative Agent or any Lender in
connection with this Agreement, the Notes or the other Loan Documents, any
rights or obligations hereunder or thereunder, or the performance of such rights
and obligations, on behalf of itself or its property, in the manner specified in
Section 13.1. Nothing in this Section 13.5
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<PAGE>
shall affect the right of the Administrative Agent or any Lender to serve legal
process in any other manner permitted by Applicable Law or affect the right of
the Administrative Agent or any Lender to bring any action or proceeding against
any Borrower or its properties in the courts of any other jurisdictions.
SECTION 13.6 Binding Arbitration; Waiver of Jury Trial.
(a) Binding Arbitration. Upon demand of any party hereto, whether made
-------------------
before or after institution of any judicial proceeding, any claim or controversy
arising out of, or relating to this Agreement or any other Loan Document (a
"Dispute"), between or among the parties hereto or any other Loan Document,
shall be resolved by binding arbitration conducted under and governed by the
Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules") of the
American Arbitration Association (the "AAA") and the Federal Arbitration Act.
Disputes may include, without limitation, tort claims, counterclaims, disputes
as to whether a matter is subject to arbitration, claims brought as class
actions, or claims arising from documents executed in the future. A judgment
upon the award may be entered in any court having jurisdiction. Notwithstanding
the foregoing, this arbitration provision does not apply to disputes under or
related to any Hedging Agreement that is a Loan Document.
(b) Special Rules. All arbitration hearings shall be conducted in
-------------
Charlotte, North Carolina. A hearing shall begin within 90 days of demand for
arbitration and all hearings shall be concluded within 120 days of demand for
arbitration. These time limitations may not be extended unless a party shows
cause for extension and then for no more than a total of 60 days. The expedited
procedures set forth in Rule 51 et seq. of the Arbitration Rules shall be
applicable to claims of less than $1,000,000. Arbitrators shall be licensed
attorneys selected from the Commercial Financial Dispute Arbitration Panel of
the AAA. The parties hereto do not waive applicable Federal or state
substantive law except as provided herein.
(c) Preservation and Limitation of Remedies.
---------------------------------------
(i) Notwithstanding the preceding binding arbitration provisions, the
parties hereto and to the other Loan Documents agree to preserve, without
diminution, certain remedies that any such Person may exercise before or after
an arbitration proceeding is brought. Each such Person shall have the right to
proceed in any court of proper jurisdiction or by self-help to exercise or
prosecute the following remedies, as applicable: (i) all rights to foreclose
against any real or personal property or other security by exercising a power of
sale or under applicable law by judicial foreclosure including a proceeding to
confirm the sale; (ii) all rights of self-help including peaceful occupation of
real property and collection of rents, set-off, and peaceful possession of
personal property; (iii) obtaining provisional or ancillary remedies including
injunctive relief, sequestration, garnishment, attachment, appointment of
receiver and filing an involuntary bankruptcy proceeding; and (iv) when
applicable, a judgment by confession of judgment. Any claim or controversy with
regard to any party's entitlement to such remedies is a Dispute.
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(ii) Each party hereto and to the other Loan Documents agrees that it
shall not have a remedy of punitive or exemplary damages against any other party
hereto or any other Loan Document in any Dispute and hereby waives any right or
claim to punitive or exemplary damages such party has now or which may arise in
the future in connection with any Dispute, whether the Dispute is resolved by
arbitration or judicially.
(d) JURY TRIAL. THE PARTIES HERETO AND TO THE OTHER LOAN DOCUMENTS
----------
ACKNOWLEDGE THAT BY AGREEING TO BINDING ARBITRATION THEY HAVE IRREVOCABLY WAIVED
ANY RIGHT THEY MAY HAVE TO A JURY TRIAL WITH REGARD TO A DISPUTE.
SECTION 13.7 Reversal of Payments. To the extent any Borrower makes a
--------------------
payment or payments to the Administrative Agent for the ratable benefit of the
Lenders or the Administrative Agent receives any payment or proceeds of the
collateral which payments or proceeds or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or proceeds repaid, the Obligations or part thereof
intended to be satisfied shall be revived and continued in full force and effect
as if such payment or proceeds had not been received by the Administrative
Agent.
SECTION 13.8 Injunctive Relief; Punitive Damages
-----------------------------------
(a) The Borrowers recognizes that, in the event the Borrowers fails to
perform, observe or discharge any of its obligations or liabilities under this
Agreement, any remedy of law may prove to be inadequate relief to the Lenders.
Therefore, the Borrowers agree that the Lenders, at the Lenders' option, shall
be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages.
(b) The Administrative Agent, Lenders and the Borrowers (on behalf of
themselves and their Subsidiaries) hereby agree that no such Person shall have a
remedy of punitive or exemplary damages against any other party to a Loan
Document and each such Person hereby waives any right or claim to punitive or
exemplary damages that they may now have or may arise in the future in
connection with any Dispute, whether such Dispute is resolved through
arbitration or judicially.
(c) The parties agree that they shall not have a remedy of punitive or
exemplary damages against any other party in any Dispute and hereby waive any
right or claim to punitive or exemplary damages they have now or which may arise
in the future in connection with any Dispute whether the Dispute is resolved by
arbitration or judicially.
SECTION 13.9 Accounting Matters. All financial and accounting calculations,
------------------
measurements and computations made for any purpose relating to this Agreement,
including, without limitation, all computations utilized by the Borrowers or any
of their Subsidiary to determine compliance with any covenant contained herein,
shall, except as otherwise expressly
75
<PAGE>
contemplated hereby or unless there is an express written direction by the
Administrative Agent to the contrary agreed to by the Borrowers, be performed in
accordance with GAAP as in effect on the Closing Date. In the event that changes
in GAAP shall be mandated by the Financial Accounting Standards Board, or any
similar accounting body of comparable standing, or shall be recommended by the
certified public accountants of the Borrowers, to the extent that such changes
would modify such accounting terms or the interpretation or computation thereof,
such changes shall be followed in defining such accounting terms only from and
after the date the Borrowers and the Lenders shall have amended this Agreement
to the extent necessary to reflect any such changes in the financial covenants
and other terms and conditions of this Agreement.
SECTION 13.10 Successors and Assigns; Participations
--------------------------------------
(a) Benefit of Agreement. This Agreement shall be binding upon and inure
--------------------
to the benefit of the Borrowers, the Administrative Agent and the Lenders, all
future holders of the Notes, and their respective successors and assigns, except
that no Borrower shall assign or transfer any of its rights or obligations under
this Agreement without the prior written consent of each Lender.
(b) Assignment by Lenders. Each Lender may, with the consent of the
---------------------
Administrative Agent and, so long as no Default or Event of Default has occurred
and is continuing, the Borrowers, which consents shall not be unreasonably
withheld, assign to one or more Eligible Assignees all or a portion of its
interests, rights and obligations under this Agreement (including, without
limitation, all or a portion of the Extensions of Credit at the time owing to it
and the Notes held by it); provided that:
--------
(i) each such assignment shall be of a constant, and not a varying,
percentage of all the assigning Lender's rights and obligations under this
Agreement;
(ii) if less than all of the assigning Lender's Commitment is to be
assigned, the Commitment so assigned shall not be less than $5,000,000;
(iii) the parties to each such assignment shall execute and deliver to
the Administrative Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance in the form of Exhibit G attached hereto (an
---------
"Assignment and Acceptance"), together with any Note or Notes subject to such
assignment;
(iv) such assignment shall not, without the consent of the Borrowers,
require the Borrowers to file a registration statement with the Securities and
Exchange Commission or apply to or qualify the Loans or the Notes under the blue
sky laws of any state; and
(v) the assigning Lender shall pay to the Administrative Agent an
assignment fee of $3,000 upon the execution by such Lender of the Assignment and
Acceptance; provided that no such fee shall be payable upon any assignment by a
--------
Lender to an Affiliate thereof.
76
<PAGE>
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance, which effective date
shall be at least five (5) Business Days after the execution thereof, (A) the
assignee thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender hereby
and (B) the Lender thereunder shall, to the extent provided in such assignment,
be released from its obligations under this Agreement.
(c) Rights and Duties Upon Assignment. By executing and delivering an
---------------------------------
Assignment and Acceptance, the assigning Lender thereunder and the assignee
thereunder confirm to and agree with each other and the other parties hereto as
set forth in such Assignment and Acceptance.
(d) Register. The Administrative Agent shall maintain a copy of each
--------
Assignment and Acceptance delivered to it and a register for the recordation of
the names and addresses of the Lenders and the amount of the Extensions of
Credit with respect to each Lender from time to time (the "Register"). The
entries in the Register shall be conclusive, in the absence of manifest error,
and the Borrowers, the Administrative Agent and the Lenders may treat each
person whose name is recorded in the Register as a Lender hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrowers or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(e) Issuance of New Notes. Upon its receipt of an Assignment and
---------------------
Acceptance executed by an assigning Lender and an Eligible Assignee together
with any Note or Notes subject to such assignment and the written consent to
such assignment, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is substantially in the form of Exhibit G:
---------
(i) accept such Assignment and Acceptance;
(ii) record the information contained therein in the Register;
(iii) give prompt notice thereof to the Lenders and the
Borrowers; and
(iv) promptly deliver a copy of such Assignment and Acceptance
to the Borrowers.
Within five (5) Business Days after receipt of notice, the Borrowers shall
execute and deliver to the Administrative Agent, in exchange for the surrendered
Note or Notes, a new Note or Notes to the order of such Eligible Assignee in
amounts equal to the Commitment assumed by it pursuant to such Assignment and
Acceptance and a new Note or Notes to the order of the assigning Lender in an
amount equal to the Commitment retained by it hereunder. Such new Note or Notes
shall be in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Note or Notes, shall be dated the effective date of
such Assignment and Acceptance
77
<PAGE>
and shall otherwise be in substantially the form of the assigned Notes delivered
to the assigning Lender. Each surrendered Note or Notes shall be canceled and
returned to the Borrowers.
(f) Participations. Each Lender may sell participations to one or more
--------------
banks or other entities in all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its
Extensions of Credit and the Notes held by it); provided that:
--------
(i) each such participation shall be in an amount not less
than $5,000,000;
(ii) such Lender's obligations under this Agreement (including,
without limitation, its Commitment) shall remain unchanged;
(iii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations;
(iv) such Lender shall remain the holder of the Notes held by
it for all purposes of this Agreement;
(v) the Borrowers, the Administrative Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement;
(vi) such Lender shall not permit such participant the right to
approve any waivers, amendments or other modifications to this Agreement or any
other Loan Document other than waivers, amendments or modifications which would
reduce the principal of or the interest rate on any Loan or Reimbursement
Obligation, extend the term or increase the amount of the Commitment, reduce the
amount of any fees to which such participant is entitled, extend any scheduled
payment date for principal of any Loan or, except as expressly contemplated
hereby or thereby, release substantially all of the Collateral; and
(vii) any such disposition shall not, without the consent of the
Borrowers, require the Borrowers to file a registration statement with the
Securities and Exchange Commission to apply to qualify the Loans or the Notes
under the blue sky law of any state.
(g) Disclosure of Information; Confidentiality. The Administrative Agent
------------------------------------------
and the Lenders shall hold all non-public information with respect to the
Borrowers obtained pursuant to the Loan Documents in accordance with their
customary procedures for handling confidential information; provided, that the
--------
Administrative Agent may disclose information relating to this Agreement to Gold
----
Sheets and other similar bank trade publications, such information to consist of
- ------
deal terms and other information customarily found in such publications. Any
Lender may, in connection with any assignment, proposed assignment,
participation or proposed participation pursuant to this Section 13.10, disclose
to the assignee, participant, proposed assignee or proposed participant, any
information relating to the Borrowers furnished to such Lender by or
78
<PAGE>
on behalf of the Borrowers; provided, that prior to any such disclosure, each
such assignee, proposed assignee, participant or proposed participant shall
agree with the Borrowers or such Lender to preserve the confidentiality of any
confidential information relating to the Borrowers received from such Lender.
(h) Certain Pledges or Assignments. Nothing herein shall prohibit any
------------------------------
Lender from pledging or assigning any Note to any Federal Reserve Bank in
accordance with Applicable Law.
SECTION 13.11 Amendments, Waivers and Consents. Except as set forth below,
--------------------------------
any term, covenant, agreement or condition of this Agreement or any of the other
Loan Documents may be amended or waived by the Lenders, and any consent given by
the Lenders, if, but only if, such amendment, waiver or consent is in writing
signed by the Required Lenders (or by the Administrative Agent with the consent
of the Required Lenders) and delivered to the Administrative Agent and, in the
case of an amendment, signed by each Borrower; provided, that no amendment,
waiver or consent shall (a) increase the amount or extend the time of the
obligation of the Lenders to make Loans or issue or participate in Letters of
Credit (including, without limitation, pursuant to Section 2.7), (b) extend the
originally scheduled time or times of payment of the principal of any Loan or
Reimbursement Obligation or the time or times of payment of interest on any Loan
or Reimbursement Obligation, (c) reduce the rate of interest or fees payable on
any Loan or Reimbursement Obligation, (d) reduce the principal amount of any
Loan or Reimbursement Obligation, (e) permit any subordination of the principal
or interest on any Loan or Reimbursement Obligation, (f) release any material
portion of the Collateral or release any Security Document (other than as
permitted or contemplated in this Agreement or the applicable Security
Document), (g) amend or waive the mandatory prepayment provisions of this
Agreement, (h) amend or waive the provisions of Sections 8.12 or 8.13 hereof or
(i) amend the provisions of this Section 13.11 or the definition of Required
Lenders, without the prior written consent of each Lender. In addition, no
amendment, waiver or consent to the provisions of (a) Article XII shall be made
without the written consent of the Administrative Agent and (b) Article III
without the written consent of the Issuing Lender.
SECTION 13.12 Performance of Duties. The obligations of the Borrowers under
---------------------
this Agreement and each of the Loan Documents shall be performed by the
Borrowers at their sole cost and expense.
SECTION 13.13 All Powers Coupled with Interest. All powers of attorney and
--------------------------------
other authorizations granted to the Lenders, the Administrative Agent and any
Persons designated by the Administrative Agent or any Lender pursuant to any
provisions of this Agreement or any of the other Loan Documents shall be deemed
coupled with an interest and shall be irrevocable so long as any of the
Obligations remain unpaid or unsatisfied or the Credit Facility has not been
terminated.
SECTION 13.14 Survival of Indemnities. Notwithstanding any termination of
-----------------------
this Agreement, the indemnities to which the Administrative Agent and the
Lenders are entitled under the provisions of this Article XIII and any other
provision of this Agreement and the Loan
79
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Documents shall continue in full force and effect and shall protect the
Administrative Agent and the Lenders against events arising after such
termination as well as before.
SECTION 13.15 Titles and Captions. Titles and captions of Articles,
-------------------
Sections and subsections in this Agreement are for convenience only, and neither
limit nor amplify the provisions of this Agreement.
SECTION 13.16 Severability of Provisions. Any provision of this Agreement
--------------------------
or any other Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remainder of
such provision or the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
SECTION 13.17 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and shall be binding
upon all parties, their successors and assigns, and all of which taken together
shall constitute one and the same agreement.
SECTION 13.18 Company as Agent for the Borrowers. The Borrowers hereby
----------------------------------
irrevocably appoint and authorize the Company (i) to provide the Administrative
Agent with all notices with respect to Extensions of Credit obtained for the
benefit of any Borrower and all other notices and instructions under this
Agreement and the other Loan Documents and (ii) to take such action on behalf of
the Borrowers as the Company deems appropriate on its behalf to obtain
Extensions of Credit and to exercise such other powers as are reasonably
incidental to carry out the purposes of this Agreement and the other Loan
Documents.
SECTION 13.19 Obligations Joint and Several; Contribution
-------------------------------------------
(a) The Borrowers shall be jointly and severally liable for the
Obligations, however incurred. References to the Borrowers with respect to the
Obligations or any portion thereof shall mean each Borrower on a joint and
several basis.
(b) To the extent any Borrower is required, by reason of its Obligations
hereunder, to pay to the Administrative Agent or any Lender or to any other
Borrower an amount greater than the amount of the Extensions of Credit actually
made available to or for the account of such Borrower, such Borrower shall have
an enforceable right of contribution and indemnity against the remaining
Borrowers, and the remaining Borrowers shall be jointly and severally liable to
such Borrower, for repayment of the full amount of such excess payment. Such
Borrower shall be subrogated to any and all rights of the Administrative Agent
and the Lenders against the remaining Borrowers to the extent of such excess
payment. The rights of any Borrower to contribution, subrogation and indemnity
under this Section 13.19 or under Applicable Law shall in all events and all
respects be subject and subordinate to the rights of the Administrative Agent
and the Lenders under this Agreement and the other Loan Documents and subject to
the prior full, final and indefeasible payment to the Administrative Agent and
the Lenders of all Obligations.
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(c) Notwithstanding anything to the contrary in this Agreement, the amount
of any Borrower's obligations under this Section 13.19 shall in all events be
limited to, but not in excess of, the maximum amount thereof not subject to
avoidance or recovery by operation of Applicable Law governing bankruptcy,
reorganization, receivership, arrangement, adjustment of debts, relief of
debtors, dissolution, insolvency, fraudulent transfers or conveyances or other
similar laws (including, without limitation, 11 U.S.C. (S)546, (S)547, (S)548,
(S)550 and other "avoidance" provisions of Title 11 of the United States Code)
applicable at any time to such Borrower and this Agreement.
SECTION 13.20 Term of Agreement. This Agreement shall remain in effect from
-----------------
the Closing Date through and including the date upon which all Obligations shall
have been indefeasibly and irrevocably paid and satisfied in full. The
Administrative Agent is hereby permitted to release all Liens on the Collateral
in favor of the Administrative Agent, for the ratable benefit of itself and the
Lenders, upon repayment of the outstanding principal of and all accrued interest
on the Loans, payment of all outstanding fees and expenses hereunder and the
termination of the Lender's Commitments. No termination of this Agreement shall
affect the rights and obligations of the parties hereto arising prior to such
termination.
[Signature Pages To Follow]
81
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers, all as of the day and
year first written above.
BORROWERS:
[CORPORATE SEAL] GLOBAL IMAGING SYSTEMS, INC., as Borrower
By: /s/ Raymond Schilling
---------------------
Name: Raymond Schilling
Title: CFO, VP, Treasurer and Secretary
[CORPORATE SEAL] GLOBAL IMAGING OPERATIONS, INC., as Borrower
By: /s/ Raymond Schilling
---------------------
Name: Raymond Schilling
Title: VP and Treasurer
[CORPORATE SEAL] GLOBAL IMAGING FINANCE COMPANY, as Borrower
By: /s/ Raymond Schilling
---------------------
Name: Raymond Schilling
Title: CFO, VP, Treasurer and Secretary
[CORPORATE SEAL] AMERICAN PHOTOCOPY EQUIPMENT COMPANY OF PITTSBURGH, as
Borrower
By: /s/ Raymond Schilling
---------------------
Name: Raymond Schilling
Title: Assistant Secretary
[CORPORATE SEAL] BERNEY, INC., as Borrower
By: /s/ Raymond Schilling
---------------------
Name: Raymond Schilling
Title: Vice President
[Signatures Continued On The Following Page]
<PAGE>
[CORPORATE SEAL] BUSINESS EQUIPMENT UNLIMITED, as Borrower
By: /s/ Raymond Schilling
---------------------
Name: Raymond Schilling
Title: Secretary and Treasurer
[CORPORATE SEAL] CAMERON OFFICE PRODUCTS, INC., as Borrower
By: /s/ Raymond Schilling
---------------------
Name: Raymond Schilling
Title: Vice President
[CORPORATE SEAL] CONNECTICUT BUSINESS SYSTEMS, INC., as Borrower
By: /s/ Raymond Schilling
---------------------
Name: Raymond Schilling
Title: VP, Secretary and Treasurer
[CORPORATE SEAL] CONWAY OFFICE PRODUCTS, INC., as Borrower
By: /s/ Raymond Schilling
---------------------
Name: Raymond Schilling
Title: Assistant Secretary and Assistant
Treasurer
[CORPORATE SEAL] COPY SERVICE AND SUPPLY, INC., as Borrower
By: /s/ Raymond Schilling
---------------------
Name: Raymond Schilling
Title: VP and Assistant Secretary
[Signatures Continued On The Following Page]
<PAGE>
[CORPORATE SEAL] DUPLICATING SPECIALTIES, INC., as
Borrower
By: /s/ Raymond Schilling
---------------------
Name: Raymond Schilling
Title: VP, CFO, Asst. Secretary and Treasurer
[CORPORATE SEAL] EASTERN COPY PRODUCTS, INC., as Borrower
By: /s/ Raymond Schilling
---------------------
Name: Raymond Schilling
Title: VP and Assistant Secretary
[CORPORATE SEAL] ELECTRONIC SYSTEMS, INC., as Borrower
By: /s/ Raymond Schilling
---------------------
Name: Raymond Schilling
Title: VP and Assistant Secretary
[CORPORATE SEAL] ELECTRONIC SYSTEMS OF RICHMOND, INC., as Borrower
By: /s/ Raymond Schilling
---------------------
Name: Raymond Schilling
Title: VP and Assistant Secretary
[CORPORATE SEAL] FELCO OFFICE SYSTEMS, INC., as Borrower
By: /s/ Raymond Schilling
---------------------
Attest: Name: Raymond Schilling
/s/ J. Hovey Kemp Title: VP and Secretary
- -----------------
Assistant Secretary
[Signatures Continued On The Following Page]
<PAGE>
[CORPORATE SEAL] QUALITY BUSINESS SYSTEMS, INC., as Borrower
By: /s/ Raymond Schilling
---------------------
Name: Raymond Schilling
Title: VP, CFO, Treasurer and Asst. Secretary
[CORPORATE SEAL] SOUTHERN BUSINESS COMMUNICATIONS, INC., as Borrower
By: /s/ Raymond Schilling
---------------------
Name: Raymond Schilling
Title: VP, Secretary and Treasurer
[Signatures Continued On The Following Page]
<PAGE>
FIRST UNION NATIONAL BANK, as
Administrative Agent and as Lender
By: /s/ Henry R. Biedrzycki
---------------------------------
Name: Henry R. Biedrzycki
-------------------------------
Title: Vice President
------------------------------
[Signatures Continued On The Following Page]
<PAGE>
SCOTIABANC INC., as Documentation Agent and
as Lender
By: /s/ Frank F. Sandler
---------------------------------
Name: Frank F. Sandler
-------------------------------
Title: Relationship Manager
------------------------------
[Signatures Continued On The Following Page]
<PAGE>
AMSOUTH BANK, as Lender
By: /s/ Dean H. Burgess
---------------------------------
Name: Dean H. Burgess
-------------------------------
Title: Vice President
------------------------------
[Signatures Continued On The Following Page]
<PAGE>
SUNTRUST BANK, TAMPA BAY, as Lender
By: /s/ Ronald K. Rueve
---------------------------------
Name: Ronald K. Rueve
-------------------------------
Title: Vice President
------------------------------
The Exhibits and Schedules to this Credit Agreement are not included with this
Quarterly Report on Form 10-Q. Global will provide these exhibits and schedules
upon the request of the Securities and Exchange Commission
<PAGE>
EXHIBIT 10.2
================================================================================
STOCK PURCHASE AGREEMENT
Dated August 31, 1998
By and Among
GLOBAL IMAGING SYSTEMS, INC.
("Global"),
SOUTHERN BUSINESS COMMUNICATIONS, INC.
("Buyer"),
CENTRE BUSINESS PRODUCTS, INC.
(the "Company")
and
THE SHAREHOLDERS OF THE COMPANY
(Collectively, the "Sellers ")
================================================================================
<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........................... 5
2.1 Agreement To Sell And Purchase........................................ 5
2.2 Purchase Price........................................................ 5
2.3 Payment Of Purchase Price............................................. 6
2.4 Closing............................................................... 7
(a) Date And Place................................................... 7
2.5 Escrow Arrangements................................................... 7
2.6 Purchase Price Adjustments............................................ 7
(a) Funded Indebtedness.............................................. 7
(b) Working Capital.................................................. 7
(c) Cash On Hand..................................................... 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...................................................... 9
3.5 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
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
3.17 Taxes.............................................................. 16
3.18 Personnel.......................................................... 17
3.19 Business Relations................................................. 17
3.20 Accounts Receivable................................................ 17
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 REPRESENTATIONS AND WARRANTIES......................... 19
4.1 Due Organization.................................................... 19
4.2 Due Authorization................................................... 19
4.3 No Brokers.......................................................... 20
4.4 Investment.......................................................... 20
4.5 Information Furnished............................................... 20
ARTICLE V PRE-CLOSING COVENANTS............................................ 20
5.1 Consents Of Others.................................................. 20
5.2 Best Efforts........................................................ 20
5.3 Powers Of Attorney.................................................. 20
5.4 Conduct Of Business Pending Closing................................. 21
5.5 Access To Records Before Closing.................................... 21
ARTICLE VI POST-CLOSING.................................................... 22
6.1 General............................................................. 22
6.2 Transition.......................................................... 22
6.3 Confidentiality..................................................... 22
6.4 Covenant Not To Compete............................................. 22
6.5 Additional Matters.................................................. 23
ARTICLE VII CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING...... 24
7.1 Conditions To Global's Obligations.................................. 24
(a) Covenants, Representations and Warranties...................... 24
(b) Consents....................................................... 24
(c) Suppliers/leases............................................... 24
(d) Discharge Of Indebtedness and Lien............................. 24
(e) Material Adverse Change........................................ 25
(f) Transfer Taxes................................................. 25
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
(g) Documents to be Delivered by the Sellers and the Company........ 25
(I) Opinion of the Sellers' Counsel............................ 25
(Ii) Certificates.............................................. 25
(Iii) Release.................................................. 25
(Iv) Escrow Agreement.......................................... 25
(V) Employment Agreement....................................... 25
(Vi) Building Leases........................................... 25
(Vii) Equity Subscription Agreement............................ 26
(Viii) Stock Certificates...................................... 26
7.2 Conditions to the Sellers' and the Company's Obligations............. 26
(a) Covenants, Representations and Warrantie........................ 26
(b) Consents........................................................ 26
(c) Documents to be Delivered by Global............................. 26
(I) Certificates............................................... 27
(Ii) Escrow Agreement.......................................... 27
(Iii) Employment Agreement..................................... 27
(Iv) Equity Subscription Agreement............................. 27
(d) Payments to the Sellers and the Company and the Escrow Agent.... 27
ARTICLE VIII INDEMNIFICATION................................................ 27
8.1 Indemnification of Global............................................ 27
8.2 Defense of Claims.................................................... 28
8.3 Escrow Claim......................................................... 28
8.4 Tax Audits, Etc...................................................... 28
8.5 Indemnification of the Sellers....................................... 29
8.6 Limits on Indemnification............................................ 29
ARTICLE IX MISCELLANEOUS.................................................... 29
9.1 Modifications........................................................ 29
9.2 Notices.............................................................. 30
9.3 Counterparts; Facsimile Transmission................................. 31
9.4 Expenses............................................................. 31
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................................................... 32
9.10 Public Announcements................................................ 33
9.11 Remedies Cumulative................................................. 33
9.12 Waiver.............................................................. 33
9.13 DISPUTE RESOLUTION.................................................. 33
</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 the Sellers' Counsel
Exhibit D Sellers' Certificates
Exhibit E Form of Release
Exhibit F Executive Agreement
Exhibit G Global and Buyer Certificates
Exhibit H Equity Subscription Agreement
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 3.5 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
Annex I Determination of Adjusted EBIT
-v-
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "AGREEMENT") is entered into as of
August 31, 1998, by and among GLOBAL IMAGING SYSTEMS, INC., a Delaware
corporation ("GLOBAL"), SOUTHERN BUSINESS COMMUNICATIONS, INC., a Georgia
corporation ("BUYER"), CENTRE BUSINESS PRODUCTS, INC., a Pennsylvania
corporation (the "COMPANY") and C. Arnold McClure and Linda McClure
(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 electronic presentation and audio visual equipment in the Commonwealth of
Pennsylvania (the "BUSINESS"); and
WHEREAS, the Sellers own all of the issued and outstanding shares of
capital stock of the Company (the "SHARES"); and
WHEREAS, Buyer desires to purchase from the Sellers and the Sellers
desire to sell to Buyer all of the Shares 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.
"ADJUSTED EBIT" means 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.
-------
"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>
"BUILDINGS" means collectively the offices of the Companies located in
Mount Union, PA, Mechanicsburg, PA and Monroeville, PA.
"BUSINESS" has the meaning specified in the first recital of the
Agreement
"BUSINESS DAY" means any day in which the NASDAQ National Market
System is open for trading in the United States of America.
"BUYER" has the meaning specified in the first paragraph of this
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 Buyer.
"CLOSING BALANCE SHEET" has the meaning specified in Section 2.7.
-----------
"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 (a) 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; (b) financial statements, cost reports or other
financial information; (c) contract proposals, or bidding information; (d)
business plans and training and operations methods and manuals; (e) personnel
records; (f) information concerning fee structures; and (g) 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.
"EARN-OUT PAYMENT" has the meaning specified in Section 2.3(d).
--------------
"EFFECTIVE DATE" has the meaning specified in Section 2.4.
-----------
-2-
<PAGE>
"EMPLOYMENT AGREEMENT" means the executive agreement C. Arnold McClure
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.
------------
"EQUITABLE EXCEPTIONS" has the meaning specified in Section 3.6.
-----------
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCROW AGENT" means Fulton Bank.
"ESCROW AGREEMENT" means the Escrow Agreement to be executed by and
among the Sellers, Buyer 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 any of the Company's assets; (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.
"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 common stock, par value $.01 per share of
Global.
"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 or
Buyer.
"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 Buyer 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.
"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, the Sellers agree to sell the Shares to Buyer and
Buyer agrees to purchase the Shares from the Sellers.
2.2 PURCHASE PRICE. The total potential purchase price for the Shares
--------------
(the "PURCHASE PRICE") shall be equal to $3,600,000, subject to any adjustment
required to be made pursuant to Section 2.6 or Section 2.8 below.
----------- -----------
-5-
<PAGE>
2.3 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be payable (i) by
-------------------------
Buyer (with respect to the portion of the Purchase Price set forth in Section
-------
2.3(a), Section 2.3(b) and Section 2.3(d) below) and (ii) by Global (with
- ------ -------------- --------------
respect to the portion of the Purchase Price set forth in Section 2.3(c) below)
--------------
at the Closing (as defined in Section 2.4 below) or as otherwise set forth in
-----------
Section 2.3(c) below as follows:
- --------------
(A) $2,400,000 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 $75,000 for the covenant not to compete provided in Section 6.4);
-----------
(B) $300,000 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 the Sellers'
indemnification obligations specified in Section 8.1 or payment to the
-----------
Sellers in accordance with the terms of Section 2.5 below.
-----------
(C) $300,000 of the Purchase Price shall be paid in the form of
shares of Global Stock to be issued to the Sellers at the Closing. The
number of shares of Global Stock to be issued to the Sellers shall be
determined based on the average of the closing bid prices per share of the
Global Stock on the NASDAQ National Market System for the ten Business Days
prior to the two (2) Business Days prior to the Closing Date. The Global
Stock shall be allocated among the Sellers as specified in Schedule 2.3.
------------
(D) regardless of obligations in Exhibit F, an amount, if any, equal
---------
to: (i) 3.5 multiplied by (ii) the amount by which the Adjusted EBIT of the
Company for the fiscal years ending July 31, 1999, 2000 and 2001 in the
aggregate exceeds $3,931,200 (the "EARN-OUT PAYMENT"); provided, however,
the Earn-out Payment shall never exceed $600,000. The Earn-out Payment, if
earned, shall be paid in cash on or before October 31, 2001; provided,
however, that (i) in the event the Adjusted EBIT of the Company for the
fiscal year ending July 31, 1999 exceeds $1,108,571, the Sellers shall be
entitled to receive on or before October 31, 1999 a portion of the Earn-out
Payment equal to $100,000; (ii) in the event the Adjusted EBIT of the
Company for the fiscal years ending July 31, 1999 and 2000 in the aggregate
exceeds $2,433,143, the Sellers shall be entitled to receive on or before
October 31, 2000 an additional portion of the Earn-out Payment equal to
$100,000; and (iii) in the event the Adjusted EBIT of the Company for the
fiscal years ending July 31, 1999, 2000 and 2001 in the aggregate exceeds
$3,931,200, the Sellers shall be entitled to receive on or before October
31, 2001 the Earn-out Payment, minus any portion of the Earn-out Payment
previously paid to Sellers in accordance with this Section 2.3(d).
--------------
Notwithstanding the foregoing, the Parties hereto agree that the Earnout
Payment, if any, shall not be paid in accordance with this Section 2.3(d)
in the event that C. Arnold McClure's employment with the Company is
terminated for any reason at any time prior to July 31, 2001;
-6-
<PAGE>
provided, however, that the Earnout Payment, if any, shall be paid in
accordance with this Section 2.3(d) in the event that C. Arnold McClure's
employment by the Company is terminated prior to July 31, 2001 due to his
death.
2.4 CLOSING.
-------
(A) DATE AND PLACE. 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 Smigel, Anderson & Sacks in Harrisburg, PA on August 31,
1998, or at such other date and time as the parties shall agree (the "CLOSING
DATE"), effective as of August 1, 1998 (the "EFFECTIVE DATE").
(B) [RESERVED]
2.5 ESCROW ARRANGEMENTS. Pursuant to the Escrow Agreement to be entered
-------------------
into among the Sellers, Buyer and the Escrow Agent, $300,000 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 the Sellers to
Buyer 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 Buyer in accordance with the terms of
the Escrow Agreement and this Agreement shall be disbursed to the Sellers . The
Sellers 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.
2.6 PURCHASE PRICE ADJUSTMENTS.
--------------------------
(A) 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 Buyer 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) WORKING CAPITAL. The portion of the Purchase Price payable at
---------------
Closing will be reduced, on a dollar-for-dollar basis, by the amount, if any, by
which the Working Capital as reflected on the Preliminary Closing Balance Sheet
is more than $25,000 less than the average of the Working Capital balances at
the end of each of the six months ended June 30, 1998 (the "WORKING CAPITAL
TARGET").
(C) CASH ON HAND. 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 $30,000.
-7-
<PAGE>
2.7 CLOSING REVIEW. Within 120 days following the Closing Date, there
--------------
shall be delivered to the Sellers a balance sheet of the Company (the "CLOSING
BALANCE SHEET") of the Company at and as of the Effective Date. The Closing
Balance Sheet shall be prepared in accordance with GAAP by the Buyer. In the
event that the Sellers dispute any items on the Closing Balance Sheet within ten
(10) days after the Sellers' receipt thereof, the parties shall jointly select
and retain an independent "Big Five" accounting firm (the "INDEPENDENT
ACCOUNTANTS") to review the disputed item(s) on the Closing Balance Sheet. The
final determination of such disputed item(s) by the Independent Accountants
shall be binding on the parties and shall be reflected on the Closing Balance
Sheet. The cost of retaining the Independent Accountants shall be borne by the
Sellers; provided, however, that Buyer shall reimburse the 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 Company's Working Capital as reflected on
the Closing Balance Sheet.
2.8 POST-CLOSING PURCHASE PRICE ADJUSTMENT. In the event that the
--------------------------------------
Working Capital as reflected on the 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 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 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 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 downward 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 the Sellers to Buyer from the Escrow Sum or by Buyer to
the Sellers, as the case may be, in immediately available funds within ten (10)
Business days of delivery of the Closing Balance Sheet, unless the Sellers
dispute any items on the 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 Buyer delivers to the Sellers a Closing
Balance Sheet modified to reflect such determination.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SELLERS
The Company and the Sellers jointly and severally represent and
warrant to Global and Buyer that:
3.1 CAPITALIZATION. The authorized capital stock of the Company
--------------
consists of 100 shares of Common Stock, 95 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 the
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
-8-
<PAGE>
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 3.2, the 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, the 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 Commonwealth of
Pennsylvania 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 Buyer and are attached
hereto as Schedule 3.4. The Company is qualified to do business in the
------------
Commonwealth of 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. 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
-9-
<PAGE>
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 the Sellers and constitutes the valid and binding obligations of the Company
and the 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
"EQUITABLE EXCEPTIONS"). Except for the Equitable Exceptions 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 the Sellers, do not (a) violate any Requirements of Laws or
any Court Order of any Governmental Body applicable to the Company or the
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 the 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 the 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 Buyer by the Company:
unaudited, reviewed balance sheets of the Company as of June 30, 1996, June 30,
1997 and June 30, 1998, and an unaudited balance sheet as of July 31, 1998, and
unaudited, reviewed statements of income of the Company for the fiscal years
ending June 30, 1996, June 30, 1997 and June 30, 1998, and an unaudited
statement of income for the one month period ending July 31, 1998. 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 one 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 the Sellers have
knowledge of any basis for the assertion of any such liability or obligation.
Since June 30, 1997, there has been no Material Adverse Change in the prospects
of the Company.
-10-
<PAGE>
3.8 CERTAIN ACTIONS. Since June 30, 1998, 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 (i) wages and salaries and
business expenses paid in the ordinary course of the Business, and (ii) 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 June 30, 1998, 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
-11-
<PAGE>
or as expressly set forth on Schedule 3.9, such real and personal properties are
------------
free and clear of Encumbrances. The Sellers and the Company have delivered to
Buyer a lien search obtained from the counties where the Company conducts
business and the Pennsylvania Secretary of State office of all UCC liens of
record against the Company's personal property in the Commonwealth of
Pennsylvania. 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 $10,000 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 the 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 the Equitable Exceptions. All
facilities owned 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 individually or the in the aggregate 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
-12-
<PAGE>
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 Buyer 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 the 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 the 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 Buyer. To the best of the Company's
and the 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,
-13-
<PAGE>
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 $35,000 or
greater (collectively, the "CONTRACTS"). The Company is not and, to the best
knowledge of the 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
-14-
<PAGE>
Equitable Exceptions, 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 the Equitable Exceptions. 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 the 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. 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 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 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, to the best knowledge of the Sellers or the
Company, 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, 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,
-15-
<PAGE>
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.
(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 June 30, 1998 (including base salary, bonus and
incentive pay) exceed (or by June 30, 1999 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 June 30, 1998 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 the 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 the
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 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 the Sellers,
threatened against or involving the Company, and none has occurred.
3.19 BUSINESS RELATIONS. Neither the Company nor the Sellers know or has
------------------
good reason to believe that any customer or supplier of the Company will cease
to do business
-16-
<PAGE>
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 the Sellers nor the Company has received any notice of any
material disruption (including delayed deliveries or allocations by suppliers)
in the availability of any portion of the materials used by the Company nor is
the Company or the 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
--------------
which amount as of July 31, 1998 is $30,564) 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 the 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 the 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.
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<PAGE>
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 (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 the Sellers have made
---------------------
available to Buyer 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 this Agreement, and neither
this Agreement, the Schedules hereto, nor any written information, instrument,
or document delivered to Global or 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.
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 officers
and 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 AND BUYER'S REPRESENTATIONS AND WARRANTIES
Global and Buyer jointly and severally represent and warrant to the 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
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<PAGE>
power and authority to execute, deliver and perform this Agreement and to carry
out the transactions contemplated hereby. Buyer 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 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 Buyer and the Agreement has been duly and validly executed and delivered by
Global and Buyer and constitutes the valid and binding obligation of each of
Global and Buyer, enforceable in accordance with its terms, except to the extent
that enforceability may be limited by 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 Global and
Buyer, do not (a) violate any Requirements of Laws or Court Order of any
Governmental Body applicable to Global or Buyer or their property, (b) violate
or conflict with, or permit the cancellation of, or constitute a default under
any agreement to which Global or Buyer is a party or by which either of them or
their property is bound, (c) permit the acceleration of the maturity of any
indebtedness of, or any indebtedness secured by the property of, Global or
Buyer, or (d) violate or conflict with any provision of the charter or bylaws of
Global or Buyer.
4.3 NO BROKERS. Neither Global or Buyer 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.
4.4 INVESTMENT. Buyer will acquire the Shares solely for investment
----------
purposes and for its own account and not with a view to the distribution
thereof.
4.5 INFORMATION FURNISHED. To the best knowledge of Global and Buyer,
---------------------
neither this Agreement, nor any written information, instrument, or document
delivered to the Sellers by Global or 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 V
PRE-CLOSING COVENANTS
5.1 CONSENTS OF OTHERS. Prior to the Closing, the Company and the 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 the Sellers to
permit them to consummate the transactions contemplated by this Agreement.
5.2 BEST EFFORTS. Global, Buyer, the Company and the Sellers shall use all
------------
reasonable efforts to cause all conditions for the Closing to be met.
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<PAGE>
5.3 POWERS OF ATTORNEY. The Company and the Sellers shall cause the
------------------
Company to terminate at or prior to the 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.
5.4 CONDUCT OF BUSINESS PENDING CLOSING. From the date of this Agreement
-----------------------------------
to the Closing Date:
(I) Except as otherwise contemplated by this Agreement, or as
Buyer may otherwise consent to in writing, the Company and the Sellers
shall conduct the Business 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 any of the representations and warranties contained in
Article III.
-----------
(II) The Company shall, and the Sellers shall use their best
efforts to cause the Company 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.
(III) The Sellers and the Company shall give prompt notice to
Buyer of any notice of material default received by the Company or the
Business 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 Company or the Business.
(IV) Neither the Company nor the Sellers, nor any of their
representatives, shall solicit, encourage or discuss any Acquisition
Proposal (as hereinafter defined) or supply any non-public information
concerning the Company or the Business or the Company's assets to any party
other than Global, Buyer or their 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 Company or the Business, (ii) the acquisition of the Company
or a material equity interest in the Company or a material portion of its
assets, or (iii) the dissolution or liquidation of the Company.
5.5 ACCESS TO RECORDS BEFORE CLOSING. Prior to the Closing Date, the
---------------------------------
Sellers and the Company agree that they will give, or cause to be given, to
Buyer and their representatives, during normal business hours and at Buyer's
expense, full and unrestricted access to the Company's personnel, officers,
agents, employees, assets, properties, titles, contracts, corporate minute and
other books, records, files and documents of the Sellers with respect to the
Business (including financial, tax basis, budget projections, accountants' work
papers and other information as Buyer may request) and to the Business'
personnel, customers, suppliers and independent accountants, to allow Buyer to
obtain such information as Buyer shall desire, and to make copies of such
information, to the extent reasonably necessary. Additionally, the Sellers and
the Company will provide Buyer opportunities to meet with key employees of the
Business, to visit facilities of
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the Business and to otherwise conduct due diligence in respect of the Company
and the Business. All materials copied by Buyer shall be maintained in
confidence by Buyer and returned to the Sellers and/or the Company, as
appropriate, 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 the
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
------------
Buyer acknowledge and agree that from and after the Closing, Buyer 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 the Sellers
shall be entitled to reasonable access to and to make copies of such books and
records at their sole cost and expense, and Buyer 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 the 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 Buyer for a period of three (3) years from the Closing, and deliver
promptly to Buyer 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 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 Buyer promptly of the request or
requirement.
6.4 COVENANT NOT TO COMPETE. For and in consideration of the allocation of
-----------------------
$75,000 of the Purchase Price paid to the Sellers by Buyer, each Seller
covenants and agrees, for a period of three (3) years from and after the Closing
Date, that he will not, directly or indirectly without the prior written consent
of Buyer, for or on behalf of any entity:
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<PAGE>
(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
or electronic presentation 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 Commonwealth of
Pennsylvania (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 and electronic presentation 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 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, the Sellers shall cause
Paul W. Tylak, CPA to prepare a short period tax return for the Company covering
the period from June 30, 1998 through July 31, 1998. The cost of preparation of
such short period tax return shall be paid for by the Sellers.
(B) Buyer and the 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 Buyer and/or the Company to the extent such
records and information pertain to events occurring on or prior to the Closing
Date; therefore, Buyer 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.
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<PAGE>
ARTICLE VII
CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING
7.1 CONDITIONS TO GLOBAL'S AND BUYER'S OBLIGATIONS. The obligation of
----------------------------------------------
Global and Buyer under this Agreement to consummate the Closing is subject to
the conditions that:
(A) COVENANTS, REPRESENTATIONS AND WARRANTIES. The Company and the
-----------------------------------------
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 the
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 this 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 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 Buyer.
(B) CONSENTS. All statutory requirements for the valid consummation
--------
by the Company and the 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 Buyer,
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. The 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. The Sellers and the Company
-----------------------------------
shall have provided for the payment in full by the Company of all Funded
Indebtedness of the Company. Such Funded Indebtedness, if any, as of July 31,
1998, is listed on Schedule 7.1(d) hereto. The Sellers 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
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<PAGE>
Company which engaged in the Business other than Permitted Exceptions 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, 1998.
(F) TRANSFER TAXES. The Sellers shall be responsible for all stock
--------------
transfer or gains taxes imposed on the Sellers incurred in connection with this
Agreement.
(G) DOCUMENTS TO BE DELIVERED BY THE SELLERS AND THE COMPANY. The
--------------------------------------------------------
following documents shall be delivered at the Closing by the Sellers and the
Company:
(I) OPINION OF THE SELLERS' COUNSEL. Global and Buyer 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.
(II) CERTIFICATES. Global and Buyer 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-1 and D-2, respectively, hereto.
(III) RELEASE. The Sellers have furnished the Company with a
-------
general release in substantially the same form as the form attached as Exhibit E
---------
hereto.
(IV) ESCROW AGREEMENT. The Sellers shall have delivered to Buyer
----------------
a the Closing the duly executed Escrow Agreement required pursuant to Section
2.5 hereof.
(V) EMPLOYMENT AGREEMENT. C. Arnold McClure 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. Buyer shall be reasonably satisfied with
---------------
the terms of the leases of the Buildings. The 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) EQUITY SUBSCRIPTION AGREEMENT. The Sellers shall have
-----------------------------
executed and delivered to Global an Equity Subscription Agreement in
substantially the same form as the form attached hereto as Exhibit H.
---------
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<PAGE>
(VIII) STOCK CERTIFICATES. The 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 THE SELLERS' AND THE COMPANY'S OBLIGATIONS. The
--------------------------------------------------------
obligation of the Sellers and the Company under this Agreement to consummate the
Closing is subject to the conditions that:
(A) COVENANTS, REPRESENTATIONS AND WARRANTIES. Global and 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 Global and Buyer prior to or at the Closing
and the representations and warranties of Global and 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 Global and Buyer of the transactions contemplated by this Agreement shall
have been fulfilled and all authorizations, 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 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 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 BUYER. The following
---------------------------------------------
documents shall be delivered at the Closing by Global and Buyer:
(I) CERTIFICATES. The Sellers shall have received an officers'
------------
certificate and a secretary's certificate executed by officers of Global
and Buyer, dated the Closing Date, in substantially the same forms as the
forms of certificates that are Exhibit G-1 and G-2, respectively, hereto.
(II) ESCROW AGREEMENT. Buyer shall have delivered to the
----------------
Sellers at the Closing the duly executed Escrow Agreement required pursuant
to Section 2.5 hereof.
(III) EMPLOYMENT AGREEMENT. Buyer shall have caused the Company
--------------------
to duly execute and deliver the Employment Agreement with C. Arnold McClure
in the same form attached as Exhibit F hereto, pursuant to which he will be
employed by the Company following the Closing.
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<PAGE>
(IV) EQUITY SUBSCRIPTION AGREEMENT. Global shall have executed
-----------------------------
and delivered to Sellers an Equity Subscription Agreement in substantially
the same form as the form attached hereto as Exhibit H.
---------
(D) PAYMENTS TO THE SELLERS AND THE COMPANY AND THE ESCROW AGENT.
------------------------------------------------------------
The Sellers shall have received the Purchase Price for the Shares. The Escrow
Agent shall have received the Escrow Sum from Buyer.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION OF GLOBAL AND BUYER. Except as provided in Section
----------------------------------- -------
8.6, as Global's and Buyer's sole and exclusive monetary remedy for any breach
- ---
by the Sellers hereunder, the Sellers agree to jointly and severally indemnify
and hold harmless Global, Buyer and each officer, director, and affiliate of
Global and Buyer, 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 the
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.
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 the
Sellers may be liable hereunder, such Indemnified Party shall give prompt
written notice thereof to the Sellers and, except as otherwise provided in
Section 8.4 below, the 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 Buyer, such litigation, action, suit, demand, or claim, or the resolution
thereof, would have an ongoing effect on Global or Buyer, the Company or its
successors, and such Indemnified Party shall extend reasonable cooperation in
connection with such defense, which shall be at the Sellers' expense. In the
event the 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 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
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<PAGE>
it is determined that such request for indemnification was proper. If the
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 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 for reimbursement of such claim in accordance with the
provisions of the Escrow Agreement prior to seeking reimbursement for such
claim. Upon expiration of the Escrow Period, Buyer may offset any claim for
indemnification made by Buyer or Global pursuant to this Article VIII against
------------
the Earn-Out Payment.
8.4 TAX AUDITS, ETC. In the event of an audit of any 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. The 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, the 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 THE SELLERS. Global and Buyer agree to jointly and
------------------------------
severally indemnify and hold harmless the Sellers and the Company and each
officer, director, stockholder or affiliate of the Company, from and against any
Indemnifiable Costs arising out of any material misrepresentation, breach or
default by Global and Buyer of or under any of the covenants, agreements or
other provisions of this Agreement or any agreement or document executed in
connection herewith. In addition, the Company and Buyer shall indemnify the
Sellers for any payment or satisfaction of any guarantees by the 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, warranties and covenants of the Sellers under Sections 3.1,3.2,
----------------
3.3, 3.1 4, 3.17 or 6.5 hereof (for which indemnification claims must be made
- ---------------- ---
prior to the expiration of the applicable statute of limitations and if so made,
such claims shall continue after such date until finally resolved), the right to
make claims for indemnification provided under this Article VIII shall expire on
------------
the third anniversary of the Closing Date (except for claims made prior to such
date which shall continue after such date until finally resolved).
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<PAGE>
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 the Sellers shall be liable for all amounts for which
indemnification may be sought. Notwithstanding the foregoing, in no event shall
the aggregate liability of the Sellers to Global and Buyer hereunder exceed the
Purchase Price. Global and Buyer shall not be obligated to pay any amounts for
indemnification under this Article VIII until the aggregate indemnification
obligation hereunder exceeds $25,000, whereupon Global and Buyer shall be liable
for all amounts for which indemnification may be sought. However nothing in this
Article VIII shall limit Global and Buyer or the Sellers in exercising or
- ------------
securing any remedies provided by applicable common law with respect to the
conduct of the Sellers or Global and Buyer in connection with this Agreement or
in the amount of damages that it can recover from the other in the event that
Global and Buyer or the 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 or Buyer:
---------------
c/o Global Imaging Systems, Inc.
13902 North Dale Mabry Road, Suite 300
Box 273478
Tampa, Florida 33688-3478
Attention: Thomas Johnson, President
Fax No.: (813) 264-7877
Tel No.: (813) 960-5508
-28-
<PAGE>
With a copy to:
--------------
Hogan & Hartson L.L.P.
Columbia Square
Thirteenth Street, NW
Washington, DC 20004-1109
Attention: Christopher J. Hagan
Fax No.: (202) 637-5910
Tel No.: (202) 637-5771
And with a copy to:
-------------------
Southern Business Communications, Inc.
5765 Reps Miller Road Suite 190
Norcross, Georgia 30071
Attention: Mark Lloyd
Fax No.: (770) 449-0188
Tel No.: (770) 449-4088
The Company:
------------
Centre Business Products, Inc.
C.A. McClure, Road 1 Box 112
Shirleysburg, Pennsylvania 17260
Attention: C. Arnold McClure
Fax No.: (814) 542-9299
Tel No.: (814) 542-2588
And with a copy to:
-------------------
Smigel, Anderson and Sacks
2917 North Front Street
Harrisburg, Pennsylvania 17112
Attention: Stuart Sacks
Fax No.: (717) 234-3611
Tel No.: (717) 234-2401
Sellers:
-------
C. Arnold McClure and Linda McClure
C.A. McClure, Road 1 Box 112
Shirleysburg, Pennsylvania 17260
Fax No.: (717)________
Tel No.: (717)________
-29-
<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; 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, with originals to be circulated to
the other parties in due course.
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
the Sellers shall bear all costs and expenses of (i) any broker involved in this
transaction and (ii) all legal expenses of the Sellers and 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, Buyer and the Sellers, their heirs,
representatives, successors, and permitted assigns, in accordance with the terms
hereof. This Agreement shall not be assignable by the Company or the Sellers
without the prior written consent of Global. This Agreement shall be assignable
by Global or Buyer to a wholly-owned subsidiary of Global or Buyer without the
prior written consent of the Sellers, but any such assignment shall not relieve
Global of its obligations hereunder. In addition, the indemnification rights of
Global and Buyer under Article VIII hereof may be assigned by Global and Buyer
------------
to First Union National Bank, N.A.
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 Pennsylvania (without reference to Pennsylvania's rules related
to choice of laws).
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 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
-30-
<PAGE>
representations, warranties and covenants contained in Sections 3.1, 3.2, 3.3,
------------ --- ---
and 6.5 of this Agreement, and the related indemnities, shall survive the
---
Closing indefinitely and not expire.
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 THE SELLERS AND GLOBAL AND
------------------
BUYER WITH RESPECT TO ANY PROVISION OF THIS AGREEMENT OR THE RIGHTS AND
OBLIGATIONS OF THE SELLERS AND GLOBAL AND BUYER 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 HARRISBURG, PENNSYLVANIA, 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.
-31-
<PAGE>
[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/ Raymond Schilling
---------------------
Raymond Schilling
Vice President, Chief Financial Officer, Treasurer
and Secretary
BUYER:
-----
SOUTHERN BUSINESS COMMUNICATIONS, INC.
By: /s/ Mark Lloyd
--------------
Mark Lloyd
President
THE COMPANY:
-----------
CENTRE BUSINESS PRODUCTS, INC.
By: /s/ C. Arnold McClure
---------------------
C. Arnold McClure
President
THE SELLERS:
-----------
/s/ C. Arnold McClure
---------------------
C. Arnold McClure
/s/ Linda McClure
-----------------
Linda McClure
The Exhibits and Schedules to this Stock Purchase Agreement are not included
with this Quarterly Report on Form 10-Q. Global will provide these exhibits and
schedules upon the request of the Securities and Exchange Commission
-33-
<PAGE>
EXHIBIT 10.4
================================================================================
STOCK PURCHASE AGREEMENT
Dated September 28, 1998
By and Among
GLOBAL IMAGING SYSTEMS, INC.
("Global"),
SOUTHERN BUSINESS COMMUNICATIONS, INC.
("Buyer"),
PROVIEW, INC.
(the "Company")
and
THE SHAREHOLDERS OF THE COMPANY
(collectively, the "Sellers")
================================================================================
<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................................................................... 6
2.3 Payment of Purchase Price........................................................ 6
2.4 Closing.......................................................................... 7
2.5 Escrow Arrangements.............................................................. 7
2.6 Purchase Price Adjustments....................................................... 7
(a) Funded Indebtness....................................................... 7
(b) Working Capital......................................................... 7
(c) Cash on Hand............................................................ 7
(d) Net Book Value.......................................................... 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................................................................. 9
3.5 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
</TABLE>
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<TABLE>
<S> <C>
3.16 Claims and Proceedings.................................................................. 15
3.17 Taxes................................................................................... 16
3.18 Personnel............................................................................... 17
3.19 Business Relations...................................................................... 18
3.20 Accounts Receivable..................................................................... 18
3.21 Bank Accounts........................................................................... 18
3.22 Warranties.............................................................................. 18
3.23 Brokers................................................................................. 18
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
4.6 Capitalization........................................................................... 21
4.7 Securities Laws Compliance............................................................... 21
ARTICLE V PRE-CLOSING COVENANTS.................................................................. 21
5.1 Consents of Others....................................................................... 21
5.2 Best Efforts............................................................................. 21
5.3 Powers of Attorney....................................................................... 21
5.4 Conduct of Business Pending Closing...................................................... 21
5.5 Access to Records Before Closing......................................................... 22
ARTICLE VI POST-CLOSING........................................................................... 23
6.1 General.................................................................................. 23
6.2 Transition............................................................................... 23
6.3 Confidentiality.......................................................................... 23
6.4 Covenant Not to Compete.................................................................. 23
6.5 Additional Matters....................................................................... 24
ARTICLE VII CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING............................ 26
7.1 Conditions to Global's Obligations....................................................... 26
(a) Covenants, Representations and Warranties......................................... 26
(b) Consents.......................................................................... 26
(c) Suppliers/Leases.................................................................. 26
</TABLE>
iii
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<TABLE>
<S> <C>
(d) Discharge of Indebtedness and Lien............................................... 26
(e) Material Adverse Change.......................................................... 27
(f) Transfer Taxes................................................................... 27
(g) Documents to be Delivered by the Sellers and the Company......................... 27
(i) Opinion of the Sellers' Counsel..................................... 27
(ii) Certificates........................................................ 27
(iii) Release............................................................. 27
(iv) Escrow Agreement.................................................... 27
(v) Employment Agreement................................................ 27
(vi) Compliance Agreement................................................ 28
(vii) Building Leases..................................................... 28
(vii) Collateral Assignment of Rights.................................... 28
(viii) Stock Certificates.................................................. 28
7.2 Conditions to the Sellers' and the Company's Obligations..............................
(a) Covenants, Representations and Warranties........................................ 27
(b) Consents......................................................................... 29
(c) Documents to be Delivered by Global.............................................. 29
(i) Certificates........................................................ 29
(ii) Escrow Agreement.................................................... 26
(iii) Employment Agreements............................................... 29
(vii) Collateral Assignment of Rights..................................... 29
(iv) Payments to the Sellers and the Company and the Escrow Agent........ 29
ARTICLE VIII INDEMNIFICATION............................................................ 30
8.1 Indemnification of Global....................................................... 30
8.2 Defense of Claims............................................................... 30
8.3 Escrow Claim.................................................................... 31
8.4 Tax Audits, Etc................................................................. 31
8.5 Indemnification of the Sellers.................................................. 31
8.6 Limits on Indemnification....................................................... 31
ARTICLE IX MISCELLANEOUS................................................................ 32
9.1 Modifications................................................................... 32
9.2 Notices......................................................................... 32
9.3 Counterparts; Facsimile Transmission............................................ 34
9.4 Expenses........................................................................ 34
9.5 Binding Effect; Assignment...................................................... 34
9.6 Entire and Sole Agreement....................................................... 35
9.7 Governing Law................................................................... 35
9.8 Survival of Representations, Warranties and Covenants........................... 35
9.9 Invalid Provisions.............................................................. 35
</TABLE>
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<TABLE>
<S> <C>
9.10 Public Announcements.................................................................... 35
9.11 Remedies Cumulative..................................................................... 35
9.12 Waiver.................................................................................. 35
9.13 DISPUTE RESOLUTION...................................................................... 36
</TABLE>
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<TABLE>
<S> <C>
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 The Sellers' Counsel
Exhibit D Sellers' Certificates
Exhibit E Form Of Release
Exhibit F Executive Agreement
Exhibit G Compliance Agreement
Exhibit H Global And Buyer Certificates
Exhibit I Equity Subscription Agreement
LIST OF SCHEDULES
Schedule 2.3 Sellers' Accounts
Schedule 2.6 Holders Of Funded Indebtedness
Schedule 3.1 Ownership Of Shares
Schedule 3.2 Liens On Shares
Schedule 3.4 Articles And Bylaws
Schedule 3.5 Subsidiaries
Schedule 3.7 Adjustments To 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 3.23 Brokers
Schedule 3.25 Indebtedness With Officers, Directors And Shareholders
Schedule 3.26 Undisclosed Liabilities
Schedule 7.1(d) List Of Indebtedness
Schedule 9.6 Other Agreements
</TABLE>
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<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "AGREEMENT") is entered into as of
September 28 1998, and is effective as of September 1, 1998, by and among GLOBAL
IMAGING SYSTEMS, INC., a Delaware corporation ("GLOBAL"), SOUTHERN BUSINESS
COMMUNICATIONS, INC., a Georgia corporation ("BUYER"), PROVIEW, INC., a North
Carolina corporation (the "COMPANY") and Neil C. Davis and Susan L. McElwain
(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 electronic presentation and audio visual equipment in the States of North
Carolina and South Carolina (the "BUSINESS"); and
WHEREAS, the Sellers own all of the issued and outstanding shares of
capital stock of the Company (the "SHARES"); and
WHEREAS, Buyer desires to purchase from the Sellers and the Sellers
desire to sell to Buyer all of the Shares 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.
"BUILDINGS" means collectively 101 W. Worthington Avenue, Suite 100,
Charlotte North Carolina, 28203 and 4020 Stirrup Creek Drive, Suite 115,
Research Triangle Park, North Carolina 27709.
"BUSINESS" has the meaning specified in the first recital of the
Agreement
<PAGE>
"BUSINESS DAY" means any day in which the NASDAQ National Market
System is open for trading in the United States of America.
"BUYER" has the meaning specified in the first paragraph of this
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 Buyer.
"CLOSING BALANCE SHEET" has the meaning specified in Section 2.7.
-----------
"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.
"COMPLIANCE AGREEMENT" means the agreement with Susan L. McElwain to
be entered into at Closing in the form of Exhibit G.
---------
"CONFIDENTIAL INFORMATION" means all (a) 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; (b) financial statements, cost reports or other
financial information; (c) contract proposals, or bidding information; (d)
business plans and training and operations methods and manuals; (e) personnel
records; (f) information concerning fee structures; and (g) 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" means the executive agreement with Neil C.
Davis 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.
------------
"EQUITABLE EXCEPTIONS" has the meaning specified in Section 3.6.
-----------
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCROW AGENT" means Central Carolina Bank.
"ESCROW AGREEMENT" means the Escrow Agreement to be executed by and
among the Sellers, Buyer 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, as adjusted for agreed upon assets and liabilities as set forth on
Schedule 3.7; (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 any of the Company's assets; (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.
"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 common stock, par value $.01 per share of
Global.
"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.
------------
"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.
-----------
-3-
<PAGE>
"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.
-----------
"NET BOOK VALUE" means the Net Book Value of the Company as calculated
in accordance with GAAP, as adjusted for agreed upon assets and liabilities as
set forth on Schedule 3.7; provided, however, that the employee bonuses and tax
------------
effect stemming thereform as described on Schedule 3.8A shall be counted against
-------------
the lesser of (i) the extent to which Net Book Value on the Effective Date is
more than the average Net Book Value at the end of each of the six months ending
July 31, 1998, as descibed in Section 2.6(d), and (ii) the extent to which
--------------
Working Capital as reflected on the Preliminary Closing Balance Sheet is more
than the Working Capital Target as described on Schedule 2.6(b).
---------------
"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 or
Buyer.
"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 Buyer 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, as
adjusted for agreed upon assets and liabilities as set forth in Schedule 3.7,
------------
provided, however, that (i) an amount equal to the amount by which cash on hand
as of Closing is less than $50,000 shall be added to the calculation of Working
Capital as of the Effective Date otherwise computed in accordance with this
definition and (ii) the calculation of Working Capital as of the Effective Date
shall not include estimated income taxes from earnings of the Company payable
through the Effective Date; provided, however, that the employee bonuses and tax
effect stemming thereform as described on Schedule 3.8A shall be counted against
-------------
the lesser of (i) the extent to which Net Book Value on the Effective Date is
more than the average Net Book Value at the end of each of the six months ending
July 31, 1998, as descibed in Section 2.6(d), and (ii) the extent to which
--------------
Working Capital as reflected on the Preliminary Closing Balance Sheet is more
than the Working Capital Target as described on Schedule 2.6(b).
---------------
"WORKING CAPITAL TARGET" shall have the meaning assigned to such term
in Section 2.6 hereof.
-----------
-5-
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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, the Sellers agree to sell the Shares
to Buyer and Buyer agrees to purchase the Shares from the Sellers.
2.2 PURCHASE PRICE. The total potential purchase price for the
--- --------------
Shares (the "PURCHASE PRICE") shall be equal to $5,000,000, 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
--- -------------------------
(i) by Buyer (with respect to the portion of the Purchase Price set forth in
Section 2.3(a) and Section 2.3(b) below) and (ii) by Global (with respect to the
- -------------- --------------
portion of the Purchase Price set forth in Section 2.3(c) below) at the Closing
--------------
(as defined in Section 2.4 below) or as otherwise set forth in Section 2.3(c)
----------- --------------
below as follows:
(A) $4,000,000 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 $55,000 for the covenant not to compete provided in
Section 6.4);
-----------
(B) $500,000 of the Purchase Price as adjusted as set forth below
will be paid in cash by wire transfer of funds to the Escrow Agent to
be held in escrow for satisfaction of the Sellers' indemnification
obligations specified in Section 8.1 or payment to the Sellers in
-----------
accordance with the terms of Section 2.5 below.
-----------
(C) $500,000 of the Purchase Price shall be paid in the form of
shares of Global Stock to be issued to the Sellers at the Closing.
The number of shares of Global Stock to be issued to the Sellers shall
be determined based on the average of the closing bid prices per share
of the Global Stock on the NASDAQ National Market System for the ten
Business Days prior to the two (2) Business Days prior to the Closing
Date. The Global Stock shall be allocated among the Sellers as
specified in Schedule 2.3.
------------
2.4 CLOSING. The Closing of the purchase and sale of the Shares
--- -------
contemplated by this Agreement shall take place at 1:00 p.m., Eastern Time, at
the offices of Templeton & Raynor, P.A. in Charlotte, North Carolina on
September 28, 1998, or at such other date and time as the parties shall agree
(the "CLOSING DATE"), effective as of September 1, 1998 (the "EFFECTIVE DATE").
2.5 ESCROW ARRANGEMENTS. Pursuant to the Escrow Agreement to be
--- -------------------
entered into among the Sellers, Buyer and the Escrow Agent, $500,000 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
-6-
<PAGE>
the Escrow Agreement for payment from such Escrow Sum of the amounts, if any,
owing by the Sellers to Buyer 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 Buyer in
accordance with the terms of the Escrow Agreement and this Agreement shall be
disbursed to the Sellers. The Sellers 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.
2.6 PURCHASE PRICE ADJUSTMENTS.
--- --------------------------
(A) FUNDED INDEBTEDNESS. The portion of the Purchase Price payable
--- -------------------
pursuant to Section 2.3(a) above will be reduced, on a dollar-for-dollar basis,
--------------
by the total amount of Funded Indebtedness as of the Closing, if any, assumed or
paid by Buyer 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) WORKING CAPITAL. The portion of the Purchase Price payable
--- ---------------
pursuant to Section 2.3(a) above will be reduced, on a dollar-for-dollar basis,
--------------
by the amount, if any, by which the Working Capital as reflected on the
Preliminary Closing Balance Sheet is more than $25,000 less than the average of
the Working Capital balances at the end of each of the six months ended July 31,
1998 (the "WORKING CAPITAL TARGET").
(C) CASH ON HAND. The portion of the Purchase Price payable
--- ------------
pursuant to Section 2.3(a) above will be reduced, on a dollar-for-dollar basis,
--------------
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.
(D) NET BOOK VALUE. The portion of the Purchase Price payable
--- --------------
pursuant to Section 2.3(a) above will be reduced, on a dollar-for-dollar basis,
--------------
by the amount, if any, by which the Net Book Value (exclusive of vehicles and
Carolina Panthers football tickets currently owned by the Company) on the
Effective Date is more than $25,000 less than the average Net Book Value at the
end of each of the six months ending July 31, 1998.
2.7 CLOSING REVIEW. Within 120 days following the Closing Date,
--- --------------
there shall be delivered to the Sellers a balance sheet of the Company (the
"CLOSING BALANCE SHEET") of the Company at and as of the Effective Date. The
Closing Balance Sheet shall be prepared in accordance with GAAP by the Buyer.
In the event that the Sellers dispute any items on the Closing Balance Sheet
within ten (10) days after the Sellers' receipt thereof, the parties shall
jointly select and retain an independent "Big Five" accounting firm (the
"INDEPENDENT ACCOUNTANTS") to review the disputed item(s) on the Closing Balance
Sheet. The final determination of such disputed item(s) by the Independent
Accountants shall be binding on the parties and shall be reflected on the
Closing Balance Sheet. The cost of retaining the Independent Accountants shall
be borne by the Buyer; provided, however, that the Sellers shall reimburse the
Buyer for the cost of the Independent Accountants in the event that such review
differs by less than 8% of Global's results.
-7-
<PAGE>
2.8 POST-CLOSING PURCHASE PRICE ADJUSTMENT. In the event that the
--- --------------------------------------
Working Capital as reflected on the 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 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 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 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 downward 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 the Sellers to Buyer from the Escrow Sum or by Buyer to
the Sellers, as the case may be, in immediately available funds within ten (10)
Business days of delivery of the Closing Balance Sheet, unless the Sellers
dispute any items on the 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 Buyer delivers to the Sellers a Closing
Balance Sheet modified to reflect such determination.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SELLERS
The Company and the Sellers jointly and severally represent and warrant to
Global and Buyer that:
3.1 CAPITALIZATION. The authorized capital stock of the Company
--- --------------
consists of 100,000 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
the 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 3.2, the
--- ------------------ ------------
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, the 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
-8-
<PAGE>
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 North
Carolina 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 Buyer and are attached
hereto as Schedule 3.4. The Company is qualified to do business in the State of
------------
North Carolina 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
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 the Sellers and constitutes the valid and binding obligations of the Company
and the 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
"EQUITABLE EXCEPTIONS"). Except for the Equitable Exceptions 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
------------- ----
-9-
<PAGE>
execution, delivery, and performance of this Agreement (as well as all other
instruments, agreements, certificates, or other documents contemplated hereby)
by the Company and the Sellers, do not (a) violate any Requirements of Laws or
any Court Order of any Governmental Body applicable to the Company or the
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 the 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 the 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 Buyer by the Company:
balance sheets of the Company as of December 31, 1995, December 31, 1996 and
December 31, 1997, and a balance sheet as of July 31, 1998, and statements of
income of the Company for the fiscal years ending December 31, 1995, December
31, 1996, and December 31, 1997, and a statement of income for the seven month
period ending July 31, 1998. The Financial Statements have been prepared in
accordance with GAAP, as adjusted for agreed upon assets and liabilities as set
forth 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 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 the Sellers have knowledge of any basis for the assertion of any such
liability or obligation. Since July 31, 1998, there has been no Material
Adverse Change in the prospects of the Company.
3.8 CERTAIN ACTIONS. Since July 31, 1998, 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
-10-
<PAGE>
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 (i) wages and salaries and
business expenses paid in the ordinary course of the Business, and (ii) 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, 1998, 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. The Sellers and the Company have delivered to Buyer a lien
search obtained from the counties where the Company conducts business and the
North Carolina Secretary of State office of all UCC liens of record against the
Company's personal property in the State of North Carolina. 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 $10,000 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 the
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
-11-
<PAGE>
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 the Equitable Exceptions. All
facilities owned 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 individually or the in the aggregate 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 Buyer 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 the
Sellers are aware of any infringement by others of any such rights owned by the
Company.
-12-
<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 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 the 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 Buyer. To the best of the Company's
and the 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
-13-
<PAGE>
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 $35,000 or
greater (collectively, the "CONTRACTS"). The Company is not and, to the best
knowledge of the 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 Equitable Exceptions, 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 the Equitable Exceptions. 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 the 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
-14-
<PAGE>
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. 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 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 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, to the best knowledge of the Sellers or the
Company, 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, 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 (and any predecessor of the
Company) has been a validly electing S corporation within the meanings of
Sections 1361 and 1362 of the Code at all times since the date of its
incorporation, and the Company will be an S corporation until and including the
Closing Date.
(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 Section 280G of the Code. The Company has not been a United
States real property holding corporation within the meaning of
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Section 897(c)(2) of the Code 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 a return year any corporation other than the
Company also was a member of the affiliated group. No Seller (A) has been a
member of an affiliated group, as defined in Section 1504(a) of the Code, filing
a consolidated federal income Tax Return (other than a group the common parent
of which was any Seller) and (B) has any Liability for the Taxes of any Person
under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract or otherwise.
(C) The Company would not be liable for any Tax under Section 1374 of
the Code in connection with a deemed sale of such Company's assets caused by an
election under Section 338(h)(10) of Code. The Company has not, in the past ten
(10) years, (i) acquired assets from another corporation in a transaction in
which the Company's Tax basis for the acquired assets was determined in whole or
in part by reference to the Tax basis of the acquired assets (or any other
property) in the hands of the transferor or (ii) acquired the stock of any other
corporation that is a qualified subchapter S subsidiary.
(D) The Company has not had at any time during the Company's existence
owned any subsidiaries (including any "qualified subchapter S subsidiaries"
within the meaning of Section 1361(b)(3)(13) of the Code.
(E) 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, 1998 (including base
salary, bonus and incentive pay) exceed (or by December 31, 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 December 31, 1998 and to the date hereof.
Since December 31, 1997, the Company has not changed the employment
compensation, benefits or consulting payments to the Sellers, except in the
ordinary course of business consistent with past practice and except for cash
dividends as agreed by Buyer. 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 the
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
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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 the 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 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 the Sellers, threatened against or
involving the Company, and none has occurred.
3.19 BUSINESS RELATIONS. To the best of the knowledge of the Company
---- ------------------
and the Sellers, no 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 individually or in
the aggregate do not result in a Material Adverse Change. Neither the Sellers
nor the Company has received any notice of any material disruption (including
delayed deliveries or allocations by suppliers) in the availability of any
portion of the materials used by the Company nor is the Company or the Sellers
aware of any facts which could reasonably 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 the 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.
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3.23 BROKERS. Except as set forth on Schedule 3.23, neither the
---- ------- -------------
Company nor the 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 3.7
---- ----------------------- ------------
or Schedule 3.26 hereto, the Company does not have any 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 the Sellers have made
---- ---------------------
available to Buyer 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 this Agreement, and neither
this Agreement, the Schedules hereto, nor any written information, instrument,
or document delivered to Global or 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.
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 officers
and employees of the Company with responsibility for the
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applicable subject matter. All references to the "Company" in Sections 3.6
------------
through 3.27 shall include the Companies' Subsidiaries.
----
3.28 All personal vehicles have been removed from the Business prior
to the Closing Date.
ARTICLE IV
GLOBAL'S AND BUYER'S REPRESENTATIONS AND WARRANTIES
Global and Buyer jointly and severally represent and warrant to the 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. Buyer 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
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 Buyer and the Agreement has been duly and validly executed and
delivered by Global and Buyer and constitutes the valid and binding obligation
of each of Global and Buyer, enforceable in accordance with its terms, except to
the extent that enforceability may be limited by 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
Global and Buyer, do not (a) violate any Requirements of Laws or Court Order of
any Governmental Body applicable to Global or Buyer or their property, (b)
violate or conflict with, or permit the cancellation of, or constitute a default
under any agreement to which Global or Buyer is a party or by which either of
them or their property is bound, (c) permit the acceleration of the maturity of
any indebtedness of, or any indebtedness secured by the property of, Global or
Buyer, or (d) violate or conflict with any provision of the charter or bylaws of
Global or Buyer.
4.3 NO BROKERS. Neither Global or Buyer 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.
4.4 INVESTMENT. Buyer will acquire the Shares solely for
--- ----------
investment purposes and for its own account and not with a view to the
distribution thereof.
4.5 INFORMATION FURNISHED. To the best knowledge of Global and
--- ---------------------
Buyer, neither this Agreement, nor any written information, instrument, or
document delivered to the Sellers by Global or Buyer pursuant to this Agreement
contains any untrue statement of a
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material fact or omits any material fact necessary to make the statements herein
or therein, as the case may be, not misleading.
4.6 CAPITALIZATION. The authorized capital stock of Global consists
--- --------------
of 50,000,000 shares of Common stock, $.01 par value, of which 17,938,184 shares
are issued and outstanding, and 10,000,000 shares of Preferred Stock, $.01 par
value, of which no shares are issued and outstanding.
4.7 SECURITIES LAWS COMPLIANCE. For the sole purpose of
--- --------------------------
demonstrating compliance with applicable securities laws and without affecting
in any respect any representations or warranties made by Sellers, the Company,
Global or Buyer in this Agreement, Global and Buyer represent that they have had
an adequate opportunity to review the properties, books and records of the
Company and ask questions and receive answers from the officers of the Company
concerning all matters relating to the Company, including the background and
experience of the current officers of the Company, and all such questions have
been answered to their satisfaction.
ARTICLE V
PRE-CLOSING COVENANTS
5.1 CONSENTS OF OTHERS. Prior to the Closing, the Company and the
--- ------------------
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 the
Sellers to permit them to consummate the transactions contemplated by this
Agreement.
5.2 BEST EFFORTS. Global, Buyer, 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 the Sellers shall cause
--- ------------------
the Company to terminate at or prior to the 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.
5.4 CONDUCT OF BUSINESS PENDING CLOSING. From the date of this
--- -----------------------------------
Agreement to the Closing Date:
(I) Except as otherwise contemplated by this Agreement, or
as Buyer may otherwise consent to in writing, the Company and the
Sellers shall conduct the Business 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 any of the representations
and warranties contained in Article III.
-----------
(II) The Sellers shall cause the Company to use its best
efforts to preserve substantially intact its current business
organization and present
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<PAGE>
relationships with its customers, vendors, suppliers and employees and
to maintain all of its insurance currently in effect.
(III) The Sellers and the Company shall give prompt notice
to Buyer of any notice of material default received by the Company or
the Business 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 Company or the Business.
(IV) Neither the Company nor the Sellers, nor any of their
representatives, shall solicit, encourage or discuss any Acquisition
Proposal (as hereinafter defined) or supply any non-public information
concerning the Company or the Business or the Company's assets to any
party other than Global, Buyer or their 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 Company or the Business, (ii) the
acquisition of the Company or a material equity interest in the
Company or a material portion of its assets, or (iii) the dissolution
or liquidation of the Company.
5.5 ACCESS TO RECORDS BEFORE CLOSING. Prior to the Closing Date,
--- --------------------------------
the Sellers and the Company agree that they will give, or cause to be given, to
Buyer and their representatives, during normal business hours and at Buyer's
expense, full and unrestricted access to the Company's personnel, officers,
agents, employees, assets, properties, titles, contracts, corporate minute and
other books, records, files and documents of the Sellers with respect to the
Business (including financial, tax basis, budget projections, accountants' work
papers and other information as Buyer may request) and to the Business'
personnel, customers, suppliers and independent accountants, to allow Buyer to
obtain such information as Buyer shall desire, and to make copies of such
information, to the extent reasonably necessary. Additionally, the Sellers and
the Company will provide Buyer 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 Company and the Business. All materials copied by
Buyer shall be maintained in confidence by Buyer and returned to the Sellers
and/or the Company, as appropriate, 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
the 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 Buyer acknowledge and agree that from and after the Closing, Buyer
will be entitled to possession of all
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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 the Sellers shall be entitled to reasonable
access to and to make copies of such books and records at their sole cost and
expense, and Buyer 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 the 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 Buyer for a period of three (3) years from the Closing, and deliver
promptly to Buyer 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
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 Buyer promptly of the request or
requirement.
6.4 COVENANT NOT TO COMPETE. For and in consideration of the
--- -----------------------
allocation to Neil C. Davis of $50,000 and the allocation to Susan L. McElwain
of $5,000 of the Purchase Price paid to the Sellers by Buyer, each Seller
covenants and agrees, for a period of three (3) years from and after the Closing
Date, that he will not, directly or indirectly without the prior written consent
of Buyer, 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 or electronic
presentation 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 North Carolina (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 and
electronic presentation 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
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<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 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, the Sellers
shall cause Farris Cooke & Associates, CPA to prepare a short period tax return
for the Company covering the period from December 31, 1997 through August 31,
1998. The cost of preparation of such short period tax return shall be paid for
by the Sellers.
(B) Buyer and the 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 Buyer and/or the Company to the extent such
records and information pertain to events occurring on or prior to the Closing
Date; therefore, Buyer 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) The Sellers, the Buyer 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. The Buyer, 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 the
Buyer and 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 or the Buyer shall make a one-time payment prior to such
election to reimburse the 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 made whole, after taxes, for the additional Taxes to
be paid, (iii) the one-time reimbursement payment shall be mutually agreed upon
by the Sellers and Global, and (iv) in the event the one-time
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<PAGE>
payment described in clause (i) above in this Section 6.5(c) differs from the
---------- --------------
actual Taxes and other costs owed solely as a result of such election, then (x)
to the extent the payment is less than the actual Taxes and other costs, Global
or the Buyer shall make a payment to Sellers in the amount of such difference,
or (y) to the extent the payment is more than the actual Taxes and other costs,
Sellers shall make a payment to Global or the Buyer, at the discretion of
Global, in the amount of such difference; provided however, that Sellers shall
provide Global and Buyer with a copy of Sellers' federal and state income tax
returns for such year encompassing payment for the Taxes resulting from such
election. In connection with such elections, within sixty (60) days following
the Closing Date, the Buyer, 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 immediately preceding sentence, the Buyer,
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, $55,000 shall be allocated to the
covenant not to complete 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. Each of the Buyer, Global and the 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 the Buyer, 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 AND BUYER'S OBLIGATIONS. The obligation
--- ----------------------------------------------
of Global and Buyer under this Agreement to consummate the Closing is subject to
the conditions that:
(A) COVENANTS, REPRESENTATIONS AND WARRANTIES. The Company and
--- -----------------------------------------
the 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 the
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 this Agreement or which have been entered into in
the ordinary course of business and except to the
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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 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 Buyer.
(B) CONSENTS. All statutory requirements for the valid consummation
--- --------
by the Company and the 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 Buyer,
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. The 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. The Sellers and the Company
--- -----------------------------------
shall have provided for the payment in full by the Company of all Funded
Indebtedness of the Company. Such Funded Indebtedness, if any, as of August 31,
1998, is listed on Schedule 7.1(d) hereto. The Sellers 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 other than Permitted Exceptions 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 July 31, 1998.
(F) TRANSFER TAXES AND BROKERS FEES. The Sellers shall be
--- -------------------------------
responsible for all stock transfer or gains taxes imposed on the Sellers
incurred in connection with this Agreement and for all fees and expenses paid or
to be paid to the brokers set forth on Schedule 3.23.
(G) DOCUMENTS TO BE DELIVERED BY THE SELLERS AND THE COMPANY. The
--- --------------------------------------------------------
following documents shall be delivered at the Closing by the Sellers and the
Company:
(I) OPINION OF THE SELLERS' COUNSEL. Global and Buyer shall
--- -------------------------------
have received an opinion of counsel to the Company and the Sellers, dated the
-25-
<PAGE>
Closing Date, in substantially the same form as the form of opinion that is
Exhibit C hereto.
- ---------
(II) CERTIFICATES. Global and Buyer 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-1 and D-2, respectively, hereto.
----------- ---
(III) RELEASE. The Sellers shall have furnished the Company with a
----- -------
general release in substantially the same form as the form attached as Exhibit E
---------
hereto.
(IV) ESCROW AGREEMENT. The Sellers shall have delivered to Buyer
---- ----------------
at the Closing the duly executed Escrow Agreement required pursuant to Section
-------
2.5 hereof.
- ---
(V) EMPLOYMENT AGREEMENT. Neil C. Davis 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) COMPLIANCE AGREEMENT. Susan L. McElwain shall have duly
---- --------------------
executed and delivered the Compliance Agreement in substantially the same form
attached as Exhibit G hereto, pursuant to which she will be employed by the
Company following the Closing.
(VII) BUILDING LEASES. Buyer shall be reasonably satisfied with the
----- ---------------
terms of the leases of the Buildings. The 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.
(VIII) PERSONAL VEHICLES. Sellers shall have removed all personal
------ -----------------
vehicles from the Business.
(IX) SELLERS RECEIVABLES. The Sellers shall, and the Company shall
---- -------------------
have caused, all of the Company's officers, directors and/or employees to have
repaid in full all debts and other obligations, if any, owed to the Company;
(X) EQUITY SUBSCRIPTION AGREEMENT. The Sellers shall have
--- -----------------------------
executed and delivered to Global an Equity Subscription Agreement in
substantially the same form as the form attached hereto as Exhibit I.
---------
(XI) STOCK CERTIFICATES. The 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.
-26-
<PAGE>
7.2 CONDITIONS TO THE SELLERS' AND THE COMPANY'S OBLIGATIONS. The
------------------------------------------------------------
obligation of the Sellers and the Company under this Agreement to consummate
the Closing is to subject the conditions that:
(A) COVENANTS, REPRESENTATIONS AND WARRANTIES. Global and
------------------------------------------------
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 Global and Buyer prior to or
at the Closing and the representations and warranties of Global and 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 Global and Buyer 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 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 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 BUYER. The
----------------------------------------------------
following documents shall be delivered at the Closing by Global and Buyer:
(i) Certificates. The Sellers shall have received an
-------------------
officers' certificate and a secretary's certificate executed by
officers of Global and Buyer, dated the Closing Date, in substantially
the same forms as the forms of certificates that are Exhibit H-1 and
-----------
H-2, respectively, hereto.
---
(II) ESCROW AGREEMENT. Buyer shall have delivered to
-----------------------
the Sellers at the Closing the duly executed Escrow Agreement required
pursuant to Section 2.5 hereof.
(III) EMPLOYMENT AGREEMENTS. Buyer shall have caused
----------------------------
the Company to duly execute and deliver the Employment Agreement with
Neil C. Davis in the same form attached as Exhibit F hereto, pursuant
---------
to which he will be employed by the Company following the Closing, and
the Compliance Agreement with Susan L. McElwain substantially in the
form attached as Exhibit G hereto, pursuant to which she will be
---------
employed by the Company following the Closing.
-27-
<PAGE>
(IV) EQUITY SUBSCRIPTION AGREEMENT. Global shall have
------------------------------------
executed and delivered to Sellers an Equity Subscription Agreement in
substantially the same form as the form attached hereto as Exhibit I,
---------
which Equity Subscription Agreement includes the requirement for the
delivery of Global Stock certificates in accordance with Section
-------
2.3(c) promptly after Closing.
------
(D) PAYMENTS TO THE SELLERS AND THE COMPANY AND THE ESCROW
-------------------------------------------------------------
AGENT. The Sellers shall have received the Purchase Price for the Shares. The
- -----
Escrow Agent shall have received the Escrow Sum from Buyer.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION OF GLOBAL AND BUYER. Except as provided in
----------------------------------------
Section 8.6, as Global's and Buyer's sole and exclusive monetary remedy for any
- -----------
breach by the Sellers hereunder, the Sellers agree to jointly and severally
indemnify and hold harmless Global, Buyer and each officer, director, and
affiliate of Global and Buyer, 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 the 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, as adjusted
for agreed upon assets and liabilities as set forth on Schedule 3.7; (C) the
------------
Company's tortuous 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; (D) the extent to which the average annual
revenue has exceeded the average annual cost of goods sold, before interest and
taxes, under the Master Purchase Agreement with NationsBanc, Inc. described on
Schedule 3.15 hereof in the event such Master Purchase Agreement is terminated
- -------------
as a result of the sale of stock to Buyer or the fact that Buyer is not a female
owned business; (E) the extent to which the average annual revenue has exceeded
the average annual cost of goods sold, before interest and taxes, under the
Epson Authorized Reseller Agreement with Epson America, Inc. as described on
Schedule 3.15 hereof in the event the Epson Authorized Reseller Agreement is
- -------------
terminated due to the discrepancy between the Company's name in this Agreement
and the name utilized by the Company in the Epson Authorized Reseller Agreement;
and (F) the extent to which the average annual revenue has exceeded the average
annual cost of goods sold, before interest and taxes, under the Reseller
Agreement with InFocus Systems, Inc. as described on Schedule 3.15 hereof in the
-------------
event the Reseller Agreement is terminated due to the discrepancy
-28-
<PAGE>
between the Company's name in this Agreement and the name utilized by the
Company in the Reseller Agreement.
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 the Sellers may be liable hereunder, such Indemnified Party
shall give prompt written notice thereof to the Sellers and, except as otherwise
provided in Section 8.4 below, the 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 good faith
judgment of Buyer following consultation with the Sellers, such litigation,
action, suit, demand, or claim, or the resolution thereof, would have an ongoing
material business effect on Global or Buyer, the Company or its successors, and
such Indemnified Party shall extend reasonable cooperation in connection with
such defense, which shall be at the Sellers' expense. In the event the 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 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 the 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 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 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 any 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. The 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, the 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 THE SELLERS. Global and Buyer agree to
-----------------------------------
jointly and severally indemnify and hold harmless the Sellers and the Company
and each officer, director, stockholder or affiliate of the Company, from and
against any Indemnifiable Costs arising out of
-29-
<PAGE>
any material misrepresentation, breach or default by Global and Buyer of or
under any of the covenants, agreements or other provisions of this Agreement or
any agreement or document executed in connection herewith. In addition, the
Company and Buyer shall indemnify the Sellers for any payment or satisfaction of
any guarantees by the 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, warranties and covenants of the Sellers under
Sections 3.1, 3.2, 3.3, 3.14, 3.17, 3.26 or 6.5 hereof (for which
- ---------------------------------------- ---
indemnification claims must be made prior to the expiration of the applicable
statute of limitations and if so made, such claims shall continue after such
date until finally resolved), the right to make claims for indemnification
provided under this Article VIII shall expire on the third anniversary of the
------------
Closing Date (except for claims made prior to such date which shall continue
after such date until finally resolved). The Sellers shall not be obligated to
pay any amounts for indemnification under this Article VIII until the aggregate
------------
indemnification obligation hereunder exceeds $10,413, whereupon the Sellers
shall be liable for all amounts in excess of $10,413 for which indemnification
may be sought. Notwithstanding the foregoing, such $10,413 amount in the
preceding sentence shall be reduced to the extent the Working Capital as
reflected on the Closing Balance Sheet is less than the Working Capital in the
Preliminary Closing Balance Sheet. Notwithstanding the foregoing, in no event
shall the aggregate liability of the Sellers to Global and Buyer hereunder
exceed the Purchase Price. Global and Buyer shall not be obligated to pay any
amounts for indemnification under this Article VIII until the aggregate
------------
indemnification obligation hereunder exceeds $25,000, whereupon Global and Buyer
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 Global and Buyer to the Sellers hereunder exceed the Purchase
Price. However nothing in this Article VIII shall limit Global and Buyer or the
------------
Sellers in exercising or securing any remedies provided by applicable common law
with respect to the conduct of the Sellers or Global and Buyer in connection
with this Agreement or in the amount of damages that it can recover from the
other in the event that Global and Buyer or the 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.
-30-
<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 or Buyer:
---------------
c/o Global Imaging Systems, Inc.
13902 North Dale Mabry Road, Suite 300
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
Thirteenth Street, NW
Washington, DC 20004-1109
Attention: Christopher J. Hagan
Fax No.: (202) 637-5910
Tel No.: (202) 637-5771
And with a copy to:
------------------
Southern Business Communications, Inc.
5765 Reps Miller Road Suite 190
Norcross, Georgia 30071
Attention: Mark Lloyd
Fax No.: (770) 449-0423
Tel No.: (770) 449-4088
The Company:
-----------
ProView, Inc.
101 W. Worthington Avenue, Suite 100
Charlotte, NC 28203
Attention: Neil C. Davis
Fax No.: (704) 344-8496
Tel No.: (704) 344-9063
-31-
<PAGE>
And with a copy to:
------------------
Templeton & Raynor, P.A.
1800 East Boulevard
Charlotte, NC 28203
Attention: Tom Templeton
Fax No.: (704) 344-8555
Tel No.: (704) 344-8500
Sellers:
-------
Neil C. Davis and Susan L. McElwain
c/o ProView, Inc.
101 W. Worthington Avenue, Suite 100
Fax No.: (704) 344-8496
Tel No.: (717) 344-9063
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; 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, with
originals to be circulated to the other parties in due course.
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 the Sellers shall bear all costs and expenses of (i) any broker involved in
this transaction and (ii) all legal expenses of the Sellers and 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, Buyer and the Sellers,
their heirs, representatives, successors, and permitted assigns, in accordance
with the terms hereof. This Agreement shall not be assignable by the Company or
the Sellers without the prior written consent of Global. This Agreement shall
be assignable by Global or Buyer to a wholly-owned subsidiary of Global or Buyer
without the prior written consent of the Sellers, but any such assignment shall
not relieve Global of its obligations hereunder. In addition, the
indemnification rights of Global and Buyer under Article VIII hereof may be
------------
assigned by Global and Buyer to First Union National Bank, N.A.
-32-
<PAGE>
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, except as described on Schedule 9.6 attached hereto.
------------
9.7 GOVERNING LAW. This Agreement and its validity, construction,
-------------------
enforcement, and interpretation shall be governed by the substantive laws, but
not the conflicts of 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
(3) years, 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, warranties
and covenants contained in Sections 3.1, 3.2, 3.3, and 6.5 of this Agreement,
------------ --- --- ---
and the related indemnities, shall survive the Closing indefinitely and not
expire.
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.
-33-
<PAGE>
9.13 DISPUTE RESOLUTION. ALL DISPUTES BETWEEN THE SELLERS AND
------------------------
GLOBAL AND BUYER WITH RESPECT TO ANY PROVISION OF THIS AGREEMENT OR THE RIGHTS
AND OBLIGATIONS OF THE SELLERS AND GLOBAL AND BUYER 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 CHARLOTTE, NORTH CAROLINA,
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.
[THIS SPACE 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/ Raymond Schilling
--------------------------------------------------
Raymond Schilling
Vice President, Chief Financial Officer, Secretary
and Treasurer
BUYER:
-----
SOUTHERN BUSINESS COMMUNICATIONS, INC.
By: /s/ Mark Lloyd
--------------------------------------------------
Mark Lloyd
President
THE COMPANY:
-----------
PROVIEW, INC.
By: /s/ Neil C. Davis
--------------------------------------------------
Neil C. Davis
President
THE SELLERS:
-----------
/s/ Neil C. Davis
-------------------------------------------------------
Neil C. Davis
/s/ Susan L. McElwain
-------------------------------------------------------
Susan L. McElwain
The Exhibits and Schedules to this Stock Purchase Agreement are not included
with this Quarterly Report on Form 10-Q. Global will provide these exhibits and
schedules upon the request of the Securities and Exchange Commission
-35-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 4,835
<SECURITIES> 0
<RECEIVABLES> 39,581
<ALLOWANCES> 1,040
<INVENTORY> 24,357
<CURRENT-ASSETS> 2,696
<PP&E> 27,365
<DEPRECIATION> 17,948
<TOTAL-ASSETS> 197,761
<CURRENT-LIABILITIES> 36,369
<BONDS> 0
0
0
<COMMON> 71,038
<OTHER-SE> 2,754
<TOTAL-LIABILITY-AND-EQUITY> 197,761
<SALES> 125,208
<TOTAL-REVENUES> 125,208
<CGS> 83,364
<TOTAL-COSTS> 110,657
<OTHER-EXPENSES> 1,844
<LOSS-PROVISION> 116
<INTEREST-EXPENSE> 3,686
<INCOME-PRETAX> 9,021
<INCOME-TAX> 4,096
<INCOME-CONTINUING> 4,925
<DISCONTINUED> 0
<EXTRAORDINARY> (1,817)
<CHANGES> 0
<NET-INCOME> 3,108
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
